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PBS Helps Comcast Crush Competition
Follow @haroldfeldRCN, a broadband and cable overbuilder, has filed very disturbing documents in the FCC review of the Adelphia transaction. RCN recounts how PBS has apparently signed an exclusive deal with Comcast for video on demand distribution of its PBS Kids Network and Sprout Network (oriented toward younger children). Comcast has wassted no time leveraging this exclusive distribution deal to disadvantage RCN -- which competes with Comcast in Boston, Philadelphia, and Washington DC. Last year, PBS Kids pulled access to its programming from RCN. The effect on RCN's video on demand (VoD) service was immediate and dramatic. According to RCN, use of VoD dropped by 85%. While stunning, it seems obvious in retrospect. Parents will use VoD to keep the kids entertained, and PBS Kids has trusted programming. Folks who dislike the crass commercialism of Nickelodeon or Disney, or who want to provide educational programming rather than just entertainment, will want PBS programming. Ultimately, RCN agreed to terms that provided it access to PBS' VoD programming. But it has now hit a new wrinkle. PBS has signed an exclusive distribution deal for PBS Kids and Sprout with Comcast's VoD distribution platform, Comcast Media Center. Unsurprisingly, Comcast wants RCN to pay through the nose, including for content it already gets through its chosen VoD provider, TVN. Anyone familiar with the history of Microsoft and how it leveraged its desktop dominance by requiring distributors to pay licensing fees even when they didn't take the product -- or risk exclusion from all MS products -- understands how this kind of deal kills competition. No one wants to pay twice. Heck, if they want to stay in business and offer products to customers at competitive prices, they _can't_ afford to pay twice. What makes this particularly outrageous, in my opinion at least, is that the PBS Kids and Sprout programming at issue is developed in no small part with public money and donations from viewers and businesses that had no intention of giving Comcast a club to beat competitors over the head. In the short term, the FCC should address this issue as part of any program access conditions it imposes. PBS Kids programming for VoD appears, at least on the basis of RCN's experience, as much "must have" programming as regional sports. In addition to fighting the "last war" by making sports programming available, the FCC should also stop anticompetitive practices in the merging VoD services -- particularly when the "must have" programming got financed by tax dollars and donations. But the PBS situation highlights a broader problem. We have disserved our public institutions and centers of knowledge terribly, with the result that they remain vulnerable to this kind of exploitation. The PBS-Comcast deal flows from the same problems and attitudes that created the Smithsonian-Showtime deal (under which Showtime acquires exclusive rights to an as yet undisclosed amount of Smithsonian material) and the numerous examples of drug companies using public grants and grants to universities to develop medications they market for billions. For too long, we have moved from treating the non-commercial community, folks like PBS, the Smithsonian, etc. with contempt. Gone are the Progressive and Great Society ideals that all citizens should have access to a common treasury of culture, education, and innovation. For years, Congress and society at large have scorned these publicly supported endeavors while praising the private sector. We have repeatedly cut funding for these institutions, required them to find funding on their own, and chastised them for living as "permanent dependencies" rather than supporting them. Small wonder that these institutions increasingly drift away from their missions and ideals. Worse, the non-stop denigration of their contributions to our art and culture causes them to undervalue the resources they have. If we keep saying that Nickelodeon and Disney can do a better job than PBS, that *Kim Possible* is just as good as *Cyberspace* and that *Rugrats* is interchangeable with *Between the Lions*, we should not be surprised to find that these financially strapped institutions not only sell themselves, but sell themselves cheaply. I call this the "Magic Bean" problem. Cash strapped non-profits, with no appreciation for the value of what they hold, trade their milk cow to a big corporation for a handful of "magic beans" that supposedly grow into a giant beanstalk leading to the pot of gold of self-sufficiency. Unfortunately, this isn't a fairy tale. At the end of the day, the public and the public institutions get a bunch of scawny bean plants while the private sector companies milk the public. In the short term, the FCC should put a stop to Comcast's ability to leverage its exclusive deal with PBS Kids and Sprout by imposing a suitable condition on the Adelphia transaction. In the longer term, however, we must deal with the "magic bean" problem before all our non-commercial cultural institutions have made similar bad deals.
