Public Knowledge Defends Consumer Choice in “The Future Of Video” Hearing,
Public Knowledge Defends Consumer Choice in “The Future Of Video” Hearing,
Public Knowledge Defends Consumer Choice in “The Future Of Video” Hearing,

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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:

    Data Caps

    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

    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.

    DISH’s Hopper

    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.

    Enough 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

    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

    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.