Can't see sports, Oscars without channel-bundle subscription you don't want? Let regulators know

Gencraft

I filed a comment today with the Antitrust Division of the U.S. Department of Justice regarding the Disney-Fox-Warner sport streaming deal, and more generally, the anticompetitive practice of streaming television sales with channel-bundling leverage and opt-out subscriptions.

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9 March 2024

Dear sir or madam at the Antitrust Division of the U.S. Department of Justice:

I understand you are scrutinizing the Disney-Fox-Warner sport bundling agreement, and you no doubt are sensitive to the situation in televised sport since the recent congressional hearings on sport media rights.

I draw your attention to two of this weekend's top offerings in sport and entertainment, because they are demonstrative of the problem now in the streaming industry—which is to say, for our times, in the television industry.

In sports, this weekend will see a meeting of the top two, closely matched soccer teams in the world contending for the Premier League championship, Manchester City and Liverpool.  NBC owns U.S. TV rights to Premier League matches in the United States.  NBC's practice is to break up matches horizontally, across its many media properties and contractual arrangements, compelling consumers to have to pay for multiple services to follow a single team in a single sport.

The practice is worse still: high-interest matches such as Sunday's are available only with the purchase of subscription bundles to channel packages consumers do not want.  Yes, the match is available from multiple electronic packages, but each is an expensive bundle: Fubo, Sling, DirecTV, and USA on cable television.  There is no one-off purchase option, nor even a one-channel purchase option.  The price of one month on one of these services far exceeds the market value of one match, or even four weekly matches.

This leveraged bundling, compelling consumers to buy what they do not want to get what they do want, especially in a billing format of opt-out subscription renewal, is an anticompetitive practice. It is ironic that Fubo has sued in private antitrust enforcement to stop the Disney-Fox-Warner agreement. Fubo's position seems to be that it wishes to profit in the vertical market from bundling leverage, but does not want providers to profit from the same model in a horizontal arrangement. In entertainment, the Oscars air on ABC Sunday night.  Like NBC in sports, ABC is making this popular program available only through bundled channel services such as Fubo, Sling, YouTube Live, Hulu Live, DirecTV, and ABC on cable television. Again, there is no one-off purchase option, nor even a one-channel purchase option. 

Again, consumers must buy access to content they do not want, again in a billing format of opt-out subscription renewal.  Media watchers such as Vulture advise consumers to purchase a television antenna to see the Oscars on ABC broadcast.  Is it not plain evidence of ABC's anticompetitive practice that in this day and age consumers would have to regress technologically to over-the-air broadcast to avoid paying for what they do not want?  Never mind the fact that old-fashioned broadcasters have substantially dampened their signal power, so that over-the-air reception is not feasible for many Americans, even on the fringes of large markets.

Disney-Fox-Warner argue that they must forge an agreement to meet consumer demand, so their agreement is in the public interest.  They are not wrong.  However, they are right only insofar as you already have permitted an anticompetitive market to exist.  For a player in this market to succeed, it must grow bigger, must exploit horizontal and vertical integration.

The fundamental problem is that the market already is dysfunctional.  Market actors are trying to replicate the cable model in a streaming world. But the cable model came about as a function of technological limitations, not market forces.

Is it not self evident that in a free market, consumers would be able to buy what they want and not buy what they do not want?

I entreat you not to approve of the creation of another integrated market player. At the same time, I entreat you, start taking a hard look at the anticompetitive practices that already are tolerated in existing horizontal and vertical integrations, especially through the strategy of channel-bundling leverage and opt-out subscription sales.

Sincerely,

Rick J. Peltz-Steele

(for information only:)
Attorney, Washington, D.C.
Chancellor Professor, UMass Law School

It's education and healthcare, stupid

CC0 Pixabay via picryl

Experts are puzzled over American discontent while economic indicators ride high. Yet they consistently fail to recognize what seems to me an obvious factor: the exorbitant cost of education and healthcare.

My feeds have been awash in stories and analyses of the disconnect between economic indicators of a prosperous America and people's simultaneous sourness on their economic prospects. The Atlantic tackles the problem perennially (e.g., Apr. 2022, Oct. 2023, Nov. 2023, Dec. 2023, Jan. 2024). Yesterday I caught up on my podcast backlog with Paddy Hirsch and Darian Woods enumerating five explanations for The Indicator earlier this month.

To be fair, the explanations are multiple, complicated, and interrelated. Almost every writer fairly points to inflation as a capstone problem. As Hirsch put it, Americans care less about mathematical formulae than about strain on the wallet at the gas pump and the grocery checkout. 

