By Andrew Langer Congress will meet Tuesday to discuss the Federal Communication Commission’s proposed budget, and it’s a doozy: The agency is requesting $388 million to help carry out its “core statutory mission.” That request is up 13 million from the year before, and up nearly 30 million from two years ago. It’s hard to pinpoint what’s causing the increase: is the agency’s core mission getting more expensive? Or is it getting more expansive?
Perhaps both are true. The current FCC administration, led by Chairman Tom Wheeler, has shown little regard for reining in its spending, or even for limiting its mission to that which Congress expressly mandated in the Communications Act. See, for example, its decision earlier this year to unilaterally reclassify Internet services as a Title II utility, subjecting one of the most innovative sectors of the American economy to onerous rules meant for monopoly telephone services of the 1930s. Several studies have predicted the move will lead to a slowdown in investment and innovation, harming consumers and potentially leading to an increase in state fees. The FCC chairman thus far seems indifferent about the unintended likely consequences stemming from the agency’s power grab.
Wheeler’s lack of concern for trickle-down charges to consumers doesn’t surprise those of us who have been watching. The FCC has long been detached from American consumers, as demonstrated by its inability to articulate its agency mandates like the “ATSC standard,” for which all U.S. consumers must pay. The ATSC standard is a group of broadcast-related patents that the agency has mandated for inclusion in all televisions sold in the U.S. It adds $5 to the cost, regardless of whether buyers want or need it.
The ATSC standard is used to receive digital television signals. But that’s not how growing numbers use their televisions anymore. Every day, there’s another news story about how consumers are “cutting the cord,” and getting all their content from a streaming device connected to the Internet and displayed on a television, like a Roku or Hulu. This so-called ‘over-the-top’ (OTT) content is getting more plentiful by the hour: HBO was the latest media behemoth to offer its programming as a stand-alone OTT service — and it surely won’t be the last. The OTT universe is expanding as fast as it can keep up with demand. “TV used to be so simple,” Variety wrote in an exploration of the proliferation of online content available over traditional television sets. “That was then, this is now.”
Streaming content is now — and “now” doesn’t require the ATSC standard. Savvy businesses are changing their services to respond to the new way people consume programming. But, surprise surprise, government is slow to keep up. As Wheeler uses the outdated Communications Act to attempt to regulate the Internet, so too does the FCC impose an outdated set of standards on television equipment, and consumers are left with the bill. Taken as a whole, it costs a lot of money: Multiplying the ATSC tax out across all the televisions sold in the U.S. annually, it’s about $200 million a year in needless fees.
Worse, it appears Wheeler doesn’t even realize what the public is paying for. Asked last fall by Congressman Mike Pompeo to explain how the ATSC standard is administered, Wheeler responded that the ATSC licensing fee includes the royalty for the MPEG-2 decoding standard. Even if that were true, it wouldn’t be a satisfying answer: MPEG-2 is used mostly for backward compatibility and the vast majority of the patents are expired. Consumers are paying the full fee for around 7 percent of the patents that the FCC forced on them. But Wheeler’s response wasn’t even accurate; the MPEG-2 codec costs an additional $2 per set, on top of the $5 charged for ATSC. Indeed, these charges really start to add up. One study found, due to these and similar fees, consumers pay up to $30 more per television than other countries. Much of this extra cost goes to a private company known as MPEG-LA, which reaps the benefits of the outdated federal requirement.
The American public is paying for television standards it doesn’t even need, and the head of the FCC can’t offer a good explanation why. As Congress considers whether to approve the FCC’s $388 million budget request, it should take a microscope to that request to ensure the Commission can articulate why it’s mandating charges like the ATSC licensing fee — surely one of countless outdated rules on the books that do a disservice to the American economy and its citizens.
Andrew Langer is president of the Institute for Liberty.
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