Why Are We Really Having This Fight?

To hear the supporters of the FCC’s set-top box mandate tell it, this massive federal intervention in the video market is all about consumers. They just want to give consumers more choices, which will ultimately save them money.

For anyone who’s visited a Best Buy or browsed Amazon lately, this argument is a bit of a head-scratcher. There’s never been a more vibrant market for video devices, many of which — from tablets and video game consoles to streaming boxes and smart TVs — run apps from traditional TV providers and streaming video services on equal footing. TV providers have started embracing options like Roku, which let viewers receive their TV service without needing a traditional set-top box at all.

If the goal here was just to save consumers money, surely this market-driven innovation toward a boxless future would be the better path. After all, “no box” will always be a cheaper option than “an FCC-approved, mandate-compliant box”. (And that’s without even mentioning the expensive network overhauls, higher energy bills, and second box consumers will be stuck paying for under the FCC plan).

So we’re back to the original question: why are we even having this fight?

The answer, in a word: Google.

Google pushed for the “AllVid” plan back in 2010, which would have forced TV providers to hand over their unbundled programming streams to tech companies to be freely repackaged into those competitors’ devices and services. The FCC had the good sense to drop the idea then, but now Google is once again leading the charge for a “new” set-top box mandate that will once again force TV providers to hand over their unbundled programming streams to tech companies to be freely repackaged into those competitors’ devices and services. (If that strikes you as remarkably similar to the 2010 “AllVid” plan, you’re not alone.)

Don’t take our word for it — just take a look at the membership list of the “Consumer Video Choice Coalition” that is leading the push for this mandate. You’ll see Google, business partners of Google, and trade associations and advocacy groups funded by Google. Where are the other tech innovators, like Roku, who are already disrupting the video device marketplace? As it turns out, they’re not fans of this idea either.

So why is Google pushing so hard for this plan? A speech given yesterday by a Google executive at the INCOMPAS trade show paints a pretty clear picture. As covered by Light Reading:

Google Fiber Head of Network Deployment and Operations Chris Levendos declared that the current content model in the US is “broken” and suggested that OTT TV could and should be used to “blow up” the existing system.
“The current model’s just too restrictive economically to encourage scale and investment to be able to then compete in the marketplace for the services,” said Levendos.
Today, Google Fiber builds out access network infrastructure in select cities, negotiates for the necessary TV franchise agreements, and then offers TV service within its network footprint. But in addition to the geographic limitations, Google Fiber is facing the same challenge that every other cable and telco TV company is up against: rising programming costs.

Translation? Content is expensive. Studios and networks spend billions and employ millions creating video programming that is adored by audiences, and they negotiate hard for the best price for their content. There’s nothing stopping Google from competing head-to-head in the TV marketplace — indeed, it’s already doing so in a few markets today — but the cost of negotiating with content owners and paying licensing fees means Google isn’t seeing the profit margins from the TV business that it’s used to enjoying in its monopoly online advertising business.

The FCC push suddenly makes a lot more sense. Google’s problem is that content is too expensive. Why not get the FCC to force TV providers to turn over the content rights for free? That way, Google can repackage the programming into its own devices and apps, capture and mine the treasure trove of consumer data that would follow, and then sell targeted ads based on data profiles that would follow you from your computer to your Android phone to your Google-powered TV. Artists, creators, and programmers would see their revenues plummet, but Google would be able to build a huge new business without having to pay for content rights. Problem solved!

If Google is serious about competing in the OTT business, there’s nothing stopping it. Google can follow the lead of Netflix, Hulu, SlingTV, or dozens of other streaming services already in the marketplace today — but that would mean playing by the same rules, and having to negotiate for and pay for content rights.

Instead, they’re lobbying the FCC for a special handout, while Google-backed advocacy groups raise misleading smokescreens about “consumer cost” and “innovation” to justify a federal technology mandate that will almost certainly increase consumer costs and derail the torrent of innovation that is already remaking the video marketplace.

It’s time to pull back the curtain on the “Unlock the Box” campaign and call it what it is: the richest company in the country looking for a sweetheart deal from the FCC.