FCC Battles Skeptics Over Pro-Consumer Set-Top Box Reforms

Federal Communications Commission officials sparred with skeptical lawmakers on Thursday over the agency's plan to increase competition in the video "set-top box" market, in a vivid illustration of the challenges facing the FCC as it prepares for a vote on the proposal later this month.

FCC Chairman Tom Wheeler has made reforming the set-top box market a centerpiece of his pro-consumer agenda. Every year, tens of millions of consumers are forced to pay hundreds of dollars to rent these clunky devices, pouring an estimated $20 billion into cable industry coffers.

"Consumers will no longer have to rent a set-top box, month after month, just to watch the programming they already pay for," Wheeler told the Senate Commerce Committee on Thursday. "Instead, pay-TV providers will be required to provide apps—free of charge—that consumers can download to a variety of devices to access all the programming they pay for."

Public interest advocates say that Wheeler's plan, which the FCC announced last week and would fulfill a 20-year-old congressional mandate under Section 629 of the Communications Act, will save consumers billions of dollars a year. Naturally, the cable industry is not thrilled at the prospect of losing this particular cash-cow, and has mobilized a fierce public relations campaign to undermine the proposal.

Earlier this year, Wheeler proposed a plan that would have required pay-TV companies to open up their programming to third-party device makers. That prompted furious opposition from the cable and entertainment industries, which warned that such a proposal would undermine their intellectual property rights by opening the door for companies like Apple and Google to repackage, and sell advertising against, their content.

In the face of such industry opposition, Wheeler made significant modifications to his original proposal. The new plan calls for pay-TV operators to provide so-called "apps" for, say, ESPN or Bravo, which consumers could then use to view content on the device of their choice. Crucially, under the FCC's revised proposal, "the delivery of programming will continue to be overseen by pay-TV providers from end-to-end," Wheeler testified on Thursday.

But despite receiving that and other concessions from the FCC, the cable industry remains vehemently opposed to the plan, which it says is overly complicated and violates federal law. Wheeler's plan would "stop the apps revolution dead in its tracks by imposing an overly complicated government licensing regime and heavy-handed regulation in a fast-moving technological space," according to a Comcast spokesperson.

In particular, the industry claims that the plan would place the FCC in the middle of licensing agreements between the entertainment industry and pay-TV providers, an assertion that is fiercely disputed by the FCC and consumer advocates. The DC-based consumer advocacy group Public Knowledge has even produced a handy graphic to illustrate that point.

"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 in a statement. "The modified approach the Chairman has described today addresses the legitimate concerns raised by these parties while preserving the benefits to the public, and fulfilling the Congressional directive that requires the FCC to ensure that viewers do not need to rent set-top boxes from their providers."

Several members of the Senate Commerce Committee, from both parties, expressed skepticism about the Wheeler's plan, especially in light of the cable industry's insistence that the proposal violates federal law. Sen. Bill Nelson, the Florida Democrat, warned that the plan could face extended litigation.

"If we stay on the present course, I fear the FCC's actions to promote set-top box competition could be tied up in court and hamstrung for years," Nelson said Thursday. "We just experienced that reality with net neutrality, which created a decade-long fight and left consumers without effective consumer protections as they used their broadband service."

Wheeler even faces skepticism from inside the FCC, particularly, and most problematically, from his fellow Democratic commissioner, Jessica Rosenworcel, whose vote Wheeler needs in order to approve the plan at the agency's open meeting on Sept. 29. Republican Commissioners Ajit Pai and Michael O'Rielly are opposed to the proposal outright.

"We're taking a hard look at what the chairman has put before us, and there's a lot in there that seems to work," Rosenworcel said. "I'm going to be very candid with you that I have some problems with licensing and the FCC getting a little bit too involved with the licensing scheme here. Because when I look at the Communications Act and Section 629, I just don't think we have the authority."

Wheeler, who needs three votes out of the five-member commission to push his proposal through, has between now and Sept. 29 to bring Rosenworcel on board.

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