Fault -- In regard to tennis, an invalid serve; in regard to sound public policy, a dangerous rewriting of the rules.
There are many reasons to be concerned about the FCC’s recent 3-2 ruling against Comcast and in favor of the Tennis Channel (ordering Comcast to include the Tennis Channel in the same basic tier offering as the Golf Channel and NBC Sports), but one certainly stands out – the further erosion by the FCC of the freedom to contract, and hence property rights protection.
Seven years ago Comcast and the Tennis Channel agreed via contract that Comcast would carry the Tennis Channel on its system in a certain way, for a certain price. When the arrangement no longer worked for the Tennis Channel, its management decided to go back on its word and sue to get a different deal, not what it deserved or what they had agreed to.
What was really at stake? The right of contract, or put another way, government protecting a fundamental property right, that of owners to be able to freely negotiate and contract to dispose of property as the owners, or their proxies, see fit. The decision by the FCC essentially provides license to run to government when a voluntarily entered, negotiated, written agreement no longer suits one party. Nothing could be more damning to property rights, and the economic underpinning of our market system.
In a normal functioning market, businesses freely decide to contract for products and services. Retailers in particular decide which product lines they will or will not carry, and there is often intense negotiating because of vigorous competition. However, when a market is regulated, prices are artificially set, capped, or otherwise controlled by governments, rather than set by free contracts between customers and vendors. The costs of entering into a “contract” escalate because in fact the contract is virtually meaningless with at least one of the parties always on guard that the government is willing to rewrite the terms to suit its desires, not the intent of the parties as described in the contract.
In this case, where the government has chosen to step in for the owners of Comcast and dictate how to operate the business, specifically to dictate what channels must be included in what product offerings, consumer prices will be artificially increased because of the action of government.
The simple fact is that inputs into a business, for which the business must pay, do have an impact on the price charged to consumers. And burdening any business with requirements to provide more as part of some package of services, hence raising prices, distorts that market and harms that product, and the broader marketplace.
You can’t have a functioning market economy without property rights. You certainly can’t have contracts if no one can be certain who has the right to contract for the disposition of specific goods and services. Without property rights, markets just don’t work.