Instead of pressing ‘play’ on new video regulations, FCC should take fresh look

Earlier this month, House Energy and Commerce Committee Ranking Member Frank Pallone (D-N.J.) took aim at the Federal Communications Commission’s (FCC) proposal to extend a longstanding cable regulatory regime to new Internet streaming services. When the senior Democrat on the committee criticizes a major proposal from the Democratic-controlled FCC, it is news. Presumably, the FCC is listening.

{mosads}The FCC is proposing to “modernize” its definition of Multichannel Video Programming Distributor (MVPD) to include video services delivered over the Internet in addition to cable and satellite video providers. The proposal would apply to prescheduled streams of video programming, which the proposal refers to as “linear programming.” It would thus not apply to on-demand services such as Netflix and Hulu.

The FCC’s stated rationale is to make the rules more technologically neutral and to create a level playing field to enable the streaming services to compete with traditional MVPDs. But the FCC’s analysis pays little attention to how this proposal would affect innovation and the development of new video business models that would be good for its consumers. Instead, its notice of proposed rule-making largely examines the legal intricacies of what type of entity might qualify as an MVPD.

Pallone, in his speech at a Duke University School of Law conference, noted that “The companies that first asked for help claimed that new entrants must be defined as cable companies if they are to get access to content. They were essentially worried that they could not compete with traditional cable companies without importing cable regulations to the online world. But consumer demand since then has driven the market to create new business models and new ways to distribute programming.” Pallone has “not been hearing from constituents that they can’t find the shows they want.” He concluded that “we should hit the pause button on regulating streaming video.”

We should pause, but we should do more than that. Indeed, this should be an opportunity for the FCC to take a fresh look at the current video regulatory regime, given the rapidly changing distribution and consumption patterns.

Because distribution methods are evolving, the FCC is proposing to shoehorn new technologies into a decades-old regulatory regime. This regulatory regime entails a number of “privileges and obligations.” The privileges include the right to seek relief under the program access rules and retransmission consent rules. Obligations range from complying with closed captioning requirements to assuring that content can be accessed using commercially available navigation devices. These “privileges and obligations” are not costless for either content providers or distributors. There are many complications; perhaps most prominently, the interplay with the copyright regime that is applicable to current MVPDs. For example, is the FCC suggesting a new compulsory license for Internet access to content?

As a nod to the importance of analysis, in its notice, the FCC “seek[s] comment on the overall costs and benefits of applying these regulatory privileges and obligations to Internet-based distributors of video programming, including incumbent operators who migrate to Internet delivery.” One would hope the FCC would do a cost-benefit analysis before proposing a major change in the regulatory regime rather than hoping commenters will (maybe) do it for them.

It would also seem to be a good idea — and one would think this would be obvious — to take the analysis a step further and evaluate the MVPD regime as it currently applies to cable and satellite video providers. Have the benefits of the regulations been greater than the costs, especially given the changing nature of video production, distribution and consumption?

It could be that the best way to create the proverbial level playing field would be to repeal the existing regulations — to deregulate — rather than extend them to new businesses. Without gathering the necessary data and doing the necessary analysis, the FCC can’t make an informed judgement on this type of question.

If a thorough analysis does indicate that the right policy move would be to deregulate, the FCC should then determine whether it is possible to do so under current law. If it is not possible, the appropriate course would be new legislation. Under any circumstances, it is highly unlikely, if the existing regime doesn’t yield net benefits, that extending it would be a good idea. The FCC should take the steps necessary to find out before hitting play on any new regulations.

Lenard is president and senior fellow at the Technology Policy Institute.