Capital Currents - Regulation of Online Video Distribution
Still very uncertain.
Some of the policy issues related to online video program distribution have become clearer, although the resolution of these issues is far from clear. They have come up in the Comcast-NBCU merger proceeding, in controversies related to program access and copyright, and in accessibility legislation.
Here’s a brief review.
The only issue that has definitely been decided is that these over-the-top (OTT) services will have to provide closed captioning. How they will accomplish that is still somewhat problematic.
The Twenty-First Century Communications and Video Accessibility Act of 2010, which was signed by the president in October, requires the FCC to adopt rules “to require the provision of closed captioning on video programming delivered using Internet protocol that was published or exhibited on television with captions.”
Transport technologies like Apple QuickTime, Microsoft Silverlight and Adobe Flash, which are used by OTT programmers such as Apple TV, Hulu, Netflix, Amazon VOD and Google TV, have the capability to carry closed captions, although these program services might not use that capability. Captions would be delivered as a separate data stream that must be synchronized with video by the receiver. Capabilities of other transport technologies like RoxioNow and the peerto-peer approach planned by Wal-Mart’s Vudu are uncertain. YouTube is working on voice recognition software to add captions, and SMPTE is working on a standard known as Timed Text that is supported by Hollywood and broadcasters.
But the law applies to video programming that is delivered as TV programming, and TV programming delivers closed captions as part of the video stream, not as a separate data stream. So substantial work might be needed to define how to extract the closed captions from the TV video stream and carry them in a separate, but synchronized, data stream.
Meanwhile, there are the program access issues. Consider the case of Sky Angel, which provides an Internet package of about 80 channels for $25 per month. These channels include Hallmark Channel, Fox News Channel, NFL Network and other familiar cable programming services. Sky Angel calls its OTT service “functionally identical to traditional satellite or cable video distribution services.”
Earlier in 2010, Sky Angel complained to the FCC that it had an agreement with Discovery Communications to carry several of Discovery’s program services, but Discovery unilaterally decided to terminate the agreement. When Sky Angel filed a program access complaint against Discovery, the FCC’s Media Bureau ruled that program access rules do not apply to OTT providers because they do not meet the statutory definition for a multichannel video programming distributor (MVPD) – they fail to offer “channels” of programming as defined by Section 602 of the Communications Act.
And now this issue has come up in the context of the Comcast-NBCU merger proceeding at the FCC. Everyone expects the FCC to impose program access requirements as a condition of FCC approval of the merger, making Comcast/NBCU programming available to other MVPDs like Verizon and small cable operators. Now the scope of demands has broadened, with OTT operators also expecting to gain access to Comcast/NBCU programming. Don’t be surprised to see an FCC-imposed condition that requires Comcast/NBCU to make programming available to all OTT operators if it makes a deal with any OTT operator. By the way, is Comcast/NBCU’s TV Everywhere service itself an OTT service?
One of these OTT operators that has reportedly been talking to the FCC is ivi TV. Ivi has complained that it has been unable to work out contract agreements with cable programming services because those services are locked into exclusive contracts with Comcast and other MSOs for online delivery. Ivi provided a list of such programming services to the FCC, which included the Outdoor Channel and the Tennis Channel. Really? Sky Angel includes both of those services in its Web TV package. Can we believe ivi?
But that’s not all. If you go to ivi’s website and look at the channel lineup, you don’t see any cable programming services. What you see is TV stations, from New York City, Los Angeles and Seattle. Ivi’s business plan seems to be to charge $5 per month to deliver about 30 off-air TV stations to its subscribers. Does ivi have retransmission consent agreements with those TV stations? Well, no. It claims that it does not need any agreements because it is covered under copyright law and pays the same schedule of copyright royalty fees as small cable TV operators. But the U.S. Copyright Office in 2008 determined that online distribution of TV broadcast signals is not covered under the cable compulsory copyright license. Meanwhile, broadcasters are suing to stop ivi.
In the long run, I expect we’ll see some programmers and broadcasters make deals with these OTT operators. Whether this will happen because of regulatory requirements or market forces is unclear. For now, regulation of online video distribution is still very uncertain.
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