Set-Top Study Rider Could Undercut FCC Plan After the Fact

“They don't want competition,” a consumer electronics official told us. The FCC, NCTA and Comcast declined to comment. A pay-TV industry official said the FCC proposal has led to significant criticisms about its effect on diversity, and there's widespread bipartisan concern about the agency plan in both chambers of Congress. While the rules are widely expected to be voted on at a meeting this fall, the appropriations rider could take longer to be signed into law, lawmakers told us.

If the FCC approves a set-top plan, and months later the appropriations rider passes, it's unlikely to leave any wiggle room for commission action, supporters and opponents of the agency plan told us. The commission itself has said it would take at least two years to implement its set-top rules and create the new technology standards required, making it unlikely any aspect of the FCC plan could take effect before the rider's expected passing date, an industry opponent of the plan told us.

The bicameral set-top rider says “none of the funds made available” in the FY 2017 funding legislation “may be used to finalize, adopt, implement, administer or enforce any proposed rule under Section 629 of the Communications Act” before 180 days pass following the completion of the study. Both House and Senate Appropriations committees cleared FY 2017 Financial Services bills with a set-top rider attached, which would mandate a legislative pause to the FCC proceeding while further study takes place. The Senate version would compel a GAO study. The House is advancing the appropriations measure on the floor this week, despite Democratic opposition (see 1606200049). Because the funds to take action wouldn't be available, the rider effectively would halt the FCC from taking any action, even if a commission vote approving set-top rules preceded the passing of the rider, said Georgetown Law Institute for Public Representation Senior Counselor Andrew Schwartzman.

A GAO study of diversity likely would take many months and delay any FCC action well into the next administration, a CE industry official who supports the commission plan told us. The current FCC under Chairman Tom Wheeler has been more open to pursuing the set-top proposal in the face of strong industry opposition than future FCC's may be, the industry official said. By forcing the agency to wait until a GAO study, lawmakers would be ignoring commission status as an expert agency, the official said.

Clyburn Comments

Such a study wouldn't be necessary under the pay-TV backed compromise proposal because it doesn't raise the same concerns about diversity of programming, a pay-TV industry official told us. Under the pay-TV proposal, third-party box makers get their content through a license, and it's third parties having access to content without such licenses that NCTA and others have said threatens programming diversity. In an emailed statement Tuesday, a spokesman for Commissioner Mignon Clyburn talked about the compromise proposal.

“Commissioner Clyburn appreciates and welcomes the constructive ‎efforts by industry to put forward an alternative apps-based proposal,” the spokesman said. “She continues to study the proposal with an eye towards a solution that adheres to Section 629 of the Communications Act; ensures truly competitive choice; enhances access to diverse programming; and provides the protections for copyright, security and privacy that consumers have come to expect.”

Commissioner Jessica Rosenworcel made supportive comments about the pay-TV compromise proposal last week, and Google, a supporter of the FCC plan, called the compromise proposal "constructive" in a statement to Politico Tuesday. The recent interest in the compromise from commissioners and supporters of the FCC plan may indicate the original set-top plan is unlikely to succeed, a pay-TV official told us.

Funding Focus

Senators told us the set-top rider may not become law until close to the end of the year, if then. Government funding expires Sept. 30, but many expect Congress will pass only a continuing resolution (CR) for an undetermined length of time. Some lawmakers have speculated a CR may extend through March.

“Policy riders don't have any impact in a CR,” said Senate Appropriations Financial Services Subcommittee ranking member Chris Coons, D-Del., in an interview Tuesday. “You only have a CR for sections of the appropriations process where we can't come to any agreement. If you have a CR, that means there wasn't a new appropriations bill, which means the relevant policy riders wouldn't be a part of it.”

Sen. Brian Schatz, D-Hawaii, agreed a CR may postpone any appropriations riders from taking effect for the better part of the year, assuming they're signed into law with a government funding bill. “If we enact appropriations bills that contain that language, it would be in effect immediately,” Schatz, an Appropriations Committee member and ranking member of the Communications Subcommittee, told us. “But we just don't know whether we'll be on a CR first or not. My guess is we're going to be on a CR first.” Schatz had secured language in an Appropriations Committee manager's package, unanimously cleared last week, that dialed down the requirements of the set-top rider, calling for a GAO impact study rather than one involving an institution of higher education, as in the initial Senate and House language (see 1606160055).

“If it were me and we were going to do a CR, I'd probably want to push it until next year,” Sen. John Thune, R-S.D., a member of GOP leadership, told reporters Tuesday. “But as the leader said, we're passing appropriations bills here.” Thune said he generally hoped to avoid the need for a CR or omnibus funding negotiation. “I think people get very tired of trying to process these things at the end of the year, at the 11th hour, when in most cases Democrats have all the leverage because we haven’t gotten the bills across the floor,” Thune said.

“That's very hard to predict because it would only become effective following the completion of our appropriations process,” Coons told us of any riders ultimately taking effect. “We have several more weeks -- I think it’s at least mid-July at the best, at most optimistic, before we have a package of bills ready to come to a conference. A conference will probably take until the early fall. I would expect end of the year.”

Schatz, despite reducing the study to a GAO one and limiting its focus, told us last week the issue wasn't settled. He originally called the idea of the set-top rider a poison pill, a contention with which Coons and some other Capitol Hill Democrats disagree. Two House lawmakers already requested a GAO set-top study April 1. “We accepted the request but work does not get underway until later this summer,” a GAO spokesman told us, saying timelines or other details “have not yet been determined” for that study.

Senate Minority Leader Harry Reid, D-Nev., joined the chorus of Democrats expressing doubts about the NPRM. “I am concerned that your proposal does not contain mechanisms to ensure that third-party set-top box providers will be required to adequately protect programming content or consumer privacy,” Reid told Wheeler in a letter dated June 14, not publicly released. “I urge you to give careful consideration to these possible consequences and ensure they are resolved before proceeding with your proposal.”

Wheeler has sought to defend the NPRM before lawmakers of both parties. He replied to the bipartisan leadership of both chambers' Homeland Security committees in a letter released Tuesday and dated June 10. “The proposal would bring to television services the same secure modularity that phone and Internet customers have long enjoyed,” Wheeler said. “We anticipate that we and our partners at FTC would vigorously protect public interest features in competitive devices and apps, in much the same way that FCC already protects those same features in cable and satellite devices and apps. The NPRM seeks comment on these certification and enforcement mechanisms.”