Three months ago, when the DC Circuit struck down the FCC’s “Cable Cap”—which prevented any one cable company from serving more than 30% of US households out of fear that he larger cable companies would use their “gatekeeper” power to restrict programming—the New York Times
bemoaned the decision:
The problem with the cap is not that it is too onerous, but that it is not demanding enough.
Even with the cap — and satellite television — there is a disturbing lack of price competition. The cable companies have resisted letting customers choose, a la carte, the channels they actually watch….
[The FCC] needs to ensure that customers have an array of choices among cable providers, and that there is real competition on price and program offerings.
Perhaps the
Times‘ editors should have consulted with the Lead Technology Writer of their excellent BITS blog. Nick Bilton might have told him the truth: “Cable Freedom Is a Click Away.” That’s the title of his excellent survey of devices and services (Hulu, Boxee, iTunes, Joost, YouTube, etc.) that allow users to get cable television programming without a cable subscription.
Nick explains that consumers can “cut the video cord” and still find much, if not all, their favorite cable programming—as well as the vast offerings of online video—without a hefty monthly subscription. (Adam recently described how Clicker.com is essentially TV guide for the increasing cornucopia of Internet video.) This makes the 1992 Cable Act’s requirement that the FCC impose a cable cap nothing more than the vestige of a bygone era of platform scarcity, predating not just the Internet, but also competing subscription services offered by satellite and telcos over fiber. That’s precisely what we argued in PFF’s amicus brief to the DC Circuit a year ago, and largely why the court ultimately struck down the cap.
Bilton notes that “this isn’t as easy as just plugging a computer into a monitor, sitting back and watching a movie. There’s definitely a slight learning curve.” But, as he describes, cutting the cord isn’t rocket science. If getting used to using a wireless mouse is the thing that most keeps consumers “enslaved” to the cable “gatekeepers” the FCC frets so much about, what’s the big deal? Does government really need to set aside the property and free speech rights of cable operators to run their own networks just because some people may not be as quick to dump cable as Bilton? Is the lag time between early adopters and mainstream really such a problem that we would risk maintaining outdated systems of architectural censorship (Chris Yoo’s brilliant term) that give government control over speech in countless subtle and indirect ways? Continue reading →
by Berin Szoka & Adam Thierer, Progress Snapshot 5.11 (PDF)
Ten years ago, Nobel Prize-winning economist Milton Friedman lamented the “Business Community’s Suicidal Impulse:” the persistent propensity to persecute one’s competitors through regulation or the threat thereof. Friedman asked: “Is it really in the self-interest of Silicon Valley to set the government on Microsoft?” After yesterday’s FCC vote’s to open a formal “Net Neutrality” rule-making, we must ask whether the high-tech industry—or consumers—will benefit from inviting government regulation of the Internet under the mantra of “neutrality.”
The hatred directed at Microsoft in the 1990s has more recently been focused on the industry that has brought broadband to Americans’ homes (Internet Service Providers) and the company that has done more than any other to make the web useful (Google). Both have been attacked for exercising supposed “gatekeeper” control over the Internet in one fashion or another. They are now turning their guns on each other—the first strikes in what threatens to become an all-out, thermonuclear war in the tech industry over increasingly broad neutrality mandates. Unless we find a way to achieve “Digital Détente,” the consequences of this increasing regulatory brinkmanship will be “mutually assured destruction” (MAD) for industry and consumers.
New Fronts in the Neutrality Wars
The FCC’s proposed rules would apply to all broadband providers, including wireless, but not to Google or many other players operating in other layers of the Net who favor such broadband-specific rules. With this rulemaking looming, AT&T came after Google with letters to the FCC in late September and then another last week accusing the company of violating neutrality principles in their business practices and arguing that any neutrality rules that apply to ISPs should apply equally to Google’s panoply of popular services. In particular, AT&T accused Google of “search engine bias,” suggesting that only government-enforced neutrality mandates could protect consumers from Google’s supposed “monopolist” control.
The promise made yesterday by the FCC—to only apply neutrality principles to the infrastructure layer of the Net—is hollow and will ultimately prove unenforceable. Continue reading →
This ongoing series has explored the increasing ability of consumers to “cut the cord” to traditional video distributors (cable, satellite, etc.) and instead receive a mix of “television” programming and other forms of video programming over the Internet. As I’ve argued, this change not only means lower monthly bills for those “early adopter” consumers who actually do “cut the cord”, but, in the coming years, a total revolution in the traditional system of content creation and distribution on which the FCC’s existing media regulatory regime is premised.
