Who says that the Internet is not regulated?  Whether to treat Internet video providers by the same rules that apply to cable and direct broadcast satellite systems is the subject of a Notice of Proposed Rulemaking released by the FCC just before Christmas, notice of which was published in the Federal Register today, setting the comment dates on the proposal.  Comments are due by February 17, and replies by March 2.  This proceeding could have a substantial impact on Internet video providers – potentially extending FCC jurisdiction to a whole host of services not currently subject to its rules, and potentially subjecting Internet video services to all sorts of rules that apply to traditional MVPDs (multichannel video programming distributors), including the FCC’s EEO rules, captioning rules and CALM Act compliance.  Even the political broadcasting rules, which the FCC notes in the NPRM only specifically apply to cable and direct broadcast satellite rather than to MVPDs generally, could potentially be looked at in the future for these services should they come under FCC jurisdiction.  At the same time, the rules could also have an impact on program suppliers and broadcast networks, as various rules dealing with access to cable and broadcast programming could extend to Internet video providers, potentially conflicting with existing contractual obligations and even the Copyright Act.  What are some of the specific issues being considered?

The issues raised in the Notice are many – including the very fundamental one as to whether the FCC even has the authority to include Internet delivered video (what the FCC refers to as Over the Top or OTT providers) under the rules for MVPDs.  While the general definition of MVPD would seem to cover Internet video (as it covers anyone who makes multiple channels of video programming available for purchase by subscribers), it is not that simple.  As with any Federal law, one can’t just stop the analysis with a quick read of the statute.  The statute, in at least one place, defines a “channel” as a portion of the electromagnetic spectrum capable of delivering a TV channel.  And the FCC has defined a TV channel as one comparable to what is delivered by broadcast TV.  It’s that reference to “electromagnetic spectrum” that has tripped up previous services seeking an expansion of the MVPD definition.  In the case of Internet-delivered service called Sky Angel, the FCC staff 5 years ago determined that, as it was not a facilities based system – it did not control that electromagnetic spectrum on which its programming was delivered – it could not be an MVPD.  The full Commission sought comments on the staff decision then (see our article on that request for comments on Sky Angel here and here,) and, with the recent Aereo decision (see our articles here and here) and its aftermath, and the seemingly daily announcement of new online video service offerings from everyone from CBS to HBO to Dish and Disney, the FCC seems now ready to move with this expansion of its authority to cover video on the Internet.  Because of the potential for very similar video services to have very different regulatory burdens (cable and satellite could be subject to all the FCC MVPD rules, while the same programming, delivered by an Internet service, might have none of those obligations under the current regulatory interpretations), the majority of the FCC want to move forward with this proposal.  But it asks for comments on whether it really has the authority to do so. 

But just what video would be covered by the FCC’s proposal?  The FCC suggests that it would be multichannel “linear” programming services – essentially those that look like cable services, where programming is pushed by the service to consumers in a continuous feed – not on-demand programming like that provided by YouTube or NetFlix.  But there are numerous issues with such definition, and the FCC asks for comments on them.  They ask, for instance, should a party that streams all of its own programming, even if done in a linear fashion, be able to avoid MVPD treatment (e.g. should Major League Baseball be able to provide a package of all of its games without MVPD treatment, or should CBS or ABC be able to provide a package of all of the programming channels that they own without such treatment)?  Should there need to be a minimum number of channels before such treatment applies (the FCC suggests maybe 20 would be appropriate)?  Should there need to be a minimum amount of daily programming before the service would be considered an MVPD?  The FCC also asks what should be considered a “payment” for such service, as only services which are purchased by subscribers are considered MVPDs – does it need to be a direct cash payment, or if it is bundled with other services for which payment is made, would that bring it under the rules?

And exactly what rules would apply to OTT services if they are treated as MVPDs?  It would seem that some rules that apply to cable and satellite (e.g. rules on inside wiring, signal leakage and perhaps many of the rules regarding set top boxes and other reception devices) simply make no sense given the technology involved.  But what about the EEO rules, and those that deal with accessibility issues (captioning and video description) or the CALM Act?  The FCC asks if these rules would stifle innovation on the Internet.

Finally (but certainly crucial to the debate), there are questions about the impact on programmers.  There are rules governing MVPDs and their relationship with cable programmers (e.g., in certain instances where a cable system owner has a financial interest in a programming channel, the channel must be made available to other MVPDs; rules also forbid cable operators in some circumstances from insisting on getting an ownership piece of a programmer in exchange for carriage).  There are rules governing the carriage of over-the air TV stations (e.g. the must-carry and retransmission consent requirements; the requirement of good faith negotiation over retransmission consent rights).  Do any of these rules make sense for an OTT MVPD?  The FCC asks about how the application of these rules would affect competition with other outlets for such programming, and whether programmers of broadcast and cable programming have the contractual rights to authorize the distribution of their programming on the Internet.  But for broadcasters, there is also the big question of territorial exclusivity, especially as one could see that many OTT MVPDs would be national, not local services.  What impact would their carriage of broadcast programming have on local TV affiliates and the local service that they provide?  Would carriage of network programming by an OTT provider undermine local television?  While the FCC does not seem to specifically ask, a question that may need to be addressed in the proceeding is whether TV stations should be able to refuse to negotiate with OTT systems that cannot show that their service is geographically limited.  There are also copyright issues as carriage of broadcast program without a copyright compulsory license (which comes from the Copyright Act, rather than the Communications Act) would require the approval of everyone who holds any copyright in any element of a broadcast program.  We wrote about some of these programming issues in more detail here. 

Obviously, there are many questions about this proposal – and this summary only scratches the surface.  There are sure to be many interesting comments filed on this matter next month, and the future of video programming and the regulation of the Internet will surely be debated as part of this proceeding.  Everyone involved in the video programming world should be carefully watching this proceeding as it moves forward.