Editorial: It’s time to kill the cable box

Since taking office in 2013, Federal Communications Commission Chairman Tom Wheeler has battled seemingly every company his agency regulates as he has pushed for rules to protect the open Internet and online privacy. Now, Wheeler is jousting with a set of players not within the FCC’s purview — the major Hollywood studios — as he tries to fulfill a long-neglected congressional mandate.

The issue is the near monopoly that cable and satellite TV operators have over the converter boxes that enable consumers to unscramble and watch the channels for which they’ve paid. As part of a 1996 overhaul of communications law, Congress required the FCC to assure that alternatives to these boxes would be available from retailers. But resistance from cable operators, technical challenges and the studios’ legitimate concerns about piracy combined to thwart would-be competitors from coming up with compelling, reliable and easy-to-use converter-box alternatives. Major consumer-electronics companies simply stopped trying after experimenting briefly with supposedly “cable ready” TVs and set-tops that couldn’t support the full lineup of pay-TV services. As a result, cable and satellite companies collect an estimated $20 billion per year — more than $230 per household on average — in fees for converter boxes that typically are bastions of yesterday’s technology.

Wheeler took a different tack in February, unveiling an ambitious proposal to require pay-TV operators to make their programming available in streams with standardized formats and security so that the manufacturers of smart TVs, Blu-ray players, game consoles, tablet computers and other devices could adapt their products to act as cable or satellite TV converters too. He backed down, however, when the studios, TV broadcasters and other programmers complained that this approach could wipe out some of the restrictions they’d negotiated with cable and satellite operators over how their content could be used. These include limits on recording and commercial-skipping, as well as requirements for where networks appear in channel lineups (for example, requiring a news channel to appear in the same portion of the program guide as other news channels).

That’s the sort of control that federal law gives copyright owners, and the FCC can’t argue with it. To their credit, pay-TV operators came up with the concept for a more workable approach, which is now the centerpiece of a new proposal that Wheeler outlined in The Times this week: delivering their programming through an app that could run securely on smart TVs and connected devices. This would be a huge win for consumers because it would eliminate the need to have a costly converter box connected to every TV in the home.

To preserve the restrictions that programmers negotiate with pay-TV operators, consumers could watch pay-TV shows only through the app, which would be controlled end-to-end by the cable or satellite operator offering it. Wheeler’s proposal also would require pay-TV operators to make apps available for free on all the major software platforms used by device manufacturers (think Apple’s iOS, Google’s Android and the like), and require the apps to offer the same TV experience that consumers have through a cable or satellite converter box. In other words, anything you could do with a converter box — including recording a show or skipping commercials — you’d have to be able to do through the app.

The sticking point for the studios and some other programmers is that Wheeler isn’t willing simply to trust pay-TV operators to play fair with their apps. His proposal would create a licensing body made up of programmers and pay-TV representatives to certify that each pay-TV company’s app met the technical standards the licensing body had developed. But this body would be overseen by the FCC to make sure it didn’t impose requirements that were anti-competitive or inappropriate. For example, an app couldn’t require device makers to exclude other legitimate sources of programming, such as Netflix or Amazon Prime. The apps also would have to make pay-TV content searchable alongside other types of programming, although the licensing body could require device makers to filter out pirated material.

The studios are understandably nervous about this idea of “integrated search,” fearing that someone searching for “Game of Thrones” will be directed not just to HBO and the iTunes store, but also to some Russian website offering free, bootlegged copies of entire seasons. So requiring search results to be filtered makes sense, as long as the filtering isn’t so ham-handed that it screens out legitimate online programming sources.

Yet the studios’ concerns don’t stop at piracy. On Thursday, the Motion Picture Assn. of America complained that Wheeler’s new proposal amounted to a “compulsory license” to the studios’ works because it “encroach[ed] on copyright holders’ discretion in how they exercise or license” their rights. In the studios’ view, that discretion is unlimited; if, for example, a studio doesn’t want Charter to let customers display its shows on Apple devices, or if it wants to block its programming from homes in certain ZIP codes, it can try to make such prohibitions a condition for carrying its programming on Charter’s cable systems. Any limits the FCC might place on the app licenses could interfere with this discretion.

The MPAA is absolutely right that the FCC can’t change copyright law. But Congress did give the agency authority over pay-TV operators and a mandate to make alternatives widely available to the operators’ converter boxes. So the agency seems well within its authority to set rules on cable and satellite services that respect the licenses they negotiate while still barring them from using apps to skew the competition among device-makers and programming services — or preventing consumers from doing things with an app that they could do with a converter box.

Pay-TV operators wouldn’t be required to make apps available under Wheeler’s proposal for at least two years, giving programmers time to negotiate terms with cable and satellite operators for the post-converter-box era. If they don’t want to be part of it, they don’t have to license their shows for pay TV. But they can’t use their copyrights as a tool to force pay-TV operators to discriminate or otherwise undermine Congress’ demand that pay-TV operators give up their converter-box stranglehold.

Wheeler’s plan shows how the FCC can live up to that congressional mandate while still protecting copyrights and saving U.S. consumers billions of dollars, and the commission should move forward with it.

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