A Puppy Named Creativity
At Tuesday's broadcast flag [hearing](http://energycommerce.house.gov/108/Hearings/06272006hearing1960/hearing.htm), Mitch Bainwol of the RIAA declared that XM's new devices "will starve--literally starve--Creativity." Who could be against creativity? Creativity is like a puppy: almost universally acknowledged to be a good thing, certainly not anything we'd want to see "starved--literally starved." I kept having a mental image of a puppy named Creativity, maybe a puppy like this:  [Thanks Martin!](http://www.flickr.com/photos/fullaperture/41632952/) And then the representatives from the MPAA or the RIAA: "You see this puppy? Do you want this puppy to be destroyed/starved/ deincentivized?" Kind of like this [famous magazine cover](http://www.marksverylarge.com/issues/7301.html). But [Gary's right](http://www.publicknowledge.org/node/492), there are other types of creativity that matter, creativity that isn't controlled by ten companies, creativity that is just as threatened by the legislative agenda of the content industries: [the analog hole](http://www.publicknowledge.org/articles/50), [the broadcast flag](http://www.publicknowledge.org/articles/51), fighting [DMCA reform](http://www.publicknowledge.org/node/495). And other endangered puppies, maybe a [bucket of puppies](http://www.flickr.com/photos/jwehler/13099667/), with names like Democratic Discourse, Home Taping, Parody, and Fair Use. We haven't always done a good job of describing what's at risk, so consider this a first step. Check out these [puppies](http://www.flickr.com/photos/mattsidesinger/42903621/) (sorry for the gratuitous [puppy](http://www.flickr.com/photos/marlana/135516859/) linking), that would be threatened by the video broadcast flag and analog hole legislation, three sites that legally use excerpts of television broadcasts to offer commentary on politics and the media. While there's an exception for "news and public affairs programming whose primary economic value is timeliness," the networks get to decide what these programs are: [an exception that swallows the exception](http://www.publicknowledge.org/node/452). As you can see, the broadcast flag is non-partisan; these shows will be locked down whether you're a Republican or a Democrat. * [Crooks and Liars](http://www.crooksandliars.com) * [Hot Air](http://www.hotair.com) * [PowerLine Video](http://www.powerlinevideo.com) And a bonus [puppy](http://www.flickr.com/photos/shine20/2701521/), this from the House Commerce Committee itself, whose [homepage](http://energycommerce.house.gov/) currently features a [legally excerpted video](http://energycommerce.house.gov/108/home/GMA2.ram) from ABC News, including comments by Chairman Barton! *Also, thanks to [flickr](http://www.flickr.com) and its members for the [Creative Commons licensed](http://www.flickr.com/creativecommons/) pictures of puppies . . . and the hour of my life I will never get back.*
Adelphia Transaction Enters Endgame
Follow @haroldfeldAbout a year ago, Comcast, the largest cable company, and Time Warner, the second largest cable company, entered into an agreement to buy the bankrupt Adelphia Cable. The companies have proposed a combination of dividing the Adelphia carcass and swapping systems between themselves to achieve a level of regional dominance unheard of in the cable world. The deal cleared the Federal Trade Commission on 3-2 party line vote. But the Federal Communications Commission (FCC) must approve the deal as well. Although analysts initially predicted smooth sailing, the FCC has in fact conducted a rigorous investigation (far more so than FTC). As the biggest cable operators, Comcast and Time Warner are also the biggest broadbnad providers. A number of public interest groups (including PK and my employer, Media Access Project have asked the FCC to impose a network neutrality condition on the merger. Last fall, the FCC imposed its "four Broadband freedoms" and a requirement to sell "naked dsl" (i.e., dsl as a stand alone service) on the mergers of Verizon-MCI and SBC-AT&T. We've argued that, at a minimum, the FCC should impose the same conditions on Comcast and Time Warner. Why? Because these two companies control more than 50% combined of all cable lines in the United states (post merger). Not only are they the largest broadband providers, but they are also the largest providers of voice-over-IP competition to the telcos. Both Comcast and Time Warner have emphasized the importance of expanding broadband subscription, voice services, and other new IP-based services to continue to increase revenue per subscriber. In any rational world, you'd expect the FCC to look at that and say "do you think Comcast or Time Warner *might* be