Policy

Program-Starved Web Streamer Shuts Down

5/15/2008 8:12 AM Eastern

Washington—A Chicago-area company that sought to provide cable television channels over the Internet has suspended service in part because it never got a ruling from the Federal Communications Commission on its legal right to obtain programming controlled by established cable operators.

Virtual Digital Cable (VDC), a startup launched in April 2006, shut down in early March after signing up just 10,000 subscribers to its $11.95-a-month, pay-TV streaming service aimed at computer-using office workers without access to TV sets.

“We discontinued service, but we didn't go bankrupt. The corporation still exists,” said VDC co-founder and chief operation officer Scott Wolf.

VDC sought to take traditional cable TV channels and put them online in a real-time, click-and-watch basis. But it was unable to obtain the rights to distribute marquee cable channels.

“We certainly actively tried to obtain content, but the cable companies would never talk to us,” Wolf said.

Based in Northbrook, Ill., VDC had a central reception facility to receive satellite programming and distribute it over the Internet. Channels on the service included the Pentagon Channel, ShopNBC and NASA TV. Its target audience was millions of workers with broadband-enabled computers but no access to cable or satellite TV.

Wolf said cable networks didn't want to damage their relationships with incumbent cable operators by signing deals with VDC.

“It was an extremely difficult environment,” he said. “We kind of became the target of the cable companies.”

In January 2007, VDC sought a ruling from the FCC that it was entitled to under federal program access laws to license satellite-delivered programming owned by cable operators—the same law that DirecTV and Dish Network depended on to get off the ground in the 1990s. VDC was the first Web-based video company to insist it was protected by the program access laws.

In a related complaint, VDC asked the FCC to require the CBS affiliate in Chicago to negotiate carriage terms in good faith. VDC said it had the technology to ensure that the CBS station's programming couldn't be viewed on the VDC service outside the Chicago market.

VDC waited fourteen months for the FCC to act but it never got answer. FCC chairman Kevin Martin—when first asked about VDC's need for a ruling early last year—said he was unfamiliar with the company or its FCC filings.

An FCC spokesman said Thursday that VDC's filings at the agency were pending and under review.

VDC was seeking mandatory access to cable channels owned by Comcast, Time Warner, Cox and Cablevision Systems. Its FCC complaint was directed at Time Warner Inc.-owned networks, including TNT, TBS, CNN and CNN Headline News.

Attorneys for the Time Warner-affiliated cable channels argued that because VDC did not fit within the legal definition of a pay-TV provider, it was ineligible to rely on the program access rules. CBS raised the same issue in addition to concerns that VDC could expose CBS to copyright infringement suits if VDC subscribers in adjacent or distant markets were watching the Chicago affiliate's programming.

VDC, Wolf said, would not withdraw its FCC complaints because favorable rulings from the national media regulator could result in a re-launch of the service.

“It would be nice to see the FCC rule one way or another,” Wolf said.

September