A two-judge panel of the U.S. Court of Appeals for the First Circuit has declined to reverse the FCC's decision that Charter is subject to effective competition from AT&T's online streaming service, concluding that the FCC's decision that OTT was a comparable service was an interpretation "based on the plain meaning of its own regulation" and was therefore a reasonable reading of the 1992 Cable Act.
Both Charter and NCTA-The Internet & Television Association had filed briefs with the court in support of the FCC.
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The Massachusetts Department of Telecommunications and Cable (MDTC) challenged the FCC's October 2019 determination that over-the-top streaming video service was a competitor to cable systems in local markets, granting an effective competition petition from Charter in Massachusetts citing the availability of the AT&T Now (formerly DirecTV Now) video streaming service.
A finding of effective competition lifts basic-cable price regulation, which has now been eliminated in all but a handful of systems in Massachusetts thanks to the ubiquity of satellite service. Cable operators deemed subject to effective competition also do not have to provide broadcast TV signals on the basic tier, though they still do.
The FCC’s Charter order said that AT&T's OTT service fits all of the definitions of 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 says 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.
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In deciding not to hear the state's challenge, the two judges—a third judge named to the panel did not participate—said that Congress had left it to the FCC to interpret "comparable" service and that DirecTV Now's package of services, including broadcast channels and non-broadcast video, was a reasonable reading of that term.
Opponents of giving OTT comparable video service standard argue that it should have to have its own facilities to qualify, as do cable and satellite MVPDs. But the FCC disagreed and the court accepted that. "Most importantly," as the FCC pointed out, "the statute contains no facilities-based test, and Congress expressly provided that video programming services could be offered 'by any means.'"
Each side must pay its own court costs, so attorneys on both sides were winners.
The decision certainly bodes well for Cox and Comcast, whose petitions for "effective competition" determinations in a number of Massachusetts counties the FCC granted last week. Cox and Comcast had also cited over-the-top service AT&T Now as the effective competitor and the FCC's Charter decision as the precedent.
