After years of fits and starts, we finally find ourselves on the cusp of a CableCARD successor as the FCC has proposed the pay television industry “unlock the box”– providing customers broader access to programming via hardware and experiences of their choosing.
As a long-time industry observer, I’ve found much of the press coverage unsatisfying – marred by a lack of situational awareness and heavily influenced by lobbying groups on all sides. Sadly, as a blog hobbyist (with a new baby), I can’t give you the polished 4000 words this topic demands. But I can provide one man’s rough yet somewhat educated and largely unbiased opinion, both textually below and via the new LPX Show podcast embedded right here – along with my pals Brad Linder and Mari Silbey.
A Very Brief Primer
We’ve been here before. In the late 90s, via Section 629, the FCC essentially ordered cable to open their content to third-party devices. It was a simpler time, with the focus squarely on security and authentication… which ultimately took the form of the CableCARD, a now archaic implementation requiring a costly PCMCIA module. This hardware-based separable security allowed a number of devices, like televisions and TiVos, to access cable programming. But it was strictly a one-way affair with no access to video on demand nor, originally, a method for handling switched digital video. Further, due to poor consumer marketing and education, across the board, coupled with insufficient support by the cable companies, CableCARD has largely been a commercial failure seeing limited uptake with only a very few consumer electronics companies still in the game.
Amidst this backdrop, while glossing over eons of machinations including DCAS, OCAP/tru2way, the integration ban, questionable waivers, STELAR, and the like, the FCC is once again exerting their influence to expand upon the original intent of Section 629 with a new proposal to Unlock The Box.
In this proceeding, we propose rules that will both empower consumers to choose how they wish to access the multichannel video programming to which they subscribe, and promote innovation in the display, selection, and use of this programming and of other video programming available to consumers. […] In the Notice of Proposed Rulemaking, we propose rules intended to allow consumer electronics manufacturers, innovators, and other developers to build devices or software solutions that can navigate the universe of multichannel video programming with a competitive user interface.
What the solution ultimately looks like and how it’s executed, should it even come to pass, will be the subject of much debate (again) – starting now, as the FCC solicits comments. But there will be much teeth gnashing, horse trading, and possibly even legal challenges, between here and there. And that’s before even getting to years of development and implementation. Assuming, once again, this moves forward.
Maybe Not Too Little, But Probably Too Late
On paper, the FCC’s wide-ranging proposal sounds great. At least for the TV-loving consumer fatigued by years of energy-hogging, poorly designed, set-top box rentals (a situation ironically exacerbated by the FCC). Who wouldn’t want all their television content from theoretically cheaper hardware of our choosing, with an also theoretically superior presentation? But while some (rightly) indicate set-top box rentals can be big business for cable, there’s also the practical matter of ongoing hardware service and support. When my TiVo remote, hard drive, or fan fail, I’m on the hook (financially) for repair or replacement. Similarly, when the next thing arrives, I’m expected to outlay additional cash to partake. Whereas in the cable environment, it’s generally a simple and inexpensive matter to replace defective hardware or upgrade to a newer model at will.
Further, as far as timing goes, I wonder if the ship has sailed. This would have made a whole lot of sense several years back, when cable couldn’t or wouldn’t properly support CableCARD and the FCC intervened with the integration ban that required the cable industry include CableCARDs in their own boxes. In hindsight, this approach (of “eating your own dog food”) was an unreasonable burden on cable that actually did very little to improve their retail CableCARD support (hey, their boxes come pre-paired) and nothing to advance Section 629 beyond the existing separable security and into more suitable content interaction.
More importantly, the landscape is entirely different now. While cable isn’t yet bleeding heavily (as a certain amount of breathless press has suggested) from the cord cutting phenomenon, they clearly aren’t the untouchable force they once were. And there’s a generation coming up that will never “watch television” in the ways the folks reading this blog do. Cable may have a hard time with what will be smaller margins and fewer television customers in this new era, but they’re already taking steps to improve their offerings — it’s in their best interest to keep their current customers happy … and attract new ones. As such, we see operators like Time Warner Cable floating a Roku-only cable television plan, a Comcast broadband+HBO package, and Verizon offering somewhat cheaper and customizable “skinny” channel bundles. Heck, even the operator-provided set-tops are becoming compelling – specifically: Comcast’s Xfinity X1 and (satellite’s) DISH Hopper. And then there are the apps, which cable argues absolves them of this FCC proposal, available on varying platforms. No, these improvements don’t represent a universal and consistent standard or option across all operators and platforms (sometimes due to licensing), not to mention cable exerts monopoly-like influence in most markets. But after years of apathy on packaging and presentation, cable’s upped their game.
