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Federal Internet Law & Policy
An Educational Project
Media :: Video Dont be a FOOL; The Law is Not DIY


"When television is good, nothing - not the theater, not the magazines or newspapers - nothing is better.


FCC Chair Newton Minnow
(cc) Wikipedia

But when television is bad, nothing is worse. I invite each of you to sit down in front of your own television set when your station goes on the air and stay there, for a day, without a book, without a magazine, without a newspaper, without a profit and loss sheet or a rating book to distract you. Keep your eyes glued to that set until the station signs off. I can assure you that what you will observe is a vast wasteland.

You will see a procession of game shows, formula comedies about totally unbelievable families, blood and thunder, mayhem, violence, sadism, murder, western bad men, western good men, private eyes, gangsters, more violence, and cartoons. And endlessly commercials - many screaming, cajoling, and offending. And most of all, boredom. True, you'll see a few things you will enjoy. But they will be very, very few. And if you think I exaggerate, I only ask you to try it."

- FCC Chairman Newt Minow, 1961, Television and the Public Interest (Youtube version of the audio of the speech)

National Broadband Plan, p. 17

Both consumers and businesses are turning to applications and content that use video. Video is quickly becoming an important element of many applications, including desktop video conference calls between family members and online training applications for businesses. Cisco forecasts that video consumption on fixed and mobile networks will grow at over 40% and 120% per year, respectively, through 2013.11

User-generated video and entertainment—from sites such as YouTube and Hulu—are a large portion of the total video traffic over broadband connections. Increasingly, video is embedded in traditional websites, such as news sites, and in applications such as teleconferencing. Skype reports that video calls account for over one-third of its total calls, and that number is growing rapidly.

Video, television (TV ) and broadband are converging in the home and on mobile handsets. The presence of broadband connections and TVs in the home could facilitate the development of a new medium for accessing the Web and watching video content. Traditional, or “linear,” television still accounts for more than 90% of all time spent watching video.

Video consumed over the Internet still represents a small portion of overall video consumption at less than 2% of all time spent viewing. Broadband-enabled video could grow as more innovative and user-friendly devices reach the home, allowing access to both traditional linear and Internet content via the TV.

Definition

"An "OVD" is any entity that offers video content by means of the Internet or other Internet Protocol (IP)-based transmission path provided by a person or entity other than the OVD. An OVD does not include an MVPD inside its MVPD footprint or an MVPD to the extent it is offering online video content as a component of an MVPD subscription to customers whose homes are inside its MVPD footprint. See Applications of Comcast Corporation, General Electric Company and NBC Universal, Inc. for Consent to Assign Licenses and Transfer Control of Licensees, MB Docket No. 10-56, Memorandum Opinion and Order, 26 FCC Rcd 4238, 4357, App. A (2011) ("Comcast-NBCU Order"). Consumers need a broadband connection to receive video content from OVDs."  - 15th Report, Para 4

"The term “Online Video Distributor” or “OVD” means any entity that provides Video Programming by means of the Internet or other IP-based transmission path provided by a Person other than the OVD. Unless otherwise stated, an OVD does not include an MVPD inside its MVPD footprint or an MVPD to the extent it is offering Online Video Programming as a component of an MVPD subscription to customers whose homes are inside its MVPD footprint" - DirectTV Information and Discovery Requestion, MB Docket 14-90, DOC 329324A2

In re Promoting Innovation and Competition in the Provision of Multichannel Video Programming Distribution Services, MB Docket No. 14-261, NPRM n. 199 (Dec. 19, 2014) ("In this NPRM, we use the term OTT to refer to linear video services that travel over the public Internet and that cable operators do not treat as managed video services on any cable system." )

Video Drives the Broadband Virtuous Cycle

Fixed line broadband services, with their greater capacity, but lack of mobility, need to be able to differentiate themselves in the market from mobile Internet access services. [2016 Broadband Progress Report paras. 24, 35 (concluding that mobile and fixed broadband are not substitutes, stating "[a]s a service that is generally high in speed and network capacity, fixed broadband is better positioned than mobile to accommodate multiple simultaneously connected devices and bandwidth-heavy household uses, particularly streaming video services, which are increasingly popular with consumers.")] [National Broadband Plan at 41 ("A user who values little more than e-mail and browsing news sites has, in principle, many choices—nearly any broadband access technology will do. But a user who streams high-definition video and enjoys gaming probably requires high download and upload speeds and low latency. That user will likely have few choices.")].

