Extending FCC's MVPD Umbrella to OTTs Seen Raising Big Questions

The FCC almost certainly will revisit the definition of multichannel video programming distributors to include one subset of over-the-top providers in the near future, cable lawyers said in recent interviews, saying they expect new rules in coming months.

Among the top FCC priorities is reinterpretation of the agency’s definition of an MVPD to include any provider of linear programming -- including OTT services, said Gigi Sohn, counselor to Chairman Tom Wheeler, earlier this month (see 1506040027). “The chairman believes that this approach will ensure both that incumbent MVPDs continue to be subject to pro-competitive and pro-consumer obligations as they transition their services to the Internet, and that new over-the-top providers will have access to the programming and other tools they need to compete with established video providers,” Sohn said at a Media Institute lunch. The agency had no comment.

Rules likely will come out this summer or fall, cable attorneys said. “It’s clearly something that’s important to" Wheeler, said Rick Chessen, NCTA senior vice president-law and regulatory policy. No date has been set for a next step in the NPRM, said an agency official.

The pay-TV world continues to await specifics, as a number of attorneys said the NPRM in docket 14-261 that the FCC put out in December is short on details in a number of key areas. “The conventional wisdom is they’ll adopt this kind of [online video provider] rule, but beyond that no one knows,” said a cable industry attorney.

Groups as disparate as numerous network-affiliated TV stations and the Consumer Federation of America support the FCC proposal. CFA said the extra negotiating power with broadcasters and vertically integrated cable companies would give online providers of linear video programming a better shot at success than ill-fated OTT operations Aereo and Sky Angel had. “By unbundling video content from Internet access, more niche programming packages -- perhaps similar to Aereo or Sky Angel -- will likely be made available to consumers,” CFA said.

The FCC proposal has been criticized by organizations such as the Atlanta Interfaith Broadcasters and AT&T. “Regulation imposes very real costs and therefore is appropriate only where there is compelling evidence of a problem to be solved,” AT&T said. Programmers worry that one FCC assumption underlying the proposal is they would be required to get rebroadcast rights so as to make them available to OTT operators, said a cable lawyer. “Rights are not always available,” said the attorney. “There are content providers who will not give them. Or [you'd] have to pay huge amounts.” There also is a question whether other OTTs not affected by the new MVPD language could still try to take advantage of it by streaming some content in a few channels so they have access rights and new huge leverage to use against programmers, the attorney said.

Though not an MVPD under the proposed new interpretation, Atlanta Interfaith said it wonders about that definition eventually capturing it. "The obligations that go with being an MVPD loom large,” including the administrative costs of regulation and program carriage requirements that could force it to change editorial policies, AIB said. A bigger worry is being crowded out of the market as proliferating numbers of MVPDs create competitive pressures that drive out local programmers like Atlanta Interfaith, said lawyer James Johnston, representing the firm. "We put our programming on the Internet, but it doesn’t get picked up the way it would on an MVPD." It's likely what the FCC rolls out won't go as far as its proposal in the NPRM, Johnston said. "If the FCC tries to go as far as it did in the proposal, you'll see a big fight."

"It's not clear there are real ramifications [for cable companies] absent the FCC doing more,” said one cable industry attorney. Some see the FCC next telling broadcasters and programmers that they can't force OTT operators to carry all their channels, given that Wheeler has alluded to slimmer programming bundles as a goal, the lawyer said. But the cable industry also worries about mission creep, as regulations on such requirements as closed captioning could spread to other OTT providers, NCTA's Chessen said. “Why should somebody who is watching on-demand programming not get alerts? This could be breaking the seal on that.”

The issue came to FCC attention in 2010 when OTT Sky Angel filed a complaint against Discovery Communications about program access rules -- with Discovery arguing that Sky Angel was not an MVPD and couldn't invoke those rules. Sky Angel has since suspended its online video operations. “It’s a little frustrating to see how long it’s taken for the FCC to pick up on this issue. I was hopeful the FCC would have tackled [it] a little sooner,” said Charles Herring, president of Herring Networks, whose AWE and One America News Network cable channels had been carried on Sky Angel. “A viable company basically shut down … waiting for a decision that’s never come.”

With cable operations increasingly migrating to Internet delivery, extending that MVPD designation to OTT operators that make linear video streams available on a subscription basis would give them various program access protections and retransmission consent protections, as well as MVPD regulatory obligations such as providing closed captioning, all of which would help boost competition, the FCC said in December. While the proposal doesn't include subscription on-demand providers, such as Netflix; traditional on-demand providers like Amazon Instant Video and the iTunes Store; ad-based linear and on-demand providers such as Yahoo Screen and YouTube; or transactional linear providers, the FCC also solicited comment on whether any of those other categories also should fall under the MVPD umbrella.

For now, the OTT area being considered "is pretty narrow," said Charles Naftalin with Holland & Knight and counsel for Sky Angel. "Sky Angel really looked, smelled and felt like an MVPD system. MVPD has been out there 20-plus years. It says what it says. If you're like cable, you're an MVPD. A lot of OTT doesn't look and feel like cable. This one did. There is no implication for a whole lot of Internet-related video."