Wheeler Hammers 'Noncompetitive' Set-Top Market

Says His Proposal Is About Open Standards

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FCC chairman Tom Wheeler read emails from a widow and an angry cable customer to make his point that competition doesn't exist in the set-top market, saying that contrary to MVPD assertions, his proposal changes nothing about the MVPD business model, but is instead "all about whether the standard for set-top boxes should be a closed standard or an open standard."

"Ninety-nine percent of pay TV customers lease set-top boxes from their cable, satellite or telco provider," Wheeler said. "There is no competitive market."

MVPDs have conceded the FCC's CableCARD hardware regime has not produced that market, but argue that Wheeler's proposal is not the solution either. [Related stories: "Powell Pounds Set-Top Plan"; "Comcast Lashes Out at FCC Set-Top Proposal."]

Wheeler said reality was contrary to the statutory mandate -- that the FCC promote a retail market for set-tops. [See: "FCC Set-Top Proposal Gets Some Love."]

The chairman held up a chart from a filing on the issue by Public Knowledge and the Consumer Federation of America to illustrate how the price of set-tops had skyrocketed (by 185%) while the price of computers and mobile phones had plummeted (80%), saying that was the difference between a competitive and noncompetitive market.

He was speaking during a press conference following the FCC's public meeting Thursday (Jan. 28), talking about the proposal he is circulating to the other commissioners on set-top boxes.

In addition to holding up the chart, Wheeler read some emails he had received after briefing the media on the set-top proposal Wednesday (Jan. 27). One email was from a widow on a reduced income who said her cable company told her there was no a way for her to purchase her own set-top. Another email called branded leased boxes a "rip-off."

"The bottom line is, the American people get it," Wheeler said. "They are literally paying the price for the lack of alternatives."

Wheeler likened his proposal for opening up set-top content to third parties to the FCC requiring phone companies to open their networks to non-Bell phones, and wireless companies unlocking phones. Functionality went up, prices went down, he said.

Wheeler said, contrary to assertions by cable and satellite operators, the proposal was not akin to the 2010 AllVid proposal, would not create the need for a second box, and did not affect programming contracts or how cable operators tier their service or set their pricing or bundling. [See: "Coalition Formed To Fight AllVid."]

As to the suggestions that his proposal is akin to the 2010 AllVid proposal, Wheeler said that while the cable industry was trying paint his new proposal as AllVid, "it is not." He said it does not require a second box.

"It is about open standards rather than the closed standards for CableCARD that kept that from being available," Wheeler added.

In a separate press conference, Republican commissioners Ajit Pai and Michael O'Rielly declined to comment on the proposal, pointing out they had yet to see it. But O'Rielly said he was not sure that set-tops were even needed anymore.