[opendtv] Re: MVPD Definition

From: Craig Birkmaier <craig@xxxxxxxxxxxxx>
To: "opendtv@xxxxxxxxxxxxx" <opendtv@xxxxxxxxxxxxx>
Date: Mon, 24 Aug 2015 09:43:02 -0400

On Aug 23, 2015, at 9:21 PM, Manfredi, Albert E
<albert.e.manfredi@xxxxxxxxxx> wrote:

So? He too is a lawyer, after all. If he thinks that "channel" implies
"linear/live," especially when cable systems use these same channels to
provide their proprietary VOD service, only shows that Tom Wheeler is not
being coached strenuously enough. Check it out:

http://transition.fcc.gov/Bureaus/OSEC/library/legislative_histories/1439.pdf

First, thank you for posting this link, as I have suggested that you read it
several times. I hope this means that you finally did.

Wheeler is a Presidential appointee who is working hard to push the President's
agenda. This was clearly obvious with the manner in which he pushed the shift
to Title II regulation of broadband. Clearly he and the President have an
agenda; but there is nothing new about this. At one time Michael Powell was
Chairman of the FCC - now he is President of the NCTA, lobbying the FCC. such
is the incestuous nature of government regulation of "natural monopolies."

As for linear live versus VOD, please show me even one word in the 1992 Cable
Act you linked to that addresses this. VOD services have never been regulated
by the FCC, and the program access rules apply only to linear channels from
broadcast and cable networks.

The 1992 Cable Act is primarily concerned with two areas:
- Carriage of local broadcast signals
- Creating competition in the markets for MVPD services

The legislation cut local broadcasters in on the lucrative subscriber fees that
cable systems were collecting for their vertically integrated programming. It
assured carriage of local broadcast stations, giving these stations protection
from the importation of distant stations, and it gave them the right to
negotiate retransmission consent fees in lieu of the existing FCC must carry
regulations.

Section 7 Award of Franchises; Promotion of Competition made it illegal for
local governments to protect existing cable franchise monopolies by refusing to
grant a competing franchise to another service in that market. This enabled the
telcos, and in a few cases other cable systems, to overbuild and compete with
the existing cable monopoly. And it is allowing Google Fiber to overbuild and
offer MVPD services in addition to broadband.

The legislation also forced vertically integrated cable systems to make their
exclusive content available to competitors in most cases. The crux of the
regulation - see section 616 Regulation of Carriage Agreements - was related
to the use of satellites to distribute this content to MVPD head-ends, and in
some cases direct to consumers in rural areas where cable systems were not
economically feasible. This is the legislative authorization for what has
become the FCC Program Access Rules.

The only exceptions - tested in the court system - are vertically integrated
programming that does not use a satellite to get the content to the cable head
end. These are primarily regional sports networks such as SportsNet LA, owned
by the Los Angeles Dodgers and a local division of Time Warner Cable.

The Program Access Rules did not exist when the local cable monopolies
had no competition.

Perhaps so. You have a complete monopoly for distribution pipe, so the
ultimate in collusion is guaranteed.

That monopoly was replaced by an oligopoly, thanks to the 1992 Cable Act. But
yes, as is often the case when Congress sticks its nose in a business, the
intended results lead to unintended consequences. In this case two oligopolies
working together to double the cost of MVPD service over two decades.

But even there, the program access rule of 1992 include the "must carry"
rules, which are a pretty clear indication that the FCC knew just how
inadequate the carriage competition was. The rules also include a stipulation
that the MVPD cannot force consumers into buying expensive tiers - only the
basic tier. Another indication that he FCC was fully aware that this supposed
competition Craig talks about was not adequate. If people had choice, as they
are now starting to, all this govt micro-management would be superfluous.

Must carry has nothing to do with this. It was a regime that the FCC put in
place in the '80s to assure broadcasters access to cable systems. The 1992 Act
added retransmission consent as an option to Must Carry, and made it illegal
for a cable system to pay an out of market station for their content in lieu of
carriage of the local station carrying the same content.

