Pay-TV Raises Content Unbundling Fears on FCC Gateway Plan

An FCC proposal to require that all pay-TV providers let devices connect to their networks by 2012 without complicated or expensive equipment such as CableCARDs and get online video drew fears of content unbundling from cable programmers, telco-TV, direct broadcast satellite providers and cable operators. AT&T, Cablevision, NCTA, Verizon and a group of seven major media companies that own cable networks were among those voicing fears that the so-called AllVid regime could lead to disaggregation of video content.

CE and other interests that have supported the gateway inquiry, sparked by recommendations in the FCC National Broadband Plan, said the commission has ample evidence to begin a rulemaking, and fears of disaggregation are overblown. Pay-TV providers’ main objection to gateways, that subscribers wouldn’t be able to view the companies’ electronic program guide, is an outcome no commenter proposed, the CEA and Consumer Electronics Retailers Coalition said. “There are sufficient technical resources and support” for the FCC to build rules based on private-sector standards, they said jointly. Replies on the inquiry were posted by the commission Friday in docket 10-91, and in initial comments Dish Network was the only pay-TV company not to pan the gateway proposal (CED July 15 p2).

Any content unbundling requirement would “stifle further innovation,” and Section 629 of the Telecom Act, which mandated the FCC take steps to create a retail market for plug-and-play devices, doesn’t let the regulator require multichannel video program distributors unbundle video services, Verizon said. “To the extent that the AllVid proposal would require MVPDs to strip out video content and offer it on a stand-alone, unbundled basis -- essentially transforming MVPDs into content wholesalers -- the record confirms this would raise a number of policy concerns,” the telco said. “Limiting the abilities of MVPDs to differentiate a product’s presentation would be particularly perverse given that many of the online competitors for MVPDs (including, for example, YouTube and Hulu) would be allowed to control the look and feel of their products.” Other comments also discussed that dichotomy.

Forcing pay-TV companies to disaggregate their service packaging and presentation, as some commenters seek, would unfairly advantage Internet content providers that could continue to combine content, presentation and other features, Cisco said. The concept of a storefront in the mall of video programming that FCC Chairman Genachowski said was AllVid’s goal now exists in the over-the-top market, the company said. “Many TVs, Blu-ray players, gaming platforms and other OTT devices provide separate ’storefronts’ for YouTube, Netflix, Amazon Unbox, and other OTT video providers. On the Internet, Hulu, ABC, and others fully control the presentation, packaging, sale, and billing of their video content."

Despite evidence of a healthy market for innovative devices and services, AllVid supporters are seeking “extraordinary intervention” by the FCC that would lessen pay-TV subscribers’ current experience, said DirecTV. The proceeding so far has shown that the commission shouldn’t move to a rulemaking, the company said. Under an AllVid regime, MVPDs could only deliver “dis-integrated digital components that third-party manufacturers would be free to delete, repackage, and overlay with material of their own choosing,” the direct broadcast satellite provider said.

The regime would essentially tell MVPDs that they can no longer be in the turnkey video business they chose but must operate a very different government-chosen business, it said. AllVid supporters have shown no justification for a system that would allow non-MPVD technologies to keep their unique interface while the providers couldn’t, particularly in a world where “MVPD and non-MVPD video offerings increasingly compete,” it said.

Forced disaggregation through the AllVid proposal would disadvantage DirecTV in competing with cable providers if the set-top box storage and intelligence, heavily used by DBS providers, weren’t kept on the AllVid devices. Since DirecTV only offers video services, if its unique video products were homogenized, customers would be more likely to choose the cable or telco providers that offer triple-play services, it said. The company said an AllVid mandate would also “undermine content suppliers’ intellectual property rights and place MVPDs in legal jeopardy” since it would require pay-TV companies to distribute their suppliers’ content in violation of earlier agreements.

Gateway adapter backers offer “mere talking points, not workable solutions that enjoy the committed support of mutually interdependent industries,” the NCTA said: “The ’solution’ now touted by the CEA and others is illusory” and “not one CE company makes a firm and enforceable commitment to build any AllVid-compatible devices” or retailers to sell them. User interfaces in AllVid customer equipment could change the consistent look and branding of networks, seven companies that own them said jointly. “The juxtaposition of illegitimate online sources with authorized content could confuse or deceive consumers, particularly now that so many websites trafficking in unauthorized video content have a sophisticated look and feel,” said CBS, Disney, Discovery Communications, NBC Universal, News Corp., Time Warner and Viacom.

Gateway foes portray the inquiry as a way to turn MVPDs into “dumb pipes,” but that need not happen, TiVo said. “MVPDs can offer legacy and new services that will flow through the AllVid gateway to advanced devices that can access them.” Unlike a dumb pipe, AllVid doesn’t limit MVPD services, the New America Foundation and Public Knowledge said. “The AllVid approach merely allows competitors to have the same opportunities to innovate as the MVPDs themselves, giving MVPD customers the option of selecting competitive devices, if they find them more suitable.”