FCC Approves Set-Top Box Change

The Federal Communications Commission (FCC) on Thursday approved by a three-to-two vote along political party lines FCC chairman Tom Wheeler’s proposed rules to separate the proprietary set-top cable or satellite box from the information that the box provides to customers. If the proposal is adopted, the stranglehold that cable and satellite operators now have will be broken, according to the FCC’s announcement.

Cable and satellite operators, known as multichannel video programming distributors (MVPDs) in telecommunications lingo, include Comcast Corp. (NASDAQ: CMCSA), Time Warner Cable Inc. (NYSE: TWC) and Dish Network Corp. (NASDAQ: DISH), as well as telcos Verizon Communications Inc. (NYSE: VZ) and AT&T Inc. (NYSE: T), that offer high-speed broadband service currently described as “over-the-top.” In 99% of cases, according to the FCC, pay-TV subscribers lease their set-top boxes from the MVPDs.

The three Democratic members of the commission voted in favor of the proposal and the two Republican members voted against. Both Republican members support eliminating the set-top box altogether

The FCC noted:

Lack of competition has meant few choices and high prices for consumers – on average, $231 in rental fees annually for the average American household. Altogether, U.S. consumers spend $20 billion a year to lease these devices. Since 1994, according to a recent analysis, the cost of cable set-top boxes has risen 185 percent while the cost of computers, televisions, and mobile phones has dropped by 90 percent.

The FCC seeks an open, hardware-independent format that provides service discovery, information about what consumers can do with the content and content delivery. The commission does not intend to mandate the format, instead it seeks a format that “conforms to specifications set by an [unspecified] independent, open standards body.”

In addition to opening up existing set-top boxes, the FCC also proposes that MVPDs offer at least one content protection scheme that can be licensed on “reasonable and non-discriminatory terms,” among other systems to maintain existing agreements and copyright protections and remedies.

The notice of proposed rulemaking includes a 30-day comment period plus another 30-day period for the FCC to respond to comments. If the proposed rule is adopted, MVPDs will have two years from the date of adoption to develop the required standards.

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