FCC Launches Set-top Box Rulemaking by 3-2 Party Line Vote

Chairman Tom Wheeler said he was “disappointed” the Republican commissioners voted against a proposal that's “asking questions” about rule changes rather than implementing them. Wheeler said many of the concerns about FCC proposals raised by the pay-TV industry about privacy, security, advertising, the costs to pay-TV carriers and the proposed rules being hostile to app-based content delivery are “red herrings.” The FCC proposals “will not require consumers to purchase new boxes,” Wheeler said. “In fact, we expect that this proposal could enable the development of software solutions that eliminate the need for any box at all.”

Media Bureau Chief Bill Lake said the item seeks comment on a framework that would require multichannel video programming distributors to deliver their content stream and information about what customers and devices are entitled to do with that stream to third-party navigation devices or apps. The NPRM also was issued, later Thursday. The NPRM recommends the information be transmitted using specifications created by an open standards body, Lake said. The NPRM proposes a two-year implementation period for the rules, and seeks comment on ensuring children’s advertising rules are followed and emergency alert system messages are passed through. It also includes a rule requiring billing transparency “to ensure that consumers understand their monthly charges” from pay-TV carriers and an order removing language about the integration band, Lake said. The item gives 30 days for comments and 60 for replies, which a cable industry official told us is a short comment period for such a complex item.

Commissioner Jessica Rosenworcel also expressed concern about the item’s complexity. “We have a lot of work to do,” she said. The most successful regulations are “simple,” Rosenworcel said. The proposals in the NPRM need to be streamlined to be effective, she said.

The proposed rules will prevent third-party device manufacturers from overlaying or adding their own advertisements to the pay-TV content stream, Wheeler said. The proposal will preserve “the sanctity of content,” he said in response to programmer concerns about third parties such as Google running ads on content they haven't licensed (see 1602160072). Those rules extend to channel placement and neighborhooding, Wheeler said. In a post-meeting news conference, Pai challenged Wheeler’s claim. “There’s nothing in this document that prevents a third party from putting in its own ads,” Pai said of the NPRM.

The proposed rules also contain provisions that would protect consumer data, Wheeler said. The item seeks comment on proposed rules that would require MVPDs to transmit their content stream only to third-party device manufacturers that have agreed to “binding commitments” to abide by the same privacy regulations that pay-TV carriers must follow, said Lake. The FCC can impose such a requirement through its authority over MVPDs, Lake said. That proposal isn’t comparable to MVPD privacy protections, said Davis Wright cable attorney Paul Glist on a news-media call hosted by the Future of TV Coalition, which according to its website counts many major MVPDs like AT&T and Comcast and their suppliers like Cisco as members. Glist has represented MVPD interests in opposition to the NPRM. The FCC plan would “blow a hole” in privacy protections because it would be difficult to enforce, Glist said. An “off-shore” third-party set-top manufacturer “could make any kind of promise that it wants to, the MVPD would not know what was happening,” Glist said.

Commissioners disagreed whether the language of Section 629 of the Communications Act empowers the FCC to move forward with the proposed rule changes. “There are times when legislative directives are not clear; this is not one of them,” Rosenworcel said. O’Rielly and Wheeler cited the same statutory language to back their opposing viewpoints. O’Rielly said the statute’s reference to “equipment” doesn’t give the FCC authority over apps, and said the NPRM took the statute “down a rabbit hole into a land where words have no meaning.” Wheeler said the statutory language compelled the commission to take action in the set-top market.

Pai attacked the proposal’s reliance on a standards-making body composed of interested parties: “To date, the defining characteristic of this proceeding has been vigorous disagreement, with video distributors and content creators on one side and the consumer electronics industry on the other.” Pai cited the lack of agreement on the Downloadable Security Technology Advisory Committee in the lead-up to the vote as evidence of the unlikelihood such a standards body could agree on anything. “If anything, when it is time to get down to the technical nitty-gritty of implementing such controversial regulations, I believe that it will be harder, not easier, to reach consensus,” he said. Wheeler said the standards-making process would prevent MVPDs from having to do the costly network reengineering they have said the FCC proposals will lead to.

Reaction Pours In

Both praise and criticism poured in. Congressional backers and tech companies were favorable while MVPDs and congressional skeptics issued sharply worded critiques.

The FCC’s proposal “raises a multitude of questions about the impact on creators and independent, minority, and religious programmers,” said Rep. Doug Collins, R-Ga., in a statement. “This FCC is allowing far left groups to run this so called independent agency by passing their proposal that puts programming content at risk and strips away privacy protections for consumers,” said Rep. Renee Ellmers, R-N.C.

“The old Ma Bell model was rejected decades ago,” said House Communications Subcommittee ranking member Anna Eshoo, D-Calif. “When competition exists, consumers win because they have choices and product pricing is cheaper.” The "new framework for innovators and companies to develop new technologies that allow consumers to access video programming without having to rent a box from their pay-TV provider is smart, fair and a long time in coming,” said Sen. Ed Markey, D-Mass. He and Sen. Richard Blumenthal, D-Conn., released a study of the set-top market that is part of the basis for the NPRM, and Markey supported a failed amendment to the 2014 Satellite Television Extension and LocalismAct reauthorization that would have required the FCC to take a similar action to the NPRM.

The FCC proposals could be a significant burden for small cable operators because of the cost of deploying equipment, the American Cable Association said in a release. The FCC proposals aren’t about “unlocking cable and satellite set-top boxes," they’re about “shifting some of the value of their underlying programming rights to Google and other powerful Internet companies,” said Tech Knowledge, a new group run by Fred Campbell, in a release. "Regulating set-top boxes may do serious damage to video programmers, especially small ones and those geared to minorities," said President Berin Szoka of TechFreedom.

Increasing consumer choice in retail devices is a “worthy goal,” said Comcast in a blog post Thursday. However, the NPRM is “flawed “because it ignored the MVPD supported proposals in the DSTAC final report, Comcast said. Pai said Thursday that there are only a few paragraphs on the MVPD supported proposals in the NPRM. “The right way to proceed would have been to issue a balanced rulemaking Notice and develop an appropriate record to make a rational judgment,” Comcast said. AT&T issued another critique of the FCC for allegedly being giving Google what it wanted. “As this proceeding continues, we hope these concerns are given the weight they deserve and the Commission allows consumers and not Google to continue to drive the market.” said AT&T.

“The law, the business case, and the technological realities all support the FCC's proposal,” said Public Knowledge in a statement. “We applaud Chairman Wheeler and the Commission for taking this step to make good on Congress’s decades-old directive,” said the Computer & Communications Industry Association. “In the same way we didn’t allow our streaming services to be throttled by the pipe into the home, we must remove bottleneck of the boxes that block content once it gets there,” said Incompas CEO Chip Pickering in a post on Medium. “The cable industry has gotten too used to denying the will of Congress and frustrating the choices of cable customers,” said Free Press.