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Tech Knowledge Comments on FCC Proposal to Force MVPDs to Offer Unbundled Wholesale Services

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Today Tech Knowledge filed the following comments at the Federal Communications Commission that address an FCC proposal to force MVPDs to offer unbundled wholesale services in the guise of creating competition in the artificial market for set-top boxes (a proposal dubbed Unlock the Box by FCC Chairman Tom Wheeler). The complete comments as filed can be downloaded in PDF format HERE. (Note, the HTLM version of the comments printed below does not contain the footnotes provided in the PDF version available at the link above and filed at the FCC.)

Executive Summary

The Wholesale Proposal Is an Impermissible Common Carriage Requirement

The FCC’s proposed regulations (the “Wholesale Proposal”) would do more than merely create competition in a market for the “equipment” used to access MVPD services that is artificially separated from the underlying MVPD services themselves; the proposed rules would effectively require MVPDs to provide unbundled, nondiscriminatory access to video programming “information flows” that are an essential part of otherwise fully integrated MVPD services. The avowed purpose of the Wholesale Proposal is to enable third parties to combine MVPD’s unbundled programming with “ancillary features” to provide entirely new, “differentiated” services in competition with MVPDs’ underlying services — the same justification that has traditionally been used to impose resale and other wholesale obligations on common carriers under Title II. The FCC cannot accomplish this result in the guise of promoting competition in an artificially created market for “equipment,” because mandatory wholesale requirements are fundamentally common carriage, and the Communications Act prohibits the FCC from treating MVPDs as common carriers. Read More

‘Clean’ STELA Is the Right Approach as the Clock Winds Down

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We’ll be marking the middle of summer with Independence Day celebrations next week, yet there is still no Senate Commerce Committee bill regarding the reauthorization of “STELA”, which is set to expire at the end of the year. The delay is likely due to the desire of some to use STELA as a vehicle for enacting piecemeal changes to the video laws. In the meantime, however, the STELA clock continues to wind down. At this hour, it should be clear that neither industry nor consumers would be well served by a video reform race against the clock.

Meaningful video reform would require a more thorough examination of the video marketplace and the potential impact of changing the laws that govern it. As CBIT noted in its recent white paper, “The Future of Broadcast Television”, the video reform debate has thus far been narrowly focused on only two options: (1) Preserving the status quo or (2) eliminating only the video regulations that enable television stations to meet their unique “public interest” obligations. Neither option is intended to harness market forces to meet consumer demand. Eliminating distortions in the video marketplace would require a truly comprehensive approach to video reform that does more than the limited options presented by industry.

With only six months left on the STELA clock, Congress is running out of time to adequately consider a more comprehensive, market-oriented approach to video reform. Though the current legislative framework undoubtedly distorts the video marketplace, rushing piecemeal reforms through the STELA reauthorization process would only result in more market distortions. Congress should take the time to do it right and consider video reform in the #CommActUpdate process, not STELA.

CBIT White Paper: The Future of Broadcast Television

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Click HERE to download the complete paper in PDF.

Executive Summary

The migration of consumers from over-the-air television to other video platforms has prompted a debate about the role that television (TV) stations should play in the future communications marketplace. This debate has focused on only two options, each of which is supported by a competing segment of the video marketplace:

  • Broadcasters support maintaining the regulatory status quo; and
  • Multichannel video programming distributors (MVPDs) support maintaining only the unique “public interest” obligations imposed on TV stations by the regulatory status quo while repealing the regulatory provisions that enable TV stations to meet those obligations.

Neither option would harness the power of the free market to determine the future of broadcast television. Though the first option would continue to rely on government intervention to preserve free over-the-air television, the second option would bear even less resemblance to a functioning free market. Repealing only the regulations that enable TV stations to meet their unique public interest obligations would effectively result in the forced abandonment or sale of TV stations at fire-sale prices, thus destroying the legitimate, investment-backed expectations of TV stations through government action. It would be the antithesis of a free market approach.

This paper proposes a free market alternative that could unleash the broadcast industry’s full competitive potential and usher in a new wave of innovation and investment in communications: Enabling TV stations to innovate and compete in the MVPD and wireless broadband market segments through comprehensive, market-based regulatory reform. This alternative would allow TV stations to transition their businesses to a free market approach by eliminating the following anticompetitive regulations:

  • The free television mandate,
  • The broadcast MVPD prohibition,
  • The Federal broadcast tax,
  • Broadcast ownership limits,
  • Broadcast programming restrictions, and
  • Broadcast spectrum limitations.

This pro-competitive approach would enable the elimination of regulations that are necessitated by the government-mandated broadcast business model while respecting the investment-backed expectations of TV station owners. The result would be a truly comprehensive approach to reforming broadcast regulation that would promote competition, investment, and innovation by allowing market forces to determine the future of broadcast television stations. Read More

Outdated Policy Decisions Don’t Dictate Future Rights in Perpetuity

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Congressional debates about STELA reauthorization have resurrected the notion that TV stationsmust provide a free service” because they “are using public spectrum.” This notion, which is rooted in 1930s government policy, has long been used to justify the imposition of unique “public interest” regulations on TV stations. But outdated policy decisions don’t dictate future rights in perpetuity, and policymakers abandoned the “public spectrum” rationale long ago. Read More

FCC Double-Standard for Media Ownership Threatens Competition and Diversity

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Today the House Judiciary Committee is focused on issues related to competition in the video marketplace. Earlier today the Committee examined the competitive implications of the proposed merger of Comcast and Time Warner Cable, and this afternoon, it’s examining the compulsory copyright licenses applicable to the retransmission of broadcast television programming by cable and satellite operators (“multichannel video programming distributors” or “MVPDs”) and the related issue of retransmission consent. Though they are separate hearings, the issues in them are intertwined.

In addition to the antitrust laws, the Comcast/Time Warner merger has implications for statutory provisions and FCC regulations governing media ownership. The FCC originally adopted media ownership limits to promote competition and diversity in the mass media marketplace. These goals remain laudable, but the media ownership limits have become laughable. Today’s double-standard for media ownership limits has served the perversely inapposite purpose of increasing the power of MVPDs in the media marketplace. While the FCC has been busy imposing new ownership limits on TV stations, it has also been quietly repealing the few remaining ownership limits applicable to MVPDs. The predictable result of this regulatory disparity has been an increase in vertical and horizontal concentration among MVPDs and programming vendors.

Congressional and FCC proceedings examining compulsory copyright licenses, retransmission consent, and broadcast exclusivity agreements threaten to accelerate the trend toward increased consolidation in the video marketplace. These proceedings are an existential threat to local TV stations. If local TV stations die, CBS and other independent broadcast programmers would be denied a critical “anchor store” for distribution of their programming. Faced with this hardship in today’s competitive market, broadcasters would ultimately be forced to consider vertical integration with cable operators, whose platforms distribute video as MVPDs and all types of content as broadband Internet access services.

The potential unintended consequences of changing only a handful of provisions that govern the complex web of relationships among video distributors and programming vendors is why a piecemeal approach to video “reform” is so ill-advised. A piecemeal approach is more likely to harm competition and reduce programming diversity than promote them. If policymakers want to promote competition and diversity, they should consider video regulation reform in a comprehensive manner. Read More