In addition to a Keynote Address by Sen. Marco Rubio and a Conversation with FCC Commissioner Ajit Pai, there were three different panels. The Free State Foundation is now releasing a transcript of the conference's second panel session," The Right Regulatory Approaches for Video Service Providers." In light of the D.C. Circuit Court's May 28 decision reversing the FCC's Tennis Channel ruling, you'll find this transcript, and the excerpts below, most interesting and very timely.

The panel discussion was moderated by DEBORAH TAYLOR TATE, Distinguished Adjunct Senior Fellow, The Free State Foundation, and former FCC Commissioner. The panel consisted of the following FCC, industry, and academic experts:

•          DONNA GREGG, Columbus School of Law and FSF Adjunct Senior Fellow
•          GIGI SOHN, Public Knowledge
•          MICHAEL POWELL, NCTA
•          STACY FULLER, DIRECTV
•          STEVEN TEPLITZ, Time Warner Cable
•          WILLIAM LAKE, FCC Media Bureau Chief

The transcript should be read in its entirety for an appreciation of all of the views of each panelist. Nevertheless, in the meantime, immediately below are selected excerpts in the order of the panelists' presentations. These excerpts provide an indication of the various perspectives presented at the session. But, again, the transcript should be read in its entirety in order to obtain a full appreciation of each panelist's views. And if you would like to watch the YouTube video of the proceedings, it is here.

DONNA GREGG

None of the circumstances that were the common underpinnings for the most questionable video regulatory schemes still exist today.  We have many more outlets.  People have a lot of different ways to tell their stories and to deliver information.... If you look at the 14th Annual Video Competition Report from the Commission, and you look at a lot of the other surveys that are being done, there truly is an unprecedented amount of competition for delivery of video, much more than there ever has been.

Must-carry retransmission consent regulation was something adopted with good intentions, with high hopes, and touted as a market solution because it requires negotiation.  But, I submit that a negotiation is not necessarily a market negotiation if the government places down the ground rules.  Must-carry and retransmission consent, in tandem, have caused a lot of outrage in the public, by viewers who are suddenly deprived of the channel or the programming that they want to watch, whether it's right before the Academy Awards or the Super Bowl, or the NCAA Final Four.

In my observations, something very encouraging was the introduction of the Next Generation Television Marketplace Act in the last Congress.  That legislation proposes an overhaul, with elimination of some of the most questionable regulatory approaches to video that I mentioned as well as others... I hope that Mr. Scalise reintroduces that and that other members will support it.

Whatever the vehicle for video services regulatory reform is, there are certain characteristics that it must have.  It must take into account the enormous change in the marketplace, in the competitive landscape, in the technology that's available now, and all of the new services coming out.  Any proceeding or vehicle that is under consideration should definitely have that as one of the things that it sets its attention upon.  It must also keep in mind some of the flaws of some of the regulatory approaches in the past. Policymakers just need to remember, to think carefully, and maybe use a little bit lighter touch.  I'm very much in favor of some of the ideas of test beds and trying new things before something is necessarily written in stone.

GIGI SOHN

Programming is fantastic.  It's great the way people are consuming TV over their iPads, even in their own homes through WiFi.  Life is good as far as programing is concerned.  But the problem is that everything is changed about TV except the Byzantine regulatory structure, and the result is really negative for consumers.  Rather than the content provider just directly providing content to consumers, you have this Byzantine set of middlemen.  Those middlemen are either protected by government fiat or in some other cases they have bottlenecks that are really not being enforced by antitrust regulators.  And sometimes, the law just doesn't fit.  So in this equation consumers are the losers. 

First for changing the regulatory structure to be more consumer-friendly is reforming or, frankly, eliminating all the regulations that protect broadcasters.  I'd love to see retransmission consent repealed.  I'm not sure that's going to happen, but there are certainly reforms that can happen short of that, including requiring broadcast stations to stay on during a dispute.  Consumers should not be the losers there.  We believe that the FCC can order arbitration, though the FCC doesn't believe that.  And I understand there's some talk in Congress about possible legislation that will directly give them that authority that so there's no question.  Certainly, distant signal protections, sports blackout, and must-carry are from a bygone era and really need to be eliminated.  They are nothing but incumbent protectionist schemes, so they really need to go.

Despite Public Knowledge's clear distaste for data caps, I'm not quite sure we have the regulatory answer yet on pricing.  I could say, unequivocally, we would oppose any use of data caps for discriminatory purposes... So that's number one.  Number two, there has to be transparency.  That's got to be critical.

