Washington

Divided FCC Votes to 'Unlock' Set-Tops

Begins next phase in contentious debate over future of video access 2/18/2016 11:41:00 AM Eastern

WASHINGTON — Following several weeks of almost constant public lobbying and importuning from both sides of the issue and the political aisle, a divided Federal Communications Commission, though even a supporter had reservations, voted Thursday (Feb. 18) to approve chairman Tom Wheeler's proposal for "unlocking" the cable set top and letting third parties access the content and programming and integrate it into their own navigation devices and online video lineups.

The vote was 3-2 along party lines.

At stake in the item is how video viewers search for and access programming in a world where that content is increasingly available over multiple platforms and devices.

Wheeler said the issue is not complex. He said Congress had required the FCC to assure competitive devices, whether box or app, and the issue was whether consumers had to be forced to rent a box (or app) "month after month, after month." He said Congress made it clear that competition was needed, and the proposal would do that.

He called red herrings suggestions that the item required a second box in the home, or for consumers to stop using the boxes they have now, or for a multibillion-dollar network re-engineering, or allowed for disaggregation of content and new ads sold around it, or that it did not protect privacy, or "slows down or stops cable innovation." He said the rules will make clear that new advertising can't be replaced or new ads placed around the cable content. Commissioner Ajit Pai insisted following the vote that there is nothing in the item that prevents the deletion or replacement or additoin of advertising by third parties.

Wheeler said the proposal does not adversely impact diverse programmers, but instead creates new opportunities.

He made the point that it was the beginning of a process and it was unfortunate that his Republican colleagues had made up their minds before that process was conducted and issues addressed.

If the chairman's proposal is approved in a final order, cable operators and other multichannel video programming distributors (MVPDs) will have to provide that information for all of their video services to any third party device of app conforming to technical specs set by a standards body.

That final order likely won't be voted on until spring at the earliest, and there are still standards to be hammered out. MVPDs say it could be up to seven years before the new regime is in place, while activist groups pushing the proposal says the timeline should be far shorter.

But the notice of proposed rulemaking (NPRM) says MVPDs won't have to implement the regulations until two years after they are adopted, so, as Pai pointed out, consumers won't see the change for almost three years at a minimum. That two years is for the development of standards, said FCC Media Bureau Chief Bill Lake.

Lake addressed the criticism of cable operators that the proposal will require multiple boxes. He said that if an operator offers an app that does not require an additional device, it must allow third parties to provide a similar box-less app.

The comment period on the item will be 30 days, with 30 days for responses, so pay TV providers will have at least a couple of months to hammer home their points that the proposal threatens their business model, particularly their contractual relationships with programmers, and intrudes in a video access marketplace already evolving toward openness. Backers of the proposal will talk of the need to boost set-top competition, lower device prices and boost over-the-top video, and brand MVPDs as gatekeepers trying to protect billions in leased box fees.

Commissioner Jessica Rosenworcel, a Democrat, supported the rulemaking, but with some reservations. "[W]hat we have here may or may not be the precise way forward — but something has got to give," she said in her prepared statement.

"Important questions have been raised about copyright, privacy, diversity—and a whole host of other issues in a marketplace that has been tough for competitive providers to crack," Rosenworcel added. "We will need to explore them in the record that develops. Let me raise one other:  This rulemaking is complicated. It describes three information streams for navigation services, work that needs to be done by standards bodies, a medley of security systems, and a trio of parity requirements.  The most successful regulatory efforts are simple ones.  More work needs to be done to streamline this proposal, because in the end for consumers to enjoy the bounty of what we have proposed—execution is all."

Democratic FCC commissioner Mignon Clyburn said consumers deserved more set-top competition and choice, and the NPRM attempted to do that. She said there was only a paltry number of diverse channels and did not agree that the proposal would adversely affect them, as some minority programmers have asserted. 

Republican commissioner Michael O'Rielly called set-top boxes a relic of the era of video stores. He called the “unlock the box” catchphrase the FCC has adopted papers over the harmful results for consumers and content producers. He said that, taken together with reclassifying OTT as MVPDs, as the chairman has proposed, the sharing of device information will have to be a two-way street, with third parties having to share their content with MVPDs.

Commissioner Ajit Pai said he also feels the set-top pain on his cable bill, but said the FCC's aim should not be to unlock the box, to eliminate it.  Pai said the FCC NPRM instead "doubles down on the necessity of having a box, substituting one intrusive regulatory regime for another,' which is why he could not support it.

Among Pai's concerns were what he said could be the advserse impact on programmers, including on diverse programmers. "[N]othing in this proposal would prevent a set-top box manufacturer from replacing the commercials in a television show with commercials sold by that manufacturer. And nothing in this proposal would prevent a set-top box manufacturer from adding commercials to a program," he said.

Pai also pointed to the bipartisan pushback from Capitol Hill as evidence that others shared these concerns.

"In seeking to give consumers more choice and control, the FCC proposes to pull the rug from under those best equipped to protect their privacy, secure their personal data, and provide equality of access to a broad array of content right now," said Adonis Hoffman, former chief of staff to Clyburn and currently chairman of Business in the Public Interest, of the vote.

Senior officials at the FCC said several weeks ago when the proposal was unveiled that it was only the beginning of the process of updating the FCC's rules on set-tops. And the FCC has gotten some pushback from legislators, Republican and Democrats, who have suggested it needs to vet the issue carefully before taking any final action.

.The vote followed one of the more intense industry efforts to get the FCC to rethink the proposal, led by the Future of Television Coalition, cable operators, Hollywood studios, and others, who are concerned about protecting the MVPD content now being offered to third parties to re-aggregate, and potentially monetize, alongside over-the-top content.

While there were some strong Hill backers of the proposal, most notably Sen. Ed Markey (D-Mass.) and House Communications Subcommittee ranking member Anna Eshoo, there were letters of concern about contracts, copyrights and impact on independent programming from legislators on both sides of the aisle.

The FCC backed its decision to propose the change with numbers. For example, it noted that 99% of set-tops are still leased from cable companies (lack of device competition), and $231 per year, or almost $20 billion per year, is spent across all U.S. homes for lease fees, a 185% increase since 1994 (lack of price competition).

FCC officials, including Wheeler, used muscular language like "impeding" and "breaking the box lockdown" (the FCC launched #unlockthebox" to promote the proposal in the Twittersphere as well).

The FCC vote stemmed from recommendations by the FCC's (DSTAC) Downloadable Security Technology Advisory Committee, though opening up the set-top for third parties was only one of two recommendations from the committee.

DSTAC was created by the Congress in the STELAR Act to come up with a downloadable software successor to the CableCard set-top security hardware solution.

Before the chairman made his choice, Republicans in Congress and MVPDs suggested the FCC had exceeded its STELAR mandate by including the proposal to disaggregate MVPD video channels and unite them with over-the-top offerings and that it was reviving the AllVid proposal from 2010 even though the marketplace had moved on.

Box maker TiVo was among the fans.

“Given the sunset of the integration ban and the absence of an industry-supported successor to CableCARD, the FCC’s rulemaking is important to ensure choice for consumers, operators, and content creators,” said Matt Zinn, TiVo Senior VP, general counsel and chief privacy officer. “We are hopeful that this proceeding results in a competitive environment that increases choice, both for consumers and operators, and protects the business models that operators and device makers have created under the current CableCARD system.”

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