Following the Federal Communications Commission’s (FCC) regularly scheduled meeting on Friday, FCC Chairman Tom Wheeler indicated that the Commission will soon address the cloud-based online video marketplace.
From a technology and operations standpoint this segment is now more than ready to advance, but it has been held back due to challenges securing carriage rights for television programming services.
This comes weeks after an FCC spokesperson said that the agency was examining rules that would enable certain over-the-top (OTT) Internet protocol television (IPTV) providers to be reclassified as multichannel video programming distributors (MVPDs).
The MVPD designation until now has been reserved for cable and satellite television operators.
It has been difficult for television programmers to license a new category of MVPDs — cloud applications — not controlled by broadband network operators that own the plant and infrastructure which deliver established multichannel subscription television services.
Specifically, Chairman Wheeler said that the Commission “has been looking into the entire question of ‘What is an MVPD,’ and online video will be a part of it.”
Wheeler noted that HBO’s and CBS’s plans, announced on Wednesday and Thursday, to provide a la carte online streaming video services, which bypass the middleman by not requiring an MVPD buy-through, are obviously going to a have a marketplace impact.
And indeed, the addition of these high-profile brands to the OTT IPTV space could spur sales of Internet-video streaming devices like Amazon Fire TV, Apple TV, Google Chromecast, Nexus Player, and Roku; and bolster utility of videogame consoles like PlayStation 4, Wii U, and Xbox One.
But the DCIA believes that for the full impact of cloud-based television to be realized, multichannel aggregators — not individual standalone services — will need to be licensed to compete with traditional MVPDs by offering comprehensive packages of television programming services
Most people simply want a wide assortment of TV channels integrated into a single service for the most attractive price they can obtain.
The purpose of the FCC’s involvement will be to expand MVPD competition and choice at the consumer level by providing greater access for online video services to broadcast television signals and linear feeds of cable programming services.
Presumably, on-demand services like Amazon’s Prime Instant Video, Hulu, Netflix, and YouTube will not be covered by these new rules, whereas those entities that propose to deliver real-time transmissions of multiple channels of TV programming will be.
These new policies will be helpful in addressing such open issues as whether and how online video services will need to compensate broadcasters with retransmission-consent fees and enter into carriage agreements and pay license fees for other programming services.
In addition, Chairman Wheeler said that the question of whether OTT IPTV services and other online MVPDs will need to meet some kind of public interest obligations as over-the-air broadcasters and cable operators do, probably also will be answered.
What the HBO and CBS announcements do underscore is that major traditional television brands are now confident that OTT IPTV technologies are ready for prime-time.
HBO’s plan to launch a standalone OTT service in 2015 reportedly will be to target “cord-nevers,” — the 10 million US broadband households that don’t subscribe to an MVPD — as an alternative to the current on-demand online video entries.
It’s also part of a larger HBO MVPD renegotiation strategy to convert 4 million non-revenue generating basic subscribers to take HBO and, given HBO’s ownership by Time Warner, it’s also supportive of Comcast’s acquisition of that company’s cable multiple system operator (MSO).
For long-term industry participants and analysts, CBS’s announcement of “CBS All Access” for $5.99/month, featuring live streaming from 14 major market CBS broadcast television stations and cloud DVR access to more than 5,000 past episodes of popular program series, may seem more stunning.
But while “The Eye” may be perceived as the most venerated and therefore, one would expect, the least progressive of the major broadcast television networks, since its separation from Viacom, it has been the least encumbered of the majors in MVPD complications that come with oversight of a large slate of cable programming channels.
CBS Interactive attracts more than 280 million visitors to its websites each month.
Its standalone price suggests, if established industry practice holds, that licensing of a third-party single video program distributor (SVPD) would cost approximately $3.00 in wholesale retransmission fees, and, at volume and scale, a full-service OTT IPTV multichannel distributor, $1.50.
Online revenue will be bolstered by dynamic ad insertion, which can stream different and newer commercials to online viewers.
Chairman Wheeler on Friday also reiterated his alignment with President Obama’s position against paid prioritization on broadband networks, which was reiterated in California last week when the President addressed an audience of technology sector entrepreneurs.
Wheeler said, “On the important question of paid prioritization, the President and I are in agreement and always have been.” Share wisely, and take care.