Outliving its Usefulness: A Law and Economics Argument for Sunset of Section 629

Abstract

As part of the sweeping Telecommunications Act of 1996, Congress directed the Federal Communications Commission to adopt regulations to promote the commercial availability of cable set-top boxes. To date, the agency’s efforts to implement Section 629 of the Act have been a total failure, despite considerable effort and at least a billion dollars spent. While some continue to encourage the Commission to pursue implementation of this statute by imposing rigid technological standards on the multichannel video industry via the agency’s new “AllVid” paradigm, there is little hope for a successful implementation of such heavy-handed interventions. The video marketplace is presently highly dynamic and increasingly competitive, and the regulatory created retail market envisioned by Section 629 is today an inefficient market organization. Section 629, now fifteen years old, has outlived its usefulness. In this POLICY BULLETIN we set forth what we believe to be sound economic, legal and evidentiary arguments to support a sunset of Section 629 under that section’s unique statutory provisions. Sunset hinges on the definition of “fully competitive,” which we define as a condition where market forces are sufficiently strong to eliminate the need for government regulation. After a review of the evidence using this definition, we find that there is a plausible legal and evidentiary case for sunset.

Keywords: FCC, Set Top Box, AllVid, Cable Television, Regulation, CATV

JEL Classification: L96