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FCC Launches Effort to Help Online Video Providers Compete With Cable Guys

The plan could make it easier for online video companies to start offering less-expensive cable-like service.


Federal regulators released new proposed rules Friday designed to make it easier for online video providers to get access to must-have channels, a change which ultimately could provide some relief for consumers tired of high cable bills.

The agency proposed broadening the current definition for what constitutes a pay-TV provider — in technical jargon, a “multichannel video programming distributor” — to also cover online video distributors.

The change would help companies like Dish Network, Verizon Communications, Sony and other companies hoping to launch a pay-TV service delivered over the Internet, instead of satellite or cable.

The change, while technical, is important because it would give online video providers protection under rules designed to prevent cable operators that own TV channels — such as Comcast*, which owns NBCUniversal — from withholding must-have content from rivals. So, in the case of Comcast, it has to offer NBC to a rival pay-TV service like Dish.

It would also require local station owners to negotiate in good faith with online video providers for permission to air local TV channels.

But while the proposal might make it a little easier for a company to launch an online video competitor to Comcast, the relief could be relatively modest.

In addition to making content available to rival distributors, the proposal says a cable operator has to sell its programming to startups at reasonable rates. But it doesn’t require programmers like Walt Disney Co. (which owns ESPN) or Viacom (which owns MTV) to do the same since they don’t own distribution systems. It also wouldn’t require these content companies to offer their channels a la carte or at reduced prices.

“Our proposal will mean more alternatives for consumers beyond the traditional cable or satellite bundle, including giving consumers more options to buy the programming they want,” said FCC Chairman Tom Wheeler in a statement.

Wheeler and the agency’s other two Democrats approved the proposed rules last month and were somewhat reluctantly joined Thursday by the FCC’s two Republican members, who have expressed some concerns about the FCC extending regulation over online video providers.

TV station owners have been supportive of the idea, mostly because it means that online video providers would be required to pay fees to broadcasters to air their channels.

Cable operators haven’t been quite as thrilled, which isn’t surprising since the proposal could open the doors to significantly more competition by Dish or other online video providers. The National Cable & Telecommunications Association said Friday that it doesn’t believe that the proposal “can be squared with the plain language” of the definition of a MVDP.

The FCC has been mulling the issue of what to do about online video providers for four years, when a little-known provider called Sky Angel asked the agency for help.

The company’s service offers family and Christian programming but it had problems adding Discovery Channel to its lineup. Sky Angel executives complained Discovery didn’t want to be carried on the small company’s online video service for fear of upsetting larger pay-TV providers.

Sky Angel shut down its online video service in January, citing its inability to offer a competitive service because media companies wouldn’t sell distribution rights to their channels.

The proposal also comes too late for Aereo, the broadcast TV startup currently in bankruptcy protection after the Supreme Court torpedoed its business. But it could help other startups hoping to offer lower-cost, smaller bundles of channels in the hope of taking subscribers away from Comcast and other traditional pay-TV providers

The agency is expected to collect comments about its proposal through next spring but a decision on rules isn’t expected before summer.

* Comcast owns NBCUniversal, which is a minority investor in Revere Digital, Re/code’s parent company.

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