Expanding the Telecommons: TV Neutrality After Net Neutrality

February 17, 2016  • Farid Ben Amor

Some commons, like roads and parks, deal in scarce tangible resources.  Cultural commons however deal in information scarcity and the national Zeitgeist.  In defense of a commons that uniquely straddles these two realms, many Americans vigorously embraced the Internet in 2014-15.  That embrace was brash, filled with passionate reactions supporting net neutrality (including unfortunate friendly fire like “dingo” namecalling,) but understandable for a significant public and cultural resource thought to be at risk.  As we know, the FCC followed suit with a fundamental change rather than an incremental one, reclassifying Internet service providers as common carriers.  This distinction codified a business model separation between the transmission and content provider elements almost a decade after much of the market did, when the most popular ISP-cum-content provider AOL tore down the remnants of its walled garden to compete on the open Internet.  Similarly, another commons – TV – recently under threat of commodification due to the attempted walling up of gardens along with increased M&A activity, will be pried open to competition with two recent FCC proposals.

Like the Internet, many Americans have also embraced the liberation of TV content from its platform shackles, beginning coincidentally about a decade ago with the launch of YouTube, Netflix’s online video service, and Hulu.  These services expanded access to popular programming, but consumers still can’t access top shows as they premiere through them.  Ten years later, we still need a traditional TV subscription to watch day-and-date primetime shows (like my favorite: the new X-Files) or major live events (for me, the Super Bowl… halftime show.)  Following suit again, Chairman Wheeler and his office proposed two rulemakings to grow a neutral TV marketplace which will make it easier for new online content providers to offer top broadcast and cable shows.  These rules would 1) reclassify facilities-based pay TV services (known as MVPDs) to include qualifying Internet video services, and 2) reform MVPD set top box requirements to switch from current hardware-based security to IP-based security.  If enacted, the FCC would not only preserve the TV commons, (otherwise at risk due to consolidation,) but permit unlimited additions to it through competitive and innovative video platforms.

The first – MVPD reclassification – significantly reduces the commercial and practical barriers that limit online video services from carrying major network programming.  Here’s why:  applying the same regulatory status to online TV platforms would enable them to a) choose to carry popular cable networks on commercially feasible terms, with the help of the program access rules; b) choose to carry broadcast networks under the long established retransmission consent regime, subject to the Copyright Office acceding in kind (which it has indicated it would likely do) and; c) neuter anticompetitive restrictions in existing affiliate agreements, which MVPDs routinely demand as a condition of network carriage and lock in for many years at a time.  These would effectively render the TV delivery platform a technology-neutral commons, freeing popular shows to appear on many more products.  And it’s important to note that these three benefits are in service of the network programmers as well, who suffer from the monopsony effect of having limited buyers to negotiate among – which further strengthens the similarity between TV neutrality and net neutrality.

The second – set top box reform – would open up choices not just for physical set top box devices, but virtual ones as well, regardless of which MVPD is provisioning the programming.  This means the technology in CableCARD, which is the current government standard for securing content, would now be replaced with an updated security standard that can go over-the-top, thereby also liberating content in a different way, from the set top box itself.  This would open the TV guide to allow new hardware and software entrants to compete in an otherwise oligarchic MVPD set top box marketplace, without disturbing the MVPDs’ content agreements.  Naturally, the incumbents are sweating about this, afraid that tech companies such as Apple would get an easy “in” to their content agreements.  But competition can also benefit the MVPDs by steering their energies for this content navigation layer away from protectionism and toward innovation to retain its customers.  And for them, this separates the platform (the guide interface) from the content.  The platform market will transition into a “replaceable parts” system, which adds more choice to the TV commons.

Even though the tech sector often instinctively views government intervention skeptically as a negative consequence to disruption, it should back these FCC rules.  They are field-leveling exercises to correct for the market failures that have permitted facilities-based incumbents to fortify against competition.  Indeed, the “virtue” of self-interest will always motivate this anti-competitive behavior in incumbents unless government prevents them from blocking new entrants and incentivize innovation instead.  History proves this.  In 1992, the US government enabled satellite TV to successfully compete against cable TV using the same MVPD “fair playing field” expansion under consideration now.  Competition was also the emphasis of the 1996 Telecom Act, in which Congress gave a clear directive to “let anyone enter any communications business.”  Given the resultant expansion of TV in the late 90s and 2000s, we know that such regulatory neutrality only grows our telecommons, advancing our society toward digital equity and decreased censorship.  The Fairness Doctrine may have been a necessity when there were only a few choices for programming, but not when there are many.  Truly, more regulation ensuring fair competition on the platform level encourages deregulation over the content flowing down the pipe.

In other words, the more the TV commons are expanded, the less need for content regulation.  These two FCC rulemakings would accomplish just that.  Moreover, in the long run, the first proposal (MVPD reclassification) may even obviate the need for set top box reform.  But programming deals run long and can take time to negotiate.  Therefore the second proposal (set top box reform) is still compelling in that it enables consumers to sample competitive TV services easily over the short term.  The best case with the passage of both set top box reform and MVPD reclassification would enable competition to develop rapidly as programming rights wouldn’t slow down new TV guide competitors, while online video services efficiently transform the TV experience from the ground up.  Having both rules would help rapidly reduce costs by increasing competition among both MVPDs and set top box manufacturers.  The enactment of these two FCC rulemakings together ensures neutrality of the TV commons for Americans at its two greatest chokepoints today, enhancing commercial opportunities for businesses and innovative products for consumers, and setting the stage for the development of TV into the Internet age.

Farid Ben Amor is a graduate student at the University of Southern California, where he researches media and telecommunication policy, and is director of business development at Pluto TV.  His views do not necessarily represent the views of his employer, however, Pluto filed comments with the FCC in favor of MVPD reclassification as discussed in this piece.

The opinions expressed in this piece are those of the author and may not necessarily represent the view of the Aspen Institute.