Consumer Choice in Sports Proves that Video Competition Abounds

On February 25, the FCC's Media Bureau released a public notice seeking comment on "current and emerging trends in the distribution of live sports programming." With a particular focus on football, the item longs for a bygone era – and, what's more, views it through rose-colored glasses. Indeed, it seems to presuppose a time when football fans had free access to every game played. In other words, gridiron glory days that never existed.

Setting to the side, at least for the moment, the significant legal authority questions posed by the notice, I submit that, rather than a basis for concern, the current state of live sports carriage demonstrates that video programming distribution is highly competitive; that consumers derive substantial benefits, including expanded viewing options, as a result; and that any impact on legacy business models is an inevitable and necessary consequence of the welcome transition to a broader marketplace defined by abundant choice.

As the notice recalls, "[f]or decades, Americans have enjoyed turning on their television sets and quickly finding the games they wanted to watch for free on an over-the-air broadcast." Let us not forget, however, that a primary driver of that simplicity was a lack of choice. Consumers typically had access, via broadcast network affiliated local television stations, to a half dozen (give or take) NFL games on Sunday as well as Monday Night Football.

Until the launch of the NFL Sunday Ticket subscription service in 1994, that essentially was the whole picture.

Today, however, consumers can choose from a healthy roster of viewing options. That includes, of course, local broadcasters, which continue to offer a comparable number of games and can be received in a wide range of ways: for free using an over-the-air antenna; by subscribing to a traditional, facilities-based multichannel video programming distribution (MVPD) platform (that is, cable, direct broadcast satellite , and telco TV); and, more recently, with a subscription to a virtual MVPD such as YouTube TV, which also is the current home of the NFL Sunday Ticket.

In addition, the existence of numerous, competing video distribution platforms – including cable channels like ESPN (which has carried Monday Night Football games for the past two decades) and streaming services such as Amazon Prime (Thursday Night Football), Peacock (Sunday Night Football), and Netflix (Christmas Day) – creates additional opportunities for consumers to view games. Thursday Night Football games on Amazon Prime, as one example, represent an additive option. Similarly, NFL Sunday Ticket and NFL Red Zone provide diehard pigskin fans new couch-based opportunities that did not exist in the halcyon days of old.

This brings me to an important point. Commenters frequently make apples-to-oranges comparisons between the single-digit game schedules offered when local broadcasters were the only game in town and what it might cost today to view every game – nearly 300 in total, including the playoffs.

The notice itself, citing a CBS News article, states that "[i]n 2025, NFL games aired on 10 different services, which, according to some estimates, could cost a consumer over $1,500 to watch all games." That article in turn references a USA Today story for a total of $651 (although the latter in fact calculates a price somewhere between $811 and $833, figures seemingly inflated by double charges for ESPN, which already is included in the YouTube TV base plan); the $1,500 figure comes from an unsourced X post that appears to overstate the price of NFL Sunday Ticket + YouTube TV and similarly double charges for ESPN. Aside from the unrealistic assumption that more than a very few people – or perhaps anyone at all – would want to watch every single game or be able to do so, it's clear that the price figures cited are likely inflated. 

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As I have documented in a multiyear series of Perspectives from FSF Scholars and posts to the Free State Foundation blog – including one just a few weeks ago – consumers are migrating steadily away from the "Big Bundle" traditionally offered by traditional MVPDs to a self-selected collection of streaming options. In that highly competitive environment, numerous distributors are choosing to offer live sporting events, in addition to the original and licensed content that they carry, to win and retain customers. That competition-fueled decisionmaking benefits consumers through lower costs and greater choice. It therefore should be celebrated, even as it unavoidably disrupts existing revenue models.

Streaming Continues to Surge as Short-Form Video Reshapes Consumer Habits

In a June 2025 post to the FSF Blog, I noted that streaming video had achieved a remarkable milestone: for the first time, it surpassed cable and broadcast television combined, capturing 44.8 percent of total viewing in May 2025. That trend continues. According to Nielsen's January edition of The Gauge™, streaming video's viewing share reached 47.5 percent in December 2025, setting yet another record. Perhaps even more impressive is the fact that, on two separate occasions, it represented over half of daily video consumption.

But the story of shifting consumer preferences extends beyond the longstanding streaming-versus-traditional-distribution-platforms narrative. An equally significant transformation is underway as social-media platforms – TikTok, YouTube Shorts, Instagram Reels, and so on – increasingly capture consumer attention with short-form content, particularly among younger demographics.

