AT&T And The FCC Argue About Set Top Boxes


Last year, AT&T become America's largest pay-TV operator after it bought DirecTV and has already made changes to the combined businesses to align customers between one service and the other. The Federal Communications Commission, or FCC, have been making noises about opening up the cable television market and last week, AT&T wrote a blog in defense of the current business model and arguing against opening up the set top box idea. AT&T's post explained how customers already have a wider choice than ever before about what, when and how to watch their favorite shows, and that pay-TV businesses already build applications for devices such as tablets and smartphones. AT&T stated that the video application model has managed to improve customer choice without the interference of Government or regulatory bodies. In an interview, Tom Wheeler said this on the subject: "The big kick I get is that AT&T and the cable companies have been putting out statements say, 'This is going to thwart innovation.' And I scratch my head and say, 'My goodness, let's see. When was the last time that competition thwarted innovation rather than spurring innovation?' And you are telling me that a locked-down, closed system will have more impetus to be innovative than a competitive, open system? I think that history shows that it is exactly the opposite of what happens in reality."

The FCC's proposals are designed to make it easier – and cheaper – for consumers to watch the television, and that their plans are to establish an open platform such that competitors can market their own set top boxes, giving customers the choice of what equipment to purchase in order to watch their shows. Currently, customers are forced to rent equipment from the provider in order to watch cable and satellite television. The FCC's data shows that the average consumer is paying $231 a year to lease the set top equipment and this continues after the cable or satellite operator have recovered the cost of the device. Tom Wheeler's statement is that the FCC are not wanting to stop the cable companies from controlling their product, but instead making it easier for consumers to consume it! The FCC's idea will stop the practice of certain types of content being restricted to certain platforms and Wheeler compared set top boxes adopting an open standard as we have seen from Wi-Fi technologies. He talked about the 1996 congressional legislation to make sure that consumers are offered competitive choices for accessing pay-TV navigation, which resulted in the "cable card" system. However, in the last five years we have seen an increasing number of smart TV sets being sold, where the technology has evolved and been refined such that it would be a relatively easy step to open up the pay-TV platform. Using a smart-TV set could mean that consumers won't need an expensive set top box to access the service.


AT&T's Vice President of Federal Regulatory, Stacy Fuller, has said that Google is behind the FCC's proposal. "When you get beyond all the hype, Google and its affiliated proponents of this technology mandate are simply trying to take our competitive service and repackage it as their own, without ever having to negotiate with us or with the content owners with whom we had to negotiate to create our service offering. It's akin to the FCC mandating that we get access to Google's home page (and all of the contract rights and algorithms that go with it) so that we can redesign and rebrand it as our own." Stacy also stated that customers would face higher prices together with fewer privacy safeguards. To this remark, Tom Wheeler answered that nobody is trying to take control of AT&T's distributed product, only that the broadcaster passes the information through to competitive providers. He also stated that there would be no change to privacy safeguards and that the FCC is not recommending everything is redesigned, more that the platform should be opened up. Tom also explained that the broadcasters and pay-TV operators shouldn't fear competition.

Although the television providers are reputed to be furious, a date has been set for a vote. Regardless of the results of this vote, it appears that any changes to the existing system will be bitterly fought by the broadcasters and cable television operators. The recent war of words is likely only the beginning.