Equal Chance for Satellite TV

Americans’ cable TV rates rose an average of 7% last year and are expected to increase further when cable rate regulations are discontinued on April 1. Consumers have every right to be angry, but Congress can, and should, help resolve the problem by allowing satellite TV providers to compete with cable operators on an equal footing. The key is letting satellite companies offer local channels to subscribers in urban markets and reducing the stiff copyright fees that satellite broadcasters have to pay--currently several times more than cable operators pay per subscriber for the same programs.

Digital compression technologies developed in the past year allow satellite operators to match cable companies in the number of channels. Meanwhile, satellite providers are consolidating operations to strengthen their ability to compete with cable operators.

Last Friday, Hughes Electronics announced that it is purchasing a competitor, PrimeStar Partners, in a deal that could catapult Hughes’ DirecTV satellite service into the nation’s top three pay TV services. It would have 6.5 million subscribers and rank behind only Time Warner and Tele-Communications Inc. In another deal, another of DirecTV’s competitors, EchoStar, announced a partnership with Microsoft to introduce a high-speed Internet-by-satellite service this spring.

The most vocal advocate for competition between satellite and cable companies has been Sen. John McCain (R-Ariz.). But a bill McCain introduced in the Senate on Monday tries to sell the cable industry and its TV network partners on the idea by giving away the candy store. The proposal would limit the Federal Communications Commission’s power to regulate the broadcast industry by requiring four of five commissioners to agree to any new regulations (currently a simple majority will do). It also would let networks own local stations that collectively have up to 50% of the national audience, instead of the current limit of 35%. In addition, the FCC’s power to approve mass-media mergers would be repealed.

McCain is right to argue that it would be unfair to simply remove the regulations restricting the satellite industry while continuing to regulate broadcast and cable. But it would be better still to apply similar regulations to satellite and cable companies and include some minimal public-interest requirements.

The FCC’s power should not be further eroded, and the right solution is to equalize opportunity and let competition do the rest.