Verizon, Netflix Seek Video Rule Tweaks to Grab Millennials

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By Lydia Beyoud

Aug. 25 — Verizon Communications Inc. and other video content companies are looking to an upcoming FCC report on video competition as a vehicle to push for regulatory changes to help them grab the eyeballs and pocketbooks of sought-after “millennial” viewers, a series of recent commission filings reveal.

Several commenters told the agency its upcoming report on the video programming market should reflect the influence of 18- to 34-year-olds who are dropping — or never starting — cable subscriptions, driving companies to compete with new online video content offerings. 

Verizon asked the Federal Communications Commission to be bold in a planned regulatory review mandated by the STELA Reauthorization Act of 2014 of its “totality of the circumstances test” for determining whether retransmission consent deals between broadcasters and so-called multichannel video programming distributors (MVPDs) are negotiated in good faith, according to a filing posted Aug. 25. The comments are in response to the FCC's public notice (MB Docket No. 15-158) seeking comment for the FCC's 17th annual competition report.

Criticizing broadcasters, Verizon said the FCC should “strengthen the existing set of obligations defining good faith negotiations” by finding a lack of good faith when a broadcaster expands a programming blackout to customers of an MVPD's affiliated Internet access services.

“The Commission should make clear that blocking access to Internet content that is otherwise generally available in order to frustrate Internet customers and increase pressure on an MVPD is not an appropriate negotiation tactic,” Verizon said.

Such a change could be a boon to Verizon as it moves closer to an anticipated fall introduction of a new over-the-top (OTT) video service targeting mobile consumers—“particularly millennials.”

While Verizon's addition to the roster of new OTT video offerings this year should enhance competition in the video marketplace, the company asked the FCC to ensure its program access rules help OTT and other competitive video providers obtain must-have programming controlled by incumbent cable operators at reasonable rates.

MVPD Status Opt-In

That would mean granting OTT providers of multiple channels of linear programming—which Verizon indicated its OTT offering would be—the option to obtain MVPD status for regulatory purposes, “including gaining reasonable access to programming, while also shielding these providers from legacy cable regulation, technology mandates, or other unnecessary regulation.”

The FCC has a proceeding underway on the possibility of modifying the definition of an MVPD to be “technology neutral” in order to enhance competition in the video marketplace.

Independent online video distributor (OVD) FilmOn X, LLC also used the public notice proceeding to urge the FCC to expand its MVPD definition in order to promote competitive parity between OVDs and incumbent MVPDs like Dish Network Corp.

“FilmOn X and other new entrants have faced crippling litigation costs when they have sought to take advantage of the same copyright licenses that have benefited incumbent MVPDs for years,” FilmOn X said in its filing posted Aug. 25. Like Verizon, the company said current regulations leave too much leverage in the hands of MVPD incumbents when negotiating content and distribution rights.

Netflix Seeks Interconnection Protections

Streaming video provider Netflix, Inc. asked the commission to keep an eye on interconnection disputes between content delivery networks (CDNs) and broadband providers as part of its report. Netflix uses CDNs to cache popular data and speed content delivery.

Disputes between Netflix and large broadband providers like Comcast Corp. helped give rise to the FCC's controversial 2015 net neutrality rules in which it extended its regulatory authority to interconnection issues, though only under a general assertion of authority under Sections 201 and 202 of the Communications Act of 1934's just and reasonable standards.

The FCC's reclassification decision was nevertheless highly controversial and faces opposition from broadband providers who have filed a lawsuit to overturn the rules.

Netflix urged the FCC to keep the pressure on Internet providers by scrutinizing “anti-competitive” fees assessed by broadband providers on OVDs to deliver traffic from CDNs onto their last-mile networks. “These fees are divorced from the actual costs of ‘physical interconnection,' and are instead designed to charge edge providers for transporting data over their terminating broadband access network,” Netflix said in its filing posted Aug. 25.

Some broadband Internet providers that have affiliated video services, such as Comcast and, soon, Verizon, “may be particularly motivated to raise the costs of competitive OVDs, as this makes the affiliated service more attractive,” Netflix said.

The company said the FCC should encourage “enforceable” industry commitments like Charter Communications Inc.'s plan to operate a “settlement free interconnection policy” for its network if its proposed merger with Time Warner Cable and Bright House Networks is approved.

To contact the reporter on this story: Lydia Beyoud in Washington at lbeyoud@bna.com

To contact the editor responsible for this story: Heather Rothman at hrothman@bna.com

Text of Verizon's filing is at http://apps.fcc.gov/ecfs/document/view?id=60001122658.

Text of FilmOn X's filing is at http://apps.fcc.gov/ecfs/document/view?id=60001122691.

Text of Netflix's filing is at http://apps.fcc.gov/ecfs/document/view?id=60001122668.