The FCC has clearly started something with its determination that streaming service AT&T Now represents effective MVPD competition to Charter's cable video service in Massachusetts, leading to a fight between cable ops and the FCC on one side and local regulators on the other.

The FCC has said the presence in a market of direct-broadcast satellite service (DirecTV or Dish Network) can trigger an effective competition finding, but this was first time a streaming service — in this case virtual MVPD AT&T TV Now — filled the bill.

An FCC determination of effective competition means that local franchise authorities (LFAs) can no longer regulate basic cable rates. All cable franchises are now considered effectively competitive, save for some systems in Massachusetts and Hawaii. That is because the FCC under Democratic chairman Tom Wheeler reversed the FCC's long-standing presumption against effective competition and, instead, assumed they were competitive unless LFA's could prove they were not.

Not long after the FCC's Charter decision last fall, Comcast filed for similar relief, citing the Charter decision and saying it should get the same status in 84 communities in the state where it delivers cable service.

But Massachusetts regulators are pushing back, signaling their plan to challenge the Charter decision and then asking the FCC to hold Comcast's request for relief in abeyance until that challenge is resolved.

Comcast says "no way." It told the FCC last week that there is nothing extraordinary about someone challenging an FCC decision and Massachusetts should not get the "extraordinary circumstances" relief of that abeyance. As to not granting Comcast the same relief as Charter in the state, the company told the FCC: "Subjecting Comcast to regulatory burdens that do not apply to any other competitor in the highly dynamic video marketplace doesn’t serve the interests of consumers and is contrary to congressional intent," Comcast told the FCC

The FCC back in October found in the Charter decision that virtual pay TV service AT&T Now qualified as a competing video service  because it checked all the boxed for an LEC-provided competitive video provider for purposes of the effective competition trigger — comparable services, offered direct to home, and marketed by AT&T. The item said a provider does not have to have its own facilities to be a comparable video service, one of the sticky wickets in the long-standing debate on how streaming video should be treated in Washington.

Related: Markey Warns FCC about Giving OTT Effective Competition Status

FCC chair Ajit Pai said at the time that given the rise of Netflix, Hulu, and Amazon, and the addition next month of Disney Plus and Apple TV, it strained credulity to argue that cable was not now subject to effective competition "across the nation."

But the Massachusetts Department of Telecommunications & Cable and the state's attorney general countered that OTTs do not offer channels of video service and that basing an effective competition filing on a non-facilities-based streaming video service "would undermine  the commission's policy goal of encouraging facilities-based investment and limiting regulation of the internet."

The state also argues that OTT's are a limited (no local TV channels), higher-cost alternative rather than a similarly situated competitor, and so giving them MVPD status would hurt consumers.

Historically, cable providers have cited the ubiquity of satellite as justification for removing rate regulations. But in this test case of sorts, Charter and the smaller, independent operators represented by ACA Connects, based that OTT competition call on the availability of AT&T TV Now, the former DirecTV Now.

To avoid a return to basic cable regulations, cable operators are looking to establish the precedent now as cord-cutting continues to cut into subscriber counts for the satellite competitors, whose ubiquity led to the FCC presumption of competition, and as over-the-top becomes the video delivery system of choice for those former satellite customers, as well as for cable operators who have made it clear that migration to broadband delivery of video and away from their traditional video distribution channels is the future of their business.

Related: Kansas's Rainbow Becomes Latest Cable Operator to Drop Linear Video

Cable companies fear that if the subscriber counts for DirecTV or Dish Network go south, local franchise authorities could cite that as a reason cable ops were no longer subject to effective competition and reinstate basic rate regulations.

WASHINGTON — In what could signal a big change in regulatory approach, Federal Communications Commission chairman Ajit Pai is proposing to set the precedent that streaming services qualify as “effective competition” to multichannel video programming distributors sufficient to trigger basic rate deregulation.

The FCC has said the presence in a market of direct-broadcast satellite service (DirecTV or Dish Network) can trigger an effective competition finding, but this would be the first time a virtual MVPD — in this case AT&T TV Now — filled the bill.

Pai said in an Oct. 3 blog post that an order would be teed up for a vote at the Oct. 25 meeting granting Charter Communications’s request (backed by ACA Connects) for a finding of effective competition. Pai almost certainly has the votes for approval or he would not have scheduled it for a public vote.

