NPRM on Treating OTTs as MVPDs Being Shared Among Some 8th-Floor Offices
A draft NPRM that would seek comment on broadening the definition of what the FCC considers a multichannel video programming distributor to include linear over-the-top video providers (see 1410010086) is being shared among some offices on the FCC's eighth floor, and Media Bureau staff has been reaching out to OTT and cable companies to discuss it, said commission officials and industry officials in interviews. Remarks by FCC Chairman Tom Wheeler and a recent speech by General Counsel Jonathan Sallet (see 1410170039) indicated an interest in the item at the commission's highest levels. Officials at the FCC, in OTT video companies and in the cable industry told us it's not clear if the item is intended to bring online programming into the FCC's purview, provide regulatory certainty for OTT companies like Aereo or increase competition for large cable companies such as Comcast.
Though still in its early stages, in its current form the draft NPRM would seek comment on classifying linear OTT services -- those that offer a set stream of scheduled content analogous to a TV channel -- said cable officials, officials in the OTT industry and at the FCC. The item would seek comment on how a linear OTT provider would be defined, and propose including OTT services that have multiple streams of linear content, said an OTT industry official. The NPRM doesn't set out to include nonlinear services like Hulu or Netflix within the new definition, but would seek comment on whether companies that primarily offer on-demand content but also offer some linear content would be included, an industry official said. The draft NPRM would propose not applying to OTT providers many of the facilities-based rules that apply to MVPDs, and seeks comment on which obligations that apply to cable and DBS providers -- such as emergency alert system requirements -- would also affect OTT providers, an industry official said.
It wouldn't be logical for the FCC to designate a service as an MVPD and not require it to do the things MVPDs are required to do, said cable consultant Steve Effros. That is “assuming those obligations were adopted to benefit the public and not just as penalties to cable,” he said. NCTA said that if the FCC allows OTT companies to be MVPDs, they “must be subject” to the same requirements as existing MVPDs, in an ex parte filing. Though Verizon has said such rules would hurt OTT's ability to compete with cable providers (see 1410200042), Aereo said in an ex parte filing last week, “Online linear channel streaming services have the ability to comply with the Commission’s regulatory obligations imposed on MVPDs.”
It's unlikely that cable legacy rules will end up being applied to a new class of MVPDs, because the move to broaden the definition is intended to increase OTT's viability as a competitor to cable, said an FCC official. But others ascribe different reasoning to the push to redefine MVPDs. Having OTT services under the MVPD banner would give the FCC jurisdiction over online programming that it doesn't currently have, Effros said. If the commission is seeking to ensure it can regulate online content, it's arbitrary to exempt nonlinear OTT providers from the obligations of an MVPD, he said. “So only those watching linear online content get to learn if there's a tornado in the area?” Nonlinear OTT doesn’t need the same protections, Aereo said. Services like Netflix “have successfully demonstrated their ability to operate and obtain necessary licenses without FCC regulatory intervention,” Aereo said.
Industry officials following the proceeding believe the proposed definition change may be inspired by Aereo's difficulties, and is intended to keep other OTT providers from suffering the same legal barrage it did. “Meaningful competition from such online services can only materialize and develop into a sustainable business in a stable and certain regulatory environment.” Aereo said. An parte filing posted online Tuesday said Aereo competitor FilmOn also met with FCC personnel to support the broadening of the definition of an MVPD. FilmOn plans to “commence retransmission of local television broadcast stations to authenticated subscribers in local markets consistent with FCC Rules” applicable to MVPDs, it said in the ex parte filing. Like Aereo, FilmOn said it's able to comply with must carry and other obligations applicable to MVPDs.
A recent move to offer OTT content by CBS (see 1410200059) may indicate Aereo and FilmOn are unlikely to see much benefit if they were designated as MVPDs, Effros said. Though as MVPDs, they would be allowed to negotiate for retransmission consent rights, broadcasters offering a competing online product and fresh from lengthy court battles with Aereo are unlikely to sell content to the companies, Effros said.
The move to give OTTs MVPD status could be connected to Comcast's planned buy of Time Warner Cable, some industry officials suggested. Since an MVPD is entitled to program access rights from vertically integrated programmers, a new proposed rule could be intended to give OTT companies more protection from Comcast, industry officials speculated. It would likely be easier for the FCC to accomplish such goals through transaction conditions, said an FCC official.