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TV WONK

The really important policy affecting the future of TV that no one is talking about

By Adam Epstein

The future of television in the United States may hinge, oddly enough, on the government’s interpretation of an 80-year-old law.

Regulators are close to determining whether some internet TV services, like Sling TV and whatever Apple is planning, should be treated like more traditional pay TV services. The decision will have a large impact on what kind of programming is available in these new internet bundles and how they compete with other options.

The proceeding is being handled by the US Federal Communications Commission (FCC). It hasn’t received much attention among the press or general public, but many of the companies affected by the ruling, from Disney to Verizon to AMC Networks, weighed in during a comment period that ended this week. The FCC’s decision is expected later this year. To explain why it’s so important, let’s take a step back.

A very brief history

US law requires that pay TV distributors (like Comcast, Time Warner Cable, and DirecTV) and programmers (like NBC, ESPN, and CNN) negotiate “in good faith” over the rights to broadcast content to customers. The distributors have to pay for the content, and the programmers aren’t allowed to indiscriminately withhold those rights.

The law established a cumbersome term for pay TV companies: multichannel video programming distributors (MVPDs). Currently, the MVPDs include cable, satellite, and telecom companies that offer pay TV service. However, services that do pretty much the same thing, just over the internet, aren’t considered to be MVPDs under the law. The FCC has proposed changing that.

Why it matters

The most important implication of that rule change is that programmers would then be forced to negotiate with internet TV services just as they have to negotiate with cable companies.

Services like Sling TV and Sony’s PlayStation Vue currently offer small bundles of channels from companies with which it has been able to strike deals. The same is expected of Apple. But if the definition of MVPD is changed to include these new services, they could have access to many more channels, and thus offer a more diverse slate of programming.

The exact implications aren’t yet clear, since these internet-only services are intentionally offering fewer channels than traditional pay TV packages. It’s also worth noting that the rule change wouldn’t affect Netflix and other subscription services that only offer on-demand video; it only applies to live television services. Still, the prospect of a rule change clearly has many companies nervous.

Who’s against it

Disney, Fox, and CBS filed a joint comment to the FCC explaining that they were firmly against changing the definition of MVPD to include internet TV. “The proposal to expand the definition of MVPD raises significant and complex questions that could jeopardize the nascent state of the over-the-top market,” the companies said.

Essentially, they argue that market forces have created a healthy environment for internet video to thrive, and that more government regulation is not only unnecessary, but could, as they put it, “limit the opportunity for consumers to obtain their desired video programming in a variety of new manners.” Other programmers, like AMC, and many cable companies, like Cablevision, are against the rule change for similar reasons.

Who’s for it

Interestingly, the TV network affiliates of ABC, CBS, Fox, and NBC, which aren’t owned by the larger companies of the same name, filed their own comment in favor of the rule change. They’re excited because it would require that internet TV services gain their consent for retransmitting their broadcasts, just like cable companies have to under the 1992 Cable Act (pdf).

The Tennis Channel is also in favor of the rule change, seemingly because it could give them access to a lot more viewers. That’s in contrast to a network like AMC, which is already in high demand and has little interest in being forced to negotiate with more distributors than it chooses to.

What could happen

Imagine a world in which Sling TV and Playstation Vue are just two of many available internet TV services and many of them offer all the channels you want to watch. Imagine that you could get the same breadth of programming via the internet as you could from your cable company.

What, then, would differentiate Sling TV from Playstation Vue and future competitors? Services could alter their pricing and tout new apps and features in hopes of winning over customers, instead of merely bragging about the channels they offer. Perhaps most crucially, services would compete over which provided the best and most seamless streaming quality to customers.

There is the possibility that, if all these internet TV services end up being similar, Apple’s upcoming service will dominate the marketplace because, well, it’s Apple. But that hasn’t stopped devices like Roku and Amazon Fire TV from competing with the unimpressive Apple TV in the market for streaming media players. To that end, Apple is planning to unveil a revamped Apple TV in June, which may coincide with the launch of its internet TV service.

However, of all the companies weighing in on the FCC rule change, Apple was not among them.

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