FCC Proposes To Unlock Cable TV Set-Top Boxes To Encourage Competition And Better Services For Consumers

On Wednesday, the Federal Communications Commission (FCC) proposed changes to unlock set-top cable television boxes to encourage competition and more choices for consumers. The change involves unlocking set-top boxes. Currently, most cable TV subscribers lease set-top boxes. The system is highly profitable for cable providers and very costly for consumers. How bad is it? According the FCC:

"... U.S. consumers spend $20 billion a year to lease these devices. Since 1994, according to a recent analysis, the cost of cable set-top boxes has risen 185 percent while the cost of computers, televisions and mobile phones has dropped by 90 percent."

Besides spending about $231.00 every year in leasing costs, consumers are often stuck in long-term, burdensome contracts. The cost of these set-top devices should have decreased along with other computer technology. To encourage competition and consumer choice:

"... FCC Chairman Wheeler is circulating for a vote a Notice of Proposed Rulemaking (NPRM) that would 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. The proposal will be voted by the full Commission on February 18, 2016... The Chairman’s proposal will let innovators create and then let consumers choose."

What are the details? The FCC proposal would:

"... create a framework for providing innovators, device manufacturers and app developers the information they need to develop new technologies. Consumers should be able to choose how they access the Multichannel Video Programming Distributor’s (MVPDs) – cable, satellite or telco companies – video services to which they subscribe. For example, consumers should be able to have the choice of accessing programming through the MVPD-provided interface on a pay-TV set-top box or app, or through devices such as a tablet or smart TV using a competitive app or software.... as required by the Telecommunications Act of 1996, the proposal identifies three core information streams that must pass from MVPDs to the creators of competitive devices or apps: 1) 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 those channels; 2) Entitlements: Information about what a device is allowed to do with content, such as recording; and 3) Content delivery: The video programming itself. "

To ensure that innovators can innovate and consumers receive the benefits promised, the FCC proposal also addressed the issue of standards:

"Standards: Promoting interoperability and removing barriers to innovation. Instead of mandating a government-specific standard for these three information flows, which might impede innovation, the Chairman’s proposal recommends that they be made available to the creators of competitive devices and navigation solutions using any published, transparent format that conforms to specifications set by an independent, open standards body. The proposal identifies five characteristics that must be met by an independent standards body: 1) openness in membership, 2) a balance of interests, 3) due process, 4) an appeals process, and 5) consensus."

Sounds good to me. This solution is long, long overdue. Decades ago, phone deregulation freed consumers from having to lease expensive landline telephones. The New York Times reported:

"Last year, Senators Edward Markey of Massachusetts and Richard Blumenthal of Connecticut, both Democrats, investigated the cable set-top box market. They estimated that the cable industry, with its hidden fees and long-term contracts, generated $20 billion in annual revenue from the box rentals."

Naturally, media companies have already voiced their concerns:

"... the change could undermine the foundation of their businesses. The concern is that the new arrangement could negate contracts between cable companies and entertainment companies, in which the cable companies pay television groups billions of dollars a year for the rights to distribute programming. Those contracts stipulate how the programming can be distributed,... how it is branded, certain copyright protections and the treatment of advertising... Opponents of the proposal also said that the industry was already providing more streaming options and the F.C.C. did not need to intervene to spur innovation. In November, Time Warner Cable, for instance, began a trial offering its cable television lineup through devices made by Roku..."

Hello? Consumers want a better experience with lower costs --now -- and not at the glacial pace of change by cable TV providers. The television business is already changing quickly. Either catch up and be a leading part of the change or continue to get run over by it.

Kudos to the FCC and Chairman Wheeler, who are showing that they clearly listen to consumers. Competitors should be able to provide both lower-cost solutions with a better user experience, and consumers should have the freedom and choice to buy them. Give innovators the freedom to innovate and let the marketplace decide, not self-interested cable TV executives. The new solutions may be cheaper set-top boxes, mobile apps, smart TVs with the set-top box functionality integrated, or a mix. That would be great. The smart TV solution would provide consumers with simplicity and fewer devices, making today's smart TVs truly smart(er).

Download the FCC proposal (Adobe PDF). What are your opinions of the FCC proposal?

Comments

[Chanson de Roland]

One of the Multichannel Video Programming Distributor’s (MVPDs) specious concerns is that Chairman Wheeler's proposed rule ". . . would could negate contracts between cable companies and entertainment companies, in which the cable companies pay television groups billions of dollars a year for the rights to distribute programming." Well, that is a good thing. The only reason that MVPDs have been able to force consumers and content providers to deal with them is that they virtually monopolized broadband, cable, satellite, and/or telco access to our homes and businesses. The FCC's Net Neutrality rule and now the proposed rule unlocking set-top boxes frees consumers to choose content and the source of content (e.g., Internet, television subscription, Netflix, etc.), and it finally, in step with new technologies, allows the content providers to bypass the MVPDs and use the broadband connections to our homes to deal directly with each individual consumer, which is already starting to happen, as companies like Netflix, HBO, et al. offer their content directly to consumers through devices like Apple TV.

So what MVPDs raise as concern and reason to oppose Chairman Wheeler's proposed rule unlocking set-top boxes is a virtue that benefits competition in the markets for content, consumer choice and welfare by offering consumers more choices at lower prices, and benefits those who would compete with the television subscriptions offered by the MVPDs by offering alternatives directly to consumers. And providing the foregoing benefits is exactly what the FCC's charter requires it to do and is in the best interests of America's consumers and in facilitating competition in the markets that the FCC regulates. Therefore, Chairman Wheeler's proposal to unlock set-top boxes not only sounds good; it is good, lawful, within the ambit of the FCC's authority, and carries into effect the FCC's very purpose for existing as an agency of the United States.