Tepid OTT Reception Seen Putting MVPD Definition Proceeding in Limbo
The FCC's rulemaking on whether to classify some types of over-the-top (OTT) providers as multichannel video programming distributors (MVPDs) in large part went dormant because it got far less OTT industry support than the agency anticipated, said municipality lawyer Tim Lay of Spiegel & McDiarmid Monday during a NATOA online seminar on the OTT market and emerging regulatory issues. Numerous OTT video service providers saw the disadvantages of taking on MVPD obligations as outweighing the benefits, such as the right to negotiate access to broadcast signals, and now the rulemaking in docket 14-261 is on hold, and it's unclear when -- or if -- the FCC will pick it back up, Lay said. The FCC didn't comment.
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The OTT marketplace has expanded hugely in the 11 years since the launch of YouTube and iTunes video, said TelVue CEO Jesse Lerman. DirecTV is expected to start an OTT offering with linear channels later this year, while YouTube and Hulu likely will do something similar in 2017. The number of OTT subscribers is expected to top 200 million by 2020, he said.
But there hasn't been a corresponding lockstep decline in pay-TV subscriptions, Lerman said. Roughly 76 percent of U.S. adults subscribe to pay-TV service, while another 6 percent are cord-cutters and 18 percent are cord-nevers, he said, saying cord-cutting likely won't take off in numbers until there is more broadband competition that could overcome the ability of incumbents to bundle their broadband and video offerings.
The rise of OTT services offered by MVPDs brings a variety of questions for local franchise authorities (LFA), speakers said. The franchise fees collected by local or state franchise authorities could drop hugely depending on whether a streaming service delivered via IP is a cable service, said Joe Van Eaton of Best Best's Municipal Law group. And, while the Cable Act says LFAs can designate cable capacity for public, educational and government (PEG) programming, the shift of MVPDs to streaming services raises the question of whether PEG carriage can be required, Van Eaton said. If streaming services don't have PEG obligations, he added, subscribers' access to PEG becomes a concern, as does whether that programming would be subject to data caps. Traditionally, every subscriber to a video service offered by a cable operator had PEG channel access because every subscriber was required to buy a basic tier that included PEG, Van Eaton said. In an OTT-dominant universe, he said, "will there be anything even equivalent to basic?"
Van Eaton said state and local regulators also will have to contend with technology issues as some OTT operators offer DVR cloud services that can't record PEG because of system designs, and challenges of consumer protection. Similar problems have come up with respect to internet services and local governments realizing they don't have means for addressing local customers' complaints, he said.
When asked about Public Knowledge's FCC complaint that Stream TV violates conditions of FCC approval of Comcast's purchase of NBCUniversal (see 1603030029) and what stops Comcast from at some future point deciding Stream TV isn't a cable service, Lay said "nothing, really. It will take a position it's a cable service as long as that's the best option." He also said if the FCC's open internet order is struck down, eliminating nondiscrimination obligations on broadband services, Comcast would have the option of calling Stream TV an information service instead and freeing itself from franchise fees. Comcast didn't comment. The FCC said the PK petition "has been received and is under review."