just a *little tempted* to use their control over the networks to interfere with rival products and services? Maybe we ought to do something about that." Sadly, we do not live in a rational world. We have come to view the very idea of regulatory safeguards as abhorrent and an oxymoron. We need incontrovertible _proof_ that a harm exists before we take action -- by which time it is usually too late. For example, please note that Netscape ultimately won its antitrust suit against Microsoft. As you can see, this has both completely undid the harm Microsoft's anticompetitive conduct caused and has prevented Microsoft from ever using its dominance of the desktop in an anticompetitive way again. Or, if you prefer a more straightforward analogy, we have food handling rules to _prevent_ food poisoning in advance, rather than leave it to consumers to force resteraunts to stay clean by filing negligence lawsuits. So it comes as no surprise that now that FCC Chairman Kevin Martin has started to circulate a proposed Order approving the transfer, it does not contain an network neutrality provision. Martin has said before he thinks we don't need network neutrality rules, and only went along with the network neutrality condition in the Bell mergers because the FCC was split 2 Republicans to 2 Democrats at the time and Martin needed to compromise to get the votes from the Dems. On the other hand, we have not lost yet. Martin still needs three votes. The newest Republican Commissioner, Robert McDowell, has shown his willingness to stand up to Martin by refusing to vote with Martin to approve multicast must carry. McDowell used to represent Comptel, the association for competing telephone companies, and therefore may take a more sympathetic view to network neutrality than Martin. Martin has shown his willingness to compromise on this issue in the past, and may well do so here. It is also noteworthy that Martin has even proposed one condition, that Comcast and Time Warner make exclusive sports programming available to competing video providers (like satellite providers or the telcos, if they start competing in video). One can safely conclude that Martin is not averse to conditions in principle, even if he doesn't like network neutrality specifically. When the Commission will vote out a final order remains unclear. While definitely after July 4, it could come as early as the following week. In the past, Martin has shown a preference for issuing major merger orders at open meetings (although the Commissioners can vote "on circulation" at any time). The next FCC open meeting is scheduled for Thursday July 13. I expect we have until then to get 3 votes for net neutrality.
Content Discontent (continued): NBC Gets it Too
NBC Nightly News ran a [story](http://video.msn.com/v/us/msnbc.htm?g=a0eb1d39-77c7-481b-963b-dcd30b399470&f=00&fg=copy) last night about how NBC is learning to embrace [YouTube](http://www.youtube.com/). NBC says that it first noticed YouTube when a pirated clip of Saturday Night Live's [Lazy Sunday](http://www.nbc.com/Video/videos/snl_1432_narnia.shtml) video appeared on YouTube's website. NBC didn't initially embrace the website, and ordered the [video removed](http://arstechnica.com/news.ars/post/20060217-6213.html) from the website (YouTube [complied](http://www.youtube.com/index?&session=gAJ9cQEoVQxlcnJvcl9maWVsZHNxAmNfX2J1aWx0aW5fXwpzZXQKcQNdhVJxBFUGZXJyb3JzcQVdcQZVOlRoaXMgdmlkZW8gaGFzIGJlZW4gcmVtb3ZlZCBkdWUgdG8gdGVybXMgb2YgdXNlIHZpb2xhdGlvbi5xB2FVCG1lc3NhZ2VzcQhdcQl1Lg==)). But rather than continuing to fight it, NBC is learning to take advantage of it because "they didn't like the piracy, but they sure liked the buzz." The television industry is beginning to recognize the internet's power to reach broad audiences and is learning to take advantage of the marketing potential. On Tuesday, NBC and YouTube announced a [partnership](http://www.youtube.com/press_room_entry?entry=c0g5-NsDdJQ). New mediums for content, like YouTube and Google Video, are new possibilities for enlarging audiences. Not only did the Lazy Sunday video get six million streams according to NBC, but run a [search](http://www.youtube.com/results?search=lazy+sunday&search_type=search_videos&search=Search) on YouTube for the video and you'll find lots of user generated videos based on the original, which have received hundreds of thousands of hits. NBC couldn't buy that kind of marketing for its programs, and content providers should be taking note. As we learned from [Digital Media Conference](http://www.digitalmediaconference.com/) earlier this week, [the winners of the digital media game will be those who can give consumers what they want when they want it.](http://www.publicknowledge.org/node/498)
