Before the FCC Vote: Set-Top Fight Redux

Pay-TV operators very much want to control the user experience, and in many ways they've now tied the content they license from programmers to other service components including but not limited to: search and discovery algorithms, advertising and promotional placements, social media apps and the tracking of customer viewing behaviors. Operators argue that trying to separate the video from other service features would cause them to violate existing contracts, and programmers agree. For example, a programmer might secure a particular position in a service provider's channel guide as part of the content licensing negotiation process. But any third-party guide provider using the same content wouldn't have to abide by the same agreement. (See Content Security Battle Threatens TV Upheaval.)

Further, programmers that develop content for minority or niche audiences say that unbundling content from a service provider interface threatens their economic viability. If a third party can monetize the content owned by programmers -- without entering into a proscribed agreement the way that distributors do -- through vehicles like banner ads and pre-roll videos, programmers say it devalues what they have to offer. And when their product is worth less, those programmers get paid less by advertisers and distributors.

"To the extent that [technology companies] are allowed to disrupt the current programmer, cable/satellite distributor relationship," said Alfred Liggins, CEO of TV One in a press conference, "and get a hold of that content, our content, and sell ads around it as well, it will significantly devalue our ability to monetize it and therefore limit our ability to continue to produce high-quality programming."

A political minefield
It was Democratic Senators who first made the case for set-top market reform, citing a need for greater choice and competition. But many Democratic lawmakers now find themselves potentially up against minority interests with which they would normally align. Advocacy by programmers developing content for minority groups has caused members of Congress on both sides of the aisle to question whether the FCC's proposal might do more harm than good.

In addition to concerns around minority programming, lawmakers are now also considering whether a new mandate to unbundle content from an operator's user interface could have a negative effect on user privacy. While service providers abide by strict user privacy laws, third-party technology companies aren't necessarily required to do the same. The FCC has addressed this issue by calling for new market entrants to voluntarily agree to the same privacy requirements, but the move has not assuaged opponents of regulation who say voluntary guidelines are inadequate.

Regardless of which side of the issue policymakers come down on, they're likely to have a fight on their hands.

Legal battles loom
The FCC also isn't going to have an easy time when it tries to push forward its new regulatory framework.

"It's probably too early to talk about lawsuits," said Michael Powell, President & CEO of the National Cable & Telecommunications Association (NCTA) in an address to reporters, "but I think you can tell by the strength of our coalition and the breadth of it that this isn't some minor inconvenience in regulatory land. I think this issue's critical to the rights and practices that these companies have."

He added, "We always reserve the right to seek redress for violations of the statute in federal court."

— Mari Silbey, Senior Editor, Cable/Video, Light Reading