Regulating Online Video Content

Recently the Kommission für Zulassung und Aufsicht der Medienanstalten (ZAK) – the German equivalent of our FCC – recently concluded that OTT services ought to be regulated the same way as other broadcast radio and television networks. Specifically they were looking at Twitch.tv the web gaming service, but the ruling could have far-reaching consequences.

I think the ruling raises two questions. First, should any regulatory body be regulating video content on the Internet? Second, why are we still heavily regulating cable TV?

The European press is lambasting the order as nothing more than a money grab. One of the benefits of regulating anything is to charge fees for that regulation. Like many regulatory bodies around the world the ZAK is largely funded by fees charged to the companies that it regulates (which is also largely true for the FCC as well). This means that regulators have a perverse incentive to regulate things, even if they don’t need to be regulated.

The idea of regulating a worldwide web ‘channel’ like a TV station is absurd. For those of you that may not know about Twitch.tv, it’s the primary gaming network for worldwide gamers. It’s owned by Amazon. It’s a huge platform and works like YouTube where over 17,000 ‘partners’ post gaming content into ‘channels.’ The platform averages 625,000 simultaneous viewers at any given time, making it one of the most popular web platforms in the world.

So regulating Twitch.tv would be the same as regulating YouTube. It’s a platform where virtually all of its content is created by others. Other than extracting fees from the platform for the privilege of regulating it, it’s hard to understand what else the ZAK could regulate. Twitch.tv and YouTube are open platforms and only function because they allow anybody to post content. Both platforms will take down offensive content or content that violates copyrights if they are asked to do so. But the platforms, by definition of the way they operate, have no control of the content that is posted. I’m at a total loss what the ZAK thinks they can regulate.

You have to also wonder how effective any regulation would be. There are a huge number of smaller web platforms that might fall into the same category as Twitch.TV. It’s hard to imagine anybody being able to launch a new platform if they are expected to comply with different rules in a hundred countries. But it’s also hard to envision the ZAK doing anything other than somehow trying to ban the content from the whole country of a platform that refuses to comply with their regulations. I don’t think the ZAK understands the political ramifications of banning a platform used by all the young tech-savvy programmers (and hackers) in their country!

But thinking about this makes me ask why we are still regulating cable companies in the US. There are slews of FCC rules that dictate things like channel line-ups. It’s FCC rules that force cable companies to still offer basic, expanded basic, and premium tiers of service. It’s now pretty clear that few consumers are happy with this structure. The average household only watches about a dozen channels monthly regardless of the size of the tiers they purchase. It is the requirement for these tiers that has allowed the programmers to force programs onto cable companies that they don’t really want.

It is the cable tiers that have forced up the price of cable. Households spend huge monthly bills to watch a dozen channels – all because the regulations force channel line-ups that contain a hundred or more channels that the household isn’t interested in.

And cable companies are now competing against companies that don’t have these same restraints. Companies like SlingTV can put together any channel line-up they want with no regulatory constraints telling them what they can or can’t offer. Surveys have always shown that people would rather buy just those channels that they want to watch. And yet cable companies in the US are not allowed to compete head-on with OTT providers.

It would be easy to blame the FCC for not keeping up with the times. However, the most draconian cable rules come directly from Congress and the FCC’s hands are tied from deviating from rules that are embedded in law. We are now at a time when we really need to consider these old rules. The cable companies are being forced to sell programming that customers don’t want to pay for. The whole industry would benefit if cable companies were free to pursue packages that people actually want to buy. Freeing up all video providers to offer what customers want is a far better solution than trying to drag web companies into becoming regulated cable companies.

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