Telecom Hardball--It's Good for Consumers

Telecom Hardball--It's Good for Consumers
November 27, 2012

S.T. Karnick

S.T. Karnick is director of research for The Heartland Institute. Before joining Heartland, he... (read full bio)

Another dispute between a TV content provider and a multipoint distributor has arisen, as FierceCable reports:

"AMC Networks is warning Verizon (NYSE: VZ) FiOS TV subscribers that they will lose AMC, IFC, WE, IFC and Sundance Channel unless the telco agrees to pay increased license fees by Dec. 31."

AMC had been an also-ran cable network for years until the addition of Breaking Bad, Mad Men, The Walking Dead and a couple of other popular fiction series. Naturally, now that the company has a bit of leverage, it's using it. FierceCable continues:

"AMC ran an on-screen crawl Sunday night during one of its most popular original programs, The Walking Dead. But it wasn't running the crawls Tuesday morning during shows that draw fewer viewers, such as Roseanne on WE.

"AMC, which has also launched a website to communicate with viewers about the dispute with Verizon, is playing hardball with Verizon by going public with its contract renewal talks. But officials at Verizon insist that subscribers won't lose AMC and its sister networks."

This comes on the heels of numerous other such disputes between content providers and video distributors, as the article notes:

"AMC employed similar tactics in its contract dispute with Dish Network (Nasdaq: DISH) earlier this year. The companies agreed to a new carriage deal in October as part of a settlement of a breach-of-contract dispute. AMC signed a carriage deal with AT&T's (NYSE: T) U-verse TV in July.

"Verizon's current AMC contract was signed in 2006, before AMC gained significant popularity from hits such as Breaking Bad and Mad Men. The programmer is looking to cash in on the success of its original programming lineup in contract renewals with cable and satellite affiliates."

Ah, the joys of competition. As cable, fiber, and satellite competition is introduced into more markets, the content providers see that they can use their content's popularity as leverage against each of the distributors that use their content. The content providers clearly figure that the potential loss of some viewers if a distributor is cut out (which is unlikely anyway) will be made up for by the higher prices they charge for their content at the remaining ones.

Companies on each side  of the provider-distributor divide have gone to court to get the government to protect their particular interests, and the disagreements between providers and distributors certainly result in disruptions of service. However, consumers are ultimately best served by letting the markets work out how best to provide the services they want, and that means hashing out pricing arrangements without the government putting its heavy hand on one side of the scale or other.

This kind of disruptive, creatively destructive market activity does not make for a quiet, conservative, one-size-fits-all batch of services for consumers, but it does result in the greatest amount of choice at the lowest price. It benefits consumers and holds businesses accountable for their choices and practices. That’s what we all want, right?

S.T. Karnick

S.T. Karnick is director of research for The Heartland Institute. Before joining Heartland, he... (read full bio)