Stations’ Online Future Hinges On ‘MVPD’

The regulatory issue that generated the most public discussion at this week’s NAB Show was the proposal to require broadcasters to put their political advertising files online. It’s up for a vote on April 27, and it’s the last thing broadcasters want to do. They say complying is going to cost a fortune and, worse, it’s going to wreck their ad sales by giving every Tom, Dick and, yes, Harry access to their ad rates on their smartphones.

In his Monday speech, FCC Chairman Julius Genachowski made clear he is wedded to the idea. On a panel the next day, Commissioner Robert McDowell said he would prefer a broadcaster-based alternative, while Commissioner Mignon Clyburn said she was “open to engagement,” which seems to be her stock answer to every question that even hints at getting to where she might stand on an issue.

But you can read about all that elsewhere by clicking on those links.

The regulatory issue that was talked about privately and extensively by broadcasters and their lawyers at NAB and that will have far greater, long-term implications for the industry was the FCC’s request for comments on the definition of multichannel video program distributor (MVPD).

I admit. That doesn’t sound like such a big deal. But, trust me, it is.

Multichannel video program distributor is a term cooked by the authors of the 1992 Cable Act to mean basically “cable system or satellite operator,” but the 42-word definition leaves room for others the FCC may wants to include. Being defined as an MVPD brings with it all kind of rights and obligations under the law. That’s why this is important.

A couple of years ago, a company that distributes video over the Internet, Sky Angel, asked the FCC to define it as an MVPD so that it could take advantage of the program access provision of the 1992 Act. The provision says that vertically-integrated cable networks have to be made available to all MPVDs.

Sky Channel wanted Discovery in its lineup, but Discovery wanted nothing to do with it.

Unfortunately for Sky Angel, the FCC staff rejected its complaint, saying that the Internet distributor did not fit the definition of an MVPD and so was not entitled to program access. Sky Angel appealed the staff ruling to the full commission, which ignored it until Sky Angel got a court order mandating that the commission consider its standing as an MVPD.

Unable to ignore a federal court, the FCC dutifully opened a proceeding at the end of March to decide whether Sky Angel and other Internet distributors deserved MVPD status.

So, why should broadcasters care?

If the FCC affirms its staff and finds that Internet distributors are not MVPDs then they will not be subject to all the regulations governing MVPDs, notably retransmission consent. In other words, an Internet distributor could pick up and redistribute TV signals without getting permission or compensating stations.

On the other hand, if the FCC finds that Internet distributors are MVPDs, just like cable and satellite operators, then they will be subject to retransmission consent. Bottom line: Stations would be able to control the distribution of their signals on the Internet.

So, it is clearly in broadcasters’ interest to argue in the FCC proceeding that Internet distributors are MVPDs.

Now, I need to inject another element into the discussion here: the compulsory license.

Spawned by the Copyright Act of 1976 and administered by the Copyright Office of the Library of Congress, the license is what allows cable and satellite operators to carry broadcast signals without getting any actual copyright clearances for all the programming contained within those signals. All the operators have to do is pay a token royalty to the Copyright Office.

The worst-case scenario for broadcasters is that some Internet distributor is able to take advantage of the compulsory license without retransmission consent and other obligations that come with being an MVPD.

As you may recall, that is precisely what ivi.tv  wanted to do. In 2010, the startup Internet distributor offered broadcast signals in Seattle and New York, hoping to attract paying subscribers.

But before the service could really get rolling, the affected broadcasters sued, claiming that ivi.tv wasn’t entitled to the compulsory license as it claimed. A federal court in New York agreed, shutting down the service. Ivi.tv has appealed. Briefs are due next month.

Broadcasters could lose that case. So, they are going to need a second line of defense. That would be a decision by the FCC that ivi.tv and its ilk are MVPDs and must behave like cable and satellite operators in all things. The compulsory license isn’t going to free ivi.tv to do what it wants if it still has to deal with broadcasters on retrans.

By the way, if you think that it would be nutty for the federal government to allow an entity to be enjoy the benefits of the compulsory license without the obligations of being an MVPD, know that this is apparently what AT&T is doing with its video service.

AT&T claims it is a cable system for purposes of the compulsory license and the Copyright Act, but it maintains that it is not a cable system for purposes of FCC regulation and the Communications Act. The only reason broadcasters have not sued AT&T over this, I’m told, is because AT&T has been voluntarily paying retrans fees to broadcasters as if it were an MVPD.

So, think of Internet distributors being classified as MVPDs as a redoubt. Even if the courts grant ivi.tv the compulsory license, it will not still not be able to grab broadcast signals and retransmit them without permission. Nor will any other company with the same idea.

Broadcasters desperately need to get their signals on the Internet so that they can be accessed on every desktop, netbook, laptop, tablet and smartphone. It’s the key to ubiquity, one of the qualities that has brought the medium this far.

If the networks and other copyright holders loosen their grip and give stations permission to put their programming online, the stations may not need the compulsory license. And there has been increasing talk that that is happening.

And if stations go online, it should be a safe environment where there are rules for handling TV signals and everybody has to play by them. And the way to create that environment is to make sure that Internet distributors are deemed MVPDs with all rights, privileges and responsibilities thereunto pertaining.

P.S. Comments in the proceeding are currently due April 30, a week from Monday. Right before the convention, the NAB asked the FCC for an extension, noting that the issues raised are “profound” and “potentially far-reaching.”

Harry A. Jessell is editor of TVNewsCheck. You may contact him at 973-701-1067 or [email protected].