Now we're not opposed to price discrimination.   I'm happy to hear that the cable industry has finally come to its senses and admitted that data caps are not about congestion.  It's about price discrimination.  Our problem with data caps as a price discrimination tool is that consumers can't really read the signals.  They don't know what to give up in order not to go over their cap, and they're going to underutilize.  We think speed tiers is a much better way for consumers to have price discrimination, for consumers to understand, "Hey, it's taking me forever to download this movie, or my stream is balky, so therefore, I need to go to another tier."

MICHAEL POWELL

There's a certain truism about the regulatory state, which is that it is only as valid as the factual predicates or the rationales that inform them continue to be viable and authentic.  Unquestionably, we have a situation in which the world of video has changed, not a little, but quite radically from the last time our government made those collective judgments about how it should be regulated.

I would be the first to admit, if we were to time travel back to 1992, you would be looking at the cable industry as a multichannel video provider that absolutely was a monopolist.  It had 98% of that market at the time.  Virtually every rule in the 1996 Act is built on one of three cornerstones, two of which are related to monopoly power, horizontal or vertical.  Horizontally, there were few, if any, meaningful, horizontal video competitors in the market.  This is before DBS.  This is before the Internet.  This is before telecomm companies were able to enter into the video market.  And many of the rules were intended to jumpstart and energize a horizontally competitive marketplace.  Secondly, in 1992, over 50%, probably closer to 53-57% of cable programming was vertically integrated with a cable operator.  Today, that number is radically lower, closer to only 14%, and the general trend over this period of time has been the disaggregation of content and distribution, not the re-aggregation of it.  Yet, the rules that are administered today are fundamentally built on the cornerstones of those earlier judgments.  And third, a huge part of it was also built on the continued protection of the long-term viability of the broadcast model, as an inherent public trust, a public social compact that the country would remain deeply committed to.  We could debate that pro or con.  But at the time that judgment was made, over-the-air viewership was still close to 70% of the American population.  The number today of those relying completely on over-the-air video distribution is only 14%.  So you could debate what you think the rules should be.  But what you can't do is continue to defend rules solely on the basis of its original purpose and conception when those factual predicates and those market rationales are no longer authentic and viable.  So what you get is a regulatory structure that at best is faded and ambiguous. And it's fertile for regulatory mischief. 

I would watch FCC process reform as legislative vehicle.  It seems to always continue.  For example, if you're talking about something like forbearance, that can be put in the context of process oriented reform as much as it is substantively about video.  That's certainly a vehicle. 

I still believe the elements of net neutrality could conceivably draw in questions about video, at least in the context of Internet-delivered videos.  So think of the Cablevision lawsuit.  Whatever its merits, that outcome is probably a long way off, given the way litigation goes.  But it is one of those exogenous events out there that could suddenly change the landscape.  People disinterested in legislative action could suddenly become intensely interested in legislative action.

IP is a big shift that's going on.  To try to jam that into the set-top box architecture thinking of the past would be a mistake.  The trend from hardware to software is huge.  Time Warner has done a really cool thing with Roku.  But it's partly because they increasingly are figuring out how to provide a live linear stream using software design, rather than hardware design.  The minute you can use software design and you speak the language of computers in the form of IP, essentially any computing device is potentially your access point. That's the Holy Grail for consumers, that you don't have to think about your box.  You don't have to think about whether you prefer the Galaxy S4 or the Apple iPhone 5.  It doesn't matter.  You're running a software stack that can operate in IP and speak the language of computers, and it can be whatever you want it to be.  That to me is the Holy Grail, not creating another thing that CES can show and you can buy.  Let the consumer have whatever they want to have, and let innovation drive things in that direction.

[W]hen the Internet started most of us probably did roughly the same kinds of things.  What we're seeing happen as the Internet grows and matures is there's a wider variation coming on about the way people use the Internet.  There are power users who use massive amounts of data and gigabytes.  There are those who love to cut the cord and do NetFlix streaming, and there are still plenty, probably 80% of the mass market of users who do very low bandwidth things:  e-mail, Facebook, Skype, Twitter.  These things do not use substantial capacity.  So as we get wider variety among the users, you do have a subsidization problem.  You have people who are all paying the same price and getting different values of use.  Frankly, the power elite user is enjoying the benefits of the subsidy that's being masked by an unlimited pricing model.  That is not to say that model isn't simple and predictable, and you might like it for those reasons.  But it does mask that cross-subsidization that in another context we worry about.

