Industry Already Pushing Back on Rumored Set-Top Box Rule

(Rob Kunzig/Morning Consult)
September 6, 2016 at 5:36 pm ET

The Federal Communications Commission is expected to circulate a new version of its cable set-top box proposal this week, according to several industry sources who have recently spoken to FCC officials. Chairman Tom Wheeler is expected to announce the broad outlines of the plan as early as Wednesday.

But if immediate reaction to the rumored new rules are any indication, Wheeler will have a hard time convincing the pay TV and broadcast industries that this particular compromise is worth pursuing.

Industry sources opposed to Wheeler’s original plan to allow third-party software and equipment companies access to the cable set-top box market tell Morning Consult that they are concerned by a provision that would set up a new licensing body. According to their conversations with FCC officials, the licensing body would be made up of industry stakeholders and other interested groups. It would have two years to reach an agreement on standards detailing how third-party groups could access copyrighted content. If they don’t reach agreement, the FCC would step in.

The final makeup of the licensing body is unclear, but multiple sources representing industries opposed to the FCC’s original plan worry that the commission will have an overly broad influence on the final standards. According to one pay-tv source, FCC staffers said the commission will have the ability to directly intervene in the licensing process and make edits to the app license.

Industry lobbyists are less concerned by the new plan’s focus on apps, which is Wheeler’s way of not favoring one delivery system over another. Those apps would, in theory, make cable companies’ feeds available to other device makers or software peddlers.

Even if the FCC takes a hands-off approach to the licensing, the pay-tv source said a body composed of dozens of disparate industry representatives and advocates would be “unmanageable.”

“The only likely outcome is that it will end up in the FCC’s hands,” the source said.

A broadcast industry source was slightly more positive, saying broadcasters would support a licensing body as long as the FCC enforced the two-year deadline but did not directly involve itself in the negotiations. But the same source conceded that the commission is likely to push for an “ongoing role” in the licensing body’s deliberations, something the broadcasting industry views as unacceptable.

A source from the programming industry was the most optimistic, saying there is nothing “inherently wrong” with an overarching licensing body as long as it allows content producers the same discretion they now have over their product. But “if this licensing authority is going to somehow exert discretion over content licenses,” the programming source warned, “it’s going to reassert all the same problems as the original proposal.”

Cable and broadcasting groups have already begun a pushback against the expected proposal of a licensing body overseen by the FCC. The National Association of Broadcasters wrote a letter to the FCC last Friday urging the commission to “establish that neither it, nor any other party outside the licensing body, will have any role in the licensing or certification processes.”

On Tuesday afternoon, the National Cable and Telecommunications Association submitted its own ex parte filing attacking the likely proposal. The NCTA said any licensing body would be “unnecessary and unworkable,” and argued that it would “essentially impose a royalty-free compulsory copyright license” on cable companies and programmers.

If the new set-top box rules are announced by the chairman this week and circulated to the remaining FCC commissioners as expected, the full commission will likely vote on the final rules at its open meeting on September 29.

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