TV Industry Gains Upper Hand In Set-Top Box Fight

July 14, 2016, 11:36 AM UTC
2016 Common Sense Media Awards
NEW YORK, NY - MAY 03: Chairman of the U.S. Federal Communications Commission Tom Wheeler speaks onstage at the 2016 Common Sense Media Awards on May 3, 2016 in New York City. (Photo by Matthew Eisman/Getty Images for Common Sense Media)
Matthew Eisman — Getty Images for Common Sense Media

What exactly is going on with the FCC’s “Unlock the Box” plan? Until this week, it looked like Federal Communications Commission chairman Tom Wheeler was in position to push through new rules that would break the pay TV industry’s lucrative monopoly on set-top boxes. But now all bets are off.

According to reports this week, Wheeler’s fellow Democrats at the FCC have walked away from the original plan and embraced a counterproposal that was put forward by the industry, and is supported by the two Republicans on the five member commission.

The dispute is important because, under the current system, consumers must rent special boxes from the cable industry at an average cost of $231 per year. Wheeler’s original proposal would have let devices makers such as Roku or Amazon’s FireStick build in cable TV access as part of their products.

That plan rankled the TV industry because it could cost it revenue, and erode the “walled garden” experience in which consumers require a dedicated device to see their shows.

In response, the industry recently trotted out a plan of their own called “Ditch the Box.” This is the option that now holds sway at the FCC, though it’s not entirely clear what it entails.

According to various trade press accounts, the industry plan will let consumers get cable access by means of apps on smart TVs, though not necessarily on other devices. This may be why device maker Roku has balked at the alternate plan.

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The collapse in support for Wheeler’s original plan is likely due to pressure from Comcast and AT&T (T), which lobbied hard to oppose it. Indeed, the two Democratic commissioners who deserted Wheeler cited industry arguments—that the original plan poses risks to copyright and minority programming—to explain their shift in position.

Meanwhile, the Wheeler plan may also have lost momentum earlier this month when Comcast (CMCSA) said it would put Netflix (NFLX) on its set-top boxes, which undercut arguments that the cable giant’s boxes are anti-competitive.

If you want to read between the lines here, it appears the cable industry is aware that a reckoning is coming for its lucrative box-rental business in a world of over-the-top entertainment devices. But it’s going to make sure the shift happens slowly, allowing it to continue collecting those monthly rental fees for as along as possible.

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According to John Bergmeyer of Public Knowledge, which has been a vocal advocate for set-top box reform, change will arrive one way or another.
“Our side is not committed to any particular technology path, so we’ve been open to considering other approaches to achieving the same goals. Asking whether it’s app-based depends on what ‘app’ actually means, and it’s been a pretty fluid definition,” he said by email.

Wheeler, meanwhile, cited a former president in telling lawmakers that he would consider the TV industry plan.

“I am following President Reagan’s good advice, ‘trust, but verify,'” he told a House subcommittee this week.

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