FCC throws open set-top box market

Heeding its own call to "Unlock the Box," the Federal Communications Commission (FCC) yesterday approved a Notice of Proposed Rulemaking (NPRM) that it believes will provide consumers more choice when it comes to acquiring the CPE through which they receive pay-TV and other broadband-related services. As has been the case with several of the FCC's broadband-related rulings, reaction to the decision was decidedly mixed.

The NPRM aims to enable a wider number of technology developers to create hardware- and software-based CPE that consumers would be able to buy and use in place of the current set-top boxes (STBs) they typically receive from their broadband and video services provider. To enable use of STB alternatives, the NPRM would mandate that pay-TV providers deliver what the FCC described as "three core information streams." These include:

• service discovery, which includes information on the programming available, such as the channel listing and video-on-demand roster, and what is on those channels
• entitlements, which includes information about what a subscriber can do with the content via the device, such as recording
• content.
  

The NPRM will not describe how this information will be made available, other than to say that the pay-TV provider should use "any published, transparent format that conforms to specifications set by an independent, open standards body."

Other features of the NPRM the FCC called out include:

• It will ensure that children's programming advertising limits and emergency alerts apply regardless of the CPE's origin.
• It will include a billing transparency rule to ensure that consumers understand their monthly charges for both programming services and equipment lease fees.
• It will retain the FCC's rules adopted in a 2010 Report and Order to improve support for consumer-owned CableCARD devices.
• It will include a Memorandum Opinion and Order removing the "integration ban" language from the Code of Federal Regulations, as required under Section 106 of the STELA Reauthorization Act of 2014.
  

FCC commissioners approved the NPRM by a vote of 3-2 along party lines, with Democrats Chairman Thomas Wheeler, Mignon Clyburn, and Jessica Rosenworcel for the proposal and Republican commissioners Ajit Pai and Michael O'Rielly against it. Those in favor noted the lack of competition in the STB space had led STB costs to rise 185% since 1994 while the prices of computers, televisions, and other consumer products that can now receive video had declined by 90% over the same timeframe. The average consumer currently spends $231 a year on STB rental fees, the FCC said in a press release announcing the vote.

In a statement following the vote, Chairman Wheeler asserted the NPRM would create open standards for STBs, thus promoting innovation and competition. "The new rules would create a framework for providing device manufacturers, software developers, and others the information they need to introduce innovative new technologies, while at the same time maintaining strong security, copyright and consumer protections."

Commissioner Pai argued that the NPRM would lead the FCC, and the communications industry, down the wrong innovation path. "Our goal should not be to unlock the box; it should be to eliminate the box. If you are a cable customer and you don't want to have a set-top box, you shouldn't be required to have one," he wrote. "This goal is technically feasible, and it reflects most consumers' preferences—including my own."

However, the NPRM would actually increase the reliance on STBs and related hardware, Pai asserted. To meet the information stream requirements, video providers would either have to re-architect their networks or supply a second box, he said his discussions with carriers indicate. And a second box would be the cheaper, and therefore more likely, approach to meeting the NPRM requirements. Also, he said the NPRM would not prevent the manufacturers of STBs from inserting commercials into the content they serve, either in addition to or in place of advertising the video provider has sold, or from removing programming it didn't want to support for some reason.

Industry objections to the NPRM echoed Pai's sentiments. Wrote American Cable Association (ACA) President and CEO Matthew M. Polka, "If the FCC moves forward with new rules, ACA is very troubled that smaller operators and their customers will be significantly burdened because these providers are hardly in position to absorb the cost of deploying new equipment to all customers, which is the likely outgrowth of this rulemaking -- a painful lesson they learned from the FCC's costly implementation of the flawed CableCARD experiment. To impose new costs on smaller operators that are already suffering badly from escalating retransmission consent and programming costs is misguided, and will surely cause unintended consequences for many consumers."

Not surprisingly, TiVo voiced support for the FCC's actions. "Given the sunset of the integration ban and the absence of an industry-supported successor to CableCARD, the FCC's rulemaking is important to ensure choice for consumers, operators, and content creators," said Matt Zinn, TiVo's senior vice president, general counsel, and chief privacy officer via a press statement. "We are hopeful that this proceeding results in a competitive environment that increases choice, both for consumers and operators, and protects the business models that operators and device makers have created under the current CableCARD system."

The FCC is likely to hear more along both lines, as it has opened a 60-day period for comments on the NPRM.

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