The Potential Conundrum of Regulating Pay-TV

In last week’s column, I argued the merits (or rather the lack thereof) of extending decency regulations to cable and satellite TV. This week, I’ll point out just how much of a quagmire this would actually be and how difficult it would be to implement, regardless of the merits.

Regulating cable and satellite TV would not be as clear-cut as it might seem on the surface. Remember, we are talking about the regulation of indecency which, unlike obscenity, is protected by the First Amendment. The complexities of such an undertaking are quite formidable, to say the least. There are several key issues that would have to be dealt with and overcome. Like they say, the devil is in the details.

For one thing, Congress would need to determine the scope of what is to be regulated. Would it be cable and satellite TV only or all forms of pay-TV?

If Congress sets out to regulate all forms of pay-TV, the term – "pay-TV" – would have to be legally defined. Besides satellite and cable, would it also include the new IPTV technology in which TV channels, programs, and movies are delivered to TV set-top boxes from the internet? Would internet video viewed on a computer also be included? Or would everything originating from the internet be automatically exempt?

Would wireless pay TV services also be included?

Would videos, whether rented or purchased, also be defined as a form of pay-TV? One could make a case for them being included because videos, both VHS and DVD, are ultimately played on a TV.

What about video delivered by cell phone? Couldn’t that also be considered a form of pay-TV?

Now, if Congress decides that the new regulations will only apply to cable and satellite TV, there are still problems. Would all channels on every cable and satellite TV system be regulated or would the regulations just apply to the so-called "basic" channels. Would the term, "all channels", include pay-per-view and video-on-demand (VOD) programs and movies? If so, how would the safe-harbor hours be enforced with VOD, since the subscriber determines when the programs and movies play?

If only the basics are to be included, some definition would be have to be devised to determine the difference between a basic and a premium channel. Would any channel that could be purchased as part of a package of channels be defined as a basic channel? If so, then most channels we currently think of as premiums would be included because they can be packaged together with similar channels. For example, HBO is sometimes packaged with channels like Cinemax, Showtime, Starz, or even other multiplexes of HBO.

Or would basics be limited those channels available in the first tier or two? Since this packaging varies from one cable and satellite system to the next, how would anyone know which channels are the real basics? Would premiums be limited to channels that could be subscribed to individually at an additional price? If that’s the case, would a multiplex channel like HBO Signature will treated like a basic, since it cannot be subscribed to individually? Also, the channels that one can subscribe to individually vary slightly from one cable and satellite system to the next, so how would anyone know which channels are the real premiums? When things like that differ from one cable and satellite system to another, would the rules be based on how the majority of the systems operate? Or would some other method be used to resolve this matter?

Perhaps the presence or absence of commercials could be used to separate the basics from the premiums. Under that system, all channels that are advertiser-supported would be considered basics and those that are not would be considered premiums. However, there are potential problems with this methodology as well. Congress would have to come up with a definition for advertiser-supported. Would it be based on the amount of advertising a channel carries? If so, how much advertising would it have to carry to be legally considered advertiser-supported? Or perhaps it would be based on the amount of revenue a channel derives from advertising. If so, what would that threshold be?

Even the term, "advertising", would have to be legally defined. Would product placement found in movies and TV shows be included in the advertising equation? What about promos run for shows on related channels? Would those count as ads?

Even when all of that is sorted out, this methodology still leaves us with the problem presented by channels like Turner Classic Movies, Fox Movie Channel, and the Independent Film Channel, which don’t carry commercials but are included in many basic packages.

Now, assuming that all of the issues surrounding the scope of the new regulations could be worked out, the penalty issues would then have to be resolved. Who would pay the fines? Channel owners? Cable and satellite operators? Performers? All of them?

If internet audio and video are included in the scope of the regulations, would internet service providers and/or IPTV operators also have to pay?

If cable and satellite operators have to pay, couldn’t large fines potentially limit some smaller cable companies’ ability to expand and implement new technology like high-definition channels?

Then there’s the issue of license revocation. Cable and satellite channels don’t have licenses like broadcast channels. How could a habitual offender’s license be revoked if it doesn’t have license to begin with? Or would it just be put out of business? But wouldn’t that limit the channel choices available to cable and satellite customers?

Could cable and satellite operators be put out of business? Wouldn’t that leave people in some areas with no cable franchise? Wouldn’t it squash competition for cable service in areas that currently have it? Would the FCC actually shut down Directv and/or Dish Network and render thousands of backyard dishes worthless?

As you can see, there is a mountain of complicated questions that would have to be answered before the decency regulation of pay-TV could become a reality. Obviously, there would be lots of i’s to dot and t’s to cross. As this legislation is being considered, lawyers throughout the Capital area are already licking their chops!