Two Potential FCC Rulings Could Reshape Streaming Landscape

Net Neutrality
Cheyne Gateley/Variety Intelligence Platform

The way video services are distributed and sold to consumers may soon be very different, based on two requests that have been recently made to the FCC.

MVPD giant Charter filed a petition with the FCC on Monday regarding the early removal of net neutrality conditions the company is still bound by until 2023, instead asking for their removal by May next year. Despite net neutrality’s revocation in 2017, Charter is still subject to terms imposed when the company acquired Time Warner Cable and Bright House Networks

The FCC is also currently in negotiations with local TV station groups (i.e. those carrying Fox, ABC, NBC, etc.) concerning the revival of a 2014 discussion to regulate virtual MVPDs such as Hulu with Live TV and YouTube TV as MVPDs. 

Charter’s argument hinges on ISPs owned by MVPDs, such as Verizon and Comcast, already having carriage agreements with big streaming services like Netflix. If they can do it, why not Charter? 

Cynics, however, would argue that Charter has seen the future of video distribution, and is attempting to raise the drawbridges, and charge a toll to lower them to streaming services, both SVODs like Netflix and Disney+, and VMVPDs such as YouTube TV and Sling TV.

Should the FCC grant Charter’s petition, there is potential for it shaking up the streaming world. It can be argued that the streaming carriage fees charged by the likes of Verizon have been artificially lowered owing to a large competitor being barred from imposing them. By allowing the full market to engage in this practice, pure capitalism should emerge, and with the near-monopoly grip most ISPs have on customers looking to stream to a TV set, they will seek to increase the fees currently levied on streaming services.

This will have multiple reverberations in the streaming world. Each of the three major types of streaming serviceAVOD, SVOD and VMVPDwill be impacted differently, each according to how they impede upon traditional MVPD service.

Being free to view, AVODs will have no subscription fees to share with MVPDs. Instead, much as MVPDs have a portion of the ad inventory on the TV networks they distribute, expect the hunt for new revenue streams to drive similar conditions imposed upon free streaming services like Roku Channel, Pluto and Tubi.

SVODs offer up many tempting possibilities for revenue carve-outs. One option for Charter would be to impose a heavy carriage fee to streaming services, driving down the competitiveness of the price as services have to pass this cost along to consumers. A less punitive strategy would be to keep the carriage fee low, or even zero, in return for services passing along a share of their subscriber revenues, much as MVPDs currently receive for premium cable services sold to their customers.

VMVPDs are MVPDs’ most immediate competition, and for operators like Charter who do not have a true VMVPD option (note that Charter does have a streaming service with 10 cable channels the user can pick called Spectrum TV Select), represent a potential customer drain. By having the ability to impose carriage fees upon these services, their monthly cost will be driven up further, and begin to compete with the basic tiers of cable (which tend to offer more channels).

VMVPDs may also find their costs increased further with the second of the FCC’s requests. At the heart of the local TV stations talks is that, should VMVPDs be regulated the same as MVPDs, they will have to negotiate the same with local TV, i.e. pay greater retransmission fees. With the mean price of VMVPD service already $12 more than in 2018, this too could move to make streaming live TV less of a bargain in the eyes of potential cord-cutters.

Of course, there is the possibility that the FCC doesn’t grant either or both of these requests (although they have already eased other restrictions on Charter as a result of their acquisitions). But if they should, the increased profitability of streaming video will take a hit, at the gain of traditional TV.