FCC’s set-top box proposal is bad policy and would harm small operators

When it comes to TV and video, consumers have more choices of providers, packages and devices than ever before – and innovations are continuously evolving.  Yet despite this vibrant marketplace, the Federal Communications Commission has proposed new set-top box rules that are unnecessary to spur competition, and would result in unintended consequences.  The FCC’s proposal is a solution in search of a problem – and it must be stopped.

If enacted, the FCC’s mandate would harm virtually all participants in the video programming ecosystem, including content producers and consumers, but smaller multichannel video programming distributors (MVPDs) and their subscribers would suffer the greatest harm.

{mosads}The American Cable Association (ACA) estimates that each individual operator would need to spend more than $1 million per system to implement the technology necessary to comply with the new rules based on just the estimated costs of components ACA has identified so far.  This does not include the added costs associated with supplying gateway devices – approximately $350 for each household – to subscribers adopting a third-party navigation device.  This burden would have a devastating impact on smaller providers, forcing at least 200 companies – mostly serving rural areas – to go out of business or cease offering video service.  For those that do manage to stay afloat, they will either have to forgo important investments in innovations and broadband expansion, pass on increased costs to their subscribers, or some combination of the two.

Smaller operators across the country are working hard to offer their subscribers the high quality video, broadband and phone services they want and need.  Despite limited capital and modest profits, smaller providers are at the forefront of offering consumers new ways to receive their pay-TV and other video services, including through innovative boxes and apps.  They have been pioneers partnering with TiVo, Roku and other third-party device vendors to offer set-top box solutions that seamlessly integrate their video service with over-the-top programming.

ACA is not alone in its opposition to the FCC’s latest overreach. A diverse coalition of MVPDs, content creators, including independent and minority programmers, civil rights advocates, labor unions, manufacturers, nonprofit organizations, and legal and economic experts have spoken out against the proposal.

There is also a growing concern that the FCC’s proposal would disproportionately impact smaller operators.  Earlier this month, a bipartisan group of 60 U.S. representatives sent a letter to FCC Chairman Tom Wheeler, arguing that the set-top box proposal would threaten the economic welfare of small operators that serve as the communications backbone of their communities.  Even those that support the proposal, such as TiVo and Public Knowledge, have recognized the harmful impact on smaller operators.  Just this week, groups representing the small business community and free market thinking weighed in with their concerns as well.

Should the Commission move forward with this proposal, exempting small providers from any new rules would serve the public interest by ensuring that the cost of service does not dramatically and unnecessarily increase and that important upgrades and investments in broadband deployment continue; moreover, doing so would prevent unnecessarily driving smaller operators out of the market.

Polka is the President and CEO of the American Cable Association.

The views expressed on the Congress Blog are the author’s own and not the views of The Hill.