FCC proposes set-top rules overhaul; operators and programmers form coalition to oppose plan

In the FCC's latest attempt to open the pay-TV set-top market to third-party retail sellers like TiVo, agency Chairman Tom Wheeler has formally proposed fundamental changes to rules governing set-top technology.

"This week, I am sharing a proposal with my colleagues to tear down the barriers that currently prevent innovators from developing new ways for consumers to access and enjoy their favorite shows and movies on their terms," Wheeler said. "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. Nothing in this proposal changes a company's ability to package and price its programming to its subscribers, or requires consumers to purchase new boxes."

Wheeler's decision to follow up on proposals made in September by the FCC's Downloadable Security Technology Advisory Committee (DSTAC) committee is a blow to pay-TV operators. Congress had set up the committee last year to -- once again to explore technologies that could open up the pay-TV set-top market to consumer electronics companies and others. Since there was no mandate that Wheeler act on DSTAC's proposals, pay-TV companies and groups representing them, including the National Cable Telecommunications Association, hoped the chairman would take no action at all. 

But he did. And on Wednesday, a group of 47 pay-TV operators and programmers, representing about every major brand in the pay-TV industry, announced that they have formed an alliance, the Future of TV Coalition, to oppose Wheeler's Notice of Proposed Rulemaking. 

In promising to "unlock" the pay-TV set-top, Wheeler described a proposal that sounded suspiciously like AllVid, the DSTAC proposal the pay-TV industry has been stridently resisting. 

Wheeler's proposal did address a core concern for the operators, keeping channel lineups dictated in program licensing negotiations in place.

The proposal breaks down into three mandates for pay-TV operators:

> They must furnish consumer electronics brands and other alternative set-top makers with "service discovery" -- that is what content is available to consumers.

> Operators must share their "entitlement" information -- that is information about what the device is allowed to do with the content. This is where channel lineup considerations come in. 

> Operators must also furnish "content delivery" -- in other words, the video programming itself. 

In announcing his proposal, Wheeler cited data compiled by vocal opponents of the pay-TV set-top leasing business. 

"Today, 99 percent of pay-TV customers lease set-top boxes from their cable, satellite or telco providers," Wheeler said. "Pay-TV subscribers spend an average of $231 a year to rent these boxes, because there are few meaningful alternatives.

"Over the past 20 years, 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. It doesn't have to be this way," he added. 

Meanwhile, in response, virtually every large and mid-sized pay-TV operator, from Comcast to Cablevision to Dish Network to Frontier Communications to WOW!, announced Future of TV. The group also includes the NCTA  and the American Cable Association, as well as a few programmers, like TV One and Revolt. 

For now, the No. 1 priority for the coalition seems to be keeping Wheeler and the FCC away from adopting AllVid, a proposal which would require operators to install a decoding device on their network that would enable third-party set-tops to work in their ecosystem. 

"American consumers have never had more freedom to find and watch the shows they love in different ways – from a la carte, to smaller packages, to traditional or new Internet providers and above all the burgeoning marketplace for streaming devices and video apps. But AllVid would slam the brakes on this progress and harm consumers. It's the ultimate example of the government trying to fix something that isn't broken," said coalition Co-Chairman Nomi Bergman, president of Bright House Networks.

For more:
- read this FCC statement
- read this Future of TV statement

Related articles:
Public Knowledge: Pay-TV customers overpaying on set-tops by $6 billion to $14 billion
AT&T to FCC: AllVid would destroy carefully orchestrated channel placement agreements
NCTA takes aim at Public Knowledge's cloud-based AllVid proposal

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