A May 2011 report titled “If a TV station broadcasts in the forest,” written by Thomas W. Hazlett, a professor of law and economics at George Mason University and the managing director of Arlington Economics, crossed my desk last week. Given the title, I did not expect his report to be complimentary to television broadcasters, and it is not.
Hazlett says local broadcasters are little more than a “rusty transmit tower.” He further claims, “The TV license continues to hold value not as a gateway to airwaves but as a toll booth for broadcast network programming.”
The report goes on, this time calling over-the-air broadcast TV “a needless expense, propped up not by customer demand, technical efficiency or business necessity, but legacy regulation generations outdated.” He calls for those broadcast regulations to go the way of “cavemen.”
By now, it was clear what Hazlett had in mind, but I continued reading, as I wanted to see his proposed solution. He suggests government take three steps to “unleash” technology and innovation.
First, he says society will achieve enormous social gains by allowing stations to deploy bandwidth-allocated TV licenses to their highest-valued uses, supplying programs to customers via alternative distribution platforms — as done in 91 percent of U.S. households already. Basically, he's suggesting broadcasters sell their spectrum and go away.
But, what about the 10 percent of homes still relying on OTA broadcasts? Hazlett says at $300 per household, those viewers could be connected to broadband, cable or satellite, making the total transition expense about $3 billion. Selling broadcast spectrum would generate about $108 billion, “Hence, the net social gain of switching out off-air terrestrial broadcasting in favor of existing MVPD networks is at least $1 trillion, or more than 300 times the cost of the transition.”
Second, Hazlett calls for the elimination of must-carry and retransmission consent, which he says are “trade barriers” favoring broadcasters over cable and satellite. Calling them “TV Bad Science” as first implemented and “absurd” today, he says they stifle consumer choice and market efficiency.
Finally, his report says the transition to OTT Internet-delivered video is already under way. Linear TV, he says, now competes with Hulu, Netflix, Apple TV and Google TV.
The report continues, “A Television Future without 1952-style TV stations is not a difficult world to imagine. It offers a promising vision: over $1 trillion in consumer welfare released for wireless services, elimination of large inefficiencies in the competition to create content bundles, new ‘broadcast’ programming coming to households via the pathway hundreds of other channels already do, through contracts with program networks and/or multichannel video bundle providers, and via the newly emerging over-the-top applications flowing to millions of TV sets, mobile handsets, notebook/netbook computers, e-readers and tablets.”
Before one gets too carried away with Hazlett's research, it's always worthwhile to follow the money and ask, “Who paid for it?” In this case it was The American Television Alliance (ATVA), an organization described as, “an unprecedented coalition of consumer groups, cable, satellite, telephone companies and independent programmers to raise awareness about the risk viewers face as broadcasters increasingly threaten service disruptions that would deny viewers access to the programs they and their families enjoy. … The ATVA's mission is a simple one — to give consumers a voice and ask lawmakers to protect consumers by reforming outdated rules that do not reflect today's marketplace.”
OK, now we better understand the foundation for Hazlett's viewpoints.
While Broadcast Engineering readers may find much with which to disagree in Hazlett's opinion piece, he makes one point with which we may concur: “There is every reason to prefer that government get out of the way, permitting markets to discover the structure that best suits customer needs given the options available.”
Amen.
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