Why This Matters: Over-the-top providers are hampered by a copyright regime that hasn’t kept up with technology, a veteran attorney says.
Ryan Baker, partner at Baker Marquart, is a veteran attorney who has represented over-the-top video streaming players, most notably FilmOn, which was the target of broadcaster lawsuits and court injunctions over its efforts to distribute TV-station signals over the ’net.
In the wake of Apple’s announced new video-streaming platform, Baker talked with B&C — his opinions are his own and not those of any particular client, he says — about what he argues is a muddled regulatory profile for OTT services that works against their ability to be disruptors in the traditional video marketplace.
B&C: Apple just announced its new streaming service. Cable and broadcast networks are players in streaming. But you argue that there are problems with the copyright law that make it harder for OTT services to roll out. How so?
Ryan Baker: You are really talking about the haves v. the have-nots. The Copyright Act was last totally revised in the 1970s. It has been updated from time to time, but it is still tied to this model that, to become a cable company, and get a right to retransmit without having to go negotiate [compulsory license] and enter into a business deal which is obviously at the discretion of content providers, you’ve got to have this infrastructure of wires and cables.
And now, even cable companies don’t just offer TV service from a headend. Now they are offering internet service, allowing their customers to use whatever OTT platform they want to get the content. So, it’s a strange world where you have a lot of the have-nots …
B&C: You’re not including Apple TV in that category?
RB: Apple is certainly a have. They have enough bargaining power and enough weight to throw around that they are going to be able to get the deals that upstarts can’t get. It’s the Aereos or the FilmOns of the world, or there is this OTT service in D.C. [Locast.]
I don’t know what will happen with that, but there was a rush to shut Aereo and FilmOn down in trying to funnel people to the Hulus or the YouTube TVs of the world. Again, you are talking about where the networks are partly controlling that outlet. And then the Googles and Apples and networks are, of course, going to do business with them.
I lobbied the FCC when chairman [Tom] Wheeler was still there and they had a request for comment over the MVPD Notice of Proposed Rulemaking. [Wheeler had proposed to a tech-neutral definition of MVPD that would have brought OTT into the tent.]
We had gone in there to meet and actually said, ‘Hey, strangely enough, we want to be regulated because we need almost the imprimatur of regulation to get to the bargaining table and have a more credible argument with the courts to interpret this 40-year-old statue to mean what it ought to mean in the modern world.’
B&C: Which is?
RB: Which is that we have an infrastructure. We don’t have an end-to-end wire that goes from a headend to a consumer’s house, but almost nobody has that anymore. There is nothing in the statute that says you have to have a wire, that you own, that reaches the customer. Most of these companies share, or lease or have easements that allow them to reach a consumer’s home, even sometimes piggybacking on a direct competitor’s wire. But that doesn’t deprive them of the right to be a cable company or to retransmit.
I am not taking a position for a client here, but I think the market is trying to sort this stuff out.
The stream, no pun intended, of entrants into the market, including the likes of Apple now, is an indication that it is taking time to sort out. Meanwhile, you have these companies like Locast, whose head is kind of on the block and in a sense everyone is kind of waiting to see if the guillotine is going to drop or not.
B&C: You have put some of the blame on the Trump administration for putting regulatory agencies in limbo and “stalling much-needed updates to applicable regulatory regimes.” But chairman Wheeler got pushback from both sides of the aisle and did not press the issue.
RB: When we met with commissioner [now chairman Ajit] Pai [when lobbying the FCC on the OTT item] he made his opposition very clear. My impression at the time was that he was absolutely disinterested and would take any opportunity to derail it. And that goes to, I think, what President Trump has been very clear about, which is “I don’t care what the regulation is, I don’t want it.”
B&C: But you will concede that defining over the top services as MVPDs didn’t go anywhere under chairman Wheeler because he got pushback from Republicans and Democrats?
RB: Yes, I will concede that it was sitting on the shelf and starting to get stale and everybody was wondering what was going on. That is true. I am not jumping on the bandwagon that everything that’s wrong with the country is because of Donald Trump.
B&C: We broke the story of that NPRM, and as I recall the proposal was that OTTs would get the compulsory license, but also retransmission-consent obligations. Do you think that is what should happen, make it a tech-neutral definition and put carriage and access obligations on OTT?
RB: I think there needs to be some clarity. This is a separation of powers question or a law-school problem. Who do we go to? We’re in the court and the court is looking to the Copyright Office and everyone is kind of looking to the FCC for what they are going to do.
The legislature hasn’t done something in 40 years, are they going to do something?
To imagine a redraft of the Copyright Act with the problem the legislature has of doing even the simplest of things, it is just unfathomable. I don’t know how or when that ever happens.
B&C: What you are left with now is the courts crudely trying to apply a 40-year-old bunch of verbiage to cutting-edge technology.
RB: During the Aereo Supreme Court argument, you heard one of the justices talk about broadcast programming and then using HBO as an example. I remember sitting there and thinking, ‘These people are going to determine the law here, and they don’t understand the basic facts.’
B&C: So, is the ball in the FCC’s court. Can they solve this?
RB: I think so. If the ball were able to be in the Congress, that is where it belongs. But as I said, there doesn’t appear much hope for that. But realistically I can’t imagine the FCC is going to do anything with this, at least until there is a new administration.
I think the FCC ought to look at how it can help the market because there are these entrenched players passing the ball back and forth. Satellite came in the 1980s and ’90s with its disruptive technology and rewrote things. Well, the internet is at least as disruptive, if not more so.
Interestingly, whether it is Netflix or Apple, they are making their own content. I don’t know how negotiations are going, but it seems to me that perhaps they are not able to make all the deals they want, so they make their own programming. Obviously they also want to have original content to give users a reason to come to them. But from the perspective of a consumer and the smaller, disruptive companies that want to find a niche in the market, some guidance from the FCC would be very beneficial.
B&C: And would it be OK if that included both giving OTT a compulsory license and the obligation to negotiate with stations individually for retransmission consent? Would that help?
RB: Yes, I think it would. I mean, obviously you are imposing a cost. But the argument all along against Section 111 [the statutory license for retransmissions by cable systems] modernization, or what the networks would call “gross expansion,” was that, “Hey, we spent all this money developing this infrastructure, and of course we have to go out and talk about must carry, so imposing a reasonable set of obligations on an entity that wants the benefit of Section 111 is absolutely warranted.”
B&C: So, to clarify, the status quo isn’t so bad for the big players in this space, it’s for the ones who can’t pay $10 billion for their own programming pipeline and have to negotiate.
RB: Yes. I think on the margins there is a lot of content being held up by an unclear regulatory environment and the difficulty smaller companies are having getting deals done and having the content consumers might expect.