Historically, cable providers have cited the ubiquity of satellite as justification for removing rate regulations. But in this test case of sorts, Charter and the smaller, independent operators represented by ACA Connects are basing that OTT competition call on the availability of AT&T TV Now, the former DirecTV Now.

To avoid a return to basic cable regulations, cable operators are looking to establish the precedent now as cord-cutting continues to cut into subscriber counts for traditional competitors and as over-the-top becomes the video delivery system of choice for former satellite customers.

Cable companies fear that if the subscriber counts for DirecTV or Dish Network go south, local franchise authorities could cite that as a reason they were no longer subject to effective competition and reinstate basic rate regulations.

A finding of effective competition lifts basic-cable price regulation, which has now been eliminated in all but that handful of systems. Cable operators deemed subject to effective competition also do not have to provide broadcastTV signals on the basic tier.

“Adopting this order would be a major step toward the commission recognizing the realities of the modern video marketplace, and the increasingly important role that streaming services are playing in it,” Pai said.

The item raises the issue of just how the FCC should define OTT services beyond effective competition, and the specter of subjecting them to the same regulatory regime, such as program-access and program-carriage rules.

The Charter ruling could fuel that debate anew, given that the cable industry has made it clear that broadband video is the future of the business and also given that the current definition of the effective competition trigger is “at least two unaffiliated [MVPDs], each of which offers comparable video programming to at least 50% of the households in the franchise area.”

The FCC’s Charter order says OTT fits all of the definitions of competitive video provider for purposes of the effective competition trigger — comparable services, offered direct to home. The item says a provider does not have to have its own facilities to be a comparable video service, one of the sticky wickets in the debate.

Pai has said the FCC should not redefine OTT providers as MVPDs subject to FCC program-access regulations. But that was back in 2015.

His predecessor, FCC chairman Tom Wheeler, proposed redefining linear over-the-top providers (with day-and-date channel lineups similar to those of traditional cable and satellite) as MVPDs, but got pushback from some OTT providers. as well as from cable operators.

Wheeler was looking to give OTT providers FCC-enforced access to vertically integrated programming to give them a boost as video competitors to cable.

WASHINGTON — In what could signal a big change in regulatory approach, Federal Communications Commission chairman Ajit Pai is proposing to set the precedent that streaming services qualify as “effective competition” to multichannel video programming distributors sufficient to trigger basic rate deregulation.

The FCC has said the presence in a market of direct-broadcast satellite service (DirecTV or Dish Network) can trigger an effective competition finding, but this would be the first time a virtual MVPD — in this case AT&T TV Now — filled the bill.

Pai said in an Oct. 3 blog post that an order would be teed up for a vote at the Oct. 25 meeting granting Charter Communications’s request (backed by ACA Connects) for a finding of effective competition. Pai almost certainly has the votes for approval or he would not have scheduled it for a public vote.

Historically, cable providers have cited the ubiquity of satellite as justification for removing rate regulations. But in this test case of sorts, Charter and the smaller, independent operators represented by ACA Connects are basing that OTT competition call on the availability of AT&T TV Now, the former DirecTV Now.

To avoid a return to basic cable regulations, cable operators are looking to establish the precedent now as cord-cutting continues to cut into subscriber counts for traditional competitors and as over-the-top becomes the video delivery system of choice for former satellite customers.

Cable companies fear that if the subscriber counts for DirecTV or Dish Network go south, local franchise authorities could cite that as a reason they were no longer subject to effective competition and reinstate basic rate regulations.

A finding of effective competition lifts basic-cable price regulation, which has now been eliminated in all but that handful of systems. Cable operators deemed subject to effective competition also do not have to provide broadcastTV signals on the basic tier.

“Adopting this order would be a major step toward the commission recognizing the realities of the modern video marketplace, and the increasingly important role that streaming services are playing in it,” Pai said.

The item raises the issue of just how the FCC should define OTT services beyond effective competition, and the specter of subjecting them to the same regulatory regime, such as program-access and program-carriage rules.

The Charter ruling could fuel that debate anew, given that the cable industry has made it clear that broadband video is the future of the business and also given that the current definition of the effective competition trigger is “at least two unaffiliated [MVPDs], each of which offers comparable video programming to at least 50% of the households in the franchise area.”

The FCC’s Charter order says OTT fits all of the definitions of competitive video provider for purposes of the effective competition trigger — comparable services, offered direct to home. The item says a provider does not have to have its own facilities to be a comparable video service, one of the sticky wickets in the debate.

