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The Emergence of Online Video: Is It the Future?

The Senate Committee on Commerce, Science, and Transportation held a hearing on “The Emergence of Online Video: Is It the Future?” on April 24, 2012.  The hearing explored the migration of viewing habits from traditional television to Internet and broadband-enabled video content.  It also examined the role that disruptive technologies play in facilitating this transition, and the business and legal models that foster the growth of this sector.

Senate Commerce Committee Chairman Jay Rockefeller (D-WV) voiced concerns that despite the growth of new video services such as Netflix and Hulu, consumers were forced to pay too much for television programming and were saddled with many channels they did not want.  "Year-in, year-out consumers face rate increases for pay TV that are rising faster than inflation," he said. "We are paying for so many channels, though we only watch a few."

Witnesses testifying at the hearing included:

Barry Diller, Chairman and Senior Executive, IAC, who said that the current rules protect traditional communications providers including the broadcasters, cable companies, and telecommunications providers.  He also stated that the Telecommunications Act of 1996 needs to be rewritten given the changes in media brought about by online content development.  Diller also lamented the state of broadband Internet access in America. New online video offerings from Netflix and Amazon are straining the limited broadband capacity in the U.S., Diller stated. He said that the government needs to step in to find a solution, declaring, “We need a national policy for broadband.”

Paul Misener, Vice President for Global Public Policy, Amazon.com, agreed with Diller that revisions need to be made to the 1996 Telecommunications Act to reflect market changes.  He went to describe the Internet as a “pull medium” that would allow customers to choose what content they paid for, unlike cable providers, who package channels together.  He also warned that policymakers should ensure that the Internet remained a "nondiscriminatory, open platform" to protect consumer choice.

Susan Whiting, Vice Chairman, The Nielsen Company, testified that while most Americans still watch video programs on a traditional television, they are increasingly turning to the Internet to view those same programs. She said that consumers want to be able to watch videos on devices such as iPads and mobile phones.  The use of video on computers has increased 80 percent in the last four years, while video watching on mobile phones has increased 35 percent in the last year alone, she said.

Blair Westlake, Corporate Vice President, Media & Entertainment Group, Microsoft Corporation, said that the entry by Microsoft and others into the video aggregation and online delivery market has contributed to consumer choice. He also said  that in December 2011 more than “60 percent of U.S. Xbox LIVE Gold members used Xbox LIVE entertainment video apps, such as Hulu Plus, ESPN3, and HBO GO, for an average of an hour each day.”  Finally he testified that the single most important issue shaping the future of video is the availability of universal, high-speed broadband access.

During questioning both Diller and Misener stressed the need for network neutrality.  “Net neutrality is mandatory because there is no question that without it you will see the absolute crushing of any competitive force,” Diller said. 

Misener singled out data caps imposed by many Internet providers as requiring vigilance by the government.  A number of advocacy groups have also expressed concern over the caps, fearing they could limit consumer access to streaming video services.  These groups have submitted letters to Congress and the FCC urging inquiries into the practice of imposing and maintaining data caps.

The archived webcast of the hearing is available on the Committee’s home page.

EDUCAUSE will continue to monitor and report on this issue.

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