Nielsen: Streaming Surpassed Cable and Broadcast Combined in May

Nielsen's The Gauge™ provides a monthly snapshot of consumer viewing behavior. More to the point, it documents the trend over time away from traditional sources – "cable" and broadcasting – toward streaming options. Over the last four years, I have highlighted a few noteworthy milestones on that path:

• In "Nielsen: Viewership of Streaming Video Has Surpassed That of Broadcast Television," a June 2021 post to the FSF Blog, I noted that, in May 2021, consumers for the first time spent more time watching streaming services (26 percent) than broadcast television (25 percent).

• In September 2022's "A Tale of Two Trends: Traditional Video Distributors Shrink While Streaming Video Grows," a Perspectives from FSF Scholars, I pointed out that, as cable subscriber losses approached 1 million (949,209) during the second quarter of 2022, streaming for the first time exceeded one-third of total viewing.

• In an October 2022 post to the Free State Foundation blog, I reported that, in September 2022, for the first time streaming (36.9 percent) surpassed cable (33.8 percent).

The zero-sum ascendence of streaming continues: according to the most recent edition of The Gauge, in May 2025 streaming (44.8 percent) for the first time exceeded cable and broadcast television combined (44.2 percent):

In a Perspectives published earlier this month, I wrote that "[f]ar from raising competitive concerns, the Charter-Cox merger appears to represent a pragmatic effort to accelerate the modernization of legacy cable offerings to a world where video competition is both fierce and consumer-driven." This latest data point from The Gauge serves to underscore that conclusion.

Deregulation Is the Cure for the Video Regulatory Disparity

In a May 27 op-ed, just-departed FCC Commissioner Nathan Simington, along with his Chief of Staff Gavin Wax, argued that a 2014 proposal by then-Chairman Tom Wheeler to regulate "virtual" video distributors (vMVPDs) the same as facilities-based video distributors (MVPDs) "deserves a second look." Relatedly, Chairman Brendan Carr, in a March 7 letter to YouTube TV and its parent company, Alphabet, noted that "the FCC and Congress have been encouraged by a diverse group of stakeholders to expand the Commission's existing rules and to apply the same or a similar framework to virtual MVPDs like YouTube TV" and that it "has multiple open proceedings seeking comment on whether to do just that."

Without question, the intended goal – in the words of Simington and Wax, "placing [vMVPDs] on equal regulatory footing with cable and satellite operators" – is one that policymakers should prioritize. After all, and as I described most recently in "No Basis Exists in 2025 for Rules Targeting Traditional Video Providers," a March Perspectives from FSF Scholars, facilities-based MVPDs subject to FCC regulations have been shedding subscribers for years while their online competitors – including the vMVPD YouTube TV, which is expected to surpass Charter Communications, Inc.'s Spectrum to become the largest MVPD by the end of 2026 – have been adding subscribers at a breakneck pace.

However, given that the video distribution marketplace is, and grows steadily more, competitive, I (and others affiliated with the Free State Foundation) have argued consistently that the appropriate path to a level playing field is through the deregulation of facilities-based MVPDs, not the expansion of existing regulations to vMVPDs.

In Comments filed in the "IN RE: DELETE, DELETE, DELETE" proceeding, Free State Foundation President Randolph May and I pointed out that "what primarily stands in the way of unbridled, consumer-benefiting competition are ill-fitting rules that hamstring the subset of participants to which they uniquely apply: cable operators and Direct Broadcast Satellite (DBS) providers."

And in "Video Subscriber Updates Underscore Ongoing Shift to Streaming," an August 2023 post to the FSF Blog, I wrote that "the appropriate response to these ongoing trends is to eliminate outdated rules, not expand them."

The proposal to extend rules targeting legacy MVPDs to vMVPDs isn't only the wrong approach from a competition policy perspective, however. It also appears to lack a statutory justification.

