Last Week in Tech Law & Policy, Vol. 30: #UnlockTheBox vs. #DitchTheBox

(By Andrew Manley, Colorado Law 2L)

This week’s post  considers the FCC’s hotly debated set top box proposal. It begins with the origins of the proposal, turning to competing arguments, next steps, and what the future holds for pay TV.

How did we get here?

Among the many amendments to the 1934 Communications Act made in 1996 was the addition of Section 629, which charges the FCC with ensuring a competitive market for commercial devices used to access services provided by Multichannel Video Programming Distributors (MVPDs). To accomplish this goal, the Federal Communications Commission issued what has since become known as the “integration ban.” The ban prohibited MVPDs from integrating key decryption features into the equipment they leased to their customers. Instead customers were to be issued a universal, removable decryption card (dubbed CableCARD) that could be moved from box to box, not unlike a SIM card in a cell phone. Through this technology, customers theoretically could access their MVPD content through a device of their choosing and rather than switching out complete cable boxes, would need only to switch cards when changing providers.

In 2013, provisions relating to the integration ban and the use of CableCARD were struck down as part of a challenge to the Commission’s encoding rules in EchoStar v. FCC. The ultimate demise of the integration ban was codified in the Satellite Television Extension and Localism Act Reauthorization (STELAR). While STELAR was the latest in a long line of legislation regulation satellite carriage of local broadcast affiliates, an added provision was the mandate for the Commission to do away with its integration ban.

Maintaining Equipment Competition Post Integration Ban

The “Expanding Consumer Choice in Video Navigation” proceeding, commonly referred to as the set-top box proceeding, grew out of end of the integration ban and CableCARD. The Commission still had a statutory duty to ensure that the devices used to access MVPD services remained competitive. In a Notice of Proposed Rulemaking, the FCC proposed to require MVPDs make available to third party hardware and software manufacturers three information flows:

  • Service Discovery: What programming and content does the customer have access to? This includes channel lineups and video-on-demand listings.
  • Entitlements: What is the customer entitled to do with the content? For example, is the customer able to use full DVR functionality while viewing the content live? Is the customer able to record the content for later viewing?
  • Content Delivery: The actual video content itself, including accessibility information (such as closed captioning and audio descriptions).

Under the proposed rules, third party devices and apps would be required to undergo a certification process similar to the process used to certify CableCARD equipment to ensure the devices and apps comply with security and robustness standards (which were to be set later). MVPDs would be required to be in compliance within two years of the adoption date for any rules resulting from this proceeding.

Debate surrounding the Commission’s proposal

Proponents of the rule-making point to high cost of equipment rentals and the lack of interoperability as justification for the rulemaking. Consumers pay up to $231 a year to lease their equipment from their service providers, and MVPD-provided equipment rarely supports over the top (OTT) services such as Netflix or Hulu. Rather than forcing consumers to use two boxes (a leased cable box and streaming box such as Roku or AppleTV), proponents argue that the Commission’s proposed rules would give consumers access to one unified system, saving consumers not only equipment costs, but power costs (in the form of one less device to plug in) and convenience (in the form of not needing to switch devices to use multiple services) as well.

The FCC has faced significant criticism over this proceeding, with the National Cable and Telecommunications Association (NCTA) being on the forefront (a comprehensive list of the NCTA’s legal criticisms of the set top box proceeding can be found here). Opponents of the proposed rules have focused criticisms largely on copyright, piracy, and diverse and minority content access concerns.

Copyright and Piracy

Opponents argue that the Commission’s proposed rules will make it easier for content to be pirated, and for that pirated content to distributed and accessed. Opponents argue that pirated content may be mixed within legitimate content, such that consumers may not even realize they are watching pirated content. Opponents also argue that, even with the certification practices in place, MVPDs will be unable to effectively stop the sale of or decertify boxes preloaded with pirated content.

Both content providers and MVPDs argue that the Commission’s proposed rules are in violation of current copyright law. It is argued that by unbundling the data streams and requiring MVPDs make them available to third party manufacturers, the Commission is allowing third parties to profit off licenses the MVPD paid for with no compensation to the MVPD. MVPDs also argue that their accumulation and presentment of multiple linear programs is a copyrightable compilation, and that the FCC’s proposal could facilitate the violation of their copyrights.

The US Copyright Office has voiced similar concerns in a recent letter, claiming that the proposal may potentially interfere with licensing agreements. Congress has also taken notice of the copyright and piracy concerns. However, groups in favor of the proposal have dismissed those concerns as overstated and based on misconceptions about the scope of the proposal or the technology behind it, criticizing as inapt, for example, comparisons of the FCC’s proposal to the torrent streaming application Popcorn time.

Diverse and Minority Content

Another criticism of the Commission’s proposed rulemaking is that, according to opponents, it disfavors content targeting diverse and minority audiences. Advocates of this perspective argue that the proposed rules will allow device manufacturers to alter carefully negotiated channel placements, as well as alter the advertisements viewers see—thus devaluing the ad time low-demand content needs to support itself. Opponents are also concerned that the use of algorithms to determine content placement in search results will push minority content to the bottom—i.e., if majority audiences frequently select majority-targeted content (e.g., American Idol) from search results, then the algorithm will naturally display that content higher than minority-targeted content (e.g., Chasing Destiny) which will be selected less frequently from the same search results. Opponents argue that this in turn will make the content harder to access and therefore less valuable.

In one op-ed, Rev. Jesse Jackson argued that the proposal would allow device manufacturers to “dismantle” diverse and minority owned content networks. Members of the Congressional Black Congress have expressed similar concerns: this proposal will put access to content in the hands of a tech industry known for its lack of diversity.

Minority communities are not united in opposition to the proposal. For example, Robert Johnson, the founder of BET, believes that the proposal will increase minority-targeted programmers’ access to viewers. According to Johnson, large MVPDs only focus on a limited number of minority targeted networks; being able to get on the same box and screen as MVPD content will mean more viewers will watch independent minority-targeted content.

Industry Counter Proposal

In a June 15th, 2016 meeting with the Commission, representatives of NCTA and other industry members including Comcast and AT&T, proposed a compromise plan they believe meets the commission’s goals as well as assuaging the concerns of industry members. The NCTA proposed to require all large MVPDs develop and deploy HTML5 based apps that would be used to deliver linear content to a device of the customer’s choosing. In further submissions, NCTA has argued that an apps based proposal would place an MVPD app next to the apps for OTT services on the home screen of a consumer’s chosen device. Consumers would have their pick of devices in a competitive retail streaming box market where devices already compete on interface and features. At the same time, MVPDs and content providers would not have to give up access to copyrighted content. NCTA argues that the sandbox nature of the apps, as well as the ease of decertification in an app environment, would relieve industry concerns regarding piracy and security.

What Next?

The proceeding has slowed while the Commission considers the NCTA’s counter proposal. Does the NCTA proposal go far enough? Does it meet the objectives the Commission set out to make reality? Should the Congressional repudiations of the Commission’s course of action be read as a loss on the Commission’s part or partisan politics? Does the broader arc of industry migration away from the cable box regime indicate that any “loss” on the Commission’s part is only a “Musish defeat?”