Bungled Bundle Bill? McCain Introduces the "Television Consumer Freedom Act"

Proposed law looks to address multiple aspects of TV in the MVPD era, including bundling, broadcast abandonment and blackouts.

True to his reputation as a maverick, Arizona Senator John McCain has authored a bill seemingly designed to please nobody, while arguably disserving just about everybody. Dubbed the “Television Consumer Freedom Act of 2013”, it consists of clumsily crafted legislative language that mashes together in one bill three disparate and contentious aspects of the current video delivery system. In only one of those three areas does McCain’s proposal come to remotely practical terms with the problem it seeks to address.

McCain’s bill aims to: (1) promote “a la carte” program availability for MVPD subscribers; (2) discourage broadcasters from removing their programming from over-the-air availability (in response to the success that Aereo has recently enjoyed); and (3) eliminate broadcast blackouts of sports coverage in certain situations.

Promoting “A la Carte” MVPD offerings

McCain has long been an advocate of an a la carte approach to program availability. Under that approach, cable and satellite TV subscribers would be able to sign up for only those channels they want to watch – no more required “bundles” or “tiers”, i.e., packages of channels including some really desirable choices and a bunch of others that probably won’t be watched much, if at all. 

The practice of “bundling”, of course, is not unique to the MVPD operator/MVPD subscriber relationship.

Upstream of that relationship, program producers like to make their programming available to MVPD operators in bundles because bundling allows producers to use their popular programs as an incentive for MVPD operators to carry the producers’ less popular programs. It’s a lot easier to convince the MVPD operator to carry one or more niche channels with limited curb appeal if such carriage is required as a condition to securing an established and guaranteed crowd-pleaser or two.  MVPD operators then pass the consequences along to their subscribers by offering subscription packages that require the subscriber to take non-A-list material in order to get the A-list stuff.

Basically, it’s a win-win set-up – except (as far as McCain is concerned) for the viewer/consumer, who is forced to pay for channels he or she probably won’t watch.

McCain’s bill would provide program producers (including broadcasters) and MVPD operators certain “incentives” to offer MVPD subscribers a la carte options. “Incentives”, here, is really just a polite term for “threats”.

Under the bill, MVPD operators would be free not to provide an a la carte option. But those who don’t offer an a la carte option would lose the benefit of the statutory copyright license that for years has made their lives much easier and, probably, cheaper. 

Broadcasters who happen to be under common control with non-broadcast program producers (think any of the major TV networks, for the most obvious examples) be similarly “incentivized”: such broadcasters would lose the right to retransmission consent and the protection of network non-duplication and syndicated exclusivity rules if all of the programming under common control is not made available to MVPD operators on an a la carte basis.

And what about program producers who don’t happen to control any broadcast licensees? Lacking any legislative benefit to withdraw (such as retrans consent for broadcasters or statutory copyright licenses for MVPDs), McCain would simply say that program producers cannot offer packages of various programs to MVPDs unless those producers also offer those same programs a la carte.

One additional twist: The bill would require that, if a program producer and an MVPD can’t come to terms on the availability of programming on an a la carte basis, the two parties would have to notify the FCC of the last terms each side offered the other. The bill is silent about what, if anything, the FCC could or should do with that information.

McCain’s proposal isn’t likely to thrill either MVPDs, or broadcasters, or program producers. Each derives some benefit from the current bundling system: MVPDs get their desired programming, along with the ability to bundle that programming with a bunch of less desirable programming and charge subscribers more; and program producers (including broadcasters under common control with producers) are able to use their popular material to assure carriage of their less popular material. A mandatory a la carte option would arguably undermine this mutually beneficial arrangement.

That is immaterial to McCain, though, because he attaches overriding importance to the availability of an a la carte option to MVPD subscribers. Let’s give the people what they want, and only what they want!

Many MVPD subscribers might agree with him, at least at first blush. But think about the real consequences. Since the current system allows popular programming to subsidize, in a sense, the production of less popular programming, the cost to access the less popular shows would likely increase in an a la carte universe, where the potential for such subsidization would be dramatically diminished. As with ordering a la carte at a restaurant, sure, you can get exactly what you want, but in the end you’ll probably end up paying more and getting less. Can we be sure that that’s what viewers really want?

And let’s not forget the niche programming that might not garner enough viewers to warrant continued production. While many of us may share the Boss’s despair at the seeming lack of viewable programming fare, the fact is that even the narrowest of niche programming presumably has some viewers. And niche programming contributes to the much-vaunted diversity of information we hear so much about. By discouraging various bundling practices, McCain’s bill could threaten that diversity by forcing lesser-viewed programming out of production. 

Deterring broadcasters from defecting from OTA operation

Since Aereo started to get traction with its system allowing mobile Internet access to over the air broadcasting – and particularly since that system survived an initial challenge in the Second Circuit – some broadcasters have been making noises about removing their programming from their OTA operations in favor of some subscription-only venue (e.g., cable, satellite, or maybe even their own version of an Aereo set-up). McCain obviously thinks that that’s not a good idea, and he means to do something about it in the second section of his bill.

Here’s where he hauls out the big guns: TV stations that engage in such mischief will lose their licenses! Yikes! While that threat is guaranteed to get your attention, upon closer scrutiny that threat largely disappears, thanks to some truly bad wording.

According to the bill, the mischief that would lead to license loss occurs when a “television broadcast station does not retransmit the signal over-the-air that is identical to the signal retransmitted” to an MVPD. 