In a March 2023 letter to Senator Charles Grassley (R-IA), then-FCC Chairwoman Jessica Rosenworcel explained that the plain language of 47 U.S.C. § 522(4), which defines a "channel" as "a portion of the electromagnetic frequency spectrum which is used in a cable system and which is capable of delivering a television channel," limits the FCC's ability to regulate vMVPDs that stream content over the public Internet:

It is imperative that the Commission give these words full meaning. As reflected in the record, online video programming distributors do not neatly fit in these statutory definitions because they lack a physical connection to subscribers and do not use any electromagnetic frequencies when delivering programming to their viewers. As you know, the Commission lacks the power to change these unambiguous provisions on its own but can do so if Congress changes the underlying law.

This statutory impediment has become more pointed in the wake of the Supreme Court's Loper Bright decision rejecting the Chevron doctrine. Rather than defer to an agency interpretation of an ambiguous statute, reviewing courts now will adopt what they view as the "best reading of the statute." In this case, and assuming for argument's sake that the statute is ambiguous, that seemingly would lead to the judicial conclusion that the FCC's regulatory authority over MVPDs does not extend to vMVPDs that deliver digital bits over the public Internet.

DIRECTV, DISH to Join Forces in Battle for Video Subscribers

Today DIRECTV announced its plans to acquire EchoStar's video programming distribution platforms – the DISH TV direct broadcast satellite (DBS) service and the Sling TV virtual multichannel video programming distributor – to more effectively compete in a rapidly evolving marketplace increasingly dominated by streaming alternatives.

This is not the first time that the two DBS operators have attempted to combine. In October 2002, the FCC effectively blocked their proposed merger by designating their application for a full evidentiary hearing, concluding that "the likelihood of the merger harming competition in the multichannel video program distribution ("MVPD") market outweighs any merger-specific public interest benefits."

Source: directv.com

But over the last 22 years, the widespread deployment of broadband Internet access has turned the video distribution competitive landscape on its head. As I have documented, most recently in a July 2024 post to the FSF Blog, for many years traditional MVPDs – cable operators and DBS providers – have been losing subscribers, financial quarter after quarter, while streaming competitors have been growing by leaps and bounds. By contrast, back in 2002, Netflix – which reported 278 million global streaming subscribers at the end of the second quarter of this year – was still solely in the business of mailing out DVDs. And Hulu, Amazon Prime Video, Disney+, Apple TV+, and Paramount+ did not exist at all.

Given the undisputable dramatic changes that have occurred in the marketplace since DIRECTV and DISH TV first sought to combine, this transaction must be evaluated in an entirely new context. Specifically, by providing DIRECTV with the additional scale needed to compete effectively, it seems that it will generate undeniable pro-consumer benefits. And given the relatively dominant position of streaming alternatives, it certainly doesn't appear to present any competition concerns.

In all, DIRECTV enumerates three specific benefits that will result:

• It "will allow DIRECTV to better meet consumers' demands for smaller packages at lower price points"
• It "[p]ositions DIRECTV to provide better integration of direct-to-consumer services"
• It "[i]mproves EchoStar's financial profile to continue the deployment of its 5G Open RAN wireless network"

With regard to "smaller packages at lower price points," an August 21, 2024, open letter written by DIRECTV Chief Content Office Rob Thun argued that, absent "fundamental change" to the way that traditional MVPDs are able to package their services, "costs will continue to soar, consumer satisfaction will erode, and the entire ecosystem will suffer."

In today's press release, DIRECTV Chief Executive Officer Bill Morrow is quoted as saying that "[w]ith greater scale, we expect a combined DIRECTV and DISH will be better able to work with programmers to realize our vision for the future of TV, which is to aggregate, curate, and distribute content tailored to customers' interests."

House Commerce Subcommittee to Hold Hearing on Video Marketplace

The House Energy and Commerce Committee's Subcommittee on Communications and Technology will hold a hearing tomorrow at 2 pm ET entitled "Lights, Camera, Subscriptions: State of the Video Marketplace." Promisingly, this hearing will focus, at least in part, on outdated regulations that inappropriately impede traditional video programming distributors' ability to participate in an increasingly competitive marketplace.

When announcing the hearing, House Energy and Commerce Committee Chair Cathy McMorris Rodger (R-WA) and Communications and Technology Subcommittee Chair Bob Latta (R-OH) stated the following:

Over the last decade, the video marketplace has undergone a transformative shift as more media content moves online. The introduction of streaming services expanded the options for consumers to choose where, when, and what content they view. While there is an unprecedented amount of content, like movies, TV shows, and news, available, the rise of these services creates challenges for traditional media providers who continue to compete despite being saddled with regulations. We look forward to discussing the evolution of this market, the steps Congress can take to ensure outdated regulations do not hinder innovation and competition, as well as how to bring the traditional marketplace into the 21st century.

