How Not to Win Friends and Influence People
By Ron Hendrickson - Tom Wheeler isn't earning himself many friends in the tech industry right now. The FCC chairman is getting roasted over ...
The FCC chairman is getting roasted over two recent items: a proposal to kill off set-top boxes and the FCC's latest Broadband Progress Report. The ISP and pay TV industries have largely panned both, and justifiably so - there's a good bit of silliness in them.
Let's dispense with the Broadband Progress Report first. The final report differs only slightly from the draft version Wheeler circulated at the end of the year. It's a bit shorter, but still vague and inconsistent. The main defect in the report is that the Commission defines "broadband" as 25 Mbps downstream, but provides CAF money for network buildouts that provide only 10 Mbps (and in some places only 4 Mbps), and then complains about a problem that the FCC itself both created and is perpetuating. Industry groups find this strange at best, and some consider it disingenuous. The report is available at https://www.fcc.gov/document/nation-makes-progress-broadband-deployment-challenges-remain.
The set-top proposal is something else again. The proposal, which will be voted on by the full Commission on Feb. 18, aims to do away with the rental fees service providers charge for the boxes and to let consumers access service providers' content via third-party apps and (presumably - the proposal doesn't explicitly say so) retail set-tops. Among other things, the proposal claims that set-top fees cost Americans $20 billion a year, with the average monthly fee being $7.34. (For what it's worth, no such fee appears on my cable bill, but I only have a DTA. Or maybe I'm just special.) Otherwise, the proposal uses a great many words to say almost nothing of substance. You can read it for yourself at https://www.fcc.gov/document/fcc-proposal-unlock-set-top-box.
The problems with the proposal, from the service provider perspective, are that it could weaken content licensing agreements and security, possibly require another as-yet-undefined box in the home, and lead to disaggregation of service providers from the content they pay for and provide. It also smacks of the failed CableCARD mandate that Congress finally canned last year. The industry understandably does not want to be saddled with yet another self-obsoleting tech mandate, and also is just tired of FCC meddling generally.
In a statement, the newly formed - and largely cable-backed - Future of TV Coalition wrote, "The FCC proposal, as best anyone can understand it, still strips out all the tools that are used to honor license agreements, would increase consumer costs by mandating yet a second box inside the home and thus ignores the trends away from in-home boxes and devices, eliminates security protections, and provides no reassurance on privacy rights."
In a Comcast (NASDAQ:CMCSA) blog post, Mark Hess, the MSO's senior vice president, Office of the CTO, Business and Industry Affairs, wrote, "It is strange now that the FCC is ignoring the important lesson of history that intrusive federal governmental regulatory interference in the market just doesn't work by proposing new mandates at a time when Congress's goals are being realized in the marketplace and consumers have unprecedented device choices that go well beyond what anyone could possibly have imagined even a decade ago."
The NCTA took a similar tack in its blog post on the subject, writing: "AllVid would force programmers and TV providers to dismantle their shows and services for companies to repackage, reuse, and exploit as they see fit and without paying for the content. And they want to do it by forcing additional hardware into the home of viewers who want fewer, not more devices."
However, not all reactions have been negative. In a statement, Robert L. Johnson, chairman of RLJ Entertainment and founder of Black Entertainment Television, wrote: "If you have a good program idea, some financing and access to the Internet, you can find your audience. But your audience can only find you if they have a modem or a set-top box or software that lets them know you are there and gives them access to your programs unconstrained by the network gatekeeper."
Industry opinions aside, just what Wheeler is trying to accomplish with the set-top proposal is difficult to fathom. And in fairness to Wheeler, the idea may not even be his - it may well have come down from on high as a political directive. Whatever the idea's source, it's ill-advised. If the object is to save everybody $7 a month, give us a tax refund. If the idea is to rein in the high cost of video programming, turn the regulatory eye on content owners' recent exorbitant price hikes. If the idea is to spur OTT video innovation, the market itself is already doing quite nicely on its own, thank you very much.
But if the idea is to cut into the already thin video margins of a pay TV industry that's hemorrhaging video subscribers, well, the proposal is a very good way to do that.