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FCC may decide how over-the-top distributors should be regulated

May 15, 2012|By Joe Flint
  • The FCC, under Chairman Julius Genachowski, may decide if over-the-top providers should be regulated.
The FCC, under Chairman Julius Genachowski, may decide if over-the-top… (Andrew Harrer/Bloomberg )

In a move that could have far-reaching implications for the development of new distribution systems for content, the Federal Communications Commission is considering changing how it defines a multichannel video programming distributor (MVPD).

Currently, MVPDs are considered to be cable and satellite operators such as Comcast Corp. and DirecTV. However, Sky Angel LLC, a company that provides programming much the same way as a cable or satellite operator does, but through the Internet -- in the industry term, "over the top," -- wants the FCC to recognize it as an MVPD.

The reason Sky Angel seeks this classification grows out of a dispute it is having with cable programmer Discovery Communications. In 2007, Discovery struck a deal to let Sky Angel carry some of its channels on its service. Like its agreements with cable and satellite operators, Sky Angel paid a monthly license fee for the channels.

However, two years later Discovery pulled out of its deal. In a filing to the FCC, Sky Angel said prior to that Discovery "never expressed any dissatisfaction with respect to the agreement or Sky Angel’s service." A Discovery spokeswoman declined to comment on why it ended the agreement with Sky Angel.

Sky Angel wants MVPD status so it can benefit from an FCC rule known as program access. That would require Discovery to treat Sky Angel as it would any other cable or satellite programmer. Typically programmers are not required by the government to sell their content to anyone who asks. However if the programmer in question also has a stake in distribution service, then it is required to sell its programming. In the case of Discovery, one of its largest shareholders is Liberty Media, whose holdings include a cable system in Puerto Rico.

In its filing, Discovery Communications countered that a traditional MVPD such as a cable or satellite operator makes programming available to consumers "over facilities they own or control." Over-the-top services such as Sky Angel "use the public Internet for video programming transmission."

While Sky Angel may be looking for regulatory relief through the program access rules, any rule change the FCC makes as to what defines an MVPD and a channel could have bigger ramifications for the media industry.

The industry is somewhat divided on the issue of whether the means of distribution determine who can be an MVPD. In its filing on the matter, Comcast Corp., parent of NBCUniversal and the nation's largest cable operator, said over-the-top distributors should not be considered MVPDs -- in part because the industry is still growing and will be hampered by having to fulfill all the regulatory commitments that are required of cable operators.

Satellite broadcaster DirecTV, however, argued that if a service is going to act like an MVPD and compete with them, they should be regulated the same way. The FCC, DirecTV said, should "establish a level playing field where competitors operate under a core set of common rights, protections, and obligations."

The Motion Picture Assn. of America, which represents the major Hollywood movie and television producers, warned the FCC to proceed with caution and stressed that the marketplace should figure out how new distribution platforms work with content providers, not the government.

"Currently, the online video distribution industry is competitive and growing," the MPAA said. "But even small changes to video programming regulations can have a far-reaching impact on the complex ecosystem that underpins the video content industry, especially in the Internet age."

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