State Mandates for Program Carriage Dispute Resolution : Welcome to the Wide World of Regulation

The current dispute between the NFL Network and cable operators over carriage arrangements is a sign the market is working rather than failing. Proposed state legislation mandating arbitration for these disputes negates the programming distributor's ability to negotiate price, terms and conditions, and is excessive considering suppliers of video programming already share a good deal of market power to balance that held by the programming distributor. The requirement to carry the programming in dispute at a rate determined by a third party would be a quot;must-carryquot; obligation.The problems that arise with the five arguments offered by the NFL Network to justify proposed state legislation are as follows: - Programmer carriage choices may not reflect consumer preferences. Simple substitution of cable operator carriage choices with programmer choices is less likely than current framework of market negotiations to protect consumers. - Mandatory arbitration is government intervention. Despite claims that it is a quot;process remedyquot; for failed negotiations, mandatory arbitration where one party alone determines carriage terms and condition is government intervention. - Current federal remedies are effective to address competitive harms. Program carriage rules administered by the Federal Communications Commission are sufficient to address allegations of discrimination and competitive harm. The recent complaint to the FCC filed by the NFL Network claiming discrimination by a cable operator illustrates there is no need for state intervention. - Behavior addressed by the proposed state legislation would be preempted by federal regulation. Section 616 of the Communications Act, giving the FCC jurisdiction over program carriage disputes, was enacted to address fears of anticompetitive discrimination by vertically-integrated cable operators. - quot;Arbitrate and carryquot; rules would violate the First Amendment rights of cable operators. The proposed state legislation would impose carriage obligations which are not sufficiently well tailored to serve an important government interest