Pay-TV biz reacts to FCC vote, says set-top 'now on same path as VCRs, iPods and Razr phones'

Top pay-TV companies and representative organizations delivered sharp criticism today of the FCC's narrow 3-2 passage of new set-top box legislation.

"The Commission's divided action is flawed because it ignores the FCC's own technical advisory committee report and instead puts the Commission's thumb on the scale by endorsing a government-mandated technology solution," said David L. Cohen, senior executive VP for Comcast (NASDAQ: CMCSA). "The right way to proceed would have been to issue a balanced rulemaking Notice and develop an appropriate record to make a rational judgment."

On Thursday morning, FCC Commissioners voted to follow through on a Notice of Proposed Rulemaking put forth by Chairman Tom Wheeler. He has proposed that the FCC take another stab at creating a technology that gives consumers a set-top box option, other than leasing a device from their operator. This proposal has been lauded most notably by Google and TiVo.

Pay-TV companies, meanwhile, say they're already on a path to render the set-top obsolete with IP-based, apps-based schemes. Added regulation, they say, will only burden them.

"A visionary might have started a proceeding today to ask how the consumer driven application economy could accelerate placing the set-top box onto the same path to the technology scrap heap as Black & White Televisions,  Betamaxes, VCRs, iPods and Razr phones," said Bob Quinn, senior VP of federal regulatory for AT&T (NYSE: T).

Opponents of Wheeler's plan say it involves little more than attempt by Google to exploit content rights it hasn't paid for. They say once Google has access to pay-TV signal feeds, it will seek to monetize them in its own way, and it will disrupt things like channel ordering. Operators of smaller, minority-targeted channels will be harmed, they add.

"The focus of that proceeding could have been how to eliminate the set-top box while protecting content creators' incentives to develop interesting programming, building upon and growing the base of minority programming which exists today, and ensuring that what consumers watch on television remains none of Google's business," Quinn said. "Instead, the FCC launched a proceeding that could cement the set-top box in your home, with little to no minority programming, collecting data on every program you watch to feed Google's advertising engine."

USTelecom President Walter McCormick added: "Access to video content is an arena where innovation, choice and competition from a broad range of competitors and technologies has radically changed how consumers view content in just the last few years. Consumers can now choose video content from a multitude of pay-TV providers, numerous online subscription services, watch on their smartphones and a host of other options. The FCC's thumb on the scales will inevitably straightjacket innovation and harm competition, neither of which will serve the public interest."

American Cable Association President and CEO Matthew Polka struck a similar tone: "It seems plain to everyone but the FCC that the video marketplace is in a highly dynamic state, particularly with regard to the means with which consumers access programming from pay TV providers. Smaller MVPDs in particular haven proven themselves to be market leaders in offering subscribers new ways to access both traditional MVPD programming and OTT video services using innovative new devices, some incorporating TiVo software and providing access to Netflix. It is troubling that the FCC is seeking comment on proposed rules based on the marketplace as it exists at this moment, which is likely to look vastly different in the years ahead. It is best for consumers to let this marketplace continue to evolve unimpeded by backward-looking regulations."

Also vocal on the issue, the National Cable Telecommunications Association pointed out that a five-year-old letter cited by Wheeler during Thursday's vote — sent from former NCTA President Kyle McSlarrow to former FCC Chairman Julius Genachowski — was taken out of context.

Wheeler asserted that the cable lobbying organization itself once called for the adoption of rules that would enable a third-party set-top market.

Meanwhile, from the side more supportive to Wheeler's plans, TiVo's General Counsel Matt Zin had this statement: "Given the sunset of the integration ban and the absence of an industry-supported successor to CableCARD, the FCC's rulemaking is important to ensure choice for consumers, operators, and content creators. We are hopeful that this proceeding results in a competitive environment that increases choice, both for consumers and operators, and protects the business models that operators and device makers have created under the current CableCARD system."

Google did not immediately respond to a request for comment.

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