Let’s Not Fumble the Over-the-Top Opportunity
FCC Chairman Tom Wheeler recently circulated a proposal to his colleagues that recommends classifying certain over-the-top providers as multichannel video programming distributors (MVPDs). The proposal aims to stimulate competition in the increasingly consolidated pay-television market.
NAB agrees these are worthy goals. Emerging over-the-top distribution provides an opportunity to unleash new competitive alternatives while preserving and enhancing localism and diversity in the Internet age. Broadcasters support the deployment of new and innovative video services that have the potential to boost competition to the benefit of consumers. We are committed to providing our highly sought after and unique blend of local and national content on any device wherever Americans want and need access.
Broadcasters are doing much of that innovation on their own today. ABC developed one of the original iPad apps, now referred to as “Watch ABC,” giving consumers a new avenue to great content from the earliest days of the tablet. Fox and Univision have announced plans for similar services, as has NBC with its NBC Now Service. Syncbak, a smartphone and tablet app developed by broadcasters, provides local viewers access to broadcast television through Internet-enabled devices. And just recently, CBS announced CBS All Access, its new over-the-top service, experimenting with new ways for consumers to access CBS stations from around the country. These are just a few examples of recent innovations that have furthered consumer access to broadcast content online, and the fact remains that local broadcast stations have the most viewed local content on the Web.
The FCC’s new inquiry, while intriguing, does have its challenges. It will take an open-minded and thoughtful approach to address the complex web of legal, policy and practical implications inherent in applying facilities-based rules to over-the-top providers. It is therefore somewhat concerning that, in recent public comments, Chairman Wheeler appeared not to appreciate these complexities:
“By facilitating access to [broadcast TV] content, we expect Internet-based linear programming services to develop as a competitor to cable and satellite. Consumers will be able to buy the channels they want instead of having to pay for channels they don’t want. As you know, a startup called Aereo has already proposed doing this, but the broadcasters were able to stop it in court, in part because of the old rules of the FCC. Aereo wasn’t the reason for the new rules, but the idea that entrepreneurs should be able to assemble programs to offer consumers choices is something that shouldn’t be hindered by the FCC.”
First, by asserting that “the broadcasters were able to stop [Aereo] in court,” the Chairman conveniently ignores that broadcasters were not the only ones to object to Aereo’s illegal operation: the Justice Department did as well. As the Solicitor General argued to the Supreme Court, “[Aereo’s] unauthorized Internet retransmissions violate… statutory requirements and infringe [broadcasters’] public-performance rights under [the Copyright Act].” The Obama Administration was therefore as responsible for “stopping” Aereo as broadcasters were.
Second, the Chairman misidentifies not only who, but what actually stood in the way of allowing Aereo to continue to misappropriate content. It wasn’t “the old rules of the FCC.” It was a statute: the Copyright Act. The Act is designed to ensure that content creators are fairly compensated for the work they develop, and derives from rights explicitly prescribed by the U.S. Constitution. If the Aereos of the world could simply take what local stations and networks pour billions of dollars into producing and turn around and charge consumers for it – especially with no added value – content creators would have little or no incentive to produce that work. That is why the Supreme Court found that Aereo “infringe[d]” on the networks’ exclusive right” under the Act. Thus, even if the Chairman could unilaterally change the FCC’s “old rules” today, Aereo’s business model would still violate the law.
Third, simply because someone introduces a new service, he or she is not suddenly an “entrepreneur that shouldn’t be hindered by the FCC.” Shouldn’t it matter to the FCC, at a bare minimum, whether content is distributed legally or illegally? Aereo was innovative only in its creative attempt to skirt the copyright laws, not, for example, in the quality or speed of its streaming service. Let’s not forget that Aereo is only now approaching the FCC to obtain MVPD status, having waited until after the Supreme Court made clear that its attempt to charge consumers without compensating rights holders plainly violated the law.
NAB supports the FCC examining how best to ensure that online entities can offer competitive alternatives. It is an important inquiry. While it presents exciting opportunities for consumers, however, without the proper level of humility and recognition of all of its challenges, it could lead to serious pitfalls. Tough questions loom, including how to handle a deluge of new potential MVPDs, how to avoid further homogenizing news, weather, sports and entertainment, and how to prevent stifling new business models outside of the MVPD context that could further enhance consumer welfare. These are all essential ingredients that must be in the mix. And yes, the law matters.
The FCC has a terrific chance to get this challenging and novel proceeding right. If it does, we are likely to see increased competition, localism and diversity. But a healthy respect for the law and the incentives it creates (and prevents) is essential at the outset. We look forward to working with the FCC as it forges ahead in this unchartered territory.