FCC Deletes, Modernizes, Streamlines Cable Rate Regulation

At today's Commission open meeting, Chairman Brendan Carr's IN RE: DELETE, DELETE, DELETE initiative bore fruit when the agency adopted a Report and Order providing the cable industry with long-overdue relief on the rate regulation front. As long as Section 623 of the Communications Act remains on the books (see below for more on that), the rate a cable operator not facing "effective competition" – essentially a null set, legally speaking, since 2017 –charges for the Basic Service Tier (BST) remains subject to regulation. This item, (circulated version available here), however, "will remove from … regulations approximately 27 pages, 11,475 words, 77 rules or requirements, and 8 forms."

The Report and Order deregulates most cable equipment, exempts smaller systems, and declines to extend its rules to commercial establishments. It also modernizes and streamlines those rules that remain in place, primarily to reflect the sunset, over 25 years ago, of tier regulation beyond that of the BST – that is, the tier (1) upon which local broadcast television stations and public, educational, and government access (PEG) channels must be carried, and (2) to which rate regulation in theory still applies.

In practice, of course, given the ubiquitous presence nationwide of "effective competition" from direct broadcast satellite (DBS) operators, telco TV providers, and virtual multichannel video programming distributors (vMVPDs), rate regulation of the BST no longer occurs. As the item notes, the Commission itself is "unaware of any local communities that are actively regulating cable rates at this time."

In a June 5, 2025, post to the FSF Blog, Free State Foundation President Randolph May described this undertaking broadly as "a meaningful regulatory reform accomplishment" and referenced the following language from our comments: "what primarily stands in the way of unbridled, consumer-benefitting competition are ill-fitting rules that hamstring the subset of participants to which they uniquely apply." The Report and Order, the goal of which is to "unleash prosperity through deregulation," is significant step in the right direction.

Speaking of deregulation, according to Law360 (subscription required), earlier this week House Energy and Commerce Committee Chairman Brett Guthrie (R-KY) stated that "'it's time to have a real conversation and update the 1992 Cable Act.'" Consistent with the position for which I (as well as others associated with the Free State Foundation) long have advocated, most recently in "Deregulation Is the Cure for the Video Regulatory Disparity," a June 9 post to the FSF Blog, Chairman Guthrie indicated that he opposes calls to extend legacy MVPD regulation to virtual alternatives: "'I fear that imposing additional regulation on this industry rather than relieving burdens on others would slow down innovation rather than encourage it.'"

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."

Cable Industry Lobbies FCC to Allow "Reasonable" Billing Practices

During a recent conversation with Commission staff, representatives from NCTA – The Internet & Television Association, Charter, and Comcast (collectively, the cable advocates) asked the agency to reconsider its rash proposals to prohibit traditional Multichannel Video Programming Distributors (MVPDs) – cable operators and Direct Broadcast Satellite (DBS) providers – from employing common billing practices that their larger and still-growing Internet-based competitors also use. At a minimum, they urged that "reasonable" Early Termination Fees (ETFs) be allowed.

As the Free State Foundation's recent comments in the State of the Communications Marketplace proceeding plainly point out, ascendant streaming services – Netflix, Hulu, YouTube, Amazon Prime, and the like – increasingly overshadow cable operators and DBS providers, which have been suffering significant subscriber losses for years.

However, the Commission's ability to regulate is limited by statute to traditional MVPDs, and – willfully ignoring clear competitive trends as well as its own complicit part in accelerating those trends – it has chosen to exercise that authority on numerous recent occasions.

For example, the FCC proposed late last year to ban traditional MVPDs – and traditional MVPDs alone – from (1) utilizing ETFs as a means of enforcing long-term, consumer-benefiting contracts, and (2) marketing their services in standard monthly increments.