This revolution has two key parts:
- Conduits: The growing inventory—and popularity—of sites such as Hulu, Amazon Unboxed and the XBox 360 Marketplace (or software such as Apple’s iTunes store), that allow users to view or download video content. Drawing an analogy to the FCC’s term “Multichannel Video Programming Distibutor” or MVPD (cable, direct broadcast satellite, telco fiber, etc.), I’ve dubbed these sites “Internet Video Programming Distributors” or IVPDs.
- Interface: The hardware and software that allows users to display that content easily on a device of their choice, especially their home televisions.
While much of the conversation about “interface” has focused on special hardware that brings IVPD content to televisions through set-top boxes such as the Roku box or game consoles like the XBox 360, at least one company is making waves with a software solution. From the NYT:
Boxee bills its software as a simple way to access multiple Internet video and music sites, and to bring them to a large monitor or television that one might be watching from a sofa across the room.
Some of Boxee’s fans also think it is much more: a way to euthanize that costly $100-a-month cable or satellite connection.
“Boxee has allowed me to replace cable with no remorse,” said Jef Holbrook, a 27-year-old actor in Columbus, Ga., who recently downloaded the Boxee software to the $600 Mac Mini he has connected to his television. “Most people my age would like to just pay for the channels they want, but cable refuses to give us that option. Services like Boxee, that allow users choice, are the future of television.” ….
Boxee gives users a single interface to access all the photos, video and music on their hard drives, along with a wide range of television shows, movies and songs from sites like Hulu,Netflix, YouTube, CNN.com and CBS.com.
Continue reading →
Continuing the “Cutting the (Video) Cord” series started by my PFF colleague Adam Thierer: The WSJ had two great pieces yesterday about the increasing competitive relevance of television distributed by Internet—a trend that was at the heart of an amicus
brief PFF recently filed in support of C omcast’s challenge of the FCC’s 30% cap on cable ownership. The first WSJ piece declares that:
After more than a decade of disappointment, the goal of marrying television and the Internet seems finally to be picking up steam. A key factor in the push are new TV sets that have networking connections built directly into them, requiring no additional set-top boxes for getting online. Meanwhile, many consumers are finding more attractive entertainment and information choices on the Internet — and have already set up data networks for their PCs and laptops that can also help move that content to their TV sets.
The easier it is for consumers to receive traditional television programming (in addition to other kinds of video content) distributed over the Internet on their television, the less “gatekeeper” or “bottleneck” power cable distributors have over programming. So the Netflix-capable
and Yahoo-widget-capable televisions described by the WSJ piece go a long way to increasing the substitutability of what we call Internet Video Programming Distributors (IVPDs) for Multichannel Video Programming Distributors (MVPDs), such as cable, satellite television and fiber services offered by telcos such as Verizon’s FiOS.
While such televisions are only expected to reach 14% of all TV sales by 2012, one must remember that a growing number of set-top boxes (
e.g., the Roku Digitial Video Player, game consoles like the Microsoft XBox 360 and Sony PlayStation 3, and TiVo DVRs) allow users to users to receive IVPD programming on their existing televisions.
As we argued in our amicus brief, the immense competitive importance of IVPDs lies not in the potential for some users to “cut the cord” to cable and other MVPDs (though that will surely happen), but in the immediate impact IVPDs have as an alternative distribution channel for programmers. In the pending D.C. Circuit case, we argue that both the FCC’s 30% cap, issued in December 2007, and the underlying portions of the 1992 Cable Act authorizing such a cap should be struck down as unconstitutional because the ready availability of IVPDs as an alternative distribution channel means that cable no longer has the “special characteristic” of gatekeeper/bottleneck power that would justify imposing such a unique burden on the audience size of cable operators. (Of course, Direct Broadcast Satellite and Telco Fiber are also eating away at cable’s share of the MVPD marketplace.)
The second WSJ piece, an op/ed, illustrates beautifully how cable operators are already losing “market power” (or at least negotiating leverage) in a very tangible way: they’re having to pay more for programming. Specifically, the Journal describes how Viacom plaid chicken with Time Warner—and won. Continue reading →
Ken Ferree and I just filed an amicus brief with the D.C. Circuit in what could be among the most important First Amendment cases involving economic regulation in years: Comcast’s challenge to the FCC’s cap on the maximum size of a cable operator’s nationwide subscriber-audience. While few may feel righteous indignation at limitations targeted at large corporations such as Comcast or Time Warner, the larger principle at stake here is deeply important: Will the First Amendment provide a meaningful check on what USC law professor Chris Yoo has called “architectural censorship” (i.e., so-called “structural” regulations that “have the unintended consequence of reducing the quantity, quality, and diversity of media content”).
In a nutshell, we argue that that:
- The provisions of the 1992 Cable Act authorizing the FCC to impose a “cable cap” are outdated in world of media abundance and vibrant platform competition.