Moreover, The Indicator helpfully told me, data show that even if wages are keeping up with inflation on average across the economy, that's not the experience of many, if not most, Americans. Wages in volatile markets, especially for young people who have the economic flexibility to change jobs more readily, are outpacing inflation times over. But wages in career tracks, for middle-aged and older Americans tied to mortgages and other responsibilities, are failing to keep pace with inflation. So yes, we're rightly frustrated when a smiling employer gleefully announces a wage hike, yet we somehow have less money in our pockets at month's end.

At the same time, I have been frustrated repeatedly by writers' and analysts' failure to recognize an elephant in the room: the exorbitant cost of education and healthcare in America. The problem is amplified by inflation, but it's not a byproduct of inflation, and it won't be remedied by any number of interest-rate hikes.

Let me interject that there is an overarching problem as well that analysts often fail to recognize, which is simply that economic indicators are not interchangeable with human happiness. American culture habituates us to equate, mistakenly, economic prosperity with personal joy. Yet ample social science data gathered around the world show that wealth, whether societal or personal, does not necessarily correlate with happiness; much less is it causal. And see Matthew 6:19-24. A productive society by economic measures is not necessarily a society that produces art, that affords opportunity for recreation and leisure, or that values freedom for individual and interpersonal fulfillment.

Even by economic measures, though, healthcare and education are anomalous sectors. As a matter of morality, healthcare cannot be left to the free market—and I say this as an economic conservative—because the essentiality of healthcare for survival makes any bargain inherently unfair, any playing field invariably unlevel.

Similarly, education, at least in part, also must operate extrinsically to the free market for goods and services. Education does not guarantee upward economic mobility. But upward economic mobility is profoundly unlikely without education. And a market has no incentives to provide educational opportunity as long as labor is abundant.

Consider: A society based on slave labor might look marvelous by economic measures: full "employment," efficient resource distribution, pyramid-building productive capacity. Yet there is zero potential for laborers' upward social or economic mobility. In America, we purport to abhor servitude and to prize socioeconomic potential as "the American dream."

Both healthcare and education are therefore imperative in our society; their absence, or unattainability, is hard felt. But the free market will provide neither in adequate supply. Healthcare will be unattainable for those unable to pay the going price. Education is a byproduct of a healthy economy only insofar as it is necessary to ongoing productivity. The economy won't provide for retraining as long as labor is abundant, and upward mobility is not even on the board.

This isn't an abstract problem. This is what Americans feel on the ground.

I went to the ER in the fall.  I was in the hospital for maybe seven hours, out-patient.  I am lucky to have insurance that covered most of the roughly $15,000 cost.  I am blessed with employment that allows me to cover without much strain the roughly 10% of the cost allotted to me. 

But for many Americans, in many instances, medical treatment is unaffordable or entails bankrupting medical debt. People choose to live with pain—not economic pain, but real pain, sometimes a toothache, sometimes terminal illness—because they can't afford healthcare. 

Why would we expect that people suffering with pain and ailments, unable to see doctors, would ever report feeling good about the economy?

My wife and I make decent money (for now). By some measures, our U.S. household ranks as high as the 93rd percentile by income. By tightening our belts for a few years, we mostly managed to put our one child, after public K12, through a bachelor's program. Still, she had to borrow about $50,000, much of it at 6.5%, to close the gap for four-year university. And we co-signed on those loans even while we were still, in our 40s, paying off our own higher-education debt. Neither our education debt nor the mortgage on our modest home discounted our income on the FAFSA that blithely informed us of our ample capacity to pay for college. And again, we're lucky and blessed. We could make it work.

For too many Americans, the cost of higher education is crippling or prohibitive. To my point, the economy doesn't care about education other than an efficient means to an end. The only relevant question is whether the hamster wheel is still turning. There's no need for people to better themselves, their lot. 

Why would we expect that people without hope for a better life for themselves or their children would ever report feeling good about the economy?

Education costs and debts work an enormous strain, financially and emotionally, on Americans. Healthcare costs, sometimes risks, sometimes debts, work an enormous strain, financially, emotionally, and physically, wearing us down, day after day.

And here's what really gets my goat: Things don't have to be this way. My cousins in Canada and Europe don't suffer under these strains. They have affordable healthcare and education. They are free to move about their lives.

