Fubo challenges FCC streaming reclassification proposal

Fubo challenges FCC proposal for streaming services reclassification under MVPD term as executives from Fubo met with Federal Communications Commission (FCC) officials.

The sports-centric streaming service expressed concern over a proposal to reclassify streaming cable TV replacements. This is due to the way that it will require them to fundamentally change certain aspects of their business.

Specifically, the proposal concerns whether to group virtual MVPD streaming services like Fubo as multichannel video programming distributors. Or MVPDs, in the same ilk as traditional cable and satellite TV services like Comcast’s Xfinity, Charter’s Spectrum, Dish and DirecTV.

Under that classification, MVPDs are required to do a number of things under the FCC’s regulations. This includes negotiating in good faith with the owners of independent local television stations like Nexstar Media Group; Sinclair, Inc.; Gray Television; TEGNA; Allen Media Group and others. The same term would not necessarily apply to subscription video on-demand (SVOD) or ad-supported streaming services like Disney+ or Tubi. However, it could apply to services like Peacock and Paramount+ that bundle local broadcast channels with streaming-only content.

A consortium of broadcasters — including all of the above named — banded together last week to launch the “Coalition for Local News,” . The consortium attempts to leverage local news broadcasts in an effort to convince federal regulators and lawmakers that the rules concerning carriage of their stations and the fees paid to local broadcast station owners are outdated when it comes to streaming services.

While cable and satellite companies are required to negotiate carriage of local stations directly with their owners, vMVPDs are exempt from this rule. Historically, services like Fubo have hammered out agreements with the owners of major networks like Paramount Global (CBS), the Walt Disney Company (ABC) and Fox Corporation for carriage of local broadcast stations on their services

For years, the networks allowed this arrangement as they focused their efforts on cable and satellite distribution. But over the last year, independent broadcasters have had a change of heart, claiming that network arrangements with streaming services cut them out of lucrative retransmission revenue at a time when consumers are increasingly shifting their business away from traditional pay TV toward streaming upstarts like Fubo, YouTube TV, Hulu + Live TV, Sling TV and others.

Broadcasters claim that this missing revenue has the ability to impair their investment in local journalism if federal regulators and lawmakers don’t step in to reclassify these types of streaming services as MVPDs.

Fubo has built its business on the back of live sports: Nearly all of its top-tier football, baseball, basketball, hockey and soccer programming comes from third-parties. That programming reaches more than 1.2 million customers as of May; Fubo says that number could increase to 1.57 million by the end of the year.

The situation might be different for Fubo if reclassified as a MVPD under the FCC’s definition, which would force it to negotiate programming agreements with broadcasters and cable networks under the same conditions as cable and satellite operators. In an ex-parte letter filed with the FCC on last Friday, Fubo affirmed its executives met with officials at the agency to argue that reclassification as a MVPD could impair its ability to grow and sustain its business.

“Fubo noted that changes to the current interpretation of MVPD to include [streaming cable replacements] would create an inefficient market and decrease the number of local stations available to consumers, which would negatively impact consumers and local stations,” Steven Brody, the assistant general counsel of regulatory and government affairs at Fubo’s parent company, said in the letter.

The letter notes that the FCC has solicited comment on the matter for nearly a decade — well before Fubo was on the market, and around the time that streaming services like Dish Network’s Sling TV and the now-shuttered PlayStation Vue were starting to gain momentum.

“Competition and consumer access to local stations has increased through the carriage of such local stations by vMVPDs, including Fubo,” Brody wrote, using the term associated with streaming cable replacements. “More specifically, approximately 97% of local stations are available to Fubo subscribers.”

But that might not be the case for much longer if Fubo is required to negotiate retransmission consent agreements directly with broadcasters, who have raised their programming rates over the last few years and indicated their intention to continue doing so.

While the back-and-forth continues, there is some doubt within the FCC itself as to whether the agency has the legal ability to reclassify the virtual MVPDs as MVPDs in the first place.

In a letter sent to Senator Chuck Grassley in March, FCC Chairperson Jessica Rosenworcel expressed concern that current federal law too narrowly defines what a “multichannel video programmer” is in a way that doesn’t automatically, or may not entirely, apply to streaming services.

“Online video programming distributors do not neatly fit in these statutory definitions because they lack a physical connection to subscribers and do not use any electromagnetic frequencies when delivering programming to their viewers,” Rosenworcel wrote, citing the federal Communications act. “As you know, the Commission lacks the power to change these unambiguous provisions on its own, but can do so if Congress changes the underlying law.”

Rosenworcel also said that, to proceed with reclassifying streaming services, Congress will need to update various policies within the Copyright Office so that the FCC could fully enforce whatever new designation for MVPD gets applied to streaming services. In her view, under the current regulatory framework, it wouldn’t be enough for vMVPDs to simply negotiate carriage agreements with broadcasters — they will also have to negotiate with distributors and film studios who own the copyright to the shows carried on those channels, or they could be forced to black them out.

“Without a statutory copyright license applying to new online video programming distributors, those distributors would be obligated to black out programming for which they are not able to negotiate copyright licenses,” Rosenworcel wrote.

Grassley responded to Rosenworcel last month, in which he restated the need for conditions over carriage to apply equally to streaming services as they do cable and satellite platforms. He urged the FCC to re-open the matter concerning classification of streaming services as MVPDs for public comment, which they did.

“We must ensure that new technological trends do not further endanger our local broadcasters, and so it is critical that the FCC consider whether the current retransmission consent model is sustainable and continues to benefit our local communities,” Grassley wrote.

News Source: Stream TV Insider