The Senate Commerce Committee has another information market issue on its hand.

Yesterday, the U.S. Senate’s Committee on Commerce, Science, and Transportation held a hearing on the re-authorization of the Satellite Television Extension and Localism Act (STELAR). The Act, along with its predecessor forms, have been in existence since 1988 and is intended to guarantee that consumers with satellite access to television programming has access to programming provided by over-the-air broadcast stations.

Consumers, due to terrain or distance, may have problems receiving signals from over-the-air broadcast stations.  Some consumers may choose satellite television as their medium for obtaining programming provided by these stations.  Depending on the agreements entered into to carry or re-transmit signals from a broadcast station, there is a chance that the consumer may not receive programming from broadcast stations within her local area.

This possibility of not receiving local broadcast station signals lies at the heart of the localism problem, where consumers may be denied information on what’s happening in their local communities and instead, in return for receiving content from a broadcast network outside of their locality, they would only have access to “local” content from another community, content that would be useless to them.

Critics of the Act want to see STELAR expire on 31 December and not be re-authorized.  Critics claim that not only are local consumers of satellite services being denied local broadcast content as a result of the agreements their satellite services enter into with outside area “local” broadcasters, but they are also bearing the burden of lost advertisement revenues where their local content is being replaced by the content of outside area broadcasters.  In addition, local broadcasters incur another dent in revenues where satellite companies are opting to lower re-transmission fees to outside broadcasters versus local broadcasters.

But if a consumer can’t receive signals from their local broadcaster due to terrain or distance, why should they be denied access to content from outside area broadcasters via satellite?  The argument that these consumers are being denied access to information about community events sounds laudable on the surface, but there are alternatives available that can supplement the lack of local television news that covers community events.

For example, more and more local stations are streaming news content online.  They are also supplementing their video content with texts and graphics.  They are noticeably expressing their journalistic chops by providing digital print and video.

Local programmers could also take advantage of this supposed demand by offering this local content online via their websites on a paid basis, assessing a fee commensurate with that of the local newspaper.  People do that today when they purchase Netflix, HBO Go, etc., so why not with local television content?

As for emergency alerts and other emergency information, there are mobile apps available that can keep consumers informed about urgent events.

Congress, when contemplating extension of STELAR, should keep in mind that at the core the issue is about competitive provision of content in another information market. Local television broadcasters must find innovative ways of getting their content in front of their local consumers.  Just being a part of the community is not enough for local broadcasters.

Congress should also bear in mind that satellite companies should be expected to meet local needs for network programming by providing broadcast packaging at the lowest cost possible.  This may mean creating packages that do not include programming from the local broadcaster because local broadcaster re-transmission fees are cost prohibitive.

If anything, extending STELAR puts the onus on local broadcasters to become more innovative on how they meet local community information needs.

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Capital. The true digital divide

A couple early morning thoughts on the digital divide.  So far the digital divide narrative has occupied two schools of thought that are not necessarily opposed to each other.

Race and the Digital Divide

The first school of thought revolves around race.  Given that within the black American community there is a higher level of poor households, affordability is keeping blacks from accessing the internet via high-speed broadband infrastructure.  If blacks do not have the income to sustain a broadband business model, then internet access providers are less likely to deploy facilities in poor neighborhoods.  Lack of deployment in these neighborhoods may result in a barrier to valuable information that may lead to greater economic opportunities, according to advocates seeking to close this gap.

Rural Communities and the Digital Divide

The second school of thought revolves around rural communities.  The argument is that lower population density as compared to urban areas makes deploying broadband access facilities in rural areas more expensive.  In addition, terrain, such as that faced by internet access providers in mountain states, has traditionally added to the problem of higher costs to provide broadband access facilities.

An Overlooked Divide

There is another divide, one that is often overlooked and it has to go to what is known as “first-mover advantage.” The real value generated by the internet is the ability to extract, analyze, package, and distribute information, and have that information be available digitally forever.  The focus on a gap between facilities deployed in black neighborhoods versus facilities deployed in white neighborhoods or the gap between rural community deployment versus urban community deployment goes to seeking out new suppliers of information.  The civil right veneer that has been placed over the broadband racial divide hides this supply-side characteristic from the policy debate.  It has also created the opportunity for the political left to craft an electoral package that can be sold to voters.

It is the other side of the equation, the production side, that, in my opinion holds more value.  When we look at the history of the internet, particularly the period when the internet was commercialized, its players included white venture capitalists; Web 1.0 internet service providers, i.e. AOL, CompuServ, Mindspring, etc.; and dial-up access providers such as BellSouth.

Black Americans could always access information from analog sources, i.e. television; print media; or word of mouth, but the efficient extraction, cataloging,  indexing, aggregation, and distribution of information via the internet were the domain of companies invested in and managed by whites.  As whites continued to level their first-mover advantage, this gap between producer/owner of capital and consumer continued to grow.

Capital not only seeks a vacuum, it also seeks a return.  Returns from investing in black or even rural communities were not going to be as high as returns invested in affluent neighborhoods, neighborhoods whose residents probably owned shares in the very companies that commercialized the internet in the first place.  Closing the “digital divide” means first closing the capital divide.

What will Government Do Next?

Government will do nothing from a capital perspective to close the digital divide. The Federal Communications Commission has a number of universal service funding initiatives designed to encourage mobile and fixed broadband deployment in rural areas; to facilitate the delivery of health care via broadband; and to reduce the costs incurred by low-income consumers for accessing and maintaining high-speed broadband service.  By subsidizing the consumer demand for broadband services, the Commission hopes to encourage the delivery of broadband services.  But again, the focus is on consumer demand, not bridging the capital gap.

The philosophical underpinnings of the American economy, where capital is to flow freely to its best use may prohibit government from taking any concrete action for closing a capital gap.  If blacks or rural residents had sufficient capital to purchase, construct, or maintain broadband access facilities, using their intimate knowledge of their communities to distribute services, we might see a decrease in the gap.  We should expect that government will stay on a path of incentivizing capital investment in infrastructure development versus trying to repair capital discrepancies via a capital transfer.