[opendtv] Re: Digital Trends: ESPN may pull its finger out of the Internet-TV dam, unleash a flood of change

  • From: Mark Schubin <tvmark@xxxxxxxxxxxxx>
  • To: opendtv@xxxxxxxxxxxxx
  • Date: Wed, 05 Feb 2014 12:41:55 -0500

Craig, you seem to be ignoring the one thing I am questioning: your timeline, i.e., the idea that it was the geographical-monopoly regulation of electric power utilities that led to U.S. regulation of radio.

Again, I am certainly no expert on the regulation of electrical utilities, but I quickly found a Cato Institute paper on the subject: "A Historical Perspective on Electric Utility Regulation" by R. Richard Geddes:

According to the paper, early regulation of electrical utilities was by municipalities, but they actually encouraged local competition. It was the change to state regulation that established geographical monopolies. The paper notes two date ranges for the state regulation: "the early wave, between 1912 and 1917, and those that adopted state regulation after 1917."

The "early wave" begins two years after the Wireless Ship Act and is coincident with the regulation of radio by the Commerce Department under the Radio Act of 1912. Thus, the U.S. Federal government was regulating radio before it could have used the regulation of electric utilities as a model.

That's all I've been pointing out.  Your timeline is flawed.

About whether some later government regulators chose to use anything as a model you are certainly welcome to speculate. The FCC has changed its mind many times since 1934.


On 2/5/2014 12:16 PM, Craig Birkmaier wrote:
On Feb 5, 2014, at 8:32 AM, Mark Schubin <tvmark@xxxxxxxxxxxxx> wrote:

On 2/5/2014 7:12 AM, Craig Birkmaier wrote:
The Federal Radio Commission was formed in 1926,
Wiki says it was formed in 1926, but the formal legislation to control it was 
not passed until 1927.

I don't follow your reasoning.  Most radio broadcasting at the time was by 
independent stations, not monopolies.  While RCA and AT&T wanted radio to be a 
monopoly, the government did not assist them in that cause, even though the 
government had created RCA in the first place.
My reasoning is that the government acting in “collaboration” with the existing 
broadcasters imposed regulations that limited competition. As the industry started 
before the government stepped in to regulate it, you are correct that there were 
many players. Once regulation began, the government managed the licensing of 
stations, and each market began to operate as an oligopoly. Some of this was 
necessary, as there is a limited amount of spectrum available, and wary technology 
often required some “protection" from interference. As technology evolved and 
more spectrum was assigned to radio (e.g. FM) radio stations did proliferate. But 
you still had to meet the regulatory burdens to obtain a license.

Initial government policy was that the spectrum belonged to the people - you 
could not buy or sell it. Eventually, however, the government allowed the sale 
of stations, essentially creating a market for spectrum.

By the time TV was ready for prime time the entrenched radio broadcasters had 
an easier time convincing the FCC that there should only be a few voices in 
each market. So TV was set up from the get go as a regulated oligopoly, 
typically with three commercial networks and one public station per market; in 
some larger markets, such as New York, a few independent voices were allowed. 
It was many decades later before a fourth commercial network was allowed, in 
part because the spectrum scarcity issue was eased a bit when the UHF spectrum 
was opened up to TV broadcasting. The four major commercial networks have 
enjoyed the benefits of operating as an oligopoly. But the biggest “mistake” 
IMHO, was the 1992 cable act, which essentially has allowed five companies to 
come to dominate both the content and distribution businesses, in tandem with 
the MVPD oligopoly.
In any case, government regulation of radio transmissions began much earlier 
than the FRC.  Consider, for example, the Radio Act of 1912, which explicitly 
authorized the Department of Commerce to determine spectrum allocations.  Even 
before that, there was the Wireless Ship Act of 1910, which also inserted the 
government into radio regulation.
Regulation is not the real issue in this discussion. I think we all understand 
and agree that regulation and standards are important in a mass communications 
medium that relies upon a public resource - i.e. the spectrum.

The real issue is business models, and the role the government has played in 
creating and regulating one of the most profitable and influential industries 
in history. In many countries there was NEVER the pretense of competition; the 
media is viewed as a function of the state, with carrying degrees of control 
over the content. In the U.S. we created the illusion of competition and 
independence from government control of content. Ironically, while the media is 
breaking free of government shackles in many areas of the world, we now 
understand that our media is far from free from government control and 
influence on the content side of the business. The politicians rely on the 
media to carry their water, and the media is richly rewarded...

As for the electric power industry, that's not my field, so I can't say when it 
began to be regulated, but I HAVE researched one little tidbit of it, which 
shows that there was not a common electric-power industry in 1903.  That's when 
Dr. Percy Brown became head of what we would today call the radiology (and was 
then called the roentgenology) department at the Children's Hospital in Boston.

The X-ray machine required electric power, but there was no power company to provide 
it, and the hospital was gas lit at the time.  A nearby opera house had electric 
lighting and their own generators to power the lamps.  So the hospital ran a line to 
the opera house for power.  But the opera-house generators ran only when the opera 
house needed them.  So, in Brown's words, "No opera, no X-rays!”
Like yourself, I am no expert on the power industry. But I did a significant 
amount of research on the subject of “natural monopolies” while I was working 
on the U.S DTV standard. There is fascinating history here with an abundance of 
information to shift through. But the bottom line seems to be that everyone 
recognized the need for a common distribution infrastructure, and the 
industrialists ASKED to be regulated as natural monopolies, giving each 
protected regions in which to operate and freedom from price competition. This 
in turn evolved into government regulation of pricing that still dominates 

So, do you think that between 1903 and 1910 an electric-power industry was 
created, was regulated as a monopoly, and became a model for U.S. government 
regulation of wireless transmissions?  The same government that had already 
been regulating communications since its establishment of postal service?  The 
same government that DECLINED to establish a monopoly on radio?

I don’t.
An absolute YES to the question of how the electric power industry became a 
regulated "natural monopoly.”

I believe this decision set the stage for the government to look for other 
natural monopolies from which they could benefit and profit. Clearly 
broadcasting did not have the burden of needing a single distribution 
infrastructure, as is the case for electric, water and sewer services. But the 
politicians knew that this new medium (radio) had enormous potential to 
influence the public and keep them in the spotlight.  While much of the world 
moved to government run broadcasters, we allowed a limited number of commercial 
interests to operate in this new medium. As it became obvious that broadcasting 
is the most powerful tool ever placed in the hands of the politicians, they 
decided that a few voices were adequate to create the illusion of competition, 
even as they used the media to (sorry) “fundamentally transform America.”

So here we are today, and five companies control 90% of all television 
programming; they are enormously profitable, and have the political clout to 
maintain their oligopoly, even in the face of a new medium that is 
fundamentally transforming almost every other aspect of our lives.


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