FCC Moves to Break Open Set-Top Box Market

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By Tim McElgunn

Jan. 27 — Federal Communications Commission Chairman Tom Wheeler is circulating a proposal that would pave the way for alternatives to the often-maligned set top box that approximately 99 percent of U.S. pay-TV subscribers now lease from service providers.

The move is the latest development in a battle over control of the interface between content and consumers that has simmered for 20 years. The clash between pay TV providers— including AT&T Inc. and Comcast Corp., on one side, and content and technology suppliers Google Inc. and TiVo Inc., and consumer advocacy groups, on the other—will come to a head in the next few weeks as the commission votes on a Notice of Proposed Rulemaking (NPRM) that Wheeler said in a statement will “tear down anti-competitive barriers and pave the way for software, devices and other innovative solutions to compete with the set-top boxes that a majority of consumers must lease today.”

Pay TV providers, who earn approximately $20 billion each year in set-top rental fees, say that opening the market to other providers risks disrupting agreements by delivering content to consumers in new packages that fall outside existing agreements. Advocates for the change claim that the pay TV industries' hold on set top features and functions has restricted technological improvements and reduced consumer choice.

Wheeler laid out his proposal in an emailed statement. Senior FCC officials provided additional details in a telephone briefing for reporters Jan. 27.

‘A Framework For Innovators.'

According to the email, the proposal, “will create a framework for providing innovators, device manufacturers and app developers the information they need to develop new technologies.”

The core of the proposal would require pay TV providers to share a set of standardized interfaces that would allow third party set top/app providers to access three critical information streams:

•  Service discovery: Information about what programming is available to the consumer, such as the channel listing and video-on-demand lineup, and what is on the channels.
•  Entitlements: Information about what a device is allowed to do with content, such as recording or viewing on multiple devices.
•  Content delivery: The video programming itself. 

With new devices and apps able to access and use that information to present content to users, consumers will be able to choose how they access pay TV services from both traditional multichannel video programming distributors (MVPDs) and new streaming video competitors.

“The new rules would create a framework for providing device manufacturers, software developers and others the information they need to introduce innovative new technologies, while at the same time maintaining strong security, copyright and consumer protections,” Wheeler said in the statement. “Nothing in this proposal changes a company's ability to package and price its programming to its subscribers, or requires consumers to purchase new boxes.”

Opponents Form Coalition

Despite Wheeler's commitment to protecting content and the terms of existing content contracts—including channel placement, advertising agreements and content security—a coalition committed to killing the proposed rules has already sprung up.

The Future of TV Coalition brings together 47 pay-TV operators, technology suppliers and programmers—including most of the largest companies in the industry as well as many smaller cable providers and cable programmers — to fight the proposal, which the group refers to as AllVid, linking it to a failed earlier attempt to create a retail set top box market.

“American consumers have never had more freedom to find and watch the shows they love in different ways – from a la carte, to smaller packages, to traditional or new Internet providers and above all the burgeoning marketplace for streaming devices and video apps,” coalition co-chairman Nomi Bergman, the president of Bright House Networks, said in a statement. “But AllVid would slam the brakes on this progress and harm consumers. It's the ultimate example of the government trying to fix something that isn't broken.”

Founding members include the seven largest U.S. cable operators, the American Cable Association (ACA), AT&T, CenturyLink Inc., most of the mid-sized incumbent and independent telephone companies, Arris Group Inc., the Motion Picture Association of America (MPAA), and a number of minority advocacy and legislative groups.

Markey Lauds Choice

Sen. Edward Markey (D-Mass.) released a statement in support of Wheeler's proposal, saying “Exactly 20 years since the passage of the 1996 Telecommunications Act, the FCC is finally on its way to fulfilling the promise to American consumers of a competitive and robust video box market. I commend Chairman Wheeler for his proposal to help ensure that consumers are not captive to bloated rental fees forever. Consumer choice should fuel the video box market, not cable company control. In the 21st century, consumers should be able to choose their set-top box the same way they choose their mobile phone.”

To contact the reporter on this story: Tim McElgunn in Cherry Hill, NJ at tmcelgunn@bna.com

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