MSOs will face a strategic choice during the next year or two. The cable industry's natural inclination will be to do battle. Cable operators didn't get to where they are by being afraid to fight. But, perhaps, there is another way.
On Oct. 28, FCC Chairman Tom Wheeler posted a blog indicating that he will ask the other commissioners to begin a rulemaking proceeding that could change the definition of multichannel video programming distributor (MVPD).
The idea is that IP-delivered video opens up so many delivery possibilities that that the current model no longer fits the reality. The biggest change suggested by Wheeler is that the over-the-top (OTT) players be given access to offer cable-owned and local broadcast channels.
Linear OTT providers are proliferating. Wheeler's post mentioned Aereo, whose attempt to retransmit broadcasters' signals without their permission reached the Supreme Court before failing. Even more challenging for cable operators will be OTT initiatives from ESPN and CBS. The usual suspects - in this case, suspects with lots of money and very high profiles - are in various stages of launching similar services. Others will come.
The cable industry doesn't want to see this happen, of course. The more attractive the OTT players, the more difficult the marketing challenge is to them. The NCTA's comment on Wheeler's move implied that, for the newly empowered MVPDs, all that glitters won't be gold. Along with the access to broadcast channels, the OTT companies would - or should - have serious obligations to fulfill:
"Redefining what it means to be an MVPD raises profound questions about how government will extend regulation to Internet video services and how any would-be virtual MVPDs will meet their 'social compact' obligations."
The NCTA didn't respond to a request for clarification on what are the "social compact" obligations to which it referred. Emergency and emergency communications and even franchising requirements figure to be things with which the cable industry would like to see the OTT players deal. (Editor's note: The NCTA contacted BTR after the story posted and inidcated that the "social compact" obligations to which it referred are things such as EAS/Emergency Alert, closed captioning, CALM Act compliance and disability-oriented services.)
The battle of defining MVPDs figures to be a long, costly and important one. The backdrop is a tremendous amount of uncertainty. The political situation in Washington is shifting to the right: The Republicans won control over Congress and likely will try to marginalize the FCC, which of course is controlled by the Obama administration. The industry and the government also will be dealing with the related and higher profile Net Neutrality issue. Those issues will be roiling even as the President Obama's administration enters its sunset years. The President's call this week for ISPs to be administered under Title II of the Telecommunications Act is illustrative of the overall uncertainty and fluid nature of the landscape.
How this all hashes out - and how long it takes - is anyone's guess. But perhaps there is another way for the cable industry to move forward: Drop opposition to a change in the definition of MVPD. Don't object to OTT companies with linear lineups being able to buy and offer anything they want.
The bottom line is that industries waste enormous amounts of time, energy and money trying to hold back the tide represented by technical progress. The telephone companies ceded a lot of capital when they tried to protect their T-1 revenues against metro Ethernet services. The telcos also lost plenty of ground protecting their circuit-switched phone services before they realized that VoIP was not a passing fancy and, indeed, a superior way to transmit calls.
Technology changes and putting up legal and regulatory barriers aimed at artificially maintaining the old system only works for a time. Cable operators have a world of great products to offer. These are growing by the day. The best path may be to avoid a retrograde battle to artificially maintain the status quo and to simply let the linear OTT players have their way.
If cable operators' services are as good as the industry claims they are, there should be no problem.