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Alan Wolk FCC Set Top Box

To box or not to box: what the FCC's set-top box intentions mean for the future of TV

By Alan Wolk | Senior Analyst

February 24, 2016 | 7 min read

On paper, the FCC’s recent move to open up the set top box to third parties seems like a sweet deal for consumers. Rather than have to rent whatever clunky, antiquated box their pay-TV provider offers, viewers will be able to get boxes from a range of manufacturers who will offer them beautiful interfaces, streaming integration and more, quite possibly for less money.

It’s a nice vision but it fails to take into account the reality of the market: there’s really no need for set top boxes anymore, regardless of who makes them.

For quite some time now the industry has been talking about BYOD (Bring Your Own Device) scenarios where consumers buy their own inexpensive streaming box or stick or even download a cloud-based app for their tablets and use that as their set top box replacement. It would put an end to one of the MPVDs main pain points, the unreliability of cable installers and the anger engendered when one fails to show up at the appointed time. These app-based solutions could be updated wirelessly and should the actual device become outdated, easily replaced.

These BYOD interfaces would provide all the same functionality proponents of the open set top box rule applaud— DVR, VOD and streaming integration, recommendation-based program guides, favorites lists—without the hassle of owning an actual set top box.

It’s where most of the industry has been heading, with the CEOs of two of the major MVPDs, Charter and Time Warner, explicitly stating that they would love to see the set top box go away.

The lone exception has been Comcast, who have invested heavily in their proprietary X1 box, which, with its advanced interface, is head and shoulders above the competition in terms of user friendliness and ease of use.

It's all about the data

Consumer concerns aside, many observers see the hand of GAFA—Google, Apple, Facebook and Amazon—behind the FCC's move. All four have been looking to get into the television business only to find themselves shut down by the MVPDs who hold a monopoly (or at best, a duopoly) over broadband connections in the U.S.. Controlling broadband essentially allows them to control pay TV, as they can shut down any attempt by the tech companies to move into the space, by simply raising the price of standalone broadband for anyone considering leaving their triple=play pay-TV universe.

What’s interesting about the FCC’s decision is that it opens the door for GAFA to get what they’ve really wanted all along—the data around TV viewing. Owning the set top box experience gives them the ability to capture all that viewing data, including who, when and where. By tying that data to what they already know about users, they’ll be able to create a very powerful data set that allows for cross-platform tracking and ad serving.

Provided consumers are still using set top boxes, that is.

A wet hot mess

There are numerous other issues that still need to be worked out before any plan is implemented (and given that the FCC is not expected to render a decision until this summer, there’s plenty of time).

Who is responsible for customer service, for example. If it’s the box that’s broken, not the service itself, how does that get broken out in terms of cost and how does the non-tech savvy viewer even begin to know the difference?

There are numerous other questions too: What will the protocol be for getting access to VOD content? Who will be responsible for ratings and measurement? If the MVPD has a deal with Nielsen, will a third party box manufacturer be able to strike a deal with ComScore? What about ads—will third party manufacturers be able to insert their own ads? What about the legacy legal agreements the MVPDs have in place with the networks concerning channel placement and VOD categories? Will the new manufacturers be bound by these or will they be able to avoid them?

None of these are deal breakers in and of themselves, but they are among the dozens of issues that will need to be sorted out (and quite possibly litigated) in order for this system to work.

If indeed it does work.

One can’t help but think the FCC is forcing a solution to a problem that won’t exist too much longer, as consumers abandon set top boxes altogether.

Which might be it’s ultimate result: the threat of losing the rights to control the set top box might just push the MVPDs to speed up the development of their own BYOD solutions. The launch of Nielsen’s Total Audience Measurement (TAM) ratings for OTT this year will spur the growth of TV Everywhere as the restrictions the networks currently place on viewing will disappear once all those iPad and Roku views are finally counted.

That alone will give the MVPDs a reason to revisit their interfaces and introduce something that looks like it was designed during this decade. Combine that with the threat of the FCC interfering with their set top boxes, and we might finally see some real innovation from an industry where innovation has been sorely lacking.

Let’s hope.

Alan Wolk is the best-selling author of "Over The Top. How The Internet Is (Slowly But Surely) Changing The Television Industry." Wolk currently serves as Chairman of the 2nd Screen Society, Expert-in-Residence at BRaVe Ventures, and Senior Analyst for The Diffusion Group in addition to servicing his own global roster of clients.

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