The last fifteen months at the FCC have yielded some of the most consequential policy decisions since the commission’s founding in the 1930s. From net neutrality to redefining what constitutes an MVPD, commissioners have consciously pursued positions that promote innovation and foster competition across an industry that currently offers consumers very little choice.
Last month, the FCC took its most progressive action yet in a 3-2 vote of the commissioners. Colloquially described as “unlocking the set-top-box,” the regulator has effectively torn down an institutional barrier to true consumer choice in pay TV. Now, cable is BYOB—bring your own box.
The significance of the unlocked box is actually amplified by two preceding FCC policy positions that would have a profound impact on the TV industry.
First, net neutrality. Set aside initial court rulings, and focus on the impact this could still eventually have, keeping in mind the US still lacks sensible, forward-looking Internet regulation entering the age of IoT.
A permissible creation of fast lanes by ISPs and the ability to charge media owners for faster throughputs could very well replace programmer carriage fees as the most lucrative aspect of content distribution. One need not look beyond the Netflix-Comcast relationship to understand the long-term value of an ISP customer, relative to that of the video sub.
Second, the FCC’s move at the end of 2014 to redefine Multichannel Video Programming Distributor (MVPD). Removing the need for physical distribution infrastructure from the definition of MVPD could prove disruptive in its own right. This opens up the competition for video subscribers to any number of firms capable of sustaining multiple “linear” streams of content, meaning a purely internet-based programming distributor could compete with your cable company. (The FCC also defined “linear” for the first time in this Notice of Proposed Rulemaking).
The introduction of streaming services like SlingTV from DISH are just the tip of the iceberg, with a proliferation of cloud MVPD services (and even new MVPDs, altogether) in the coming months and years.
The Democratization of Content
And now, the FCC’s third installment: the consumer should be able use her Apple TV or TiVo Bolt as a primary cable box; possibly even a gaming console. For context, there are more gaming households in the U.S. today than there are households paying a cable bill each month.
Unlike most MVPD set-top-boxes, these third-party platforms have been built around user experience and an agnostic facilitation of content discovery. And, unlike the MVPD boxes, there isn’t a wholesale restriction of competing video services by the incumbent video service provider. It’s the pure democratization of content.
It’s fantastic for the consumer, liberating even, but it will be disruptive to traditional ad sales models, particularly those models that reliably link providers and geographic reach.
Fragmentation Demands Agility
When neighborhoods are inevitably serviced by a multitude of MVPDs, the result will be a diffusion of geographic scale at an order of magnitude tens-of-times greater than the fragmentation challenges cable interconnects resolved two decades ago. This time around, however, it will require dynamic, inventory management platforms to help MVPDs fully monetize these audiences, as their business models increasingly transition to that of the digital publisher.
While “BYOB” could foster the innovation and facilitate the competition consumers want, unanticipated consequences could ensure a decade of continued disruption in content distribution.
The mistake to be made today is to assume this transformation is years away. It was less than two years ago that Nielsen reported the universe estimate for multimedia device households (e.g. Apple TV) as “N/A” in its 3Q’14 quarterly Total Audience Report. What is clear is that the pace of change among consumers’ viewing behaviors is accelerating on a curve that makes reliable trending painfully difficult.
Fortunately for MVPDs, the ad tech solutions they need to ensure stability in their ad business were designed precisely for such an environment.