Scheduled witnesses include:

• FuboTV Inc. Board Member and CEO David Gandler (witness testimony)
• National Association of Broadcasters President and CEO Curtis LeGeyt (witness testimony)
• Consumer Reports Senior Policy Counsel and Manager of Special Projects Jonathan Schwantes (witness testimony)
• America's Communications Association – ACA Connects President and CEO Grant B. Spellmeyer (witness testimony)

In a recent post to the Free State Foundation's blog, I presented the latest evidence of longstanding subscriber trends – specifically, that traditional video programming distribution platforms, both facilities-based and virtual, continue to shed customers while countless streaming services add them.

Consequently, and as I argued in "With Pay-TV on the Wane, Legacy Regulations Should Follow," a July Perspectives from FSF Scholars, "consumers have available more than sufficient choices to compel a comprehensive change in course away from government intervention … and toward the exclusive reliance upon efficiently operating market forces."

Perhaps tomorrow's hearing will serve as a significant step in that direction.

Video Subscriber Updates Underscore Ongoing Shift to Streaming

In a July 2023 Perspectives from FSF Scholars, I took aim at the core assumption underlying calls to expand the definition of a "Multichannel Video Programming Distributor" (MVPD) to include virtual substitutes streamed over the Internet (vMVPDs). Contrary to what proponents might have you believe, subscribers cutting the physical cord are not switching en masse to online alternatives. Instead, they're migrating primarily to streaming platforms like Netflix, Hulu, and Amazon Prime.

The latest video subscriber numbers provide further evidence that both facilities-based MVPDs (cable, Direct Broadcast Satellite (DBS), telco TV) and vMVPDs are weathering the impact of a seismic shift in consumer preferences away from the monolithic video "big bundle" to a self-curated collection of more targeted offerings.

Some key data points:

• According to the Leichtman Research Group (LRG), the top cable operators lost 925,532 subscribers during Q2. The two DBS providers, DIRECTV and DISH TV, combined shed nearly 600,000 customers. And Verizon FiOS saw its total drop by 70,000. Overall, LRG found that traditional MVPDs lost 1.61 million customers.
• Wells Fargo analyst Steven Cahall reported even higher traditional MVPD declines: 1.72 million customers, representing 7 percent of the total.
• Overall, LRG saw vMVPD subscriber totals decline in Q2 by 115,000 – despite an estimated 200,000 additional YouTube TV customers. (Note that not all vMVPDs release subscriber data to the public.)
• Steven Cahall, meanwhile, saw vMVPDs add just 8,000 subscribers in Q2.
• Netflix, on the other hand, added 1.17 million customers in the United States and Canada during Q2, for a total of 75.57 million.
• And Hulu added 300,000 subscribers in Q3, for a total of 44 million subscribers.

As I concluded in "With Pay-TV on the Wane, Legacy Regulations Should Follow," the appropriate response to these ongoing trends is to eliminate outdated rules, not expand them:

Put simply, the issue is not that the definition of an MVPD is not sufficiently broad, it's that pay-TV companies confront a marketplace that is dramatically changed…. To fully harness for consumers the benefit-generating engine that is competition, it is time for regulators (and regulations) to step aside and let the marketplace drive optimally efficient outcomes.

Greater Video Competition Should Prompt Less Regulation, Not More

Dormant for nearly a decade, the FCC's misguided proposal to expand the definition of "Multichannel Video Programming Distributors" (MVPDs) – a category limited to facilities-based offerings such as cable, Direct Broadcast Satellite, and telco TV – recently has received renewed attention. In a letter dated March 24, 2023, responding to an inquiry from Senator Charles Grassley (R - IA), FCC Chairwoman Jessica Rosenworcel pointed to statutory definitions as the basis for not subjecting MVPDs that stream content over the public Internet – that is, "virtual MVPDs" (vMVPDs) such as YouTube TV, Hulu + Live TV, Sling TV, and DIRECTV STREAM – to legacy regulations.

