Cable and satellite TV companies are not popular, consistently ranking near the bottom of customer satisfaction studies. One of the reasons is that Americans spend nearly $20 billion per year to rent set-top boxes from pay-TV providers, according to a recent Senate report. So when a proposal to open up competition against the oft-reviled set-top boxes was issued by FCC Chairman Tom Wheeler on January 27, the cable providers didn't receive many sympathy notes.
Wheeler isn't acting in a vacuum: He essentially picked one side in the debate from a nine-month committee study, called DSTAC. And he got encouragement from various players, such as eight Democratic Senators, including presidential contender Bernie Sanders, who wrote to him last November. Technically, Congress has no authority over the FCC, but their support shows it's an important issue for constituents.
Cable companies are predicting catastrophe if this plan goes through, of course. But they are right about one thing: Wheeler's proposal would be more radical than it first looks.
The coming battle isn't just between big cable and consumer choice; nor is the fight just about hardware. It's mainly a fight over consumers waged by big cable and big tech, especially Google, trying to control the future of online TV. This being a Washington fight, companies on both sides are funding coalitions and lining up political allies. Later this week, on February 18, the FCC will vote on Wheeler's plan. And to understand what's really at stake, we decided to stop following the rhetoric and instead follow the money.
Wheeler's plan aims to make alternate set-top boxes like TiVo and Roku more competitive, but its biggest effect would be to move beyond the box to app-based access for cable TV. That means getting service from Comcast or Charter would start to look more like Netflix, Hulu, or streaming video service Sling TV. Cable is already (slowly) headed this way. Most pay-TV providers offer online viewing though web portals and apps, smart TVs, or streamers like Roku and consoles like Xbox—but only in addition to renting a set-top box at home. In November, Time Warner Cable began a trial in New York City, where, in lieu of a traditional set-top box, it ships a free Roku 3 device running its TWC TV app. The cable company isn't saying what might happen next.
The FCC proposal would allow anyone to build an app that lets subscribers access their cable service. Developers would get access not only to the fire hose of video streams from TV providers, but also all the metadata needed to build their own electronic program guides, channel lineups, on-demand menus, search, and content recommendation. Netflix and co., in comparison, only allow people to use the company apps to get to their video.
Search and advertising giant Google is leading the effort to open up access to cable streams by backing a new coalition called Consumer Video Choice, complete with a red, white, and blue logo befitting this election season. In addition to TiVo, Vizio, and a few tech advocacy groups, Consumer Video Choice includes over two dozen tech firms through the Computer and Communications Industry Association, such as Amazon, AOL, Microsoft, Netflix, and Yahoo.
The Google side has been pretty vague about what this new TV regime might look like. It has presented a very rough demonstration to the FCC and staffers on Capitol Hill but still hasn't shown it publicly or to the press. (Fast Company has been asking for weeks for more information.) In the absence of concrete details, opponents are painting a worst-case scenario.
"Google doesn't do these things for humanitarian reasons…their business is based on advertising," says Victor Cerda, senior VP and an investor in Vme Media, which owns two Spanish-language TV channels reaching 70 million people in the U.S. Cerda's biggest concern: If Google sucks in feeds from cable networks, such as Comcast, that carry his channels Vme and Vme Kids, Google can replace the commercials he's sold with Google's own ads. "They are going to place ads around programming that I have had to spend money to buy or…produce," he says. That could push his advertisers to making deals with Google, rather than him.
Cerda also worries about the loss of the traditional channel lineup, where he negotiates to be placed with other Spanish language, children's, and family channels. "I want to be grouped with the Univisions and Telemundos, because they draw traffic," he says. Adding the ability to search is not a bad thing, he says, and some cable TV apps already do this. But Cerda doesn’t like the look of Google's web searches, where the top results are paid placements, saying, "If I don’t pay, will their algorithms put me down in the ether with the Weather Channel?"
