Push to Refresh Record on MVPD Streaming Services Has Uncertain Future
An NAB request for the FCC to refresh the record on the state of the streaming industry could get some traction at the agency, but reviving the long-dormant proceeding on reclassifying streaming services as MVPDs and generating the same retransmission consent dollars that now come from cable companies would likely be a much heavier lift, said broadcasters and network executives. “You don’t need a commission vote to refresh the record,” said former FCC Commissioner Robert McDowell, now a partner at Cooley, which represents broadcast affiliate groups and broadcasters such as Gray Television. The big four TV networks aren’t interested in refreshing the record and believe the current system of compensating affiliates for streaming rights works, a network executive told us.
Broadcasters have intermittently lobbied the FCC for years to rejuvenate docket 14-261 with no results, but NAB's asking the FCC to get involved adds momentum to the request, broadcast and network executives said. NAB largely stayed out of the proceeding when it was active due to internal conflicts between the broadcast networks that own streaming services and the network affiliate groups. The recent filing stops short of outright requesting that the FCC reclassify streaming services, or even saying the streaming market has grown, suggesting NAB is still trying to walk a fine line, network and broadcast officials said. NAB declined to comment. Streaming video providers are starting to push back on the NAB proposal, with DirecTV CEO Bill Morrow voicing opposition in meetings with the FCC commissioners (see 2211170055).
As MVPD subscribers decline and streaming subscribers grow, broadcasters have become increasingly vocal about the retrans funds they get from streamers and the way those contracts are negotiated. “Networks are paying us below market rates for the signals they’re putting on" over-the-top contracts "that we don’t see and aren’t told about,” said Gray Executive Chief Legal and Development Kevin Latek on the company’s earnings call this month. “After such an agreement is all-but finalized, the Big Four network will then present the agreement to its local Affiliated stations in what generally amounts to a ‘take it or leave it’ deal that the Affiliate must accept if it is to be carried on the virtual MVPD at issue,” said all the big four network affiliate groups in a meeting with Chairwoman Jessica Rosenworcel in March.
Broadcasters told us there’s reason to believe Rosenworcel would be amenable to refreshing the record on streaming because she supported the original NPRM in 2014 and said then she believed the FCC has the authority to reclassify streaming services. “We have the authority to update our rules to reflect the fact that video services are being offered over new platforms,” wrote then-Commissioner Rosenworcel. “We have the authority to interpret the statutory term multichannel video programming distributor (MVPD) to include providers of multiple streams of linear, over-the-top television.” Current and former network executives said it isn’t clear that the FCC has such authority over streaming services, and Republican then-FCC Commissioners Ajit Pai and Mike O’Rielly made similar arguments when the original NPRM was approved. A big challenge to the Chairman Tom Wheeler-era initiative was how to define virtual MVPDs in a way that included cable-like services but not subscription VOD services like Netflix, emailed John Bergmayer, legal director at Public Knowledge, which backed the proposal.
Media Alliance Executive Director Tracy Rosenberg told us the changed video marketplace from 2015 could point to more willingness regulate streaming. It's now a more mature industry, undercutting arguments that regulation could cripple it as it emerges. Rosenberg said cable-like regulations on streaming might make sense because it's somewhat a successor industry to cable as cord-cutters jump to streaming. Cable-like rules would then provide regulatory continuity, she said. Rosenberg said states in particular might be interested in pursuing streaming regulations since that could provide a replacement to cable franchise fees that are withering due to cord cutting. She said some state regulation could then bubble up to the federal level. Media Alliance backed reclassifying some OTTs as MVPDs in 2016 (see 1606170036).
Reclassifying streaming services could be a divisive topic among commissioners, network executives said. Lawyers who were involved in opposition to the 2015 proposal (see 1506220023) said they don’t expect the affiliates’ new push to go any further than last time. The problem affiliates face isn’t OTT providers but networks, and rules on livestreaming are a bank shot attempt at regulating broadcast networks, one said. He said it could be tough to get the two Republican commissioners to approve. Another said the commission almost surely won’t get involved while it's deadlocked 2-2. The current nominee for the vacant fifth commissioner position, Gigi Sohn, said she would recuse herself from FCC proceedings involving retransmission consent and broadcaster copyright issues (see 2201270075). “Streamers are becoming the cable companies of the 21rst Century,” said McDowell.