My cousins pay more in overall tax burden—but not much more, and maybe less if I factor in my lifetime healthcare and education costs, as well as property taxes. And don't get into it with me over quality. As to education, I teach in Europe, and my students there are, to be frank and on average, better equipped as liberal arts undergrads than my American 1Ls, not for lack of work ethic. As to healthcare, I haven't met my primary care doctor since three primary care doctors ago. The reason I went in the fall to the ER, where I waited for five hours to be seen, was that neither my primary care network nor any area urgent care had a single opening. My "best healthcare plan anywhere in the world" must have been mislaid with my jetpack.

Can you imagine an America in which a university degree or a hospital admission would not have to be followed by years or decades of monthly payments? in which people could retrain for better jobs without incurring crippling debt? in which people could change jobs without sweating the burden of massive debts or the risk of losing access to life-saving medicine for themselves or their families?

That would be a free market. A level playing field. 

That's not what American corporations want. So that's not what Congress wants.

It's ludicrous (ludacris?) to expect that people—consumers—would radiate joy about a rosy economy as long as they're shackled, compelled to run the hamster wheels of a market that's not really free.

FTC 'junk fees' proposal needs tightening

The CFPB is attacking junk fees in banking. The FTC rule
would govern consumer sales transactions. CFPB image.

Today I submitted the following comment to the Federal Trade Commission on the notice of proposed rule-making regarding "Trade Regulation Rule on Unfair or Deceptive Fees." These are the "junk fees" that the Biden Administration has pledged to combat.

The NPRM was published on November 9, 2023. You too can comment at the Federal Register website. You can bet that business will be crying loudly about the impracticality of simply telling customers what the price of a thing is.

I support the proposed rule, though I don't think it goes far enough. My comment focuses on select points of ambiguity on which already I foresee business intransigence.

Elsewhere in the world, even tax is part of a price. When my friends and family visit from abroad, they are flummoxed by the repeated experience of seeing a price and then having to pay more. For some reason we countenance this in America, as if in some kind of wild West approach to market regulation, it's OK for a seller to put a gun to the consumer's head at the point of sale. As I say in my comment, that is not what "free market" means.

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December 6, 2023

I support the proposed rule because I support free-market transaction and regulatory policy. A free market requires transparency around the terms of transaction to both buyer and seller. When a buyer is surprised by junk fees, that is, fees that are applied to a transaction after the customer believes that she or he has concluded negotiation of the terms, the seller is able to conclude the transaction upon an unfair advantage. It is an appropriate role for government regulation to level the marketplace by ensuring transparency, and that means upfront total pricing.

I note [a] point of potential ambiguity, and, thus, potential abuse by sellers. In the proposed rule, “Government charges” are defined as

all fees or charges imposed on consumers by a Federal, State, or local government agency, unit, or department. This definition covers only fees or charges imposed by the government on consumers and does not encompass fees or charges that the government imposes on a business and that the business chooses to pass on to consumers.

I anticipate argument over two points.

First, I expect that quasi-governmental actors, such as a corporations created by statute, and government contractors, such as service concessionaires, are not agencies of government. Sellers might disagree.

Second, if a governmental actor compels a seller to report and pay a per consumer or per transaction fee, I expect that the fee is nonetheless a fee that the business “chooses to pass on to consumers.” Sellers might disagree.

By way of example, I have just made a car reservation with Avis at BWI. My upfront price was $104.82.

On the payment page, the following fees were added:

• Concession Recovery Fee (11.11%): 12.27
• Customer Facility Charge-3.75/day: 7.50
• Transportation Facility Charge-2.25/day: 4.50
• Vehicle License Fee-0.56/day: 1.12
• Total Tax: 14.97

The additional fees sum $40.36, which is a 38.5% markup on the upfront price.

All of these fees are sanctioned by Maryland law. The former two fees are passed on by Avis to the Maryland Airport Authority (MAA), and the latter fee is, self-evidently, a tax. I do not know the beneficiary of the penultimate two fees, but I assume that the Transportation Facility Charge goes to an MAA shuttle contractor.

So first, is the MAA contractor a “government agency, unit, or department” under the proposed rule? I suggest no, because contractors and concessionaires, like quasi-governmental “sue or be sued” entities created by Congress, are expected to comply with the rules of the competitive marketplace when they act in a commercial capacity. However, Avis might disagree, arguing that the fee is set by the MAA. The MAA is a governmental unit of Maryland state government.

