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A fight over fees paid to transmit CBS content to Time Warner Cable customers has left millions of viewers without access to the channel. It has also drawn attention to long-standing tensions over how television is produced, packaged and priced. A small but growing number of Americans have cut their cable cords and cancelled satellite transmissions. Instead, they are taking advantage of new technology to customize their viewing experience at a lower cost. Non-traditional companies are entering the TV production business and competing with traditional broadcasters. For example, Netflix recently garnered 14 Emmy nominations for its original programming. Diane and her guests discuss the future of television.
- Brian Stelter media reporter at The New York Times and author of "Top of the Morning."
- Susan Crawford professor at the Cardozo School of Law, fellow at the Roosevelt Institute, co-director of the Berkman Center, author of "Captive Audience" and a contributor to Bloomberg View and Wired.
- Adam Thierer senior research fellow at the Mercatus Center at George Mason University.
MS. DIANE REHMThanks for joining us. I'm Diane Rehm. For more than a week, millions of Time Warner Cable subscribers have not had access to their local CBS channel or the station's digital content. A dispute over fees has drawn attention to rising tensions in the television industry as more options for viewing become available for customers. Joining me to talk about the future of television is Susan Crawford, professor at the Cardozo School of Law and author of "Captive Audience" and Adam Thierer, senior research fellow at George Mason University.
MS. DIANE REHMWith us from the NPR bureau in New York, Brian Stelter of the New York Times and author of "Top of the Morning." And we do welcome your calls, your comments. Join us 800-433-8850. Send us an email to firstname.lastname@example.org. Follow us on Facebook or send us a tweet. It's good to have you all with me.
MS. SUSAN CRAWFORDIt's great to be here.
MR. ADAM THIERERGreat to be here.
MR. BRIAN STELTERThanks.
REHMBrian Stelter, I'll start with you. Give us an update on the negotiations between CBS and Time Warner Cable.
STELTERI wish I had some news for you, but they continue to sit on their opposite sides of the court and complain about each other. They have been talking in the last few days. They revealed, you know, the middle of last week that they are sort of negotiating right now, but there's no evidence of an imminent settlement, which is kind of wild because it's been almost two weeks now.
REHMYeah, Susan Crawford, explain what's at stake for both companies.
CRAWFORDWell, back in the early '90s, we really worried about consumer abuse by cable companies so we gave satellite a chance to get access to programming in the 1992 Act, start a new industry. We gave phone companies the right to go into video and to get broadcasters on board. We gave them the right to ask for money from cable distributors.
CRAWFORDWell, it's proved to be a gravy train for the broadcasters. They've gotten more and more money, going up from $200 million in 2006 to probably $6 billion in 2018. And they see an opportunity for additional revenue streams.
CRAWFORDCable is, meanwhile, making lots of money and so the two sides together have a system that's perfectly engineered to raise prices for consumers. Consumers want to watch TV and...
CRAWFORDAbout 90 percent of Americans do that through cable and satellite and at this point, the problem for consumers is if they want to cut the cord and exit from their local cable distributor, which is usually a monopoly. The problem is the rosy scenario of lots of online choice may not exist for reasons having to do with the market power, the cable distributors and their ability to constrain programming coming over to consumers. So it's quite an issue.
REHMAdam Thierer, how do you see it?
THIERERWell, you've got a lot of big players in this debate all with conflicting interests. You've got broadcasters and content companies who want to get paid for their high-quality programming and get it out to as many people as possible.
THIERERYou have cable companies who would like to get that content, but not pay as much as the content companies want for it. And then you have consumers who obviously want as much content as possible at the cheapest possible rate. And you've got a lot of other players here.
THIERERYou've got sports leagues and all sorts of other folks and the bottom line is something's got to give. Not everybody can be happy here. And the problem is you've got regulations here at the federal level, governing just about every side of this marketplace.
THIERERThe government has its thumb not on just one side of the scale, but on both, but certainly more on the sort of broadcaster's side with rules regarding how their programming should be carried, the fact that it has to be carried, where it appears on a cable channel, the fact that you cannot, as a cable company, bring another broadcaster into your local market and cut a deal with them if there's already a local broadcaster there.
THIERERThere are rules regarding sports programming and on and on and on, rules, rules, rules, rules, rules.
REHMAnd one part of that, which you've just mentioned the sports part, Steve, in Wethersfield, Conn. sent an early email saying: "It's rumored the large part of what we're charged for cable/satellite goes to pay for sports coverage, even if I don't watch any sports. I stopped watching televised sports because I did not believe in the pay scales. Does this mean I'm still supporting high salaries for these players, teams and owners just because I subscribe to satellite TV?" Brian Stelter?
