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PK President and CEO Gigi Sohn was back on the Hill Wednesday morning, offering testimony before the House Subcommittee on Communications and Technology on “The Future of Video.”
The panel featured seven other members, including representatives from the broadcast, cable, satellite, movie, internet and streaming industries. Specifically, that means Charlie Ergen of DISH Network, Robert Johnson of Sky Angel, David Hyman of Netflix, Jim Funk of Roku, David Barrett of Hearst Television, Michael O'Leary of the MPAA, and Michael Powell of the NCTA (and formerly of the FCC) all joined Gigi on the panel. Needless to say, it was a big panel.
Unlike the UMG/EMI Merger hearing last week, there was no one central issue for panelists to be either “for” or “against.” Rather, the hearing covered topics such as the definition of a multichannel video programming distributor, data caps, DISH’s Hopper, retransmission consent agreements, must-carry regulations, and more, all of which elicited different combinations of support and opposition from the witnesses.
With a topic as broad as “video” and witnesses representing nearly all of the key players in the industry, such diversity was to be expected. However, one thing that did receive nearly universal approval was the idea that reform is needed to ensure that the future of video is bright. It’s the “how” they disagreed agreed on.
Of the many issues discussed regarding the future of video, these were some of the ones that I found most noteworthy:
Ranking Member Eshoo kicked off the discussion about data caps in her opening remarks, expressing concern that they could negatively affect the growth of the streaming video market. She reminded the committee that while the Department of Justice recently launched an investigation into data caps, the Committee itself should hold a hearing into the matter as well.
She later asked the panel when data caps are discriminatory and when they are not. David Hyman of Netflix answered that when the same content from different video providers counts differently against a user’s data cap, there is a discriminatory implementation. Gigi agreed and drove the point home with a real world example: Comcast’s Xfinity service and the Xbox 360. There, Comcast’s own video service is exempted from its soon-to-be 300 GB data cap, while services like Netflix or Hulu still count against a user’s limit.
Gigi explained PK’s position: data caps are not in and of themselves wrong, but when they are applied in an arbitrary, discriminatory, or anti-competitive way, Congress should be concerned. Further, Congress should also be concerned that the FCC so far has appeared to not be concerned, as PK’s two-year-old request for an investigation into the usefulness and necessity of data caps has been ignored.
Michael Powell of the NCTA responded by first saying that caps are not the industry standard, which unfortunately doesn’t really get to the whether or not he thinks a discriminatory cap itself is a problem. And it is not as though cable companies aren’t experimenting with extremely limited data caps – Time Warner Cable continues testing a 5 GB per month plan in Texas, one that would potentially inhibit the growth of streaming video services.
The kicker to this? Powell lamented that because of net neutrality and the FCC’s Open Internet Order, the cable companies he represents aren’t allowed to charge content providers to generate an additional stream of revenue, so they are forced to look to caps instead.
In the spirit of additional hearings, Representatives Eshoo and Waxman called on Subcommittee Chairman Upton to hold a hearing regarding the proposed spectrum transaction and collateral agreements between Verizon and the cable companies of SpectrumCo, which include Comcast, Time Warner, and Bright House Networks. This type of inquiry makes nothing but sense – the deal appropriately requires a high level of scrutiny, and while the FCC and DOJ are looking into the matter, it wouldn’t hurt if Congress exercised its oversight authority and held a hearing regarding the transaction too.
The spectrum sale alone should trigger interest, especially when the country’s largest wireless provider is set to acquire even more valuable spectrum when it appears to be warehousing its currently unused spectrum. Consolidation of spectrum in the industry’s most powerful player should always raise a red flag. But there’s more.
During questioning, Gigi described PK’s concerns about the collateral agreements between Verizon and the cable companies, especially in regards to the Joint Operating Entity, better known as “the JOE.” It’s bad enough that the marketing and reselling agreements represent the effective laying down of arms between wireless and wireline providers when it comes to competition in the video market. But the JOE also introduces the likelihood of new technology being developed and used as an anticompetitive tool against the companies that are not a part of the group.
For instance, a new video technology that is patented by the member companies and later becomes a de facto industry standard could be withheld from competitors, which could greatly harm consumer access when it comes to new video services.
Interestingly, when Representative Markey asked Charlie Egren of DISH if he was afraid of being locked out of the JOE’s technology, Ergen couldn’t really offer much of a reply. Of course, it’s possible to read between the lines of his general comments regarding whenever two “vicious competitors” agree not to compete with each other in order to get a good sense of what he truly thinks. However, Ergen couldn’t comment specifically on the matter because he does not have access to the unredacted information in the proceeding before the FCC.
Yet parties such as DISH should still be concerned about the deal, and likely would be if so much of the proposed transaction weren’t hidden underneath a vail of secrecy. That’s why PK filed a challenge to the confidentiality designation with the FCC regarding the basic governance structure of the JOE.
Predictably, David Barrett of Hearst Television (as well as the National Association of Broadcasters) went after the Hopper, a new product from DISH that records primetime network television and lets you watch those shows without the commercials after they have aired. Barrett’s stated concern was that the Hopper would be damaging to local broadcasters. Representative DeGette kindly reminded him that while she too is concerned about local broadcasters and their business models, she is also interested in finding a balance that allows for consumers to have choice in the market.
The truth about the Hopper is that it is a question that has already been answered. The Supreme Court ruled in 1984 – nearly thirty years ago – that recording television for the purpose of personal time shifting is a legal fair use. When asked by Representative Doyle why the Hopper didn’t fit into this fair use exemption, Barrett could only reply that it doesn’t, without providing much of an explanation.
To be fair, he did talk about “prioritization” and the need to make trade-offs when it comes to policymaking. While it was clear that he was talking about his concerns over the effect on local broadcasters, it wouldn’t be too much of a stretch to have also understood him to be asking for prioritization of his industry’s old business model over consumer choice.
Perhaps most interesting was a question by Representative Scalise, who has proposed legislation with Senator Jim DeMint that represents a sweeping reform to a variety of communications-related laws and regulations. Scalise asked the panel whether they believed that the current video marketplace allows consumers sufficient choice over what, when, where, and how they watch video programming. Gigi, Ergen, and Johnson of Sky Angel said no, while the rest of the panel said yes.
Whether it be artificially low data caps that effectively reduce consumer access to particular video services, the potential for former competitors to lay down arms and prevent others from using newly created technologies, or stopping consumers from accessing new and exciting DVR technology, it certainly does not appear that consumers have attained “enough” choice in the video market. Not yet.
The hearing lasted for over 2.5 hours and covered many more issues than the ones mentioned in this post. Overall, it was encouraging to see Congress interested in not only reforming out-of-date rules and regulations but also in protecting consumer choice in the emerging online video market. If Congressional hearings like this one can prompt either the FCC or the DOJ to take action on some of these issues, that’s a good thing.
If you’re interested in having a quiet end of June/start of July this weekend with a few of your closest friends on the House Subcommittee on Communications and Technology, you best click here.