This is the right outcome, of course. However, the justification put forth overlooks the forest for the trees. The dramatic rise of vMVPDs, as well as the multitude of other Online Video Distributors (OVDs) that make video content available to consumers – think Netflix, Amazon Prime Video, Hulu, Disney+, Apple TV+, HBO Max, Paramount+, and so on – has rendered the video programming marketplace robustly competitive. Consequently, the goal of the Commission in 2023 should be to identify opportunities to eliminate outdated rules that apply to traditional MVPDs, not extend them to the new entrants whose competitive influence obviates any justification for regulatory intervention.

I, as well as other Free State Foundation scholars, document regularly the rapid growth of streaming services at the expense of traditional MVPDs. Recent examples include "On Video, the FCC's Competition Report Falls Short," a January 2023 Perspectives from FSF Scholars, and "A Tale of Two Trends: Traditional Video Distributors Shrink While Streaming Video Grows," a Perspectives published in September 2022.

In the latter, I followed these changed circumstances to their logical conclusion, writing that:

[I]t is past time for the Commission and Congress to take all necessary steps to eliminate one-sided burdens that impede competition – such as set-top box regulations, program access and carriage requirements, and the network non-duplication and syndicated exclusivity rules [that apply solely to facilities-based MVPDs] – and instead rely on the efficient operation of marketplace forces to drive down prices and expand consumer choices.

Chairwoman Rosenworcel did acknowledge the current competitive reality in her letter to Senator Grassley, highlighting the fact that "the video marketplace has changed significantly with the introduction of streaming services." Nevertheless, and as was the case with the 2022 Communications Marketplace Report, she failed to articulate an appropriate deregulatory response.

While it is true that vMVPDs do not deliver video content within "a portion of the electromagnetic frequency spectrum which is used in a cable system" and therefore do not fall within the statutory definition of an "MVPD," it is equally true that, given the vast array of competitive options available to consumers, regulations premised upon that technical distinction have outlived whatever utility they once may have had and should be eliminated.

Congress Should Respect Free Speech and Markets for Video Content

On September 2, House Resolution 1329 was introduced, which declares its purpose in "[r]ecognizing the need for greater access to rural and agricultural media programming." One can see the benefit to viewers of being informed about agricultural weather, agribusiness, commodity markets, and Western sports like rodeos. At the same time, it's important that government respects the First Amendment free speech rights of video programming distributors to select content and determine where or how it is presented to their subscribers. A resolution is perhaps a fitting way to commend Western living, but Congress should steer clear of mandating or appearing to direct the programming content choices of video service distributors.  

House Resolution 1329 salutes farmers, ranchers, agricultural productivity that supplies the American people with food, and the importance of agricultural investment to our nation's future. It also calls attention to the potential for rural and agricultural video programing to inform Americans about those issues, including residents in big cities and suburbs. In these the matters the resolution's outlook is worthy of respect.

The House resolution – in agreement with identically-worded Senate Resolution 712, introduced back on July 14 of this year – also decries media consolidation's harmful impact on access to such programming. But that point deserves significant qualification. American consumers have access to more video programming choices and distribution outlets than they did thirty years ago. In the early 1990s, nearly all Americans had only one choice for subscription-based multi-programming video distributor (MVPD) services, a local analog cable provider. Yet in 2022, Americans are served by a local cable provider with expanded programming tier offerings and by two nationwide direct broadcast satellite (DBS) providers. Many Americans also have access to competing former telco MVPD services. Additionally, online digital streaming services are available nationwide, with online video distributor (OVD) subscriptions now outnumbering MVPD subscriptions. And broadcast TV programming, which is now offered via multi-streaming channels and with HD quality, overwhelmingly constitutes a widely available non-subscription viewing option. 

The House resolution recognizes the emergence of competing OVDs. It states that "multichannel video programming distributors and providers of digital and streaming media should make delivery of rural agricultural programming, including agricultural news and western lifestyle content, a priority." Although the sentiment behind the resolution may be commendable, it ought to be remembered that video networks are private property. Any government intervention in the marketplace favoring the carriage or specific placement of one particular channel or program on a cable or other video network risks improperly overriding the editorial rights of cable providers or other video distribution network owners. 