STELTERIf you pay for cable, you do pay for sports. If you pay for any form of cable/satellite, any TV at all really, you do pay for sports. And those costs are going up rapidly. In a few days, Fox Sports will join this by launching a brand new competitor to ESPN called Fox Sports 1 and they will make a dollar or two from each of us on top of what we're already paying.
STELTERThe reason why they can do that is because sports is so popular, even though not all of us watch it, enough people do. And it's such compelling live programming, in other words, you know, you don't ever really want to tape a sports event unless you have to. You don’t want to DVR it. You don't want to watch it later. You want to watch it live.
STELTERThat's a compelling proposition so the media companies that own the rights to these sports have been able to raise their fees again and again.
REHMSo what has this blackout meant for consumers?
THIERERWell, for the consumers in the areas affected, they've obviously lost CBS programming.
REHMAre they still paying for it?
THIERERWell, potentially, yes, they are. And the question is, you know, should there be any sort of rebate or anything? But the better question is how quickly can it get back on the air? This is probably one of the more heated disputes that we've seen in the world of television in recent years.
THIERERThere have been disputes that have come before this, however. In fact, there are all sorts of garden variety contractual battles in the world of video. AMC and DISH went at it last year. Viacom and DirecTV and so on, so these things do happen and they would even happen in a purely free market.
STELTERI would add one more layer to this, which is that we're moving throughout the media industry from a world where advertising revenue is paramount into a world where subscription revenue is paramount. And we can see that in newspapers, which, of course, have been on the newsstands for years, but now online, The New York Times and others are charging for their websites, at least in part.
STELTERAnd in television, we're seeing the same thing. We already have cable channels that rely on subscriber revenue, but these broadcast stations, like CBS, increasingly are trying to make up for declines or stagnant advertising revenues by increasing subscriber revenues.
STELTERSo we can see it all across the industry from music to film to television to newspapers and that's part of what we're seeing here with this fight between CBS and Time Warner Cable. CBS says at least that it needs more subscriber revenue, that we need to help pay for the shows we watch more than we used to.
REHMAnd here's another advance email from Andrew in Atlanta, Ga. He says: "I've not paid for cable in years. Even if I subscribed to all three major streaming services, Netflix, Amazon Prime and Hulu Plus, I will still only be paying approximately $25 per month in comparison to the $150 I would pay for cable. Cable offers less control and packages the one or two channels I watch regularly with hundreds of channels I'm not interested in. Why would I pay more for a service that offers me fewer options?" Susan?
CRAWFORDIt's a very good question. But people who are addicted to sports, and there are a lot of us, are going to keep paying for these packages.
CRAWFORDAnd also, if you want real-time news, it's still very difficult to get very high quality news programming online. So the cable distributors are really in a perfect position to be in the middle between consumers and their ability to get access to this programming because you're not going to be able to get sports or news without hanging on to those packages.
CRAWFORDAnd cable can systemically throttle services like Netflix, Hulu and the others because they've got a built-in conflict of interest and a monopoly. It's easy for them to do.
REHMThe L.A. Times has reported that customers are getting a little more than a $4 rebate for the week of CBS they missed.
THIERERYeah, and that's probably going to happen in some of those markets. I want to comment on the previous...
THIERER...point, though, which is that the good news today is that we do have a lot of different options for the way we get video and your caller there, or the person that wrote that letter, obviously reflects a large growing number of people who are utilizing sort of the opportunity to cut the cord entirely and utilize these alternative platforms from Netflix to Hulu to Apple iTunes, Google Chrome App. There are so many different options now.
THIERERSo that's the good news and that will help them lower the bill and get just what they want. For many other people, including me however, we like the idea of a bundled cable or satellite programming content set of options where you have a serendipitous experiment where every night you can flip to something else.
THIERERI may only want to see Bravo or the Hallmark channel maybe once a month, but it's there and, you know, that's the diversity of choice that is provided to me in the modern market.
STELTERI sort of imagine two universes, parallel universes and one is the cable bundle that most Americans pay for and most seem to like, even though they wish it didn't cost so much. Then there's this parallel universe developing of Netflix and Hulu and Amazon and now they're even making their own original shows.
STELTERAnd for some people, for an interesting and growing minority, that parallel universe is enough TV. But I think most of us, at least in the short to medium term, are going to pay for both. We're going to pay for Netflix and cable and we want to have a wide variety of options.
STELTERIf cable can learn anything from that parallel universe, it's that we want more on-demand options and they've got to work harder on that, to improve that. But I see, at least in the short term, people paying for both.
CRAWFORDBut here's the issue, if your local cable monopoly is the only wire into your house capable of supporting, you know, substitute out any bandwidth intensive use, education, health, anything, it's not just TV, if that's your only choice, then the fates of companies like Netflix and Amazon and the rest of them are completely dependent on how they're treated, how their kneecaps are broken as they try to get to subscribers.
