Comcast, the 1992 Cable Act, and You

November 8, 2019 , , , , , ,

Don’t be disappointed, but this post isn’t going to give you a complete history of the 1992 Cable Act. That law had a lot of great ideas — and led to some great results — but it also had some disappointments, as the law was either watered down or poorly implemented. However, one of its concepts, “program carriage,” deserves special mention since it’s not only still necessary for the area it was intended for — cable TV — but it also makes sense as a model for platform regulation more broadly. The program carriage rules were designed to protect independent content creators from the power of large distributors while also promoting competition between different distributors. This is highly relevant to the ongoing dispute between Comcast and Starz, which shows that the 92 Act’s principles matter in the real world.

The Part of the Law I Care About Today

The 92 Act is long, but the part of the law I want to talk about is codified at Section 536 of Title 47 of the US Code and is stirringly titled, “Regulation of Carriage Agreements.” It takes the form of directives to the Federal Communications Commission and requires that the agency adopt rules prohibiting certain practices. These practices include:

“prevent[ing] a cable operator or other multichannel video programming distributor from requiring a financial interest in a program service as a condition for carriage on one or more of such operator’s systems” 

This means that cable companies and satellite TV providers (multichannel video programming distributors, or MVPDs, such as Comcast) have to let independent programmers (like Starz) stay independent — they can’t demand equity or anything equivalent. The FCC’s directives also include:

“prohibit[ing] a cable operator or other multichannel video programming distributor from coercing a video programming vendor to provide, and from retaliating against such a vendor for failing to provide, exclusive rights against other multichannel video programming distributors as a condition of carriage on a system” 

This means that MVPDs can’t demand exclusivity — sort of. It means they can’t demand exclusivity when it comes to MVPDs. A cable company can’t require that a programmer be cable-only, for instance, and not be available on satellite TV as well. As I’ll discuss below, the statute does not prevent a cable company from demanding exclusivity in other ways, even though the same principles would seem to apply. Finally, the FCC’s directives also include: 

“prevent[ing] a multichannel video programming distributor from engaging in conduct the effect of which is to unreasonably restrain the ability of an unaffiliated video programming vendor to compete fairly by discriminating in video programming distribution on the basis of affiliation or nonaffiliation of vendors in the selection, terms, or conditions for carriage of video programming provided by such vendors”

This is the one that has proved the trickiest — or rather, the one the FCC has been the most reluctant — to enforce. It is an economic non-discrimination provision that is designed to prevent an MVPD from preferencing its own content or content that it has a financial stake in. It doesn’t guarantee independent programmers carriage on cable, but it does create a level playing field for them. Unfortunately, the FCC has put rules and procedures in place that allow an MVPD to decline to carry or discriminate against an independent programmer for almost any reason, however pretextual it may seem, to defeat a program carriage claim. But that’s another issue.

The Starz Dispute

This brings us to a current dispute between Starz (which, by the way, produces a lot of programming of interest to African American audiences, including the well-regarded show, “Power”) and Comcast (which, by the way, is about to argue to the Supreme Court that key civil rights protections should be weakened). 

It is impossible from a distance to know exactly what the real sticking points are in any particular carriage dispute, other than “money.” But there are some troubling signs that Comcast’s dispute with Starz is exactly the kind of scenario that Congress was trying to avoid with the 1992 Cable Act.

First, Comcast may be preferencing its own content and services in a discriminatory way. CNBC has noted that major cable operators — “flush with content options” after years of merger binges — may be “reconsider[ing] the amount they’re willing to pay” for third-party programming. CNBC also observes that, “Another factor that could come into play is that Comcast is planning to launch an ad-supported streaming service next year called Peacock.” Peacock will likely primarily offer Comcast-owned programming. It is hard to see Comcast systematically favoring its own content and services as anything but “discriminating in video programming distribution on the basis of affiliation or nonaffiliation of vendors.”  (You might observe that it would probably be easier to just limit vertical integration between major distributors and content, rather than trying to police them for self-preferencing behavior. And you’d be right.)

Even more blatantly, the New York Post reports that “Comcast cited increasing options for consumers, noting that Starz is selling directly to consumers online through streaming platforms like Amazon Prime and Roku” as a justification for its hardball tactics. Now it is true that the 1992 Cable Act only requires that large MVPDs not demand MVPD exclusivity, and is silent about other forms of distribution. It is also true that Public Knowledge has long argued that the definition of MVPD can easily be interpreted to cover some online platforms. That aside, it seems straightforward that any time a major MVPD such as Comcast demands some form of exclusivity from independent programmers —  or extracts penalties from independent programmers for not getting exclusivity — it’s violating Congressional intent and policy, if not the letter of the law. It shouldn’t matter whether Comcast is trying to prevent Starz from being carried by a smaller MVPD or a smaller online video provider — the effect on independent programmers should be the same.

Monopsony Power is Bad for Diverse Programming

The Starz dispute also illustrates how monopsony power (that is, market power as a buyer, rather than monopoly power, which is market power as a seller) is bad for diverse programming. If Comcast didn’t have monopsony power, then carriage on Comcast wouldn’t matter quite so much to Starz. Starz would simply be carried on some distributors but not others, and things would be just fine. But that’s not how things work today — carriage on Comcast (and the exact details of how this carriage works) is extremely significant to Starz’s future. As the New York Post reports, “if the dispute is not resolved, the channel could lose as many as 8 to 9 million subscribers.” Monopsony power can give distributors significant power over suppliers. Think of the power that Walmart has in physical retail, or that Amazon has in online marketplaces. Monopsony (or “gatekeeper”) power is also one of the primary reasons why Public Knowledge opposes cable mega-mergers.

What the Starz dispute shows is that this is not some abstract economic argument — it’s something that affects real creators and viewers, and can disproportionately affect minority communities.

Lessons from the 1992 Cable Act

There are several things we can learn from the 1992 Act. 

First, laws are only as good as their enforcement. Parts of the 1992 Act were enormously successful — satellite TV would not have grown into the massive service it is today without the 1992 Act’s rules preventing big cable companies from starving them of programming. Other parts of the 1992 Act were bogged down with evidentiary and procedural rules that almost turned them into a dead letter. Even today, programmers who have credible claims of discrimination find it almost impossible to proceed with their challenges.

Second, laws should be written as broadly as possible to address the underlying harms. Comcast is able to openly and flagrantly discriminate against independent programmers and rival video distribution services because the 1992 Cable Act only prevents retaliation against carriage by rival MVPDs. Perhaps broader terms could have been used.

Additionally, these rules show that legal regimes that target unfair discrimination can be narrowly targeted, yet profound in their implications. This should be a lesson for digital platforms. For example, it makes no sense to say that a search engine should not “discriminate,” since making choices is exactly what search engines are for. But it might make sense to prevent a search engine from systematically favoring its own content over third-party content. The same reasoning could apply to app stores, social networks, online retail, and so on. Rules against self-dealing make sense in many contexts when common carriage-like “neutrality” requirements do not. Similarly, public policies that prohibit large platforms from requiring exclusivity from independent producers might make sense as applied to today’s dominant online platforms. 

Finally, the fact that the 1992 Cable Act is almost 30 years old doesn’t make it any less needed. The same problems it sought to address are happening today. Particular businesses and technologies might come and go, but the incentives for platforms to engage in self-dealing and to discriminate against third parties (and rival distributors) remain the same. In the case of Comcast and Starz, the 1992 Cable Act also shows that, decades later, the same policies are needed to deal with the same problems, since without oversight, dominant platforms will always resort to the same old tricks.