It’s hard to believe that anyone could have strong feelings about something as seemingly prosaic as a cable or satellite set top box. But the operators who provide them, and the Hollywood producers whose content goes through them, are livid today after the FCC voted to begin a process that eventually could open the market to independent consumer electronics manufacturers.
Here’s a look at what it’s all about, and how it could affect pay TV consumers and providers:
Q: What does the FCC want to do?
A: Wheeler and fellow Democrats on the commission want to help consumer electronics manufacturers sell set top boxes to cable and satellite subscribers, giving them an alternative to the ones that nearly everyone leases from operators.
Q: Why is the agency doing this?
A: The Telecommunications Act of 1996 directed the FCC to open the market. That was reinforced in a 2014 bill that regulates satellite broadcasting: Congress ordered the FCC to study new technologies and then “promote the competitive availability of navigation devices.” Wheeler and others also believe it’s a good idea.
Q: What’s so good about it?
A: Supporters say consumers could save a lot of money. Manufacturers such as Apple, Amazon or Google also might offer innovative features, including the ability to switch between cable and non-cable programming — for example Internet-delivered streams from Netflix and Amazon Prime — without switching the imput to the TV set.
Q: How much could subscribers save?
A: It would vary by provider. On average, subscribers pay $90 a year in rental fees for each box, which comes to $231 for a typical household. That adds up to about $20 billion per year. The FCC says that charges for set top boxes have increased 185% since 1994. Of course, they’ve become a lot more technologically sophisticated with DVRs and Internet capabilities. Still, the FCC says that the rising costs stand in contrast to computers, televisions and mobile phones where competition has led to a 90% drop in prices.
Q: Why do we even need a set top box?
A: Cable companies encrypt their signals to deter piracy. Historically, they’ve put the technology to decrypt the transmissions in their set top boxes.
Q: Why do you say “historically”?
A: Some operators are talking about getting rid of boxes. “Where we’re headed is the ability of customers to access the complete video product without having to rent a set-top box from us,” Time Warner CEO Rob Marcus told analysts in October.-(He’s awaiting approval from the FCC and Justice Department to sell his company to Charter.)
By contrast, Comcast Cable chief Neil Smit said this month that he plans to accelerate the rollout of his company’s X1 box, the brains for its sophisticated TV-and-Internet home entertainment system. “We’re putting out 40,000 boxes a day which, if you do the rough math, it’ll get us in the range of 50% of the footprint covered by the end of the year,” he said.
Q: What’s kept manufacturers from offering alternatives?
A: The FCC hoped to comply with the Telecom Act order to open the market via an operator-supplied smartcard, called a CableCard, that helps with decryption. But TiVo and others who built devices using CableCards had a hard time selling the concept to consumers. Many operators provided indifferent support for the technology, and it only accommodated one-way communications — meaning no VOD or pay-per-view.
Q: How would the FCC change that?
A: It would require cable companies to come up with at least one form of downloadable security software and license it to others on “reasonable and non-discriminatory terms.” Third party boxes would still have to comply with rules governing privacy, emergency alerts, and restrictions on advertising to children.
Q: Cable and satellite companies oppose this. What do they say?
A: They say that many operators already offer consumers far more flexibility by enabling them to stream programming on computers and mobile devices. They add that the rules would prevent them from coming up with new apps or devices to keep up with changes in technology — and might open a Pandora’s Box of problems involving copyright protection.
Q: What kinds of copyright problems do they foresee?
A: Independent device makers might try to repackage cable channels or programming. For example, they potentially could break the bundling agreements that operators accept when they negotiate carriage deals with content providers including as Disney, Fox, NBCUniversal, Time Warner, Viacom, and Discovery. Or they might present programs in different ways than the creators intended — possibly profiting by charging additional fees, overlaying ads that they sell on shows, or simply selling the gobs of data they could collect about viewers.
Q: That’s their problem. Why should I care?
A: Opponents say that niche channels, including those that appeal to minority viewers, are most vulnerable to being shuttled aside — and would suffer most from a threat to their businesses.
Q: Do content companies share these fears?
A: Many do. The MPAA, A&E Television Networks, AMC Networks, Discovery, Disney, Fox, Comcast’s NBCUniversal, Viacom, TV One, Fuse Media, and Sean “Diddy” Combs’ Revolt TV music channel have lined up against the FCC.
Q: Who supports the FCC?
A: Google and TiVo are big supporters, They’re joined by the Writers Guild of America, West, and activist groups including Public Knowledge, Consumers Union, and Consumer Federation of America — and the editorial boards of The New York Times, USA Today, The Los Angeles Times, The Boston Globe, and The Chicago Tribune. BET founder Robert Johnson also sides with the regulators.
Q: What do supporters of the FCC’s rules say about cable’s concerns?
A: They say operators are trying to confuse the debate so they can protect a cash cow. There’s no evidence that anyone plans to hurt the public interest or interfere with copyrights. The FCC can deal with problems if they arise. This is simply about giving consumers better ways to enjoy the programming that they already buy.
Q: How quickly would consumers see a change if the FCC decides to go ahead with the rulemaking?
A: It will take a long time, and might not happen at all. The agency probably won’t have final rules until late this year. Then it will take time for operators to come up with the decryption standard they’ll license. They might feel little urgency to do so if the election in November turns the White House over to a president who opposes the FCC’s initiative. And if the next president supports the FCC, then cable and telecom companies probably will file suits to tie the rules up in court.