Cable and other video providers' editorial decisions about whether to carry content and how to present it are constitutionally protected free speech. In Turner Broadcasting System, Inc. v. FCC (1994), for instance, the Supreme Court held that cable video programming distributors engage in and transmit speech and therefore receive First Amendment protections. Moreover, in a concurring opinion in the D.C. Circuit's 2013 Comcast v. FCC decision, then-Judge Brett Kavanaugh wrote that "[j]ust as a newspaper exercises editorial discretion over which articles to run, a video programming distributor exercises editorial discretion over which video programming networks to carry and at what level of carriage." 

Moreover, if Congress or the FCC were to adopt a regulation favoring a specific type of video content for carriage on MVPD networks then the regulation would not be content neutral. Any government mandate for prioritizing carriage or ensuring cable basic tier placement for rural and agricultural content – or any other specific type of content – would by definition be content-based and therefore subject to strict scrutiny. It's highly unlikely that a court would find that a program carriage or placement mandate favoring specific video content furthers a compelling government interest and is the least restrictive means to further that interest. 

Video policy ought to be guided by the principle of limited government. That principle should caution us against the risk of public officials unduly influencing the programming content choices of private video networks. Another concern is that government could end up preferring highly objectionable content. Rural and agricultural programming may be all-American and family friendly, but there are myriad programming choices that are neither.

As both chambers of Congress consider resolutions that recognize the value of rural and agricultural video programming, its Members should steer clear of allowing such recognition to turn into any form of requirement for private sector video providers. 

Virtual Video Programming Services Continue to Gain Ground

In "Pixel by Pixel, Video Streaming's Ascension Comes Into Focus," a September 2021 Perspectives from FSF Scholars, I reported that the growth of Internet-based alternatives to traditional, facilities-based multichannel video programming distributors (MVPDs) may be slowing. More recent data, however, indicates that the opposite is true: virtual MVPD (vMVPD) subscriber totals have nearly doubled over the past year. Over the same period, the number of traditional MVPD customers has continued its downward trend.

There is no question that consumers are turning away from legacy video programming offerings and toward the many streaming options available – and that, consequently, both Congress and the FCC need do more to remove outdated regulations that exclusively target facilities-based providers (that is, cable operators, Direct Broadcast Satellite operators, and telco TV providers).

For more on this point, please see "Streaming Continues to Redefine the Video Landscape: It's Past Time to Eliminate Legacy Regulations," a Perspectives I wrote for the Free State Foundation in July 2021.

An evidentiary open question, though, has been to what extent viewers still crave the classic big bundle provided by facilities-based MVPDs: live channels + video on demand + an electronic programming guide + digital video recording capabilities.

The sheer number of subscribers to primarily library-based services like Netflix (214 million), Amazon Prime (over 200 million), Disney+ (118 million), and Hulu (43 million) suggests that preferences are trending away from these types of offerings toward a self-curated collection of more targeted options.

This hypothesis is bolstered by two data points.

One, the number of consumers who obtain service from traditional MVPDs continues to decline. According to the Leichtman Research Group, total subscribers to the top seven cable operators decreased by more than five percent, from 44.3 million to 41.9 million, between Q3 2020 and Q3 2021. Notably, Hulu, number four on the list of top streaming services, now has more subscribers than the top seven cable operators combined.

Two, 49 percent of broadband households subscribe to four or more streaming services.

According to Parks Associates, however, the number of broadband households subscribing to vMPVDs – which replicate the traditional product offered by facilities-based providers but deliver content over a user-provided broadband connection to a consumer-owned streaming device or smart TV – is now "nearly double" what it was just one year ago: 19 percent.

The impressive success enjoyed by vMVPDs – a large category of providers that includes Hulu + Live TV, YouTube TV, Sling TV, Philo, AT&T TV NOW, and fuboTV – reinforces the oft-made case for additional deregulatory action by Congress and the FCC.

