No Good Market Goes Unregulated
In yesterday’s Re/code op-ed justifying sweeping new regulation of the video marketplace, FCC Chairman Tom Wheeler highlighted the virtues of watching pay-TV content on any and every device. I couldn’t agree more. The real question is why the government should inject itself in a marketplace that is teeming with innovation, choice and competition from both established players and just about every major technology company.
Only the willfully oblivious could ignore how TV is changing every day. Netflix has become a global powerhouse. Amazon has won awards for its original programming, and consumers can watch almost everything, on just about anything. Contrary to Wheeler’s assertion, cable content can already be watched on iPhones, iPads, Xboxes, Rokus, smart TVs and more. Pay-TV companies offer apps of their services for millions of customer-owned devices, as do most major TV programmers. HBO Now, anyone? But irrespective of real progress, no good market seems to go unregulated these days.
In a world where consumers want to get rid of set-top boxes, Wheeler’s proposal reaches backward to breathe new life into the market for more boxes, using a pre-Internet, 20-year-old law minted in a time far, far before “House of Cards,” binge watching, YouTube and smartphones. This rear-view-mirror regulation is the wrong vision for the video future, and one should be surprised and alarmed that the FCC is peddling it.
What the FCC fails to make clear is that the cost of leasing a cable box will be replaced with the cost of buying and using a retail box.
Consumers will not get lower prices from this proposal. In reality, they will absorb cost increases from a new government mandate that will require network reengineering, the development of new technical standards, and new adapters that will be required to use an alternative retail box. What the FCC fails to make clear is the cost of leasing a cable box will be replaced with the cost of buying and using a retail box. Retail boxes in the market today are no bargain. The latest Tivo box will cost you $299 to buy, and after the first year, you will pay a $14.99 monthly subscription fee (forever). And to get any new innovations in boxes, you will have to toss yours out and buy a new one.
Consumers won’t get more video programming, either. A new retail box will just let you watch the same content you pay for now on a different device. It may be repackaged and put in a different guide, but these are evolutions that are already in the market, and can evolve nicely without government intrusion.
But wait, says the regulator, a government rule will enable viewers to search for content, whether on cable or on the Web. But the FCC already trails the market in that respect. For example, TiVo brags that its new Bolt does this now. Roku already searches across its video apps; Samsung’s new remote already remembers which HDMI input you need; iOS and Android already support search.
This functionality is likely to be widely available soon without a protracted and costly government technical mandate. But wait, says the regulator, we have to open up metadata for pay-TV packages so Google’s search crawlers can find it. But there is no proposal to break open the apps of Netflix or Amazon or Hulu or other video services that live inside apps. Proprietary apps, apparently, are only good for the favored goose, but not for the vilified gander.
Why negotiate and pay for ESPN, Food Network or TV One, when the government will create a mandate that lets you build a box and fill it with top-value content without paying a dime?
So, what gives? Sadly, the real benefits of the FCC’s proposal tilt decidedly to the commercial interests of a few well-heeled tech companies. What’s in it for them? In short, they get to create their own video service on the back of others. Rather than negotiate and pay for content — like all video streamers do today — they want the government to mandate its free availability. Why negotiate and pay for ESPN, Food Network or TV One, when the government will create a mandate that lets you build a box and fill it with top-value content without paying a dime?
This harms content creators — particularly minority programmers — that rely heavily on their deals with pay-TV companies to fund the content that consumers love. The FCC also hands over access to valuable set-top box data to the likes of Google. This all allows these tech giants to profit handsomely off the intellectual property of others without sharing any of that cash (or prized big data) with the people who created it.
Government power has been enlisted to blatantly advance the interests of a few deep-pocketed companies who could clearly license high-value content, but prefer not to. It’s a huge corporate giveaway in which consumers are the pawns who will foot the bill.
Michael Powell is the president and CEO of the National Cable & Telecommunications Association (NCTA), and was formerly chairman of the Federal Communications Commission (FCC) from 2001 to 2005, and a member of the FCC for eight years. Reach him @chairmanpowell.
Originally published at recode.net on January 29, 2016.