Earlier this year the Federal Communications Commission promised to "tear down anti-competitive barriers" by opening up the set-top box market in the United States and freeing consumers from $20 billion a year in rental charges. The proposals have spooked content owners, not least the MPAA who fear that pirate sites will take the opportunity to build a "black market" business.
For millions of cable TV viewers around the world, the only way to access the content provided by broadcasters is through a set-top box. In many cases these boxes are provided exclusively by broadcasters, forcing out competition.
This consumer-unfriendly situation has attracted the attention of the Federal Communications Commission (FCC) in the United States who report that 99% of pay-TV subscribers are chained to set-top boxes provided by suppliers at inflated rates.
“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,” the FCC announced in January.
According to the FCC, since 1994 the cost of computers, TVs and mobile phones has dropped by 90%. However, due to a lack of competition in the same period cable set-top box costs have risen by 185%.
“Congress recognized the importance of a competitive marketplace and directed the Commission to adopt rules that will ensure consumers will be able to use the device they prefer for accessing programming they’ve paid for,” the FCC said.
In February the FCC approved a proposal that would allow consumers to swap expensive cable boxes for other devices and apps, a change set to boost competition but deliver a blow to companies such as Comcast who would suddenly be open to competition from companies such as Alphabet/Google.
The proposal triggered a 60-day period in which cable providers and other stakeholders were invited to provide input and comment. Earlier this month President Barack Obama came out in favor of the plan but now the MPAA has weighed in with an unsurprisingly hostile opinion.
In a piece titled “It’s About Creators”, Neil Fried, MPAA Senior Vice President, Government and Regulatory Affairs, accuses FCC Chairman Tom Wheeler and even the President of “gloss[ing] over the harm the proposal will cause the creative community.”
Noting that the MPAA’s members are not in the set-top box market, Fried says that they’re in the vital content creation business, content which gets licensed to cable, satellite and other platforms such as Netflix, iTunes, Amazon and AppleTV.
“These distributors then profit from the content through equipment sales, subscription fees, advertising, and the monetization of viewers’ online profiles,” the MPAA says.
According to the MPAA, the FCC proposals will ‘take’ the intellectual property of its members and “give” it to the technology industry, effectively ignoring copyright law.
“[T]he FCC proposal requires pay-TV providers to transmit to third-party device manufacturers and internet application developers all the content that pay-TV providers license from programmers, without requiring those third parties to seek consent from the programmers or to compensate them,” the MPAA writes.
Interestingly, not only is the MPAA concerned about competition from third-parties such as Google, but is also suggesting that pirate sites could take advantage of the situation to begin offering new unauthorized services.
“No matter what you think about the pay-TV set-top box market, the FCC may not promote alternatives by taking the intellectual property of the content industry and giving it to some members of the technology industry, or by making it easier for pirate site operators to build a black market business by stealing that content. Unfortunately, that’s what the proposal would do,” the MPAA warns.
Indeed, as one delves deeper into the MPAA’s statement, the scale of their concerns really becomes apparent.
The currently locked-down set-top box environment ensures that via strict licensing arrangements, entertainment industry companies have complete control over which content is offered to the subscriber. However, third-party set-top boxes are expected to provide content from both Pay-TV providers and also content being offered on the Internet. And according to the MPAA that can mean only one thing.
“We anticipate that video navigation device and application providers will rely on the proposed rules to offer ‘cross-platform searches’ and ‘recommendation engines’ that mingle pay-TV content with internet content,” the MPAA says.
“We are not contesting cross-platform searches of authorized content — but we must oppose any regulation that would import the piracy problem from the internet search world into the pay-TV world by mixing pirated content with authorized content, causing further harm to content creators and the creative economy.”
Of course, even if not referenced by name, no MPAA piece of late would be complete without a negative reference to Google. Hollywood blames Google for falling to curtail Internet piracy, a situation that could bleed into the living room with the FCC’s set-top box proposals.
“[O]n the Internet, search engines frequently prioritize search results for sites offering stolen content over those offering authorized content, and searches for film and TV programming almost always yield results that mingle the two types of sites,” the movie industry group complains.
Noting that some have suggested that if the content providers don’t like the situation they’ll just have to litigate under existing copyright law, the MPAA says that is “cold comfort” to content creators.
“[T]he regulation would fundamentally undermine copyright law, create a piracy problem that does not exist today, and place new burdens on content owners to police the app and device market for stolen copies of their works, forcing them to undertake time-consuming, costly litigation, and sustain additional lost revenue to piracy,” the MPAA concludes.
The FCC’s proposals certainly have the potential to open up a huge can of worms. That being said, it’s inevitable that the Internet will eventually dominate the living room, it’s only a question of how controlled – if at all – its pipe will be.