Online Video Offerings from INCOMPAS/DISH TV Bolster the Case Against Local Cable Rate Controls

On October 15, it was reported that INCOMPAS and DISH NETWORK have entered into a Retail Partner Program agreement to provide nationwide video service offerings, including video services comparable to cable multi-channel video programming distributor (MVPD) services. According to reports, INCOMPAS members will resell DISH TV's video services, making them available via broadband connections to INCOMPAS subscribers. This market development demonstrates the competitiveness of the video market and it bolsters the case against outdated local cable rate controls. 

My October 11 Perspectives from FSF Scholars paper, "FCC Action Would Finally Eliminate Local Cable Rate Regulation," explained why the Commission should adopt its proposed LEC "effective competition" order. Local rate regulation of basic cable tier services and equipment shouldn't exist in today's competitive video marketplace, which includes nationwide direct broadcast satellite (DBS) services and over-the-top (OTT) online video services. Based on the Commissions' "LEC test," the proposed order would eliminate local cable rate controls in the few geographic areas where they are still enforced. 

The Commission's proposed order is scheduled for a vote at its public meeting on October 25. The order is prompted by Charter Communications' petition requesting the Commission to find that AT&T TV NOW's nationwide offering of streaming video service via broadband Internet facilities is comparable to cable services and provides effective competition to cable systems in certain Massachusetts and Hawaii localities. My Perspectives paper sets forth some positive results that would obtain from the Commission's adoption of its proposal. 

The Commission's "LEC test" requirements aside, the INCOMPAS/DISH TV announcement goes to show that today's video marketplace offers consumers competitive choices. Legacy cable regulation based on early 1990s analog- and VCR-era market assumptions, including local cable rate regulation, provide no discernable benefit to consumers in 2019's video landscape. Local cable rate controls ought to be scrapped.

The Video Marketplace Is Competitive

Video Competition
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The FCC's Attempt to Make Choices for Consumers Will End up Harming Them

In February 2016, the Federal Communications Commission (FCC) adopted a Notice of Proposed Rulemaking (NPRM) purporting to “unlock the box,” mandating requirements for video navigation devices. Including the time the FCC spent writing the NPRM, this proceeding has lasted roughly ten months. After heavy criticism from inside and outside the FCC, the Commission is now apparently proposing an entirely new set of regulations which would require pay-TV providers to deliver video service through an application (as opposed to a set-top box) that can be used on “widely deployed platforms.” The draft Report and Order (unseen by the public) is scheduled to be voted on during an Open Meeting on September 29, 2016.  
If the technological innovation of the video marketplace has changed so much in the last ten months that the Commission has revised its proposal, what makes the FCC so sure that “apps” will be the technology consumers want in the future? And shouldn’t the FCC let the public comment on such a dramatic revision before the Commission casts its votes?

In FSF’s recent comments to the FCC regarding the status of competition in the video market, FSF scholars explained that consumers have more choices for video access than ever before. Our comments also discussed how the FCC’s original and new proposals would violate copyright terms, disincentivizing creators from producing additional content. (In addition to our comments, see my August 2016 blog and Senior Fellow Seth Cooper’s February 2016 blog for more on the copyright violations that the FCC’s proposal would enable.) Regardless of these very important issues, the FCC has misunderstood what should be a pretty simple concept: consumers like having choices in the video market. The fundamental mistake the FCC made in its original proposal was not the type of technological mandate; it was the mandate itself!

The video market has experienced tremendous innovation in the last five to ten years as online video distributors (Netflix, Amazon, Hulu) have emerged to become competitors with facilities-based pay-TV providers (Comcast, Verizon, Time Warner Cable). In fact, Netflix, Amazon, and Hulu combined have more than twice as many subscribers as all cable providers combined. The video market has been transitioning from set-top boxes to applications, so this mandate simply creates unnecessary uncertainty and removes the traditional options for consumers who are less likely to adopt to the latest market trends. (See here, here, and here for examples of the innovative transition that is occurring in the video market.)

If adopted, the mandate proposed by the FCC will raise costs for pay-TV providers. In fact, the FCC’s fact sheet acknowledges this because the proposal exempts providers with fewer than 400,000 subscribers in an attempt to “limit burdens on smaller providers.” Ultimately, consumers will end up paying for this technological mandate with an increase in the price of their pay-TV service.

