Rockefeller’s Online Video Proposal May Be Dead on Arrival, Say Lobbyists, Observers

Rockefeller is eyeing the Satellite Television Extension and Localism Act, which needs to be reauthorized by the end of 2014, with his bill and may hold a hearing on the bill as part of a conversation on consumer choice, said a spokesperson for the chairman. The aide said it’s “premature to speculate” on the outcome of STELA, but indicated the concepts in the Consumer Choice in Online Video Act “could very well be” included in that debate. Rockefeller is already in discussions about what STELA should include, the aide said.

Rockefeller didn’t significantly consult with his committee colleagues, Democratic or Republican, or with industry before introducing this bill, said industry officials who have concerns with the bill. “This is a highly regulatory and probably unworkable bill, but above all, it’s not an a la carte bill,” said an industry official. “It’s a program access bill for” online video distributors, said the official. That official’s sense is that this bill is going nowhere, that it’s a “thought piece,” and that it may remain one. The bill is Rockefeller’s own push and is not necessarily that of the committee nor does it reflect any sort of majority viewpoint, with little consultation with Republicans or industry, said a different communications official. Officials also pointed to Rockefeller’s committee control and said he holds the cards in terms of holding any hearings.

The Rockefeller bill caught most committee staff and members of both parties by surprise, said a broadcast industry lobbyist. This bill won’t pass Congress, the lobbyist said, which he and his colleagues surmised the moment they saw its details. There’s no question the Rockefeller bill would hurt “local broadcasters” due to its provisions about Aereo as well as the provision about distant signal importation, said the broadcast lobbyist, who opposes the bill. It also would hurt cable and satellite companies, the lobbyist said, even musing that online video providers may not be happy because they can’t do exclusive deals under the bill’s terms. The real question is whether these issues become a real fixation for Rockefeller -- who’s retiring at the end of next year -- in the coming months or whether they fade after this proposal, the lobbyist said. He doubts a hearing will happen but believes pieces of Rockefeller’s bill could survive and advance in some other form. He expects a Senate Commerce STELA hearing in Q1 and eventually expects STELA passed by unanimous consent or some similar measure.

Communications Subcommittee Chairman Mark Pryor, D-Ark., is looking forward to reviewing the specifics of the bill, his spokeswoman told us Wednesday. A spokeswoman for committee ranking member John Thune, R-S.D., said Tuesday afternoon that Thune was still learning details of the proposal. The spokeswoman didn’t comment Wednesday. The bill, S-1680, listed zero cosponsors.

When asked whether Rockefeller had engaged with other committee members and industry, a committee aide to the chairman told us it’s no secret Rockefeller was interested in addressing the need for more a more consumer-centric video market. The aide cited a past hearing on the topic and Rockefeller’s outlines of committee priorities. “In particular, the Chairman has heard from consumers about their frustration with ever-increasing pay television bills and real choice in the programming they receive,” the aide said by email. “The bill reflects the Chairman’s vision, based on his work on this issue -- broadly speaking -- for more than two decades, and the fact that he doesn’t believe companies always put consumers first."

The aide reiterated Rockefeller’s commitment to now talking with colleagues and industry. “Frankly, Rockefeller has been a U.S. Senator for 30 years -- he knows how to move legislation,” the aide said. “The bill he introduced is a marker to begin a discussion and from which to build consensus."

The bill is unlikely to pass Congress, said Guggenheim Partners analyst Paul Gallant in a research note to investors Wednesday. But the bill begins key debates, especially if the FCC gets involved, he said. The text, not yet posted online but made available Tuesday night, showcases “several important elements” that Rockefeller hadn’t hinted at in an earlier news release, Gallant said. He pointed to three main priorities revealed by the text. “Aereo is legalized, and broadcasters are prevented from thwarting Aereo via engineering work-arounds,” he said, expecting an “all-out broadcast/content lobbying blitz” to prevent this legalizing provision. ISPs would not be able to use usage-based pricing to hurt over-the-top providers, with the FCC deciding, it said, also mentioning how ISPs may be able to make quality-of-service deals with content and apps companies.

Stifel Nicolaus also judged the bill’s prospects to be slim, it told investors in a research note. “We don’t expect the legislation to be enacted into law as it takes on too many powerful interests and appears too regulatory for Republicans, but it lays down a marker and could influence possible video reforms in a satellite-TV reauthorization bill next year.” The bill would help online video distributors like Netflix and others exploring similar services, but may appear problematic for cable companies and telcos, ISPs and some other companies, said Stifel. “Sen. Rockefeller has basically floated a trial balloon and could make changes in response to feedback from stakeholders."

Dish Network “agrees with Chairman Rockefeller that outdated TV rules need to be updated for this century to give consumers greater choice, and that consumer over-the-top (OTT) alternatives need to be addressed,” said Deputy General Counsel Jeffrey Blum in a written statement.

"While I respect Sen. Rockefeller’s intentions, I think his bill is counterproductive, unnecessary, and, ultimately, anti-consumer,” said Free State Foundation President Randolph May. “It is just wrong to make policy based on assumptions that the video marketplace is the same as it was in 1992 when the Cable Act was adopted.” The video market is effectively competitive, he said, citing players from satellite to wireless to phone to fiber. “But Rockefeller’s bill, which contains forced access mandates at regulated prices, is the very type of measure that ultimately subsidizes non-facilities based program purveyors at the expense of video distributors that have invested in building out networks and acquiring programming to carry on their networks,” May said. “This type of forced access and subsidization ultimately harms consumers by diminishing the supply of both programming and high-speed broadband facilities over which to carry the programming.

"The bill’s UBP [usage-based pricing] provision will encounter massive resistance from all cable and phone companies, and we would not expect it to pass Congress,” Gallant said. “But the important point here is the potential for Rockefeller’s bill to influence FCC oversight of broadband pricing. We don’t yet know whether [new FCC] Chairman [Tom] Wheeler will focus on UBP, but the timing of Rockefeller’s bill -- just a week after Wheeler took office -- is interesting.” Gallant said he suspects Rockefeller may be trying to influence the FCC.

Several companies as well as Free Press and Public Knowledge voiced varying degrees of support, at least for certain elements of the bill, and said they would work with Rockefeller. Public Knowledge Senior Staff Attorney John Bergmayer called the legislation “the ambitious approach we need to ensure that the benefits of online competition come to the video marketplace.” Public Knowledge plans to advocate for “the benefits of the approach” and the ways the bill “would bring fairness, transparency, choice, and competition to online video,” he said.

Rockefeller wants to talk to his colleagues and stakeholders about the bill and has long been able to accomplish his priorities, “even when the odds aren’t in his favor,” the Rockefeller aide said, citing how Rockefeller pushed the legislation that created FirstNet.