REHMWhat a feature. Advertising Age is reporting that Radio Shack says HD antenna sales are jumping amid this CBS blackout. Time Warner customers may be growing inpatient. We're going to take a short break here. When we come back, more of your emails, your phone calls. I look forward to hearing from you.
REHMAnd welcome back. We're talking about the future of television, what's happening with new players like Netflix, like Amazon entering the picture. Here with me in the studio, Adam Thierer. He's senior research fellow at George Mason University's Mercatus Center. Susan Crawford is a professor at the Cardozo School of Law, a fellow at the Roosevelt Institute. She's the author of "Captive Audience" and a contributor to Bloomberg View by ISDN. From NPR in New York City Brian Stelter. He's media reporter at the New York Times and author of "Top of the Morning."
REHMAnd here's our next email from Tony in Plano, Texas. He says, "I'm looking forward to the day when TV is delivered by the internet and we will choose what programs we want to watch from anywhere in the world when we want to watch it. How long will I have to wait? Will it actually go that way?" Susan Crawford.
CRAWFORDEventually. This very brittle, very controlled programming distribution system is going to break down, but here's the problem. If you've got a gatekeeper for more than 85 percent of Americans that rely on cable...
REHMAnd who is that gatekeeper, Susan?
CRAWFORDThe gatekeeper is the local cable monopoly, which is perfectly positioned to stand in between you and that rosy future. So if they can keep raising prices, you may be able to access programming of your choice, but you're going to be paying a lot for that data connection. Already Comcast charges, let's say, $73 a month for a connection of 50 megabits down, 6 up. You can get 100 megabit connection in South Korea or Japan for $13 a month or $16 a month. The comparison is stunning.
STELTERThere are interesting developments on the cable side and what Susan's talking about is getting it to the home. And that's where it gets really complicated I would say, to be understating it. Intel, for example, is trying to create what it calls a virtual cable service, which you would buy over the internet the same way you buy Netflix. And with Intel's product you would stream it through the internet to your television set so it would feel like cable, it would look like cable. But hopefully it would -- and it would have all the channels or many of the channels that you would get currently from cable but it would be delivered via the internet. And it would work maybe more seamlessly with other devices and all that.
STELTERWhat's stopping Intel is a couple of things. Number one, there are contracts with existing cable and satellite companies like Time Warner Cable that really, really discourage channel owners from selling their channels to new companies like Intel. Time Warner Cable says they don't necessarily make it impossible, but they admit they try to make it very hard because they are trying to discourage that competition.
STELTERThe second thing that may hold back Intel or companies like it like Google or maybe Apple in the future is this idea that your broadband connection's going to cost you a lot more if you're watching video through the internet all the time. Or maybe there's going to be a cap that's going to stop you altogether from watching that video. Now the companies that provide broadband, like Comcast, say they're trying to provide an open internet and provide as much access as people want. But there are real questions and real skepticism about whether they would allow that sort of ecosystem to flourish.
THIERERWell, I think for all the talk about gatekeepers and local monopolies, the reality is we already have a lot of this over-the-top video being delivered. We already have a lot of internet television. In my home I do watch programs delivered via Netflix and other types of services, or even through video game platforms. We already have telecom-provided platforms, wireless- and satellite-provided platforms. They are not perfect. They are not always equal in every area to cable but FCC data shows that in most areas you do have at least two of these providers and some three.
THIERERWe should always get more competition. That's a good thing but we already some. And the reality is that there's no reason that these operators, these cable or satellite operators or other broadband providers would block this content. They get paid for delivering bits, digitized bits of information to consumers. And despite all this talk about gate keeping, the reality is they're only going to get paid more if they deliver more.
CRAWFORDWell, luckily for me, John Malone has reentered the cable scene in America. He was the great monopolist who drove the adoption of the '92 act I talked about at the top of the show. He's saying, cable is basically a monopoly now in America for this high-speed, low latency delivery of bits. And if you're a monopoly, you're never going to charge less to subscribers and you're also going to raise gates at the entrances to your networks for content providers. He wants to be able to charge people trying to reach subscribers for the privilege of doing so.
REHMTwo Tweets, the first saying, "Cable companies should be treated as common carriers by the government, which would require service at a reasonable price." The next saying, "I feel like Comcast holds me hostage. I needed to just watch network TV. Terrible customer service, no alternative." Do you want to comment, Brian?
STELTERIn the companies like Comcast that do distribute programming and broadband to us, they do seem to be aware of how bad they're perceived in the marketplace. That doesn't mean they're going to improve. Doesn't mean they're going to change, but they do seem to be very sensitive about how low their customer service centers have been and how badly they're perceived. And they say, Time Warner Cable, Comcast, that they are trying at least to get better.