In this context, what will the marketplace look like in several years when Unlock The Box (possibly) comes to fruition? Are we already headed to something close enough, without government intervention and in calling together a huge consortium of players for years of work?
Be Careful What You Wish For
While the FCC is proposing third-party devices have expanded access to pay television content, it’s not unfettered. They concede any solution should not interfere with the cableco’s contractual relationships, to include advertising, and are sensitive to consumer protection, specifically privacy.
— Gigi Sohn (@GigiBSohnFCC) February 18, 2016
It’s safe to assume the cablecos will take this opportunity to renegotiate what’s permissible, given the FCC’s marching orders, and there’s no telling what will come out the other side. What could a future TiVo look like under this scenario given their current business model of selling viewership data, selling ads, and skipping ads? As TiVo declares:
With SkipMode functionality, users instantaneously can transport themselves past commercial interruptions and back to the recorded show. The ability to skip entire commercial breaks is a breakthrough
I suspect cable will strongly argue that programatically skipping ads is effectively the same as removing them. Whereas TiVo would rebut that requiring user intervention at the time of the each and every ad break, versus Hopper’s more automated approach, represents self-determination. Who prevails? TiVo (and their customers) risk losing certain features and revenue streams.
The FCC’s proposal also “tentatively concludes” that the direct-broadcast satellite (DBS) providers (DISH, DirecTV) should be similarly held to #UnlockTheBox provisions while acknowledging a significantly different technical approach will be required along with additional hardware… at presumably additional expense, and perhaps partially negating the point of this exercise. We know that something can be architected, given DirecTV’s RVU and the Windows Media Center satellite TV integration that almost was, yet I suspect they’ll successfully lobby their way out of inclusion given undue burden and logistical challenges. However, should satellite be included in a final order, what’s then to stop cable and satellite from similarly insisting over-the-top content provides like Netflix and Sling TV also open up their streams so third parties … allowing the cable industry to deconstruct and present that over-the-top video in a manner of their choosing?
Unanswered Questions and Unintended Ramifications
The FCC has much to say on what they’d like to see from UnlockTheBox, with three information streams being made available to third parties, yet largely glosses over the critical mechanics of who bankrolls and overseas the development process… along with its ongoing management. As CableCARD is a cable-only solution, it’s been shepherded by CableLabs — a R&D organization, funded by its member cable companies. With satellite providers potentially on the hook to similarly unlock their boxes, would we need an entirely new organization or government entity (!) for standards, certification, and arbitration… should a provider take issue with a 3rd party’s implementation, like TiVo’s aforementioned ad skipping? Related, the FCC seems to be proposing a scenario in which they’re attempting to regulate (or deputize the video providers) companies, products, and services which they may not have jurisdiction over. Can you say quagmire?
Further, the FCC doesn’t give operator’s content licensing complexity the weight it deserves. For example, some channels are expected to be provided as a bundle, possibly in close proximity, while other deals prohibit certain sorts of client endpoints. With third parties being able to slice and dice content presentation at will and serve it up on basically anything, will cable providers be on the hook legally and financially for breach or contract? Will the FCC? Or will rates go up to encompass expanded licensing? And programming dropped where it can’t be done? In fact, some have raised concerns that this initiative could harm niche and minority programming:
That’s partly why some black and Hispanic organization are upset. Right now, wealthy programmers––including those that appeal to minority audiences––pay for prime listing space. In return, people see your network and watch it. But if tech companies take over, who will decide the pecking order? The worry is that tech companies would turn their boxes into vast and depthless rooms––much like the Internet is––where minority programs will lose the slight edge they can buy in the current pay-for-queue-style listing.
We’re Fighting The Wrong Battle
I’ve been beating the CableCARD successor drum longer and more consistently than most. But its time has passed. Heck, even TiVo has signaled a de-emphasis on retail cable products (although theirs is something of a catch-22, given the current CableCARD regime).The fact is, the world is different. How and where content is consumed is shifting, something recognized by even the glacially slow and arrogant Big Cable. And, beyond television, we also have myriad other forms of entertainment eating away at traditional television.
Amidst this evolving landscape, and while not mutually exclusive, the well-intentioned FCC majority has bigger fish to fry. Specifically, ongoing net neutrality and broadband-as-a-utility battles (including “zero rating“), to provide for robust over-the-top options without ISPs prioritizing their own traffic or negotiated services, punitive data caps with overages that don’t scale, and the like.