What's the relationship between online video distributors (OVDs) and multichannel video programming distributors (MVPDs)? In the immortal words of the Facebook status line: It's complicated.
Three-and-a-half months after the Federal Communications Commission (FCC) issued a Notice of Proposed Rulemaking (NPRM) on the subject, the comments are in on whether or not certain OVDs should be reclassified as MVPDs. Specifically, the FCC is considering whether online providers offering linear, scheduled video programming should be entitled to the same rights, and subject to the same obligations, as traditional pay-TV operators. MVPD benefits include assurances of licensing access to programming from broadcasters and cable entities. Obligations include the responsibility to deliver features like closed captioning and emergency service information, as well as such other requirements as adhering to regulations that ensure content can be accessed on commercially available navigation devices.
The yes votes
A number of programmers wrote to the FCC in favor of extending the MVPD definition to OTT players. Their position is that a change is necessary to keep the video distribution market competitive. The Tennis Channel went even a step further by suggesting the FCC should also consider classifying online providers of non-linear video as MVPDs. In that case, the Tennis Channel said it believes the FCC should review which rules and policies might be waived as inapplicable in an online environment.
There is, however, a major caveat to the programmer argument. Several organizations pointed out in their comments that granting retransmission consent is not the same thing as providing a copyright license for the content that an OVD wants to stream. As the National Association of Broadcasters (NAB) put it, "Any party retransmitting broadcast signals must obtain the consent of the station broadcasting those signals, as well as licenses and approvals associated with the content that a station airs."
The copyright issue is one that came into focus during Aereo Inc. 's legal fight to become an online MVPD. At that time, the US Copyright Office decided that Aereo and others of its ilk were not entitled to a blanket statutory copyright license. (See Aereo's Cable Status Denied by Copyright Office.)
A group filing from several broadcaster affiliate associations explained specifically that, "In the absence of a statutory compulsory license, OVDs classified as MVPDs will be governed by copyright licenses negotiated in ordinary, arms-length transactions between OVDs and rights holders."
In other words, OVDs would still have a lot of work to do in gaining access to content, even with the benefit of program access guarantees from the FCC. And they'd still have to pay for those copyright licenses, just like conventional pay-TV providers.
In addition to broad programmer support, the FCC's NPRM also got a thumbs-up from Verizon Communications Inc. (NYSE: VZ). Verizon wants to improve the regulatory environment for its own planned OTT video service. The company said the Commission should adopt the MVPD proposal, but also not impose certain "outdated and burdensome regulations" to over-the-top providers. For example, Verizon argued against applying cable franchising rules, "must-carry" obligations and technology requirements like the security integration ban to OVDs.
Verizon also added its own proposed addition to the NPRM. In its filing, the company argued that OVDs should have a choice of whether or not to gain the privileges and responsibilities of an MVPD. Reclassification should not be automatic, but, according to Verizon, an option for OTT providers.
The no votes
While the majority of programmers filing comments lined up in favor of the FCC's NPRM, the majority of service providers (minus Verizon) lined up firmly against it. There are two main reasons for this. First, existing cable companies -- largely through the National Cable & Telecommunications Association (NCTA) and the American Cable Association (ACA) -- have declared that it would be illegal to define OVDs as MVPDs because online distributors do not own and control the video transmission path. As stated by the NCTA, "MVPDs are limited to those facilities-based providers that offer consumers a transmission path along with video programming, and do not include OVDs."
Second, MVPDs have argued that there is no compelling reason to adopt the FCC's NPRM, and that, in direct contrast, adding regulatory burdens to OVDs could actually harm the growing OTT market. In related fashion, cable companies want their own over-the-top services to be treated the same as those delivered by non-MVPDs. As the ACA described it, the FCC must clarify "that a cable operator distributing video services over the Internet to its subscribers is not providing a cable service."
In an odd juxtaposition, several OTT providers agree with the argument about MVPD regulatory burdens. MLB Advanced Media, for instance, noted that, "As a leader in the online video distribution (OVD) market, we do not believe that such regulation is warranted. The OVD market is already providing consumers with more choices than ever before to watch high-quality television programming on personal computers, tablets, smart phones and other Internet-connected devices."
Amazon.com Inc. (Nasdaq: AMZN) also chimed in, saying that, "The NPRM incorrectly assumes that online video content delivery is simply an extension of the current cable television industry." Instead, Amazon believes that OVDs are creating a new type of business altogether; one that should not be regulated like the cable industry.
Whether the FCC adopts its MVPD NPRM or not, the Commission now has its work cut out for it navigating industry arguments (and potential litigation) on all sides. Amid the net neutrality debate, downloadable security discussions and industry merger reviews, the MVPD definition is just one more tangled issue on the FCC's daunting 2015 agenda.
— Mari Silbey, special to Light Reading