The new FCC chairman, Ajit Pai, wants continued growth in online video by encouraging broadband improvements. Can he get network operators to come along with him?
I had the privilege of moderating a discussion put on by the Churchill Club in 2015 entitled The Future Will Not Be Televised: The Rise of Over-the-Top Video. Ajit Pai, then FCC Commissioner and now chairman, participated in the discussion and gave a prepared speech before it. Mr. Pai’s remarks at the event highlight one of the major challenges he will face during his tenure as chairman.
Passionate supporter of online video growth
Speaking about the rapid growth in online video services – like Netflix, Crackle, and PlayStation Vue – Mr. Pai was clear about the value they bring to consumers:
“It’s unclear which business models have the most long-term potential. But what is clear is that the American consumer is the big winner. We have broken free from zoo-like constraints on our television viewing. For the first time in the history of video, we are in control.”
He said that, unfettered by legacy rules and regulations, online video entrepreneurs have ushered in a golden age of television. And who can argue that point when 455 scripted shows were produced in 2016 compared to 266 in 2011.
Mr. Pai is as delighted as the rest of us with the much more a la carte world of video entertainment ushered in by online services. I have no doubt he will work hard to defend it.
Passionate supporter of minimal regulations
At the time of Mr. Pai’s speech in 2015 the decision by the Supreme Court that Aereo was an MVPD was on the minds of many. On the back of this new classification, Aereo had solicited the patent office to allow it to get a statutory license to local TV channels. The office ruled is was not a cable company and not entitled to one, effectively killing the company. Then FCC Chairman Tom Wheeler wanted to fix this situation by expanding the definition of MVPD to include online providers. Mr. Pai was very much against this approach, arguing that it would bring burdensome regulations to online video.
Recalling an earlier part of his speech when he talked about the first video to be uploaded to YouTube – Me at the Zoo – Mr. Pai said:
“For me, the way forward on over-the-top video is simple. There is no market failure. There is no problem to be solved. There is thus no need for the FCC to get involved and impose regulations that are over a decade older than Me at the Zoo.”
It looks like he may well have been right. Even though the proposed rules were never passed, new skinny bundle services such as Sling TV, and SVOD services like CBS All Access, are bringing local channels to the web. Coverage is very spotty, but things are headed in the right directions.
Sees opportunities for government to help online video growth
Mr. Pai is not totally opposed to all regulations. He does see how government can help the growth of online video: by stimulating the expansion of broadband coverage, and boosting broadband speed. He said:
“If we want to fast forward, so to speak, our policies should encourage greater infrastructure investment and network capacity.”
For rules encouraging broadband investment to be effective, Mr. Pai will need to work with mobile operators, telcos and cable companies.
However, many of those same companies have online services which compete with digital natives like Sling TV and Hulu. Operators are already moving to advantage their services on their networks. For example, usage of AT&T’s DirecTV Now on its mobile network does not count against the data cap. Given that a 1 or 2 GB cap can be exhausted in an hour or so of viewing, this is a big advantage which Sling TV simply can’t match.
Continued network investment helps online video growth. Anti-competitive behavior like zero-rating retards online video growth. Getting operators to do the former, while backing away from the latter will be a challenge. Particularly if Mr. Pai wishes to stay true to his light regulation approach.
Why it matters
The new FCC commissioner, Ajit Pai, wants to ensure online video’s continued strong growth.
He views keeping broadband operators investing in their networks to boost speed and availability as the best way to keep online video growing.
However, network operators are beginning to use anti-competitive practices on their broadband networks (mobile and fixed) that will retard online video growth.
Getting operators to invest in their networks and refrain from anti-competitive practices on those networks will be a major challenge.