The Set-Top's Not Dead, Set-Top Regulation IsThe Set-Top's Not Dead, Set-Top Regulation Is

Consensus achieved. Executives in the industry agree that an FCC proposal to regulate pay-TV services in an attempt to drive retail set-top competition has effectively been killed.

"I'd consider it pretty much on life support," said American Cable Association (ACA) Senior Vice President of Regulatory Affairs Ross Lieberman at S&P Global Market Intelligence's 7th Annual Multichannel Summit. Lieberman echoed sentiments throughout the industry, which has now widely proclaimed the set-top regulation at death's door.

The Federal Communications Commission (FCC) proposal was originally scheduled to go up for a vote in September, but it was pulled from the regulatory agenda with reports that the Commission didn't have the majority it needed to pass the ruling. Had Democrats won the White House in last week's presidential election, FCC Chairman Tom Wheeler would have had time to continue trying to muster that majority. However, now that Republicans are preparing to take over leadership at the agency in early 2017, time has run out.

Further signaling that a possible vote on set-top regulation before the end of the year is off the table, the FCC yesterday wiped out its agenda for today's scheduled meeting, which originally included, among other items, a vote on pricing controls for Business Data Services (BDS). The BDS vote was expected to pass along party lines, with the three Democratic Commissioners voting for it and the two Republican Commissioners voting against. (See FCC Drops Business Access Reform and FCC Prepares to Vote on Price Regulation.)

The proposed BDS ruling was in some ways less controversial than the set-top proposal. But Tom Wheeler has been under intense pressure over the last week to avoid any votes that would be unlikely to achieve approval under a Republican administration.

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The FCC has attempted for years to open up access to pay-TV services on retail devices, starting with the now-terminated CableCARD mandate in 2007, and leading to the "Unlock the Box" proposal put forth last February. In its most recent incarnation, "Unlock the Box" took on a similar form to a proposal submitted by pay-TV industry advocates calling for an apps-based approach to delivering pay-TV services on third-party boxes.

However, those same industry representatives decried the FCC's version of the recommended regulation, which mandated a licensing body to review apps for standardization and availability. Significant backlash in the industry and Congress had Democratic Commissioner Jessica Rosenworcel wavering in her support of the ruling. Without her support, Chairman Wheeler had no chance of getting the ruling approved. (See FCC's New Pay-TV Plan: Shove It Up Your App.)

One of the main arguments by pay-TV representatives against set-top regulation has been that market-led innovation is making government intervention unnecessary. Pay-TV providers point to the apps they are already creating to make their video services accessible on retail boxes and smart TVs.

However, proponents of regulation point out that these apps are not fully featured, and in particular are missing any digital video recording function that would allow users to record and save shows for later.

Regulatory proponents also argue that service providers have been slow to bring apps to market, and that user-friendly apps are still not widely available across popular retail products. Pay-TV operators had some incentive to develop those apps with the threat of regulation hanging over them. Now there is little incentive to move forward unless and until a significantly larger number of consumers cut the cord and start abandoning pay-TV services altogether.

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