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Vertical integration and the must carry rules in the cable television industry: An empirical analysis
Unformatted Document Text:  Must carry rules 24 non-carriage behavior. As such, what the findings imply for the must carry regulations and the Supreme Court’s ruling is largely unfavorable. Policy implications The basic premise of the government’s argument in support of the must carry rules is that cable system operators have every incentive to deny carrying local stations on their systems, as a form of market closure. To back up this premise, the government argued, among other things, that because the cable and broadcast television industries are competitors on the programming front, cable operators that are vertically integrated have the incentive to favor their affiliated programmers to the detriment of broadcast programmers. However, while it is true that the broadcast and cable industries are competitors in some aspects and cable system operators have some disincentives not to carry local stations, the results of the studies here did not bear any systematic evidence that cable systems denied carrying some broadcast stations for anticompetitive reasons. Actually, the stations most likely to be denied carriage, in the absence of the must carry rules, were low rating independent stations and/or duplicate network stations from a distance. While these at-risk stations may represent important voices in a marketplace of ideas, non- carriage of these marginal stations can not be regarded as anticompetitive. In fact, it can be argued that society could make better use of the resources these stations occupy. Therefore, unless the government’s interest was to ensure the viability of every single station in the country, the must carry regulations can hardly be viewed as good economic policy in the promotion of efficient use of public resources.

Authors: Yan, Zhaoxu.
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Must carry rules
24
non-carriage behavior. As such, what the findings imply for the must carry regulations
and the Supreme Court’s ruling is largely unfavorable.
Policy implications
The basic premise of the government’s argument in support of the must carry
rules is that cable system operators have every incentive to deny carrying local stations
on their systems, as a form of market closure. To back up this premise, the government
argued, among other things, that because the cable and broadcast television industries are
competitors on the programming front, cable operators that are vertically integrated have
the incentive to favor their affiliated programmers to the detriment of broadcast
programmers.
However, while it is true that the broadcast and cable industries are competitors in
some aspects and cable system operators have some disincentives not to carry local
stations, the results of the studies here did not bear any systematic evidence that cable
systems denied carrying some broadcast stations for anticompetitive reasons. Actually,
the stations most likely to be denied carriage, in the absence of the must carry rules, were
low rating independent stations and/or duplicate network stations from a distance. While
these at-risk stations may represent important voices in a marketplace of ideas, non-
carriage of these marginal stations can not be regarded as anticompetitive. In fact, it can
be argued that society could make better use of the resources these stations occupy.
Therefore, unless the government’s interest was to ensure the viability of every single
station in the country, the must carry regulations can hardly be viewed as good economic
policy in the promotion of efficient use of public resources.


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