At first glance, the Federal Communications Commission's (FCC) proposal to open the set-top box market to competition would seem a bold and beneficent nod to consumers and the public interest. But like many policy maneuvers in Washington, nothing is as it first seems, and there is more to this than meets the eye. At stake are billions of dollars in revenue, the reconfiguration of a market and a host of societal issues that go well beyond notions of consumer price or choice, including privacy, data protection, piracy and equal opportunity.
Although I recently served as chief of staff and senior legal adviser to a Democratic FCC commissioner, I admit to being confused by Chairman Tom Wheeler's recent proposal, which appears to be regulatory redux of a well-settled matter in law and policy.
It is clear that Congress directed the FCC to make sure consumers could choose the equipment they use to access pay television. The STELA (Satellite Television Extension and Localism Act) Reauthorization Act put an end to the current set-top box regime, and mandated the agency to develop a new system to spur the retail market for pay TV video navigation devices.
The FCC appointed a Technical Advisory Committee (DSTAC) comprised of industry experts, executives, engineers and watchdogs "to identify, report, and recommend performance objectives, technical capabilities, and technical standards of a not unduly burdensome, uniform, and technology- and platform-neutral software-based downloadable security system." The objective was to advance the competitive availability of set-top boxes and television sets in fulfillment of Section 629 of the Communications Act.
After many months and much study, the DSTAC issued a report in August 2015, which outlined several paths forward. One path outlined an apps-based approach to navigation devices, which is favored by cable operators. The other path outlined a hardware approach similar to the erstwhile AllVid proposal, which is favored by companies such as Google and TiVo. While the DSTAC report did not seem to favor one approach over the other, Wheeler's approach certainly does.
And therein lies the problem.
Wheeler has launched a Notice of Proposed Rulemaking (NPRM) to address these issues. In what promises to be an epic clash of the titans, the battle lines have been drawn: Big Cable has lined up on one side favoring the apps approach, and Big Tech (actually Big Alphabet) has lined up on the other side promoting the hardware approach. New members from every quarter of the communications, technology and advocacy communities are being added daily. This scenario conjures up the old African proverb "When the elephants fight, it is the grass that suffers" — a lesson not lost on those of us here on the ground.
So for many consumers, who are seemingly happy with the growing amount of choices being extended by pay TV providers today, including Amazon, Netflix, Roku, Xbox, X1, PlayStation TV and Sling, this is a curious conflict with a dubious intent. It begs the questions: Why this, and why now?
In the draft proposal, Wheeler has made a deliberate decision to focus on the navigation hardware system, and ignore the apps approach altogether. In doing so, he has put a thumb on the regulatory scale. His decision has tremendous implications for the future of this market, and is tantamount to the referee picking the winner of the Super Bowl before the kickoff. The most glaring irony altogether is that everybody would like to see the set-top boxes we all know and loathe go away.
Indeed, there are credible merits to both sides of this argument. The rising price of set-top boxes over the years is a concern for consumers, and giving consumers control over their navigation devices is a laudable policy goal. Yet, there are some glaring inconsistencies and hidden agendas that should see the light of day if we go down the primrose path.
A closer look suggests that the chairman's policy is designed to substitute one set of players for another, or to be more precise, replace today's set-top box with something designed by Google. In one of the finest examples of congressional choreography, Google demonstrated its newest thing for Capitol Hill staff a mere one day after Wheeler's announcement. Critics have decried the timing as more collusion than coincidence, but that might be going too far.
The chairman's choice to favor the hardware approach has definite implications for the market, and indefinite benefits for consumers. And it is this consequence that is most troubling. It appears that the FCC has already greased the skids by allowing one company to help it write the specifications of a system that is supposed to be open to definition. As with other major policy matters, Google has demonstrated an outsized affect and influence on yet another Obama technology policy decision.
If the FCC adopts the Wheeler proposal in a final "Report and Order" later this year, it will usher in major changes with dubious public interest and consumer benefits. It will cede its regulatory and oversight authority on privacy and security. It will embed a regime that creates more, not fewer, hurdles for small players, new entrants and minority content providers to pierce the Silicon Curtain. And according to reliable studies, it will have a negligible impact on the retail price of the set-top box.
When all is said and done, the battle on set-top box policy could reveal several lessons. First, the invisible hand of the free market can be stifled. Second, money matters more and more in public policy. Third, just because something claims to be pro-consumer does not mean it really is.
It is perfectly all right if consumers choose the FCC-Google option at the end of the day. But they should at least know the tradeoffs. While Google has a wonderful suite of indispensable, utilitarian products ranging from Gmail to Chrome to YouTube, it does have a dark side. Anything and everything that comes in contact with Google — especially data — gets stored, tracked, analyzed, leveraged and monetized to favor Google over anyone else. It has become a black hole for many small businesses who eschew paid search, and it has completely changed the advertising ecosystem not necessarily for the better. That is its business model, and it has been hugely successful with it. So if this is the pro-consumer choice Chairman Wheeler propounds it to be, it is only fair that full disclosure and transparency become the order of the day. Consumers and the public interest demand nothing less.
Hoffman is chairman of Business in the Public Interest and adjunct professor in Communication, Culture and Technology at Georgetown University. He served at the FCC from 2013 to 2015.