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It’s Crunch Time for the FCC’s Plan to Bust Open the TV Set-Top Box Market

Influential senators are urging the FCC to get set-top box reform over the finish line.

Federal regulators are poised to approve an ambitious plan to free consumers from the tyranny of the cable TV "set-top box," some two decades after Congress passed a law mandating increased competition in the video device marketplace.

For the last eight months, Federal Communications Commission Chairman Tom Wheeler and his colleagues have been working on a proposal to increase competition in the market for set-top boxes, those clunky, antiquated devices that millions of cable and satellite subscribers are forced to rent for hundreds of dollars per year.

On Thursday, the FCC will vote on a measure that would require cable and satellite operators to provide so-called "apps" for any paying subscriber, that allow users to access their usual programming content, like ESPN or Bravo, which consumers could then use to view content on the device of their choice, including Android, iOS, and Amazon phones and tablets—no set-top box required.

Thursday's FCC vote, which follows years of wrangling with Big Cable, Hollywood, and their allies in Congress, has been a long time coming. Leading up to the vote, which requires a 3-2 majority of the five-member FCC to succeed, industry watchers and telecom analysts expressed guarded confidence that the proposal will be approved, despite the skepticism of a key Wheeler ally on the commission, Jessica Rosenworcel.

For 20 years, since the Telecommunications Act of 1996, consumer advocates in Congress like Sen. Edward J. Markey, the Massachusetts Democrat, have been trying to pressure federal regulators to ensure a competitive video market. But the efforts of Markey and others have been largely stifled by the recalcitrant cable companies and industry-friendly regulators at the Bush-era FCC.

"Over the past 20 years, we've seen an explosion of choice and innovation in consumer electronics," Sen. Markey told reporters during a conference call on Tuesday. "For two decades, however, there's been no choice in the pay-TV video box marketplace. Today, consumers have little or no choice but to rent their box from their cable, satellite, or telecommunications provider in perpetuity."

The lack of competition and consumer choice in the set-top box market has led to a gravy train of lucre for the cable and satellite industry.

Oregonians and Americans should not be held captive by Big Cable's price gouging.

A whopping 99 percent of pay-TV subscribers are forced to pay an average of $231 per year to rent these 90's era devices, pouring nearly $20 billion annually into the coffers of Comcast and other industry giants, according to a 2015 Senate report by Sen. Markey and his colleague Sen. Richard Blumenthal, the Connecticut Democrat.

The FCC's set-top box reform proposal is particularly important for consumers in underserved rural communities—such as Humboldt County, California—according to public interest advocates.

"The lack of choice for either video services or set-top boxes allows pay-TV services to continually raise the rental fees on these devices," a coalition of groups led by Sean McLaughlin, Executive Director at Access Humboldt, wrote in a letter to the FCC. "Rural subscribers therefore end up paying higher and higher prices for equipment that has long since been paid for, without seeing any improvement in equipment or service."

The FCC's set-top box reforms will provide "tremendous economic relief to the poorest rural customers—many of whom do not have access to affordable broadband fast enough or reliable enough to allow them to 'cut the cord' and receive over the top services," McLaughlin and his colleagues added.

With less than 24 hours to go before the FCC's vote, two influential Democratic senators urged the agency to approve the measure.

"It is long past time to break the stranglehold Big Cable has over their customers through forced set-top box rental fees," Sen. Ron Wyden, the Oregon Democrat, said in an emailed statement. "Cable providers should not double dip on customers who are already paying monthly subscription fees for their content. The FCC should act, as directed by Congress, on its authority to create a competitive marketplace that will save consumers money and promote innovation in the industry."

"Oregonians and Americans should not be held captive by Big Cable's price gouging," Wyden added. "Consumers deserve to benefit from the increased choice and innovation Chairman Wheeler's proposal would create."

In a Facebook post, Sen. Al Franken, the Minnesota Democrat, implored the FCC to "side with consumers and vote to unlock the box."

Not surprisingly, Comcast and other cable industry giants aren't thrilled about losing their cable-box cash-cow, and have vigorously resisted the FCC's proposed reforms. This despite Wheeler's effort to ameliorate some of their concerns, including by altering his original proposal to ensure that "the delivery of programming will continue to be overseen by pay-TV providers from end-to-end," as he testified before Congress earlier this month.

"Since his initial proposal, the Chairman has worked assiduously to address all the legitimate concerns raised by some programmers and the pay-TV industry," John Bergmayer, Senior Counsel at Public Knowledge, said earlier this month. Still, Big Cable and Hollywood remain concerned that Wheeler's plan would improperly insert the agency into complex licensing agreements between content companies and pay-TV providers.

And in fact, Wheeler's latest proposal would position the FCC to exert oversight over licensing agreements between cable companies and app-makers. That's one reason why Wheeler's Democratic colleague Jessica Rosenworcel has expressed concern about the plan. Earlier this month, Rosenworcel testified before Congress that she had doubts about the FCC's legal authority to act in this way.

It appears likely that Wheeler will have to further modify his plan, specifically with respect to the thorny issue of FCC authority over licensing, in order to satisfy Rosenworcel and win her vote to ensure passage of the reform package. The FCC is scheduled to vote on the set-top box measure at 10:30 a.m. Thursday.

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