On The Economic Regulation Of The Television Industry

This dissertation summarizes four issues involved in the economic regulation of the television industry, based on its special regulatory structure, attempting to apply the ideas and methods of the economics of regulation to the television industry. These issues are yardstick competition, universal service, interconnection and regulatory convergence, which can be supported by one another in a framework. This dissertation provides a basic framework for studying the economic regulation of the television industry, and examines the tendency of the television industrial economic regulations in China.Firstly, the dissertation presents a unique perspective into the yardstick competition in the television industry, after analyzing the function of advertisement. By means of treating program scheduling as the main output to measure the television broadcasting firms, the author concludes that there are DEA-based advertising revenue caps in three kinds of television channels. The regulatory implication is that DEA-based advertising revenue caps, as a sort of form of transfer for regulators to pay the television broadcasting firms, provide a regulatory framework to promote the competition among the three operating models in television industry.Secondly, the dissertation gives a definition of the universal service of the television industry, that is, all consumers are able to enjoy the free elementary television service. It accounts for the reason of the public service provided by the television industry is penetrated in practice. Given the basis, the paper puts forward a mechanism within which the goal of universal service is achieved in the television industry, including four essentials. The premise is that the special regulatory structure makes it possible television signals intercrossed to cover the terminals. However, the must-carry rules become the core preserving the viability of free channels. While the yardstick competition among the three operating models is based on the must-carry rules, the quota effect of advertisement provides a subsidy for broadcasting. Moreover, price discrimination involved in advertisement determines its income redistribution effect which provides a second source related to subsidy.The cost of universal service, first of all, depends on its special regulatory structure of the television industry, embodying the ideas of serving all the consumers universally. According to above mechanism, not only all operators but also advertisers and the consumers of advertiser-supported TV and pay-TV contribute to the universal service fund of the television industry.With regard to interconnection, the study begins from the vertical integration of the content with the transmission suppliers. The vertical structure of the television industry means that the cost structure of producing and distributing programs makes the vertical integration possible. The author believes the special regulatory structure constrains the integration radically, and structural separation is the conventional method to control access. The access pricing between the production and broadcasting, based on the time of broadcasting programs and advertisements, complies with the rule of yardstick competition among the advertising revenue caps, while the must-carry rule dominates the separation between the network and broadcast stations. Further more, the characteristic of universal service providing the free channels must be taken into account requiring transmission network access to end-users.In fact, the way of predominating upstream firms to access downstream ones is just the regulatory mode that regulators promote reasonable interconnection within the television industry, which is established on the basis of yardstick competition, must-carry rule and universal service dependent on the author's inference.With the advent of IPTV, the process of convergence among the networks of television, telephone and broadband Internet is quickened. Concerning the regulation of IPTV, the author points out that access pricing and interconnection are still its core. Two vertical relationships comprise the vertical structure of IPTV, such as the ISP-content and the ISP-conduit. So there are two types of openness—open protocols and open access. Only when reasonable interconnection comes true, and the goal of Network Neutrality is realized, can IPTV be expanded in an all-around direction. The prospect, however, will be proven realizable only within a framework of regulatory convergence. Therefore, the author indicates that existing sector-specific regulations need to be harmonized and transited to the regulatory convergence step by step. This challenges the present regulatory structure of the television industry.Finally, the author advances the tendency of the television industrial economic regulations in China based on above theoretical framework. Namely, pay-TV will be boosted through the yardstick competition. The transition to digital television will be accelerated according to the idea of universal service, and so will the establishment of systems of public service and universal service in China's rural areas via broadcasting television signal reaching all villages. The structural separation will be strengthened reasonably to promote the interconnection. The development of IPTV will be pushed within a framework of regulatory convergence.