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FCC Proposes Defining OTT Video as Effective Competitor

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.