FCC goes over the top again to battle America's cable-box rip-off

Chairman Wheeler to propose agency act as copyright holder

The US Federal Communications Commission (FCC) is to take another crack at breaking the multi-billion-dollar consumer rip-off that is cable set-top boxes by setting the regulator up as a copyright office.

FCC staff were briefing organizations late last week on the revised plan, prompting an angry letter from the cable industry and leaks of the main points from those supportive of the idea. The FCC's chair Tim Wheeler is due to announce the plan early this week.

The new approach will seek to circumvent a legal constraint on the original plan – that of broadcasters' copyright – by creating a new licensing authority.

That authority will be overseen by FCC staff and will help develop a contract that covers the sharing of cable data through new apps. As such, it would prevent the industry from tying up data sharing in endless and fruitless contract negotiations.

The app approach was pushed by the industry in response to the FCC's original plan of requiring cable companies to publish their current data streams in an open-source format. The industry argued that an open-source approach could cause leaks in personal data and allow third parties to introduce their own ads.

The FCC and Wheeler are, however, extremely skeptical of the industry's claim to offer an alternative that would open them up to competition – and for good reason. First, the locked-down box rental market forces consumers to pay many times what cable boxes are actually worth every year – resulting in billions of dollars of annual profit.

Second, the FCC has been trying for 20 years to crack the market; each time the industry has claimed to offer a solution that it has then subsequently undermined (just three examples: CableCARD, AllVid and DSTAC). Interestingly, the FCC just hired as a technical advisor one man who wrote a paper [PDF] outlining all those failed attempts in the past while also criticizing the FCC's most recent idea.

Calling bluff

By embracing the app idea put forward by the industry and by taking a strong hand in its implementation through a new contract authority, the FCC hopes to both call the industry's bluff and make the concept enforceable.

Predictably, it has met with yet more aggressive criticism. A hastily written letter [PDF] from the National Association of Broadcasters (NAB) argues that "it is critical that neither the Commission nor any third party have the ability to rewrite any terms or conditions contained in programming contracts."

It adds that it "cannot support any order where the Commission creates an ongoing ability to review or modify broadcaster contracts through the licensing process" and that such an approach would "undermine the Commission's stated goals of protecting content, respecting copyright, and avoiding third-party casualties in its quest to generate a competitive set-top box marketplace."

In reality of course, what the proposal would do is remove broadcasters' ability to continue to control the market and so keep out competition from companies like Google that don't play by its rules.

Currently companies such as Apple, Amazon and Netflix negotiate contracts individually with content providers, a situation that has led to Amazon and Netflix creating their own original content as a way to correct a power imbalance, and which has led to enormous frustration at Apple as it has tried to offer an AppleTV that comes with cable company content, and failed. Apple even delayed the release of its most recent TV puck in an effort to reach contractual agreement.

As has happened repeatedly since the FCC outlined its original plan in January, the industry has reached out to a friendly business press to push its line. We can expect to see more outraged commentary from cable industry proxies in the coming days.

Comes down to one woman

Whether the FCC plan will move ahead is likely to be largely dependent on a single Commissioner – Jessica Rosenworcel. Her term officially ended on June 30, but despite having been approved for a second term by President Obama, the Senate – well, Republicans in the Senate – are dragging out her confirmation as a form of leverage, pushing at one point for the early resignation of Wheeler.

If Rosenworcel is not formally approved by the Senate by the end of the year she has to leave the federal regulator. Partly as a result of that, and the fact that the cable industry has significant support among Senate Republicans thanks to generous campaign contributions, Rosenworcel has taken a publicly skeptical stance against the original FCC proposal.

As such, Rosenworcel will effectively have to balance her own career with presidential politics and the likelihood of the revised FCC proposal solving the cable-box consumer rip-off when she makes the decision whether to support it.

If Wheeler can get Rosenworcel on board, the FCC can pass the measure – as it has done repeatedly this year – with a majority of three Democrat Commissioners against two Republican Commissioners. If he can't, it could fail and US consumers will face another decade of being ripped off. ®

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