According to industry reports Apple’s plans to launch an over-the-top pay TV service, similar to Sony’s PlayStation Vue, this fall may be delayed due to difficulty securing carriage agreements with local broadcasters. While agreements with cable networks such as MTV, TBS, and USA are done on a national basis, in the U.S., broadcast network (ABC, NBC, CBS, FOX, and CW) carriage agreements are done on the local level.

Broadcast network programming is carried on “local affiliates” or local stations. Due to Federal Communications Commission (FCC) regulations preventing the importation of out-of-market signals Apple needs agreements to carry the local broadcast affiliate in each of the 210 Designated Market Areas (DMAs) in the United States. A DMA is defined as a group of counties that form an exclusive geographic area in which the home market television stations hold a dominance of total hours viewed.

Gaining access to local affiliates, however, is a critical step in building an over-the-top pay TV service that can compete with multichannel video providers (MVPDs) such as Comcast, Charter, Verizon FiOS, AT&T U-Verse, DIRECTV and Dish Network for a share of the $94.8 billion in pay TV subscription revenue in the United States.

Like PlayStation Vue, an over-the-top pay TV service from Apple would have several of advantages.

• Sony, and assuming Apple rolls out an over-the-top pay TV service based off of Apple TV, have shifted the cost of acquiring and maintaining set-top boxes (STB) to the consumer.
• Once all the fees, additional service charges, surcharges and taxes are added up over-the-top pay TV services costs less than the bundles from incumbent pay TV providers.
• As an Online Video Provider (OVD), Apple’s over-the-top pay TV service is not currently subject to the same program carriage rules as their facility-based competition. Though this could change as the FCC has issued a Notice of Proposed Rule Making (NPRM) related to the distribution of multiple linear video programming streams, including Internet-based services

 (For an in-depth analysis of PlayStation Vue see Strategy Analytics Digital Media report Can PlayStation Vue Successfully Capture a Share of the Pay TV Pie?)