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Public Knowledge Defends Consumer Choice in “The Future Of Video” Hearing

June 29, 2012 , ,

PK President and CEO
Gigi Sohn was back on the Hill Wednesday morning, offering testimony before the
House Subcommittee on Communications and Technology on “The Future of Video.”

The panel featured
seven other members, including representatives from the broadcast, cable,
satellite, movie, internet and streaming industries. Specifically, that means
Charlie Ergen of DISH Network, Robert Johnson of Sky Angel, David Hyman of
Netflix, Jim Funk of Roku, David Barrett of Hearst Television, Michael O’Leary
of the MPAA, and Michael Powell of the NCTA (and formerly of the FCC) all
joined Gigi on the panel. Needless to say, it was a big panel.

Unlike the UMG/EMI
Merger hearing last week, there was no one central issue for panelists to be either “for” or
“against.”  Rather, the hearing covered
topics such as the definition of a multichannel video programming distributor,
data caps,
DISH’s Hopper,
retransmission consent agreements,
must-carry regulations, and
more, all of which elicited different combinations of support and opposition
from the witnesses.

With a topic as broad
as “video” and witnesses representing nearly all of the key players in the
industry, such diversity was to be expected. However, one thing that did
receive nearly universal approval was the idea that reform is needed to ensure
that the future of video is bright. It’s the “how” they disagreed agreed on.

Of the many issues
discussed regarding the future of video, these were some of the ones that I
found most noteworthy:

Data Caps

Ranking Member Eshoo
kicked off the discussion about data caps in her opening remarks, expressing
concern that they could negatively affect the growth of the streaming video
market. She reminded the committee that while the Department of Justice recently
launched an investigation into data caps, the Committee itself should hold a hearing
into the matter as well.

She later asked the
panel when data caps are discriminatory and when they are not. David Hyman of
Netflix answered that when the same content from different video providers
counts differently against a user’s data cap, there is a discriminatory
implementation. Gigi agreed and drove the point home with a real world example:
Comcast’s Xfinity service and the Xbox 360. There, Comcast’s own video service
is exempted from its soon-to-be 300 GB data cap, while services like Netflix or
Hulu still count against a user’s limit.

Gigi explained PK’s
position: data caps are not in and of themselves wrong, but when they are
applied in an arbitrary, discriminatory, or anti-competitive way, Congress
should be concerned. Further, Congress should also be concerned that the FCC so
far has appeared to not be concerned, as PK’s two-year-old request for an
investigation into the usefulness and necessity of data caps has been ignored.

Michael Powell of the
NCTA responded by first saying that caps are not the industry standard, which
unfortunately doesn’t really get to the whether or not he thinks a
discriminatory cap itself is a problem. And it is not as though cable companies
aren’t experimenting with extremely limited data caps – Time Warner Cable
continues testing a 5 GB per month plan in Texas, one that would potentially inhibit the growth
of streaming video services.

The kicker to this?
Powell lamented that because of net neutrality and the FCC’s Open Internet
Order, the cable companies he represents aren’t allowed to charge content
providers to generate an additional stream of revenue, so they are forced to
look to caps instead.

Verizon/SpectrumCo

In the spirit of
additional hearings, Representatives Eshoo and Waxman called on Subcommittee
Chairman Upton to hold a hearing regarding the proposed spectrum transaction
and collateral agreements between Verizon and the cable companies of
SpectrumCo, which include Comcast, Time Warner, and Bright House Networks. This
type of inquiry makes nothing but sense – the deal appropriately requires a
high level of scrutiny, and while the FCC and DOJ are looking into the matter,
it wouldn’t hurt if Congress exercised its oversight authority and held a
hearing regarding the transaction too.

The spectrum sale
alone should trigger interest, especially when the country’s largest wireless
provider is set to acquire even more valuable spectrum when it appears to be
warehousing its currently unused spectrum. Consolidation of spectrum in the
industry’s most powerful player should always raise a red flag. But there’s
more.

During questioning,
Gigi described PK’s concerns about the collateral agreements between Verizon
and the cable companies, especially in regards to the Joint Operating Entity,
better known as “the JOE.” It’s bad enough that the marketing and reselling
agreements represent the effective laying down of arms between wireless and
wireline providers when it comes to competition in the video market. But the
JOE also introduces the likelihood of new technology being developed and used
as an anticompetitive tool against the companies that are not a part of the group.

For instance, a new
video technology that is patented by the member companies and later becomes a
de facto industry standard could be withheld from competitors, which could
greatly harm consumer access when it comes to new video services.

Interestingly, when
Representative Markey asked Charlie Egren of DISH if he was afraid of being
locked out of the JOE’s technology, Ergen couldn’t really offer much of a
reply. Of course, it’s possible to read between the lines of his general
comments regarding whenever two “vicious competitors” agree not to compete with
each other in order to get a good sense of what he truly thinks. However, Ergen
couldn’t comment specifically on the matter because he does not have access to
the unredacted information in the proceeding before the FCC.

Yet parties such as
DISH should still be concerned about the deal, and likely would be if so much
of the proposed transaction weren’t hidden underneath a vail of secrecy. That’s
why PK filed a challenge to the confidentiality designation with the FCC regarding the basic governance
structure of the JOE.

DISH’s Hopper

Predictably, David
Barrett of Hearst Television (as well as the National Association of
Broadcasters) went after the Hopper, a new product from DISH that records
primetime network television and lets you watch those shows without the
commercials after they have aired. Barrett’s stated concern was that the Hopper
would be damaging to local broadcasters. Representative DeGette kindly reminded
him that while she too is concerned about local broadcasters and their business
models, she is also interested in finding a balance that allows for consumers to
have choice in the market.

The truth about the
Hopper is that it is a question that has already been answered.
The Supreme Court ruled in 1984 – nearly thirty years ago – that recording
television for the purpose of personal time shifting is a legal fair use. When
asked by Representative Doyle why the Hopper didn’t fit into this fair use
exemption, Barrett could only reply that it doesn’t, without providing much of
an explanation.

To be fair, he did
talk about “prioritization” and the need to make trade-offs when it comes to
policymaking. While it was clear that he was talking about his concerns over
the effect on local broadcasters, it wouldn’t be too much of a stretch to have
also understood him to be asking for prioritization of his industry’s old
business model over consumer choice.

Enough Choice?

Perhaps most
interesting was a question by Representative Scalise, who has proposed
legislation with Senator Jim DeMint that represents a sweeping reform to a
variety of communications-related laws and regulations. Scalise asked the panel
whether they believed that the current video marketplace allows consumers
sufficient choice over what, when, where, and how they watch video programming.
Gigi, Ergen, and Johnson of Sky Angel said no, while the rest of the panel said
yes.

Whether it be
artificially low data caps that effectively reduce consumer access to
particular video services, the potential for former competitors to lay down
arms and prevent others from using newly created technologies, or stopping
consumers from accessing new and exciting DVR technology, it certainly does not
appear that consumers have attained “enough” choice in the video market. Not
yet.

The hearing lasted
for over 2.5 hours and covered many more issues than the ones mentioned in this
post. Overall, it was encouraging to see Congress interested in not only
reforming out-of-date rules and regulations but also in protecting consumer
choice in the emerging online video market. If Congressional hearings like this
one can prompt either the FCC or the DOJ to take action on some of these
issues, that’s a good thing.

If you’re interested
in having a quiet end of June/start of July this weekend with a few of your
closest friends on the House Subcommittee on Communications and Technology, you
best click here.