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OTT to FCC: USF Streaming Fee Would Be Impossible to Administer

A man using his phone while watching TV
(Image credit: Maskot via Getty Images)

Streaming content providers are telling the FCC it would be unwise and unworkable for Congress to expand the broadband subsidy base to include over-the-top video and others in the vague "Big Tech" basket and essentially impossible for the FCC to administer.

Currently, Universal Service Fund subsidies are levied on telecom services, not broadband, but with traditional phone service waning, that contribution base is withering as well, leading some to suggest that online behemoths be brought into the subsidy fold. Since those telecom subsidies are passed on to subs on monthly bills, levying them on streamers would almost certainly raise the OTT video price to consumers, though that was not the tack the Motion Picture Association was emphasizing in its comments on the FCC's inquiry into how to keep the USF fund sustainable.

In comments on the FCC's upcoming report on the future of USF, MPA counted the ways in which getting Congress to expand contributions to broadband content providers including streamers was a nonstarter, saying  that would "(1) exceed the Commission’s authority, (2) be inadvisable as a matter of policy, and (3) present significant implementation issues that would render such an approach unworkable."

Also: Network Affiliates Push FCC for OTT Must Carry

They told the FCC that the contribution problem can't be fixed by making streamers and other online services -- MPA suggests those would include online advertising, cloud services, online marketplaces -- subject to USF fees.

MPA represents Netflix Studios, LLC, Sony Pictures Entertainment Inc., Paramount Pictures Corporation, Universal City Studios LLC, Walt Disney Studios Motion Pictures, and Warner Bros. Entertainment Inc. OR put another way, a veritable Who's Who of streaming content players -- Netflix, Disney Plus, Hulu, ESPN Plus, Peacock, Paramount Plus, Crunchyroll, HBO Max.

They told the FCC that suggestions that streamers "disproportionately" get the benefits of broadband deployment while paying nothing to support broadband nets is false.

For one thing, they argued, they have been investing billions to develop programing that is highly valued by consumers and broadband buildouts allow those users to get even more value from their broadband service dollar. Then there are the investments in content delivery networks (CDNs) to help alleviate traffic issues and in versatile video encoding and variable bit rates to make data transfers more efficient.

They also say that from a policy perspective, targeting specific uses of broadband, say streaming rather than telehealth of IoT applications, does not make sense because it could hinder or favor a particular use.

Even if the FCC were to recommend that Congress expand the USF contribution base to include online services, it would create a host of intractable administrative problems, on which it elaborated:

"[O]nline services do not require Commission licenses to operate, there is no effective cap on the number of providers in the marketplace, and that number is always changing," MPA said. "Online platforms, including streaming services, social media networks, advertising platforms, and online marketplaces, are continually entering and exiting the market, creating a situation in which the Commission would be unable to properly determine which firms must pay contributions. USF
cannot be assessed on such a dynamic set of services in any way that is 'specific [and] predictable.' Moreover, the diversity of online business models and services makes 'equitable and nondiscriminatory' USF contributions impossible to structure, administer, or enforce."

As edge providers have moved more into Washington's regulatory sites, there have been various efforts to bring over-the-top video into the FCC's ambit, including pushes to define over-the-top video providers as MVPDs and subject them to program access and carriage requirements, as the FCC once proposed under then FCC chairman Tom Wheeler, and to put them under the FCC's must-carry regime as well.

ISPs have also argued that the Netflix's of the world were pushing for middle-mile net neutrality to avoid paying for the upgrades needed to handle the increased traffic load their OTT services generate. ■

Contributing editor John Eggerton has been an editor and/or writer on media regulation, legislation and policy for over four decades, including covering the FCC, FTC, Congress, the major media trade associations, and the federal courts. In addition to Multichannel News and Broadcasting + Cable, his work has appeared in Radio World, TV Technology, TV Fax, This Week in Consumer Electronics, Variety and the Encyclopedia Britannica.