STELTERI do think one big wildcard here is wireless. What I mean by that is AT&T, Verizon, T-Mobile. If I'm going to be really optimistic, I'm looking for an optimistic point to make here. I would say that my wireless service has gotten so much better in the last couple of years. I now stream Netflix shows and Hulu shows on my phone as if it's no big deal. And that's something that we couldn't have imagined a few years ago. So they may become competitors increasingly as well for this.
REHMWhat do you think, Susan?
CRAWFORDWell, if you use your wireless connection to watch one high-definition movie, you're going to dig through 3 gigabytes of data, which for many Americans is the end of their monthly plan. And so you'll pay big overages. And so that's why Netflix, although it's the most popular application for wired use over the internet, maybe 3, 5 percent of people use wireless connections to watch Netflix. It's just so expensive in terms of the caps and overage fees that it's not a substitute for what you can do over cable.
THIERERBut these feeds are only getting faster and there are other options. My kids walk around with their wireless devices watching some things on 4G over a Telco system. They'll switch over to Wi-Fi on occasion. They'll sometimes pop in a disk or something. There are many different types of platforms to consume media in the modern information age. Regarding the previous Tweet on common carriage, I think it's important to answer that because it's a very dangerous idea to put all of these cable companies and Telco companies back into the box of being a regulated monopoly.
THIERERWe did that for over 70 years in this country. We tried it with something called AT&T. I don't think we want to go back. I don't think we want to go back to local cable monopolies that are heavily regulated either. We have a facilities-based competitive marketplace that's in the works. It is not perfect. Susan, I know, has been very critical of it but it's certainly better than where we came from in the AT&T past.
REHMI think I know your comment, Susan.
CRAWFORDWell, when it comes to high-speed internet access, it really is the substitute for what a phone line used to be in our lives. It's the general purpose two-way communication conduit for everything. And so when people figure out in government that there's a monopoly on the cable side and that we're paying a lot more and getting a lot less than other countries, something is going to happen. It's going to take some political uproar, but we are going to change the situation.
STELTERI wonder if the uproar will come if companies like Comcast increasingly introduce systems where you pay more for more broadband. Susan knows better than I, but Comcast is experimentative with this in some smaller markets. Time Warner Cable has done the same. And as people notice -- if people notice that they're getting charged more for more broadband or they're hitting some sort of thing that feels like a cap, the same way we have on wireless, I wonder if that'll propel the sort of concern that Susan's describing.
REHMI cannot resist reading this email which says, "There's a very good online option for news, NPR. Fantastic online content and user friendly." I'm going to open the phones now, 800-433-8850. First to Chris in Charlotte, N.C. You're on the air.
CHRISHi, Diane. Love your show.
CHRISI just wanted to say that I know so few and fewer and fewer people that are in my age group that actually subscribe to cable TV. I mean, just...
REHMHow old are you, Chris?
CHRISSo, I mean, if you know what you're looking for and you know how to use your resources online, there's a lot you can get. And just especially with Netflix having their own production, I mean, it's just getting better. You can even find UBC documentaries online, which I subscribe to some channels that offer those. So I have an old computer that I just hooked up to a big-screen TV and that's how I get most of my content online, just through Netflix. It's my only subscription. And, yeah, so that's how I get most of my content is through YouTube and Netflix.
REHMSo younger and younger people heading in that direction, Brian.
STELTERThis is the specter of cord cutting that gets talked about, the idea that we will cut the cable cord if we don't need it because Netflix is good enough or in the case of the caller, he'll never sign up for cable. He'll be a cord-never because he never feels the need to have it. Historically college students and then people shortly out of college in their early 20's generally don't sign up for cable in as big numbers as older Americans. But as they age, as they get married and start a family, they almost always sign up for some sort of pay television because, well let's face it, television's an important companion device. It's important to have around for many children. It's a babysitting tool sometimes. It's all those things.
STELTERI interviewed the head of Time Warner Cable recently and I asked him about the specter of cord cutting. And his answer to me was very interesting. I thought he was going to say, we're not concerned about that at all. What he said was, we don't know if this generation, this millennial generation, is going to act differently than every other generation before it. They've all paid for cable as they've grown up in the past, but what will this generation do? And I don't think we know.
CRAWFORDYou know what's fascinating here is that still only 300,000 or so cable subscribers, pay TV subscribers dropped the cord last year. So -- and there are, you know, tens of millions who still subscribe. So...
STELTERI was amazed by how low that was.
CRAWFORDYeah, it's .3 percent of cable subscribers. So, yes, cutting the cord is happening but it's slow. And here's a totally underreported thing. The connections between the eyeball networks like Comcast and Time Warner Cable reaching subscribers, connections between those networks and Netflix's networks that it use, are systematically being degraded. So that during primetime, Netflix looks worse than it should over these connections because the cable operators have a built-in conflict of interest to drive people towards their own video on demand. So that's a huge problem that we're going to see more of.
