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Diller Calls for Rewrite of 1996 Act To Aid Growth of Online Video Platforms

Monday, April 30, 2012
ByPaul Barbagallo

An overhaul of the Communications Act is needed to ensure the continued growth of online video platforms, Barry Diller, chairman and senior executive of IAC/InterActiveCorp, told lawmakers April 24.

The last time Congress updated the act was in 1996, when the internet was barely in its infancy.

It took more than five years to produce that statute, the 1996 Telecommunications Act, which focused mainly on deregulating the telephone industry and was itself the first major overhaul of telecommunications law since the Communications Act of 1934.

“That act…does not address the reality of this force [the internet] that has been going on since 1995,” said Diller, the former head of Paramount Pictures and the architect of the Fox network, for whom Federal Communications Commission Chairman Julius Genachowski worked prior to taking the helm of the agency.

Diller testified to the Senate Commerce, Science, and Transportation Committee alongside executives from Microsoft and Amazon.com during a hearing on the future of pay television, in which Diller's company, IAC, could play a significant role.

Internet TV Controversy
In February, IAC formally introduced Aereo, an internet-based television service that offers customers the ability to stream--and record to the cloud--live broadcast programming of the major networks on their phones, tablets, and internet-connected TVs for $12 a month.

Aereo is seen as providing TV viewers a cheaper alternative to cable, which packages broadcast TV channels (ABC, CBS, FOX, NBC) together with hundreds of cable channels (like ESPN and HBO). IAC executives are hoping Aereo will appeal to consumers who want to watch live broadcast programming but do not want to pay for hundreds of cable channels they never watch.

“The internet gives us the ability to offer individual programs…or the narrowest or narrow casting,” Diller said.

Several broadcast companies already have filed suit to shut the service down, alleging copyright infringement for “retransmitting” broadcast signals without permission.

In a tense exchange with Sen. Jim DeMint (R-S.C.), Diller refuted notions that Aereo is a “network” or “reseller” or “multi-channel video distributor.”

“It is a platform,” Diller said of Aereo. “We are taking broadcast signals that are free, allowing [consumers] to record them and use them on any device they like…We're not reselling anything.”

“We charge the consumer for the infrastructure, the little antenna, and the internet cloud service,” he added. “We're not a distributor at all.”

When asked by Sen. John Kerry (D-Mass.) what would prevent him from creating his own broadcast network and distributing it exclusively over the internet, Diller responded, “Absolutely nothing.”

“[The internet] gives you an absolutely open possibility to create anything,” Diller said.

But, Diller said, incumbents wield too much power under current laws.

“Incumbents have the means and incentive to engage in economic and/or technical discrimination against online video distributors,“ Diller said.

“The rules need to reflect that there is a potential positive competitor to what has become a very closed system … dominated by relatively few companies,” he said.

Asked about regulations, Diller said they should be “relatively light touch.”

“There's got to be the levelest of playing fields that can be legislated,” Diller said. “There are all sorts of legacy obligations that broadcasters took on, that cable operators took on, that [phone companies] took on…that should now be included in the internet.”

Net Neutrality Needed to Protect Online Video
He was making a tacit reference to net neutrality, under which internet service providers would be prohibited from blocking or degrading the Web traffic of content generators, like Amazon.

“Maintaining an open internet is crucial for the provision of these competitive services,” said Paul Misener, vice president for global public policy at Amazon.com.

Over-the-top television, in which companies use the internet to bypass traditional pay-for-TV control points and deliver programming “over the top,” via a broadband connection, rather than the existing cable or satellite systems, has been long feared in the cable business, leading many cable operators to launch their own web TV services.

When asked if cable operators and broadcasters may try to thwart startup online video providers, Misener said the situation requires a close look.

“We've seen indications that they [cable operators] may wish to restrict the availability of competing content,” Misener said. “That needs to be monitored vigilantly by Congress.”

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