FCC Explains Cable Set-Top Box Proposal, Everything Else It Does To Senate (Again)

Image courtesy of inajeep

Election years beget a compressed Congressional schedule. The House and Senate just got back to work in D.C. after a six-week break, and will be taking another six-week break as soon as we hit October 1 (picking up again after the election), so everything the committees want to do has to get done now. Like bringing in all five FCC commissioners for another episode of everyone’s favorite series, The FCC Explains And Defends Literally Everything It’s Doing.

The last two episodes, in March and July, featured the House of Representatives. Today, however, we got a change of scenery as the Commission took in the lovely wood paneling of a Senate room, instead.

Congress, of course, operates by committee. And so today’s hearing, like many past outings, took place before the Senate Commerce Committee. All five FCC commissioners — Mignon Clyburn, Jessica Rosenworcel, Ajit Pai, Michael O’Rielly, and chairman Tom Wheeler — were present to testify and answer questions about all the commission’s current major initiatives. And while it was occasionally testy, with long stretches at front and back devoted entirely to discussions of partisanship in Washington, for the most part it was less fiery than other recent FCC oversight events.

Discussion included 9-1-1 upgrades, privacy rules, Lifeline and universal service, broadband deployment, business data services, 5G development, and more — but at the top of the list, as you might guess, is the FCC’s new proposal for a cable set-top box alternative. Wherever a wealthy industry and a potential new regulation intersect, you find passionate politics and heated rhetoric, and this is no exception.

A common refrain when industry argues against an FCC proposal, as we saw in net neutrality and see again now, is that the FCC doesn’t have the authority to do the thing it’s doing. And so in his first remarks, Wheeler repeatedly brought the focus back to the mandate the FCC explicitly has from Congress, in the Telecommunications Act, to act.

Later this month, Wheeler said, “the Commission will vote on whether to fulfill a mandate Congress gave us 20 years ago. … The Commission shall” ensure competitive viability in the market, and right now, we don’t really have that.

“Why are you doing this if the market is working?” he asked rhetorically. “It isn’t. 99% of consumers have no choice, despite the statutory mandate that they shall have choice.”

He also then dug in on the industry opponents to the plan: “The cable industry has been playing rope-a-dope with that statutory mandate for 20 years,” Wheeler said. “First they created a licensing body but failed to license that technology in a meaningful manner. Then, in 2008, Comcast” — which is really very ticked off about the new proposal — “announced ‘the age of the closed proprietary set-top box is behind us, the era of open cable is here.’ Eight years ago.”

That came after the launch of the CableCARD in 2007, which is now widely considered to have been a total failure scuttled into irrelevancy from before it began. That is the outcome Wheeler hopes to avoid for the next attempt.

Wheeler noted that since 2008, “Consumers have seen nothing happen. Then in 2010,” — the next time the FCC tried to get an alternative going — “The NCTA filed, ‘consumers should have the option to purchase video devices at retail that can access [their pay TV] without a set-top box supplied by that provider.’ Six years ago,” Wheeler said.

Since then, even more nothing, while the cost goes up and up. “And Congress mandated that [consumers] should have an alternative to paying.”

Commissioners Pai and O’Rielly, when prompted by committee chairman Sen. John Thune (SD), repeated their usual objections to the entire way the FCC proposes, votes on, and adopts rules, calling for procedural reform. (Commissioners Rosenworcel and Clyburn devoted their opening testimony to other topics.)

The biggest sticking point across the board for the set-top box proposal — from Commissioners, Senators, and industry representatives — appears to be the licensing requirement.

The current FCC plan requires pay-TV operators and content companies to come together to create a bey that will create a standard license meant to connect these new cable-company apps to the manufacturers that make the devices. That plan, though, is contentious at best.

Pai, in response to questions about it, stated that he had concerns about the FCC inserting itself into private business arrangements. “The media bureau can second-guess any consensus” participants come up with, he said, and if they don’t reach one, “the FCC itself will write the standard licensing agreement.”

To a regulator with strong pro-business or free market inclinations, that is of course unconscionable. However, in a bit of a strange-bedfellows moment, commissioner Rosenworcel agreed with him.

“Set-top boxes are clunky and costly. customers don’t like them and they don’t like paying for them, and that’s not just my professional opinion, it’s my personal opinion too,” she said in response to a later question. But, “I have some problems with licensing and the FCC getting a little too involved with the licensing” issue, she continued, stating that in her opinion, section 629 of the Communications Act does not give the FCC authority to intervene in licensing.

However, she stressed, change “would be a good thing for consumers, my household included.”

Sen. Ed Markey (MA), who often enjoys shaking up otherwise-sleepy sessions, came prepared with props. He brought out a cable box wrapped dramatically in chains, to laughter. Calling it “a relic,” he pointed out that it may well be in your house today, since 99% of subscribers rent one from their provider, to the tune of $89 per year per item, to the average household fee of $232 annually.

Markey then held up an Amazon Fire TV stick, naming it and pointing out, “This costs $40.” But the 100 million households that get paid TV all have to rent the box, because the content cannot be run on third party devices like the Fire TV stick.

“So that’s what the FCC is considering right now. How do we transition to this modern technology, and not this archaic technology?” We did it 30 years ago with the black rotary phone, he pointed out, so why not change the law and make it happen again?

Thune pointed out in response to his colleague, however, that Amazon has filed comments in opposition to the FCC proposal. “The process to create an oversight body … will delay competition,” Thune read off from Amazon’s filing.

That led to another senator questioning the commissioners about complexity, starting with Rosenworcel.

“It’s time to inject competition into our set-top box market. Nobody has ever written to me saying they love set-top boxes,” she replied. “If I have one concern, it’s that the licensing scheme gets the FCC into the business of trying to figure out model licenses, and I don’t see how that fits into the statute we have.” That’s “the complexity I see,” she said.

Pai said that the cable industry’s app proposal was much simpler, and therefore better. “I would hope that we embrace more of the original app proposal as it was presented to us,” and that the FCC’s layers of complexity make things worse.

Sen. Richard Blumenthal (CT), said during his questioning time, “These set-top boxes are dollar devourers; they suck money out of consumers’ pockets,” and asked Wheeler to speak to the actual savings and benefits for consumers.

Wheeler spoke first to the way that fees are hidden: “The surprise is, ‘oh my goodness, I’ve got this additional charge'” that doesn’t show up in the ads, he said. “You’re being held hostage! And as commissioner Rosenworcel has said repeatedly, it’s time to do something about this.”

“We respect enormously the various corporations and trade associations that come to us, and we try to work with them,” Wheeler continued, before repeating, “But the Congress gave us a mandate and a responsibility to consumers, and we try to fulfill that mandate.”

When it comes to billing and boxes, Sen. Claire McCaskill (MO) also beat her own personal favorite drum for a moment, confirming with Wheeler that while the FCC can enforce customer service and truth-in-billing guidelines for cable, it cannot do so for satellite TV.

McCaskill referred back to her recorded call in which she tried to get a monthly insurance-style charge removed from her satellite bill. “They tried to tell me they were going to charge me to quit charging me. this is the kind of stuff that’s been going on, and I just hope that we deal with the fact that you do not have the authority with satellite to clean up some of these practices, and people are outraged at the bait and switch in the business model that [her report] uncovers, that is not customer-friendly.”