How the Cable Industry’s Lobbying Strategy Backfired

Cable providers wanted to ease set-top box rules, but now the FCC is pushing a plan to open the market to new competition.

AP Photo/Matt Rourke, file

The Federal Communications Commission unveiled a plan Wednesday that aims to break the cable industry’s stranglehold on the market for set-top boxes, potentially paving the way for a new generation of devices that could allow viewers to easily switch back and forth between TV channels and online services like Netflix.

The proposal is a major blow to the cable and satellite TV industry, which pulls in an estimated $20 billion every year leasing out its boxes to consumers. And it is, at least in part, a self-inflicted wound.

The FCC’s proposal is a response to a law that the cable industry fiercely lobbied Congress to pass in 2014. At the time, the law seemed like a significant victory for the cable companies and a defeat for consumer advocates. But the FCC’s announcement Wednesday flipped that outcome on its head.

The five-member commission plans to vote on the proposal next month, and will then have to review public comments before approving any final rules. But FCC Chairman Tom Wheeler left little doubt about what direction he is heading.

“The proposal is about one thing: Consumer choice,” Wheeler wrote in an op-ed on the technology news website Re/Code Wednesday. “You should have options that competition provides. It’s time to unlock the set-top box market—let’s let innovators create, and then let consumers choose.”

In 2014, lawmakers were working on what many considered a “must-pass” reauthorization of a satellite TV law. Because it was one of the few bills with any hope of passing a gridlocked Congress, virtually every lobbyist with any connection to the TV industry tried to attach their pet issue to the legislation. But the National Cable and Telecommunications Association, the lobbying arm of Comcast and other big cable providers, was the only group with any real success.

At the urging of NCTA and other cable groups, lawmakers attached language to repeal an FCC regulation that required cable companies to include a “CableCARD” in their set-top boxes. The purpose of the CableCARD, a credit-card-sized device that de-scrambles TV channels, was to create a competitive market for cable boxes. But the system was confusing and inconvenient, and some 99 percent of consumers continued to pay an average of $231 every year to rent the boxes from their cable provider.

The cable industry argued the CableCARD requirement was unnecessary, and lawmakers in both parties largely agreed. Sen. Edward Markey, a Massachusetts Democrat, blocked the bill from reaching the Senate floor in a last-ditch attempt to try to strip out the cable-box language, but he ultimately backed down.

Lawmakers agreed to include a provision to instruct the FCC to establish a working group to produce a report on making the cable-box market more competitive. But the bill didn’t direct the FCC to take any particular action, and many believed that the report would just gather dust at the FCC. When the Senate passed the legislation in November 2014, NCTA applauded the lawmakers for “achieving bipartisan consensus” and deciding to “sunset the FCC’s outdated and ill-conceived” CableCARD requirement.

The FCC’s working group, made up of consumer advocates, tech companies, and cable companies, produced its report last August, but it wasn’t able to agree on any one set of recommendations for set-top box rules. Representatives from consumer groups like Public Knowledge and tech companies like Google and Amazon wanted the FCC to issue new regulations requiring cable companies to make their video feeds accessible to third parties, which could then create their own interfaces and features. But the cable industry argued Internet video is already thriving, and that consumers can continue to access online services and cable TV through apps on their devices.

While the FCC wasn’t required to do anything with the report, Wheeler, who often says his mantra is “competition, competition, competition,” largely took up the plan from the consumer groups and tech companies.

But the cable industry isn’t giving up yet. A group of 47 cable providers, content companies, and other groups launched the “Future of TV Coalition” Wednesday to try to rally opposition to Wheeler’s plan. Alfred Liggins, the CEO of the cable network TV One and the cochairman of the new coalition, called the FCC’s proposal “a brazen money grab by Big Tech companies that would do severe damage to the programming ecosystem, and in particular, niche and minority-focused networks.”

Rep. Bob Latta, an Ohio Republican and the chief author of the language repealing the CableCARD requirement, warned that the proposal for another “government-dictated standard” would “inevitably lead to higher costs and less choices for the American people.”

Markey, who had tried to block the CableCARD repeal, is celebrating the fact that the whole saga has apparently backfired on the cable industry. “The FCC is finally on its way to fulfilling the promise to American consumers of a competitive and robust video box market,” Markey said in a statement. “Consumer choice should fuel the video box market, not cable company control. In the 21st century, consumers should be able to choose their set-top box the same way they choose their mobile phone.”

—This article has been updated.