Media as Industry: Economic Foundations of Mass Communications 177
Vertical integration may produce efficiencies by permitting media to control or opti-mize risk. A policy tradeoff seems to exist between economies of vertical integration and the competitive benefits of easier entry in the absence of such integration. The point of the Mexican example is that even though vertical integration was blamed for the media ownership concentration and lack of competition, in reality the government’s spectrum policies sustained the monopolist. In the United States, in the past regulators have sometimes restricted vertical integration by television and cable networks into programming to increase competition or source diversity, but these restrictions are now generally regarded as contrary to consumer interests and are being repealed.
reception for a message transmitted or printed in grayscale may readily exceed that accorded a color message that requires many more bits of information.
Networks
The structure or topology of a communication network helps define the nature of the messages it can effectively carry. Several important distinctions are useful here. A mass media broadcast, defined earlier, is a one-to-many, one-way communication path that can transmit messages over the air or in print. Print media convey a public good (the message) by means of a private good (the book, magazine, or newspaper).
In over-the-air broadcasting both the message and the medium are public goods, which typically conveys a substantial cost advantage. Two-way or interactive net-works are organized in a fundamentally different way than broadcast netnet-works. In-teractive networks conserve capacity by relying on time-sharing of common facilities.
Connecting all pairs of users directly all the time, with nearly all the links unused at any given time, would be much too costly. Instead, providers use switching (time-sharing) to provide access to trunk facilities or employ other methods of dividing common capacity. These methods all rely on the assumption that users are not all simultaneously and continuously engaging in communication. For this reason an ordinary telephone network could not be used to broadcast even one radio station to all households simultaneously, and the Internet as structured today has similar limi-tations that prevent its use as a mass medium. Therefore, at least using current ter-restrial technologies, two-way telecommunications networks and one-way mass media networks are distinct entities that are not functionally interchangeable as providers of mass communications.
Printing
Printing is the oldest mass media technology. Commercial newspapers first appeared in Europe early in the 17th century, and mass circulation newspapers could be found throughout the world by the mid-19th century except where governments suppressed them. Many innovations in printing technology have taken place over the centuries, generally with the effect of making newspapers and periodicals cheaper to print at higher quality and in greater quantity. The availability, beginning in the mid-19th cen-tury, of cheap newsprint manufactured from softwood pulp was key. Improvements in printing technology are typically embodied in capital equipment whose manufacture is currently concentrated in a few countries, notably Germany and Japan. The most recent innovations in printing technology rely on computers and telecommunications that facilitate the organization, selection, and creation of content. Many newspapers and magazines now distribute their content electronically as well as in printed form, but the future of this method of distribution remains uncertain. Few publishers have
Media as Industry: Economic Foundations of Mass Communications 179
been successful in imposing user fees, and advertising demand for electronic distribu-tion remains constrained by issues of measurement and effectiveness.
Terrestrial Broadcasting
Although use of the electromagnetic spectrum for radio and video broadcasting is only a century old, there have been several generations of improved transmission methods. Any message traveling from one person to another at a distance must be impressed upon a medium (such as paper, magnetic tape, or carrier wave) by encod-ing (for example, typesettencod-ing, digitizencod-ing, or modulatencod-ing) to suit the features of the medium, and then decoded or transformed back into terms accessible to human senses. For many years electronic communication used analog modulation for this purpose, because it was one of the most cost-effective ways to get the job done. In recent years, however, the cost of digital processors has fallen greatly. If the informa-tion to be transmitted is in digital form, such computers can be used to lower the cost of communicating any given amount of information by conserving relatively expen-sive bandwidth. This is done by compressing the information in each signal into a smaller package, using digital processing to remove bits that can be computed or interpolated at the receiving end. Digital coding is still more expensive than analog coding, but the bandwidth savings compensates for this disadvantage. For example, new digital television broadcasting standards permit the use of a single current ana-log television channel to broadcast six or more digital television signals in the same area. Owen (1999) surveyed the economic implications of recent advances in elec-tronic mass communication technology, including the possible convergence of mass media technology with the computer and information network technologies.
The implications of digital transmission and processing go beyond terrestrial broad-casting. The technology is generally applicable to any electronic transmission path and greatly reduces the cost of distributing mass media messages. Lower distribu-tion costs can have significant implicadistribu-tions for developing economies, which will no longer have to build more than one television tower and transmitter to broadcast up to six television signals, each of which can be programmed independently.