We often hear our profitability talked about while people ignore completely the cost of building and maintaining the network.  The network is a $200 billion expense over the last decade, and it takes $30 billion a year across all broadband providers to keep it going.  That includes digging up the ground, laying wires, and keeping those wires current.  You have to sink that money in the ground before you're paid one dime from a subscriber.  The question is, when you go to recover those costs, what's the fairest way to allocate those costs among the people who buy your service?  If you have people who use it a little, should they pay the same as the people who use it a lot?  Or, should you have the people who use it a lot pay more than the people who use it a little?  That's what we're really trying to figure out:  the fairest way to allocate the cost of a high fixed cost network.

STACY FULLER

Broadcast programming presents the most particular problems because it isn't a true market.  The market for broadcasting programs is subject to numerous regulations that protect broadcasters and promote free, over-the-air television service.  In 1992, when cable was the only MPVD, Congress created the "must carry" and the "retransmission consent" rules.  These essentially give local broadcast stations a government-mandated, geographic monopoly over network content and guarantee distribution even for the least watched stations, even in areas where their broadcast channel doesn't actually reach.  For a long time, this actually worked well.  That's because you had broadcasters being a monopoly on one side of the table and you had cable being a monopoly on the other side of the table, a balance of terror.  No broadcaster wanted to lose all their eyeballs in the cable franchise area, and no cable operator wanted to lose the broadcast networks.  Ultimately, these two parties were able to reach a deal, and blackouts were almost unheard of.  Things have changed, but the government rules still give the broadcaster its monopoly.

It's time for the government to take a fresh look at the video marketplace and see how it really affects consumers.  Maybe it's time to remove regulations that were put in place 20 years ago when the world looked far different than it does today.  Or maybe it's time to look at new regulations in order to protect consumers.  I wouldn't profess at this point to know all the answers.  But at the very least it's time to start the debate and to look at it with a realization of what the marketplace looks like today. 

If forbearance authority came down the road, as long as it is well thought out and justified, it would be a nice option.  Then Congress could act quickly to give the FCC authority to keep up with the marketplace.

Being a satellite provider, we have a little different technology, and we will never be the all-IP world.  We don't have a head end on the ground, so basically we use our set-top box as a head end in the home.  And that's not saying we're not innovating.  Our new Genie Box has a gateway in the home that can talk to any RVU-enabled television, which is an open platform.  Samsung has them.  Other companies are developing it so you don't need the set-top box on every single television set.  But, in the satellite provider world that we live in, we don't just transmit plain vanilla programming.  And if we were just sending through the channels, then any box can have that functionality.  That's fine.  But for us to compete, especially as a stand-alone video player, we're really competing on our innovative services.  We're competing on customer service.... We believe in innovation and we think it's happening.  And we're forward-thinking and trying to get rid of all these boxes in the house.  But in order for us to be competitive and to provide customer service and innovation, we need to have at least that basic gateway be our box.

STEVEN TEPLITZ

The 1992 Cable Act, and a lot of the FCC rules and regulations that have since followed, are really premised on the notion that cable is a monopoly provider.  Whatever the situation was in 1992, it just absolutely isn't the case today.  There are more programming options now.  Consumers have an increasing ability to watch what they want, when they want it, and on a whole variety of devices. 

Clearly, the marketplace has changed dramatically, and the rules haven't... [D]oes that matter?  In some cases maybe it doesn't.  It's just a little bit of an annoyance.  But there are real harms in other cases, for example, retransmission consent.  The government has inserted itself into the relationship between MVPDs or originally cable operators and broadcasters in a circumstance that no longer exists.  Now those rules have caused significant blackouts and price increases that are rate increases or retrans fees that get ultimately passed on to consumers.  Both the rates and the blackouts cause real consumer harm.  And that has really been the result of the mismatch between monopoly-based rules and a more competitive environment.

A long-term solution is a comprehensive rewrite of these rules.  That seems for a variety of political and practical considerations unlikely.  But there is a real opportunity to look at more targeted reforms... And Congress can give the FCC more tools.  Specifically, forbearance for video service would be a way to address, on a case-by-case basis, some of the most egregious problems. 

Predicting what's going to happen in Congress is a fool's errand.  But STELA hearings, comprehensive legislation that is introduced, or conferences like this are a real value.  Having a dialogue about what the marketplace looks like today and why the monopoly era mindset needs to be jettisoned is a real value.  Over the next year or so, the real mission is going to be winning the hearts and minds of people to recognize how competitive the video marketplace really is.

