Verizon to FCC: Online video providers should not be subject to cable regulation

Verizon sign
Verizon says online video distributors have established themselves as competitors to traditional video distributors and therefore should not be hampered by legacy regulations designed for monopoly cable systems.

Verizon has told the FCC that online video distributors (OVDs) should not be held to traditional cable regulations, a regulatory regime the telco says is part of a bygone era when communities had only one option to get video content.

In an FCC filing, the telco cites how OVDs are expanding options for consumers and have established themselves as competitors to traditional video distributors. As a result, Verizon says that OVDs should be able to “continue this trajectory unhampered by legacy regulations designed for monopoly cable systems.”

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Verizon added that exempting OVDs from legacy cable regulation reflects the auspices of the Cable Act. Unlike a traditional cable system, which requires a facility that consists of closed transmission paths and associated signal generation, OVDs deliver their services over the internet.

“Consumers access over-the-top video content through the public internet, rather than a provider’s ‘closed transmission paths’ as defined in the Cable Act,” Verizon said. “And a broadband network does not include ‘associated signal generation, reception, and control equipment that is designed to provide a cable service’ for an OVD.”

What’s telling about the cable regulations is that they were designed to accommodate an industry that typically offered consumers one choice for video service.

“Many of the commission’s cable regulations were intended to protect consumers from monopolistic behavior and pricing at a time when there were few video distributors and consumer choice was limited to a single local cable incumbent and broadcast TV,” Verizon said.  

Today, users have access to a wide array of linear video channels and tens of thousands of movie and TV titles from broadcast, satellite, cable, and online distributors as well as original programming from OVDs, such as Hulu, Amazon, and Netflix. Viewers can access content on the devices of their choice

Verizon has also asked the FCC to confirm that a cable operator that sells an over-the-top service separate from its linear “cable service” will not be subject to local franchising authority (LFA) regulation “regardless of whether the online subscribers access the service within or outside of the provider’s franchise footprint.”

Already, the FCC has ruled that an LFA’s jurisdiction only applies to the delivery of cable services over traditional cable systems.

“The LFA’s jurisdiction does not reach true over-the-top video services at all,” Verizon said. “A contrary conclusion would extend the jurisdiction of an LFA to video offerings that have no actual connection to—and place no additional burden on—use of the public rights-of-way.”

Alan Wolk, lead analyst at TV[R]EV, told FierceOnlineVideo that he agrees with Verizon’s thesis.

“The ruling is a double-edged sword: its initial intent was to allow online-only providers to negotiate retransmission and carriage agreements in the same way terrestrial services could—that was a concern in the early days on online-only distribution,” Wolk said.

Wolk added that because the ruling “allows the FCC to regulate online providers like terrestrial ones, which could include having them apply for local franchises, it would be a mistake since the local franchise requirement is largely responsible for the monopoly/duopoly that exists in regards to broadband today.”

The timing of Verizon’s filing comes as the telco readies its own OTT video play.

Lowell McAdam Verizon
Lowell McAdam

Lowell McAdam, CEO and chairman of Verizon, told investors during the J.P. Morgan Global Technology, Media and Telecom Conference in Boston in May that it would use the combination of Yahoo and AOL as the “platform … to test out an over-the-top service.”

At that time, McAdam did not provide specific details on what would be available under the proposed OTT video service, according to a report in Variety. This proposed service would be a complement to its struggling Go90 ad-supported mobile video service.

Additionally, Verizon has been considering an internet-delivered skinny bundle offering similar to AT&T’s DirecTV Now and Dish Network’s Sling TV.