Powell: TV's Golden Age Is Set Against Tarnished Regs

Will tell Congress that it is time to rethink regs based on outworn cable monopolist/broadcast subsidy models
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National Cable & Telecommunications Association president
Michael Powell said Tuesday his Hill testimony about the future of video will
focus on three things: 1) cable's golden age is now; 2) technology is driving
choice, removing friction points between cable and consumers including set-tops,
navigation; and 3) the cable industry is not trying to thwart over-the-top
video.

Given those, he says, it is time to take a fresh look at
regulations that are premised on either a concentrated, vertically-integrated
monopolist model of cable that is not true today, or on subsidizing
broadcasters and protecting them from competition. Whether those should
continue to be the national judgments on those services "is worth some
reconsidering by Congress," he says.

Powell, who is a witness at the June 27 future of video
hearing in the House Communications Subcommittee, says that the ‘50s and ‘60s,
familiarly tabbed TV's "golden age" was an iron age compared to the quantity,
quality and diversity of today. His definition of diversity was niche
programming that would often be neglected in a traditional advertising model,
rather than the two-revenue stream model of cable. Want to Fish, cook, dance or
lose weight? There is a cable channel for you, he says. He concedes that cable
was once a monopoly, at least among MVPDs, with 98% of the viewers. He points
out that is down to 57% and either flat or trending down. The largest
multichannel video provider? Netflix, says Powell, followed by Dish and
DirecTV.

On the tech front, Powell says that the industry is moving
away from set-tops and set-top-based navigation to cloud and app-driven
interfaces. Just as Google can push software updates every week, the cable
industry will be doing that in the next 3-5 years.

Powell says that the government should reconsider a video
marketplace regulatory regime based on the "rapidly eroding
predicates" that undergird it. The key missing ingredient in that model is
the Internet, he said.

And in that conversation about regs in need of review should
be retransmission consent and must-carry, he suggested, though with members on
both sides of the issue NCTA is not staking out a position.

Powell said that, like other regs, must carry-retrans was
based on historical assumptions that might have been true at one time, but may
not still be today. Two reasons he thought it would have to be part of the congressional
conversation, he said, were the changed marketplace and the fact that,
irrespective of whether the increasing prices broadcasters were charging were
fair or not, and he conceded some of it was high-value content -- that did not
change the fact that it was a cost that was being borne by consumers and part
of the exponential rise in programming costs and would have to be part of any
conversation about affordability.

Powell suggested another reason to take a fresh look at old
regulations was that not to do so would doom stakeholders to an endless cycle
of litigation. "We'll all spend the rest of our lives in court litigating
the ambiguous application of modern rules to dated services," he said,
which would result in communications law being rewritten by judges.

As for suggestions cable operators are trying to stifle
over-the-top competition, Powell said that is not the case. In fact, he pointed
out, cable operators make really good margins on their broadband service and he
had never heard of a business that would want to discourage high-margin
business to drive it to the lower margins of traditional video service. "Why
would that ever be rational?" he asked, adding that at the right price,
"we could sell nothing but broadband."

In response to a question about usage-based pricing, Powell
said that the industry had not done a good enough job of telling its story that
such pricing stemmed not so much from congestion-management as from the need to
fairly allocate the fixed cost of an expensive asset. He used as an example of
two houses, one where they kept the thermostat at 70 degrees, the other where
they opened the windows to cool off. The first would pay more for their
electricity.

He said that the FCC and even consumer advocates had
conceded usage-based pricing as what he called a partial solution to network
neutrality's impact on a two-sided market. If it is illegal to charge Google or
Netflix, he said, the costs are borne by the consumer alone, so usage-based
pricing was a way to more fairly allocate those costs, given that 2% of users
account for about 42% of traffic.

Powell, a former Justice Department attorney, said he was
not surprised that the agency was investigating cable and over-the-top video,
particularly since it was a dynamic market with new entrants. He said that
investigation was a far cry from evidence of any antitrust violations, and that
he would be surprised if it led to any possible antitrust suit. That is because
the issues Justice is reportedly interested -- usage caps, access to
programming, TV everywhere, most-favored-nation contracts, were looked at as
part of the Comcast/NBCU deal and found, at least in that specific instance,
not to run afoul of antitrust laws.

He also said that when he was at Justice, such inquiries
were private, rather than public, so that someone must have a very strong
motivation for making sure everyone knew about it. He did not point any fingers.

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