Home Analysis FCC move to disintermediate STBs opposed by US pay-TV sector

FCC move to disintermediate STBs opposed by US pay-TV sector

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FCC Media Bureau Chief William Lake presents Unlock the Box rule to FCC meeting on Feb 18 2016

By Barry Flynn, Contributing Editor

The US telecoms regulator, the FCC, this week began sifting through around 28,000 responses received by last Friday’s deadline to its proposal to disintermediate pay-TV operators’ set-top boxes. Early comments have already made it clear that the country’s subscription TV establishment is dead against it.

The FCC’s commissioners voted to adopt the proposed ‘rulemaking’ – dubbed ‘Unlock the Box’ – on February 18th – allowing interested parties until April 22nd to give their views on the measure, which essentially would allow consumers to access pay-TV operators’ content via any device or app they choose to – obviating the need to rent or buy a set-top box.

The FCC says the new rule is needed because “subscribers are chained to their set-top boxes [and] cable and satellite operators have locked up the market,” arguing that “lack of competition has meant few choices and high prices for consumers.” In this respect, the regulator points to research showing that since 1994, “the cost of cable set-top boxes has risen 185%, while the cost of computers, televisions and mobile phones has dropped by 90%.”

Accordingly, says the FCC, “the ground rules we propose in this Notice of Proposed Rulemaking are designed to let MVPD subscribers watch what they pay for wherever they want, however they want, and whenever they want, and pay less money to do so, making it as easy to buy an innovative means of accessing multichannel video programming (such as an app, smart TV, or set-top box) as it is to buy a cell phone or TV.”

Under the new rule, multichannel video programming distributors (MVPDs) will be compelled to deliver three separate streams of data to the creators of competitive devices or apps requesting access. These are:

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

Rather than mandate its own standards for these three information flows, a move the FCC says might impede innovation, the regulator is recommending 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.”

Similarly, the FCC is not proposing to mandate any particular security system to protect MVPDs’ content. Instead, the regulator will require MVPDs to offer “at least one content protection system that is openly licensed on reasonable and non-discriminatory terms.”

Not surprisingly, the US pay-TV industry is up in arms about the new measure. Quite apart from anything else, if adopted, it risks losing a significant slice of the $20bn a year the FCC estimates US consumers spend to lease operator-controlled set-top boxes.

This is not the principal complaint opponents advance in their submissions, however. One common view is voiced by content companies such as Disney, which argues that the rule does not make sufficient allowances for the contractual terms under which they provide premium content to pay-TV operators.

Such contracts often specify in great detail how rights-holders’ content should be presented, both in terms of the quality being delivered, and its context – for instance, how it is placed within a distributor’s electronic programme guide, or what type of content can be placed around it. How could such rules be enforced in the new environment?

This position gains support from a joint filing by the largest US cable operator, Comcast, and its subsidiary, media conglomerate NBC Universal, which says the FCC proposal contravenes “typical provisions in programming agreements between programmers and MVPDs” and conflicts with copyright law, since it deprives programmers and MVPDs of the right to control how their original content is published and used, “enabling the creation of unauthorized derivative works.”

If the proposal goes through in its present form, Comcast says, it will “require MVPDs to become mere wholesale providers of raw programming and unbundle their services so that third-party devices and apps can re-assemble the piece parts into derivative services without the approval of MVPDs.”

In any case, the Comcast filing points out, the move is “unjustified in today’s highly competitive and dynamic video marketplace,” and “completely ignores the fact” that pay-TV operators’ apps are already driving “significant competition and consumer choice in the device marketplace.”

Satellite pay-TV operators have also weighed in, with a joint filing from Echostar and Dish arguing that the proposed regime is “unworkable for satellite operators” because of their inherently uni-directional delivery architecture.

The text of the FCC proposal addresses this difference by saying that “DBS providers specifically will be required to have equipment of some kind in the home to deliver the three Information Flows over their one-way network” – in other words, they will have to pay for CPE under the new regime, even where a subscriber chooses not to rent their set-top box.

However, comment the two operators, “it would not be a simple matter to add the concept of a satellite gateway device to the proposed rules, as implementation would present its own challenges that could vary depending upon the path chosen.”

Technology solution providers such as Cisco and Roku also oppose the FCC move. Cisco takes a similar line to Comcast in arguing that apps are already delivering the type of competition that the FCC is after, and will continue to do so “if not constrained by a set-top box mandate,” going on to suggest that the mandate would not only “hamper security” but “stifle future innovation.”

OTT streaming specialist Roku, meanwhile, in which UK pay-TV operator BSkyB has a stake, also argues that the proposed rules would threaten innovation, adding that they could not only “undermine customer service,” but that wresting away control of the UI from pay-TV operators “could result in higher costs to consumers.”

Internet giant Google – whose Android technology is present in an increasing number of set-top boxes (see previous story) – and TV services provider TiVo, whose platform is licensed to operators such as Virgin Media in the UK – are reported to be the two major lobbyists throwing their weight behind the FCC proposal. However, neither of the two companies submitted comments on the FCC proposals, presumably on the basis that the FCC had already made their arguments for them. Apple and Microsoft were also notable absentees from the list of comments submitted to the FCC by last Friday’s deadline.

US civil rights organisation The Electronic Frontier Foundation (EFF) is another prominent backer. In a recent article, it commented that, “naturally, pay-TV companies and their allies in the entertainment industry are fighting hard to stop the new monopoly-breaking rules,” saying that they were raising “many of the same arguments they tried to raise against net neutrality.”

The copyright argument was bogus, said the EFF: “When these companies talk about copyright, what they mean is control over your experience and the design of your technology.”

The EFF went on to describe the set-top box as “a frozen artifact of a bygone age whose features have been caught in a time-warp of innovation-through-permission,” arguing that open competition could bring many more options, such as “new TV interfaces that present recommendations from various critics and tastemakers, or from your friends”. Incorporated into new video devices, these could take the viewer “straight to those shows and movies in one step, no matter which of your pay-TV or Internet video services they appear on.”

Following the deadline for comments on April 22nd, there is an additional deadline for ‘reply comments’ on May 23rd. After that, the FCC is proposing to hold meetings with interested parties between June 6th and June 10th.

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