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FCC Set-Top-Box Rulemaking Could Boost Smart TV, Streaming-Player Sales

2/15/2016 08:00:00 AM Eastern

Sales of smart TVs and streaming-media players could get a boost under a proposal by Federal Communications Commission (FCC) Chairman Tom Wheeler to open up competition in the pay-TV set-top box market.

Wheeler wants pay-TV providers’ leased set-top boxes to compete with smart-TV apps and consumer-purchased set-top boxes. Both types of products could combine over-the-top (OTT) services and pay-TV channels into a single user interface to search across OTT, pay-TV, and over-air broadcast channels for a specific TV series or movie. Consumers also wouldn’t have to switch among TV inputs to access all of the sources, and in the case of a smart TV, they would be able to dispense with a pay-TV provider’s remote to use their TV’s remote to access pay-TV services.

Wheeler said his goal is to drive consumers’ set-top costs down and spur innovation through competition. If smart TVs ran apps to access pay-TV services, however, there would be no set-top box to purchase at all.

The proposal, which goes up for an initial vote Feb. 18, is in response to a law requiring the FCC to adopt rules “that will ensure consumers will be able to use the device they prefer for accessing programming they’ve paid for,” Wheeler said. The proposal would apply to satellite, cable and telco providers of pay-TV service.

The Feb. 18 vote on a notice of proposed rulemaking (NPRM) will initiate a public-comment period that could lead to a final vote sometime this year.

The NPRM will seek comments on multiple issues, including the technical aspects of delivering pay-TV content through hybrid OTT/pay-TV set-top boxes (STBs) or directly to smart TVs. Issues to be discussed include whether cable-company content would enter a smart TV through the TV’s quadrature amplitude modulation (QAM) tuner, get IP-based video content through a networked broadband modem, or both.

The NPRM would also seek comment on whether satellite- TV providers would have to make their content available over a broadband modem to smart TVs and set-top streaming boxes.

“MVPDs [multichannel video programming distributors] and competitors should be able to differentiate themselves and compete based on the experience they offer users, including the quality of the user interface and additional features like suggested content, integration with home entertainment systems, caller ID and future innovations,” Wheeler said.

Content will remain secure, Wheeler added, because smart TVs “currently ensure the same security for copyrighted material as the traditional set-top box.” Copyrighted content will be protected from piracy “much as it is protected under the existing CableCard regime,” he said.

CableCard flop: CableCard technology was promoted as a way to stimulate set-top competition by enabling retailers to sell cable-TV and Verizon FiOS set-top boxes.

The boxes accept CableCards leased by cable companies and Verizon to authorize service. AT&T’s U-verse service and satellite-TV services were not included in the 20-year-old CableCard mandate, which has expired.

The mandate didn’t deliver robust set-top-box competition, said Strategy Analytics analyst Jason Blackwell, because service providers “have not made it an easy process” for consumers to get the cards. In addition, “getting the card up and running … has also been a long, tedious process on the phone again with a customer support agent,” he said.

On top of that, cable companies “have done very little to make customers aware of the option to purchase a STB at retail,” and retail boxes have not been cheap, Blackwell said.

Chances for success: With the new proposal, “some of the challenges that have been faced by CableCard could be overcome with the use of streaming-media boxes or smart-TV apps,” Blackwell told TWICE. “The cost of streaming media boxes is much less, and they could be updated more often. Authentication will also be easier since the customer would only have to log in to the app rather than authenticating a CableCard directly with customer service.”

The proposal could also boost smart-TV sales. “The additional support for pay-TV should drive additional sales,” said Brett Sappington, Parks Associates director of research. “Consumers prefer easy, and if the device provides easy access to content, consumers should respond.”

Michael Jude, Frost & Sullivan research manager, agreed. “Smart TVs with built-in STB functionality would likely be pretty popular. There would probably be an increase in demand for smart TVs.”

Streaming media player devices that access pay- TV services would be a logical extension of a company’s streaming-player line, Sappington added.

Challenges: Adding pay-TV apps to a smart TV could be challenging, however.

For one thing, said Strategy Analytics analyst David Watkins, “TV life cycles are still stubbornly high at around six to seven years on average, which can result in software platforms becoming out of date well before the TV is replaced.” TV suppliers “have not helped themselves by constantly reinventing the smart-TV experience every year and offering limited ongoing support to older models and platforms.”

Nonetheless, he said, “things are improving on this front as the leading smart-TV vendors are building the smart functionality directly into the TVs’ OS, in theory making it easier to push regular system updates.”

Watkins also wondered whether TV apps will be able to fully replicate the functionality of a set-top box. The performance gap is narrowing, he said, yet “processing power, multichannel audio reproduction, and recording capability are just a few functions that a dedicated STB can perform better than a TV.”

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