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FCC Considers Extending Broader Pay TV Rules to OTT Providers

The FCC is moving ahead with a formal consideration of the possibility of extending the pay TV regulations that govern MVPDs to over-the-top providers of linear channels.

The commission on Friday issued a notice of proposed rulemaking for what it described as an effort to “modernize the definition of a multichannel video programming distributor to reflect that video services are no longer tied to a particular distribution technology.”

The MVPD definition rulemaking process will inevitably tie in with the commission’s upcoming actions on the net neutrality issue, as those rules would come into play with any effort to more tightly regulate the activities of OTT providers offering cable-like channel packages.

Sony Corp. is in the process of launching such a service, as is Dish Network, and Google has its Google Fiber experiments under way. Microsoft’s Xbox Live and the indie Roku offer a slew of authenticated apps from major cable programmers, but those type of devices are not expected to be included in the definition. Streaming heavyweights such as Netflix, Hulu and Amazon would not be affected because they offer a menu of programs but not linear channels.

The FCC positioned the proposed effort as being beneficial to the OTT upstarts as it would extend key protections and prevent the largest programmers from refusing to allow them to purchase their content on similar terms as the established cable operators, satcasters and telco providers.

“This consumer-focused approach would ensure that incumbent providers will continue to be subject to the pro-competitive regulations that apply to MVPDs as they transition their services to Internet protocol delivery,” the FCC said. “It also would ensure that nascent, Web-based video programming services will have access to the content they need to compete with established providers.”

But private companies are typically loath to be subject to any federal regulatory authority, and digital businesses have grown up in a realm largely unfettered by governmental control. The extension of MVPD-like rules digital upstarts could open the door to FCC-imposed caps on their size and scope, as well as rules about providing access to local TV stations, through retransmission consent negotiations or the must-carry law; and even public-service requirements.

The National Cable & Telecommunications Assn., the primary lobbying org for the largest cable operators, was reserved in its response to the FCC notice. But cable operators are expected to fight the effort out of concern that it could offer digital upstarts a leg up in gaining access to programming.

“While we do not believe that the Notice’s tentative conclusion can be squared with the plain language of the definition for a multichannel video distribution provider, we appreciate the efforts of commissioners to identify many of the difficult policy issues that such a conclusion would raise,” the NCTA said. “We look forward to participating in this proceeding to ensure that any rules deemed necessary in today’s competitive video distribution marketplace are fairly applied to all.”

The FCC’s move was applauded by Aereo, the now defunct digital streaming service that aimed to offer subscribers the ability to watch local broadcast TV stations on mobile devices. Broadcasters effectively sued Aereo out of existence, asserting that its business model constituted bald copyright infringement as Aereo did not compensate the stations for their signals. Had Aereo been regulated like an MVPD, broadcasters would have had to try to negotiate retrans deals with the company, although the out-of-home component of Aereo’s service would probably still have been a big sticking point.

“By clarifying the definition of MVPD to encompass linear online video distributors, the FCC will usher in a new age of competition and investment in the video marketplace. Content creators will have more distribution platforms, innovative video products will emerge and most importantly, consumers will have more choice,” Aereo CEO Chet Kanojia said. “Even though Aereo won’t have an opportunity to compete in this new world, having a clear set of rules for online linear video distributors ensures that we’ll have a robust video marketplace for decades to come.”

Initial public comments on the FCC’s notice will be due 30 days after the notice is published in the Federal Register, with reply comments due after 45 days. The timing of the FCC’s move ensures a busy first part of the year for the commission led by chairman Tom Wheeler (pictured) as it is also wrestling with a final decision on the complicated issues raised in the net neutrality fight.

Correction: An earlier version of this story suggested that Netflix, Amazon and Hulu would be affected by the effort to expand the definition of an MVPD provider. Those companies do not offer OTT linear channels, which is the FCC’s focus.

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