U.S. telecom regulator Federal Communications Commission (FCC) has postponed the final voting on the revised rules for “Unlock the Box” NPRM (Notice of Proposed Rulemaking) proposed by its Chairman, Tom Wheeler. In Feb 2016, FCC voted 3-2 to advance the “Unlock the Box” NPRM. The final voting was scheduled to take place on Sep. 29, 2016.
In a statement on the FCC website, the agency said that the Set-Top-Box Order has been removed from the September meeting agenda. The proposal will go on the commission’s circulation list and remain under consideration.
Per the FCC, the set-top box market, dominated by pay-TV operators, is currently valued at about $20 billion annually. Meanwhile, lack of competition has resulted in higher rental fees for consumers. At present, an average consumer spends around $231 per annum to lease set-top boxes. According to a recent study by the FCC, the cost of cable set-top boxes has risen 185% while the price of computers, televisions and mobile phones has dropped 90% since 1994.
Under the “Unlock the Box” NPRM, the FCC has proposed to set terms for licensing new devices that would pose competition to traditional set-top boxes. According to the regulatory body, pay-TV operators have to provide three information streams – programming information, programming permissions including the ability to record and TV programming to third-party device makers like Roku, Amazon.com Inc. (AMZN - Analyst Report) and TiVo Inc. (TIVO - Analyst Report) .
Consumers can select set-top box or applications from any of these developers. The FCC said that it intends to bring down the price of software and devices to competitive levels and thereby help consumers to save costs.
Major U.S. pay-TV operators have been vehemently opposing the NPRM. They have argued that the idea of establishing a central licensing body to implement a single license for programming over applications is in conflict with today’s licensing practices. As of now, programmers do not offer uniform rights to all devices and uses.
In addition, the new licensing policy will put a check on the innovation in the set-top box industry. Per the FCC proposal, the new feature of any device has to be approved by the licensing body and reviewed by the commission. This will eventually slow down the approval process. Pay-TV giants like AT&T Inc. (T - Analyst Report) , Comcast Corp. (CMCSA - Analyst Report) and Charter Communications Inc. (CHTR - Analyst Report) have taken a stand against the FCC proposal. Comcast and Charter Communications currently carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
In the new proposal, pay-TV operators will have to offer subscribers a free app that allows them to access the same program they have already paid for on several devices, including tablets, mobile phones, gaming consoles, streaming devices (like a Roku or Apple TV), and smart TVs. Subscribers will no longer have to pay the monthly rental fee for set-top receivers since the app will be both mandatory and free. As per the FCC, the new proposal will help subscribers to reduce their pay-TV bills by $10-$15 per month.
The revised proposal has something better for the pay-TV industry. The existing business model among operators, programmers and advertisers will remain intact under the new proposal. Pay-TV operators will be able to control user’s TV viewing experience through the apps that they provide. Moreover, pay-TV operators will get time up to Sep. 2018 to comply with the FCC propositions. It remains to be seen whether Tom Wheeler’s proposal finally gets the FCC nod or not.
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