REHMHelp me to understand Aereo and how it's involved in this lawsuits, Adam.
THIERERWell, Aereo is essentially an effort to deal with the crazy regulatory system that we've got today. It's basically a reinvention of the idea of over-the-air antennas, miniaturized antennas that can be utilized by a consumer to pickup over-the-air television. Barry Diller is the brains behind this idea. And it would be an extraordinarily disruptive force. It's already in the courts being litigated because broadcasters say it should not be legal for these signals to be carried. And it's so far been upheld by the courts as being acceptable. But that court battle's going to continue and it's likely that's going to go a long way.
REHMAnd you're listening to "The Diane Rehm Show." Susan, would you agree?
CRAWFORDI would agree but it's a little bit of an edge case. Aereo is just about the broadcast networks and there's so much else going on. Brian Stelter, our media phenom keeps reporting on the golden age of television in the cable, pay-TV package. And he's right and you can't get that over the air. And can't get that through Aereo.
REHMOkay. Another term, what is Google Chromecast and how does it compare with options like Apple TV, Xbox and Roku, Brian?
STELTERIt's the latest in a series of little inventions that you plug into your TV set that give your TV set access to the wide world of the internet. I have Apple TV at home, it's similar. It allows you to pull up different programming online. For example, just to give a very recent example, yesterday CNN showed a little bit of an interview of Anthony Wiener that was happening here in New York. And the website called BuzzFeed was doing it. Well, CNN dipped out after a few minutes and they said, if you want to watch the rest, go onto YouTube. And it was streaming live on YouTube.
STELTERWell, I plugged in my Apple TV, I pulled up YouTube and started watching it on my TV set that way. You know, it's not always the easiest thing in the world, but devices like Apple TV and now Google Chromecast are trying to make it easier to tap into that parallel universe of online programming.
REHMBut all of this depends on internet access, Susan.
CRAWFORDThat's right. You can think of the cable pipe as one big digital pipe. A little bit of it is allocated to internet access and there's a built-in conflict of interest not to make that the most successful platform.
REHMAll right. To Jamesville, N.Y. Hi, Jesse.
JESSEHi, how are you today?
REHMGood, thanks. Go right ahead.
JESSEWell, I'm calling because this conversation is really interesting and I think it's enlightening to a lot of people that don't have access to broadband. I access a wireless connection...
REHMOh, I'm sorry, Jesse, you're breaking up on us. I gather he did not have access to...
CRAWFORDYeah, we're subject to an enormous digital divide inside America where about a third of Americans don't have a wired home. FCC says 50 percent -- only 50 percent of Americans have access at home to 3 megabits per second. Netflix says that to watch a DVD-quality movie or an HD-quality movie, you're going to need a better connection than that. So people relying on wireless are even a step back from the poor state of wired connections.
THIERERBut that's just not true. I mean, the reality is that high-speed broadband wireless networks have developed more robust in this country than almost any other nationwide. And Verizon, AT&T, T-Mobile, Sprint -- I sit down at my home with the Google Chromecast that I ordered two weeks ago, turn on my phone, started watching some Netflix show that I've been watching, "Orange is the New Black," and streaming it to my television wirelessly through a Telco-provided 4G connection. And it was perfect, no problem.
THIERERNow I can downgrade that image if I need to, to watch my data plan, because obviously we do have to be careful about going over data caps. But the reason they're there is because these are not unlimited resources. You can't have everybody just utilizing them massively without having a lot of costs. So you have to pay for these things. There is no free lunch in the world of broadband. But the good news is, there are options and there are -- I mean, when you talk about companies like Google and Apple and Netflix, these are big players that are involved in putting pressure on these broadband players. And that's what keeps this market competitive.
STELTERIt's the best of times, it's the most uncertain of times, right. There's more to watch than ever, there's more ways to watch than ever. But because of these giant collisions that are happening between these media and tech giants, it's so unclear how it's going to turn out. It's so unclear how we're going to get broadband and wireless in the future and from who. It's unclear who's going to disrupt this marketplace in the future. But, gosh, it is a great time to watch TV if you can get access to it.
CRAWFORDWell, just to respond to Adam, 83 percent of Americans who have a Smartphone also have a wire at home. People in South Korea, in Japan and in China are way ahead of us. They make us look like a backwater when it comes to connectivity.
REHMI don't understand that. You've said that before. How can it be?
CRAWFORDThis turns out to not happen by magic. It happened because of policy. You can call that overregulation. It's the way we make innovation happen in America.
REHMSusan Crawford. She's professor of Cardozo School of Law. Short break here. More of your emails, your phone calls when we come back.
