FCC Expected to Propose New Set-Top Box Licensing Regime

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By Lydia Beyoud

Sept. 6 — The Federal Communications Commission is working on a new pay-TV set-top box proposal that may insert the agency into contractual arrangements between retail video navigation device makers such as Apple Inc. and providers such as AT&T Inc.-DirecTV or Dish Network Corp., according to telecom industry sources following the issue.

The commission is trying to finalize a plan this year to free consumers of the need to rent set-top boxes amid fierce opposition from pay-TV providers and bipartisan concern on Capitol Hill. The set-top box market is valued at an estimated $20 billion in annual revenues.

After its initial proposal ran into strong headwinds, the FCC is said to be readying to propose creating a licensing body composed of various representatives of the video market with the purpose of developing licenses for third-party set-top box makers to license content and also receive certain information streams from pay-TV providers. The FCC would retain the authority to exercise oversight and possibly some of the terms of those licenses, according to sources familiar with the developing proposal.

Once a device is licensed, every multichannel video programming distributor (MVPD) would be required to create an app for that device, those sources said. Cable groups and broadcasters are concerned an FCC role in the licensing agreements could vastly expand the commission's regulatory reach into an area that it hasn’t previously touched.

The general parameters of FCC Chairman Tom Wheeler’s compromise proposal, based on accounts of industry representatives’ meetings with FCC officials but still in flux as of Sept. 6, has sent content creators, broadcasters and pay TV providers into a frenzy over the implications of a licensing body.

The licensing body the FCC is said to be contemplating “does not reflect how licensing is handled in the marketplace today,” a group of cable companies represented by the National Cable and Telecommunications Association said in a Sept. 6 agency filing. “Programmers today do not pool and offer uniform rights across all platforms and uses. They segment the market, license some rights to OVDs [online video distributors] and other rights to MVPDs, and make refined judgments about devices, device security, and how to distribute their content on various platforms,” the trade group said.

FCC spokeswoman Kim Hart declined to comment.

The FCC is trying to do something to lower the cost to consumers of renting a device from their pay-TV provider by opening up a gaping hole in copyright law that a future FCC could use to expand its authority over contractual agreements, one broadcast industry source told reporters on background Sept. 6.

The cable industry, led by Comcast Corp. and the NCTA, had pitched their own alternative to the FCC’s original proposal that relied heavily on an app-based approach. This model, they said, would protect consumers' privacy, retain contractual agreements, and reduce or eliminate the need for a separate device altogether.

However, that approach had been heavily criticized by public interest groups as not moving the ball forward in giving consumers more options to access their video content.

John Bergmayer, senior staff attorney at public interest group Public Knowledge, told Bloomberg BNA the industry members’ concerns over the licensing body were “missing the forest for the trees.” The FCC’s entire goal in the proceeding would be undermined if consumers lacked parity of content and features through the use of an MVPD-developed app that might hold back certain content or features for competitive reasons, he said.

The White House voiced its support for the FCC’s earlier set-top box proposal.

In an April 15 blog post, the president’s National Economic Council advisors hailed the agency’s efforts as part of a broader administration effort to take on initiatives to counteract “anti-competitive behavior.”

September Meeting

The new proposal appears tentatively slated for the FCC’s Sept. 29 meeting agenda, multiple sources told Bloomberg BNA, but could still be pushed back if the Wheeler fails win support from two of his four fellow commissioners before the meeting.

Fellow Democratic Commissioner Jessica Rosenworcel has expressed concerns about Wheeler's earlier proposal.

To contact the reporter on this story: Lydia Beyoud in Washington at lbeyoud@bna.com

To contact the editor responsible for this story: Keith Perine at kperine@bna.com

For More Information

Text of the NCTA filing is at http://src.bna.com/ik7.

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