As described in their ex parte letter, the cable advocates urged senior staff from Chairwoman Rosenworcel's office and the Media Bureau to reject outright the proposal to require that traditional MVPDs provide service in daily increments, a clear form of impermissible rate regulation. On the topic of ETFs, they similarly championed regulatory restraint – but suggested that, if the Commission is to intervene, it should limit its focus to "unjust or unreasonable" ETFs.

Of course, asking an administrative agency to determine what is and is not "reasonable" creates a separate set of subjective concerns. Accordingly, the cable advocates proposed a series of factual considerations upon which the FCC might base its decisions, including whether consumers:

• Have a choice between options with and without ETFs,
• Are informed clearly about the existence of ETFs before they sign up for service,
• Are afforded an initial window during which they may cancel service without having to pay an ETF,
• Are not subject to ETFs that are "excessive relative to the value received," and
• Face ETFs that decrease over the term of the contract.

In comments and reply comments, FSF President Randolph May and I strongly opposed any agency action in this proceeding. Specifically, we argued that ETFs and monthly billing increments are pro-consumer common practices that lead to lower costs and greater choice; that the Commission's misguided proposals clearly constitute impermissible rate regulation; and that new burdens exclusively targeting cable and DBS providers inappropriately would pick winners – unregulated streaming behemoths – and losers – struggling traditional MVPDs uniquely subject to FCC oversight.

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.

Consumer Preferences Steadily Shift to Streaming Video

During the second half of 2022, the percentage of U.S. households with a pay TV subscription (think: "cable") fell below half for the first time. When presented with the choice between accessing a specific show on a linear channel or a subscription video-on-demand (SVOD) service, consumers increasingly opt for the latter – and not just to avoid ads: younger Americans, in particular, "emphasize that SVOD is the place where they already watch shows most of the time." And speaking of SVOD, one analyst expects SVOD services to add 40 million new subscriptions in 2023 – an impressive feat given current economic conditions.

Indeed, each passing week seemingly provides additional evidence that consumers prefer their video streamed – and that, as a result, in 2023 no justification exists for regulations that single out traditional providers of video content. Far from gatekeepers, cable operators and other facilities-based Multichannel Video Programming Distributors (MVPDs) find themselves uniquely stymied by legacy rules predicated upon marketplace conditions that simply do not exist today.

In Comments and Replies filed in the 2022 Communications Marketplace Report proceeding, Free State Foundation scholars (1) documented the rapid consumer migration from traditional MVPDs to Internet-based alternatives, and (2) and argued persuasively that, consistent with its statutory responsibility to identify "laws, regulations, [and] regulatory practices [that]... pose a barrier ... to the competitive expansion of existing providers of communications services," the FCC should take swift steps to eliminate outdated and one-sided carriage- and equipment-related rules that constrain competition, arbitrarily pick winners and losers, and, ultimately and consequently, harm consumers.

However, as I pointed out in "On Video, the FCC's Competition Report Falls Short," a January 2023 Perspectives from FSF Scholars, the ensuing Report failed to articulate an appropriate deregulatory agenda in response to the markedly transformed video programming landscape that it described. (Keep in mind, too, that that Report focused on the years 2020 and 2021 – a lifetime ago given the pace at which video distribution is evolving.)

Going forward, Free State Foundation scholars will continue to highlight data points compelling Commission deregulatory measures that afford every participant in the vibrantly competitive video programming marketplace an equal opportunity to compete.

Communications Marketplace Report Nears Release

On December 13, the 2022 Communications Marketplace Report was put on circulation at the FCC, indicating that the report is nearing approval. The Commission is required to prepare and release the report by the end of the year.

Free State Foundation President Randolph May, Senior Fellow Andrew Long, and I filed comments and reply comments in the FCC's 2022 Communications Marketplace Report proceeding. As FSF's July 2022 comments stated available data from 2020 and 2021 support the conclusion that the broadband and video services markets are effectively competitive" and that "each of these markets increasingly is characterized by effective intermodal competition." Regarding the broadband Internet access services, our comments cited a host of data regarding competing provider coverage, next-generation network deployment, speeds, and pricing that point to the competitive and innovative state of the market. 