According to a Digiday article citing a report by GCI (subscription required), global consumers on average spend a tremendous amount of time each week watching short-form video content on social-media platforms: six hours and 39 minutes. In fact, the amount of time global consumers spend accessing such content significantly exceeds the amount of time they view streaming video: 5 hours. This represents a fundamental realignment in how people – especially younger generations – consume video.

These twin trends carry significant implications for communications policy. Indeed, the (1) ongoing ascendance of streaming video over legacy distribution platforms, and (2) explosive growth of short-form video underscore what I and others affiliated with the Free State Foundation long have argued: that the video marketplace is intensely competitive and consumer-driven. Consequently, legacy regulations born of a bygone era interfere with marketplace mechanics and artificially constrain competition-fueled growth in consumer welfare.

This reality is particularly relevant in the context of the FCC's ongoing review of the proposed transaction between Charter Communications, Inc. and Cox Enterprises, Inc., currently on day 101 (out of 180) according to the Commission's informal timeline. As the Free State Foundation noted in its comments, the combination of these geographically distinct distribution platforms appears likely to benefit video subscribers, in particular the Cox customers who would gain access to Charter's packages bundled with popular streaming options (HBO Max, Disney+, Paramount+, and ESPN Unlimited, among others).

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.

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."

FCC, Following White House Lead, Again Targets Cable and DBS

On August 12, 2024, the Biden Administration released a Fact Sheet noting a proposed FTC rule that "would require companies to make it as easy to cancel a subscription or service as it was to sign up for one" and announcing that the FCC "is initiating an inquiry into whether to extend similar requirements to companies in the communications industry" (emphasis added).

A News Release issued the same day by FCC Chairwoman Jessica Rosenworcel revealed that she has circulated to her fellow commissioners a draft Notice of Inquiry that "would seek information on ways to ensure that consumers have appropriate and efficient access to customer service resources when working with their phone, cable and broadband providers" (emphasis added).

Source: whitehouse.gov

When it comes to video distribution, of course, there is a wide chasm between "companies in the communications industry" and "cable." The former, broader category includes both unregulated streaming services and traditional Multichannel Video Programming Distributors (MVPDs) that rely upon facilities within their exclusive control. The latter category presumably is limited to the traditional MVPDs uniquely subject to FCC regulation: cable operators and Direct Broadcast Satellite (DBS) providers.

Given this critical distinction, if adopted, this Notice of Inquiry (and the Notice of Proposed Rulemaking sure to follow) first and foremost would result, not in a net benefit to consumers, but in yet another one-sided restraint on the ability of traditional MVPDs to compete effectively with far larger streaming services that grow more popular by the day. Similar instances in just the last year include:

• A pending Notice of Proposed Rulemaking adopted in April 2024 that would interfere with contracts between traditional MVPDs – and traditional MVPDs alone – and independent programmers by banning most favored nation (MFN) provisions and "unreasonable" alternative distribution method (AMD) provisions.
• A requirement adopted in March 2024 that traditional MVPDs – and traditional MVPDs alone – must "specify the 'all-in' price for video programming in their promotional materials that include pricing information and on subscribers' bills."
• A pending Notice of Proposed Rulemaking adopted in January 2024 that would force traditional MVPDs – and traditional MVPDs alone – to provide subscribers with a rebate whenever they are unable to agree on carriage terms with a broadcast station or programmer, a proposal I critiqued in an October 2023 Perspectives from FSF Scholars.
• A pending Notice of Proposed Rulemaking adopted in December 2023, in response to which the Free State Foundation filed comments and reply comments, that would prevent traditional MVPDs – and traditional MVPDs alone – from employing two cross-industry common billing practices: (1) early termination fees (ETFs), which make it possible for distributors to amortize up-front customer costs over an agreed-upon and enforceable term, and (2) whole-month billing.

For more on this topic, I recommend that you read "FCC's Dated View Drives Dramatic Shifts in Video Strategies," a July 2024 post to the FSF Blog, and "The FCC Is Complicit in the Decline of Traditional MVPDs," a May 2024 Perspectives.

FCC's Dated View Drives Dramatic Shifts in Video Strategies

In a recent post featured in today's Policyband newsletter (subscription required), Golden West Telecommunications Cooperative explained (and apologized to its customers for) a $4 per month price increase for video services. The reason put forth: rising cable programming and retransmission consent fees. Golden West even pointed out that "[o]ther telecommunications cooperatives in South Dakota have discontinued cable TV due in part to rising costs" – an exodus part of "a broader trend" that includes WideOpenWest and Frontier Communications.

