September 27, 2016

FCC: Boxes? We Don’t Need No Stinking Boxes!

On September 29, the FCC is scheduled to vote on its new ‘unlock the box’ initiative. As has been widely reported, Tom Wheeler and the gang have (finally!) accepted that the future of TV is an app (a prediction I made more than three years ago). As such, the proposed rules would require MVPDs (after a two-year transition period) to provide a free app alternative to those who want it. The apps would run on the consumer’s own Internet-enabled device (BYOD) and thus obviate the need to lease MVPD hardware.

Besides indicating that we obviously have some TDG fans at the FCC (you’re welcome, guys), what does this surprising proposal tell us about the future of TV? Two things.

1. The Internet has Eaten the TV.
Television used to be an important medium. Sober, suit-wearing Congressmen used to lecture with a straight face about the ‘critical value’ of TV as a source of news and information to proud, upstanding Americans. In 2016 this is simply ridiculous.

The Internet (not TV) is now the essential utility for most Americans. They rely on it daily, in many cases both professionally and personally. The Internet (not TV) drives concrete policies at the federal, state, and local level. Know anyone who files their taxes, signs up for healthcare insurance, or pays their electric bill via a TV show? Do elementary schools build TV labs for their students? Do public libraries provide free TV access to those who can’t afford it? I don’t think so.

Let’s be real. TV is great. TV Is fun. We’re in a second Golden Age of television, no? The reality, however, is that TV is a platform for delivering entertainment content to the home. Period. Once you accept the premise that broadband is primary (and TV is secondary), public policy priorities start to fall into place.

First, all discussions about access (i.e., the ‘digital divide’) become discussions about broadband Internet access. In other words, first and foremost, every American household should have access to the Internet. If they don’t, government policy should try to help. TV is optional and, in the context of access, irrelevant. (Can you imagine a bill subsidizing pay-TV access for low-income families?). The FCC has in fact been working along these lines for years via its reports on broadband access.

As broadband access has become ubiquitous, TV no longer looks like a separate service. Instead, both the average consumer and the average government bureaucrat can understand that TV is just another Internet content type (i.e., broadband video) and just another app on a home screen.

Once the issue is framed in this way, the status quo treatment of STBs has already lost. Forcing the user to lease a proprietary hardware device (i.e., a legacy MVPD STB) in order to access a particular content type is anachronistic, if not ludicrous. (What if Facebook made users lease a proprietary hardware device for $200/year in order to sign in to the service? TDG warned about this some eight years ago.)

Bottom line: the FCC’s new policy is both surprisingly radical and surprisingly obvious. That’s what happens when government policy moves from a 1996 technology paradigm (Cablecards) to a 2016 technology paradigm (apps).

2. Streaming is an Entry-Level Necessity. Legacy TV is a Luxury.
Technologies start at the high end, but they don’t stay there. Thirty years ago the first mobile phone in the US cost $3,995 and the power supply (and carrying case) was called a car. Fifteen years ago affluent families bought their kids ‘multimedia’ PCs and subscribed to ‘high speed’ Internet so they could stream videos for their homework projects and get an edge over their less fortunate classmates. Ten years ago smartphones capable of playing video were still viewed by many as high-end toys for investment bankers and road warriors.

Today, there are programs to provide free prepaid smartphones to homeless people in order to connect them with friends, family, and vital social services. This gives you an idea just how important broadband access is to modern life.

The lowest-end pay-TV service in the US (Sling TV Orange for $20/month) is a streaming service. The most popular SVOD streaming service (i.e., Netflix) starts at $7.99/month. The most popular AVOD streaming service (i.e., YouTube) is free. The average price for pay-TV is now $103 per month. By any sensible measure, legacy pay-TV streaming is more expensive than streaming. The only truly cheap thing about legacy STBs is the UX.

Bottom line — the original impetus for the FCC’s efforts to ‘open up the box’ was a desire to save people money. It’s perfectly logical, then, that the new proposed regulations embrace streaming TV apps.

Public policy always struggles to keep up with technological change, and is often hopelessly behind the times. The FCC’s new TV app proposal is a welcome exception to this rule, and should be approved.

Stick with TDG and stay ahead of the curve.

Joel Espelien is a Senior Advisor for TDG and serves as an advisor and Board Member to the video ecosystem and technology companies. He lives near Seattle, WA.

Sign Up for Weekly Analyst Insights

Recent Insights