REHMAnd we're back talking about the future of television. With CBS cable television arguing among themselves, it's affecting everybody. CBS Time Warner, but here's an email from Paul, in Colleyville, Texas. He says, "A friend had AT&T U-verse internet plus cable. Would watch Netflix. No hesitation or buffering. Dropped the cable, but kept the internet. Netflix now buffers and hesitates. Friend believes AT&T is doing deep-packet inspection to throttle."
REHMWhat do you say to that? Help us to understand what's in this email first, Susan, and then what you believe AT&T is doing.
CRAWFORDSo this U-verse product, that the caller mentions, takes fiber all the way to the neighborhood, but then between the neighborhood and someone's house there's an old-fashioned copper phone line. So U-verse, the product, isn't a direct substitute for what's possible over a cable wire going all the way into your home, in terms of capacity. Now, U-verse also is controlled by AT&T and I understand from Netflix, that there is real degradation of their product going on during primetime hours.
CRAWFORDPut it this way, users are requesting Netflix streams in huge numbers. Right. And instead of adding capacity to the edges of their networks, AT&T is returning money to shareholders. AT&T returned more money to shareholders in 2012 than it invested in its network. Right. So their priority is to harvest, to soak what they've got, and continue making as much money as possible.
THIERERThere have been hundreds of billions of dollars invested by telephone, cable companies, satellite companies in providing broadband and other types of high-speed services. The reality is, is that there is not this effort -- this sort of conspiratorial effort to try to degrade all these services. The reality is, is that sometimes these networks have issues, especially late at night in primetime hours. You can have, especially in the cable systems, congestion and latency issues creep up just by nature of the shared architecture of the system.
THIERERI mean, those systems could be better. They continue to invest in them because obviously that's not an optimal experience for everybody. But it's a very different thing to say that, than to suggest there's some sort of grand conspiracy here to degrade all these television programs.
STELTEROne of the few things Netflix can do and does do, is release reports that show which distributors provide the best Netflix experience and which ones provide the worst Netflix experience. So at least they can suggest to consumers what's going on here.
CRAWFORDBut, in the absence of a competitive market or oversight, the distributor has absolutely no incentive to do anything about it. They've got a captive audience. They've got people who will subscribe because that's their choice.
THIERERExcept that we've already been through the fact that there are these growing competitive options and that a lot of people, like a lot of your callers and emailers, Diane, have suggested that they are cord cutters and that they're going to alternative platforms and don't need cable anymore.
CRAWFORDIn the third quarter of 2012, 99 percent of new high-speed internet subscriptions went to the local cable monopoly.
THIERERBut then maybe a lot of those people are satisfied with what they've got.
REHMWe don't know.
CRAWFORDYeah, we think that cable has won, basically.
REHMAll right. To St. Petersburg, Fla. Valerie, you're on the air.
VALERIEI appreciate the opportunity, and I appreciate the conversation about delivery methods and competition. What I'd really like to hear the panel discuss is how journalism and information to support a democracy is going to survive this, even past the next few years, during with local TV may have more money. As the newspapers are losing revenue and having to close and cut back, the major networks, including the major cable networks that produce original news, as do a lot of local stations, you know, in quite a worthy way, they're revenue is getting undermined, and they're cutting back.
STELTERIt sure is the most uncertain of times. When it comes to journalism production, you know, the amount of news gathering and production that needs to happen. And I think a lot of the answer to this lies in the point earlier about subscriber revenue versus advertising revenue. To take my newspaper, The New York Times, as an example, increasingly we're subsidized, not by advertisers, but by our subscribers online, as well as in print. And we'll see more and more journalism outfits move in that direction.
STELTERNext week, on cable, Al Jazeera America joins the lineup. It will try to compete with CNN and Fox News and MSNBC. It says it'll be more of a straightforward, down-the-middle, objective news source, with a lot less opinion than we see on other channels. And that's existing thanks to two revenue sources. The biggest one of course, the Emir of Qatar, which is willing to subsidize and pay for hundreds of millions of dollars of programming, but the other revenue stream is subscribers, cable subscription fees.
THIERERSo Brian's exactly right. It is very uncertain times for the future of journalism. The good news, however, again, there's more outlets, there's more options than ever before. There's a question about where high-quality journalism will continue to come from, it's something I think we all care about. We used to rely mostly on advertising to pay the bills, at least with commercial media. And then subscription revenue, as Brian suggested. It may be that last week's model that we saw with Jeff Bezos taking over the Washington Post becomes a model of philanthropy.
THIERERWe know it works quite well for NPR, correct? I mean some of the biggest companies and philanthropists in the world support NPR. And that's a wonderful thing. It may be that this evolution of business models away from advertising and subscription base, moves to a world of philanthropy as going forward.