 

In the time since FSF's comments were filed, news stories and reports – about fixed broadband speed improvements, fiber broadband subscriber growth, fixed wireless access (FWA) service subscriber growth, multi-gigabit cable broadband"10G" network rollouts by Comcast and by Charter Communications, subscriber growth in cable competitive mobile virtual network operator (cable MVNO) services, projected growing demand for 5G mobile data, mobile wirelessbroadband affordability, fixed broadband speed improvements, strong wireless network investment, speed increases for 5G wireless networks, and more – appear to confirm the effectively competitive state of the broadband market.

 

Furthermore, FSF's August 2022 reply comments emphasized policy actions that the FCC should take to promote continued investment, innovation, and competition in the broadband and video markets. Regarding broadband inputs, the reply comments emphasized repurposing of spectrum for commercial use, particularly in the lower 3 GHz, the 4 GHz, 7 GHz, and 12 GHz bands. And on the infrastructure siting front, FSF's reply comments recommended that the Commission: (1) declare that fees charged by local governments for deploying wireline facilities in rights-of-way that exceed reasonable costs effectively prohibit broadband services, contrary to Section 253(a); and (2) adopt presumptive reasonableness timeframes of 60-days and 90-days for local governments to act on permit applications involving existing and new wireline facilities in rights-of-way. 

 

Hopefully, the 2022 Communications Marketplace Report will recognize the continuing reality of the competitive state of the broadband market (as well as the video market). Expect to hear more from Free State Foundation scholars following the release of the forthcoming report.

Streaming Services Surpass Cable in Total Viewing

Just-released video consumption numbers from Nielsen hammer home a point to which Free State Foundation scholars repeatedly return: streaming is the 800 lb. gorilla in a marketplace distorted by one-sided, outdated regulations that inappropriately hamstring cable operators and other traditional multichannel video programming distributors (MVPDs) – and thereby deny consumers the full benefits of competition.

In "A Tale of Two Trends: Traditional Video Distributors Shrink While Streaming Video Grows," a recent Perspectives from FSF Scholars, I drew a stark contrast between (1) the latest evidence of steady traditional MVPD subscriber losses, and (2) a watershed moment in the battle for eyeballs between streaming, broadcast television, and cable: in June 2022, streaming for the first time surpassed the one-third of total usage threshold.

Nielsen data covering the last three months underscores the zero-sum rivalry between the new and old guards. From June to September, streaming's share climbed an additional 3.2 percent, to 36.9 percent. Over the same period, cable's share fell 1.3 percent, to 33.8 percent. Critically, streaming's share surpassed that of cable in July – and, by September, that gap had grown to 3.1 percent.

The following chart illustrates these recent developments:

As Free State Foundation President Randolph May and Director of Policy Studies and Senior Fellow Seth Cooper argued persuasively in Reply Comments filed in GN Docket No. 22-203:

The legacy video regulatory landscape bears no resemblance to 2022's marketplace in which consumers increasingly favor a dynamic, self-curated mix of subscription streaming services accessed on consumer-owned devices over traditional MVPD services. Thus, the Commission should identify legacy regulation of MVPD services based originally on a lack of competition and eliminate, modify, or recommend congressional repeal of such regulation.

Nielsen: Viewership of Streaming Video Has Surpassed That of Broadcast Television

In a June 11 Perspectives from FSF Scholars, "Streaming Continues to Redefine the Video Landscape: It's Past Time to Eliminate Legacy Regulations," I made the case that the video distribution power center has shifted from traditional, facilities-based providers to those that lead in the online space.

Both streaming platforms, such as Roku and Amazon Fire TV, and streaming services, led by Netflix and Amazon Prime but including Disney+, Hulu, HBO Max, Paramount+, and numerous others, enjoy user totals that far exceed those of traditional, facilities-based multichannel video programming distributors (MVPDs).

As a consequence, outdated rules premised upon marketplace assumptions that in 2021 absolutely do not apply only impede competition.

