Firms that provide broadcasting services are called networks since they can broadcast the same programs in different geographic locations. As a result of this, regulating authorities fear that large networks may control “too much” information which will enable them to influence the thinking of the citizens and therefore cause damage to pluralism, which strengthens democracies. For this reason, the U.S. Federal Communication Commission (FCC) always sets a limit on how many radio and television stations can be controlled under a single ownership. Section 6.1 of this chapter analyzes the competition among broadcasting networks assuming that the stations use scheduling and program types as strategic means to attract listeners and viewers. Section 6.2 analyzes how the regulating authorities regulate the span of control over the airwaves by allocating limited amount of spectrum to bidders. Finally, Section 6.3 integrates Chapters 5 and 6 by analyzing the market consequences of digital convergence, where digital convergence if defined as the provision of telephony, the Internet, and broadcasting via a single fiber-optic line connected, possibly, to a single provider.

Broadcasting and Cable Television

Broadcasting differs from cable television in one major respect. Cable services are sold to consumers, whereas broadcasting via the airwaves reaches all consumers who possess the appropriate receiving equipment (e.g., radio, TV set, antenna, etc.). In this respect, cable companies resemble telephone companies who can connect and disconnect unpaying consumers from the network.

Since broadcasting companies cannot collect fees from their viewers and listeners, they resort to generating revenues from advertising only.