Usually, routine letters to the FCC from industry players, asking it to take some action or pleading with it not to, don’t get much coverage. But the tech press has picked up on an amazingly overheated letter (PDF link) from the NCTA (cable’s trade association), where it claims that AllVid (which we’ve written about on the blog many times) would turn cable systems into nothing but “wholesalers,” and that allowing users a choice of user interfaces with which to view their content would throw their businesses into disarray. (See here, here, here, here, and here for coverage.)
This is ludicrous. In the first place, AllVid does not stop cable companies from continuing to offer their own devices and software—as an option to consumers. In any event, with CableCARD, consumers can already view their cable content on alternative devices, with different user interfaces—on Windows Media Center PCs, or Moxi or TiVo DVRs. The world has not ended, and copyright has not been overthrown. AllVid is just CableCARD done right—and it seems that, at all costs, cable’s main concern is that if the FCC does anything to make it easier for consumers to use third-party devices with their cable subscriptions, it should do a half-baked job. This strategy has worked for the past ten years or so, and why mess with “success”?
The letter is right about one thing: public policy treats some companies different than others. Amazon or Netflix wouldn’t be subject to AllVid—nor should they be. MVPDs like cable and satellite TV are different than other video providers, and that justifies treating them differently. Cable companies built their empires by getting laws passed in communities around the nation that made it illegal to compete with them, and they run their wires over public property. Satellite TV companies are given exclusive licenses to parts of the airwaves—you need permission from the FCC to even think about competing with them. And both of them are given special privileges under the law—for example, broadcasters have to negotiate with them for “retransmission” agreements. Internet-based video services—none of which offer the scope of programming offered by old-line pay TV systems yet—do not have these privileges. It is entirely justified to treat cable TV differently—which is why Congress passed a law that requires the FCC to enact something much like AllVid.
Anyway, NCTA’s letter makes for fun reading. Now for the technical part of the blog post. Since NCTA’s letter is full of bullet points, here are some offered in response to a lot of the issues that have been raised against AllVid.
- By itself, the MVPD marketplace is not moving in a direction that allows new entry and experimentation with regard to user interfaces, devices, and content presentation. Rather, the emerging model consists of large companies negotiating with incumbent MVPDs. But Section 629 requires the FCC to assure the availability of devices from “vendors not affiliated with any multichannel video programming distributor,” not just vendors that have cut special deals with them. At the same time, developments in the marketplace do show that, as a general matter, MVPDs do not need to maintain complete control of their customers’ experience.
- The analyses offered by the FCC and the DoJ in the context of the Comcast/NBC merger demonstrate that MVPDs have an incentive to discriminate against online video. Thus, it is likely that MVPD-controlled set-top boxes will not offer online video features to the degree that consumers demand.
- Any legitimate interests of content providers do not present a reason to limit the scope of AllVid, any more than they would require the FCC to limit the functionality of current third-party DVRs that rely on CableCARD and offer their own custom user interfaces. Additionally, existing licenses deal with MVPDs’ expressed concerns as to content protection and privity of contract in ways that AllVid would not disturb. Content would still be handed off from one secure technology to another, and privity of contract is not necessary because technologies accepted as secure by the MVPD have their own security requirements before handing off content to another device.
- Consumers should be able to control the user interface of their devices, but nothing about AllVid would prevent MVPDs from continuing to offer their own user interfaces as an option. Furthermore, if an MVPD differentiates itself from other MVPDs by offering a superior user interface (rather than the usual criteria of content availability and price), it stands to reason that consumers will flock to it.
- AllVid presents no novel standardization or governance issues, and the future of the video device market need not be fragmentation, on the one hand, versus stagnation, on the other.
- Today, set-top boxes are among the factors that prevent consumers from switching MVPDs, thus limiting competition in that market. As these devices come to hold more customized data and recorded programming, these switching costs will increase.
- The Commission could not predict all the benefits of its *Carterfone* ruling, nor of the Computer Inquiries. But they turned out to be many. The value of these kinds of actions is in how they create a platform that allows experimentation and innovation, which is ultimately shaped by consumer demand and yet-uninvented technology. Thus, innovators who may benefit from a more open platform will not be able to submit to the FCC exactly which of their future AllVid products will be a hit with consumers. In fact, those who might bring the most consumer benefit under AllVid may not have heard of it yet. At the same time, those who benefit from the current regime will be motivated to argue against change at the FCC, armed with much detail. But this dynamic should not prevent the FCC from moving forward on a pro-consumer, pro-innovation policy such as AllVid.
- Because the only existing markets for set-top boxes are either distorted by MVPD discrimination or closed off to third-party competition, there is no reason to suppose that the market for set-top boxes is different from other markets for consumer electronics devices, and that consumers necessarily prefer to rent rather than buy them.
- The FCC should not create a regulatory system that enshrines the current (but temporary) marketplace norms, such as a distinction between “televisions” and “computer screens.”
- Opponents of AllVid have not articulated an alternative approach that would satisfy the Commission’s stated goals for AllVid.
Maybe with AllVid, the FCC won’t fall once again for the bogus arguments put out by the beneficiaries of the status quo, and decides to take seriously its responsibility under the law to give consumers more choices.