FCC Chairman Offers Plan for Internet Video Competition to Traditional Cable

Under the proposal the FCC would alter its traditional definition of a cable system as coming through wires or satellites.

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Look out Comcast. FCC Chairman Tom Wheeler is unveiling a major proposal to revamp the structure of the cable TV business that would enable Web-based cable competitors to challenge traditional cable systems.

Wheeler unveiled his proposal Tuesday in an FCC blog post. Wheeler said the plan is now being before other FCC commissioners. If they approve, the FCC will seek public comment on the move.

Under the proposal the FCC would alter its traditional definition of a cable system as coming through wires or satellites and allow creation of multi-channel cable systems that instead use the Web as the delivery platform.

Wheeler is proposing that like their wired counterparts, Web cable systems get full access to local TV and cable channels.

Wheeler’s proposal could have dramatic potential on cable systems, current providers of online video programming and makers of hardware to see online content on TV. It could revive Aereo, which has expressed interest in creating an online cable system. It could also allow Netflix, Roku and Google TV to convert their various Web content efforts into full fledged cable systems.

Aereo CEO and founder Chet Kanojia on Tuesday praised Wheeler’s proposal calling it “an important step in the right direction for consumers” and suggesting it would increase investment in video programming.

“By moving this forward, the FCC will provide much-needed regulatory clarity which ultimately will increase investment in the video programming market. As a result, innovation will flourish and new video products and services will emerge, providing consumers with more choices in programming and pricing,” he said in a statement.

The plan would avert some issues in broadcasters battle with Aereo over the airing of their signals over the Web that went to the U.S. Supreme Court — broadcasters would get paid for retransmission of their signals — but other issues remain.

Broadcasters in the Aereo case were concerned in the Aereo case about the possibility that local station signals could be viewed outside the local area, potentially allowing viewers in Seattle to watch programs sold to stations in New York.

Wheeler had suggested before that he was readying a proposal to redefine cable systems, but his blog entry Tuesday unveiled the details.

“Consumers have long complained about how their cable service forces them to buy channels they never watch. The move of video onto the Internet can do something about that frustration – but first Internet video services need access to the programs,” said Wheeler in the post.

He called the proposal a “first step” to open access and said the result would be to give consumers more alternatives.

“In 1992 Congress realized that the then-nascent satellite industry would have a hard time competing because much cable programming was owned by cable companies who frequently kept it from competitors,” said Wheeler. “Congress mandated access to cable channels for satellite services, and competition flourished. Today I am proposing to extend the same concept to the providers of linear, Internet-based services; to encourage new video alternatives by opening up access to content previously locked on cable channels.”

The Writers Guild of America West applauded Wheeler’s proposal.

“A technology-neutral definition is long overdue and will enhance consumer choice,” the group said in a statement. It suggested as the largest cable systems “move to consolidate their control of content distribution through mergers, this game-changing proposal to allow new competitors is absolutely necessary.”