Cable Industry Bites Nails After FCC Chairman Tom Wheeler’s Anti-Bundle MVPD Pitch

The U.S. cable industry is on Yellow Alert. After learning that the head of the Federal Communications Commission wants to potentially revise the legal definition of pay television, the National Cable and Telecommunications Association (NCTA) said Wednesday that it hopes the agency doesn’t act too hastily.

“Redefining what it means to be an MVPD [multichannel video programming distributor] raises profound questions about how government will extend regulation to Internet video services and how any would-be virtual MVPDs will meet their ‘social compact’ obligations,” a spokesman for the NCTA said in a statement. “With so many unknowns, the FCC should take great care in any such examination so as to avoid creating new problems that would result in unintended consequences and would fail to honor principles of competitive neutrality among rival providers.”

In a blog post Tuesday, FCC Chairman Tom Wheeler said he wants the commission to include online-only TV services in the rules that regulate MVPDs, essentially making the term “technology neutral.” Such a change, he said, would allow more competition from emerging players in the streaming marketplace.

Specifically, Wheeler cited Aereo Inc., the two-year-old startup that is attempting to transform into a cable TV-like company after its previous business model -- which involved capturing broadcast signals with remote antennas and charging a fee to access them online -- was deemed illegal by the U.S. Supreme Court. Wheeler said in the blog post that representatives from Aereo visited the FCC to make the point that MVPD regulations are out of date and need to move into the 21st century.

Wheeler, a former cable-industry lobbyist, apparently agrees: He said Tuesday that he has asked the commission to start a rule-making proceeding that will modernize the FCC’s interpretation.

Chet Kanojia, Aereo’s founder and chief executive, said a change in the rules could provide much-needed clarity and called Wheeler’s proposal an “important step in the right direction” for viewers.

“The way people consume television is rapidly changing and our laws and regulations have not kept pace,” Kanojia said in a statement. “By clarifying these rules, the FCC is taking a real and meaningful step forward for competition in the video market. The FCC recognizes that when competition flourishes, consumers win.”

Encompassing Web-only services under the same regulatory umbrella as traditional cable could have significant implications for the industry’s current business model, which is dependent upon cable companies offering a suite of networks under one bundled package. If you want AMC, for instance, you have to take MTV and the Weather Channel too. Wheeler’s proposal was, in part, a direct attack on the bundled status quo, as a revision of the rules could open the floodgates for streaming companies that offer slimmed-down packages or even channels on an a la carte basis.

“Consumers have long complained about how their cable service forces them to buy channels they never watch,” Wheeler wrote.

Wheeler also spoke of a need to prevent large cable conglomerates from squelching innovation by not allowing online-only TV services fair access to their content. Classifying online-only services as MVPDs, he reasoned, would give them equal access to content owned by cable operators and the same ability to bargain to carry broadcast TV networks. He provided few specific details, however. “A key component of rules that spur competition is assuring the FCC’s rules are technology-neutral,” he said.

A spokeswoman for Comcast Corp., the country’s largest cable company, declined to comment on Wheeler’s proposal, instead referring to the statement by the NCTA. Read the group’s full statement here.

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