Can we be frank here? That language makes no sense at all. A TV station doesn’t “retransmit” its signal – it transmits it. And in practical terms, it’s unlikely in the extreme that a broadcast station would attempt to broadcast one batch of programming while simultaneously feeding a different batch to the local MVPDs. More likely, the broadcasters’ threat alluded to above would play out by having the networks opt not to provide their affiliates with primo, prime-time programming. So, for example, the Fox prime-time schedule might end up exclusively on the MVPD-only FX channel, while the Fox Network feeds its affiliates re-runs of old Fox shows. In that case, the station affiliates would still be feeding their OTA programming to the MVPDs, so McCain’s proposed threat wouldn’t reach them.

Maybe we’re missing something, but this proposal would achieve nothing in terms of addressing the issues swirling around Aereo. (If McCain really wanted to revolutionize copyright law to ensure that the next Aereo controversy doesn’t occur, he would take a crack at redefining “MVPD” in a way that reflects the increasing level of online viewership that is tied to the decreasing level of scheduled OTA television viewing.)

Prohibiting blackouts of certain sports programming

The final section of the bill is probably the only one likely to please both the broadcast and cable industries. It provides that sports programming cannot be blacked out (like when an NFL team doesn’t sell out its home game within a certain period before kickoff) when the game is played in a publicly-financed stadium.   Hard to argue with that, unless you’re a professional sports league or team that has negotiated out extensive agreements based on the existence of the blackout.

But really, in the overall scheme of things whether or not blackouts are permitted in some limited instances isn’t likely to compel support for McCain’s bill.

Hopefully, the bill wasn’t intended as something to be enacted, but rather as a starting point for further change. But even there, you have to wonder: why? After all, McCain’s bill is more or less a recycling of identically titled legislation originally introduced by Senator Ron Paul in 2007. 

Over the years, John McCain’s maverick nature has garnered him his fair share of supporters and detractors. That’s not just because he’s been willing to go out on a limb for what he believes in, popular support be damned, but also because he’s been a very skilled and effective legislator that produced results on a regular basis. Sadly, this time, it looks like he’s just gone off on a tangent.

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Comments (4) Read through and enter the discussion with the form at the end
Phil Hochberg - May 15, 2013 2:30 PM

You ought to go back and re-read Section 5 of the McCain bill. In no way does it p;rovide that "sports programming cannot be blacked out...." It merely says, justifiably or not, that when a game is blacked out locally, a cable operator or satellite carrier could import a distant signal to break that blackout. Note that there would not be any benefit whatsoever -- indeed further detriment -- to the local over-the-air station.

Kevin Goldberg - May 22, 2013 10:40 AM

Thanks for pointing that out. I'm not sure that re-reading Section 5 of the bill would have helped, but I certainly should have done a closer reading of the already-existing laws it sffects.

While I've done that, I'll use this opportunity to direct our readers to something I believe to be an excellent summary of that section of the McCain bill:

http://www.fangraphs.com/blogs/mccain-introduces-bill-to-ban-nfl-blackouts-mlb-blackouts-untouched/

Neal McLain - May 23, 2013 1:15 AM

As a former cable guy, I've been thinking about a-la-carte for a long time. I've tried to imagine what might actually happen if Congress were to mandate full a-la-carte for cable companies (and, by extension, satellite and other MVPD retailers). My thoughts on the subject are posted on my blog entry at http://tinyurl.com/nlw8jj6 .

McCain's bill seems to miss another point: the difference between a broadcast network (ABC, NBC, CBS, FOX, etc.) and a broadcast station. Networks do indeed own some broadcast stations, but most stations are owned by third-party group owners (Belo or Sinclair come to mind). Each station carries network programming pursuant to an affiliation agreement with one of the networks.

McCain's threat that any "broadcaster" that removes its OTA programming and switches to a cable-only channel is meaningless for group owners. If some network (like FOX or CBS) decides to switch its network feed to cable only, the independent group owners certainly aren't going to turn in their licenses and go off the air. They'll have plenty of choices for alternate programming -- they could affiliate with (or buy out) some off-brand network or band together and form their own network.

Or maybe they might buy a cable channel like CNN. CNN is having a difficult time these days battling FOX NEWS on the right and MSNBC on the left. Selling out would be a way out of this dilemma. It would give the broadcasters a known brand with plenty of growth potential.

If McCain really wants MVPDs to break up their programming, perhaps he should propose a bill that would let MVPDs offer programming in common-interest tiers. Many cable operators would welcome a chance to do it, especially if they could move sports to a separate tier. And McCain wouldn't have to write a new bill to do it -- just repeal the grotesquely-misnamed "Cable Television Consumer Protection and Competition Act of 1992."

Ed - June 28, 2013 10:03 AM

It is amazing how the regulatory function of our government has, over the decades, grown to protect more the supplier than the consumer. This Television Consumer Freedom Act proposition has the same approach: It carefully considers the application of current marketing paradigms to effect a change that is both appealing to the consumer while staying within the same playing field.

If we continue to look for an "a la carte" solution for the TV consumer while keeping within the current regulatory model(s) that more benefit the supplier then, both parties will lose.

I say, "think outside the box". There MUST be a win-win for everyone. For instance, if the commodity discussed were food and its many delivery methods from field to table, we may discover some new answers. My food purchase decisions are not hampered by "bundling". I do not have to buy ketchup if I choose to purchase frozen french fries. I do not have to buy bacon when I purchase eggs. And, if I prefer a more organic or less processed food, I can go to my local organic food supplier. I can even mix up my food purchases at various suppliers to obtain the "bundled food package" I prefer. And doesn't this system of free market work best in our society?

I am seeking others in this discussion...

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