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FCC’s set top box policy displays no understanding of markets

On 18 February 2016, the Federal Communications Commission issued a notice of proposed rulemaking that would allow third parties access to a consumer’s cable television set top box (STP) to gather information that could be used to provide competitive viewing services. Specifically, the third party would have access to:

1. Information about what programming is available to the consumer, i.e., channel listing, video-on-demand lineups;

2. Information about what a device is allowed to do with content; and

3. The video programming itself.

The Commission’s rationale for allowing a firm like Google access to these information streams is that with this information, third parties could create services i.e., apps and hardware, to compete with a cable company’s STP.

Will this policy increase demand for content thus driving up prices, revenues, and returns on the capital it takes to create content? No, it won’t. What the Commission’s policy will do is create a shell game for content. It’s not clear whether there will be a change in demand for content and while alternatives for accessing content will increase incrementally, unless the policy entices more consumers to go online, the policy won’t do much for increasing economic activity in the content markets.

In addition to not creating additional demand in the content markets, the Commission ignores the competition that already exists for cable and the movement from STP to apps. Steve Pociask makes this observation in a recent piece for Forbes.com where he argues that:

“Absent the plan, cable competition already exists and its growing”, and that, “the market is currently moving away from STB to apps, but the plan would forever require STBs.”

The Commission’s proposed policy is indicative of an ongoing problem of failing to focus on the primary market that its policy impacts, in this case the content market. Where information is proprietary, the Commission should protect the content owners’ rights. Otherwise, the Commision should advocate policy that promotes content flows.