A Day At the Senate Commerce Committee
Follow @artbrodskyWe hope by now you've heard the news, that the Senate Commerce Committee earlier today approved new telecom legislation, 15-7. Along the way, the pivotal Snowe-Dorgan amendment on Net Neutrality lost on a tie vote, 11-11, with Sen. Olympia Snowe (R-Maine) voting with the Democrats. In baseball, a tie goes to the runner, but not here. That result alone was a remarkable accomplishment, considering the overwhelming House vote against Net Neutrality. The momentum is gaining. It's important to remember that the bill is about more than simply Net Neutrality. Here's the statement we issued earlier: >"Over the course of two days, the Senate Commerce Committee handed control of Internet content to the telephone and cable companies, and control over the design of consumer electronics to the movie and recording industries. In each case, big companies win, and consumers lose. >"In failing to approve strong Net Neutrality language, the Committee gave the telephone and cable companies something they have not had in the history of the Internet - a way to control what goes over the Net. They would be free to discriminate in favor of content in which they have a financial interest or in favor of those companies which can afford special new fees the companies charge. Under this regime, the telephone and cable companies would have no incentive to make any improvements to today's Internet, on which consumers, innovators and small businesses depend. We are grateful for the strong support we did receive from the Committee members who voted for Net Neutrality. >"In approving the broadcast flag for video, the Committee extended the control Hollywood will have over consumers' content that they lawfully receive. Under the flag, Hollywood, acting through the Federal Communications Commission (FCC) will have a significant role in how consumer electronics are designed and manufactured. Once again, consumers will have their rights short-circuited when it comes to using their devices lawfully. Although the Committee did not approve content controls for digital radio, the language of the bill makes clear that one will eventually be enacted, if not by a stacked committee created by the bill, then by the FCC later on. >"Despite today's events, Public Knowledge will continue to fight for a telecommunications bill that protects the rights of consumers to have access to an open Internet and to engage in lawful uses of copyrighted content." Considering the result in the House just a few weeks ago, the Senate committee vote is somewhat remarkable. The debate on Net Neutrality was notable for a number of reasons. First, the byplay between the Senators on that issue and on Internet tax was biting. Sen. George Allen (R-Va.) gave a stirring defense of the Internet as job creator, engine of the economy, etc., when proposing an amendment to make the moratorium on taxing Internet access permanent. When it came to defending the content of the Internet in the form of Net Neutrality, he bailed, and the other senators, notably Byron Dorgan (D-N.D.) and Barbara Boxer (D-Cal.) called him on it. Dorgan, of course, is a former state tax official who has consistently been on the other side of the Internet tax issue from Allen, but who has turned into a staunch defender of Net Neutrality. Sen. Maria Cantwell (D-Wash.) also emerged as a staunch defender of Net Neutrality. She took on Committee Chairman Ted Stevens (R-Alaska), who criticizes search engines for prioritizing advertising. Cantwell said that search engines pay lots for bandwidth as it's their largest expense. Stevens had a hard time grasping that Net Neutrality was the law until last September when the FCC changed the rules. He said continually he was simply preserving what was in place. Several senators tried to remind him of the non-discrimination provisions of the 1934 Communications Act, but he didn't get it. It's important to remember the other dynamics surrounding the bill. The Committee had some intense debate over build-out requirements for cable competitors before rejecting them, and over preemption of state regulation of consumer complaints for wireless services. It's a shame the broadcast flag issues weren't more contentious. Now the big question is what happens to the bill. We don't know. No one knows. The fact is there are still lots of objections to the bill, and at this point there appear to be sufficient number of votes to keep it bottled up without coming to a vote. Stevens hinted he might try to construct a slimmed-down version that could win the super-majority needed, but no one at this point is optimistic. They will think about it over the July 4 recess.