- Because cable is no longer the unique “bottleneck” or “gatekeeper” that it was in 1992, these statutory provisions (not just the FCC’s 30% rule) must be subject to strict scrutiny under the First Amendment as a limitation on free speech.
- Because there are “less restrictive means” of ensuring cable operators do not impede the flow of video programming to consumers, the court should strike down these provisions.
- Even if the court upholds the statute, it should nonetheless strike down the cap issued by the FCC in December 2007 (30% of all Multichannel Video Programming (MVPD) subscribers as based on an outdated model of the video marketplace.
I encourage you to read our brief (below). I’ve provided a summary below, along with some additional commentary we just couldn’t cover under our 3500 word limit.
Strict Scrutiny. Yoo’s article Architectural Censorship and the FCC is essential reading for anyone who believes that government regulations on the size and shape of the “soapbox” can have huge effects on speech itself. Yoo argues that the First Amendment should check this kind of regulation–however “content-neutral” it might seem–under “strict scrutiny”, which requires that the government show that a regulation is the “least restrictive means” available for advancing a “compelling government interest.” But Yoo ultimately concludes (pp. 713-718, PDF pp. 45-50) that, under existing precedent, most “architectural censorship will be effectively insulated from meaningful judicial review.” Continue reading →
In an essay I posted here back in October called “Cutting the (Video) Cord: The Shift to Online Video Continues” (part of an ongoing series), I reflected on an interesting piece by the Wall Street Journal’s Nick Wingfield’s entitled “Turn On, Tune Out, Click Here.” Wingfield’s article illustrated how rapidly the online video marketplace is growing and noted that so many shows are now available online that many people are cutting the cord entirely by canceling their cable or satellite subscriptions and just downloading everything they want to watch via sites like Hulu and supplmenting that with services like Netflix. In today’s Washington Post, Mike Musgrove writes about these same trends and developments in a column entitled, “TV Breaks Out of the Box.” Musgrove notes:
This has been a big year for both Netflix and online video services like Hulu.com, where people can watch episodes of popular shows such as “The Office” for free, though users do have to sit through a few commercials. When Tina Fey debuted her impression of Sarah Palin on “Saturday Night Live” last month, more people watched the comedy sketch online at NBC.com or Hulu.com than during the show’s broadcast. Last week, YouTube announced that it would start carrying old TV shows and movies from the film studio MGM.
As for Netflix, it seems that somebody there has been busy this year. While most customers still use the online video rental site mainly for movie deliveries by mail, the company now has a library of online content available for viewing on your TV through a variety of devices. A $99 appliance from Roku that plugs into your TV set and connects to the Web has been popular among some folks dropping their cable subscriptions. A couple of new, Web-connected Blu-ray players from Samsung and LG Electronics also allow Netflix subscribers to instantly watch titles from the company’s online collection.
Musgrove continues and notes that it’s about more than just Hulu and Netflix:
Continue reading →
Back in the mid- and even late 1990s, I was engaged in a lot of dreadfully boring telecom policy debates in which the proponents of regulation flatly refused to accept the argument that the hegemony of wireline communications systems would ever be seriously challenged by wireless networks. Well, we all know how that story is playing out today. People are increasingly “cutting the cord” and opting to live a wireless-only existence. For example, this recent Nielsen Mobile study on wireless substitution reports that, although only 4.2% of homes were wireless-only at the end of 2003…
At the end of 2007, 16.4 percent of U.S. households had abandoned their landline phone for their wireless phone, but by the end of June 2008, just 6 months later, that number had increased to 17.1 percent. Overall, this percentage has grown by 3-4 percentage points per year, and the trend doesn’t seem to be slowing. In fact, a Q4 2007 study by Nielsen Mobile showed that an additional 5 percent of households indicated that they were “likely” to disconnect their landline service in the next 12 months, potentially increasing the overall percentage of wireless-only households to nearly 1 in 5 by year’s end.
And one wonders about how many homes are like mine — we just keep the landline for emergency purposes or to redirect phone spam to that number instead of giving out our mobile numbers. Beyond that, my wife and I are pretty much wireless-only people and I’m sure there’s a lot of others like us out there.
Anyway, I’ve been having a strange feeling of deva vu lately as I’ve been engaging in policy debates about the future of the video marketplace. Like those old telecom debates of the last decade, we are now witnessing a similar debate — and set of denials — playing out in the video arena. Many lawmakers and regulatory advocates (and even some industry folks) are acting as if the old ways of doing business are the only ways that still count. In reality, things are changing rapidly as video content continues to migrate online.
I was reminded of that again this weekend when I was reading Nick Wingfield’s brilliant piece in the
Wall Street Journal entitled “Turn On, Tune Out, Click Here.” It is must-reading for anyone following development in this field. As Wingfield notes:
Continue reading →
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