Just-released data from Nielsen underscores the degree to which streaming is revolutionizing how consumers access video: more people now view streamed content than watch broadcast television.

This, without question, is a watershed moment.

For more from Free State Foundation scholars on the pressing need to deregulate further the video distribution marketplace, please click here, here, here, and here.

Modern TV Act Would Remove Old Rules, Bring Video Policy Up to Date

The Modern Television Act of 2019 is promising new legislation that would bring federal video policy into greater alignment with 21st century market realities. Introduced in the U.S. House of Representatives on July 25 by Reps. Steve Scalise and Anna Eshoo, the Modern TV Act would repeal or at least reduce a number of old legacy broadcast TV and cable regulations that were based on a now-obsolete picture of the video market. The Modern TV Act is a bipartisan compromise measure that the 116th Congress ought to take up in earnest this year.

Among its provisions, the Modern TV Act would eliminate distant signal importation prohibitions, syndicated exclusivity rules, network non-duplication rules, authority to regulate local cable rates under Section 623, and cable leased access rules. Most of those rules involve dealings between market participants that own video programming and video service providers that distribute programming to retail subscribers. Once those rules are eliminated, video programmers and video service providers can, in most instances, simply negotiate contracts to address which programming receives carriage in which local TV markets. The Modern TV Act also would eliminate, or at least largely eliminate, cable and satellite compulsory licenses for carrying copyrighted video programming, thereby allowing parties to negotiate copyright royalties.

The Modern TV Act moves firmly in the direction of establishing a federal video policy that matches the competitive conditions of today's innovative video marketplace. For several years, Free State Foundation scholars have called attention to the fact that legacy regulations of broadcast, cable, and direct broadcast satellite (DBS) TV services are based largely on early 1990s, or even earlier, assumptions about the analog and VCR-era video market. But those regulations are now hopelessly out of touch with today's marketplace. 

The days are long gone when the video service choices of most Americans were largely limited to over-the-air (OTA) broadcast TV or a single cable operator. Today, most Americans can choose between a cable provider and two DBS providers, while many also have access to a former "telco" video services provider. Unlike the days when cable operators had a 91% market share among pay-TV services, at year's-end 2017, cable served 55.2% of multi-channel video programming distributor (MVPD) subscribers, DBS served nearly 33.5%, and "telco MVPDs" serviced 11.3%. Meanwhile, in 2018 antenna use for OTA broadcast TV reached its highest level since 2005, with 31% of U.S. households having an antenna on at least one TV. Online video distributor (OVD) services have also dramatically transformed the video market. In early 2019, Netflix had over 60 million U.S. subscribers to its streaming video service, while Amazon Prime and Hulu had 101 million and 28 million. Widespread adoption of OVD services has been recognized as an important cause of annual MVPD subscriber losses going back to 2013. Total MVPD subscriptions were down to 94 million at year's-end 2017, and sharp declines have been reported for 2018 and 2019.

Legacy regulations geared toward last century's outdated technologies and less competitive, pre-Internet market conditions confer no benefit on consumers today. Instead, their continuation saddles broadcast, cable, and DBS TV service providers with burdensome compliance costs as well as restrictions that can inhibit their ability to compete with each other and with online competitors. 

Furthermore, as Free State Foundation President Randolph May and I have explained in numerous writings, many legacy video regulations, including leased access rules, amount to forced access mandates. Requiring video service providers to carry video programming not of their own choosing violates their First Amendment free speech rights. The Modern TV Act's proposed repeal of leased access rules would better respect the free speech rights of cable providers. 

To help bring federal video policy up to date, the 116th Congress should give prompt consideration to the Modern TV Act.

Regional Sports Networks, the DOJ, and the First Amendment

Sinclair Broadcasting Group has agreed to buy 21 regional sports networks and Fox College Sports from Disney.

