#UnlockTheBox: Claims Consumer Benefits, But A Costly Exchange in the End

#UnlockTheBox: Claims Consumer Benefits, But A Costly Exchange in the End

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Last fall Congress held a hearing on Federal Communications Commission Oversight to explore the proper role of the FCC in supporting our increasingly broadband-reliant, technologically converging Internet ecosystem.  During the hearing, several members of the House Communications and Technology Subcommittee raised concerns about whether the FCC would seek to further alter the communications landscape by revisiting its “AllVid” proposal, which would’ve required paid television providers to create new set-top-box hardware that competitive companies could sell (think: TiVO).

At the time, FCC Chairman Tom Wheeler declared that he had no intention of going back down the AllVid path.  Contrary to those declarations, however, the Commission this week began circulating a proposal to #UnlockTheBox – i.e., require cable, telecom, and satellite providers to architect new set top boxes that competing technology, consumer electronic, and software developers could monetize in any number of ways.

While Chairman Wheeler and supporters of his proposal contend that opening up the cable box market is necessary to increase competition, their positions are being met with opposition from a variety of sources. “The market for video is fiercely competitive, said Tom Struble, Policy Counsel at TechFreedom, a non-profit, non-partisan technology policy think tank.  “Amazon and Google offer cheap ways to stream content to TVs from computers and mobile devices, and Netflix now has more subscribers in the U.S. than any MVPD (multichannel video programming distributor). And even when people still subscribe to cable, they’re increasingly watching video over-the-top, as major companies like Verizon and Comcast have launched OVD (online video distributor) services.”

With nearly a quarter of the U.S. population falling into the category of “cord cutters” (15%) and “cord nevers” (9%), consumers have an array of options to choose from when it comes to video programming.  A recent article by the Los Angeles times noted “there are more than 100 Internet video services operating in the U.S., with at least 40% launching during the last two years.”  Further, “the proliferation of devices and the low cost of these services have finally enabled people to have real choice,” said Adam Ware, head of digital media at the Tennis Channel, which launched its streaming product in 2014. “And it has happened faster than anyone expected.”

As The Times points out, the growing number of options and varying prices for streaming content can be overwhelming and make comparison shopping difficult. However, “consumers, by and large, are delighted by the opportunity to get more control,” said Brett Sappington, director of research of Parks Associates. “But the challenge comes from finding all of that content. You have to go into each service to find out if the content you want to see is available.”

The Commission will vote on Chairman Wheeler’s proposal during its February 18, 2016 meeting, but reactions to the proposal’s outline are already strong. “Mandating that MVPDs change their technology is costly and may subject their content to widespread piracy. There are better ways to promote competition in video markets,” continued Struble, who believes “politics is behind the FCC’s push for a set-top box mandate.”

The Multicultural Media Telecom and Internet Council (MMTC) also expressed concern over Chairman Wheeler’s current proposal, which it believes “would force programmers and distributors to disaggregate their shows and services, then provide the content to companies to repackage without compensating the content creators or respecting the basic terms of licensing deals.”  Noting that minority programmers “already lack equal access to capital and carriage on new media platforms,” this proposal, if adopted, “would impact their placement, profile, advertising revenue, and current and future investments in quality multicultural programming.”  MMTC is likewise “concerned that the Commission would move forward on a proposal that primarily rewards big technology corporations that have stunningly poor diversity records in the areas of employment, ownership, and supplier diversity.”

Underscoring the harm to diverse interests, Former FCC Chairman and current head of the National Cable & Telecommunications Association Michael Powell explained in an op-ed for Re/Code, this proposal “harms content creators — particularly minority programmers — that rely heavily on their deals with pay-TV companies to fund the content that consumers love….This all allows these tech giants to profit handsomely off the intellectual property of others without sharing any of that cash (or prized big data) with the people who created it.”

 

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