Pai has said the FCC should not redefine OTT providers as MVPDs subject to FCC program-access regulations. But that was back in 2015.

His predecessor, FCC chairman Tom Wheeler, proposed redefining linear over-the-top providers (with day-and-date channel lineups similar to those of traditional cable and satellite) as MVPDs, but got pushback from some OTT providers. as well as from cable operators.

Wheeler was looking to give OTT providers FCC-enforced access to vertically integrated programming to give them a boost as video competitors to cable.

Cable operators have a simple answer to the FCC's burning question of whether the video marketplace is competitive--yes--and a suggestion for how the FCC should proceed armed with that conclusion, including by making sure new online video competitors don't do anything to hurt that flourishing competition.

That came in comments by NCTA-The Internet & Television Association on the FCC's latest call for input on its annual video competition report.

The FCC under Republican Chairman Ajit Pai is likely to break with recent tradition and actually produce a report that comes to a conclusion about that competitiveness, rather than simply provide a snapshot of the marketplace as previous reports under Democratic chairs have done.

NCTA says the whole point of the report is to come to a conclusion about whether it is time to "dismantle a regulatory framework premised on the lack of competition." The previous reports under Democrats did not conclude one way or another.

NCTA also knows what the report should conclude: "Today's marketplace is characterized by vigorous competition" it says, among content providers of all stripes.

Given that Congress' concerns prompting the FCC reports--"a lack of MVPD competitors to cable and vertical integration of cable operators and most of the most popular cable program networks"--do not exist any longer, it says, "regulations premised on a lack of competition in the video market have no place in a market that is vigorously competitive."

Among other things, NCTA points to the steady decline in the share and number of MVPD subs, and the FCC's conclusion--a divided conclusion under Democratic chairman Tom Wheeler back in 2015--that MVPD's were presumed in all local markets to be subject to effective competition subject to rebuttal.

But NCTA wasn't telling the FCC to butt out entirely.

"New gatekeepers in the online marketplace should be monitored to ensure that the vigorous video competition that currently exists among MVPDs, between MVPDs and online video distributors, and among program networks and suppliers continues to flourish," it told the commission.

WASHINGTON — The unusual scene of the Federal Communications Commission strongly defending cable deregulation played out in a federal appeals court here, with the agency defending its decision to presume there is local MVPD competition in a market unless franchise authorities can prove otherwise.

When the FCC decides that a market is competitive, basic rate regulation is eliminated.

The FCC’s decision to reverse the presumption of no effective competition — which placed the burden of proof on cable operators — was prompted both by a legislative directive (in the Satellite Television Extension and Localism Act Reauthorization, or STELAR, bill) to make the effective-competition determination process easier on smaller cable providers and by a petition from NCTA: The Internet & Television Association to extend the reversed presumption to all cable providers.

The National Association of Broadcasters was on the other side of the argument. The NAB backs the National Association of Telecommunications Officers and Advisers in seeking to reverse the new FCC policy, concerned that basic-cable deregulation threatens TV stations that are “must buys” on regulated basic tiers.

In oral arguments on Nov. 10, FCC attorney James Carr cited NCTA and the American Cable Association, which represents smaller operators. Carr cited NCTA’s submission showing that in each of 210 designated market areas across the country, more than 15% of pay TV customers were subscribing to a cable competitor, primarily satellite TV. That’s one of the key benchmarks in determining effective competition.

The FCC said that does not mean that there will be effective competition in each franchise area, because DMAs typically encompass multiple franchise areas. Carr’s point was that there was no countervailing evidence in the record or raised by NATOA to show “there is some marked deviation from the mean that would lead us to expect there was a significant cluster that didn’t meet the threshold.”

In other words, if there was going to be a presumption that had to be disproved, it made more sense for it to be that competition exists rather than it doesn’t.

Stephen Kinnaird, representing NATOA, told the court the FCC had seized on “narrow streamlining legislation” to “shed statutory duties that it had long been keen to escape,” and, in the process, violated the statute.

It is hard to gauge how judges are leaning by their questions, as they probe arguments and play devil’s advocate. But several seemed to suggest that if there was going to be a presumption one way or the other, the NCTA evidence about presuming in favor of competition made sense. There’s no schedule on when the judges will rule but a decision likely won’t come until at least the first quarter of next year.