The Federal Communications Commission unveiled its long-awaited proposal to increase competition in the video "set-top box" market on Thursday, but the agency's "compromise" plan faces no guarantee of final approval after months of furious pushback from the cable and entertainment industries.
FCC Chairman Tom Wheeler has made it a priority to break the cable industry's dominance of the cable set-top box market, which forces most consumers to pay an average of $231 per year to rent these old-school devices, pouring nearly $20 billion annually into the coffers of Comcast, Charter and other industry giants, according to a 2015 Senate report.
"I am proposing rules that would end the set-top box stranglehold," Wheeler wrote in a Los Angeles Times op-ed published Thursday. "If adopted, consumers will no longer have to rent a set-top box, month after month. Instead, pay-TV providers will be required to provide apps—free of charge—that consumers can download to the device of their choosing to access all the programming and features they already paid for."
Wheeler's plan represents an effort to update federal regulations to reflect a rapidly evolving consumer video market, in which users are increasingly accessing content via internet-based services like Netflix, Amazon and YouTube.
In addition to saving consumers billions of dollars every year, Wheeler's goal is to create an environment where users can choose between third-party devices and software apps to seamlessly switch between internet-based and traditional pay-TV video programming. Pay-TV providers "must provide their apps to widely deployed platforms, such as Roku, Apple iOS, Windows and Android," according to a FCC fact-sheet.
Making set-top boxes more open and affordable is particularly important for increasing video access in low-income and minority communities, Alex Nogales, president and CEO of the National Hispanic Media Coalition, told my colleague Nicholas Deleon earlier this year.
John Bergmayer, senior counsel at Public Knowledge, praised Wheeler's proposal.
"With this action, the Commission could save consumers billions of dollars a year," Bergmayer said in a statement. "Under the Commission's plan, consumers would be able to access their TV subscriptions on any device, and in many cases on devices they already own. In addition to saving consumers money, this action would allow consumers to access online video right alongside cable TV, in the same familiar interface."
Big Cable and its Hollywood allies, including Disney, Viacom and FOX, had furiously opposed Wheeler's original proposal, which would have required cable and content companies to open up their programming to third-party device makers.
These corporate giants were particularly concerned that without safeguards protecting the intellectual property underlying their legacy businesses, Silicon Valley companies like Google or Apple could offer, and serve advertising against, slimmed-down programming packages that include content that originated on cable systems.
Chip Pickering, CEO of INCOMPAS, a pro-competition trade group that represents dozens of tech companies including Google, Amazon and Facebook, issued a statement praising Wheeler's new proposal as "a win for competition, consumers and innovators. Competition is the law, and we commend Chairman Wheeler and the FCC for standing up for consumers who want lower prices, more choice, and the freedom to discover new and exciting content streaming online."
Big Cable and Hollywood were, and continue to be, wary of increased federal government involvement in their lucrative industries
The path to Wheeler's new proposal was rocky, to say the least. Consumer advocates were dismayed last month when the US Copyright Office appeared to side with the cable and content companies, warning that Wheeler's original proposal could take "bundled video programming created through private effort and agreement under the protections of the Copyright Act—and deliver it to third parties who are not in privity with the copyright owners, but who may nevertheless exploit the content for profit."
Big Cable and Hollywood had warned of widespread copyright infringement and security breaches, prompting Wheeler to substantially revise his plan to incorporate industry concerns. In one concession, the FCC agreed to the industry's demand that pay-TV providers continue to control DVR recording functionality.
More broadly, Big Cable and Hollywood were, and continue to be, wary of increased federal government involvement in their lucrative industries, at a time when the FCC is aggressively pursuing a variety of pro-consumer policies, including rules protecting net neutrality, the principle that all content on the internet should be equally accessible to consumers.
"The modified approach the Chairman has described today addresses the legitimate concerns raised by these parties while preserving the benefits to the public, and fulfilling the Congressional directive that requires the FCC to ensure that viewers do not need to rent set-top boxes from their providers," said Bergmayer.
In a statement, the National Cable and Telecommunications Association, which represents the nation's largest cable companies, accused the FCC of withholding key details from Wheeler's proposal about how programming would be licensed to third-party device manufacturers and software developers.
"This proposal would far exceed the Commission's legal authority and improperly insert the government into private contract negotiations between pay TV distributors, content creators and device manufacturers," the NCTA said. "This element of the Chairman's proposal must be eliminated or drastically altered if the Commission hopes to have a sound app-based plan that truly benefits consumers while protecting the critical rights of content creators."
Wheeler and other "unlock the box" advocates are racing against the clock, in part because Republican lawmakers have inserted controversial "riders" into must-pass 2017 federal budget legislation preventing the FCC from moving ahead with the proposed set-top box reforms, as well as industry-opposed policies strengthening broadband privacy and enforcing the net neutrality rules.
Wheeler's new proposal will now be circulated among the five FCC commissioners for review, before a likely vote at the agency's September 29 monthly open meeting, where the plan will need a three-vote majority to pass.
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