Content Discontent, and Why the Discovery Channel Gets It
Last Friday, PK took a field trip out to the [Digital Media Conference](http://www.digitalmediaconference.com) in McLean, Virginia, to catch up on the latest happenings in, um, Digital Media. The morning sessions opened with "Industry Roundtable: Perspectives from Leading Associations and Interest Groups," featuring representatives from the content industry ([MPAA](http://www.mpaa.org), [RIAA](http://www.riaa.org/default.asp), [DiMA](http://www.digmedia.org), [ESA](http://www.theesa.org)) and device manufacturers ([CEA](http://www.ce.org)). As you can see, the panel was a little stacked. At past panels, moderator Gary Arlen (check out [his account](http://www.ipdemocracy.com/archives/2006/06/25/index.php#a001697) of the day) wore a referee's jersey to keep things under control, but this time opted for an equally effective sports-themed tie. Congratulations to CEA's [Michael Petricone](http://www.netcaucus.org/biography/michael-petricone.shtml) for his spirited defense of consumers' rights. What was striking about the panel was not the content industry's legislative agenda (the usual: [analog hole](http://www.publicknowledge.org/articles/50), [broadcast flag](http://www.publicknowledge.org/articles/51), and opposing [DMCA reform](http://www.publicknowledge.org/news/letters/hr1201-support-letter-20050427)), but the disconnect from the rest of the conference. The room was mostly empty, while the room next door--a panel focusing on ["the Battle for the Digital Consumer"](http://dmwmedia.com/blog/todd-beals/dmc2006-panel-1-the-battle-for-the-digital-consumer) --was packed. The consensus in that room, and really of the conference, was that the winners of the digital media game would be those who could give consumers what they wanted when they wanted it. The question left unasked and unanswered by the content industry reps was the long term viability of a business that is openly antagonistic to the desires of its customers . . . And yet, content matters! One of the recurring themes of Friday's conference was that the companies best positioned to take advantage of the new market were those who owned their own content. Why? Because then you don't need to deal with the licensing battles that hinder any innovation in content delivery. While the big industry associations are using [litigation](http://www.publicknowledge.org/node/306), legislation and even [international treaties](http://www.publicknowledge.org/node/454) to lock down content, some people are getting out there, distributing their content, and making money. People like the [Discovery Channel](http://www.discovery.com/). In the first keynote of the day, Dawn McCall of the Discovery Networks International described the over 100 unique outlets her company uses to get their content to consumers. A fleet of cable networks, but also podcasts, webcasts, mobile devices, iTunes downloads, HD, even [tours of national parks on Google Earth](http://dsc.discovery.com/videogalleries/nationalparks/nationalparks.html). You name it, they do it. She credited her company's explosive growth to the decision to own their own content, and a deliberate effort to be platform neutral. Changing the content to fit the platform, rather than forcing the platform to fit the content. Interesting idea, but one you won't hear much around Washington these days.
preservesthe openness of the Internet and the public's access to knowledge, promotes creativity through balanced copyright, and upholds and protects the rights of consumers to use innovative technology lawfully.
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