Second, are these fees “impose[d] on a business[,] and … the business chooses to pass [them] on to consumers”? I suggest yes, because Avis owes these fees to the MAA, et al., but is not obligated to pass them on to consumers. As long as Avis accounts for the fees with the government, Avis remains free to price its services as it pleases. Moreover, to calculate the state tax on the car rental, 11.5%, the tax basis includes the fees. Thus, it seems plain to me that the fees represent the price of service and are not akin to a tax that is imposed upon the transaction. However, Avis might disagree, arguing that the seller is a mere conduit for fees set by the MAA.

I suggest that the junk-fee rule is virtually impotent in a broad range of transactions if it does not address fees in a transaction such as this one. While I might like to see tax and all incorporated into upfront pricing—as it is in countries the world over—I understand that that is not the American custom. But any fee besides tax on sale or service should be disclosed to a customer as part of an upfront price. Otherwise, the proposed rule is completely undermined. I must go all the way to the payment page of the Avis transaction before I discover the actual price, a substantial markup, for the transaction I desire.

I hope you will clarify that government contractors and comparable quasi-governmental actors are not governmental actors within the meaning of the proposed rule. And I hope you will clarify that government-sanctioned fees that are incorporated into the tax basis of a transaction, even if imposed on a per customer or per transaction basis, are fees that a seller “chooses to pass on to consumers.”

NBC resists TV free market, overcharges U.S. viewers: PL football costs $20 in Canada, $70 in United States

Each year, I become freshly enraged at the cost of seeing Premier League football in the United States, a ready example of antitrust non-enforcement in the communication sector.

The Sporting News had the audacity, or stupidity?, to describe NBC carriage of PL matches in the United States as a "luxury." I guess it is, a luxury only the rich can afford. To follow one's team, one must, at minimum, subscribe to NBC partner FuboTV for $70 per month. Access via FuboTV costs just US$20 per month in Canada.

The tangled cross-ownerships of what used to be broadcast TV are indicative of the dearth of consumer protection in the area. NBC "competitor" CBS (Viacom) owns a stake in FuboTV. The legacy broadcasters are using their weight in contracting power to lock down content in channel consolidators that emulate the old cable TV business model, by which consumers were compelled to overpay for a sliver of content in a library they didn't want. Hardly the free market promise of streaming.

But the FCC long ago left the helm unmanned on consumer protection when broadcasting gave way to cable. And the FTC and DOJ have had little interest in expanding their purview in times of corporate-captured governance. As usual, the United States purports to model free market capitalism in an oligopolized market that is anything but.

FuboTV in Canada at left, United States at right.
The package in Canada has fewer channels,
but if PL is all you want, that's not an option.

Antitrust regulators need to up their game to meet challenges of media convergence, Argentine researchers write in UNESCO paper

Published by UNESCO, a new policy paper from Argentine researchers Martín Becerra and Guillermo Mastrini warns that antitrust regulation must adapt to the convergence of media, telecommunication, and internet to remain effective and preserve people's rights.

Prof. Mastrini

Becerra is a researcher with the National Scientific and Technical Research Council (CONICET), an Argentine government agency, and holds academic appointments at the National University of Quilmes (UNQ) and the University of Buenos Aires (UBA).  Mastrini also serves on the UBA faculty.

The researchers reach the counter-intuitive conclusion that the internet's accessibility to new market entrants, and the ease with which new communication technology should facilitate the balkanization of media services, ironically has worked to concentrate property, revenue, and audience globally.  Thus the role of the regulator is more important than ever, while anachronistic regulatory approaches remain siloed in sectors of disparate expertise.

Prof. Becerra

Becerra and Mastrini rather articulate a "relevant market" approach to organize regulatory authority.  At the same time, they eschew a one-size-fits-all approach to the different problems presented by different entities, namely internet "giants," telecommunication conglomerates, and media companies.  Moreover, the researchers stress that values of access to culture, freedom of expression, and pluralism should be baked into the regulatory framework.

The report is La convergencia de medios, telecomunicaciones e internet en la perspectiva de la competencia: Hacia un enfoque multicomprensivo (my translation: The Convergence of Media, Telecommunication, and Internet from the Perspective of Competition: Toward a Multiple-Understanding Approach) and is published by UNESCO as no. 13 in the series, Discussion Notebooks on Communication and Information, ISSN no. 2301-1424 (2019).  The report is in Spanish and includes an executive summary in translation.  HT @ Observacom.

