FCC's Tom Wheeler: Let’s redefine ‘pay TV’ to include online streaming

FCC chairman Tom Wheeler suggested on Wednesday that online streaming services could be classified as equal to cable TV. That would give online streaming services more bargaining power, and could allow more customers to ditch their cable bundles.

If you ask most people, they’ll tell you that they watch TV shows on only a few channels -- yet cable bundles come with hundreds of channels, many of which appeal to only a small number of people. Wouldn’t it be nice to be able to pay only for the TV shows you actually watch?

The Federal Communications Commission is edging closer to making that scenario real, as chairman Tom Wheeler announced that the FCC may soon revise the definition of “pay television” to include Internet services that stream TV shows online.

Why does a redefinition of pay television matter? It comes down to bargaining power. Cable companies such as Comcast have the power to strike deals with broadcasters such as Viacom and Time Warner to carry their content. Viacom and Comcast might disagree on pricing, but the broadcaster is required by law to at least meet with Comcast. This is not the case with online streaming services, such as the ones Sony and Dish are planning. They have to negotiate with each broadcast network individually. That’s why many shows aren’t available online -- the network that owns the show can simply refuse to negotiate with the online provider.

Chairman Wheeler’s proposal would expand the definition of “multichannel video programming distributor” so that it’s technology-neutral, which means it would include cable as well as online streaming services. Those online companies, including newcomers such as Aereo, would then have more negotiating power to be able to carry the TV shows that people want to watch.

The definition change wouldn’t affect services such as Netflix and Amazon, since they don’t stream live TV. But it’s not hard to imagine that better protection for online streaming companies would lead to more such companies being established, which would make it easier for consumers to cut the cord by ditching their cable bundles altogether. Wheeler noted in his announcement that online streaming services “may offer smaller or specialized packages of video programming, so consumers will be able to mix-and-match to suit their tastes.... And perhaps consumers will not be forced to pay for channels they never watch.”

The New York Times notes in a blog that even if the rule is changed successfully, it would be naive to expect sweeping changes right away. Streaming video companies still have to negotiate deals with big broadcasters, and streaming itself is more or less controlled by the companies that provide broadband Internet connections -- many of whom also provide cable TV service. But this redefinition would open up TV programming to more companies, who could then compete to deliver them in a way that’s convenient to consumers. That’s a meaningful step toward a future in which consumers can pay only for the TV shows they actually watch.