The FCC is
proposing to bring
Internet-based streaming video services within the scope of its legacy cable
regulations,
and reply comments have just been filed. Specifically, the FCC seeks to re-define
the legal meaning of the term multi-channel video programming distributor"
– MVPD – to include subscription-based online video distributors – OVDs.
According to the FCC, its proposed changes would take stock of new video
competition from online services, such as Netflix or Amazon Prime.
But the
FCC's new-wine-in-old-wineskins approach to video regulation raises profound
law and policy issues. The text of the Communications Act appears to foreclose
the agency making such a change. Extending regulations based on early 1990s
assumptions about cable monopolies to the dynamic Internet is also dubious. And
such a redefinition of terms raises serious First Amendment questions.
If
anything, the FCC's move should prompt Congress to act with greater urgency in
bringing about the reforms that are truly needed. Today's dynamic market for
video services calls for a new framework that reflects technologies and
competition that didn't exist when the cable legacy regime was established.
Congress should adopt a simplified market-based framework for video services. A
streamlined approach to match today's video market should treat competition
rather than regulation as the norm, seek to treat all video providers equally,
and respect the First Amendment.
The FCC proposes
to redefine the Communications Act's term for "multi-channel video
programming distributor" – or MVPD – by including within its scope "services
that make available for purchase, by subscribers or customers, multiple linear
streams of video programming, regardless of the technology used to distribute
the programming."
In
particular, the FCC proposes extending to OVDs the ostensible benefits of
program access regulations enjoyed by MVPDs. Program access regulations limit
the ability of MVPDs to withhold satellite programming from competitors in the
video distribution market. In effect, those regulations are intended to ensure
that MVPDs that also own video programming make their programming available at
wholesale for their rivals to sell at retail to subscribers. Program access
regulations thereby impose restrictions on free market entrepreneurship and
decisions about protected speech content. The FCC suggests that expanding such
regulations will spur further video competition.
Back in
2010, the FCC's Media Bureau concluded that the agency lacked the statutory
authority to redefine MVPD in the manner the agency now proposes. (It’s
discussed briefly in my Perspectives from
FSF Scholars essay "Keep Online Video Free
from FCC Regulation.")
The Media Bureau concluded the text of the Communications Act appeared to
foreclose it from re-defining MVPD to include OVDs that do not offer their own
physical transmission path directly to video consumers.
Related to
the statutory problem with re-defining MVPD, as the FCC now has proposed, is
the First Amendment problem. Cable operators and other MVPDs have free speech
rights in the editorial choices of their video programming channel lineups and
tier packages.
The U.S.
Supreme Court has recognized that the constitutional permissibility for several
cable-related regulations depends upon Congress's findings of so-called cable
monopoly bottlenecks in the early 1990s. But there has been a dramatic technological
transformation of the video market since then. The competitive landscape now
includes two nationwide direct broadcast satellite services (DBS), former
telephone company entrants in the MVPD market, as well as OVDs. Wireless
delivery options also exist now. The prevalence of these innovative and
competitive forces reinforces the First Amendment problem with expanding cable
monopoly-era regulations, as the FCC proposes.
Under the canon
of constitutional avoidance, a statute susceptible to more than one reasonable
construction is interpreted to avoid raising constitutional problems. Should
the FCC follow through with its proposed redefinition of MVPD, the
constitutional avoidance canon could likely be invoked by a court of law to
prohibit such a redefinition. In fact, this canon already has been invoked in
the cable regulation context.
In Comcast v. FCC (2013), Judge Brett
Kavanaugh of the U.S. Court of Appeals for the D.C. Circuit issued a concurring
opinion concluding that government interference with the editorial discretion
of video programming distributors is only permissible where such distributors
possess market power in the relevant market. Judge Kavanaugh's antitrust-based
reading of Section 616 program carriage regulations was bolstered by the
constitutional avoidance canon. First Amendment protections for editorial
decisions related to video programming tipped the scales in favor of free
speech absent market power. (Free State Foundation President Randolph J. May
and I discuss Judge Kavanaugh's excellent judicial opinion in an essay we
called "The Case for Program
Carriage Reform.")
The larger
point is that the technological and competitive disruption to the video market
posed by online video services should lead Congress to do away with the legacy
cable regulatory apparatus. The FCC's proposed jerry rigging of the old system
to suit current market realities should add urgency to comprehensive
legislative reform efforts. Congress should pursue a market-based framework
that is more streamlined, reduces regulations, seeks to treat video providers
similarly, and respects the First Amendment.
In January
2015, FSF President Randolph J. May, myself, and several members of FSF's distinguished
Board of Academic Advisers submitted a written response to the
House Energy and Commerce Committee's white paper questions about modernizing
federal video policy.
The FSF Board of Academic Adviser members were Professors Michelle Connolly, Richard
A. Epstein, Gus Hurwitz, Daniel Lyons, Bruce M. Owen, Glen O. Robinson, James
B. Speta, and Christopher C. Yoo. Our response proposed that "[a] new framework
should be established that is applicable all video services in the digital
marketplace, the organizing principle of which is a rebuttable presumption that
runs in favor of marketplace freedom and against regulatory intervention in the
video market." Such a framework would eliminate the existing silo regime
that subjects different providers of similar services to different regulatory
burdens. It would also limit the FCC's authority to adopt broad anticipatory ex ante rules by confining the agency's
actions to an ex post process based
on adjudication of individual complaints alleging specific abuses of market power
and consumer harm.
The Next Generation
Television Marketplace Act – legislation that has previously been introduced in
Congress by Rep. Steve Scalise – also offers a promising approach to
comprehensive reform for video services policy. The bill was designed to
eliminate outdated legacy regulations in the video marketplace.
The FCC's
MVPD redefinition proposal should prompt Congress to comprehensively reform the
outdated federal video services regulatory policy. Congress should regard
competition rather than regulation as the norm, seek to treat all video providers
equally, and respect First Amendment free speech strictures.
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