The FCC Chairman’s Tactical Retreat On Set-Top Boxes (Updated)

After months of intensive lobbying by pay-TV providers and TV programmers, as well as mounting pressure from congress, FCC chairman Tom Wheeler has apparently backed off quite a bit from his original proposal to “unlock the [set-top] box” and is preparing to adopt the broad outlines the industry’s app-based counter-proposal. But that doesn’t mean the struggle for control of the set-top is over.

Federal Communications Commission (FCC) Chairman Tom Wheeler gestures at the FCC Net Neutrality hearingIn an ex parte filing with the commission this week, the National Cable & Telecommunications Association, along with DirecTV-parent AT&T, pushed back forcefully against elements of what appears to be Wheeler’s new plan to bring greater competition to the market for pay-TV-compatible set-top boxes, as mandated by congress more than a decade ago.

The new plan, as described in general terms in a series of ex parte filings in recent weeks, will apparently require multichannel video programming distributors (MVPDs) to develop apps that can run on third-party devices but that replicate all of the features of MVPDs’ own services, including making all the operator’s linear and on-demand content available on similar terms.  It will also require MVPDs to make their content searchable by third-party, universal-search applications.

Critically, the new plan will apparently allow MVPDs to maintain control over the user-interface for their apps, and keep it separate from the device’s UI — a key concern operators and programmers had with Wheeler’s original proposal, which would have allowed device makers to incorporate pay-TV content directly into their own UIs.

In its filing this week, however, NCTA raised a host of new objections.

Topping MVPDs’ list of concerns with the new plan is an apparent proposal by Wheeler to create a new centralized licensing body, to be overseen by the FCC, that would establish and enforce standardized licensing terms and conditions for operator-developed apps.

“Mandating that a central licensing body must control the licensing of MVPD apps on device platforms – including dictating the specific license terms and conditions – is well beyond the scope of the Commission’s authority under Section 629. Nothing in the statute empowers the Commission to hand over to a third party MVPDs’ rights to the proprietary technologies and service that make up their apps, and such an approach would mark an unprecedented, and unlawful, expansion of
the Commission’s authority in this area,” the NCTA says in its filing. “Moreover, the central licensing concept would essentially impose a royalty-free compulsory copyright license on MVPDs and programmers by having the Commission and central licensing authority determine specific licensing terms and requiring MVPDs to provide apps across device platforms.”

As before, the issue comes down to control.

The purpose behind the centralized licensing body, it’s pretty clear from a filing by the Google-backed Consumer Video Choice Coalition in response to the NCTA’s complaints, is to prevent MVPDs — and their programmer allies — from using the app-licensing process to anticompetitive ends:

The desire of the content industry to exclusively control all terms of the license is antithetical to the Commission’s responsibility to implement Section 629 and to protect the public interest. Unless the Commission exercises its authority as a backstop for the public interest, there is no assurance that the proffered license will be fair, reasonable, or nondiscriminatory. Indeed, a license created and controlled by a group of MVPDs and content companies may well become the means to restrain the very competition Section 629 was intended to promote. Moreover, it is possible that any arrangement where programmers and MVPDs jointly determine the terms of app licenses would raise serious antitrust concerns, yet antitrust immunity might be claimed due to the FCC regulatory context.

Without FCC oversight of app licensing, the coalition warned, nothing would prevent programmers and MVPDs from establishing agreements to:

  • Eliminate the ability of consumers to time-shift and record programming for in-home viewing;
  • Deny programming or features to certain devices or classes of devices for anticompetitive reasons;
  • Prevent viewers from accessing non-MVPD programming, including programming from minority or other non-mainstream programming or user-generated
    content platforms, like YouTube or Vimeo; or
  • Require that devices give MVPD content priority in search results,
    recommendations, and related features.

Interestingly, although Google and its cohorts are worried about potential collusion between programmers and MVPDs, the new FCC proposals appears to have opened up at least a bit of daylight between the operators and content owners. In a separate filing, MPAA-member companies urge the commission to require any third-party navigation device to provide absolute parity between MVPD apps and individual programmer apps offering the same content:

[A]ny parity rule should…ensure that consumers can freely access programmer apps without programmers being subjected to any MVPD-imposed conditions and to ensure that a consumer using a programmer’s app to view video programming should encounter the same ease of experience that the customer would have using an MVPD app to view the corresponding content…To be clear,…the Commission should expect that if a consumer is auto-authenticated to access video programming within an MVPD app (e.g., is recognized and validated without having to enter login credentials), that same consumer should be auto-authenticated with the same ease of use when seeking to access content in a programmer’s app. Furthermore…the Commission should evaluate whether an MVPD is making available to programmers the same information and statistics the MVPD collects and compiles as the result of consumer usage of an MVPD app, including that provided to device manufacturers in connection with user initiated searches.

In other words, when they’re not colluding, the studios want to make sure then can compete on equal terms with MVPDs for access to viewers.

None of this sounds like anything close to a consensus on how to fulfill the congress’ original mandate to bring competition to pay-TV navigation devices. So, while the MVPDs appear to have won the battle over the UI, this is still a long war.

Update: Shortly after this piece was posted, the FCC officially released Chairman Wheeler’s new proposal. At first blush, it appears to be more or less as advertised, but we’ll have more after a more thorough reading.

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