FCC Votes To Increase Competition For Set-Top Box Market

The FCC voted today to consider chairman Tom Wheeler’s new proposal for shaking up the set-top box market by, well, creating an actual competitive market that consumers have the option to use.

In their monthly open meeting this morning, the commission voted 3-2 along its usual lines to adopt the Notice of Proposed Rulemaking (NPRM) formally called “Expanding Consumers’ Video Navigation Choices; Commercial Availability of Navigation Devices.” Commissioners Jessica Rosenworcel and Mignon Clyburn voted with Wheeler to approve the proposal; commissioners Ajit Pai and Michael O’Reilly voted against.

As we’ve explained previously, the NPRM asks pay-TV companies to make sure that competing manufacturers can receive programming information (like channel guides and on-demand content), asks them to make their video content available to those manufacturers, and seeks clarification on what a set-top box needs to be able to do with content it receives.

The gist is that if the proposal does lead to a new rule, that instead of having to pay Comcast an extra $12 per month just for the ability to get TV signals to your living room, you’d be able to run “Comcast programming” on something like your Xbox, Roku, Apple TV, or dozens of other possible or existing devices.

As is usual, each of the commissioners delivered remarks about the proposal before the commission took a vote.

Commisioner Clyburn recalled the last attempt made to open up the box market, the largely-failed CableCARD. Because this NPRM puts forward a plan to have an independent body make a standard, instead of setting its own rigid standard, it should meet with more success, she intimated.

“While prior Commission attempts in this area have been less than successful,” said Clyburn, “standardization and technological advancements have made it easier to introduce competition and innovation in this set-top market.”

She added, “Today’s [proceeding] seeks to give consumers more control in how they access video services and attempts to promote innovation in the display, selection, and use of this programming. In short, choice.”

Clyburn, and others, also pointed to the statistics at the heart of the matter: that 99% of pay-TV customers currently rent a box from their provider, that those rental rates have risen significantly faster than inflation, and that the total bill comes to a whopping $20 billion annually nationwide.

Commissioner Rosenworcel leaned on the competition angle, meanwhile. “Here’s an experiment,” she began. “You can do it at home. Just sit in your favorite comfortable chair — you know, the one in front of the television. In one hand hold the remote control for your set-top box. In the other, hold your mobile phone. Now ask yourself: which of these two devices has changed substantially over the last two decades? Which has seen extraordinary innovation? And which has benefited from competition?”

The answer, Rosenworcel concluded, is obvious: competition is better for everyone.

Commissioner Pai sympathized with the frustrations Wheeler’s proposal expressed, saying that he has three set-top boxes in his own home and finds them “clingy and expensive” and adding that he “feels the pain” every month when the bill comes due. But, Pai continued, he sees that problem as the “product of an intrusive regulatory regime,” and sees that the best way around it is simply to eliminate the cable box.

“If you are a cable customer and you don’t want to have a set-top box, you should not be required to have one,” said Pai. “This goal is technically feasible and reflects most consumers’ preferences.”

Instead, Pai said, the NPRM being considered by the FCC would double-down on cable boxes, forcing every customer to have “an entirely new set of boxes,” just not necessarily ones provided by their cable providers.

Commissioner O’Rielly, in his remarks, claimed that as far as he is concerned, set-top boxes overall are “a relic of the past, well on their way to the fate of the video rental store,” and that for the FCC to consider the proposal at all in 2016 is foolhardy at best.

The fees that pay-TV companies charge consumers for proprietary boxes they may or may not be able to opt out of are indeed high, as we’ve seen in our bill breakdowns.

Cable companies, which make serious bank from collecting those rental fees every month, have argued that the FCC’s proposal will ruin everything. Arguments floated so far include harms to diversity, harms to competition and innovation, and ever-popular claims that prices will have to go up (as they always do anyway).

However, as Wheeler made clear in his closing remarks, the issue as he sees it is one of consumer choice. “You know, this issue really is not complex,” Wheeler said.

“Congress has explicitly instructed us to assure that there are competitive information devices, be it a box or an app. There’s no ‘one is software, one is hardware.’ The functionality is the same. The issue is whether you are forced to rent that box month after month after month, or whether you are forced to rent that app month after month after month.”

“Technology has advanced to a point where [competition] is possible without changing the functioning of the pay-TV system, its copyright protections, and its security, whether an app or a box,” he added.

Wheeler also pointed out that the FCC’s current proposal is not dissimilar to one the cable industry floated itself a few years ago.

Wheeler shared slides comparing the existing cable model and the one he proposes, and then pointed out that they are, in fact, the same slide. “There is identical service delivery” under the new proposal, said Wheeler. “There is identical entitlement authorization There is identical relaying of choice back to the cable system, and there is identical delivery of programming.”

He also dispelled the myths that have rapidly begun to swirl around the proposal. “Nothing in this item requires a second box in this home. Nothing in this item requires customers to stop using the system they have right now.”

In conclusion, Wheeler said, “This is is not complex. The law mandates it. Technology allows it. The industry at one time proposed something similar to it. And consumers deserve a break and a choice.”

All that said, the FCC is a bureaucracy and its process is, well, bureaucratic. Although the FCC has accepted the NPRM for consideration, that doesn’t actually mean anything changes in the immediate sense (or perhaps ever).

Instead, today’s proceeding it kicks off the public comment period, where anyone and everyone can write in with their opinion on the proposed rule change.

Our colleagues down the hall at consumers Union (the advocacy arm of our parent company, Consumer Reports) applauded the vote, saying, “For too long, pay-TV customers have had to shell out money month after month to lease these boxes, on top of the ever-increasing price of service. It’s time to untether the consumer from that clunky, old box. This vote is an important step toward tearing down barriers that have limited competition and innovation in this market. We will keep working with the FCC to help develop a strong, practical set of standards that will better serve consumers.”

Want more consumer news? Visit our parent organization, Consumer Reports, for the latest on scams, recalls, and other consumer issues.