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FCC Should Sunset Set-Top Box Provision Because Market is Fully Competitive

House Energy and Commerce Committee Republicans formally asked FCC Chairman Agit Pai to close the docket on the set-top box proceeding because it is no longer under active consideration, and because it “remains an unnecessary regulatory threat to the content creation and distribution industries” and casts a “shadow over investment and innovation.”

This is a wise, pro-competitive, pro-property rights, and good government request from Congress to the new Pai FCC.

The FCC should efficiently utilize this decision opportunity to employ the statutory sunset provision in the law to permanently sunset and remove this unnecessary and serious regulatory threat to competition, copyrighted contractual content and its creation, investment, and innovation.

It surely is among the top 75% of regulations that the Trump Administration has targeted for removal.

The FCC can justify its sunset of the Section 629 set-top box provision based upon the rich and overwhelming official FCC evidentiary record of:

1) the video-related competition documented in the FCC’s recent 1-17-17 video competition report;

2) the still fresh 2016 FCC set-top proceeding record that provided copious evidence that video-related markets are fully competitive;

3) the FCC’s June 2015 rulingthat cable operators are subject to… "Competing Provider Effective Competition”” exempting cable from regulations; and

4) the accurate and prescient competitive analysis and approach in the FCC’s 2008 approval of the XM-Sirius merger that correctly recognized that Internet-delivered-content: revolutionized how people access and consume content overall; and flooded the market with new competition.

Here is the sunset provision: “Section 629 (e) Sunset The regulations adopted under this section shall cease to apply when the Commission determines that— (1) the market for the multichannel video programming distributors is fully competitive; (2) the market for converter boxes, and interactive communications equipment, used in conjunction with that service is fully competitive; and (3) elimination of the regulations would promote competition and the public interest.”

This sunset provision in law is simple, straightforward, and clearly satisfied based on the obvious vibrant, Internet-converged, video competition in the marketplace (summarized below.)  

The section 629 provision was written in 1996 when cable still was still largely a monopoly; the evidentiary record today, twenty-one years later, proves the markets fully competitive and the provision obsolete.

This provision of law included a total sunset provision precisely because Congress anticipated that the 1996 Telecom Act’s overall purpose of deregulation to promote competition would in fact succeed, and enable the technological innovation and competition that eventually would make section 629 obsolete and sunset-able.

That eventuality is now. Consider this summary of the evidence that these are fully competitive markets.

In 2016 and 2017, the FCC documents that most Americans have 3+ wireline video distributors and 7+ choices when wireless is included. That’s far more than any country in the world.  

It spotlights a plethora of new online video distributors and competitive alternatives like Netflix, Amazon Prime, Google-YouTube, Dish Sling TV, Verizon’s Go90, AT&T’s DirectTV Now, CBS All Access, Hulu, HBO Now, Showtime, Starz, among others – comprising ~70% of downstream Internet traffic in 2015, per Sandvine.   

As for competition for navigation devices, over 200 million Americans watch their video content on smartphones and tablets, and even more do if one includes laptops and desktop computers.

Information from the Free State Foundation’s FCC filing spotlighted at least 20 types of competitive navigation devices that consumers can use to bypass a cable set-top box: i.e. Smart TVs, Roku 4, Roku Streaming Stick, Amazon Fire TV, Amazon Fire TV Stick, Google Chromecast, Google Nexus Player, PlayStation 4, Xbox One, Western Digital Media Player, Wii U, Netgear, NeoTV, Vizio, CoStar LT, Asus Cube, Hisense Pulse, NeoTV Prime, TiVo Bolt, Nvidia Shield, etc.

In addition, Amazon’s Echo, Google’s Home (with Google-YouTube search), and Apple’s Siri are becoming voice activated and directed, video navigation devices.

In short, the markets for video distribution and navigation devices are fully competitive, deregulating will promote competition like it has before, and that is in the public interest.  

Anybody who imagines that this still pending set-top box proceeding is not a risk overhang, need look no further than the public response of Public Knowledge yesterday. It continues to push for the proceeding, and continues to ignore that the Internet has and is revolutionizing video distribution and access, making it unrecognizable from the set-top box marketplace of 1996.

Officially sunsetting this obsolete provision is essential because the previous FCC proved that under heavy-handed FCC leadership, this provision could be transmogrified into a hyper-regulatory vehicle to force the creators and operators of the pay TV industry, which produces ~$200b in revenues annually, to unlock the copyright, contractual, and privacy protections of their property and then force them to share it for free with online video competitors like Google-YouTube, which expect and demand that Internet content be priced at a wholesale price of zero and not have any intellectual property protections or restrictions.   

The statute, combined with the evidence, reason, and the public interest of good government all demand the FCC sunset this obsolete and abusable provision so that it cannot come back in the future to haunt and destroy distribution and content creation value in the future.  

Scott Cleland served as deputy U.S. coordinator for international communications and information policy in the George H. W. Bush administration. He is president of Precursor LLC, an internetization consultancy for Fortune 500 companies, and chairman of NetCompetition, a pro-competition e-forum supported by broadband interests.

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Precursor AllVid Series

Part 1: FCC’s AllVid Proposal Is Really the Great Google Ad Grab [1-29-16]

Part 2: The FCC’s Googleopoly Gatekeeper Navigation Device Set-up [2-17-16]

Part 3: FCC’s Apparent Arbitrary AllVid Proposal [3-18-16]

Part 4: AllVid: FCC-Sponsored Piracy Would Extend Google’s Monopoly & Monopsony [3-28-16]

Part 5: AllVid Deja-Vu: Google-YouTube’s Forcing Video to be Open to Piracy Again [4-13-16]

Part 6: NetCompetition Statement & Comments on FCC’s Anticompetitive AllVid NPRM [4-22-16]

Part 7: Google’s Growing US Search/Android Share Complicates FCC’s AllVid Proposal [5-23-16]

Part 8: Google-Android’s Strategy to Monopolize Home Digital Information & Services [6-2-16]

Part 9: New App-Based AllVid Proposal Smokes-out Google & Public Knowledge’s Agenda [6-20-16]

Part 10: Will FCC Allow Google to become the Fox that Guards its AllVid Henhouse? [8-25-16]

Part 11: Will the Federal Communications Congress Try to Unlock Copyright Licensing? [9-7-16]

Part 12: Will FCC Force AllVid Search Neutrality on Pay TV Providers to Help Google? [9-14-16]

Q&A One Pager Debunking Net Neutrality Myths