Aereo Decisions and Retransmission Ripples

The FCC Is Mandated with Supporting the Public Interest Regarding Spectrum


The U.S. Federal Communications Commission (FCC) is mandated with managing regulatory spectrum, and is constrained with maintaining the public interest in spectrum allocation and use (including where to allocate the spectrum, managing interference, etc.) However, this is generally narrowly interpreted in terms of spectrum allocation policy, and the FCC has been reluctant to engage in additional rule-making about content availability, notably, leaving retransmission consent to business relationships between content owners and distributors. Further, the FCC has relatively narrow jurisdiction over the Internet (generally extending to net neutrality); in fact, one could argue the Internet is underregulated and regulation is fragmented, with the Fair Trade Commission (FTC) and FCC.

Landmark retransmission legislation is crafted in the terms of fair use laws (notably, the Sony Betamax case) as well as laws around private performances (notably, the Cablevision case on remote storage DVRs). Aereo, a company which offers free-to-air TV and DVR to multiscreen devices, is attempting to leverage those rulings to build an over-the-top, free-to-air distribution network as a subscription service. The legal cases appear to be going well outside the Ninth Circuit (nine western states). Distributors, especially satellite distributors which have at times used antennas on their set-top boxes to work around satellite spectrum issues, are taking note and considering the cost/benefit of content licensing from the major networks. Some smaller telcos are looking at offering services around FTA channels along with smaller subscription offerings.

How Long Is the Free-to-air Rights Window?


In Europe, the larger role of public service broadcasters has dictated that content is becoming available via catch-up services for 8 days or 14 days. In the United States, only Hulu (to a PC) has given consumers access, with free-to-air DVRs suffering a lack of customer interest, challenges around access to metadata, etc. The value of advertising, including in important demographics such as the growing Hispanic market, drives free-to-air platforms while content owners look for revenue models including subscription/retransmission for multiscreen and advanced services (DVR, free VOD, catch-up, multiscreen) in addition to advertising. However, as advertisers sign on to multiscreen and Nielsen-C8 (8 day ad credit) relationships, broadcasters and affiliates may think more along the European lines of content availability. Leveraging Hulu as an online (PC) extension of the free-to-air viewing, perhaps even allowing some content onto multiple screens without a Hulu Plus subscription, could be considered.

But Consumer-friendly Broadcast Decisions Will Backfire


The FCC and courts, however, are in a tight spot. They could attempt to be the voice of the consumer (public interest) in ensuring that rights made available for content that has been broadcast leverage free-to-air broadcast spectrum (a valuable public asset) are meaningful to consumers. Specifically, consumers are looking for rights to watch the content at a reasonable appointment-based time and on an array of devices that are rapidly replacing TVs. However, increasing access through regulatory means to this content would drive the valuable content away from free-to-air platforms. The current regulatory direction, to push responsibility to private business relationships, is likely to be maintained. One example is that the FCC is said to be considering ending sports black-out rules (which likely stepped over the public/private responsibility line in any case).

I recently corresponded with my Senator, John McCain, about his proposed “Television Consumer Freedom Act” legislation. One section of this bill "responds to statements by broadcast executives that they may ‘downgrade’ the content on their over-the-air signals, or pull them altogether, so that the programming received by multichannel video programming distributors (MVPDs) customers is preferable to that available over-the-air." Senator McCain states, "A broadcaster will lose its spectrum allocation, and that spectrum will be auctioned by the FCC, if the broadcaster does not provide the same content over the air as it provides through MVPDS." This will simply clarify the rules that a specific broadcaster channel must provide similar content between its free-to-air and MVPD distributed versions. The major networks have both free-to-air and cable-only channels on which to distribute content, so it will not fundamentally alter the conclusions.

The chain of consequences that would result from any regulatory or court decision to extend consumer rights around content, unfortunately, would likely back-fire and decrease the value of content available for free-to-air programming, as well as decreasing the viability of local programming.

Meanwhile, distributors who seek to develop offerings based on free-to-air content (possibly including in-home DVR or network DVR) may be able to address the value end of services but would lack rights that enable cohesive and responsive experiences, including free VOD, multiscreen, and catch-up rights.