News Ticker

FCC’s MVPD proceeding: the next divisive issue

FCC Commissioner Ajit Pai (R)

Federal Communications Commission Tom Wheeler’s proposal to reclassify some online video providers as multichannel video programming distributors is going to be another divisive, partisan issue—an all-too familiar pattern at the agency.

The gist of the proposal would result in over the top services that provide linear programming (programming streamed on a set schedule) falling under the same regulations as cable or other pay TV services.

Wheeler recently said the agency would take up the issue in the fall, but GOP commissioner Ajit Pai, a constant thorn in Wheeler’s side, is already building his case for why it’s a really bad idea.

From Pai’s perspective, there is no market failure. Over-the-top video is thriving.

“Given the remarkable success of the over-the-top video industry, the burden should be on those who favor new regulations to prove what’s wrong and explain why we should change,” Pai said Friday in an address to the Churchill Club, a business and tech forum in Palo Alto, Calif.

Pai cited numerous examples of online video that have popped up all across the Internet, from YouTube to Netflix to CBS All Access.

The argument for redefinition is that it would help the OTT industry, stimulating more competition for cable because TV stations would now be required to engage in retransmission consent negotiations.

In a speech before the cable industry, Wheeler signaled his position: “The commission has its work to do to clear obstacles to competition. We will proceed to consider whether to adopt a technologically-neutral definition of a multichannel video program distributor and, to be candid, I favor a technologically-neutral definition that includes Internet-based companies that choose business models that fit this status,” Wheeler said.

But that presents its own legal dilemma, Pai noted. While the FCC could compel retransmission negotiation agreements, it has no authority over the Copyright Office, which must also grant a compulsory license.

“Right now, cable operators have a legal right to a compulsory license. But that license only applies to ‘cable systems,’ and the U.S. Copyright Office has taken the position that over-the-top providers don’t qualify,” Pai said. “Some hope that the Copyright Office will change its mind, but I wouldn’t bet on it.”

Pai argued that there is nothing that prevents programmers from negotiating carriage and licensing agreements right now, pointing out that a number already have, such as PlayStation Vue and Sling TV.

Pai said a lot of digital video programmers agree with him, including Amazon and the Digital Media Association, that represents Apple, Microsoft, and Sony.

“The way forward on over-the-top video is simple. There is no market failure. There is no problem to be solved,” Pai said.

Taking a cynical view of the agency, Pai speculated why the FCC would want to regulate over-the-top video companies like cable companies.

“In my view, it’s all about increasing the FCC’s authority—about putting the FCC at the head of the digital table and bringing another industry within our reach,” Pai said.