An Economic Analysis of the FCC's Program Exclusivity Ban

Abstract

Existing regulations generally ban vertically integrated cable operators from entering into exclusive agreements for the distribution of their programming. In this paper I evaluate the economics of this ban and the empirical analysis used to support it. I argue that banning vertically integrated cable companies from offering exclusive content makes little economic sense in the context of today's broad video distribution market and competitive programming market. Moreover, the empirical analysis used to justify the ban, presented in the FCC's Adelphia Transfer Proceedings, is fundamentally flawed and shows no consumer harm from exclusive regional sports networks (RSNs). In this paper I present a more appropriate empirical analysis that finds no evidence of harm from exclusive RSNs. First, even controlling for demographics and time and region fixed effects, cities with exclusive RSNs do not necessarily have lower DBS penetration than cities without exclusive RSNs. Second, exclusive RSNs were positively correlated with the total number of MVPD subscribers, suggesting that exclusive RSNs may even benefit consumers.