Consumers likely will be able to see the increase in their provider’s costs on their monthly bills, but there will also be hidden costs. The FCC’s mandate could disable pay-TV providers from differentiating their application’s interface and usability. This would discourage providers from developing new ways to deliver their service. Such a requirement could force video distribution, which recently has been at the forefront of innovation, onto the back burner of technological development. Consumers would enjoy less innovation in the video market than they otherwise would, absent the FCC’s proposed regulations.

On September 16, 2016, Jason Furman, Chairman of the Council of Economic Advisers for President Obama, praised FCC Chairman Tom Wheeler for his efforts to “improve the proposal.” But neither President Obama and his closest advisers nor Chairman Wheeler and his FCC colleagues are knowledgeable enough to predict the future and mandate efficient outcomes in the video marketplace. Consumers, collectively, are the only group of people who can dictate what technologies provide value and which do not. While applications (as opposed to set-top boxes) might be closer to where the video market is moving right now, technology changes so rapidly that it may be only be a matter of weeks or months before the mandated technology is out-of-date.

Over the period of ten months, the FCC changed its mind about what technology to mandate for pay-TV providers and consumers. Who is to say that the FCC will not mandate a new technology a year or so down the road? The FCC should shut down this proceeding and allow consumers in the competitive marketplace to choose the technologies and platforms they prefer when accessing video content. If not, at the very least, the FCC should issue a new NPRM, instead of a Report and Order, so the public can comment on its quick switch from set-top boxes to applications. 

Content Availability in U.S. at an All Time High

On March 17, 2016, SNL Kagan released a new study entitled “U.S. Availability of Film and TV Titles in the Digital Age,” which quantifies the availability and growth of legitimate digital offerings of film and TV series in the U.S. based on a review of 33 major online video on-demand distributors and 14 TV everywhere on-demand services.

Key findings from the study include:

• 98% of premium films and 94% of premium TV series were digitally available on at least one of the reviewed online services.

• 97% of premium films were digitally available on at least one of the reviewed online video on-demand services – up from 94% in 2013. The report also found that 93% of premium TV series were digitally available on at least one of the reviewed online video on-demand services – up from 85% in 2013.

• On TV Everywhere on-demand services, which provide online access via an authenticated paid subscription, 96% of premium films and 82% of premium TV series were digitally available on at least one of the services reviewed.

• 95% of premium films and 84% of premium TV series were digitally available on at least five of reviewed online services. 

Additionally, a new study from FX Networks found that the number of scripted series has increased 94 percent from 2009 to 2014. Consumers have many choices regarding video devices and online video services. It is pretty clear that there is more video content available for consumers today than ever before, despite FCC Chairman Tom Wheeler’s recent statement that “consumers essentially have no choices.” (See FSF’s new infographic on the FCC’s set-top box proposal.)

The findings from the SNL Kagan study are important when considering the misguided regulations proposed by the FCC to add mandates to set-top boxes and lock in old technology. It is clear from this study that the video market is moving online rapidly, but the FCC’s proposal could stifle this innovative transition, harming the creative process and the growth in consumer choice.

The United States is a leader in providing strong IP rights protections for the creative community. This has helped create the dynamic, growing market for video services, but the FCC’s proposal could reverse this progress by jeopardizing the protection of copyrighted content.

The FCC Should NOT Impose New Video Device Mandates!

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FCC Should Resist Regulatory Conditions Unrelated to Charter Merger

The FCC is reviewing Charter Communication's proposed acquisition of Time Warner Cable and Bright House Networks. March 4 marked day 160 on the Commission's informal 180-day merger review shot clock. If the merger is approved, it potentially will enable accelerated upgrades to digital video services and faster deployment of high-speed broadband services. The merger may also enhance competition for enterprise broadband services and provide cable subscribers with improved video device offerings.

Along with the merger's potential benefits, Charter/TWC/BHN poses only remote potential for harm. Certain market competitors have criticized the merger based on speculative ill effects regarding the availability of online video services and independently manufactured set-top boxes. Yet those criticisms lack solid foundation in fact. Nor do these criticisms have any direct connection to the merger. They involve broader questions about the video marketplace and FCC policy. These market-wide policy questions, to the extent they deserve closer attention, should be reserved for general proceedings, not merger reviews.