Email, apps and webpages can be accessed anywhere anytime over mobile Internet services that are always with you. The ability to access and interact with high quality, resource intensive video, gaming, photography, virtual reality, and cloud computing sets fixed line broadband services apart and drives demand.

Connecting America: The National Broadband Plan, Federal Communications Commission 41 (2010), https://www.fcc.gov/general/national-broadband-plan ("A user who values little more than e-mail and browsing news sites has, in principle, many choices—nearly any broadband access technology will do. But a user who streams high-definition video and enjoys gaming probably requires high download and upload speeds and low latency. That user will likely have few choices.")

Demand for OTT Video has grown since mid-2000s

  • Boy, We Really Love Streaming Media, NCTA Blog Jan. 22, 2016 (70% Downloadtraffic during peak hours is video audio)
  • Sandvine Report: Netflix And YouTube Account For 50% Of All North American Fixed Network Data, Sandvine Nov. 11, 2013: Download traffic: Netflix 31.6%, YouTube 18.6%, P2P < 10% (down from 31% 5 years ago, 60% 11 years ago)
  • Gregory S. Crawford, The Economics of Television and Online Video Markets, Working Paper No. 197,  June 2015 P 45 At the end of 2012, North American Internet usage on fixed networks had grown by 120% (Haider (2012)) Much of this was driven by the grown in online video consumption, particularly Netflix. “Audio and video streaming account for 65% of all downstream traffic [on North America fixed networks] from 9pm-12am and half of that [33.0%] is Netflix traffic.” Amazon, Hulu, and HBO Go accounted for 1.8%, 1.4%, and 0.5% of peak traffic. Real-time entertainment, dominated by streaming audio and video, accounted for 67.4% of peak download traffic, with Netflix accounting for 46.9% of that amount. Peak traffic in Europe is less dominated by audio and video (47.4%), but this is no doubt due to lesser availability of OTT providers
  • [Sandvine Report: Netflix and Youtube Account for 50% of All North American Fixed Network Data, Sandvine (Nov. 11, 2013), ("Sandvine data on end user behavior reveals that bandwidth intensive applications dominate fixed line broadband service, with Netflix’s service in 2013 making up 31.6 percent of access network traffic, and YouTube making up another 18.6 percent of access traffic, for a combined total of 50.2 percent of traffic.  Other top sources of traffic included BitTorrent, MPEG, Hulu, iTunes and Flash Video.")]
  • [CISCO Visual Networking Index: Forecast and Methodology 2015-2020, Cisco 3 (2016)] CISCO data reveals that video “will be 82 percent of consumer Internet traffic by 2020, up from 70 percent in 2015.”

Service providers and the FCC recommend that end users using video applications have certain minimum broadband rates.

  • 16th Video Competition Report at ¶¶ 218-28. (Live streaming can require higher broadband; where download, store/buffer, and display can require lower broadband.)
  • Netflix Comments, Dkt. 14-90 at 6, 23 (Netflix recommends 3 Mbps for DVD quality video); Netflix Petition, Dkt 14-57, at 16 (Netflix states that 10 Mbps is sufficient for at least individual needs)
  • Letter from Pantelis Michalopoulos, Stephanie A. Roy, Counsel for DISH Network Corporation, to Marlene H. Dortch, Secretary, FCC, MB Docket No. 14-57, Declaration of David Sappington at 2 (March 25, 2015) ("'Comcast informs customers through its Xfinity website that only services with downstream speeds of at least 25 Mbps are appropriate for streaming video.'")
  • Inquiry Concerning the Deployment of Advanced Telecommunications Capability to All Americans in a Reasonable and Timely Fashion, and Possible Steps to Accelerate Such Deployment Pursuant to Section 706 of the Telecommunications Act of 1996, as Amended by the Broadband Data Improvement Act, 2015 Broadband Progress Report and Notice of Inquiry On Immediate Action to Accelerate Deployment, GN Docket No. 14-126, FCC 15-10,  ¶ 26. (2015) (“2015 Broadband Progress Report”).  In that Report, the Commission determined that 4 Mbps was insufficient to satisfy most households’ broadband needs, particularly when accounting for the bandwidth intensive demands of video services.
  • The Commission concluded in the Connect America Fund order that 5 Mbps was necessary to stream HD video.  Connect America Fund, 29 FCC Rcd at 15651, ¶ 17;
  • Comcast markets its 6 Mbps service (its lowest speed offering available to all subscribers) as being only sufficient for sharing photos and downloading music, while 25 Mbps is marketed as necessary to “stream and download full-length TV shows and is “best for 2-3 devices online at the same time.” XFINITY Advertisement, Washington Post, A18, Oct. 30, 2014; Comcast, XFINITY Internet Offers, http://www.comcast.com/xfinity-internet-offers (visited Apr. 17, 2015).
  • Time Warner Cable, More great High Speed Internet offers from Time Warner Cable, http://offers.aiprx.ordertimewarnercable.com/offers/twcInternet.php (visited Feb. 5, 2015) TWC’s advertising states, “Between laptops, tablets and smartphones, you need all the bandwidth you can get.”
  • Apple, Apple TV (2nd and 3rd generation): Troubleshooting Playback Performance, http://support.apple.com/kb/TS3623 (visited Nov. 19, 2014) (recommending 8 Mbps “for 1080p high-definition movies and TV shows” and 6 Mbps for “720p content”). 
  • Letter from Pantelis Michalopoulos, Counsel for DISH, to Marlene H. Dortch, Secretary, FCC, at 2, transmitted by letter from Stephanie A. Roy, Counsel for DISH, to Marlene H. Dortch, Secretary, FCC (Mar. 25, 2015) (“DISH Mar. 25, 2015 Ex Parte Letter”) (“DISH targets high speed broadband homes and promises access to its [Sling TV] product on a variety of devices both inside and outside the home.”)

