integrated pay-television provider might have to foreclose, either partially or completely,
a rival upstream content provider. OVDs must necessarily rely on a high-speed broad-
band connection to households in order to deliver their programming, the vast majority
of which are also owned by existing cable or telco MVPDs. There are therefore legiti-
mate concerns that MVPDs will somehow manipulate their broadband networks in ways
that disadvantage rival OVDs, perhaps by offering differential download speeds for rival
online content, imposing data caps that lower the value of an Internet-delivered video
service, or setting usage-based prices with similar effects.
103
Furthermore, it is hard to
determine if such strategies are anti-competitive, as they can also help MVPDs efficiently
manage their network traffic.
The market for online video distribution is in its infancy, so appropriate policies are
difficult to determine on either a theoretical or empirical basis.
Rubinfeld and Singer
(2001)
demonstrate the typical foreclosure calculus in the context of the AOLTime
Warner merger, and
Farrell and Weiser (2003) analyze foreclosure incentives in the con-
text of the FCC’s Computer Inquires, the Microsoft case, and the then-nascent FCC
Broadband proceedings.
In the Comcast/NBCUniversal merger,
FCC (2011b) evaluated the potential for
foreclosure online by analyzing the merged entities’ historical tendency to favor inte-
grated and discriminate against unintegrated programming in television markets. Fur-
thermore, the potential for online foreclosure motivated many of the conditions
imposed by the FCC in its ultimate approval of the merger (
Baker et al., 2011; FCC,
2011b
). That ruling found that, absent conditions preventing it, the merged entity would
have the ability and incentive to hinder the development of competition in the online
video marketplace. A key element of its merger approval was a condition requiring
the merged entity to license NBC content on non-discriminatory terms to rival uninte-
grated OVDs in a manner similar to the Program Access rules, imposing a new baseball-
style arbitration procedure to help enforce it in a timely manner.
These are all contentious policy issues that are being debated by competition and sec-
tor regulators around the world. More empirical research establishing some basic facts
about the nature of traditional and online television substitutability, measuring the incen-
tives to foreclosure, and distinguishing between efficient and foreclosing MVPD man-
agement practices would be welcome.
7.7. CONCLUSIONS
Watching television is the dominant leisure activity for hundreds of millions of individ-
uals and, unlike many media markets, it has continued to grow despite the rising pop-
ularity of the Internet and online video. This is particularly true of pay television,
103
The same issues are at play in the issue of search bias discussed in Chapter 10 of this volume.
333The Economics of Television and Online Video Markets
..................Content has been hidden....................
You can't read the all page of ebook, please click here login for view all page.