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Lawmakers Weigh Future of Online Video

As online distribution grows, House members consider an update to the 20-year-old Cable Act, debating whether to relax rules on cable- broadcast negotiations, whether protections for online channels are necessary to guard against punitive data caps, net neutrality violations.

House lawmakers are contemplating an overhaul of the 20-year-old statute that governs the cable industry, suggesting that the proliferation of online video distribution and influx of competition from other types of providers may warrant a rollback of certain longstanding regulations.

At a hearing on Wednesday, members of the Energy House Commerce Committee's technology subcommittee heard a range of views from a diverse set of industry witnesses as they considered legislative steps to improve competitive conditions in the rapidly evolving video market.

At issue is a potential rewrite of the 1992 Cable Act, which was intended to curb what lawmakers then viewed as a monopolistic cable market, vesting the Federal Communications Commission with significant regulatory authorities over issues such as rates and channel carriage.

But whereas cable was once the only game in town, the video market has expanded to encompass satellite and phone providers, as well as a constellation of digital players. A growing chorus of voices has questioned whether the 20-year-old law still makes sense.

"In 1992 Congress was concerned about the cable monopoly. That does not exist today," said Rep. Lee Terry (R-Neb.).

Several Republican members of the panel argued that with the virtual monopoly that the cable industry once held in the video market effectively eroded, they should begin rolling back some of the regulatory provisions contained in the statute.

Greg Walden (R-Ore.), the chairman of the Subcommittee on Communications and Technology, framed the question as a matter of fairness, asserting that to level the playing field Congress should either expand the video regulations to cover providers in every medium, or relax them, and he left no doubt about his preference.

"One option is to recognize the competitive landscape and start deregulating cable, satellite, and broadcast companies. The other is to expand the Communications Act to apply to the new technologies and services," Walden said. "I, for one, do not believe we should be expanding video regulation."

The 1992 statute was implemented at a time when cable companies commanded 98 percent of the pay-TV market, and after several years of precipitous rate increases that well outpaced the rise of inflation.

It was a bitter loss for the industry, and now that cable's share of the pay-TV market has dipped to slightly more than 50 percent, service providers are hoping to convince lawmakers to ease some of the regulations, such as the so-called "must-carry" and "retransmission consent" provisions that govern negotiations between broadcasters and cable operators.

Michael Powell, a former chairman of the FCC who now heads up the National Cable and Telecommunications Association, called this a "golden age" of video content, touting the proliferation of online outlets like Hulu and YouTube, television programming flooding tablets and mobile devices, and competitive service offerings from satellite firms and other providers.

"But this golden age is set against a regulatory environment that is tarnished," he said, suggesting that lawmakers rationalize the rules governing video providers so that cable operators would have the same compliance obligations as other distribution channels. "On balance we think that would be a dramatically lighter regulatory regime," he said.

For broadcasters, who are on the other side of the negotiating table, abandoning the powers they gained in the Cable Act would be a major policy setback. David Barrett, CEO of Hearst Television, was on hand to testify on behalf of the broadcast industry, and warned lawmakers against rolling back must carry or retransmission consent. Those "bedrock principles," Barrett argued, are an essential leveling agent to ensure that both broadcasters and cable have "skin in the game" in their negotiations.

An Eye on Data Caps, Net Neutrality

In delivering a bevy of new options for consumers, the rise of online video platforms has also ignited a debate over what rules, if any, should be imposed on Internet Service Providers (ISPs) to ensure that users have full access to those video services.

The concern is that many broadband providers are building out their own video content offerings, which of course compete with Web-only platforms. That suggests that ISPs might have an incentive to slow delivery of a rival service or, as Comcast has done with its Streampix video service, exempted traffic generated by its own product from a monthly usage cap, while Netflix and other video applications would be recorded by the meter.

Under the FCC's net neutrality regulation, ISPs are generally prohibited from blocking delivery of lawful content on their networks, though those rules are being challenged in court, and many observers expect them to be overturned.

Netflix was a vocal critic of Comcast's data capping, and the cable giant has since dropped the policy.

But David Hyman, general counsel for the online movie-rental pioneer, appealed to lawmakers to consider provisions to protect Web-only video platforms as broadband providers expand their digital offerings.

"As traditional platforms and networks move to distribute their programming in an on-demand fashion over the Internet, they are beginning to compete more directly with pure-play or over-the-top Internet video providers like Netflix," said Netflix General Counsel David Hyman. "In adapting to this changing landscape, these platforms and networks should not be permitted to unfairly leverage their data delivery networks or content distribution relationships to stifle unaffiliated video providers."

Kenneth Corbin is a Washington, D.C.-based writer who covers government and regulatory issues for CIO.com.

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