At the end of January, the US FCC telecoms regulatory body released a proposal to loosen the grip pay TV providers have on consumer set tops. Ahead of next week’s FCC vote, AT&T has openly voiced its criticisms over the proposal, claiming Google is behind the plans – likening it to the FCC demanding operators take control of Google’s homepage.
Chairman of the FCC Tom Wheeler is determined to drive competition and therefore innovation in the US by opening up the market to box and dongle manufacturers such as Roku, Apple, Google, and TiVo. Devices such as Apple TV and Chromecast will hence be able to use the regular cable feed in collaboration with pay TV operators, putting them right in the midst of the $20 billion a year, but declining market.
The FCC revealed figures that show that US consumers pay an average monthly fee of $20 to operators for rental of set top hardware, which has increased by 185% over the past 22 years, while prices for devices such as TVs, PCs, and mobile phones have fallen by 90% in the same time. Having said this, the advent and development of RDK (reference design kit) has dramatically reduced the cost of set tops – so operators seem to be making a lot of money from the hardware.
Pay TV operators typically have out dated and slow set top hardware, replaced every ten years or so, which is why third party device vendors will thrive due to a superior user experience. Operators will insist that their UI remains intact, but until recently the UI was just a channel guide or flipping channels. Increasingly consumer expectation is to be able to stream OTT video alongside traditional linear TV.
The two sides of the argument is that on the one hand, operators want to control the experience that the customer has, on the other, fresh UIs would have appeared much earlier if they hadn’t.
But as we slowly standardize on HTML5 and a future of cloud rendering, operators are finally harnessing modern UIs which are identical or similar on all devices. We might argue that the FCC’s proposed set top mandate is unnecessary and far too late. This should have happened ten years ago, and had it happened back then few operators could have pushed back.
Tom Wheeler has responded to these arguments by saying, “The big kick I get is that AT&T and the cable companies have been putting out statements saying, ‘This is going to thwart innovation.’ And I scratch my head and say, ‘My goodness, let’s see. When was the last time that competition thwarted innovation rather than spurring innovation?’ And you are telling me that a locked-down, closed system will have more impetus to be innovative than a competitive, open system? I think that history shows that it is exactly the opposite of what happens in reality.”
But in order for this to actually happen, these companies will have to have the right to change UIs created in the cloud, and impose their own. Right now the pay TV operator sees apps as something you have to go in and out of, and their own service as a single App that shows ALL content. If they lose that advantage, they seen their value-add diminishing rapidly.
We also recently highlighted that it was almost an act of outright irresponsibility on the part of the FCC not to raise its intentions on this matter prior to allowing Arris to buy Pace and Technicolor to buy Cisco’s set top business, since their values were predicated on the way things are done today.
The Future of TV Coalition, made up of most of the US’s large and medium operators and co-chaired by Alfred Liggins of TV One and Nomi Bergman of Bright House, argue that the FCC’s proposal could affect contractual arrangements with rights holders, who may see this as breaking terms relating to channel bundling, for example, if a fresh UI allowed OTT content to be folded in alongside bundled content, affecting most favored nation clauses.
Wheeler’s comments were in response to a blog post from AT&T’s Vice President of Federal Regulation, Stacy Fuller, stating, “When you get beyond all the hype, Google and its affiliated proponents of this technology mandate are simply trying to take our competitive service and repackage it as their own, without ever having to negotiate with us or with the content owners with whom we had to negotiate to create our service offering. It’s akin to the FCC mandating that we get access to Google’s home page (and all of the contract rights and algorithms that go with it) so that we can redesign and rebrand it as our own.”
Wheeler added, “First of all, nobody is trying to take control of what AT&T distributes as their television signal, all we are trying to say is that you need to pass information through to competitive providers.”
The FCC vote will take place on February 18th, but we hope to see some more blog posts from Stacy Fuller before then.