'Hit Pause' on Regulating OTT, Pallone Cautions FCC
House Commerce Committee ranking member Frank Pallone, D-N.J., scolded the FCC Friday for any potential flirtation with regulating over-the-top (OTT) video and possibly reclassifying its companies as multichannel video programming distributors. “We should hit the pause button on regulating streaming video,” Pallone declared, speaking remotely from the Capitol to an audience in the Venable law offices during an event hosted by Duke Law (see 1510090028">1510090028).
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“Some have urged the FCC to help prop up some video business models through additional regulation,” Pallone said. “The companies that first asked for help claimed that new entrants must be defined as cable companies if they are to get access to content. They were essentially worried that they could not compete with traditional cable companies without importing cable regulations to the online world. But consumer demand since then has driven the market to create new business models and new ways to distribute programming.”
The FCC has expressed interest in expanding the MVPD definition to encompass aspects of OTT video services, stirring much debate in recent months (see 1508240024).
Pallone’s constituents complain of programming costs and TV blackouts, he said. “But so far I have not been hearing from constituents that they can’t find the shows they want. I think that is because content is starting to break free from the traditional models. Networks have learned to supplement their old revenue streams by selling some of their shows to competing online providers. Some of these shows are older reruns, but some are new content. In this market, consumers are beginning to have more programs to choose from, more ways to get them, and more options on prices.” Pallone said the OTT market “is still burgeoning” and “we cannot know what business models consumers will prefer. ... And we cannot know yet how to craft the proper consumer protections.” The FCC should keep “asking the tough questions” on video, but “in the case of defining online video providers as cable companies, I do not think we can say 'yes,'” he said. “Until we all better understand the ultimate impact on consumers, the FCC should avoid adopting sweeping new regulations.”
"Amazon supports Congressman Pallone's call for continued innovation in video delivery for customers," said Amazon Director-Public Policy Brian Huseman. "We remain concerned that grafting a twentieth-century regulatory model onto modern digital media platforms could impair the success of this thriving marketplace and reduce choice for customers."
The Pallone remarks may have put a stake in the FCC’s OTT video proceeding, one broadcast industry lobbyist told us. But others hesitated to go that far in interpreting the state of play.
“I don't see it that way,” countered Free Press Policy Director Matt Wood by email. “It's all kind of idiosyncratic -- meaning different entrepreneurs have different bottom lines and aims. But when I was in private firms 5 or 10 years ago, we had clients who wanted to be virtual MVPDs. It's not the business model for every OTT provider, but I don't think that means we should allow it for no one.”
“It does seem like a stretch to read this as the death knell,” said New America Foundation's Open Technology Institute Policy Counsel Josh Stager, citing Pallone’s limited mention of video issues since becoming ranking member and saying “it remains to be seen just how much energy he's willing to invest in fighting [FCC Chairman Tom] Wheeler on this proceeding.”
“This is a sound recommendation,” Information Technology and Innovation Foundation telecom policy analyst Doug Brake said of Pallone’s OTT comments. “The proposal by the FCC to put linear online video distributors in the same regulatory bucket as traditional pay TV services is premature. While we generally encourage a shift to over-the-top video over general-purpose networks, the economics of this transition are complex. Video distribution is an incredibly dynamic area of the digital economy, and the FCC should continue to observe the online market before acting as this transition continues to develop.”
Pallone also called for Congress to more “closely investigate” the NFL's role in the video market. “Although Congress gave the NFL its antitrust exemption for dealing with broadcasters, the league operates as one unit to negotiate multibillion-dollar deals with cable and satellite distributors, cable channels and online services,” Pallone said. “Between all these deals, some estimate that the NFL’s programming costs account for the most substantial portion of all sports programming costs.” Lawmakers should assess whether the NFL “is operating as a monopoly in their dealing with other distributors,” he recommended. The exemption may still be beneficial, he acknowledged, not going as far as other lawmakers in calling for an outright end to the exemption.