Set Top Box Endgame

Last Thursday’s FCC Open Meeting presented an interesting turn of events for the Commission’s set top box proceeding. After whiffing completely on the NPRM’s convoluted “three flows” approach, Commission leadership recanted its opposition to an applications-based approach – one that I had been advocating for months – and centered its attention on it.  An apps-based approach also was at the core of what the related industry filed as a compromise plan to achieve resolution of this proceeding.  Unfortunately, the leadership did not accept yes for an answer and tried to add a multitude of unworkable provisions to a reasonable plan.  In doing so, they found a way to make all interested parties essentially hate the proposal, resulting in a last minute scramble.  In a rare move, the Chairman pulled the item off the meeting agenda at the last minute, stating that Commissioners had run out of time to negotiate final technical changes to the document.

In reality, it was not just a lack of time that led to a stall in the item.  This proceeding is still plagued by major unresolved issues. Since deliberations presumably will continue in coming weeks, it seems appropriate and necessary to outline the problem areas I see preventing a conclusion:

  • FCC Control of the Model License and API: Some have proposed replacing provisions in earlier versions that provided explicit FCC review and approval roles with active FCC monitoring and threats of future action if progress is deemed unsatisfactory.  For practical purposes they are the same thing.  Preserving any role for the Commission is highly objectionable, especially to the content and MVPD communities, because it could potentially alter private commercial agreements without full knowledge or understanding of the entire negotiation and tradeoffs made.  Think of it like pulling a loose string from a sweater.  Beyond the Commission having no authority or expertise in this area, such interference could undo important protections enacted in those commercial agreements.       
  • The Myth of Universal Search: One of the benefits of the item touted by proponents is that it will enable a competitive market in so-called “universal” or “integrated” search apps.  Specifically, MVPDs would be forced to provide entitlement data and other metadata to third parties via a mandated application program interface, or API, supposedly enabling a consumer to search all content available in one interface that could compete with the interface of a set top box.  This mandate would allow an MVPD’s over-the-top competitor access to all the proprietary information needed to undercut the MVPD’s content pricing to consumers, a truly disastrous outcome.  Moreover, since the Commission mandates the metadata flow only from MVPDs, not from over the top providers, the promise of universal search will be unfulfilled.  Under this scenario, MVPDs’ search engines and content pricing will be inherently disadvantaged compared to their competitors’.  To the extent universal search proves important to some consumers, why would the Commission discriminate in favor of third party app providers?
  • Questionable Feasibility: A key component of this item is a requirement that every MVPD with over 400,000 subscribers develop and support a native app for every widely deployed operating system.  No one even knows how many apps this would be right now.  Is it 10?  20?  Apple alone has three distinct operating systems (OSX, iOS, and tvOS) that probably fall under the definition of a widely deployed platform.  And each of these native apps has to be able to provide the exact same functionality as the most advanced set top box the MVPD offers.  A miraculous engineering feat to be sure if it even proves possible, but assuming it does – the cost could be substantial.  The only way to transform this mandate into anything resembling a manageable, realistic task would be to provide a safe harbor for particular widely adopted and available consumer apps so that MVPDs can better manage their scarce software development and support resources.
  • Opening the Door to the App Tax: Today, many of the widely deployed platforms usually receive an upfront fee or cut of revenues from software developers to have their apps made available on these very popular platforms.  The Commission’s set top box item mandates distribution of apps by MVPDs even to app platforms that require some form of this revenue sharing.  This means either FCC-sanctioned cuts to content producers or distributors’ bottom line and more profits for app stores, or FCC-mandated development of yet another type of app with less capability.  Clearly, MVPDs should not be required to develop either full-featured or consumption-only apps for platforms demanding revenue sharing of any kind.  Opening the door to this behavior will further distort the video marketplace, making content more expensive or even unavailable to consumers.  This needs be addressed upfront, not punted to a later date.
  • Competition from Pirated Content: Programmers and MVPDs have registered valid concerns that the third party integrated search engines contemplated by the item would result in pirated content being displayed in search results alongside legitimate MVPD content.  When faced with an onscreen choice to pay $1.99 for an episode of their favorite show from the MVPD app, or click on a pirated version, some will do the right thing, but others will make the choice that little by little, will further degrade the video marketplace.  MVPDs should not be required to provide their apps to any third party that includes pirated content in its search results.  This is another issue that should be spelled out now if the item is to move forward.

This proceeding has had more than its fair share of twists and turns, so maybe we shouldn’t be surprised that it has ended up in this unenviable spot.  In many ways it has served as another perfect case in point for why the Commission should make every open meeting item available to the public, an initiative I have led the charge on.  Clearly, it’s the only possible way to break the cycle of misunderstandings, spin, and shell games that characterize the current broken process.   

Substantively, the only way to fix the item is to address the key problems and flaws identified above.  Only by doing so would a true app-centric approach be workable for most of the affected companies.  More importantly, it’s the only way to get a resolution that would benefit consumers by eliminating the set top box altogether for those interested.  And isn’t that what the Commission should be focused on? 


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