FCC proposal removes hurdle for online TV providers

Cord-cutters should rejoice this holiday season as the Federal Communications Commission proposes changes to rules that would treat companies distributing TV programming online the same as it treats cable and satellite TV providers.

FCC Chairman Tom Wheeler on Friday proposed a regulation tweak that would mean companies distributing TV online would be treated the same as cable and satellite TV providers, which are technically known as multichannel video programming distributors or MVPDs. Today, because online distributors aren't treated the same as cable companies, media companies are not required to offer their programming to Internet companies that distribute TV shows over a broadband connection. Meanwhile, regulation exists that actually requires traditional cable and satellite TV to carry certain content, like broadcast TV.

What this has meant for online companies looking to offer consumers an alternative to cable and satellite TV service is that they are shut out of offering key content, like broadcast TV. As a result, consumers, who have cut the cable cord, have been unable to get the same breadth of content from Internet-based TV services that they could get from a paid TV provider or in some cases over-the-air TV broadcasters.

It's this difference in regulatory classification that allowed network TV broadcasters, such as CBS, which owns CNET, to deny Aereo access to their programming, even after it offered to pay retransmission fees. Earlier this year, the US Supreme Court said that it was illegal for Aereo to retransmit broadcast TV over the Internet without paying broadcasters a retransmission fee. Because Aereo is not classified an MVPD, broadcasters were also not obligated to offer access to its content for a fee.

Even though he didn't name Aereo outright, Wheeler said that the existing rules are ultimately hurting consumers who are being denied access to content on alternative platforms.

"Big company control over access to programming should not keep programs from being available on the Internet," Wheeler said in a statement. "Today, we propose to break that bottleneck."

Aereo has since shut down its business, which means any changes to the rules will not benefit the service or its customers. But Wheeler hopes that a tweak to the rules will allow companies in the future to develop multichannel TV services online that will have the same access to content that other traditional cable and satellite TV services enjoy.

"When digital technology made video simply zeroes and ones, it opened up the opportunity for new Internet-based competition to cable and satellite services," Wheeler explained in a statement. "Yet efforts by new entrants to develop new video services have faltered because they could not get access to programming content that was owned by cable networks or broadcasters."

The chairman went on to say that the changes to the rules would level the playing field for online TV distributors.

Wheeler's move today was issuing a Notice of Proposed Rulemaking or NPRM, the first official step in changing the regulation and classification of online TV providers. It must be voted on by the full Commission before it can be opened for comment. The two Democratic commissioners on the FCC say they will vote to open the measure for public comment, but the two Republican commissioners say that applying old rules to handle the new ways of distributing content on the Internet is bad policy. They each say will vote against opening the proposal for discussion.

Commissioner Ajit Pai said that expanding regulation to online video is premature, and it could have unintended consequences.

"The video marketplace is changing, and changing fast. Internet-based video distribution -- a flickering hope at the dawn of the Internet age -- is a real and growing phenomenon," he said in a statement. "In evolving markets like these, the government should be hesitant to extend the outdated regulations and classifications of old. It's for this reason that I can't vote to approve this Notice of Proposed Rulemaking."

The NCTA, which lobbies on behalf of the cable industry, also urged the FCC to proceed with caution.

"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 group said in a statement. "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."

Meanwhile, the advocacy group Public Knowledge applauded the FCC chairman's proposal. John Bergmayer, a senior staff attorney for the group, said that the proposal makes sense from both a legal and policy standpoint in order to treat all services equally, regardless of the technical differences delivering the content.

"This action is similar to what policymakers did in the 1990s, when they laid the groundwork that allowed satellite TV providers like DISH and DirecTV to grow," he said in a statement. "It's not about regulating existing successful business models, but about creating new opportunities and a level playing field in ways that will pay off in the years to come."

Aereo's founder and CEO Chet Kanojia admitted that the FCC's actions have come too late to save his company, but he applauded the chairman's efforts.

"The FCC has taken a bold and meaningful step forward to provide much-needed regulatory clarity in the video marketplace," Kanojia said in a statement. "We know that when our laws and regulations don't keep pace with technology, consumers are the ones who lose out. 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. And, that's a real win for creators and consumers."