Cable, Satellite Companies Warn of FCC's Set-Top Box Proposal

FCC chairman Tom Wheeler is proposing an open platform for the set-top box, something he says will boost competition as consumers would have the choice of renting the devices from their pay-TV provider or buying one on their own. Many cable and satellite companies charge their subscribers a fee to rent a box.

A group of cable and satellite companies, along with some nonprofit associations representing minority groups, have formed the Future of TV Coalition to oppose the proposal. On Tuesday, the coalition's co-chair, TV One CEO Alfred Liggins, and NCTA president-CEO Michael Powell, held a conference call to argue against it.

The FCC proposal "would require an enormous amount of time, effort, re-engineering and cost," said Powell. "It would take four, five, six, seven years to fully implement, even by their own admission, and by that time, who knows what the video marketplace will look like, or whether this is a solution in search of a problem." The coalition believes most companies are moving to mobile apps, not a new set-top box, to distribute content on a myriad of new screens. Powell pointed to Netflix, Amazon Prime and Hulu as companies that were making content across screens and devices.

The proposal will be brought to the FCC's next open meeting on Thursday. If it passes, there then will be a period for the public to file comments. The commission would then make a final vote on a final proposal.

The MPAA also opposes Wheeler's proposal, which critics say would jeopardize copyright and privacy protections or hobble innovation.

Executives suggested the plan would give the manufacturer of the new set-top box model undue power over content and consumer privacy. At a time when most content producers are eager to recoup the costs of their production, said Powell, allowing a single technology concern to help stream or distribute content without paying some sort of recompense appeared unseemly.

"The big kick I get is that AT&T and the cable companies have been putting out statements that say, 'This is going to thwart innovation,'" Wheeler told Variety's "PopPolitics" on SiriusXM earlier this month. "And I scratch my head and say, 'My goodness, let's see. When it the last time that competition thwarted innovation rather than spurring innovation?' And you are telling me that a locked down, closed system will have more impetus to be innovative, than a competitive, open system? I think that history shows that it is exactly the opposite of what happens in reality."

He said that what it could lead to are fewer remote controls and easier navigation, where consumers can "shape television to how they use it."

Wheeler said that the average consumer is paying $231 per year to lease set-top boxes, even after cable and satellite companies have already recovered the cost to make them.

"All we are saying is, 'Cable operators, you can go ahead and control your product," he said. "But have an open platform so that anyone can build a device, and then let's compete on who can offer the better device.' Let's have the cable company say, 'You want to pay me for my interface, because it does all these things nobody else does.' Rather than, 'You must pay me.' We are just trying to get to that basic American concept of competition."

He also said that copyright, privacy and other protections would remain in place.

On Tuesday, Rep. Anna Eshoo (D-Calif.) and 12 other Democratic lawmakers signed a letter in support of the proposal.

They wrote that the FCC should "ensure that the agency maintains its statutory obligation to give consumers an alternative to having to rent a set-top box from their pay-TV provider every month."

They also wrote that "while we agree that apps offer consumers another option for watching video programming, they may not necessarily provide the same features and functionality that are available through a pay-TV provider's leased set-top box."