Multichannel Video Distribution
Multichannel video distribution systems encompass a variety of technologies, both wired and wireless. Examples include cable television; multipoint, multichannel dis-tribution systems; local multichannel disdis-tribution systems; and direct-to-home satel-lite broadcasting. These technologies have in common the packaging of many simultaneous video channels into a single service, in contrast to conventional broad-casters, who commonly operate a single channel. As noted earlier, in this respect multi-channel video distributors resemble certain print media, especially daily newspapers,
in their need to select and package content not only over time, but also across channels.
This permits the medium to appeal to more consumers than a single-channel medium could hope to do; however, bundling (that is, selling multiple channels as a package) may require some consumers to acquire access to unwanted content as part of their subscription packages. This bundling effect often gives rise to competition policy dis-putes because competitors may be discouraged from entering if they cannot offer the same range of content as an incumbent medium. Bundling may either increase or de-crease consumer welfare.
In several industrial countries multichannel distribution has already become the dominant mode of video distribution. In the United States more than 80 percent of television viewers use cable or satellite rather than off-air antennas. As fewer con-sumers depend on over-the-air broadcasts and as demand for spectrum by mobile communications providers grows, one can expect countries gradually to abandon terrestrial broadcasting.
Satellite Broadcasting
Satellites that orbit the earth directly over the equator at an altitude of about 35,785 kilometers have an orbital speed that exactly matches the speed of the Earth’s rota-tion. Hence they appear to remain stationary over a single point on the equator and can be used as if they were extremely tall fixed antennas. Satellite broadcasting is a special case of multichannel distribution. Increasingly powerful direct-to-home sat-ellites operate on ever higher frequencies, permitting smaller and smaller receiving antennas. Satellites will be launched in the next year that operate in the Ka frequency band, which lies beyond 20 gigaHertz (20 billion cycles per second). As antennas shrink they become easier to conceal, addressing both aesthetic and, in some coun-tries, political concerns. Satellite broadcasts, both audio and video, easily bypass the authority of local and national governments. They also bypass relatively expensive terrestrial distribution systems. Content can be uplinked to a broadcast satellite from outside the area to which the satellite is broadcasting. Ka band satellites may provide not just multichannel video distribution, but also inexpensive two-way service to homes, and perhaps individual users, including telephone and Internet access. The political implications of direct broadcast satellites are obvious, but in peace time national governments maintain, by treaty, the right to regulate or limit broadcasts to their populations. These matters, as well as the allocation of relevant portions of the spectrum and orbital slots among countries, are worked out within the framework of the United Nations’ International Telecommunications Union (for information about the union go to http://www.itu.int).
One interesting implication of satellite technology, especially the next generation, is that repressive governments may be less able to control access by their populations to outside political and cultural influences. Another implication is that the low per unit
Media as Industry: Economic Foundations of Mass Communications 181
distribution costs associated with satellites (compared with terrestrial distribution) may greatly expand the quantity of media content offered in response to a given level of consumer and advertiser demand. Finally, low distribution costs will probably increase the tendency for content to be distributed more widely, enhancing the trend toward globalization of the media and facilitating the further globalization of popular culture.
The Internet
The Internet is often touted as the newest mass medium. As a technology, however, the Internet is more closely analogous to point-to-point telephone or postal networks than to point-to-points broadcast networks. Nevertheless, the speed and low cost of access to the Internet in most countries makes it a preferred mechanism for distribut-ing media content akin to that found in small periodicals and newsletters. The Internet also supports rapid dissemination of low bandwidth, non-real-time content, such as email, that may be a close substitute for politically significant mass media content and is much less easily regulated by governments. (However, Internet access is more readily blocked by repressive governments than access to transnational radio broad-casts or black market sources of printed and recorded content.)
The current design of the Internet makes it inherently inefficient as a broadcast medium. While a television broadcaster sends out one signal that millions of people can receive, an Internet broadcaster seeking to reach millions must send a separate signal to each recipient, thereby tying up bandwidth proportional to the size of the audience. Future Internet designs may change this. The Internet as it currently exists has not demonstrated an ability to compete successfully with conventional media for advertising revenue. Indeed, failure to produce sufficiently large, verifiable audi-ences attractive to advertisers contributed to the 1999–2000 demise of hundreds of
“dotcom” ventures throughout the world. (Most Internet advertising has been based on barter transactions in which two dotcoms agree to show each others’ advertise-ments.) Thus, whatever the strength of its role in the marketplace of ideas, the Internet is not yet and may never be an important mass medium (Owen 1999).