As predictably as a proverbial knee-jerk, some competitors in the video marketplace quickly announced their opposition to the deal. Matt Polka, CEO of America's Communications Association, a trade group representing smaller cable operators and telecommunications providers, has already called on the Department of Justice to reject the transaction.

I'll say right up front that I have questions regarding whether the DOJ's Antitrust Division, at least when it comes to the communications, information services, and video markets, appreciates the extent to which ongoing transformations and convergences are altering the competitive landscape so that traditional legacy product and market definitions no longer hold.

I certainly don't doubt that those at the Antitrust Division are acting in good faith. But I hope the Department will not lightly dismiss the judicial rebuke it received when U. S. District Court Judge Richard Leon refused its request to block the AT&T/Time Warner merger. The trial court's decision, affirmed by the D.C. Circuit's recent opinion in United States v. AT&T, Inc., repeatedly faulted DOJ for refusing to credit the "real-world evidence" of the "tectonic" changes occurring in the video marketplace. Foremost among these changes is the quick rise of major online video streaming services like those offered by Netflix, Amazon, Hulu, and the like. And the court also took into account the extent to which digital web giants like Google and Facebook increasingly are cutting into advertising revenues heretofore garnered by traditional video distributors such as cable operators and broadcasters.

Regarding a current FCC proceeding to determine whether, pursuant to Section 623 of the Communications Act, "effective competition" exists in particular local video markets so as to relieve Charter from rate regulation, just last week I said this in "The Metaphysics of Video Competition":

"This one 'effective competition' determination proceeding demonstrates yet again why Congress needs to update the Communications Act. Whatever Congress may have been thinking when it adopted the "effective competition" provision in 1992, it certainly didn’t have in mind today's myriad – and still proliferating – Internet video streaming services. I need not name them all here or say more here about their competitive impact."

I understand that the FCC, in the "effective competition" proceeding, is acting in the context of the Communications Act's provisions which, aside from the outcome of any particular proceeding, are in need of updating when it comes to regulations applicable to the video marketplace. That's why I said:

"A good place at least to start considering an update of the Communications Act video provisions is Rep. Steve Scalise's deregulatory 'Next Generation Television Marketplace Act,' first introduced in 2011. The bill made sense then and it makes even more sense now, when the video marketplace is much more competitive today than it was eight years ago."

But now back to the Sinclair-Disney transaction and Sinclair's acquisition of the regional sports networks. I hope DOJ will be cognizant of the extent to which consumers already have – and increasingly so – choices available with regard to both video distributors and video programs.

It's no surprise that there will be claims of potential foreclosure, or diminishment of competition, by those seeking to prevent consummation of a merger or acquisition of assets, or at least to have conditions imposed. That's as sure a bet as wagering that the sun will rise in the East tomorrow. Most often these claims come from competitors, or those purporting to represent consumers, who forget that the antitrust laws are intended to enhance consumer welfare, not protect competitors.

One final note: It is likely that the Antitrust Division will be importuned to interfere with the Sinclair-Disney transaction based on the claim that the regional sports network programming somehow is "must have" programming – presumably meaning, in this age of media abundance, that a platform that doesn't offer the very same sports programming at the very same time, and in the very same format, ipso facto is rendered non-competitive. No matter that there is more sports programming available on more platforms than ever before.

In the context of commenting over the years on the FCC's program access regulations, in essence a form of compelled speech that in and of themselves raise First Amendment concerns, I have said that FCC enforcement actions relying on agency-defined "must-have" categories of programming, such as sports networks, amount to content-based speech controls.

Were the Department of Justice to base its actions on judgments regarding whether particular programming is or is not "must have" content, the First Amendment concerns are not materially different than they are cross-town when the FCC engages in such content-based determinations. Absent a video marketplace in which consumers' choices of viewing platforms and programming are demonstrably shrinking, rather than expanding, I'd prefer to leave the choice of what programs consumers "must have" to the marketplace, rather than the government.

Such an approach would be better for consumers – and for respecting the First Amendment as well.