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Senate hearing on digital platforms hears calls for new laws

April 24, 2012 | 11:34 am

Barry Diller, Susan Whiting, Paul Misener and Blair Westlake testify before the Senate

If new digital platforms are to survive and thrive, laws and regulations governing the media and telecommunications industries need to be overhauled, executives from Microsoft, Amazon and IAC told the Senate Committee on Commerce, Science and Transportation.

"Incumbents have the means and incentive to engage in economic and/or technical discrimination against online video distributors," IAC Chairman Barry Diller testified Tuesday morning at the hearing looking at the potential of online video. IAC is a digital content company.

Diller, a former television executive who became head of Paramount Pictures and was an architect of the Fox network, said during questioning that the Communications Act of 1996 should be revisited.

"The rules need to reflect that there is a potential positive competitor to what has become a very closed system ... dominated by relatively few companies," Diller said.

There was some agreement from the committee. Jim DeMint (R-S.C.) said, "Our video laws simply no longer reflect the current realities of the marketplace." Those laws, "should not promote or protect one technology over another or one competitor over another."

Much of the hearing focused on whether online video will emerge as a serious competitor to cable and satellite television. Besides Diller, others testifying were Blair Westlake, corporate vice president of Microsoft Corp.'s media and entertainment group; Paul Misener, Amazon's vice president for global public policy, and Susan Whiting, vice chairman of Nielsen Co.

"The TV landscape will likely experience more change in the next 18 months than in past five years," Westlake predicted.

At the same time though, there was a general consensus that online video is not in a position to overtake current multichannel video program delivery systems. Diller said online video will be a supplement but not a replacement for pay television.

Diller and others expressed concern that traditional media companies that control content and distribution will have little incentive to see online video emerge as a serious competitor. Asked about net neutrality -- a principle that requires a broadband distributor to treat all Web traffic equally -- Diller said that without it,  "You will see the absolute crushing of any competitive force."

Amazon's Misener added that his company had seen indications that traditional media companies "may wish to restrict the availability of competing content," and said the situation needs to be "monitored vigorously" by Congress and the Federal Communications Commission.

As is often the case in a hearing about content distribution, the subject of how channels are packaged and sold by cable companies was also a topic. Sen. Jay Rockefeller (D-W.V.), who chairs the committee, complained about having to pay for 500 channels when he only watches 10. Sen. John Thune (R-S.D.) asked why ESPN doesn't just sell itself directly to consumers, seemingly suggesting that this is something that programmers want but that distributors are against.

Diller made it clear that ESPN and other programmers have little interest in changing the current system.

"It would be insane for ESPN to sell itself directly to consumers," Diller said, noting that he doesn't watch ESPN yet is paying for it. "Selling it individually is something they would avoid."

There was an interesting dust-up at the start of the hearing between Diller and DeMint. Diller is a backer in Aereo, a company that sells tiny antennas to consumers and thus allows them to access broadcast TV signals over the Internet. The company launched in New York this year and broadcasters are suing to shut the service down, claiming Aereo does not have the permission or the legal right to retransmit their content via the Internet and is in violation of copyright laws.

DeMint asked Diller what his reaction to Aereo would be if he still had his broadcasting hat on. Diller acknowledged he'd be protecting his turf.

But Diller also said that Aereo, which charges consumers $12 a month, is not reselling broadcast content but is rather a technological platform.

"We charge a consumer for an infrastructure we put together," Diller said. "We don’t charge for programming that is broadcast on this free direct-to-consumer system."

DeMint indicated that is a distinction without a difference, and when he was done questioning Diller turned to Amazon's Misener and sarcastically asked, "Do you plan to intercept broadcast signals and sell them over your network?"


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-- Joe Flint

Photo: Testifying before the Senate Committee on Commerce, Science and Transportation are, from left, Barry Diller, IAC chairman; Susan Whiting, Nielsen Company vice chairman; Paul Misener, vice president for global public policy; and Blair Westlake, vice president of Microsoft's media and entertainment group. Credit: Karen Bleier / AFP/Getty Images.