REHMHow likely, Susan?
CRAWFORDWell, here's a constructive idea, why don't we tie these two issues together. As we make the national upgrade to fiber that we're going to have to make to keep up with China and Korea and Japan and Taiwan, let's siphon off a little bit of that money to support local journalism because the problem is there isn't a really great business model right now for journalism. The Times does very well and it's continuing to make money, but we need reporters in every state house in the country, keeping track of what's going on.
CRAWFORDA lot of things are going under-reported at this moment.
REHMAll right. And here's…
STELTERYou could make an argument -- I'm sorry.
STELTERYou could make an argument that since we all pay in our cable bills every month for CNN, Fox News, MSNBC, for example, we pay a couple of bucks a month for all three of those together, but we don't pay for newspapers in our wireless bill or in our broadband bill. I'm sure a lot of newspaper people would dream about a day where even a few pennies would go toward their work.
REHMAll right. And here's an email whose writer has asked me not to use his name. He says, "I work for a local broadcaster who's owned by a national corporation. Our company is being purchased by a larger TV and newspaper conglomerate, which currently owns a newspaper here in town. As a result, we'll have to be owned by a separate entity because the law forbids our new parent company from owning us. I'd like to know if your guests think that ownership laws like this are still necessary and whether we'll see them change any time soon." Susan?
CRAWFORDI have a lot of sympathy for the writer here. I'm not convinced that the FCC's existing rules on cross ownership between newspapers and TV stations make a lot of sense because the margins are often so low and sometimes we've got dinosaurs who need to huddle together in the snow in order to survive. So let's let them do it. What I'd like to see is a lot greater capacity, internet access, so that more choices of these kinds of outlets are available.
THIERERWe had a huge fight about these media ownership rules in this country about a decade ago. And they included these cross-ownership regulations that the writer is referring to. I wrote a dreadfully boring book about it at the time called, "Media Metrics," that I'll put a quick plug in for here. And suggested that that was the right time to do it. It was a time of great uncertainty and change for newspapers and broadcast outlets, both radio and television outlets. Now, it may be too late. It may just be the case that we're not quite sure if this will do any good, if we relax these rules.
THIERERI still think it should be done, but this is something we should have probably done a decade ago.
CRAWFORDThe key move would be to separate ownership of content from the ownership of conduit. That would make possible a much richer environment for information.
STELTERThere's conventional wisdom in the local television industry right now, which says that maybe there can't be four or five or six news operations in cities. Maybe there's going to be just two or three in the future. What we've got to hope and what we can try to work towards, as journalists in these markets if you work at a station, is that the quality remains high of the ones that continue to exist. Now, there increasingly will be sharing arrangements between stations in markets, especially in small and medium-sized markets across the country.
STELTERBut that doesn’t mean that quality of news has to go down necessarily. You know, local TV still remains the main way most people learn about what's going on in their city and their country. And so it's vitally important.
REHMLet's go to Lafayette, La. Hi, John. John, are you there?
JOHNYes, I am.
REHMGo right ahead.
JOHNYes. I wanted to talk a little bit about convergence. And convergence specifically between the large wireless carriers and the cable (word?) through something called small cells. And one of the tells -- I believe that this is something that we're going to see happen and in a big way in the coming years. And I think one of the tells is what ended up being hundreds of millions of dollars in purchases of wireless licenses from the cable host, from Cox, from Comcast, by Verizon and AT&T.
JOHNSo that they could have more spectrum.
JOHNSo I'd like the panel maybe to talk about it.
REHMSure. All right. Susan?
CRAWFORDWhat the caller's referring to is what was essentially a non-compete agreement between Verizon on one side and the cable guys on the other that was blessed by the federal government last year. This is when you can really tell that competition is not fierce. Fierce competitors don't agree to jointly market their services. So you've got Verizon backing off from installing fiber around the country. They marched that in March 2010, only 18 million Americans will get it. And then you've got Comcast and Time Warner cable doing extremely well.
STELTERBut, Susan, come on. I mean, this was spectrum that was lying fallow and the cable companies weren't doing anything with it. Verizon came along and said, we needed more spectrum to provide better high-speed broadband to the masses. They made a deal, they got it and they're getting it out there. This is the next generation of wireless broadband that is happening right in front of us. This is a good news story.
CRAWFORDRight. But only 11 percent of these highfalutin wireless connections actually provide 10 megabytes per second connectivity.
STELTERMaybe today, but maybe tomorrow we don't know what'll happen, Susan.
CRAWFORDWell, we don't know.
REHMAll right. To Silver Spring, Md. Hi, Doug.
DOUGHi, Diane. Nice to talk to you.
REHMSure. Good to talk with you.