I and other Free State Foundation scholars have documented extensively the rapid and relentless ascent of streaming services and the corresponding loss of subscribers by traditional providers subject to the FCC's statutory authority. We have argued that these seismic shifts demand an aggressive deregulatory response from both Congress and the Commission. We have implicated the latter's refusal to eliminate one-sided rules – and confounding desire to impose still more one-sided rules – as an exacerbating factor in the decline of facilities-based Multichannel Video Programming Distributors (MVPDs). And we have explained how that decline harms competition and, in turn, consumers.

Not surprisingly, these marketplace trends are not slowing down. By way of example, Netflix days ago announced that it added 1.45 million subscribers in the United States and Canada during the second quarter, bringing its total to over 84 million. Traditional providers, on the other hand, experienced yet another "worst quarter ever" between January and March – an overall drop in pay television subscriptions that surpassed 12 percent – and analysts anticipate that second quarter results could be just as bleak.

Nevertheless, the FCC remains unwilling to remove its blinders and focus on the reality before it. Consequently, an increasing number of facilities-based MVPDs are adapting to the steadily more inhospitable competitive landscape by embracing an "if you can't beat them, join them" approach that deemphasizes their own legacy bundled offerings. Some, as noted above, are exiting the marketplace altogether and/or outsourcing their video operations to virtual MVPDs (vMVPDs) – WideOpenWest, for instance, has partnered with YouTube TV.

Others are striking deals with programmers and streaming platforms so that they can provide consumers the online alternatives that they prefer over traditional video packages. Examples include:

• Comcast is offering broadband customers the Xfinity StreamSaver™ bundle that includes Apple TV+, Netflix Standard with ads, and Peacock Premium with ads. As I noted in a recent post to the FSF Blog describing the available-at-retail Xumo platform, Comcast provides broadband customers with a Xumo Stream Box – which supports hundreds of third-party apps, including those of multiple vMVPDs that compete directly with its own legacy video products – at no additional cost.
• Charter gives subscribers to certain Spectrum TV® video packages access to Disney+ Basic and ESPN+. It also provides a free-for-six-months Xumo Stream Box to those that subscribe to Spectrum One Stream and add Spectrum TV.
• Altice USA last week announced the launch of Entertainment TV, a vMVPD service that offers over 80 channels for $30 per month and is available to broadband subscribers as part of its Optimum Stream product. As reported by Daniel Frankel, managing editor of Next TV, "[l]ike many cable operators, the company would prefer to leave linear video behind."

Traditional MVPDs find it increasingly challenging to win and retain customers in the vibrantly competitive battle for eyeballs that includes not just streaming alternatives, but social media platforms – particularly YouTube – and gaming. The FCC's dogged determination to saddle them with even more one-sided rules, such as unreasonable constraints on their ability to employ common billing practices, is exacerbating the situation and driving them to retrain their focus. As a result, consumer choice and overall consumer welfare are compromised.

Xumo Streaming Devices Compel the Sunset of Set-Top Box Rules

The Free State Foundation's recent comments responding to the FCC Office of Economics and Analytics' State of Competition in the Communications Marketplace Public Notice argued that "the Commission should follow its sound decision in September 2020 to terminate the 'unlock the box' navigation device proceeding and announce that the sunset provision set forth in Section 629(e) of the 1996 Act has been satisfied." Comcast's announcement on June 27, 2024, that Xumo streaming devices, which are available for purchase at retail and now support a fourth competing virtual Multichannel Video Programming Distributor (vMVPD), is a more than compelling reason to take that long overdue step.

Enacted nearly three decades ago in a context today wholly unrecognizable, Section 629 sought "to assure the commercial availability … of converter boxes … and other equipment used by consumers to access multichannel video programming … from manufacturers, retailers, and other vendors not affiliated with any" MVPD. The Commission effectively abandoned this misguided effort four years ago, but it stopped short of triggering the sunset provision set forth in subsection (e). Consequently, the regulatory requirement that cable operators make available "separable security" remains on the books (and imposes needless costs).

Source: xumo.com

The Xumo platform, the product of a joint venture that includes Comcast and Charter, provides consumers with access to three of the largest cable services – Comcast's Xfinity, Charter's Spectrum, and Mediacom's Xtream – as well as over 250 third-party apps.

