The session explored the migration of viewing from traditional television to Internet and broadband-enabled video content, and examined the role that disruptive technologies play in facilitating this transition, and the business and legal models that will foster the growth of this sector.
Committee Chairman Jay Rockefeller (D-WV) opened with a pair of questions: 1) How will the disruptive technology that online viewing provides lead to better content and more consumer choice? And 2) How do we harness this change for the power of consumers so we can get higher quality programming at lower rates?
He was generally receptive to the notion of over-the-top (OTT) services, like those represented by Amazon and Microsoft, for potentially providing downward pricing pressure on consumer cable bills, which he criticized for outstripping inflation. He also chastised current cable and satellite multichannel video program distributors (MVPDs) for making him pay for 500 channels, while he only views 10.
At one point, Diller responded by saying that major basic cable programmers, such as ESPN, would be “insane to go a la carte” abandoning the traditional model of 100% of cable subs having to pay for these channels whether or not they want to receive them.
The DCIA’s answers to Rockefeller’s first two questions are: 1) Cloud-based Internet protocol television (IPTV) offers virtually unlimited channel capacity as a result of the way the technology distributes video programming - this is drastically different from channel-bound cable and satellite systems. And 2) We harness this change first by replicating on the new platform all that consumers currently receive (albeit with incremental quality improvements), so that conversion does not force them to miss out, and second by introducing unique new services, many of them a la carte.
Cloud-based IPTV is more economical than cable or satellite and therefore able simultaneously to offer programmers greater revenue - from both traditional license fees and new interactive services - and also to offer consumers more attractive pricing.
Diller also said that without network neutrality protections, traditional broadcasters and cable operators would penalize competitors who try to deliver content those legacy distributors do not own - even as a complementary offering. “We have to protect network neutrality,” agreed Senator John Kerry (D-MA).
If the hearing had a major deficiency, it was that it did not scrutinize how broadband network operators control access to content - through caps, proprietary offerings, and pricing/packaging programs that should begin to raise questions. The problems of Internet access providers owning video content arguably should be the greatest concern to Congress as the technological transformation to cloud distribution proceeds.
We agree with the concerns voiced by a coalition of public interest groups in their letter this week to Congress.
Diller noted that first-rate broadband service was also crucial, and there seemed to be a consensus among panelists that universal broadband access was going to be very important to the success of online video businesses - and a future world not divided between video “haves” and “have-nots.”
In an acknowledgment of demand for “TV Everywhere” type services, Misener said that, “Although we recognize that our customers want to watch a variety of high-quality video content at affordable prices from the comfort of their homes, we also realize that they are on the move, and thus they want access to digital video not just anytime, but also anywhere.”
Meanwhile, Westlake touted Microsoft’s delivery of television programming to Xboxes, its work in video-on-demand (VoD), and its development of voice recognition software that integrates search with video delivery.
With cloud-based IPTV, in the fullness of time, it should be possible to access any previously recorded video content on demand, delivered to any device. And also to access any live streaming feed.
Susan Whiting testified that viewers find value in access to video content online from any device whenever they want to access it.
Diller, a former top TV and movie studio executive, said copyright law was working and condemned the “ridiculous overreach” of the Stop Online Protection Act (SOPA), recently abandoned legislation that was strongly opposed by the DCIA. In contrast, we would support coverage of IPTV services by the Communications Act of 1996, which would not require a lengthy rewrite during an election year.
The Next Generation Television Marketplace Act, proposed in December, is another possibility. This bill would further deregulate the broadcast industry to eliminate coverage requirements and allow broadcasters to negotiate retransmission fees more like cable programmers such as AMC or CNN do for their license fees. Key questions would be how broadcasters’ access to public airwaves is addressed and what happens to their requirement to present public-interest programming.
Diller defended his Aereo TV service, which offers subscribers access to a remote digital broadcast antenna and cloud DVR capabilities for $12/month, but which broadcasters are suing for failure to compensate them for retransmission of their signals in violation of copyright law.
With seeming inconsistency, he told Senators that a level playing field was critical and that the same rules and regulations that apply to traditional MVPDs should be applied to online video services. We agree: Aereo needs to pay for the programming it redistributes, as do related services ivi.TV and NimbleTV.
In the most heated part of the hearing, Senator Jim DeMint (R-SC) questioned the legitimacy of Aereo for its interception of station signals and then retransmission of them - charging viewers while not paying content tights holders. The Senator got it right.
Indeed, it was refreshing to see how far the Committee has progressed in its recognition of cloud-based IPTV as the coming distribution platform for television and interactive video.
There are many, many more questions to address to ensure that innovation progresses at an optimal pace, and that the interests of all stakeholders are reflected in the process. Share wisely, and take care.