The Program Access Rule deal with vertically integrated cable programming.

As for mandating "basic cable," Congress (not the FCC) saw that cable
monopolies were forcing subscribers to buy tiers they did not necessarily want,
when all they wanted was their local broadcast stations.

Bottom line, the 1992 Cable Act is a classic case of Congress doing one thing,
knowing that the outcome would be something else - i.e. the unintended
consequences. In this case it was the still powerful broadcast industry that
was able to get Congress to give them the tools they needed to eventually
control 90% of the content offered by MVPD services, and keep raising the
prices for these services at rates higher than inflation. The Act did nothing
to control rates, the intended consequence, and little to promote competition.
The MVPD business was transformed from a monopoly into an oligopoly.

Yes, but who cares?

Sony?

"Non-discriminatory" **only** matters for local monopolies, so **people** can
have equal access at fair prices.

DBS is not a local monopoly Bert. But the Program Access Rule allowed the DBS
systems to capture a huge chunk of the market. Without this the DBS systems
would have gotten "off the ground" so to speak.

And consumers did not get equal access at fair prices ; the unintended
consequence was that consumers got a second or third option for MVPD service at
inflated prices.

Now instead, you let ESPN figure it out, without any govt coercion. It's
simply not necessary or desirable to have ESPN on all OTT sites. As of today,
you feel a need for that ESPN fix? It's easily available, to everyone, for
$20. Reinventing the anti-competitive MVPD formula, over the Internet, is not
necessary or desirable.

As I said, I like the fact that we are beginning to see the marketplace work.

But you still must subscribe to a bundle of 20 channels to get ESPN via Sling.
Only the number of channels you may not want has changed; the price is lower
because you are paying less in subscriber fees, and are not paying for the
facilities based MVPD infrastructure. But you need a broadband service to use
Sling, so the cost difference is not as great as it appears. It still cost
about $50/mo to use Sling, versus the national Average of $67/mo to buy the
extended basic bundle from a facilities based MVPD.

Whether MVPD bundles are anti-competitive or not is a reasonable issue to
discuss. Clearly consumers would prefer an ala carte system where they could
buy only the channels they want at non discriminatory prices.

We're not there yet. It appears that there will be multiple competitors
offering MVPD services over the Internet alongside other OTT services that
focus on VOD bundles like Netflix.

You can rest assured, Craig, that with ESPN subscriptions continuing to
decline, new options will become available. Not because of artificial rules,
but because ESPN will see the need. And if the decline ends, then ESPN can
play hardball once again. So what? This is called the open market.

ESPN is primarily suffering from real completion from other sports networks,
and the fact that they overpaid for rights for much of the content they offer.
They will see growth in subscribers this fall as they always do, as this is
"Prime Time" in the world of sports with college and professional football.

Let's see what has changed in five years, based on what Skipper's boss told us
recently.

It is patently obvious that fussing about trying to put the same regs on
Internet TV distribution, as were applied to walled garden, proprietary,
locally monopolistic services, is a colossal waste of taxpayers' money.

The only taxpayer money in play here is the annual budget for the FCC. What is
in play here is propping up a business model that is very lucrative for both
the oligopolies and the politicians that they ply with campaign contributions.
Today, Michael Powell's NCTA now holds more sway in D.C. than Gordon Smith's
NAB.

This was clear in the announcement by Chairman Wheeler that he wants to rescind
the rules in the 1992 Cable Act that prevent a cable system from importing a
distant station, when a local station goes dark because of a retransmission
consent dispute.
If the cable system can import this content during a dispute, the local station
and the network they are affiliated with lose leverage in the negotiation.

Thus the NAB responded as follows:

https://www.nab.org/documents/newsroom/pressRelease.asp?id=3764

"Exclusivity rules are a lynchpin of the local broadcast business model and
help sustain viewer access not only to high-quality network entertainment
programming, but also to local news and lifeline information. The order
currently circulating at the Commission imposing changes to these rules would
threaten the vibrancy of our uniquely free and local broadcast system. NAB
strongly opposes this order that would ultimately cause harm to consumers and
their reliance on localism.

