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FCC’s App Proposal Would Do Away With Set-Top Boxes, But Big Cable Is Pushing Back

The FCC is trying to make it easier and cheaper for you to watch TV. But the plan to unleash pay TV service from the set-top box that has been its delivery mechanism for decades has opponents — notably, the Big Cable lobby — raising their fists.

Last week, FCC chairman Tom Wheeler unveiled a proposal that would require MVPDs (Comcast, DirecTV, etc.) to offer their subscribers an app that would allow them to access the full suite of programming they pay for, without the need for a set-top box.

The average consumer pays $231 per year in set-top box rental fees; Wheeler has likened this stranglehold to the way consumers once had to rent phones from Ma Bell. But the MVPDs are not going to let that $20 billion in annual revenue evaporate without a fight.

Another major flashpoint: Along with the app, Wheeler’s proposal calls for the formation of a body that would issue a standard license for device makers so that the app will work on their hardware products. The body would be made up of representatives from MVPDs and content companies, but the FCC would have oversight.

The FCC insists that control of the app will be in the hands of pay-TV providers and content producers, and that the terms of their own copyright and distribution agreements will remain in place.

But opponents see the proposal as a big overreach of authority by the commission, establishing a “shadow copyright office,” in the words of one TV-industry lobbyist, that could seek to expand its authority down
the road.

The proposal is set for an FCC vote on Sept. 29. As the date approaches, a lobbying blitz is largely centered on Democratic commissioner Jessica Rosenworcel, who is seen as the linchpin vote.

Here’s what the proposal will mean for various concerned parties.

Content creators

MPAA chief Chris Dodd says the proposal amounts to a “compulsory copyright license” — and the FCC lacks authority to act in that role. Studios argue that they would be compelled to offer content for the app even if they don’t have online rights, as could be the case with some events or sports programming.

The cable industry

For cable companies, it’s Armageddon. Already under extreme pressure from new competitors, the industry does not want to lose a revenue source or the technological capabilities offered by set-top boxes. The cable business already beat back an earlier version of the proposal to “open up” the set-top box; that plan would have required the companies to provide access to channel feeds to manufacturers wishing to build their own navigation devices that a consumer could actually buy. But even with the revised version, there’s concern that untethering programming from the proprietary set-top box will open the door to Google and other digital heavyweights getting into the business of TV navigation and search.

The FCC

Wheeler has not shied away from battles with industry interests during his tenure, the biggest of which has been over net neutrality. It’s no secret that the commissioner has pursued pro-consumer efforts to ease the firm grip the largest MVPDs have on the pay-TV business — and set-top box rental fees are a perfect target.

Consumers

Dispassionate industry observers say the proposal is not earth-shattering. A number of cable providers already offer apps of their programming feeds (although not for all channels). Analyst Craig Moffett of MoffettNathanson notes that the major cable operators will have two years to comply, and the business has been moving to apps anyway. “It is, honestly, not that big of a deal,” he says.

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