Demand for Video drives broadband demand

  • [Charter / TWC Merger, Application and Public Interest Statement, Charter Corporation, at 23 n 56 (“Winfrey Decl. para. 10. Incentives to encourage OVD growth act as a spur to increased demand for high-speed broadband. As Dr. Scott Morton explains, “New Charter will have an increased incentive and ability to promote OVDs and other edge providers in order to encourage usage that expands subscribership to its broadband network.” Dr. Scott Morton Decl. para. 37.”)]
  • [Charter Ex Parte, MB Dkt 15-149 at 6 ("The content offered by OVDs drives the growth of traffic on the Internet, and, in turn, the demand for high-speed data services which will have higher profit margins at New Charter than any other service will")]
  • Vik Saxena, Ph.D., Sr. Director, Network Architecture, CTO Office, Comcast Cable, Bandwidth Drivers for 100G Ethernet, Slide 11 (Jan. 2007), ("VoD Adoption is Shaping New Network Needs");
  • Letter from Maureen R. Jeffreys, Counsel for AT&T Inc., and William M. Wiltshire, Counsel for DIRECTV, to Marlene H. Dortch, Secretary, FCC, MB Docket No. 14-90, at 5 (Apr. 21, 2015) ("AT&T says that it 'views itself as fundamentally a broadband company' and that the 'combined company can remain competitive only if it provides customers with as rich an entertainment environment as possible' including OVDs.");
  • Letter from Samuel L. Feder, Jenner & Block, Counsel for Charter Communications, to Marlene H. Dortch, Secretary, FCC, MB Docket No. 15-149, at 6 (Dec. 11, 2015) ("The content offered by OVDs drives the growth of traffic on the Internet, and, in turn, the demand for high-speed data services which will have higher profit margins at New Charter than any other service will")

Video's broadband demand drives investment in broadband

  • [Preserving the Open Internet Order, 25 FCC Red. at 17911 para 14"Streaming video [services] have led to major network improvements such as fiber to the premises, VDSL, and DOCSIS 3.0. These network improvements generate new opportunities for edge providers, spurring them to innovate further."]
  • the "rise of streaming online video is perhaps the best and clearest example the Commission used to illustrate that the Internet constitutes one such technology" that "create[s] a need for infrastructure investment. . . that complements] and further drivefs] the development of the initial innovation and ultimately the growth of the economy as a whole." Verizon, 740 F.3d at 644 (citing  Preserving the Open Internet Order, 25 FCC Red. at 17909-11 paras 13-14; Timothy F. Bresnahan & M. Trajtenberg,  General purpose technologies: 'Engines of Growth'?, 65 J. ECONOMETRICS 83, 84'(1995)).

MVPD had an incentive to build out national backbones in order to link their local networks and act as a video distribution network. Vik Saxena, Ph.D., Sr. Director, Network Architecture, CTO Office, Comcast Cable, Bandwidth Drivers for 100G Ethernet, Slide 10 (Jan. 2007) (nationwide backbone benefit: "very flexible and low cost linear and OnDemand video distribution"); John Schanz, Executive Vice President, National Engineering and Technology Operations, Comcast Cable, Network and Technology Slide 4, May 1, 2007 (describing network capabilities, listing its ability to deliver OnDemand video as number one feature)

Consistent with the virtuous circle, bandwidth demanding services such as Netflix and YouTube drive consumer demand for broadband, greater demand for broadband drives broadband investment, and improved broadband networks enables innovation and creation of new online services. 

