FCC to Pay-TV Providers: Let's Swap Set-Top Boxes for Apps

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The FCC has revised its controversial plan to "unlock the box" with an updated proposal that calls for pay-TV providers to let customers access content on apps and not require them to lease set-top boxes.

According to the Federal Communications Commission, 99 percent of US consumers lease a set-top box from their pay TV provider, spending an average of $231 a year. That's a collective tab of about $20 billion annually in rental fees. And while the price of computers, TVs, and mobile phones has dropped 90 percent in two decades, the cost of set-top boxes has risen 185 percent since 1994.

"We keep paying these charges even after the cost of the box has been recovered because we have no meaningful alternative," FCC Chairman Tom Wheeler wrote in an LA Times op-ed.

The Commission in February voted to "unlock the box," a move that would open TV data to innovators—from Apple to Netflix—so they can create new consumer hardware or software to replace the traditional set-top box.

The cable industry, however, was not at all interested in the proposal. Instead, lobbyists over the summer offered another solution: ditch set-top boxes in favor of apps that let TV fans watch shows anywhere.

And that is essentially what Wheeler has proposed with rules that he says will "end the set-top-box stranglehold."

If adopted, consumers would no longer have to rent a bulky box, but could instead download apps to access the programming and features for which they pay. That means users can catch up on Comcast content via an Apple TV or Roku, stream DirecTV offerings to an Xbox, and pipe Verizon's service through a smart TV, the chairman wrote in his op-ed.

Pay TV providers would be required to provide their apps to popular service providers like Roku, Apple, and Amazon and make sure that customers can search say, the Comcast app, from the Roku main menu.

Those who like their set-top box could also just keep it.

This will happen via a standard license that "will give device manufacturers the certainty required to bring innovative products to market," the FCC says. "Programmers will have a seat at the table to ensure that content remains protected. The license will not affect the underlying contracts between programmers and pay-TV providers. The FCC will serve as a backstop to ensure that nothing in the standard license will harm the marketplace for competitive devices."

That oversight, however, has the cable industry concerned. "The Chairman isn't just proposing a 'standard license' but a centralized licensing organization that would exist in perpetuity," the National Cable and Telecommunications Association (NCTA), said in a statement. "The work of this licensing body would be subject to intrusive FCC oversight, creating a bureaucratic morass and improperly involving the FCC in private licensing arrangements in a way that will slow the deployment of video apps, ignore copyright protections, and infringe on consumer privacy."

NCTA wants this section to "be eliminated or drastically altered."

GOP FCC Commissioner Michael O'Rielly is also skeptical. "I will review this proposal carefully over the coming days and weeks, but at the outset it appears to exist within a fantasy world of unlimited Commission authority. The Commission is and must remain in the business of licensing spectrum and infrastructure, not content," he said.

The FCC is scheduled vote on the rules on Sept. 29; if the two Democrats side with the chairman, it will likely pass. Pay-TV providers will have two years to comply.

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