Back in September we highlighted the predicament of ivi TV, a US company which countersued a bunch of big media firms in the US, after getting cease and desist orders from them. It had been broadcasting free to air TV content over the internet, claiming that the US ‘must carry’ rules should apply to it, just as much as cable.
In fact they don’t, simply because the must carry programming rules took years to be reached and were due to the arrival of first cable operators and then satellite operators, who effectively did just the same as ivi, and went ahead and rebroadcast free to air programs. The must carry regulations were brought in by the FCC to make them legal and set up payments to broadcasters for the use of their channels.
Right now the FCC does not regulate the internet, although it might if it pushes through its Title II approach to regulating ISPs. There are alternatives to this happening. The cablecos and the telcos want a light regulatory touch and have offered to be self-regulating, other lawmakers have proposed, and had rejected, light touch net neutrality regulation, but more may be proposed.
But the entire ivi TV issue may be big enough to spark off another change in the legal standing of the internet. The company has gone on record saying that the FCC has asked it about contracts which cable networks have with cable operators, in particular Comcast, which restrict networks from putting their content on the internet.
The ivi CEO Todd Weaver has already found himself being interviewed by the FCC over the restrictive clauses in the Comcast contracts, and could become a staunch ally here. Comcast has many cable networks in a bind, that is the companies which produce entire channels from original content. It has insisted on having these internet clauses, from periods when these TV channels were looking for carriage on Comcast and other cable operator networks. It is these very clauses which prevent most cable networks looking for their own internet partnerships, and instead gives Comcast and other major pay TV operators the opportunity to allow these networks to make internet revenue only by sharing advertising with them on their TV Everywhere strategies.
In other words right now, if someone wanted to do what ivi wants, and use the internet for pay OTT, the cable operators can stop them doing anything more exciting than re-broadcasting free to air programming. So as ivi, which is charging around $5 a month for service, begins to develop and wants to sell cable networks, it has found they are all legally tied up. The FCC could potentially bring an anti-trust suit against Comcast and others to prevent it using the type of prohibitive contracts that it already has in place.
Ivi insists that it pays for its content, both through a copyright payment for the free to air channels, but also it is prepared to pay directly per customer to take on more channels.
If the cable operators win out here it and preserve most content ONLY for their TV Everywhere services, it will mean that TV will remain tied to the maintenance of their physical cable networks. Those networks give the cable operators the underlying broadband strength to take on the telcos in broadband and fixed line voice. It is also creating the spare cash to mount challenges in the future with cable owned cellular services.
To the consumer, having anti-trust control in the hands of a few pay TV networks, means that pay TV will remain a $50 to $150 a month proposition across the US. By supporting companies like ivi, which have no network to maintain, it could become simply a $5 or $10 a month proposition. Sure someone would have to pay for the upkeep of broadband networks, but that would mean that broadband capacity would slowly become more expensive ‘ and bit pipe pricing would come into being ‘ paying for the bits you use, rather than for all of the relative quad play services on them.
We have said it before that this is the death of the Quad play and certainly of triple play.
In that ivi says that it is legally operating under US Copyright Law and claims that the Copyright Act expressly authorizes secondary transmissions of copyrighted works embodied in primary transmissions as long as statutory licensing fees are paid periodically to the Register of Copyrights, which it says it does.
A letter published in Fierce IPTV this week from Weaver puts his case and makes the allegation that cable companies are unfairly manipulating access to content both through potentially illegal contracts and through implied threats, about what they might do to cable networks, if they work with companies like ivi.
Weaver points out that he set the company up in 2005, building first a content distribution system, a technique for live streaming, and a downloadable conditional access system, all of which took two years. It is only since the company has come out of stealth and begun to seek deals with contact owners that ivi has found first a lack of willingness to play along, but also many asides saying , ‘We can’t because cable will kill us.’
Just a few days ago Broadcasting and Cable magazine printed the allegations and the news that the FCC is interested in becoming involved.
In our view the FCC has no choice but to fully investigate Comcast, a business which is taking over a major studio, taking over a major investment in Hulu and which is proposing free content over the internet, but only for its subscribers, at the same time as blocking the same content getting to market in other, legitimate ways.
If the FCC goes ahead and makes this a formal investigation (and we honestly can’t see how it can do anything else) then it would be in a position to rescind any contracts deemed to be illegal, and open up content across the US to multiple ivi style businesses ‘ in the process crashing the artificial stronghold on content control that US cable operators currently have. If the FCC fails to do this just as Comcast takes over NBC Universal, then it will have set a precedent which will allow Comcast to decide on the route to maker for almost all US content, vis-a-vis the internet.
Given that FCC involvement could be to the benefit of the major telcos (at least to the point that it damages their biggest rival) we might expect to see AT&T and Verizon perhaps changing their lobbying position somewhat, to one more in favor of Ivi.