It’s Boxing Day at the FCC
Here’s What You Need to Know
**Update as of 10:00am Thursday, September 29: The FCC has removed Chairman Tom Wheeler’s set-top box order from the agenda of today’s open meeting and said the proposal will remain under consideration. “We have made tremendous progress – and we share the goal of creating a more innovative and inexpensive market for these consumer devices. We are still working to resolve the remaining technical and legal issues and we are committed to unlocking the set-top box for consumers across this country,” the three Democratic commissioners, Wheeler, Jessica Rosenworcel and Mignon Clyburn said in a joint statement.**
If you haven’t already, you will soon be seeing lots of coverage of a major Federal Communications Commission (FCC) proposal regarding set-top cable boxes. But, those headlines and hype may be a little short on details about what it really means. Fortunately, we’re here to help breakdown the debate.
Today the FCC will vote on a proposal put forth by Chairman Tom Wheeler to allow cable and satellite subscribers to pick the device they use to receive their content, ending the effective requirement that customers rent set-top boxes from their providers. The measure has pitted major cable providers, who earn $19.5 billion annually from set-top box rentals, against tech companies, like Google and TiVo, who stand to reap substantial rewards if the set-top box market is opened up to third-party devices.
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- “Google’s Proposal”: Tech companies, led by Google, have vocally supported Chairman Wheeler’s proposal. They argue the current system places cable companies as an unnecessary intermediary between users and content. The tech giants have suggested that consumers should be allowed to purchase cheaper, third-party devices to watch cable and online content through one device, allowing non-cable content to exist equally alongside cable content.
- Cable Companies’ Case: The major cable companies and their trade association, the National Cable and Telecommunications Association (NCTA), have lobbied hard against the proposal, arguing that government regulated technology mandates are generally antithetical to innovation. It is also possible that third-party devices will complicate cable companies’ ability to provide technical assistance to users and increase costs as they are forced to ensure compatibility with a variety of new devices. Many, like AT&T, also believe the market has already come up with a winning approach to providing non-cable content alongside cable content: an apps-based system with the cable operator as the hub for a variety of apps.
- Content Producers’ Concerns: The content producers, being represented in the fight by the Motion Picture Association of America (MPAA), have also come out against the FCC proposal over concerns that the move will limit their ability to negotiate deals with operators for individual platforms and features. The MPAA echoed analysis by the U.S. Copyright Office that the proposal would violate copyright law by interfering with a copyright owner’s exclusive rights to license content as it wishes.
- The Swing Vote: The latest development, which will determine how today’s vote goes, is the swing vote of FCC Commissioner Jessica Rosenworcel, a Democratic communications lawyer and policy expert appointed by President Obama in 2012. The five-person commission consists of three Democrats and two Republicans, and while commissioners tend to fall upon party lines, Rosenworcel, unlike her Democratic colleagues, has said she has “some problems” with the proposal. In an email last week, Rosenworcel wrote that she supports the objective of moving beyond set-top boxes, but is not confident this proposal is the way to do it.
Tomorrow’s headlines are guaranteed to show a big victory for someone. Whether it’s big cable companies or big tech companies appears to be up to one FCC commissioner who has yet to make up her mind on the proposal.
News You Can Use
WAITING TO EXHALE, BREXIT EDITION. Last week, Britain’s chief Brexit champion, Foreign Secretary Boris Johnson, claimed negotiations to exit the EU would begin, “by the early part of next year.” But, Johnson was publicly corrected by Prime Minister Theresa May, with Downing Street saying they have yet to determine the timing or strategy for triggering Article 50 of the EU treaty, which begins a prescribed two-year period for exit negotiations. There’s speculation that Prime Minister May is waiting to see what the global political landscape looks like after U.S. and French presidential elections, which could result in victories for the global populist movement with Donald Trump and, far less likely, Marine Le Pen. Dealing with new European leaders or the prospect of more countries leaving the EU could dramatically change how Brexit is maneuvered.
FREE TRADE: THE SCAPEGOAT. Both Hillary Clinton and Donald Trump’s critiques of free trade have centered on the conventional wisdom that decades of free trade policies have primarily benefitted the 1% and left working-class Americans with even less than before. But, the London-based Resolution Foundation has reviewed the data and adjusted for various factors – like population growth and the end of the Cold War – and concluded that the economic hardships faced by low income workers is generally “rooted in domestic policy.” Whether it is the unintended consequences of policies like minimum wage increases or huge marginal tax rates, free trade has served as a scapegoat for failed domestic policy for so long that it has become the accepted culprit for the economic woes targeted by domestic policymakers right and the left.
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BLUE-COLLAR BERLINERS. Voters in this month’s elections in Berlin delivered a blow to Angela Merkel’s conservatives at the hands of the populist, right-wing Alternative for Germany Party (AfD). The demographics of much of the AfD voting bloc appear similar to British voters who supported Brexit and American voters bolstering Donald Trump’s presidential chances: male, middle-aged, relatively uneducated, blue-collar workers. The local German vote shows there is now a global trend toward populist nationalism. Even if some of the reasons fueling the trend may be different from country to country, at least one consistent element is a growing gap between the transnational elite and the less-skilled, less-mobile blue collar workers they are leaving behind.
MIND THE OBAMACARE GAP. In the age of Obamacare, purchases of gap insurance to cover high deductibles have grown as deductibles have skyrocketed. These gap insurance plans are separate policies with a monthly fee, offering coverage of deductible payments on the original insurance – effectively they are insurance for your insurance. While 8 in 10 individuals may qualify for some form of Obamacare subsidy to help ease the burden of those high healthcare deductibles, these gap plans have a strong appeal to small businesses who must face those costs alone. As consumers and businesses find their footing in this new Obamacare-centric world – a policy that was supposed to reduce health care costs – look for gap plans and other supplemental insurance to increasingly meet the needs of the marketplace and hide the true costs of health care.
TECH’S GOTV STRATEGY. 2016 has proven to be the year of surprisingly robust civic activism in Silicon Valley, with new-tech-backed voting initiatives, many of them aimed at registering millennial voters, multiplying daily. While these initiatives mostly claim to be bipartisan, it is clear that Donald Trump’s candidacy has pushed investors to seek ways to drive up millennial turnout which will in turn help Hillary Clinton’s chances of victory. This type of subtle political activism will likely raise serious questions about the partisan nature of such efforts and could fuel post-election disconnect if these new voters help Hillary Clinton win The White House.
Mark Your Calendars
Tuesday, October 4: Vice Presidential Debate, Longwood University, Farmville, VA
Sunday, October 9: Second Presidential Debate, Washington University, St. Louis, MO
Wednesday, October 19: Third Presidential Debate, University of Nevada, Las Vegas, NV