Why Cable Companies Could Let Customers Ditch Set-Top Boxes Soon

June 17, 2016, 8:41 PM UTC
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A customer exchanges cable boxes at the Time Warner Cable store in Torrance, California, U.S., on Monday, Aug. 12, 2013. Time Warner Cable Inc. said it's talking with CBS Corp., after a breakdown in negotiations led the cable provider to block its customers from seeing the network. Photographer: Patrick Fallon/Bloomberg via Getty Images
Photograph by Patrick Fallon — Bloomberg via Getty Images

The U.S. pay-TV industry proposed a plan to allow more than 50 million subscribers to ditch costly set-top boxes to get television and video programs to try and convince federal regulators to abandon more far-reaching reforms.

Tom Wheeler, chairman of the Federal Communications Commission, proposed in January opening the $20 billion cable and satellite TV set-top box market to new competitors and allow consumers to access multiple content providers from a single app or device.

Under the industry proposal unveiled in meetings with the FCC this week, the pay-TV industry would commit to creating apps to allow consumers to watch programs without needing to lease a box and the FCC could implement regulations enforcing the commitment.

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Kim Hart, a spokeswoman for Wheeler, said on Friday that he was pleased the “industry has adopted the primary goal of our proposal, to promote greater competition and choice for consumers, and agree it is achievable.”

Wheeler wants to see additional details to “determine whether their proposal fully meets all of the goals of our proceeding,” Hart said.

Wheeler’s proposal has faced criticism from companies like AT&T Inc, Comcast, Twenty-First Century Fox, CBS, Walt Disney, Viacom, and others, along with more than 150 members of Congress. They have raised copyright, content licensing and other issues.

Opponents fear rivals like Alphabet or Apple could create devices or apps and insert their own content or advertising in cable content.

For more, read: Why the FCC’s Set-Top Box Plan Is Not a Security Risk

Wheeler’s proposal would create a framework for device manufacturers and software developers to allow consumers to access content from providers such as Netflix, Amazon.com, Hulu, YouTube, and a pay-TV company on a single device or app.

FCC Commissioner Jessica Rosenworcel, a Democrat, praised Wheeler for proposing reforms, but told Reuters “it has become clear the original proposal has real flaws. … We need to find another way forward. So I’m glad that efforts are underway to hash out alternatives.”

The FCC voted 3-2 along party lines in February to advance its plan. A final vote could come as early as August.

Americans spend $20 billion a year to lease pay-TV boxes, or an average of $231 annually, the FCC says. Set-top box rental fees have jumped 185% since 1994, while the cost of TVs, computers and mobile phones have dropped by 90%.

In April, President Barack Obama backed Wheeler’s proposal, saying the cable industry is “ripe for change.”