Like so many mergers before it, the Charter/TWC/BHN proposal is the subject of a stream of news commentaries and interest group press releases. Also like other mergers, Charter/TWC/BHN is the target of intense lobbying, reflected in ex parte filings to the Commission. Quite often, market competitors that are not a party to the transaction seek to persuade the Commission to impose regulatory conditions on its approval.

A claim repeated in news stories and ex parte filings by market competitors is that Charter/TWC/BHN would adversely affect availability of online video distributor (OVD) services. But there is less than meets the eye here. None of the merging entities have significant ownership in video programming networks. 

Charter/TWC/BHN simply wouldn't have video programming network content to withhold from OVD services. Nor is there reason to think Charter/TWC/BHN would have particularly strong incentives to impair their own broadband subscribers' access to OVD services. Even if Charter/TWC/BHN has an interest in protecting its video service from OVD competition, there is no good reason to think that interest would lead it to impair legal Internet traffic for its broadband subscribers. This would harm Charter/TWC/BHN's good will with its subscribers and thereby undermine return-on-investment in its broadband networks.

Still another claim has been made that Charter/TWC/BHN would stop making its video service accessible to consumers with TiVo or other set-top box devices. But it is also far-fetched to think Charter/TWC/BHN would stop allowing access to its video services through independently manufactured CableCARD-enabled set-top boxes. For starters, all major cable providers offer their own subscribers CableCARD-enabled set-top boxes. Major cable providers have made available to subscribers for leasing about 55 million such devices. Charter has provided about 5.7 million CableCARD-enabled devices to its own subscribers. That number far exceeds the 55,000 CableCARDs that Charter has supplied to subscribers using independently manufactured devices.

Charter/TWC/BHN has said it intends to deploy Charter's Worldbox set-top box device to its expanded footprint once the merger is concluded. Unlike CableCARD devices, Worldbox has downloadable security capabilities. Charter’s Worldbox would offer consumers in Charter/TWC/BHN's footprint the benefit of a cloud-interfacing device that is likely far superior to CableCARD-enabled devices many lease today. Such a device marks an important marketplace development toward apps-centric delivery of video content. In a 2013 waiver order, the Commission recognized the benefits of Worldbox in accelerating deployment of downloadable security in video devices.

By the same reasoning, Charter/TWC/BHN's deployment of Worldbox constitutes an important public benefit to consumers. And for its part, Charter/TWC/BHN would likely enjoy equipment cost savings from deployment of Worldboxes. Even so, it would be to Charter/TWC/BHN's detriment to block video accessibility to CableCARD-enabled devices. Rendering CableCARD devices useless for its video network would mean significantly reducing – if not destroying – the value of its own equipment.  

Even assuming these claims regarding OVD services and set-top boxes by those questioning the merger give cause for concern, they are not specific to the merger. That is, it does not appear that Charter/TWC/BHN would actually increase the risk of harms being alleged. There is nothing inherent in the merger that would make impairment of OVD services more likely if the Commission grants approval. Claims about OVD impairment could just as easily be made against any video service provider. Similarly, concerns about continued CableCARD compatibility could be raised with respect to any cable provider. In reality, these claimed problems with Charter/TWC/BHN are iterations of larger beefs held by various competitors or interest groups about the communications marketplace or communications policy.

Generalized concerns about the broadband and video markets should be the subject of generic industry-wide proceedings. And if necessary, those concerns may be addressed through market-wide rulemakings. Where a merger gives rise to a unique set of harms or potential harms, those may be targeted with a merger-specific remedy. But general concerns and issues should not be pigeonholed into merger review proceedings involving only two or three market participants.

It is unfair for merging parties to be singled out by the Commission for special regulatory burdens based on market-wide concerns. This is especially so when other market participants do not receive similar regulatory treatment. For the Commission to use the merger review process to achieve broader regulatory goals not specific to the merger is an evasion of rulemaking procedures. The Commission also risks exceeding its authority by imposing regulatory conditions on merging parties that have no express basis in the Communications Act.

Indeed, the Commission has already initiated industry-wide proceedings dealing with the regulatory treatment of both OVDs and video devices. These issues that implicate the entire video market and FCC policy should be raised in those proceedings – not in the merger review proceeding for Charter/TWC/BHN.