Final comments are in at the Federal Communications Commission on the agency’s proposal to unlock the set-top box — a move supporters say will create healthy competition in the pay-TV market, and one opponents — including a former FCC economist — say will do the opposite.
“Clunky, technologically-backwards rental set-top boxes that cost consumers an average of $231 a year and earn billions for cable companies are a frozen artifact of a bygone era,” Electronic Frontier Foundation attorney Mitch Stoltz said Friday.
The EFF, Public Knowledge and other supporters told the FCC the proposed regs to compel pay-TV providers like Comcast and DirecTV to make their content accessible by third party devices and apps would break the monopoly providers have on the market.
“Competition will drive innovation in features and allow consumers to vote with their dollars for devices that are easier to use, have more sophisticated search functions, and integrate multiple sources of programming,” Stoltz said.
Public Knowledge attorney John Bergmayer said the proposal “will save consumers billions of dollars, unleash innovation and competition on a stale market, and give creators new ways to reach viewers while decreasing copyright infringement.”
“[I]n addition to benefitting viewers while protecting privacy and other public interest goals, [the proposal] will ensure that content creators retain control of their programming, will make it easier for viewers to access lawful content (thus decreasing piracy), will promote diverse and minority programming, and will benefit video distribution competition, including making traditional pay TV services more appealing to viewers who might otherwise ‘cut the cord,’” Bergmayer said.
Opponents of the rules disagree, and told the FCC the market is already addressing the issue with apps, streaming services and devices.
“Contrary to the FCC’s bleak depiction, many content providers have embraced applications to showcase their programming,” California-based tech advocacy group CALinnovates said, listing ABC, Comedy Central, Disney, ESPN, MTV, Showtime, Sony, and TBS among providers offering their content on streaming services including Xbox Live, Hulu, Netflix, and Sling TV.
“Even traditional MVPDs are jumping into the app arena,” the group said referencing an app announced by Comcast earlier this week subscribers can use in place of a set-top box. “Consumers can watch this content on an array of devices, including tablets, gaming systems, smart phones, computers, Roku, and smart TVs.”
In addition to the possibility the rules will require consumers to adopt a second box if providers and third parties can’t agree on technical specifications, while also putting providers content at risk of piracy, economist Dr. Christian Dippon of NERA Economic Consulting says they won’t achieve the FCC’s goals.
“The agency is also mistaken in its belief that set-top boxes should have followed the same downward trend as other hardware and are currently overpriced,” Dippon and CALinnovates said. “The alleged drop in other hardware prices since 1994 flows from a mistaken understanding of how the Bureau of Labor Statistics calculates changes in its [consumer price index], and completely fails to account for the improvements in the quality of today’s set-top boxes.”
In his announcement of the proposal FCC Chairman Tom Wheeler said the cost of set-top boxes has risen 185 percent, while the cost of computers, TVs and mobile phones has dropped 90 percent. According to the congressional study the FCC cited in its proposal, the set-top box lease market is worth almost $20 billion.
Dippon said content creators invest in programming with the assumption TV providers will offer a return on the investment, while providers are willing to offer contracts because of “robust competition” from other providers.
“The FCC’s proposal risks upsetting this creative balance by allowing third parties to make money distributing content without negotiating with content creators,” they said.
In a study commissioned by the National Cable and Telecommunications Association, which threatened Thursday to sue the FCC if it passes the proposal, former chief economist at the FCC Steven Wildman said the rules “are likely to artificially distort competition to the detriment of consumers.”
According to Wildman, the rules will allow potential third-party set-top box manufacturers like Google “to repackage programming offered on [multichannel video programming distributor] systems (along with other Internet-provided programming) and to sell advertisers access to audiences that are currently jointly created by MVPDs and the networks they carry.”
The result “is likely to distort competition in multiple ways that promote inferior services and diminish the quantity, quality and diversity of video programming,” Wildman said.
Following a vote to advance the rules in February, Wheeler said the rules will prohibit third-party boxes and apps from interfering with advertising content.
“Existing copyrights and programming agreements are unaffected,” Wheeler said. “Nothing in this proposal slows down or stops cable innovation.”
