FCC Looks to End Cable Box Rentals
Washington — Federal regulators Thursday put the metal boxes most Americans rent to receive cable or satellite programming at the center of a high-stakes fight over the future of TV and video.
The Federal Communications Commission voted 3-2 along party lines to begin crafting rules intended to spur competition in the set-top-box market by developing technology standards so third-party devices and apps could decode pay-TV signals.
Such a move would let consumers purchase boxes from technology companies instead of renting them from their cable or satellite provider. The rules could open the door to all-encompassing devices and apps that combine pay-TV access with Internet streaming.
“The issue is whether you are forced to rent that box every month after month after month,” said FCC Chairman Tom Wheeler, a Democrat, who proposed the rules.
“The consumers have no choice today,” he said.
About 99 percent of the nation’s 100 million pay-TV subscribers rent at least one set-top box, with the average household paying $231 a year in fees, according to a survey by Sens. Edward J. Markey, D-Mass., and Richard Blumenthal, D-Conn. That adds up to about $20 billion a year in revenue for pay-TV providers.
The formal rule-making process launched Thursday will be complicated. It grapples with difficult issues involving network architecture, privacy of valuable data about consumer viewing habits and copyright protections for video content.
The FCC’s decision, which stems from a 1996 law that requires the agency to ensure the commercial availability of pay-TV navigation devices, sets up a major fight.
On one side are Comcast Corp., Verizon Communications Inc., AT&T Inc. and other pay-TV providers, who oppose FCC open-technology mandates for set-top boxes.
The rules would break the hold providers have on their content, and they fear that would allow third-party device manufacturers to wrap advertising around programming or viewing guides.
The pay-TV companies prefer an approach focused on apps, such as the customized ones some providers are rolling out that allow subscribers to access programming from various devices and that could eliminate the need for set-top boxes.
Time Warner Cable already is testing an option in the New York City market that lets users receive their programming via a Roku device instead of renting a box.
On the other side of the issue are consumer groups and technology firms such as Google, TiVo and Vizio interested in developing new devices that would be able to combine pay-TV programming with other features, such as Internet streaming and expanded program guides that could feature advertising.
“It’s time to untether the consumer from that clunky, old box,” Consumers Union said. “This vote is an important step toward tearing down barriers that have limited competition and innovation in this market.”
Supporters said the new rules could fuel competition that will increase consumer choices and drive down prices.
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They point to past actions by the FCC that unleashed innovation by opening up closed networks.
In 1968, the agency allowed consumers to attach any lawful device to the AT&T telephone network, which led to the demise of the rented rotary telephone and the development of answering machines and cordless phones.
In 2007, the FCC required that consumers be allowed to use any mobile device on a wireless network instead of being limited to those provided by the carrier.
“You can choose your own mobile phone, you can choose your own computer or your own tablet, so you should be able to choose your own video box,” Markey said. “It is technologically possible to effectuate this revolution.”
Advocacy coalitions have formed on both sides of the debate, and members of Congress have begun expressing support and opposition.
Comcast and AT&T criticized the FCC for opting for government mandates focused on old technology instead of fostering the already developing video app marketplace.
The agency’s proposal “could cement the set-top box in your home, with little to no minority programming, collecting data on every program you watch to feed Google’s advertising engine,” said Bob Quinn, senior vice president for federal regulatory policy at AT&T, which owns DirecTV.
Hollywood is divided on the issue. The Motion Picture Association of America, which represents the large movie studios, opposes new set-top-box mandates. The Writers Guild of America, West is backing the FCC’s effort.
Wheeler promised that licensing and copyright protections would remain the same and that third-party device or app providers would not be able to add their own advertising to pay-TV programming.
“Nobody’s going to insert ads into it,” Wheeler said. The rules will “require the sanctity of the content be passed through unchanged.”
The battle lines on the set-top-box regulations are similar to those in the highly charged debate over Internet traffic rules, known as net neutrality.
Last year, Wheeler and the commission’s Democratic majority sided with consumer groups and technology firms in enacting tough new utility-like oversight of high-speed Internet service providers.
AT&T Inc. and other broadband providers – many of which are large pay-TV companies as well – are challenging the net neutrality regulations in federal court, along with the wireless industry.
New rules to open up the set-top-box market could be headed to court as well if they are adopted by the FCC.
“This isn’t some minor inconvenience in regulatory land,” said Michael Powell, president of the National Cable & Telecommunications Association, a trade group. “This is mission critical to the rights and practices that these companies have.”
Powell this week said his organization was hopeful that the FCC would produce rules pay-TV companies could live with. But if not, he said, a legal challenge was possible.
The commission’s two Republicans, Ajit Pai and Mike O’Rielly, voted against the proposal Thursday.
They said the agency’s Democratic majority was intent on forcing new regulations on a rapidly evolving industry that could lead to higher costs for consumers as pay-TV providers have to make complex changes to their networks.
“Our goal should not be to unlock the box. It should be to eliminate the box,” Pai said.
The video marketplace is creating new apps that allow pay-TV subscribers to watch programming via apps and FCC mandates are a “20th century approach to this 21st century problem,” he said.
Markey, who coauthored the provision in the 1996 law that requires set-top-box competition, said new rules were needed to make that goal a reality after earlier failed attempts.
“Without strong FCC action, consumers would be left with no choice but to rent set-top boxes from the cable providers in perpetuity,” he said.