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App Economy

Here’s Why Your Cable Box Just Won Its Latest Bout With The FCC

Just 20 minutes before a vote to "unlock" set-top boxes, the head of the FCC backed down—at least for now.

Here’s Why Your Cable Box Just Won Its Latest Bout With The FCC

[Photo: Flickr user David Precious]

It seemed like such a no-brainer: a government proposal that would have forced cable and satellite TV companies to make set-top boxes optional and give subscribers more choice. Who wouldn't support a plan that lets consumers save an estimated $231 a year on box rental fees?

Alas, nothing is that simple in Washington—or Hollywood. That helps explain the dramatic move today when FCC Chairman Tom Wheeler pulled his "Unlock the Box" proposal just minutes before it came up for vote in a public open meeting. He insists he's not abandoning the plan, but says now that it needs more work. The sudden move is a big political blow for Wheeler, who was appointed by President Obama and presides over a majority-Democrat commission, which he can usually count on to support his proposals.

Nevertheless, he was facing strong opposition from some pretty powerful foes, in particular cable giants like Comcast and companies like Verizon and AT&T, all of which have a big stake in the pay-TV business. And despite the inclination many Americans have to hate their cable companies, those companies made some arguments against the set-top box proposal that proved persuasive.

Past Mistakes

The previous government policy to provide an alternative to set-top boxes, a decoder called CableCARD, was disastrous. That's in part because cable companies dragged their feet, but also because it cost them a lot of money. The cards were meant to plug directly into TVs or boxes from third parties, but the policy required cable providers to install the cards even in their own set-top boxes, at extra cost.

This time around, cable companies have been fighting for several reasons. One is that they invested a lot in new cable boxes—some of which, especially Comcast's new Xfinity X1, finally work well, with intuitive interfaces in the spirit of popular streaming boxes like Roku. The other issue is one of control: The FCC originally wanted them to make all their data streams—like scheduling and copy-protection requirements—available to any app or device maker. They especially bristled because Google and other Silicon Valley giants were backing this FCC proposal.

That also freaked out Hollywood. The big players got worried that the iron chains of copy protection would be loosened by this open access to data streams, making theft easier—despite vigorous assurances by Wheeler that it wouldn't. Meanwhile, small broadcasters were afraid that channel placement, which they pay for like any other piece of real estate, would go out the window if anyone could build whatever app and interface they desired. The head of a small Spanish language broadcaster, Vme Media, told me that he really needed to be next to giants like Univision and Telemundo so that channel surfers would be more likely to stumble across him.

Then things really got weird: Cable boxes became a civil rights and minority rights issue. Members of Congress, especially in the congressional Black Caucus, joined forces with cable companies, also with the concern that scrambled channel placement would make it harder to find those minority-owned channels. But others in the African-American and Latino community leadership, like BET founder Robert L. Johnson, came out in favor of busting the cable set-top boxes—to save their viewers money and give them more options for watching.

Compromise, But Not Enough?

After getting earfuls on its draft proposal for most of 2016, Wheeler's team proposed a pretty big compromise: TV subscribers would have the option to use an app instead of a cable box, but only cable or satellite TV suppliers would be allowed to build the apps. This isn't so different from what's happening anyway. Cable companies like Time Warner Cable are already providing apps that run on devices like smart TVs, Roku, and Xbox, as well as non-TV gadgets like tablets. But only customers who shelled out monthly for an unneeded cable box can use the apps. Getting TV service still requires getting a box, and the apps need to be unlocked with a valid subscriber number.

The latest plan, unveiled September 8, would just dump the box requirement. It even keeps in place the requirement that subscribers can (for the most part) only use the apps when they are at home. TV rights agreements are tied to geography, a complication leftover from the days when the only way to watch was broadcast TV. Still, big cable, Hollywood, and minority advocates said no. Conservative members of Congress, and the two (out of five) conservative members on the FCC, are also reliable opponents of most regulations.

One of the sticking points was the proposal to create a content-licensing commission, overseen by the FCC, to ensure that devices like streaming boxes can get access to show the content. Again, there's the issue of losing control that rankled Hollywood. Powerhouses including the Motion Picture Association of America and SAG-AFTRA called Wheeler's proposal an "unworkable de facto compulsory licensing regime that requires creators to allow their work to be shared across multiple platforms without compensation."

All that opposition might not have mattered if Wheeler could count on, as he usually does, the support of his two liberal commissioners: Mignon Clyburn and Jessica Rosenworcel. But Rosenworcel is also worried about the licensing board—she told a Senate committee that it might be outside the FCC's powers to create such an entity. It seems she still has concerns, even after a pledge by Wheeler two weeks ago to work with her on it.

"We have made tremendous progress—and we share the goal of creating a more innovative and inexpensive market for these consumer devices," said Wheeler in a statement released this morning. "We are still working to resolve the remaining technical and legal issues, and we are committed to unlocking the set-top box for consumers across this country."

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