Xumo devices can be obtained directly from these providers (in some cases for free) or – critically – at retail. The Xumo Stream Box can be purchased directly from the Xumo website, while Xumo TVs manufactured by Pioneer, element, and Hisense are available on store shelves at Best Buy, Meijer, and Walmart.

Consequently, the goal of Section 629 – to make it possible for subscribers to purchase a set-top box from a third party rather than lease one directly from their provider – clearly has been achieved. (The longstanding availability of app- and browser-based options to access MVPD services similarly satisfied that objective, notwithstanding the FCC's unwillingness to acknowledge that fact.)

But wait, there's more: not only does the Xumo platform foster device-based competition, it also facilitates service-based competition. As noted above, Xumo devices recently added support for Fubo, a vMVPD that competes with traditional MVPD offerings. And that's on top of existing support for popular vMVPDs YouTube TV, Hulu + Live TV, and Sling TV.

Subsection(e) of Section 629 states that any rules adopted thereunder "shall cease to apply when the Commission determines that (1) the market for the [MVPDs] is fully competitive; (2) the market for [devices] used in conjunction with that service is fully competitive; and (3) elimination of the regulations would promote competition and the public interest."

Xumo devices singlehandedly satisfy the first two conditions, and the sunset of one-sided rules that unjustifiably impose compliance costs clearly would "promote competition and the public interest." All that is left is for the Commission to acknowledge – "determine," per the language of the statute – that which undeniably is true.

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.

Google's YouTube Scores Rights to NFL Sunday Ticket

Late last year, it was announced that, beginning with the 2023 National Football League season, Google's YouTube will be the exclusive home of the NFL Sunday Ticket game package. This represents a watershed moment in the rapidly transforming video programming distribution marketplace.

For the past 28 years, the NFL Sunday Ticket has been available only to subscribers of the DIRECTV Direct Broadcast Satellite (DBS) service, a traditional, facilities-based multichannel video programming distributor (MVPD). And for much of that time, it served as a potent customer-acquisition tool for DIRECTV, a key product differentiator vis-à-vis other traditional MVPDs (cable operators, DISH Network, telco TV providers) well worth the $1.5 billion in licensing fees DIRECTV reportedly paid annually.

In "Pixel by Pixel, Video Streaming's Ascension Comes Into Focus," a September 2021 Perspectives from FSF Scholars, I noted that two other Big Tech titans, Amazon and Apple, had emerged as potential bidders for the NFL Sunday Ticket and recounted the significance of that package in the pre-streaming era:

When most consumers subscribed to one – and only one – package of primarily live, linear cable and broadcast channels from a facilities-based MVPD, DIRECTV's longstanding exclusive agreement to distribute the NFL Sunday Ticket was seen as the quintessential example of "must-have" content, a crown jewel able to win customers from rival distributors. So much so that in 2014, AT&T's offer to acquire DIRECTV for $48.5 billion hinged upon the DBS provider's ability to renew its deal with the NFL.

By early 2020, however, the landscape had changed dramatically, thanks in large part to the immense popularity of streaming video. DIRECTV had lost more than 4 million subscribers over the previous two years, the NFL Sunday Ticket had become a "money loser," and AT&T was looking to exit the video distribution business altogether – a step it took in August 2021.

The agreement between the NFL and Google provides further evidence of the steady consumer migration away from traditional MVPDs and toward video streaming in all of its forms: beginning next fall, the NFL Sunday Ticket will be offered, not by a DBS, cable, or telco TV provider, but rather by a virtual MVPD (vMVPD) – YouTube TV – and an Online Video Distributor (OVD) – YouTube Primetime Channels.

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.

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.

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.

FCC Defends its Order on Effective Competition in the Video Services Market

On July 15, the FCC's legal brief was filed with the First Circuit in Massachusetts Department of Telecommunications and Cable v. FCC. The case involves a legal challenge to the Commission's LEC Test Order (2019). In that order, the Commission found that the "LEC Test" for determining whether local areas are subject to "effective competition" in video services can be satisfied by competition to incumbent cable operators from over-the-top (OTT) or online video services offering multi-channel video programming. Specifically, the order found that AT&T's streaming video service, which included 65+ channels, was comparable to Charter Communications' multichannel video programming distributor (MVPD) service. Thus, the order found that "effective competition" existed in the few localities in the U.S. still subject to local cable rate controls.  

