Retrans Rules, OTTs as MVPDs Dominate Video Competition Report Comments

What AT&T called the regulator's "outdated retransmission consent regime" -- and Verizon termed a "broken retransmission consent regime" -- is leading to increased TV station blackouts and higher prices, MVPDs said. To fix an what it sees as an imbalance in retrans consent negotiations, the FCC needs to revise its totality of circumstances test for good-faith negotiations, and add such actions as blocking online access to Internet content during a blackout, and forced bundling of content and forced tiering as evidence of lack of good-faith negotiations, Verizon said. A mandatory standstill, interim carriage, and cooling-off period requirement when retrans contracts expire "can help prevent consumers from experiencing widespread disruptions in service and increased rates during and because of retransmission consent negotiations," Verizon said. The company also advocated "abandoning the CableCARD regime" and other technology mandates. And as the FCC considered expanding the MVPD definition to include certain types of OTT providers, it should make such MVPD status a choice that gives "reasonable access to programming, while also shielding these providers from legacy cable regulation, technology mandates, or other unnecessary regulation," Verizon said.

Retrans reform proceeding docket 10-71 "provides numerous meritorious proposals for re-balancing the broken retransmission consent negotiation process that currently hampers the delivery of video programming," AT&T said, though it didn't cite specific proposals. It said the FCC shouldn't stretch the definition of MVPDs to incorporate certain OTT video services: "Doing so would be harmfully premature given the still developing OTT ecosystem, and applying outdated or overly restrictive regulation could undermine the advancement of Internet-delivered video."

With broadcasters competing "with the increasingly consolidated pay TV industry and growing numbers of online video providers for viewers, advertising dollars, and investment capital," the FCC needs to update ownership rules so broadcasters can "realize economies of scale and scope, and obtain needed investment," NAB said. It said TV station ownership rules are an "unduly narrow view of the market [and] increasingly unjustifiable as rising numbers of advertising dollars and eyeballs are diverted to other media platforms." NAB also urged the agency to look into whether local and regional consolidation in the cable industry is leading to subscriber costs growing rapidly.

CenturyLink said it supports American Television Alliance proposals on retrans reform. ATVA had said an array of negotiating tactics such as restricting access to online content, requiring bundling, blacking out of marquee events, stopping the importation of an out-of-market signal, ceding broadcast negotiation rights to a third party such as an affiliated TV network, equipment limits and charging for subscribers who don't receive a broadcaster's service should be considered signs of negotiating in bad faith (see 1507170048). CenturyLink also said the FCC should tread carefully in reclassifying some OTTs as MVPDs. "If the regulatory mantle is too heavy, new video delivery technologies will be crushed, [yet] some regulation in order to protect consumers and promote consumer choice may be appropriate," CenturyLink said.

While that MVPD definition should be stretched to include OTT for the regulatory assistance -- such as statutory copyright licensing -- it would provide in gaining content rights, the FCC needs to "apply a light regulatory touch to Internet-based video services where the provider is not also providing the transmission path," FilmOn X said. Otherwise, it said complying with MVPD regulations "may create entry barriers that inhibit new competition."

It may be premature to change the definition of MVPD because there are no widely available commercial services that would meet the OTT-as-MVPD definition, said CEA. "Now is not the time to intervene in the nascent and rapidly evolving online video marketplace, which to date has seen explosive growth absent any industrywide regulatory involvement," CEA said. "Refrain from regulation and let online video technologies and business models more fully develop and compete."

Though some broadband providers won't interconnect with an online video distributor, or upgrade capacity to meet demand, without that OVD paying a fee, their "terminating access monopoly ... gives ... market power to impair a consumer’s experience and demand fees from online content providers," Netflix said, pushing for settlement-free interconnection: "Video competition ... depends upon FCC oversight of interconnection -- and putting in place policies that keep the Internet a free and open platform for expression."

As the number of cable systems continues to shrink -- 91 cable systems operated by 47 entities, with more than 5,300 subscribers in 32 states shut down last year -- the report shouldn't just document this trend but look for reasons why, including what role the booming costs of programming are playing, the American Cable Association said. As demand for video limits the ability of MVPDs to change their business models, and competition limits their ability to raise prices even as programming costs are rising, "multichannel video economics are deteriorating and may limit new broadband deployment by smaller-scale MVPDs," ACA said.

Most favored nation clauses in programming contracts are used to restrict new entries in the TV market, and warrant a closer FCC look to see if they're being used to stifle competition, Public Knowledge said. While the FCC is working on clearing out "regulatory underbrush" of now-obsolete rules that were slowing the video market's development -- such as the sports blackout rule, network nonduplication and syndicated exclusivity -- it's missing other such opportunities as unnecessary "basic tier buy-through" obligations forcing MVPD subscribers to get a basic tier before they can purchase any other video programming, Public Knowledge said. When digital broadcast TV is available via a digital antenna for many viewers, PK said it "makes no sense to require that customers pay for that programming with their cable subscriptions -- though of course they should be free to do so."

Public Knowledge asked that submitters include empirical data on the state of the video industry, and raised the question of whether the FCC should start requiring that companies it regulates turn over such information. "It seems odd the FCC has to rely so heavily on this self-reported information," while broadband providers have obligations for data reporting, PK Senior Staff Attorney John Bergmayer told us Monday. "It seems odd you have to ask the companies you're regulating could they provide some information about themselves."