The FCC announced two significant policy initiatives by Blog post in the last week – perhaps recognizing that the Internet provides a better way of packaging a message about policy directions than an unpredictable news conference.  The two decisions announced this week by Blog post were (1) the Chairman announcing that he has directed that a Notice of Proposed Rulemaking be circulated among the other Commissioners to treat Over-the-Top TV providers (“OTT” providers, usually those that provide service over the Internet) of linear programming as MVPDs – meaning that they would be treated, for regulatory purposes, in much the same way as cable and satellite TV services, and (2) an announcement by the head of the incentive auction task force that the auction by which some of the broadcast TV spectrum will be purchased from TV users and resold to wireless carriers for broadband wireless uses will be postponed from its expected date in the summer of 2015 until early 2016.  We will write about the postponement of the auction later.  But what does the MVPD proposal mean?

The MVPD issue is one that we last wrote about here.  At the urging of some OTT providers, apparently including Aereo, the FCC has been urged to treat these providers, when they provide “linear” programming (programming that is provided at set times on a set schedule, in the manner of broadcast TV or cable programming, as opposed to the on-demand programming of a Netflix or Hulu), in the same fashion as cable and satellite.  The Chairman, in his blog post, announces his support for an FCC proceeding to review that proposal, apparently looking to use linear Internet programmers as a new competitive force against cable and satellite TV.  By treating these services as MVPDs, they could get access to over-the-air TV programming (if they can negotiate retransmission consent agreements with the TV stations) and equal access to programming provided by vertically integrated cable programmers (those programmers that have attributable ownership from cable system operators).  But, obviously, there are some big “ifs” here.

Would such treatment really provide any additional program access to these OTT providers?  There is no assurance that the OTT providers can negotiate retransmission consent agreements with TV stations at rates that they would find reasonable (remember that Aereo’s business model argued before the Supreme Court was to provide that programming free to viewers – see our posts on the Supreme Court argument here and on the decision here).  Similarly, the rules on access to cable programming are restricted just to those programmers who are vertically integrated, leaving much additional cable programming to pure marketplace negotiations (and even the vertically integrated programming is really a market-based negotiation, with the simple restriction that, subject to certain exceptions, the programmer must in fact fairly negotiate with the unaffiliated MVPD).  The original petition to treat OTT providers as MVPDs was by Sky Angel, which wanted access to cable programming (see our posts here and here).  How much programming they would actually be able to access if the FCC changed their regulatory treatment remains to be seen. 

There are additional issues that will need to be reviewed.  Much programming, especially over-the-air TV, is licensed on a market-by-market basis.  With very few exceptions, MVPDs cannot retransmit over-the-air television signals beyond the home markets of the stations.  One question that may need to be addressed is just how robust the geo-blocking used by these systems is, to avoid licensed local programming from bleeding out to viewers in other markets (and theoretically, in other countries, as the Internet obviously allows for worldwide connections).

Also, on the retransmission of local television signals, there is another potential issue.  Retransmission of a local station’s programming by cable and satellite is permitted, without negotiations with all of the program suppliers to a television station, by specific “compulsory licenses” under the Copyright Act.  These licenses give MVPDs the rights to retransmit over-the-air television programming by cable and satellite within the TV station’s own market without additional substantial payment by the MVPDs, and without additional negotiations with the program suppliers.  These licenses are the result of Congressional actions (and, for satellite, are periodically renewed, including the current review of the satellite retransmission provisions through the STELA legislation that is attempting to make its way through Congress now).  The Copyright Office thus far has declined to find that Aereo and other OTT providers qualify for the compulsory licenses, so either that interpretation would need to change, or legislation would need to be enacted, for any FCC action to make OTT carriage of most TV stations as easy (in terms of the number of authorizations needed) as it is for existing MVPDs.  We wrote about these issues, in connection with Aereo’s claims to be a cable system, here. 

So we will be interested in seeing the specific proposals of the FCC once these are released in the coming weeks.  It would seem as if this is far from a done deal, as many issues need to be resolved before Internet-delivered video programming becomes a true competitor to the cable and satellite services on which most of us currently rely.