FCC Decision on MVPD Status for OTT Providers Worries Broadcast Industry

   Sky Angel, a company that distributes programming via the Internet, has filed a claim with the FCC earlier this week to request recognition as an MVPD alongside other traditional cable or satellite operators like Comcast, DirecTV and Dish Network. The claim stems from Sky Angel’s ongoing dispute with cable programmer Discovery Communications, which signed a deal with Sky Angel in 2007 that authorized the OTT provider to carry Discovery content on its service. Sky Angel was also required to pay Discover a monthly license fee for the channels.

   If Sky Angel was classified as an MVPD, the FCC’s “program access” rule would have taken effect, requiring Discovery to give Sky Angel the same contract rights as a cable or satellite programmer. If a programmer has a stake in a distribution service, then it is required to sell its programming to any MVPD upon request. One of Discovery’s largest shareholders is Liberty Media, whose holdings include a cable system in Puerto Rico. This would place Discovery under the FCC’s “program access” rule if Sky Angel were considered an MVPD.

   But, because there is no clear association between OTT and MVPD providers, Discovery was able to cancel its deal with Sky Angel in 2009 without reason or consequence. In its complaint to the FCC, Sky Angel claimed that Discovery “never expressed any dissatisfaction with respect to the agreement or Sky Angel’s service,” though OTT providers are currently not protected by regulations in similar situations.

   Discovery Communications filed its own counter argument to Sky Angel’s claim with the FCC, emphasizing the difference between a traditional MVPD’s ability to make programming available to consumers using facilities they own or control and Sky Angel’s OTT service which uses public Internet pipelines to transmit video.

   Discovery’s argument may carry some weight in the FCC’s clarification process due to the list of broadcast industry companies that support its position. Comcast, the largest U.S. cable operator and parent company of NBC Universal, argued that OTT distributors should not be considered MVPDs. “The OTT industry is still growing and it will be hampered by having to fulfill all the regulatory commitments that are required of cable operators,” Comcast said in a company statement.

   The Motion Picture Association of America (MPAA), which has long been cautious of Internet-streaming content providers, warned the FCC to proceed on the matter with the same approach.

   “The marketplace should figure out how new OTT distribution platforms work with content providers, not the government,” the MPAA said in a response statement. “Currently, the online video distribution industry is competitive and growing. But even small changes to video programming regulations can have a far-reaching impact on the complex ecosystem that underpins the video content industry, especially in the Internet age.”

   While satellite pay-TV operator DirecTV expressed mixed reactions to Sky Angel’s FCC filing, the company argued that Sky Angel should be regulated by the FCC if service is going to be classified as an MVPD and compete with DirecTV and other satellite broadcasters.

   “The FCC should establish a level playing field where competitors operate under a core set of common rights, protections and obligations,” DirecTV said in its own company statement.