According to top executives from Amazon.com (Nasdaq:AMZN), online content company IAC/InterActiveCorp (Nasdaq:IACI) and Microsoft Corp. (Nasdaq:MSFT), the U.S. online video industry has reached a crossroads where Congress and government regulators could play a defining role in shaping the digital-services market landscape--not to mention the industry's future.
The executives implored a key Senate committee to safeguard Internet neutrality principles and ensure broadband access. At stake, potentially, is growth--even viability--of the burgeoning online video content delivery business, the executives told members of the Senate Committee on Commerce, Science and Transportation.
IAC Chairman Barry Diller told the committee that Congress "must be vigilant that the rules of the game favor entry and innovation," adding he is "extremely bullish" on Internet-enabled video distribution. "If properly nurtured, the marketplace will develop multiple forms of distribution and many new competitors. This will in turn stimulate new sources of content and creativity that will give a multitude of options to consumers, while enriching our culture and advancing our economy," Diller said.
If U.S.-based market competitiveness is to be preserved and domestic online and broadband-enabled video platforms are truly to thrive, executives said changes must be made to the federal statutory and regulatory framework governing telecommunication.
Needing reexamination, they said, is the federal Communications Act of 1996 (Pub.L.104-104), which overhauled the nation's decades-old telecom law to, among other ends, further intramodal competition among communications companies.
Diller, a former chairman and CEO at Paramount Pictures Corp., told the committee that online video services should operate under the same legal and regulatory standards as traditional broadcasters, such as Fox, which he helped develop.
Congress ought to prohibit cable providers and telecoms from "leveraging their dominance in existing markets for video delivery to control emerging markets," Diller said. "Incumbents have the means and incentive to engage in economic and/or technical discrimination against online video distributors," he said.
The FCC, Diller added, has sought to protect consumers against some of the technical means of discrimination in its Open Internet rules, but those rules may not survive judicial scrutiny, he warned.
The issue crystallized earlier this month when Comcast disclosed that its streaming video service does not count against its bandwidth cap, while similar streaming services like those from Netflix do.
Also appearing Tuesday before the committee chaired by Sen. Jay Rockefeller IV, D-W.V., were Blair Westlake, corporate vice president of Microsoft's media and entertainment unit; Paul Misener, Amazon.com's vice president for global public policy, and Susan Whiting, vice chair of the television ratings organization Nielsen Co., which also tracks what people watch on the Internet.
During his testimony, Misener called on Congress and the Federal Communications Commission to "vigorously" monitor marketplace adherence to Net neutrality principles. Additionally, he said, officials ought to examine consumer data caps instituted by some carriers.
"Although Internet subscribers should pay for the bandwidth they use, immutable or unrealistically priced data caps could hinder or prevent competitive products and services made possible by online video, Misener said, adding emphatically, "Consumer choice, without impairment, must be preserved."
Microsoft's Westlake also told the 25-member committee that universal access to high-speed broadband was the "single most important issue" shaping the future of online video.
"As we move forward, however, the availability of universal, high-speed broadband will continue to be critical to the health and vibrancy of a market that supports and enables innovation and competition," he said.
In her testimony, Whiting, vice chairman of Nielsen, said Americans, on average, watch five hours of video a day--91 percent of which is watching traditional TV. For online video, Americans, on average, watch about 4.5 hours each month, with 56 percent of streaming time through such as Google's (Nasdaq:GOOG) YouTube and Netflix (Nasdaq:NFLX).
Citing wider availability of digital content and the "explosion" of laptop computers, tablets and mobile devices, Whiting noted online video views are definitely on an upward trajectory. For instance, use of personal computers to view video has increased 80 percent in the last four years, she said.
"Consumers are saying unequivocally, that online video will continue to play an increasingly larger role in their media choices," she told the committee.
- see the Senate hearing archived webcast
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