2015 may be remembered as the year everything changed in the TV business. After much speculation, FCC Chair Tom Wheeler this week acknowledged that he is pushing a proposal to guarantee Internet TV services access to the same broadcast and cable content that is available to cable and satellite operators. The new rule would apply to "linear" channels offering a prescheduled programming line-up, so on-demand providers like Netflix and Amazon wouldn't qualify. But it does open the door for a completely new category of online TV company, the so-called "over-the-top" or OTT provider, to give the established cable industry a serious run for its money.
The rule changes could dovetail nicely with recent talk about cord-cutters who are finding lower-cost alternatives to cable TV channel bundles. Depending on how the rules play out, savvy online companies could create targeted channel offerings that would make the existing plans favored by cable companies look expensive and obsolete. "Taking advantage of this rule, new OTTs may offer smaller or specialized packages of video programming, so consumers will be able to mix-and-match to suit their tastes," Wheeler wrote in a blog post at the FCC's website. "Perhaps consumers will not be forced to pay for channels they never watch."
Wheeler wants the category of "multichannel video programming distributor" to become "technology-neutral," which would allow the Internet to be used as a method of transmission, alongside cable and satellite, for television providers seeking access to programming. "The definition of an MVPD should turn on the services that a provider offers, not on how those services reach viewers," Wheeler wrote. "21st century consumer shouldn't be shackled to rules that only recognize 20th century technology."
The move is being forced to some degree by an ongoing series of challenges to the existing cable-bundling model. First, there was the court case involving Aereo and its novel idea for allowing consumers to "lease" individual digital antennas that give them access to over-the-air broadcasts that the company provided as video streams. Aereo has been effectively shut down by the Supreme Court, but it recently said it has lobbied the FCC for changes to the existing rules that have shut it out of the market. (For the time being, Aereo is arguing that it should qualify for a compulsory license to carry broadcast content.) Next, companies including Dish, Sony, and others started looking to launch linear over-the-top television services.
And then there were the twin bombshells earlier this month about both HBO and CBS planning to sell their offerings, a la carte, as Internet subscriptions rather than as part of a cable bundle. In fact, CBS All Access is already online, offering next-day and on-demand programming as well as live TV, including ads, from CBS affiliates in 14 markets.
The broadcast industry's primary concern is one of geography, with the NAB looking to ensure inclusion of local broadcast stations, not just national content. "NAB welcomes video distribution platforms that legally deliver local TV content to consumers when and where they want it," said NAB Executive Vice President of Communications Dennis Wharton in a prepared statement. "We look forward to engaging with the FCC to ensure that this new competition enhances, rather than undermines, localism."
Clearly the cable industry isn't exactly rallying around the proposed expanded MVPD class. The National Cable and Telecommunications Association argued that the cable and satellite TV industry already offers "robust competition and an ever-expanding menu of video options" to consumers. If the NTCA sees that the writing is on the wall, it wants to ensure that Internet TV providers shoulder the same burdens as cable companies — they include various technical requirements, public-service obligations, and a good-faith negotiation standard when it comes to carriage agreements — in addition to any benefits.
"Redefining what it means to be an MVPD raises profound questions about how government will extend regulation to Internet video services and how any would-be virtual MVPDs will meet their 'social-compact' obligations," the NTCA statement said, warning that "the FCC should take great care in any such examination so as to avoid creating new problems that would result in unintended consequences and would fail to honor principles of competitive neutrality among rival providers."
Even the Writers Guild of America, West got in on the act with a statement applauding the proposed rule change, suggesting that it can help break up the increased consolidation of content distribution among a few major players. "A technology-neutral definition of an MVPD is long overdue and will enhance consumer choice," the WGAW said. "With the largest MVPDs attempting to consolidate their control of content distribution through mergers, this game-changing proposal to allow new competitors is absolutely necessary."
Any rules the FCC draws up may be challenged in court unless Washington lawmakers offer explicit support for them. (In his blog post, Wheeler referred back to the Congressional mandate that satellite service be allowed to access cable channels back in 1992.) And some real leverage will still be held by the cable companies. As long as most American homes get their broadband Internet service from cable providers, and assuming the principal of net neutrality falls by the wayside, those companies may still expect to have something to say about whose data is allowed through the pipes — and who will pay the tolls for bandwidth-sucking Internet TV services.