FCC Chairman Wheeler has announced a proposal — designed by
The Google proposal would do a lot more than give third-parties an opportunity to design and sell set-top boxes. It would give Google a government-mandated right to insert its own branded search and other services between consumers and the programming packages offered by video service providers (similar to the way its search engine intermediates between consumers and web pages today) so that Google can sell more ads.
Allowing Google to take ad revenue from video service providers while rebranding their programming packages as Google’s own would lead to higher monthly subscription prices for consumers and damage competition among video service providers, who could no longer compete by differentiating their own brands and services. It would also give Google — which is already the world’s largest media company — even more power to influence what consumers see and what they buy.
None of which is necessary to unlock set top boxes. As Wheeler himself has acknowledged, apps are already replacing the traditional set-top box: Apps on “today’s smart TVs prove that we can preserve all the security and copyright protections of the set-top box without that actual box.”
Video service providers have responded to consumers’ enthusiastic embrace of apps as the dominant means of accessing content and resources on third-party electronic devices. According to the FCC’s expert advisory committee, all of the major cable and satellite video providers already support apps that permit consumers to access their video services on PCs and Macs, iOS and Android smartphones and tablets, and smart TVs — apps that “follow the same approach as the apps that Netflix, Amazon, Hulu, Google, YouTube and other OTT [over the top video] providers use.”
If the FCC truly believes it must “do something” to accelerate the demise of the set-top box, it should simply accelerate the ongoing shift from set-top boxes to video apps. An apps-based approach to set-top box regulation would leverage existing, industry-wide standards to provide cable and satellite video consumers with the same type of access to video programming that is offered by over the top video services like YouTube and that consumers already love. Easy peasy.
But Wheeler routinely favors the interests of Google over the public interest, and Google opposes an app-based approach to video content delivery that is similar to the one used by
Sadly, consumers will pay the price for Google’s government windfall. Putting together packages of video programming is costly — so costly that it often represents the “vast majority” of video service providers’ costs. Cable and satellite providers typically recover the high costs of aggregating video content into packages through a combination of subscription fees and advertising revenue. Because the Google proposal would enable Google to siphon off some of the ad revenue opportunities created by cable and satellite video providers’ investments in content (for which Google would pay nothing), video providers will be forced to recoup the lost ad revenue by raising monthly subscription prices. And because a “Googlized” interface between consumers and video content would harm competition among video service providers by homogenizing their services, consumers could end up with fewer choices in the video marketplace.
Netflix and other OTT providers might end up paying the price too. Wheeler has also proposed to classify OTT providers as “multichannel video programming distributors” (or “MVPDs,” the regulatory category that applies to cable and satellite video services). If the FCC classifies OTT providers as MVPDs, OTT providers would be required to offer access to their video content separately from their apps so that Google could use their programming rights for free too. If, as Wheeler claims, “consumers should be able to choose how they access [MVPD] video services” using the Google proposal, then consumers should have that same choice no matter how an MVPD provides its video services — whether by cable, satellite or “over the top.”
The fact that the rationale behind the Google proposal is equally applicable to programming provided by Netflix — a video service provider who doesn’t even offer set-top boxes — shows why the proposal is not truly about unlocking “set-top boxes.” It is the aggregated packages of cable and satellite video programming rights that Google seeks to unlock. After all, why should Google go to the expense and trouble of securing all those programming rights in the marketplace when its friends in the Obama Administration can so easily give it direct access to those rights at consumers’ expense?
