YouTube is the ‘ultimate à la carte’

So what about Chairman Rockefeller’s online video legislation? However well intentioned it may be, it is not pro-competition, but actually heavy-handed, unwarranted, implicit price regulation. It would profoundly distort the marketplace in several destructively uneconomic ways.

It would not promote competition based on economics and property; it would simply favor one type of business model over all others. That would foster competition for government favors, not competition for Americans’ business.

The legislation should repeal the obsolete 1992 Cable Act, because it incorrectly assumes that cable is a monopoly when nearly half of America’s video households, 46 million, get service from a cable competitor.

Specifically, it seeks to treat online video distributors, the way Congress treated DBS companies in 1992, with mandated program access. In 1992, DBS providers were completely new entrants facing a then effective cable monopoly.

Those market facts warranted government intervention to jumpstart competition. Today those market facts no longer exist.

Consider the primary beneficiaries of this legislation. They aren’t new entrants and they aren’t facing an effective monopoly.

First, Google-YouTube already has a billion viewers, is the third most valuable company, and generates $30b in gross annual profit. The other is Netflix, which is the largest video distributor by subscribers in the U.S., and which enjoys a stratospheric market valuation and a billion dollars in annual gross profit.

The legislation would effectively grant these two online video juggernauts, who consume half of the nation’s peak downstream bandwidth, with implicit, multi-billion dollar, bandwidth and content subsidies. That’s not competition. That’s corporate welfare for billionaires.

In sum, American consumers already enjoy the most unfettered video choice in the world.

This legislation perversely would destroy consumer video choice because it would destroy the sound and sustainable economics of the current vibrantly competitive video marketplace.

It nonsensically would force content producers and bandwidth providers to offer their products at prices and on terms where they could not earn any return on their investment.

Simply, government mandates naturally limit consumer choices. In contrast, market-based competition naturally promotes consumer choice.

Scott Cleland is Chairman of NetCompetition, a pro-competition e-forum supported by broadband interests and President of Precursor LLC, a research consultancy for Fortune 500 companies. Cleland served as Deputy U.S. Coordinator for International Communications & Information Policy in the George H. W. Bush Administration.