Internet policy proposals make for strange bedfellows.
With its net neutrality vote barely in the rear view mirror (and plenty of litigation yet to come), the Federal Communications Commission (FCC) must now turn its attention to the Notice of Proposed Rulemaking (NPRM) that it issued in December, recommending that the definition of a multichannel video programming distributor (MVPD) be updated to cover some online video providers. (See FCC Ready to Reclassify Some OTTs – Report .)
Opinions on the NPRM vary greatly. Although that's to be expected, it's notable that some traditional opponents are finding themselves on the same side of the MVPD argument, while some historical allies are now in conflict. For example, Verizon Communications Inc. (NYSE: VZ) and the National Association of Broadcasters (NAB) both support a revision to the MVPD definition, while several big-name programmers are lining up with pay-TV providers against it.
There are numerous implications to the proposed policy change. Chief among them is the fact that, if passed, the new policy would permit over-the-top video providers to negotiate for content retransmission rights in the same way that traditional cable operators do today. In turn, that would allow independent OTT providers to deliver linear video programming online without needing to provide the pipe for distribution.
In comments filed with the FCC, the NAB came out strongly in favor of changing the MVPD definition. The new definition would give NAB members access to new distributors, and therefore potentially to new revenue. Officially, the NAB said that it believes that the FCC's rules need to be modernized to take into account the rise of online video and "to promote a level competitive playing field."
Verizon also expressed its support for the NPRM. However, Verizon's motives are far different from the NAB's. With its much-anticipated plans to launch an online video service later this year, Verizon wants to ensure that the regulatory environment is favorable for its own Internet video offering. (See Verizon Likes OTT Video Prospects.)
Specifically, Verizon wants its service to qualify as an MVPD so that it has an easier time acquiring content. Yet, at the same time, Verizon wants only some of the existing MVPD regulations to apply to online providers.
According to Verizon's comments, "the Commission can facilitate emerging competition by ensuring that unnecessary regulations are not imposed on over-the-top video services. Most importantly, legacy cable regulation, including local franchising obligations, should not apply to online providers."
On the opposite side of the table, Walt Disney Co. (NYSE: DIS), CBS Corp. (NYSE: CBS) and Fox Broadcasting Co. filed comments jointly against the NPRM. Their position is that market forces will drive online innovation, and that new regulations could actually make it harder for OTT providers to do business. One of the major issues for the three big broadcasters is that online providers would need private copyright clearance from content owners because Internet distribution isn't covered under the same statutory right of distribution by which traditional MVPDs transmit programming.
To put it in clearer terms, these broadcasters are pointing out that they can't legally grant retransmission rights for all content without an overhaul of the existing Copyright Act. Currently, the broadcasters' own TV Everywhere services -- such as Fox Sports Go, CBS All Access and WatchABC -- are transmitted legally under cable's statutory right. But, they argue, if OVDs (online video providers) were also classified as MVPDs, they wouldn't have the same ability to transmit because the Copyright Act "does not provide for compulsory licensing of Internet transmissions."
The copyright argument is dizzying, but it's one that DirecTV Group Inc. (NYSE: DTV) also took care to articulate in its comments opposing the NPRM. In addition, DirecTV posited that the FCC should only consider those providers that deliver continuous linear programming to be MVPDs; that the Commission should not extend must-carry programming requirements to the Internet; and that the agency should take into account technical differences between traditional television and online video delivery as they apply to issues like emergency alerts and video descriptions.
Not surprisingly, several large service providers and the National Cable & Telecommunications Association (NCTA) filed their own comments against the NPRM. There have been no comments yet from Comcast Corp. (Nasdaq: CMCSA, CMCSK), Time Warner Cable Inc. (NYSE: TWC) or Dish Network LLC (Nasdaq: DISH). But AT&T Inc. (NYSE: T), Cox Communications Inc. and Charter Communications Inc. have all signaled their opposition.
In their filed comments, the big service providers all argued that the market should be allowed to develop without FCC intervention. However, Charter was careful to note that if the FCC does change its MVPD definition, then "it should ensure that OVDs (online video providers) affiliated with cable providers (or other traditional distributors) are afforded equal treatment to unaffiliated OVDs, and given the same freedom from the legacy obligations that accompany the provision of traditional, facilities-based service."
Charter's position is undoubtedly influenced by the MSO's stated plan to "explore launching more comprehensive linear and on-demand OVD options in the future."
If the FCC thought its work to update the definition of an MVPD would be easy, it was sadly mistaken. Given the divergent opinions and agendas involved -- not to mention some fairly dense legal issues -- the Commission has a long road ahead.
— Mari Silbey, special to Light Reading