Network Provider Incentive to Protect MVPD Video Revenue

Incentives

Multiple play network providers have an incentive to protect their revenue from MVPD video service from potential competitive substitute services such as OTT video.

See Joint Academics and Experts Comments, MB Docket 14-57, at 3 (noting that while Comcast’s video division has incentives to harm OVDs, Comcast’s broadband division has incentives to protect them

"For example, the Commission noted that “broadband providers like ATT and Time Warner have acknowledged that online video aggregators such as Netflix and Hulu compete directly with their own core video subscription service,” id. (internal quotation marks omitted), and that, even absent direct competition, “[b]roadband providers . . . have powerful incentives to accept fees from edge providers, either in return for excluding their competitors or for granting them prioritized access to end users,” id. at 645–46." [USTA v. FCC Slip 18 DC Cir. 2015]

MVPDs are an important source of revenue

OTT Video is a competitive substute service for MVPD video service

Paid cable subscription TV numbers are declining, with peak adoption rate in 2009. 

Therefore MVPD / Broadband Networks Have an Incentive protect its video service

Because video drives broadband demand, BIAS providers argue that they have a disincentive to degrade access to video applications. [Comcast / Time Warner Cable Reply to Responses, MB Docket No.14-57, at 7 (Dec. 23, 2014) ("Comcast also lacks the incentive to degrade the traffic of edge providers, including OVDs, that are key complements to Comcast's high-growth broadband service in which Comcast has invested tens of billions of dollars. Comcast needs edge providers to offer attractive content, applications, and services so that existing and new Internet customers continue to demand Comcast's broadband service.")];

Ability

[Crawford 45 ("Netflix saw its share price drop by 5% on the morning of the news [that the 2010 OI Rules had been overturned] and by 13% from its pre-Christmas peak as analysts envisioned 'hundreds of missions of dollars in data subsidies'")]

BIAS Abilities to harm rivals FCC13 para 259

 

Regulatory Treatment

1976: "In May, 1976, the Federal Communications Commission promulgated rules requiring cable television systems that have 3,500 or more subscribers and carry broadcast signals to develop, at a minimum, a 20-channel capacity by 1986, to make available certain channels for access by third parties, and to furnish equipment and facilities for access purposes. Report and Order in Docket No. 20508, 59 F.C.C.2d 294 (1976 Order)." [Midwest Video p. 691]

1979: Supreme Court rules FCC lacks authority to impose common carrier obligations on cable video service providers. FCC v. Midwest Video Corp., 440 U.S. 689 (1979)

History

International

 

Table 7: MVPD Video Subscribers (in millions) from FCC Report 2013

Year
End of Year 2010
End of June 2011
End of Year 2011
End of June 2012
MVPD Total
100.8
N/A
101.0
n/a
Cable
59.8
58.9
58
57.3
Comcast
22.8
22.5
22.3
22.1
TWC
12.4
11.2
12.1
12.5
Cox
4.9
4.8
4.8
4.7
Charter
4.5
4.4
4.3
4.3
Cablevision
3.3
3.3
3.3
3.3
All Other Cable
11.9
11.6
11.3
10.5
DBS
33.4
33.5
33.9
34.0
DirecTV
19.2
19.4
19.9
19.9
DISH Network
14.1
14.1
14.0
14.1
Telephone
6.9
n/a
8.5
n/a
AT&T U Verse
3.0
3.4
3.8
4.1
Verizon Fios
3.5
3.8
4.2
4.5
All Other Telephone
0.4
n/a
0.5
n/a

Timeline

First Youtube Video Uploaded April 23, 2005

Missed Opportunities

"Buy when the stock is first offered." - Chauncey Depew.

The Trojan Room Coffe Pot on Look East


The Don Lee Broadcasting System, History Guy


Arrival of a Train 1896 by "The Lumičre brothers"

Online Video Deliver (OVD) Era Begins

Color Television Era

Cable Television Era

Black and White Television Era

Color Movie Era

Silent Movie Era

 

Market / Industry Structure

Content Producers / Owners / Creators

Advertisers

Content Distributors

Broadcast TV

Devices / Set Top Boxes

Eyeballs / End Users / Consumers / Subscribers