Nov 27, 2017 - Economy & Business

​Washington feeds uncertainty in a changing media landscape

Illustration: Rebecca Zisser / Axios

One after another, regulators are making moves that underscore just how fast the media industry is changing, putting pressure on Washington to make sure laws keep up.

Why it matters: The internet has generally been seen as a democratizing force for the flow of information by giving diverse voices more ways to reach Americans. But new technologies, like high-speed broadband and automation, have changed the way information reaches people on the internet. And while media businesses scramble to respond, Washington is split on what to do.

Where it stands: Regulatory decisions over the past week have significant ramifications for the digital industry.

  • The Justice Department sued to block AT&T's takeover of Time Warner, an $85 billion deal that would have combined one of the country's largest internet service providers with a TV and movie programming powerhouse. Blocking it sets a precedent of future media and telecom deals.
  • The FCC released its plan to repeal existing net neutrality rules. Under the new plan, which is expected to be adopted next month, internet service providers like AT&T, Verizon, and Comcast would be able to block or slow down consumers' access to certain content and strike deals to give preferential treatment to some content companies.
  • Both rulings come on the heels of a media deregulation blitz at the FCC that is seen as a win for broadcasters — including Sinclair Broadcasting Group's $3.9 billion bid for Tribune Media — and newspapers.

A few major shifts are driving the policy turnabouts:

  • Legacy media is collapsing to tech. Traditional TV networks are suddenly competing for viewership with tech companies like Netflix, Amazon, Google and Facebook, that people only need an internet connection to access for a fraction of the cost. This makes must-have content that will attract audiences even more valuable.
  • The pipes are merging with content. Internet service providers don't want to be "dumb pipes" that just deliver the bits that power the internet. They know that to survive, they need to give consumers an incentive to buy their service. So the companies that own the internet pipes are merging with the content companies to provide better experiences. This is why Comcast bought NBCUniversal, and why AT&T wants to buy Time Warner.
  • Fear of discrimination. These mergers are mostly taking place to get ahead of consumers' migration to digital TV. But some worry that mergers could give deep-pocketed media conglomerates an unfair advantage over upstarts.If large companies own the content and the pipes to distribute it, they'll have an incentive to speed up the delivery of their own digital streaming content at the expense of their rivals'.Net neutrality rules aimed to prevent that kind of favoritism, but the current FCC argues those rules impede innovation.

The split: At the heart of uncertainty right now is that two divergent views are emerging from this administration of how to handle increasing consolidation on all fronts.

  • While the FCC is giving industry players — specifically broadcasters and internet service providers — room to grow bigger in a changing media landscape, the Justice Department is taking the opposite approach by trying to prevent a mega-media merger from happening.
  • Democrats have long been concerned about too much power in the hands of a few, while Republicans tend to be more business-friendly. But the Trump administration has also shown distrust of giant corporations with outsized market power.

What to watch: A lot rides on whether the Justice Department succeeds in blocking AT&T's acquisition of Time Warner. The outcome of that court case could trigger a new wave of media consolidation, or stop new mergers in their tracks.

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