Sheriff Wheeler says the cable industry's tail light is broken

BOSTON -- Watching the cable industry, led by its chief lobbyist and sympathetic Republican FCC commissioners, wail about what they're calling the "relentless government assault" on their business at INTX this week, I was reminded of the unwitting driver who asks the small-town sheriff why he was just pulled over.

You've seen this in a few movies.

"Your tail light is out," says the billy club-wielding law man, behind his austere shiny sunglasses 

"No it's not," the hapless passer-through responds.

"Now it is," says the cop, shattering the light with his club.

The way FCC commissioners Ajit Pai and Michael O'Rielly describe it, the cable industry is driving the speed limit and signaling just fine, but agency Chairman Tom Wheeler has already decided to haul the industry into the county jail anyway, with his proposals to "unlock" pay-TV set-tops to third-party operators, regulate how ISPs handle consumer privacy and set rates MSOs charge businesses for special access.

"It's sentencing first, verdict later," a dissonant Pai told a partisan crowd, while appearing at a rare gathering of the four FCC commissioners on the INTX stage Tuesday.

Despite an outcry from Washington and Hollywood, O'Rielly said Wheeler has already decided to put his controversial proposal to regulate the pay-TV set-top business up for a commission vote as it currently stands.

"I believe it's already done — it's cooked," O'Rielly said "At the end of the day, this proposal put forth by the Chairman is what's going to be voted on. I predict it will happen in October."

He called the proposal "garbage" that needs to be "thrown out," eliciting probably as loud an applause that the lightly filled Boston Convention Center could muster, with attendance at the National Cable Telecommunications Association's signature trade show certainly well below the projected 8,000, which would make it flat with last year's diminished event.

The official catch phrase of this year's INTX was "disruption," but "regulation" was really the theme for an industry that seemed  to be — in many product announcements and presentations — trying hard to prove that it was being innovative, mostly in its approach to set-tops. 

Comcast, for example, showed off its new system for building X1 functionality natively into devices like Samsung TVs and Roku OTT set tops. When Comcast Chairman and CEO Brian Roberts did hold up a new set-top at the company's Monday-afternoon INTX presser, it was the tiny, DVR-less, HDR-capable Xi5. The message: The set-top may not be gone, but it's presence — and the need to regulate it — is shrinking away. 

A Comcast exec even told me that the company might sell the Xi5 at retail.

Indeed, a number of the CPE devices on display at INTX — such as WOW's new TiVo-powered IP/QAM hybrid client — aren't the bulky kind of DVR box you necessarily think about when you hear Wheeler say consumers are paying, on average $231 a month to lease a set-top. 

So what's Sheriff Wheeler's beef with cable?

The boogeyman on everyone's lips is Google. At INTX, I heard time and time again from high-level cable operatives that on issues such as leased set-tops and special access, Google has the President's ear — and by extension, Wheeler's ear. 

"I think the Commission and the White House have worked very closely with Google," said Matthew Polka, President and CEO of the American Cable Association. Polka, who represents the regulatory interests of the smaller side of the industry, said he can't remember a time in all the year's he's been coming to the erstwhile "Cable Show" when the ACA's and the NCTA's agendas have been in such lock step. 

Wheeler, Polka told me, earnestly believes his recent proposals will be helpful to consumers, "and he's trying to work with companies like Google to accomplish those aims."

"But what's interesting to me," Polka added, "is the perception that, from a regulatory perspective, just because Google is newer, or maybe they're bigger or maybe they're perceived to be cooler, that they're more innovative and our industry is not."

Think of Google as the "Boss Hogg" in our small-town lawman scenario. 

The FCC Chairman may have high-reaching goals, Polka added, but he has been "sold a bill of goods" by Google in trying to reach for them.

"Google wants the data from TV so that they can impose their own guide, their own advertisements, and they care less about privacy concerns, copyright concerns, negotiating for terms of carriage," Polka said.

So what does Wheeler want out of these proposals that seem to favor Silicon Valley and make little sense?

Defending himself to a sparse, depleted crowd of cable industry pros in the waning hours of INTX Wednesday, Wheeler did not go deep, saying only that his proposals were only about re-establishing competition and innovation in an industry that once grew up on such things.

Indeed, Wheeler went into no specifics at all. And maybe it's a waste of time for the cable industry to work so hard getting into them, too. MSOs can show him all the app-based delivery systems they want.

The broader issue is that the cable industry is passing through Wheeler's county in unique position to absolutely control both residential and commercial broadband in the decades to come. The reasons Wheeler wants to haul the business in for regulation matter less at this point than the fact that he's absolutely determined to do so, incoherent surface reasoning or no.

"He wants to reach out further into the businesses of ISPs to be able to regulate them, whether its privacy, whether it's through set-top boxes, whether it's through Title II, or through special access," Polka said, providing perhaps the clearest explanation of all of this I've heard.

Hey Brian, Tom and Patrick: Your tail lights are out.—Daniel

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