Just prior to resigning from the FCC, Commissioner Nathan Simington wrote an article for the Daily Caller that suggests that the FCC should consider regulating streaming video in the same manner as traditional video offered by cable companies.
Commissioner Simington recognized this is an unusual position to take for an Administration and FCC that is trying to eliminate regulations. For example, he authored an earlier article that suggested that the FCC DOGE itself, and get rid of a lot of unneeded regulations and functions.
Commissioner Simington’s article makes some good points. He says that online content “allows a handful of powerful players to grow larger and more monopolistic, often while avoiding even the most basic public interest obligations. . . The result is a system that favors consolidation.”
Cable companies are saddled with a lot of outdated rules that are a disadvantage in the market. Cable companies are forced to pay ever-increasing rates for the right to carry local network affiliates. Programmers of all kinds hold cable companies hostage and force them to accept and pay for a lot of programming they don’t want in order to get the programming they must have.
Commissioner Simington proposed two solutions to make the market fairer. First, he thinks that the rules against TV station consolidation should be eliminated. He says that allowing station owners to get larger will allow them to be more efficient and give them more market power. This has been a talking point for Republicans for many years.
His second suggestion is surprising. He suggested reclassifying online platforms as MVPDs (multichannel video programming distributors) which would put platforms like YouTube, Hulu, and FuboTV under the same regulatory rules as cable companies. This would impose the same outdated rules on these platforms that plagues cable companies and satellite TV. I find this extraordinary because it would expand the FCC’s regulatory authority at a time when it seems that federal regulation across the board is going in the other direction.
The problem with both of his ideas is they wouldn’t really fix the industry. Consider the slow death of linear programming. No amount of station consolidation will fix the fact that one of the primary reasons why people have abandoned traditional linear cable programming is that they love the idea of watching what they want when they want. There are still millions of homes dropping traditional programming every quarter. It was just announced this week that streaming subscriptions now outnumber traditional cable subscribers.
I have to wonder what regulating the industry would do to the large number of companies like Tubi TV, Pluto TV, Plex, and Crackle that offer free programming and make their money from advertising. Bringing these companies under the MVPD rules would add costs and almost certainly break the free model.
The real underlying problem for both cable companies and streaming companies is the cost of programming. For the last fifteen years, programmers have regularly increased the cost of programming at a much faster pace than inflation. Programmers also flex their muscles to force cable companies and streaming companies to carry and pay for programming they don’t want to carry. The culprit in the industry is the companies that create programming, and there has been no discussion of regulating them – if that is even possible.
This article brought something to mind I remember from an economics class on regulation. The professor regularly told us, “Regulators gonna regulate”, meaning that regulators will find new things to regulate if not kept in check by legislators. As the FCC eliminates large numbers of regulations, perhaps it needs to find new things to regulate to justify its existence.
As usual, a very interesting article! It’s interesting to look at why we have various regulations and the laws that require them. For telegraph, it seems like some regulation was desired since, in many areas, they were a “natural monopoly.” Further, there was a desire for interconnection between competing telegraph companies so a Postal Telegraph customer could send a telegram to a Western Union customer. I suspect these natural monopoly and interconnection desires lead to these telecommunications companies being regulated as common carriers. When radio was introduced, there was a need to allocate a limited resource and protect those who got the allocation from interference. Further, due to the limited amount of spectrum available, there was a desire to ensure the public had a “diversity of voices” available. This led to “the fair allocation of stations among the states” and ownership limits. It also lead to the “fairness doctrine” to ensure listeners heard differing views on an issue “of public importance.” Though the Supreme Court decided the Fairness Doctrine was constitutional in Red Lion in 1969, the Commission itself decided it was not constitutional in 1987. As I recall (perhaps incorrectly), there was an attempt to apply a Fairness Doctrine to newspapers in Florida. This was overturned on constitutional grounds. By the 1980s (and probably quite a bit before), there were more broadcast stations than newspapers, so the “scarcity” argument no longer worked.
A fair amount of broadcast regulation appears to be a barter arrangement between the public and the broadcaster to recover some of the value of the spectrum the broadcaster is using. I wrote an article about this 25 years ago. It is at https://hallikainen.org/org/pub/6513196902.pdf .
FCC regulation of CATV is interesting. There tends to be a “natural monopoly” reason for it (it is very unusual for a company to overbuild an existing system). Other regulation of CATV seems to be that if it is required of broadcasters, it should be required of CATV even though CATV does not use RF spectrum.