"It is curious that the FCC keeps relying on the rationale that it is taking
such pro pay-TV actions because the rules are decades-old, but refuses to
even review or remove broadcast ownership rules that were imposed under
market circumstances that clearly no longer exist."

I'm sure Bert agrees with the NAB on the second paragraph.

We do not know if Wheeler will succeed in eliminating the local exclusivity
rule. As it is clearly defined in the 1992 legislation, we can be certain that
the NAB will challenge any attempt to eliminate it by the FCC.

I'm pretty sure that's not the explanation. Dish had to convince ESPN to be
distributed online, to anyone, without the benefit of that fat welfare check.

They still get a welfare check from Sling subscribers. We don't know if it is
fatter or slimmer than the fees they get from Dish DBS subscribers, but I would
not bet on slimmer.

Hardly "easy." But it was possible because ESPN was losing customers - some
of those customers who were paying it welfare, and got fed up.

Perhaps, but I seriously doubt that many cord cutters have subscribed to Sling.
If you cut the cord to stop paying for ESPN why would you subscribe to Sling.
The service is primarily targeted at Millennials who have never subscribed to a
MVPD service.

If there was anything "easy" about Sling TV, it was that ESPN had seen the
light. The Dish traditional MVPD service, I'm pretty sure, had very little to
do with this new service (well okay, Dish understands the territory).

And their start-up costs were significantly lower as most of the needed
infrastructure was already in place. Could it be that ESPN chose DISH for this
experiment as they already have a working relationship?

But once again, WHO CARES? And when I ask WHO CARES, I mean among "us, the
people." Not among the special interests.

If the FCC extends the Program Access Rules and requires Internet MVPDs to
carry local stations if they want to offer the broadcast networks, the special
interests will have another win under their belts.

We will care about new services that offer better value.

The FCC is OUR agency. They are supposed to work for OUR benefit. We the
people couldn't care less if Apple's negotiators are not up to the skill of
Dish's negotiators.

FOTFL

"OUR" government?

Please....

We the people know full well that Apple can consult with Dish, and if ESPN
sees an advantage, Apple may even carry ESPN. But we the people have
absolutely no interest in furthering Apple's own best self-interests, only to
lead to higher prices and a distorted marketplace again.

If we the people had a say, MVPDs would be required to publish the subscriber
fees we pay for each channel and then let us only choose the channels we want,
with no other price increases to make up for the lost revenues.

Fat chance of that happening!

For a service people cherish (broadband)? They gained subscribers.

Yup. And they just got a long term guarantee that they can milk that franchise
for decades, if the Title II rules hold up in court.

For a service that no longer needs to be a monopoly, and support outrageously
high salaries for certain entertainers? Loss in subscriptions was to be
expected.

Especially in the worst economy we have seen in decades.

In a weird way I have some empathy for your decision not to pay for a MVPD
service. We are told that the total number of hours the average person watches
TV have stayed steady or increased. In this, I believe the oligopolies are
blowing smoke.

I am now in the demographic that supposedly watches the most TV, yet I am quite
certain I watch much less than I did a decade ago. Could it be that consumers
are getting over their infatuation with the "boob tube?"

We the people don't need to prop up such market distortions, with our tax
dollars. The lawyers should spend their time doing something else.

It is not our tax dollars propping this up. It is the campaign contributions
that control the politicians and the regulators they appoint. And the
television industry that provides the stage for the politicians to persuade us
that our votes count...

So Netflix and Amazon are writing billion dollar welfare checks?

If they do, and their prices get too high as a result, then people can
trivially drop those services. No truck rolls, no appointments, no
unnecessary delays. Netflix and Amazon are HARDLY your only choices for TV
material.

Merely stating the obvious. Most of your cherished OTT services are either
owned by the content oligopoly, or buy most of their content from this
oligopoly.

Regards
Craig

References:
- [opendtv] Re: MVPD Definition
  - From: Manfredi, Albert E

[opendtv] Re: MVPD Definition

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