End Government Subsidies for Satellite TV Providers

Government subsidies in business are rarely a good thing. Regardless of how well-intentioned, subsidies distort markets and, in the worst cases, amount to cronyism and governments picking winners and losers for political purposes.

In the television industry, what began decades ago as an attempt to give emerging satellite TV companies a foothold in the market has turned into an incentive for satellite operators to block consumers’ access to local and regional programming. As the modern TV landscape has evolved, it’s time for Congress to keep pace with the times and eliminate anti-consumer subsidies for big satellite companies who no longer need them.

Back in 1988, the satellite television industry was still in its infancy and most consumers had few options. They could get by with the handful of channels picked up by their TVs’ antennas, or they could subscribe to whichever cable company held the monopoly in their area. At the time, the technology didn’t exist for satellite providers to offer local broadcast network affiliate stations’ programming in most areas, meaning subscribers couldn’t watch content on the “Big 4” TV networks. In order to level the playing field and give consumers more choices, Congress gave the emerging satellite TV industry a big boost by allowing them to beam in out-of-market signals so people could watch their favorite network shows.

This provision, called a compulsory signal license, also meant that satellite companies did not have to negotiate with local network affiliates to retransmit their programming into the homes of satellite customers, as the cable industry did. Instead of paying a negotiated, market-based price, compulsory licensing subsidized the satellite operators and allowed them to pay fixed, below-market rates to carry network programming.

At the time it certainly made sense. But as technology has rapidly advanced and satellite is one of many choices consumers now enjoy, the need for government subsidies has long passed.

However, this hasn’t stopped satellite and cable providers from lobbying to extend the Satellite Television Extension and Localism Act Reauthorization (STELAR), which is set to expire at the end of this year. That’s bad news for satellite subscribers in 12 markets across the United States who are being denied access to local news and weather coverage and are forced to watch imported programming from stations in New York or Los Angeles.

That’s because under STELAR, it is cheaper for satellite providers to import programming in these markets than negotiate with local broadcasters to retransmit their content. This is clearly well outside the bounds of what Congress intended when it first passed the legislation, and consumers in these markets are now being used as pawns in a broader attempt by satellite and cable companies to tilt the balance even more in their favor.

Consumers are the biggest loser in this fight, as local content is still very much in demand even in the era of cord-cutting. In a recent study, 81 percent of the coveted 18-49 year-old demographic consume local TV news at least once per week, while nearly half watch every day. In this age of rapid technological advancement, it simply makes no sense for a provider to deny local or regional content to consumers, yet that’s exactly what STELAR incentivizes.

There are signs that lawmakers are getting the message. U.S. Sens. Susan Collins and Angus King of Maine recently wrote to Senate Judiciary Chairman Lindsey Graham, ranking member Dianne Feinstein, Chairman of the Senate Committee on Commerce Science, and Transportation Roger Wicker, and ranking member Maria Cantwell, noting that STELAR “provides a below-market incentive for AT&T/DIRECTV to deny viewers in Northern Maine the in-state coverage they desire and deserve.” Separately, a bipartisan group of Senators, including Sens. Jon Tester, Michael Bennet, Michael Enzi and John Barrasso representing the underserved states of Montana, Colorado and Wyoming, has also called out DirecTV for refusing local access, saying “customers of these 12 media markets still receive limited or no access to locally broadcasted network stations through their subscriptions.”

The STELAR legislation has accomplished its mission long ago. Satellite providers are fully able to compete with cable and internet/streaming TV in a robust marketplace that is giving consumers more content and pricing options each year. When laws become obsolete, or worse, end up skewing the marketplace to consumers’ detriment, Congress has a duty to respond. In this case, the easiest remedy is also the simplest one, which is to do nothing and let STELAR expire.


Demetrios Karoutsos is a political and public affairs strategist.

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