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FCC Wobbles On Cable Box Bust-up, In Nod To MVPDs

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BoxThe FCC may be softening its stance around its highly contested proposal to let all set-top boxes freely access cable content.

Set-top box and OTT device manufacturers love the idea because they’d be able to tap into all sorts of heavily gated cable content. Multichannel video programming distributors (MVPDs) don’t, since it would undermine their ability to control where their content winds up.

It appears the FCC is starting to listen to TV content providers, however.

Recent filings obtained by Bloomberg indicate CBS and 21st Century Fox have spoken with the FCC and that Chairman Tom Wheeler might be sympathetic to a counterproposal the National Cable & Telecommunications Association (NCTA) raised this June.

The counterproposal would keep cable-owned content locked, in theory, but extend access to a cable provider’s content via an HTML5 app.

In this scenario, a third-party device manufacturer like Google (via Chromecast) or Apple wouldn’t have direct access to Comcast-owned content – but rather a Comcast-owned app.

The NCTA claims this structure lets consumers ditch their MVPD-owned box (which come with those pesky monthly rental fees) for a third party manufacturer’s – but they’d still be required to download their cable provider’s app. 

This would prevent third-party device manufacturers from freely adding their own branding, logos or ads into programming owned by the MVPD.

Thus, the MVPDs could safeguard their streams, which would secure their advertising interests.

“The Olympics is a classic example where companies spend multimillion dollars for rights to be the sole sponsor in the Olympics,” said Dan Jaffe, EVP of government relations for the Association of National Advertisers. “If someone can letterbox an ad or overlay an ad with a competing product, that can undermine the process. We are neutral to whether content runs on apps or set-top boxes. What we do care about is that there is clear and explicit protections for advertising’s contractual rights.”

Rob Aksman, the co-founder of Hulu’s interactive ad server BrightLine, added that the NCTA proposal ultimately “preserves the sanctity of the walled garden.”

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Those walled gardens ostensibly protect content owner rights and licenses from copyright theft, guard against data leeching and enable better control over viewer experience. They would also restrict access to web advertising companies, whom MVPDs fear would introduce arbitrage and fraud into the TV ecosystem.

Still, industry experts say NCTA’s proposal for an app-based ecosystem is just reinforcing the status quo and that it doesn’t necessarily address the FCC’s original concerns that the current environment is anti-competitive and that consumers don’t have a lot of choice.

“The network counterproposal is great, but it’s essentially just an endorsement of what’s already happening in the free market,” Aksman added. “Every single MVPD already has or is launching a device-agnostic streaming bundle that viewers can download and run from the device of their choice.”

In the greater New York City area, Time Warner abandoned the set-top box with an “IP-only” service that lets viewers download its app as a virtual set-top box, he pointed out.

Jim Nail, principal analyst at Forrester, is also skeptical an apps-based approach will make significant impact.

“If they are HTML5 apps on an independent box, why do the MVPDs get to control it?” he asked. “This seems to contradict one of Wheeler’s other goals to foster more competition – this locks the MVPDs into their current dominant position.”

The FCC is meeting with all parties involved, including content owners, and an FCC spokesperson pointed to Wheeler’s comments during an open commission meeting in early August: “The fact that the industry has come in, given us information, engaged in meetings with us has been really helpful. I believe that many of their suggestions will be adopted. We have been focused, indicative of the fact that the first principle I laid out was on copyright and contract protection.”

The NCTA hasn’t issued a formal update since its late July FCC filing that included the technical specs for its open standard-based apps proposal.

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