The technology of the audio industry is booming, leading to wonderful competition to generate new products. In this survival-of-the-fittest game, innovative products become more readily available while unpopular products disappear – except when the companies that make the outdated devices appeal to Congress to mandate old technology on new products – thus stifling innovation. One of these proposals was the topic of a House Committee on Energy and Commerce hearing today, where I testified on behalf of the companies who innovate. Specifically, broadcasters want to require that analog receivers be installed in a host of digital devices – a cell phone with an FM antenna.
At a time, where most agree that government is over reaching and when the economic bright spots are our innovation sectors, it seems incredible that this inane proposal choking a fast-developing new technology with an old technology would not pass the hee-haw test. But broadcasters still carry political weight, and many members of Congress fear them, so I found myself on the witness list this morning addressing why this idea makes as much sense as requiring every car be led by a horse.
We live in an amazing time, where wireless and the Internet have meshed to create a golden age of content creation. People can get news, music, video and other entertainment in many different ways. Also testifying today was the head of Pandora, whose service is sweeping America. Consumers can now buy music by the song, or all they can hear, or use any of several market offerings to sample, search and personalize. While some of the big distribution companies may see their market shrink, entrepreneurs and new creators rapidly jump in and create new services, products and groundbreaking content.
Broadcast radio now faces unprecedented competition, and despite already having the advantage of a free license for public spectrum and being the only media not to pay performers, it is stagnating. Broadcasters have lost their historic monopoly on music transmission, and they now exist in a more competitive environment. Indeed, digital audio advertising giant TargetSpot found nearly half of 18- to 24-year-olds (47 percent) spend less time listening to broadcast radio than they did a year ago. Not surprisingly, the steepest decline in broadcast radio listenership was among these “digital natives.”
At today’s hearing, Members of Congress on the House Energy and Commerce Committee also heard why the broadcasters’ plea to mandate an FM radio chip in each smartphone, ostensibly for emergency reasons, is a bad idea.
First, at least two dozen phones equipped with FM tuners are already in the marketplace for consumers who desire that feature. Most consumers surveyed say they don’t want Congress to mandate the FM chip, and their marketplace refusal to buy phones that have these FM chips speaks volumes.
Second, the delivery method is outdated and the extra hardware, including a special antenna, and design requirements increase production costs for little return in value.
Third, the role of radio in emergencies is diminishing rapidly. Many if not most radio stations are no longer manned 24-hours a day. People with cell phones can actually use the phone and a new system to send emergency text messages just recently mandated by Congress.
The correct answer for broadcasters is not to seek new laws or studies from Congress to protect their business model. Instead, broadcasters must do what other industries do when faced with new market entrants – learn to compete smarter and harder.
Wasting taxpayer funds on studying an unnecessary restriction on innovation is the kind of special interest expenditure that frustrates average Americans. You don’t have to be a member of the Tea Party to hate waste and special interest market intervention.
Innovation is driving our economy, and nowhere is this truer than the audio industry. Hardware manufacturers, online innovators and artists are all taking advantage of extraordinary new business opportunities. As always during times of disruptive innovation, incumbent industries are coming to Congress and requesting special protections. Congress should ignore these self-interested pleas, and continue to promote a vibrant and dynamic free market economy that creates investment and jobs.
Gary Shapiro is president and CEO of the Consumer Electronics Association (CEA)®, the U.S. trade association representing more than 2,000 consumer electronics companies, and author of The New York Times bestselling book, “The Comeback: How Innovation Will Restore the American Dream.”