DOUGI just wanted to tell your panel -- Susan had said earlier, like, something about people get their news faster from cable. I'd like to disagree with that because I get all my news from NPR and PBS. Also, I can't remember if it was Brian or Adam that said that they, you know, that people are getting cable to put their kids in front of it, you know, as a babysitter or whatever, whereas, I don't do that. I'm a stay-at-home parent.
DOUGAnd my daughter, who's five, I put her in front of PBS kids and she's been able to navigate PBSkids.org since she was three. So there's a lot of things out there for PBS and I'm blessed to live near the nation's capitol where we have at least 10 different PBS stations and different stations that are publicly given to us. And me and my wife donate to PBS and NPR.
DOUGAlso I -- oh, I’m sorry. And one more thing, I don't have cable. I haven't had cable for over a decade and I subscribe to the three majors, Netflix, Hulu and Amazon Prime, all through my PlayStation 3.
REHMThat's really interesting.
THIERERLots of options.
REHMOn the matter of your three-year-old, you may want to tune in tomorrow to our second hour to hear what a Columbia University professor has to say about the impact of putting a child in front of an iPad or television set for hours and hours during the day. And how that not only may affect the child, but may have an impact on the family. So tune in tomorrow. Thanks for calling. And you're listening to "The Diane Rehm Show."
REHMAnd to Rensseleer, is that -- or is it Rensselaer?
JEANThat's correct. Rensselaer, Ind.
REHMThat's what I thought. Hi, Jean. You're on the air.
JEANHi. It's great to speak to you. My question briefly is, Rensselaer is a really small rural town. And where I live we have cable through Dish, the satellite, but we can't get internet in any form that's not basically still almost dial-up. And my question for the panel is, how do you see the markets reacting to trying to get more rural areas because there's a big push now, I see, in advertisements where they're saying they will reach us in these sort of small, isolated communities. But when I called they say, oh, no, you're in a black zone. We have -- or a red zone or some sort of zone…
JEAN…where there's nothing for you. So we have to connect through, like -- we still connect through dial-up. We connect through MiFi, those little boxes.
JEANAnd I just wanted to know what was going on.
STELTEREvery few months AOL reports its earnings and technology reporters are always stunned that AOL still has a healthy dial-up business. But this explains why, because there are still these pockets across the country that they can't get access. And Susan, I think, would say it's because the cable companies aren't willing to spend the money it takes to get there.
CRAWFORDRight. It's doesn't align with the models. These are not evil companies, it's just that they have promised Wall Street that they'll be making X amount of revenue per shareholder. Right. So they have no incentive to expand beyond dense metro areas. So as a result, 19 million Americans can't get a wired connection where they live. In other countries, and, in fact, in the United States when we launched our telephone system, which was the envy of the world, everybody gets it at a reasonable cost and we are world class country as a result.
THIERERLike your caller Jean, I grew up in rural Indiana myself and in Illinois and we didn't have access to a lot of things there growing up in the '60s and '70s that people do today. There are always going to be pockets that are harder to serve than others in the United States. We're a big country.
REHMWhy are they harder to serve?
THIERERBecause geography matters. And it is hard to reach some pockets with service. I mean, when I was growing up in the middle of an Illinois corn field, a lot of the farms that I used to go to still had outhouses. And that was in the '70s. You know, it takes a long time to serve certain communities with certain services.
REHMSo do you believe that plans are underway to get to these sort of black holes?
THIERERIn most communities you can get some level of access. And clearly it's not always adequate.
REHMBut she's got dial-up.
THIERERLike dial-up is not good enough anymore.
REHMAnd this is 2013, after all.
THIERERAnd luckily there have been many plans made to try to find ways to reach those deep-seated rural pockets. And there are already a lot of federal programs that already deal with it.
REHMHow long is she going to have to wait, Susan?
CRAWFORDWell, we hope it won't be too many more years, but here's the problem, Sweden, less dense than we are, you only pay 11 cents per megabyte per service and everybody's got it. We pay 53 cents. So there's clearly a broken marketplace here. We're not reaching enough people. We're charging them too much, and we're falling behind in the global race.
REHMYou're going to get the last word, Brian.
STELTERThe wild card here, as it is in so many conversations about technology in the future, is Google. What will Google and companies like it, and the next Googles of the world, do to provide TV and internet to us? Google already in a few markets is putting in something called Fiber. They seem interested in wireless, as well. And I wonder Fiber, 10 years from now, if they'll be a big part of this discussion.
REHMHope I'm around to see it, Brian Stelter. He's media reporter at The New York Times, author of "Top of the Morning." Adam Thierer is senior research fellow at George Mason University. Susan Crawford is professor at the Cardoza School of Law and author of "Captive Audience." Thank you all so much.
REHMGood to be with you. Thanks for listening all. I'm Diane Rehm.
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