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Why should I have to be in Charlottesville to watch what’s on NBC29, my local NBC station? Why can’t I watch the Duke game on my laptop, instead of my television? The signal is getting sent to my house for free after all, so why does it matter where I am? The internet was supposed to free us from the petty limitations of physical space and geography.
Enter ivi TV, on a mission to let you watch your local stations over the internet, anywhere in the world, for $4.99 a month. Living in DC, I’d happily pay $5 to watch 30 Rock, ACC sports, and my local news on my computer. The ivi system also works well for advertisers, since ivi can provide precise information on the number and demographics of viewers (not to mention expands the number of people who can see their ads). Television stations do not incur any new costs or have to change their operation at all. In fact, they get another stream of revenue from ivi in addition to the cable companies and satellite providers who already pay them.
This all sounds great, so what’s the problem? Shockingly, broadcasters, cable companies, and big media corporations don’t think this is such a great idea. So they’ve filed a lawsuit accusing ivi of disrupting their business model copyright infringement.
The lawsuit hinges on whether or not ivi is considered a cable operator. Under the current system, cable companies get many special privileges that, taken together, enable them to carry broadcast stations. For example, they get an automatic copyright license, and every cable operator has access to the programming channels produced by other cable operators. Most importantly, when cable operators ask to carry broadcast stations, the broadcasters are legally required to negotiate in good faith. This means that a broadcaster can tell ivi to get lost, but is legally required to try its best to work out a deal with Cablevision (unless the broadcaster just ignores the FCC). An act of Congress granted Satellite providers the same advantages as cable systems, but online providers are left out.
A judge will decide the legal merits of this argument, but that’s not really the point. Why does the law mandate that broadcasters cooperate with certain distribution models (orbiting satellites and underground cables) while effectively preventing new models from emerging? The Internet is clearly the future of video content delivery. As long as cable companies continue to receive special treatment, it will be nearly impossible for innovative companies like ivi to compete with the current market leaders. And if the FCC approves the proposed Comcast-NBC merger, NBC would have less incentive to make a deal with any online video providers who might compete with Comcast's cable business.
In 2009, two industries were tied for the worst customer satisfaction with a score of 63: Subscription Television, and…Newspapers. Newspapers are engaged in an industry-wide effort to figure out how to adapt to the Internet. They discovered that “the newspaper” is no longer their product; they are in the news business. That means that they have to compete with everyone providing news, not just other papers.
Broadcasters and cable companies are in the content distribution business, and they too need to figure out how to adapt to the Internet. I want to choose whether 30 Rock reaches me on my phone, laptop, or television. You probably couldn’t care less whether the signal comes over the Internet, in a cable, or by carrier pigeon. Broadcasters should have to compete with all sorts of content distributors, including those using the Internet. Instead, it appears they plan to file lawsuits until the Internet goes away. Good luck with that.