Provision of Television Broadcasting in the Modern Age

Topics: Broadcasting, Television, Externality Pages: 26 (7575 words) Published: November 14, 2012

Mark Armstrong
University College London

March 2005: final version July 2005


This essay discusses the merits of public intervention in the provision of television broadcasting services. I argue that intervention was justified in the past, when there were just a few channels and when advertising was the sole source of commercial funds. However, the advent of subscription television overcomes many of the market failures which once existed.Moreover, asymmetric treatment of broadcasters acts to distort the incentives of commercial broadcasters. Finally, viewers have an increasing ability to avoid unappealing, but perhaps socially desirable, content, which further weakens the case for public intervention in the market.

1.The Historical Context

In this essay I wish to discuss three questions about the provision of television broadcasting in the modern age:2

1. Will the broadcasting market deliver what people want to watch? 2. Should people be allowed to watch only what they want to watch? 3. If not, will people watch what we want them to watch?

I start with the second question and consider whether broadcasting policy should be directed to “give the public what it wants”? In the UK, the tone of the debate about public service broadcasting was set in the earlier radio era. John Reith, the first Director General of the BBC, wrote,3 “the preservation of a high moral tone is obviously of paramount importance.” And “[t]here is no harm in trivial things; in themselves they may even be unquestionably beneficial, for they may assist the more serious work by providing the measure of salt which seasons.” Coase (1950, page 177) remarked that

1 This is the edited text of an inaugural lecture given at University College London on March 10, 2005. It is based in large part on joint work with Helen Weeds, see Armstrong and Weeds (2004), although the views and errors expressed here are my own. I am grateful to her and to two referees for useful comments. 2 This essay is more about television than radio. Many of the arguments presented below do not apply to radio to the same extent. For instance, at the time of writing, subscription radio is not a widespread phenomenon, and so the choice is between state-funded radio versus advertising-funding radio. The latter is likely to involve substantial market failure (see section 3 below). Moreover, radio is a less “vivid” medium, and less likely to assert the hypnotic pull of television (see section 4.3 below). See Coase (1950) for a fascinating account of the early years of radio broadcasting in the UK, and the rationales given at the time for monopoly provision. 3 These quotes are from 1924 and 1925. See Coase (1950, page 47). public service broadcasting may have given some listeners what they wanted better than it did others: “Though the programme policy of the [BBC] gave the lower social classes what they ought to have, it gave the educated classes what they wanted; or, at any rate, more of what they wanted than they thought they would obtain with what was believed to be the only alternative – commercial broadcasting.”

Ronald Coase is perhaps the most distinguished economist to have written about broadcasting. Although his contributions to this topic are several decades old, the issues he raised and the criticisms he targeted at public policy remain relevant today.For instance, Coase (1966) discussed the UK’s 1962 Pilkington Report on Broadcasting. I quote at length: 4

“I can give you the flavor of the argument by quoting some passages [of the Pilkington Report]...:

‘No one can say he is giving the public what it wants, unless the public knows the whole range of possibilities which television can offer and, from this range, chooses what it wants to...

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