What Does the Shift Toward Online Video Streaming Mean for Regulatory Policy?

A flurry of announcements that HBOCBS, and Lionsgate and Tribeca Enterprises will stream video content online has prompted plenty of speculation about its potential success or impending failure. Some claim it proves that all consumers want to purchase video programming on an ‘à la carte’ basis. Others claim that HBO’s online service is “doomed before it even starts.”

I’m inclined to side with [mc_name name=’Rep. Bobby Rush (D-IL)’ chamber=’house’ mcid=’R000515′ ], who is optimistic that the trend will positively impact the video marketplace while remaining mindful that it’s too soon to predict the ultimate fate of à la carte video streaming.

No matter how these services fare among consumers, however, the fact that a cable channel (HBO), a broadcast network (CBS), and a major movie studio (Lionsgate) have all chosen to experiment with a new distribution model offers valuable insight to policymakers.

Competition in the Video Marketplace Is Increasing

The shift to online distribution is in part a response to increased competition among video programmers and distributors. For example, now that NetflixAmazon, and other online video distributors have begun producing original television series, ‘premium’ cable channels with original series (i.e., HBO and Showtime) are seeking to expand their audiences.

Localism in Limbo

The Federal Communications Commission (FCC) rules governing broadcast television — e.g., media ownership limitations and broadcast exclusivity protections — are intended to promote ‘localism’ (e.g., local news programming). In this respect, its noteworthy that CBS’s online service currently offers live streams only for large markets in which it has ‘owned and operated’ stations (though its working to add affiliate stations to its online service).

It’s also noteworthy that FCC Chairman Wheeler said nothing about the importance of preserving localism when he encouraged broadcast licensees to go ‘over the top’ in a speech at the National Association of Broadcasters convention earlier this year.

It’s unclear whether localism would survive a shift in the delivery of broadcast television programming from over the air to online streaming, and thus far, it appears that the FCC is unprepared (or perhaps unable) to address the issue. The FCC’s silence on localism online stands in stark contrast to its recent expansion of localism policies for television programming that is delivered over the air. Does Chairman Wheeler plan to leave local communities behind as part of his plan to adopt technology neutral rules for online video services?

Broadcasters Embrace Innovation

The CBS announcement challenges the technocratic mantra that broadcasters stifle innovation. CBS’s decision to stream content online indicates that broadcasters are willing to embrace innovation when the government permits it, and confirms that the biggest hurdle to innovation in the broadcast industry is restrictive government regulation.

The ‘Integration Ban’ Is Anachronistic

Consumers don’t need a cable ‘set top box’ (STB) to watch online video steams or over the air broadcast programming. Many innovative companies like Simple.TV are already taking advantage of this fact to market their own STB-like services for over the air and online programming without resorting to government regulation. Yet the Senate is tying itself in knots over the ‘integration ban’, an FCC rule that prohibits cable operators from integrating decryption technology into their set top boxes. As the cable STB becomes an anachronism, so does the integration ban.