Commissioner Nathan Simington of the Federal Communications Commission (FCC) recently penned an op-ed (together with Gavin Wax, his chief of staff) highlighting a fundamental problem in America’s media landscape: traditional broadcasters operate under strict regulatory constraints, while streaming platforms enjoy virtually unlimited freedom.
Their solution? Expand FCC oversight to include streaming services as “multichannel video programming distributors” (MVPDs), subjecting them to the same rules governing cable and satellite operators.
While Simington correctly diagnoses the regulatory asymmetry plaguing today’s video market, their prescription—more regulation rather than less—risks doubling down on outdated frameworks, rather than modernizing them for the digital age.
Understanding the Regulatory Divide
The commissioner’s argument centers on a stark reality: traditional broadcasters face ownership caps that limit national audience reach to 39%, local market restrictions, and various public-interest obligations, while streamers like Netflix, Amazon Prime, and Disney+ can theoretically serve 100% of the U.S. market without triggering any FCC oversight.
The result is what some call regulatory arbitrage, as I noted in an earlier post:
The phenomenon gives rise to regulatory arbitrage, in which content providers exploit differences in regulations across methods of distribution. This practice has gained prominence with the rise of over-the-top platforms and streaming services, which operate under different regulatory frameworks than their cable counterparts.
As streaming services continue to disrupt the traditional broadcasting model, regulatory arbitrage allows these platforms to bypass certain restrictions that apply to cable operators, creating a more fragmented and competitive marketplace. For instance, streaming platforms often face less stringent content regulation, fees, and taxes than traditional cable providers, enabling them to offer diverse programming and pricing structures that appeal to consumers seeking flexibility and choice.
Simington agrees, finding “a distorted media landscape where local broadcasters face regulatory barriers that their online competitors can bypass despite competing for the same viewers, advertisers, and cultural influence.”
When a regional broadcaster wants to merge with another station to achieve economies of scale and better compete with the streaming giants, the FCC can block the transaction under outdated ownership rules. Meanwhile, Amazon can acquire MGM Studios or Disney can absorb Hulu without FCC interference, because these deals involve “online video distributors,” rather than traditional MVPDs.
Technological convergence has made such technology-specific regulations obsolete. This year’s Super Bowl both aired on Fox broadcast television and simultaneously streamed on Tubi and Fubo. The Academy Awards were broadcast on ABC, while streaming on Hulu and YouTube TV. When identical content flows through multiple media channels, regulating those channels differently creates arbitrary market distortions.
The FCC’s Choice: Expanding vs Eliminating Regulation
The original economic justifications for broadcast regulation have eroded. Spectrum scarcity—the primary rationale for ownership limits—has diminished considerably due to digital compression and alternative distribution methods. As Justice Clarence Thomas noted in FCC v. Fox Television Stations, “dramatic technological advances” have “eviscerated the factual assumptions” underlying broadcast regulation.
Simington correctly concludes that the FCC must “modernize its ownership rules to allow traditional broadcasters greater flexibility to consolidate and compete.” While what is meant by “modernize” remains to be seen, let’s be generous and assume they mean to relax or eliminate ownership restrictions.
Nevertheless, he proposes treating streaming platforms as MVPDs, subjecting them to ownership limits, content obligations, and transparency rules. But this approach suffers from several economic flaws.
Rather than creating a truly technology-neutral competition policy, the Simington proposal seeks to extend an outdated regulatory framework to cover more technologies. The FCC’s “Delete, Delete, Delete” docket was opened to eliminate unnecessary or harmful regulations, not to expand them.
Regulatory frameworks should encourage innovation, while maintaining appropriate consumer protections. Streaming was able to begin and grow because streamers were not subject to the same heavy-handed regulations as traditional linear providers:
The relatively low cost of entry combined with a light regulatory burden fostered the rise of streaming services. Companies like Netflix (initially a DVD-rental service) recognized the potential of online streaming, and capitalized on it by launching its streaming service in 2007. Netflix was soon followed by Hulu, initially as a joint venture between News Corp and NBC Universal. The companies invested heavily in content acquisition and development, building vast libraries of movies and TV shows. The availability of large amounts of on-demand content attracted subscribers, creating a virtuous cycle of more subscribers generating more revenue, which allowed for further investment in content, attracting even more subscribers.
Expanding legacy media regulations to streaming platforms could discourage the technological experimentation that has driven improvements in video quality, user interfaces, and content personalization.
A Plea for Rational Reform
Simington deserves credit for highlighting regulatory asymmetries that distort video competition. But the solution isn’t to expand 20th-century regulations to 21st-century technologies. Rather, it’s to modernize our entire approach to reflect technological convergence and consumer choice. As my colleagues and I at the International Center for Law & Economics (ICLE) noted in our comments to the “Delete, Delete, Delete” proceeding, the evidence suggests the current ownership rules do not promote diversity or localism.
Writing for a unanimous Supreme Court in FCC v. Prometheus, Justice Brett Kavanaugh concluded that the FCC had acted reasonably in determining that its media-ownership rules were no longer needed to serve the agency’s public-interest goals—including viewpoint diversity—given the dramatic changes in the media marketplace. That decision reflected growing judicial recognition that legacy regulatory frameworks may inhibit broadcasters’ ability to serve local communities and compete with unregulated online platforms.
Revisiting the national cap is a necessary step toward modernizing media policy for a competitive and pluralistic information environment. Rather than subject streamers to the same outdated ownership rules faced by MVPDs, the FCC should offer the MVPDs the same light-touch rules that streamers currently enjoy.