Google has not yet discussed its plans with us, instead shunting us off to a third-party PR rep not authorized to speak on the record. He assures us that Google would not interfere with advertising. Publicly, Google downplays the extent of its work. At a recent conference in Washington, D.C., Google VP Milo Medin said, "So right now, inside Google, I'm unaware of any plan to actually go build products that meet this interface." Although he added, "I'm sure Android TV will eventually build something that could speak to this."
Cable companies have been accused in the past of buying minority-group supporters on issues like the failed Comcast-Time Warner Cable merger and of creating fake "astroturf" grassroots organizations, but it's not so clear-cut here. A coalition member the U.S. Hispanic Chamber of Commerce has received hundreds of thousands of dollars in the past from Comcast, according to a study by the New York Times and the Center for Public Integrity. Youth advocacy group ASPIRA has received large grants from Verizon and Comcast (though also from the Federal government). But the League of United Latin American Citizens has received an undisclosed amount from Google. The United States Hispanic Leadership Institute has gotten money from AT&T, Comcast, and Google.
Victor Cerda bristles at allegations of influence. "I think that's offensive. It's kinda saying, the minorities are involved, but they're…being paid off," he says. "It's like what, we can't articulate our position, and we are not businessmen who participate in media and know when our rights, our business interests are…in jeopardy because of proposals?"
The cable companies have some strong conservative supporters, such as the Hispanic Leadership Fund PAC, but also the mostly liberal Congressional Black Caucus (CBC). Back on December 1, U.S. Representative from Brooklyn Yvette Clarke and 29 other CBC members of Congress sent a letter to Wheeler asking him to not take the so-called AllVid side from the DSTAC committee. DSTAC was charged with promoting competition among TV "navigation devices," based on the twenty-year-old Telecommunications Act of 1996—from long before people were thinking about cable TV apps.
Clarke's letter made now-familiar points, that the AllVid plan would allow new channel lineups to relegate independent and minority programmers "to the bottom of the pile," and allow tech companies "to sell intrusive advertising without sharing any revenue with programmers."
Clarke has received significant funding from the pay-TV side, according to OpenSecrets.org, which collects Federal Election Commission filings. Major contributors include AT&T, the National Association of Broadcasters, Verizon Communications, and Cox Enterprises. Big cable has contributed to other CBC members who signed the letter, with AT&T being especially prominent.
Congresswoman Clarke's office told Fast Company that she has received contributions from those on both sides of this issue, so has no obligation to either constituency. However, Google has not been listed as a major contributor during her House tenure.
There's plenty of tech money on the other side. U.S. Rep. Anna Eshoo of Silicon Valley issued a letter today signed by 12 of her House Democrat colleagues (most from California) strongly supporting Wheeler's plan. Google (and new parent company Alphabet) has been one of Eshoo's top 5 funders in four of the past five elections (2008-2016), and has contributed close to $100,000 in that time. Only two of the Senators who sent a letter to the FCC, Ron Wyden and Elizabeth Warren, have received much Google money. Some others have received big contributions from the cable industry.
Nonprofits in Consumer Video Choice have also gotten Silicon Valley money. Member Open Technology Institute is part of the New America Foundation, which breaks down funding by ranges. Recently, Google donated between $250,000 and $999,999. Google executive chairman & former CEO Eric Schmidt and wife Wendy donated $1 million or more; however, so did the U.S. State Department. Comcast, Dish, and AT&T gave much smaller sums. Google has consistently been in the top tier of funders for Consumer Action, but the organization has also gotten regular, smaller contributions from TV providers like AT&T, DirecTV, and Time Warner Cable. Public Knowledge, which provides a lot of the research behind the Video Choice group, gets more than half of its funding from foundations. The rest includes both sides of the debate, with biggest donors such as Google and the Consumer Electronics Association, but also AT&T, Charter, DirecTV and Dish Network. Public knowledge also has a personal tie: Gigi B. Sohn, cofounder and former president and CEO of the organization, is now counselor to Tom Wheeler.
It's hard (maybe impossible) to definitively say how much money or relationships motivate a politician or nonprofit group. But however the set-top box regime shakes out, for-profit companies will implement it. And money certainly motivates them.