The brief for the FCC ably defends the legal basis for the LEC Test Order and for the relief from local cable rate regulation that the Commission granted to Charter in the order. Hopefully, the First Circuit will take a similar view and uphold the order. The LEC Test Order is an important measure that cleared away costly legacy cable regulations that no longer make sense in today's competitive video marketplace, wherein cable MVPDs compete not only with direct broadcast satellite (DBS), but also against OTT services. 

My October 2019 Perspectives from FSF Scholars paper, "FCC Action Would Finally Eliminate Local Cable Rate Regulation," identified four positive results from the LEC Test Order: (1) removal of old rules that don't fit today's competitive video market; (2) establishment of regulatory parity between cable providers and competitors not subject to local rate regulation; (3) removal of burdens on the cable providers' editorial free speech rights; and (4) prevention of local authorities re-regulating cable rates. In an April 2019 blog titled "The Metaphysics of Video Competition," Free State Foundation President Randolph May first wrote about Charter' petition to the FCC for relief from local cable rate regulation in light of competition it faced from AT&T's nationwide streaming MVPD service, then called AT&T NOW. His October 2016 media advisory responding to the Commission's adoption of the LEC Test Order is available here. 

Cisco Report Offers Insights on Growing Video Traffic and Mobile Speeds

Cisco's valuable Annual Internet Report projects significant growth in connected devices by 2023, and much of the growth in data traffic flowing to and from those devices will be video. As the Report observes: "Video devices, in particular, can have a multiplier effect on traffic." The report projects significant growth in smartphones as well as connected TVs such as flat-panel screens, smart Blu-ray players, gaming consoles, and other video devices. The report estimates that 66% of installed flat-panel TVs will be Ultra-High-Definition (UHD) or 4K, up from 33% in 2018. The bit rate for UHD video streaming is 15-18 Mbps, more than double the rate for HD.  

Importantly, Cisco's report projects growth in mobile connection speeds that will more than match that higher bit rate requirement for UHD video streaming on smartphones and other connected devices. According to the report, the average mobile download speed will increase from 13.8 Mbps in 2018 to 43.9 Mbps by 2023. Moreover, North America's average mobile connection speed is projected to climb to 58.4 Mbps by 2023, up from 21.6 Mbps in 2018. And average Wi-Fi speeds from mobile devices will reach 100 Mbps by 2023. 

Improving capacity for mobile viewing on enhanced 4G LTE networks and 5G networks will strengthen consumer perception of the substitutability of wireless for wireline services. Expect to hear more on this issue of substitution in a Free State Foundation paper later this spring. 

The Importance of Combatting Digital Piracy

This week the Chamber of Commerce's Global Innovation Policy Center (GIPC) and NERA released a new report titled, "Impacts of Digital Piracy on the U.S. Economy." Anyone interested in protecting intellectual property rights, especially including copyrights, should read this important, if somewhat alarming, study.

The report chronicles the extraordinary growth of digital streaming video services just in the past few years. Now, according to the report, there are more than 500 licensed online video portals. And more streaming subscribers than paid TV subscribers. Not only are all the proliferating video streaming services providing consumers with an abundance of choices for enjoying an incredibly wide variety of content, but, not surprisingly, they have contributed significantly to economic growth and produced hundreds of thousands of new jobs.

All that is good.

But there is a dark side too – an alarming increase in digital piracy – which largely is the focus of the new GIPC/NERA report.

It's worth reading the entire report, but here are some of the key findings:

·     80% of digital piracy is now due to streaming, largely encouraged by the widespread proliferation of piracy devices and apps that make pirated content easier to access. 

·     Overall, approximately 26.6 billion viewings of U.S.-produced movies and126.7 billion viewings of U.S.-produced television episodes are digitally pirated each year, mostly from outside the U.S.

·     Digital video piracy deprives the U.S. economy of a minimum of $29.2 billion in reduced revenue each year.

Enough said to demonstrate that the losses resulting from digital piracy – the harm suffered by the artists and creators who labor to produce the pirated works, and the harm to the overall economy – demand attention from U.S. policymakers and those abroad.

My Free State Foundation colleague, Seth Cooper, and I have addressed the scourge of digital piracy many times in the past, and we've offered various proposals to combat it. Here are two FSF Perspectivesthat contain proposals for addressing digital piracy at home and abroad:

·     Modernizing Criminal Copyright Law to Combat Online Piracy, June 18, 2018

·     Modernizing International Agreements to Combat Copyright Infringement, November 16, 2018

I submit that along with the new GIPC/NERA report, these Free State Foundation papers are worthwhile reading too.