Video distribution is no longer exclusive to cable, broadcast, satellite, and other “MVPDs” (multichannel video programming distributors). Increasingly, consumers are “cutting the cord” and turning to alternative, internet-based means of accessing their favorite video content. For many consumers, online streaming services like Netflix and Hulu and devices like Roku and Chromecast are less expensive alternatives that also allow them more control over the content they pay for.
Online video is a potentially thriving new market. Every day, more and more content is available online, spurring innovation in ways to access that content. However, despite the attention that new online video and streaming devices get, traditional pay TV is still larger than online video, and traditional pay TV providers still have enormous influence over the market and top content. They are able to ensure that much of the most valuable content is still tied to an MVPD subscription. This level of control gives incumbent distributors such as cable and satellite providers the ability to prevent growth of a competitive video marketplace rich with innovative services and devices.
There are several issues currently in play that will affect the state of video competition. One issue we have addressed in detail is the set-top box market. As background, the 1996 Telecommunications Act directed the Federal Communications Commission to take steps to ensure an open and competitive cable box market. The goal was to ensure subscribers did not need to rent a set-top box from their provider simply to watch programming they are already paying for.
The FCC came up with the CableCARD standard—a physical card that is inserted into a third-party device like TiVo that enables people to access only the channels they pay for. Unfortunately, CableCARD has not lived up to expectations. Ninety-nine percent of cable subscribers still pay fees to rent devices from their providers instead of using third-party CableCARD devices.
In December 2014, Congress directed the FCC to set up the Downloadable Security Technical Advisory Committee (DSTAC). This committee includes engineers from trade groups, consumer groups (including Public Knowledge), pay TV providers, and consumer electronics representatives. The Committee was charged with recommending a CableCARD replacement to the FCC, and provided the FCC with its two-pronged report in August 2015.
In February 2016, the FCC opened up a proposal for public comments. The proposal allows pay TV customers to access programming on the devices and apps of their choice without having to rent a set-top box from their cable provider. Deemed by public interest groups as “unlocking the box,” this proposal will increase competition and choice, as well as lower costs for consumers. Providers can still make and sell their own devices; we are simply asking that they support third-party devices as well.
The FCC was scheduled to vote on the proposal to unlock the box at the FCC open meeting on September 29th, 2016, but the item was removed from the agenda that morning.
The system by which cable and satellite providers compensate broadcasters for the right to deliver local television stations to their subscribers is called “retransmission consent.” This system was implemented in the 1990s, in an attempt to ensure that broadcasters were treated fairly in negotiations with cable companies who, at the time, faced little competition and thus were able to exert significant power over retransmission agreements.
Since that time, however, satellite providers and other competitors have flourished, and broadcasters have consolidated and strengthened their positions, shifting the power from video providers to broadcasters. As a result of this power shift, broadcasters have substantially increased their demands for compensation (to the tune of billions of dollars each year), and consumers are now used as bargaining chips, with programming blackouts harming consumers as a means of increasing negotiating leverage. At the same time, cable consolidation has harmed smaller programmers by limiting their ability to survive disputes with large video providers.
Now, the FCC is taking a fresh look at the retransmission consent system. At the direction of Congress, the Commission is examining the “good faith rule”, which requires that both sides of these negotiations deal with each other in good faith, with an eye toward quickly resolving disputes. Public Knowledge is actively engaged in this process, as we believe that consumers should come first and never be used as bargaining chips.
What PK Is Doing…
Public Knowledge is working to make subscription video content available on third-party devices, freeing consumers from having to rent set-top boxes from their cable or satellite providers.
Public Knowledge is working to resolve the imbalance in the retransmission consent system, ensuring that consumers are protected, blackouts are kept to a minimum, and small video providers and broadcasters are able to survive in the face of mounting industry consolidation.
Public Knowledge is fighting for online video services to be recognized as multichannel video programming distributors (MVPDs) under the Communications Act. This would open up the video marketplace to new online providers and allow innovation subscription services to fairly compete in the marketplace under the same protections and regulations as any other pay TV service.
Public Knowledge supports efforts to ensure that consumers have choice and that large cable companies do not abuse their market power as distributors, including changes to FCC rules and examining whether restrictive programming contracts are anticompetitive. Small and independent programmers are sometimes treated unfairly by large cable companies, and that this can lead to higher costs for viewers and reduced choice. For example, large cable companies can require that independent programmers keep their programming off online services, even though they could not tell them to keep their programming off of competing MVPDs (such as satellite or fiber-based services).
To learn more check out the following:
We are asking people to share their cable costs in response to the set-top box proceed at publicknowledge.org/TrueCableCosts.
We urged the Chairman of the FCC under President Trump to end the cable box ripoff.
We issued a press release and official comments asking the FCC to reform the retransmission consent system.
We filed comments with the FCC about the future of video as a viable competitor for traditional MVPDs.
Here are the PK experts on this issue: