A close look at FCC Chairman Tom Wheeler’s proposal to make online video distributors [OVDs] the regulatory and legal equal of cable and satellite with all the same rights and obligations means such services, including Aereo, would be subject to retransmission consent. This is a big deal and broadcasters at all levels will need to be fully engaged in the rulemaking to make sure it doesn’t go bad.
If Tom Wheeler and Aereo are for it, broadcasters are against it, right?
In fact, the FCC chairman and the never-say-die, past-and-would-be-future online distributor of local broadcast signals may be allies on what may become one of the most far-reaching TV proceedings of the Wheeler regime.
On Tuesday, Wheeler confirmed in his blog earlier reports that he would open a full-blown rulemaking to make online video distributors [OVDs] the regulatory and legal equal of cable and satellite with all the same rights and obligations.
Wheeler sees the proceeding as spurring the development of virtual cable systems — companies offering popular cable channels and broadcast signals to paying subscribers via the Internet.
It’s a “first step,” he says. ” The result should be to give consumers more alternatives from which to choose so they can buy the programs they want.”
Such services are already on the way, he notes. “Dish has said that it intends to launch an online service that may include smaller programming bundles. And it has already begun offering foreign language channels online.
“Sony, DirecTV and Verizon are also in the hunt. Recently, CBS announced a streaming service that includes linear channels, separate from cable subscriptions; and the new HBO service may as well.”
The trick is to stretch the legal definition of MVPDs beyond just cable and satellite, Wheeler says. “The result of this technical adjustment will be to give MVPDs that use the Internet (or any other method of transmission) the same access to programming owned by cable operators and the same ability to negotiate to carry broadcast TV stations that Congress gave to satellite systems in order to ensure competitive video markets.”
Whether the FCC can make the “technical adjustment” will be hotly debated in the rulemaking. Fearing the competition that could be spawned by the adjustment, some cable and satellite interests will be arguing against it.
Wheeler’s chief concern is making sure the nascent virtual cable systems enjoy the benefit of program access rules available only to bona fide MVPDs. Weak and limited in scope now, the rules could be beefed up in the rulemaking.
But MVPD status also carries obligations, notably retransmission consent. Go back and read that last quote from Wheeler three paragraphs above. When he talks about giving OVDs the “same ability to negotiate to carry broadcast TV stations,” he is talking about retrans.
What’s interesting is that when Aereo got wind of Wheeler’s plans, CEO Chet Kanojia and his legal entourage visited Wheeler to encourage the initiative and, of course, provide their self-serving views on how it should turn out.
The Aereo team indicated that if given MVPD status, it would abide by must-carry and retransmission consent rules like other MVPDs as long as it was not forced by the big multimedia companies to take a “bundle” containing channels it had no interest in.
Aereo also said it would expect the same treatment as cable and satellite operators get in negotiating for programming. “[A]ny licenses offered to online services should be in relative parity to licenses offered to other types of systems offering similar access to linear broadcast television channels.”
Although Wheeler would clearly like to spawn a new medium to compete directly with cable and satellite, he can only go so far.
Aereo or any other OVD interested in carrying broadcast signals would also need the compulsory license, which affords blanket copyright coverage for all the programming that makes up broadcast signals. Right now, it’s only available to cable and satellite operators.
Aereo and the like-minded FilmOn believe that they can convince a federal court that the license should also be extended to online distributors. So far, those efforts have been a big bust, but they plod on.
The other avenues for expanding the compulsory license to OVDs include the Copyright Office and Congress. The former has been hostile to the idea and the latter has shown no inclination to help.
Wheeler already has a long record on which he and the other four commissioners could decide next week whether OVDs are MVPDs, although it is probably best that the FCC conduct the more comprehensive rulemaking Wheeler is contemplating given the magnitude of the issues.
Four and a half years ago, an OVD called Sky Angel asserted that it was an MVPD and attempted to force Discovery Communications to make its programming available under the program access rule, an MVPD entitlement.
Rather than rule on Sky Angel’s MVPD status, the FCC asked for a round of comments in 2012 and has been mulling them for two years.
In those comments, broadcasters led by the affiliate groups of ABC, CBS and NBC embraced extending MVPD status to OVDs with good reasons. The big one was that the MVPD status would presumably impose retransmission consent obligations on OVDs.
“[P]rogramming distributors that utilize the Internet cannot be left to retransmit television broadcast signals online at will, leaving broadcast stations both unable to control the distribution of their signals over the Internet and unable to recapture the value of retransmission and resale of their signal, as this would have obvious and potentially devastating consequences for broadcasters,” the affiliates argued.
So even if the Aereos of the world somehow managed to win the compulsory license, TV stations would still be protected against the OVDs carrying their signals without compensation. Keep in mind that when the FCC started collecting comments on how to regulate OVDs, whether Aereo would qualify for the compulsory license was very much up in the air.
Wheeler and Aereo are allies in the way the Soviet Union was during WW II. Neither can be fully trusted — Wheeler, because his record so far has been inimical to broadcasting and, Aereo, because it started its business life as a video anarchist, scheming to sell broadcast signals to the public without compensating broadcasters or other copyright holders. It took two and a half years of litigation, including a Supreme Court ruling, to discipline Aereo.
It’s hard to know what Aereo’s current strategy is. Perhaps it sees adopting the mantle of MVPD and playing within the rules as the best way to get what it really needs — the compulsory license.
Incidentally, another bane of broadcasting, FilmOn, has also told the FCC it is ready to behave, to submit to the obligations of MVPD, including must carry and retrans, in exchange for its program access benefits.
This is a big deal. Broadcasters at all levels will need to be fully engaged in the rulemaking to make sure it doesn’t go bad. The FCC may have some discretion to amend the program access and retrans rules.
In comments, the Fox affiliates warned against the FCC creating a “loophole” through which some OVDs could carry broadcast signals without paying retrans fees. “This would create a downward spiral in retransmission consent revenues and local television broadcast service.”
As Wheeler said, the upcoming rulemaking is a “first step.” Broadcasters need to make sure it is in the right direction.