On February 18, the FCC voted 3-2 in favor of adopting a Notice of Proposed Rulemaking (“NPRM”) in the matter of “Expanding Consumers’ Video Navigation Choices; Commercial Availability of Navigation Devices.”  The NPRM is part of an FCC proposal to encourage increased competition in the set-top box market. Set-top boxes are the dual purpose devices that convert video content from cable, satellite, and internet providers into digital or analog TV signals, and which contain the programming menus subscribers use to navigate their TV content. With last month’s action, the FCC is seeking public comment on new regulations that would require multichannel video programming distributors (“MVPDs”)—predominately big cable companies like Comcast and Time Warner—to make their channel data accessible to would-be competitors like Google, TiVo, and Roku. Specifically, the proposal would require MVPDs to make three distinct information flows available to all set-top box devices: 1) service discovery information (channel listings, video-on-demand lineups, etc.); 2) entitlements (information detailing what the device may do with accessible content, such as record shows or fast forward through them); and 3) content delivery (the program content itself, along with the information necessary to make it accessible to disabled viewers).

In his statement announcing the NPRM, FCC Chairman Tom Wheeler noted that 99% of all pay-TV customers currently rent set-top boxes directly from their content providers to the annual tune of nearly twenty billion dollars. The average subscriber spends $231 per year in set-top box rental fees. Troublingly, according to Wheeler, over the last twenty years cable set-top box prices have increased by 185%, while the cost of computers, TVs, and mobile phones has dropped by 90%. In the FCC majority view, these statistics evidence a non-competitive market failure.

Commissioner Jessica Rosenworcel’s statement supporting the NPRM suggested further that the proposed regulations are inspired by the model of cell phone technology. When consumers upgrade to a new smart phone, they have a host of device options to choose from regardless of service provider, which incentivizes smart phone manufacturers to innovate. Conversely, because cable providers are not required to make all of their channel data available to competing set-top box manufacturers, there has not been comparable innovation observed in the set-top box market. Moreover, this state of affairs has arguably made content navigation suboptimal. As an example, a Comcast cable subscriber who also has a Netflix account must search each of these services individually to locate a desired show. Because the proposed regulations would require both Comcast and Netflix to make their programming data accessible to the subscriber’s set-top box regardless of what company manufactured or provided it, this would allow the user to run one single search of all their purchased content using just one menu. The related hope is that increased competition would abet additional cross platform app development.

Opponents of the proposed regulations, including dissenting Commissioner Michael O’Rielly, have argued that the new regulations pose security risks that the NPRM has not adequately addressed. In Mr. O’Rielly’s view, the proposed regulations could precipitate a free riding problem, wherein anyone capable of writing a compliant app might be able to stream MVPD content for free, which would cause content providers to exit the market altogether, leaving consumers with fewer programming options than they currently enjoy. Commissioner Ajit Pai’s dissent cited concerns from diverse programmers that the proposed regulations do not address their concerns that new set-top box developers could engage in TV “redlining” that would exclude minority programs or bury them deep in channel line-ups. Mr. Pai also explained that MVPD’s have developed apps that allow smart phones or tablets to function as content navigation devices, and that further innovations in this vein will make set-top boxes obsolete even beyond their outdated eponym. Other concerns center on the vagueness of the incipient regulatory scheme. For example, under the current model consumers can easily replace malfunctioning set-top boxes by returning them to the cable provider; without clear guidance in the new regulations, it’s possible that a broken set-top box could be more costly and time consuming to repair.

Whatever one’s view of the recent NPRM, it’s clear that changes to the current paradigm could very well be on the horizon. The MVPD’s will either look to adapt in the hopes of avoiding FCC regulations, otherwise those FCC regulations could force their hands.

 

Breck Wilmot is a J.D. candidate, 2017, at NYU School of Law.