Pay as You Go


To those watching this month's big fight, pay-per-view television is a godsend. Previously, the only way to see top boxing match was either to go to Las Vegas, which was very expensive, or to go to a closed-circuit theater, which was crowded with drunks and only slightly less expensive than the trip to Vegas. But with pay-per-view, several people can get together, split the cost, and for less than be price of a movie ticket watch the fight in the comfort of someone's home.

But some people in Washington, D.C., don't like pay-per-view. They talk about halting its expansion. To those who aren't into professional wrestling, boxing, and soft-core adult films (the current mainstays of pay-per-view), this may not seem very important. But this flap is about more than whether fans will get to see Ric Flair, Evander Holyfield, and Marilyn Chambers. It's about how telecommunication is regulated in this country.

The problem is that in the future more and more events will go to pay-per-view. In 1992, for example, some summer Olympic events, such as swimming or equestrian sports, will be on pay-per-view, live and in their entirety. (NBC will still offer traditional coverage of the highlights of the most-popular sports.)

But more events on pay-per-view mean more competition for over-the-air television. And Rep. Edward Markey (D–Mass.), chairman of the House Telecommunications subcommittee, worries that the expansion of pay-per-view "will mean the gradual erosion and potential destruction of the free over-the-air television system as we know it."

Markey paints a "nightmare" world where over-the-air news disappears and "only the wealthiest" can watch sports or movies on television. We will become a society of information haves and havenots. And that bodes ill "for the lower part of the socioeconomic part of the spectrum" (whatever that means).

Actually, we aren't likely to see the death of broadcast television any time soon. But even so, why should we care? Markey would have us believe that only the rich can afford cable. In fact, over 60 percent of all American households have cable. Virtually everyone who has access to cable has purchased it. The 40 percent of Americans who don't have it mostly live in very remote rural areas or in cities whose politicians have held up the delivery of cable. At about $20 a month, basic cable—including CNN, CNBC, the Discovery channel, and other sources of news—is within the means of even the poorest Americans.

But Markey is right about one thing: Pay-per-view will hurt the broadcast networks. Network viewership has dropped dramatically over the last decade because of cable, and more pay-per-view channels will accelerate this decline. In an April "Nightline" report, Dave Marash gave us the network view of this trend: "As recently as 20 years ago, ABC, CBS, and NBC owned 90 percent of the TV audience. Today the three broadcast networks' share is down below 60 percent and dropping.…You've got a growing audience stolen from free TV." (Emphasis added.)

Despite these losses, the networks earn over $10 billion each year. And if Markey's rumblings about pay-per-view ultimately turn into legislation, it will benefit these corporate titans, not Joe Sixpack.

Washington protects established businesses (and established campaign donors) at the expense of newer ones. Look at how Congress dealt with the issue of cable regulation last year. Noting that virtually all cable systems are monopolies that can gouge their customers, Congress decided to pass legislation to stop this. Some wanted to let local governments regulate cable rates; some wanted the FCC to do it.

But the policy pushed by every economist who has studied the situation—abolish the exclusive franchises that give cable systems monopolies—was ignored. Sure, more competition means lower prices, but it also means more competition for broadcasting—and for established cable companies. But rate regulation robs systems of the money they need to expand and holds down competition with the networks.

Politicians love to crow about helping to keep prices down and helping the common man. But what they propose would help only their friends in broadcasting boardrooms—and screw all of us who want better and more extensive cable service.