The risk with set-top boxes is if you're imposing technical standards in an area that's moving as quickly as this is, you're probably going to get it wrong.  That imposes real costs.  We see with the CableCARD regime now, the cable industry has spent tens of millions of dollars for something that is not necessary and is probably a mistake.  We don't want to revisit that.  And so the wait and see approach to all of it is the right one.

We think that any government approach should encourage tiered pricing.  They should encourage different business models.  We've got to remember that the Internet just really isn't that old.  Originally, everything was metered.  Then it went to flat rate.  Now there's a mix and range of different pricing options.  And the marketplace will continue to change based on what customers want, what works and what doesn't. 

We have usage-based plans that, from our perspective, are all about giving customers more choice.  So if you want to use less or you want to pay less and use less, we have an option for that.  We also continue to offer an unlimited option for our subscribers.  So let different companies experiment.  The real concern that we have is with some of the dialogue about having the government exclude a particular pricing model.  We think that is really a bad approach.

WILLIAM LAKE

There's a lot of talk these days in Washington about the evolution of voice service to IP.  But there's a parallel evolution, perhaps not quite as far advanced, of cable service from analog to digital, and then ultimately to IP.  It's clear that in the future video service, even those provided by the MVPDs, will be an application riding on an IP platform.  We're already thinking about what the implications are of that evolution for regulation of the service providers and for the treatment of the devices at the end of the network.  A simultaneous evolution is going on with respect to the handling of content.  There is what someone recently called a steady drip, drip, drip of video content onto the Internet.  It's very much in its beginnings.  The program providers realize that they still make most of their revenue from traditional TV distributors.  As long as that's the principal business model, I think that will limit the availability of video on the Internet.  But that's a business evolution and we see it occurring.

The Commission recently decided not to extend the prohibition, the per se rule prohibiting exclusives with respect to content of vertically integrated cable companies.  What we did, instead, was to move to a case-by-case approach bolstered by presumptions; for example, a presumption that a regional sports network must have programming.  The reason for trying to insert presumptions is that a case-by-case approach without some presumptions or rules to guide it can be very resource intensive.  Our thought was that rather than have a per se rule, if we could have a case-by-case approach but guide it with presumptions of that sort, we might be able to accommodate these developments and possibly develop a model that we could use in other contexts.  This is just one example of the fact that the Commission, under existing law, has the ability and the willingness to try to adjust our regulation to changing circumstances.  And it will continue to do that unless and until Congress gives us a different regime to administer.

To pick up the theme of process reform and forbearance, there is a variant of forbearance that Congress has tried in the video area, which is to establish sunset provisions with authority for the Commission to consider extension.  That's what we used in the case of the exclusives ban with respect to vertically integrated content.  We recently decided not to extend our view ability rule, another case in which Congress said, "After X number of years, take a look and see whether it should be extended."  And we decided not to.  Of course, we have the authority to do that with other provisions that are simply FCC rules.  We recently decided no longer to forbid encryption of basic tier services on cable, because market conditions had changed, and that rule was no longer necessary.

[Retrans is] a very odd regime of essentially regulated negotiations.  Someone has suggested that's an oxymoron like managed competition.  But it's the regime we have, and we have tried to thread that needle.  We've got a lot of input in response to our notice of proposed rulemaking on that.  And the proceeding is not dead.  We continue to look at it and to watch events in the marketplace.  We have concluded and told the Congress that we don't have the ability under the current statute to take some of the remedies, such as mandatory arbitration that have been urged on us.  Congress obviously could choose to give us that authority.  But we'll try to do the best we can under the statute we have.

The AllVid proposal is still out there.  We've continued to watch the developments in the marketplace.  And there have been a lot of developments since we've made that proposal.  I'd like to hope and think that maybe the proposal would help to spur some of those developments...

One thing that's happened is it's clear that whole home solutions are something that consumers increasingly want.  They just don't want one box in each room separately.  They want a system in which they can record in this room and watch in that room, and so forth.  One thing we did last year was to impose the requirement that boxes have an IP output.  Whatever the status of that first box in the home, we wanted to make sure that there was a retail marketplace for all the other boxes that would be connected to it.  And that would be enabled by having an IP output on the first box.  Whether that rule survives the EchoStar decision is an open question.  We know that our CableCARD regime took a real hit in that decision.

In my view, the marketplace is free to experiment in the area of pricing.  We'll watch, and if there are particular practices that seem to be nefarious, we may have to consider action.  But I think tiered pricing plans are something that the market can experiment with and we'll see what consumers want.

A PDF of the full transcript of Panel I, "The Right Regulatory Approaches for Video Service Providers," is here.