FCC Proposes New Rule To Unlock Set-Top Cable Boxes To Encourage Innovation, Competition, Choice And Lower Prices

During an open Commission meeting on Thursday February 18, 2016, the U.S. Federal Communications Commission (FCC) discussed and approved several agenda items including a proposal to encourage competition with the cable television set-top boxes that many consumers lease from their cable-TV providers:

"The Notice of Proposed Rulemaking (NPRM) will create a framework for providing innovators, device manufacturers, and app developers the information they need to develop new technologies, reflecting the many ways consumers access their subscription video programming today. Ninety-nine percent of pay-TV subscribers have limited choices today and lease set-top boxes from their cable and satellite operators. Lack of competition has meant few choices and high prices for consumers – on average, $231 in rental fees annually for the average American household. Altogether, 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. Congress recognized the importance of a competitive marketplace and directed the Commission to adopt rules that will ensure consumers will be able to use the device they prefer for accessing programming they’ve paid for."

The NPRM recommends that Multi-channel Video Programming Distributors (MVPD), including legacy cable-TV providers, TV networks, and others that provide programming via cable and/or the Internet, be required to deliver three core information streams:

"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,
3. Content delivery: The video programming itself."

Consumers can keep their current cable set-top boxes, or switch to newer solutions when available. The FCC did not dictate standards for the solutions. Instead the FCC recommended that:

"... these three streams be available to the creators of competitive solutions using any published, transparent format that conforms to specifications set by an independent, open standards body... The Notice of Proposed Rulemaking also recommends content protection rules... The proposed rules do not mandate a single security system but simply require MVPDs to offer at least one content protection system that is openly licensed on reasonable and non-discriminatory terms. This gives MVPDs the ability to create their own content protection system to prevent theft and misuse, while ensuring that manufacturers will be able to build devices that can access protected content from a variety of MVPDs."

The proposed rules also include the following requirements for MVPDs:

"Ensure that children’s programming advertising limits and emergency alerts apply regardless of whether the consumer leases the MVPD’s set-top box or uses a competitive solution to access video programming;

Include a billing transparency rule to ensure that consumers understand their monthly charges for both programming services and equipment lease fees in accordance with section 629; and

Retain the Commission’s rules adopted in a 2010 Report and Order to improve support for consumer-owned CableCARD devices."

Much needs to happen before competitive set-top box solutions are available in the marketplace. The next step includes a comment period where interested parties (e.g., companies, consumers) -- supporters and opponents -- submit feedback about the proposed rules. Then, the FCC reviews the feedback and may adjust its rules based upon that feedback. After finalized rules, companies will then develop set-top box solutions. The proposed rules document lists several topics the FCC seeks feedback about. Some of those topics:

"... ways to address any licensing and consumer protection issues... how best to align our rules on device billing and subsidies... whether the rules the Commission adopted in a 2010 Report and Order to improve support for consumer-owned CableCARD devices have continued relevance and should remain valid and enforceable... statistics show, however, that almost all consumers have one source for access to the multichannel video programming to which they subscribe: the leased set-top box, or the MVPD-provided application. Therefore, we tentatively conclude that the market for navigation devices is not competitive, and that we should adopt new regulations to further Section 629. We invite comment on this tentative conclusion... the process that an MVPD uses to decide whether to allow such a device to access its services... it appears that consumers have downloaded proprietary MVPD applications many times; we seek comment on whether consumers actually use those applications to access multichannel video programming..."

Regardless, the proposed set-top box rules will disrupt the revenue streams cable-TV operators have enjoyed for decades. So, you can expect them, and their allies, to put up a fight. Wired magazine reported:

"Each consumer has invested thousands of dollars into the box without having any ownership,” says Chip Pickering, CEO of Incompas, a trade association for “competitive networks” backed by Google, Amazon, Netflix, and others. “That’s a monopoly business model.” The distribution of set-top boxes, then, is essentially a monopoly within an already monopolistic industry..."

One argument opponents have used is to blame Google:

"Google has become a popular bogeyman for entrenched cable interests for good reason. The company has actively supported set-top box disruption, both through its involvement with Incompas and through direct contact with the FCC. AT&T went so far as to call it “Google’s Set-Top Box Proposal” in a corporate blog post opposing the rules..."

Despite the hype and spin that has been presented (and will be presented), it's important for consumers to remember that:

“Nothing in the [FCC] proposal changes linear TV or traditional TV’s advertising. Their programming, their advertising, nothing that they do today will be changed,” says Pickering. What could change is that the traditional programming would be served up alongside Internet programming..."

View the FCC "Unlock the Box" press release (Adobe PDF) or here. View the FCC "Unlock the Box" NPRM (Adobe PDF) or here.

The FCC set-top proposal is is good news for consumers. It starts to break the monopolistic strangle-hold. Cable-TV providers have had decades to recoup their infrastructure investments. It's time to move forward with solutions more friendly for consumers. Kudos to the FCC for encouraging competition to lower cable prices for consumers.