Looking at streaming (the subject of your article!), I think there MAY be need for regulation of the communications part, but not the content part. With the introduction of fixed wireless access by cellular companies, there is now competition for Internet access. Besides a local telephone company and a local CATV company, there are now multiple cellular companies also selling internet access in many areas. As such, the natural monopoly need for regulation seems to be diminished. There MAY still be need for regulation requiring interconnection on reasonable terms. But, I see no need to regulate streaming audio and video providers. There may be a need to limit collusion and price fixing between competing suppliers, but that seems like an FTC job.
Again, thanks for the interesting article!
No preexisting regulatory model for Internet. But your view of Internet Protocol-based telecommunications provides a suitable framework. The resistance continues to be rooted in the outdated early1990s AOL and CompuServe perspective of Title I optional information services. What is new is truly novel is the growth of mobile services in just the past 15 years.
it is somewhat unfair the cable companies are saddled with rules that many others don’t have. However, there are some tradeoffs. franchise agreements that mean essentially exclusive rights to hang coax cable on poles, rules in place that anyone that wants that same access right must provide TV, pay the franchise fee, and be basically a cableco-over-fiber.
Also note that no one escapes those fees. We’ve pursued IPTV but the local channel fees are incredible.
The flip side is that Paramount can sell directly to customers via their AP without the burden of those fees, and at rates far far less than the cableco or anyone offering IPTV would pay. It’s like a thinly veiled conspiracy to destroy traditional access to the media in favor of ownership specific apps.
The price to cut the cord is now quite a bit higher than traditional access, and you can really only save money if you pare down your selections or cycle through them and binge everything on each app before cancelling and moving on.
The burden of carrying the TV service is now on the ‘ISP’, including that cableco, and ISPs really struggle to raise prices to compensate for it.
I would love to know in which areas the phone and cable companies are now refusing to offer television and only offer streaming. That was my experience
This is a challenging Macro Economic question. Normally, I’d say choose your fighter – which theory best fits – there really isn’t one. A hybrid approach is needed In the US.
The FCC and the US government helped shaped this unnatural market and should support legacy sectors whose platforms contribute to the growth of streaming. At the same time, large streamers are eating up the existing pipe with high-def streams and not contributing to the ecosystem they benefit from.
Some ideas:
– Modernize FCC regulation to include large streamers under MVPD-like rules. Also consider streaming franchise fees if streamers use broadband to deliver certain content.
-Tax credits for cable operators to pivot toward open access models. Subsidize local news and community access programming
-Impose a usage fee on large streamers to support the USF.
-Federal investment in AI and video compression R&D. Getting greater efficiency from existing investment is key
-Apply antitrust scrutiny to exclusivity deals in sports programming
Streamers have benefited from low regulation while legacy providers are burdened by infrastructure costs and regulations. Taking some steps to correct this imbalance and either lightening the load on cable/telco companies or imposing obligations on steamers is good for the marketplace and the consumer.
Interesting ideas! I don’t really like the idea of charging streamers franchise fees. Franchise fees are paid by companies putting physical infrastructure in the public right of way as compensation for that use. A streamer is not using the right of way. The franchise fees are part of the cost of providing communications service paid by CATV providers. They cover these costs from their linear TV subscribers and increasingly their internet service customers. CATV companies can and are shifting the use of their facilities from linear TV delivery to internet communications. Their infrastructure investment and franchise fees continue to have value. I’m not so sure about the future of non-interactive communications services like broadcast television (remember the IVDS radio service where you could order a pizza from your TV?).
Cable operators already offer “open access” through internet access. Anyone can rent a server to provide content to everyone in the world. The traditional “open access” (like “Wayne’s World”) follows the older linear television model while streaming is interactive.
The “usage fee on large streamers” is interesting. I assume they are already paying someone to put their data on the network. Is this payment not sufficient?
I do think of internet service providers as communications services that should contribute to and benefit from the USF. In the 17-108 proceeding, the FCC cited letters from members of Congress. One such letter, from John D. Rockefeller IV, says “We believe it is also imperative that the Commission revisit its decision regarding the exemption of Internet service providers from universal service contributions and access charges. New reports of voice telephony and fax services over the Internet – the providers of which do not pay either access charges or universal service contributions – indicate that these providers are now indeed offering telecommunications services, and that they should incur universal service obligations. Like long distance carriers, they rely on the local phone network to receive and deliver their services. They should not be allowed to continue to burden without paying their fair share for its upkeep.” It’s interesting that voice and fax were what made something a telecommunication service instead of just the transmission of bits from here to there being telecommunications. So, in my view, ISPs should contribute to and benefit from USF. Streamers who pay for telecommunications services to get their data to their customers would thereby be contributing to USF.
Again, thanks for the interesting comments.