FCC Chairman Ajit Pai said that the days of "must see TV" are giving way to the "must watch internet" and that the government needs to recognize that and treat the video marketplace accordingly.
Pai, in something of a valedictory address, was speaking at a Media Institute virtual luncheon event Tuesday (Dec. 15), where he talked about the rise of streaming video and, as a result, the need for the FCC and other levers of government to recognize that reality in their approach to video competition policy.
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One way to do that, he suggested, was to advance a new "broadcast internet" ATSC 3.0 standard to help broadcasters better compete, as his commission has done.
Pai, who is exiting the commission by Jan. 20, talked about his reforms of various FCC regs, including the leased access rules on cable, which mandate access to cable systems by independent programmers looking for channel space. He said it does not make sense for the government to mandate wholesale video access when there is online video being distributed to a worldwide audience.
He called that dereg low-hanging fruit, but also said the FCC had reached higher on the tree, including reforming the Children's Television Rules, in part, again, because of the wealth of competing content online.
The FCC had closed the spigot for franchise authorities to tax cable operators and said he expects that deregulatory decision to survive the current court challenge.
Pai called the FCC's 2017 broadcast ownership dereg decision, which was thrown back to the FCC by the third Circuit court of appeals, a reasonable response to market conditions, including eliminating the nonsensical broadcast-newspaper crossownership rules, again, nonsensical in part because of the competiton from the Web.
He said the decisions were obvious and needed and consistent with the FCC's mandate to review regs, but were blocked by the court, which had been coopting FCC decisions for the past 17 years.
The Supreme Court has agreed to hear the FCC's and broadcasters appeal (on Jan. 19) of that Third Circuit smackdown, which Pai called a breakthrough.
The chairman said the government needs to reassess the marketplace given the explosion of online video and that the long-predicted cord-cutting is an accelerating reality.
"Today, nearly 300 options are available to U.S. consumers. Over the past 13 months alone, we’ve seen the launch of major new services like Disney+, Apple TV+, HBO Max, Peacock, and a revamped CBS All Access," he said. "Early indications are that the big winners in the streaming wars are consumers, who are signing up for these new services by the millions. Disney Plus viewers celebrated the Fourth of July with a viewing of Hamilton, and in the midst of season 2 of The Mandalorian, Disney has learned that “this is the way,” with a recent announcement that the service already has 86 million subscribers. Subscribers to HBO Max can view the network’s award-winning programming like Succession and Curb Your Enthusiasm. And starting with the new Wonder Woman movie this Christmas, they’ll be able to watch Warner Bros. studio’s major motion picture releases the same day they open in theaters.
"On top of all that, established over-the-top players like Netflix are still churning out shows that dominate the cultural zeitgeist like Tiger King and The Queen’s Gambit. (One can only hope that there’s a purple documentary in the works on Prince.) "
Follow the money, meaning advertising budgets, he said, and the big winner is online and mobile media. It has created a gulf between the haves and have-nots. Google and Facebook are the "haves," predicted to draw more ad dollars than all TV and radio stations combined.
Congress should expand its forbearance authority--forbearing from enforcing regs it no longer considers necessary--beyond telecom carriers, he argued, as a way to help legacy video providers. The FCC should be able to apply the same forbearance to cable and broadcast regs.
He also called for a rewrite of the Cable Act given that streaming accounts for a quarter of all TV viewing, a trend he expects to accelerate. He said such a Cable Act update is desperately needed.
On the broadcast front, he pointed out there are no rules on how many streaming services a company can own, while there are still such rules on broadcasters. That does not make any sense, he suggested. He said the government is not grappling with what the market is and where it is, completely ignoring the explosion of video when considering market share.
From any perspective, the competitive marketplace should include TV, radio, cable, streaming, social media, gaming, or something else to come. The government should not artificially restrict the market based on what it looked like decades ago. What if the law said that only 39% of subs could conduct a Google search?," he asked, which would be the online version of the FCC's 39% cap on broadcast TV group reach.
Asked if over-the-top video should be regulated like MVPDs, he said he was generally skeptical of shackling new media with old regs and added that there could be all kinds of unintended consequences.
Pai would not comment on the Sec. 230 petition and whether he would act on it before he left.
