PublishedJune 27, 2012

House Hearing Examines Online Video, Data Caps

The constant refrain out of the “Future of Video” hearing was that whatever the future of video may be, it probably is not cable. The hearing opened with, and generally focused on, a single statistic: in 1992, when Congress passed the cable act, cable controlled 98% of the  pay for television market. When the FCC last released similar data in 2006, that number had dropped to 65%.

The witnesses at the House Communications and Technology subcommittee represented a number of industry players: cable, broadband and traditional broadcast providers. The MPAA was also there, representing the content industry without which, it claimed, there would not be a market for distribution at all.

The crux of the discussion revolved around the notion of both expanding and reforming the 1992 and 1996 regulations on cable television distribution, so as to ensure their pertinence to emerging, broadband based industry players. The legislators seemed to be in general agreement that such reform was necessary, but disagreed as to whether it would be more prudent to expand the regulations to include internet-based distribution of video, or simply repeal them altogether.

Industry representatives generally seemed to favor expanding the regulations, as they believed it would create a more level playing field. Less clear however, was their willingness to accept the “responsibilities” of their cable competitors such as the must-carry clause, which compels distributors to carry local broadcasts. The cable representative, the President of the NCTA, adamantly denied a concentrated effort to suppress the development of alternative means of television distribution.

There were a number of specific issues which generated a majority of the disagreement. The emerging, broadband based companies pushed for regulation of discriminatory data caps imposed on them by the cable companies. These caps cut off or degrade the data transmitted by certain companies such as Netflix once it has reached a certain information threshold.

Gigi Sonne, president and CEO of Public Knowledge, brought up the fact that on the Xbox, Netflix has a data cap whereas Comcast’s Xfinity did not, despite the fact that they provide a similar service. Her example illustrated the danger of data caps becoming discriminatory unless applied equally or not at all.

Netflix general counsel David Hyman told the committee, “When you couple limited broadband competition with a strong desire to protect a legacy video distribution business, you have both the means and motivation to engage in anticompetitive behavior.”

David Barrett, President and CEO of Hearst Television, also clashed with the panel over the issue of retransmission consent. The broadcast representative maintained that with the advent of DVR and commercial skipping, the revenues from retransmission consent agreements were necessary to offset their declining advertising costs. The cable industry representative however, maintained that the money was not being spent effectively and to the benefit of the consumer.


Charlie Ergen, Chairman and Co-Founder of DISH Network defended his company’s AutoHop technology that allows people to skip commercials. His full testimony can be found here.

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