Here is the executive summary:

The converging qualities of information and communication technologies challenge classic regulatory frameworks when regulating audiovisual media activities, on the one hand, and telecommunications, on the other. The digitalization of communications causes a metamorphosis in the definitions of what each sector encompasses and the emergence of actors that provide products and services and develop businesses in convergent markets simultaneously and in increasingly vast geographical areas.

Regulatory approaches that sought to protect freedom of expression in the media, guarantee access to cultural and informational resources and sustain economic competition to avoid distortion of markets today are being reviewed in light of the new reality of progressive integration and of the growing crosscutting elements within the media, telecommunications and Internet ecosystem. In fact, there are limitations that prevent responding effectively and consistently to the problems raised with the consolidation of the digital revolution.

This policy paper provides analytical tools based on comparative law and inquires about antitrust policies and their relationship with the objective of having diverse and pluralistic communication systems that stimulate public debate in democratic societies. Therefore, it has a multi-understanding approach, since one of its objectives is to facilitate the dialogue of areas that until now have had fields of study, normative translations and institutional expressions separated from each other.

After consulting Latin American regulators in the area of defense of competition, specialists in the region in the field and presenting an updated state of the art of the debate about the relevance of economic competition approaches to seek clear answers for the new problems of a convergent environment in communications, the document makes recommendations with the aim of improving the design of public policies both in the field of information and communication services, and in those that serve economic competition, harmonizing fields and disciplines that were not conceived in an articulated way.

In this context, the policy paper is proposed as an input for public policies and a contribution to optimize the understanding of current phenomena with deep repercussions in the culture, information and communication of societies and individuals.

En español:

Las cualidades convergentes de las tecnologías de información y comunicación desafían los encuadres normativos clásicos a la hora de regular las actividades de medios audiovisuales,  por  un  lado,  y  las  de  telecomunicaciones,  por  otro  lado.  La  digitalización de las comunicaciones provoca una metamorfosis en las propias definiciones de lo que cada sector abarcaba y el surgimiento de actores que proveen productos y servicios y desarrollan negocios en los mercados convergentes de modo simultáneo y en ámbitos geográficos cada vez más vastos.

Los enfoques regulatorios que buscaron como objetivos proteger la libertad de expresión en los medios de comunicación, garantizar el acceso a los recursos culturales e informacionales y sostener la competencia económica para evitar la distorsión de los mercados hoy están siendo revisados a la luz de la nueva realidad de la progresiva integración y de los cruces cada vez mayores dentro del ecosistema de medios, telecomunicaciones  e  Internet.  En  efecto,  hay  limitaciones  que  impiden  responder  de manera eficaz y consistente los problemas suscitados con la consolidación de la revolución digital.

El presente policy paper provee herramientas de análisis basadas en el derecho comparado e indaga sobre las políticas antitrust y su relación con el objetivo de contar con sistemas de comunicación diversos y plurales que estimulen el debate público en sociedades democráticas. Por ello es multicomprensivo, dado que uno de sus objetivos es facilitar el diálogo de áreas que hasta el presente han tenido campos de estudio, traducciones normativas y expresiones institucionales separadas entre sí.

Tras consultar a reguladores latinoamericanos del área de defensa de la competencia, a especialistas de la región en la materia y exponer un actualizado estado del arte del debate académico y de divulgación acerca de la pertinencia de los enfoques de competencia económica para satisfacer con respuestas claras los nuevos problemas propios  de  un  entorno  convergente  en  las  comunicaciones,  el  documento  formula  recomendaciones con el objetivo de mejorar el diseño de las políticas públicas tanto en el campo de los servicios de información y comunicación, como en el de las que atienden  a  la  competencia  económica,  armonizando  campos  y  disciplinas  que  no  fueron concebidos de modo articulado.

En este sentido, el policy paper se propone como un insumo de políticas públicas y una contribución para optimizar la comprensión de fenómenos actuales con hondas repercusiones en la cultura, la información y la comunicación de las sociedades y las personas.

Pai FCC net neutrality policy steers US wrong way

Today a political cartoon from my brother, Spencer Peltz, in AP Gov at Calvert Hall, where he is student body president.

Probably needless to say, I agree with the sentiment wholeheartedly.  India's Telecom Regulatory Authority is headed wisely in the opposite direction.  Read more at Global Net Neutrality Coalition.  Tiered access, a.k.a. internet censorship, is bad for social liberals and economic conservatives.  The only winner under the Pai FCC plan is corporate oligarchy, and that's not free-market capitalism.  Oh, there're other winners, too: people and commercial enterprise every else in the world, India included.  Guess whom that leaves as losers?