Get complete coverage of the FCC's set-top proposal.

WASHINGTON — Federal Communications Commission chairman Tom Wheeler has taken a “not to worry” approach to some of the issues that are concerning cable operators and broadcasters about his new set-top box proposal.

Wheeler dismissed concerns from both groups when asked if his proposal to give third parties access to program information in cable set-top boxes meant that those third parties could replace or delete TV-advertising content — or repackage it, for instance, with new ads on an opening screen or channel guide with search-based advertisements, a la Google.

The rules ensure that such a scenario would not happen, Wheeler said. According to sources within and outside the FCC, in meetings before the proposal was made, the chairman’s office also assured concerned broadcasters that their ad-supported content would be protected.

MARKET WILL DECIDE

But when the text of the set-top box proposal was released, the introduction talked about proposing to leave “the treatment of advertising to marketplace forces,” as is the case with the current set-top regime.

That left at least one FCC source critical of Wheeler’s plan wondering just how much leeway the marketplace would have to monetize cable and broadcast programming in new ways.

There is language in the section about what third parties — such as Internet-search giant Google or an app developer — would have to pledge to do to get access to set-top content. In addition to adhering to consumer-information privacy regulations and passing through emergency alerts, third parties would be required to “adhere to children’s programming advertising limits.” That’s in part because the FCC said it was concerned that navigation device developers “would violate advertising limits during programming for children.”

Either the FCC plans to make third parties, rather than programmers, responsible for making sure the content being repackaged through new guides and searches and devices meets children’s ad limits, or it appears to be anticipating that those third parties would be supplementing the children’s programming with advertising that might exceed those limits. The FCC source said that wording was troubling.

Broadcasters have tried to leverage the set-top proposal as another shot at cable operators, suggesting the FCC is right to look at the cost of boxes — rather than, say, retransmission-consent fees — as a driver of higher cable prices.

But one broadcaster source said station owners were also concerned about the FCC respecting their programming deals with cable operators, as well as with a company like Google having the ability to change a channel lineup or sell ads against broadcast programming without stations getting any cut of that new revenue.

The source said broadcasters had “heard all the right things” from the chairman’s office.

Attorney Paul Glist, a privacy expert and counsel to the National Cable & Telecommunications Association, told reporters in a conference call that Wheeler’s assurances about ad policies were not comforting. Such promises were effectively empty, he added, since they could not be monitored or enforced.

Google uses all of its access to information to monetize its ads, Glist said. In this case, he said, it would be doing so “without any compensation to the programmers.”

For all of the chairman’s mentions of what would not be permitted, he said, there were no restrictions on monetizing the search function.

A senior official said that the language about children’s advertising was related to issues raised about the placement of pop-up ads on Smart TVs in kids programming that the cable operator or broadcasters did not authorize or get to monetize, and the possibility that could happen on third-party navigation devices. The FCC currently has no rules that would prevent, say, a car company from striking a deal to place a pop-up ad on an LG Smart TV.

POP-UP AD CONCERNS

That would mean a third party could strike a similar deal for pop-up ads on the new set-tops that, for instance, Google could monetize. The FCC official said that is indeed the case, but the agency is aware of programmer concerns that could violate agreements about the branding and feel of their content. That’s why the Notice of Proposed Rulemaking asks if rules are necessary to prevent such ads and what the agency’s authority would be, the official said, adding the FCC was not ignoring programmer concerns.

No one has filed a complaint about Smart TV pop-up ads yet, the source noted, but that might be because they’re not yet prevalent.

The FCC’s proposal is just that. It asks a lot of questions about how the FCC should achieve the overall goal of promoting competition in navigation devices. If cable operators and broadcasters want to protect their ad models, they need to make sure Wheeler’s proposal explicitly backs up his assurances about protecting those models.

Comcast’s NBC Universal is declining to air a series of advertisements from Dish Networks’ Sling TV over-the-top service, a practice the satellite company claims is proof that the service is touching a nerve with operators.

An NBCU spokesperson confirmed that its owned and operated stations in New York, San Diego, San Francisco and Washington, D.C., have declined to air the spots, but would not comment further.

In a blog posting, Sling TV CEO Roger Lynch said Sling TV ads are running across owned & operated stations and affiliates of ABC, CBS, and Fox, as well as independently owned NBC affiliates.

The ads are part of SlingTV’s new ad campaign, dubbed “Take Back TV,” which was launched on July 20. The company has aired three spots targeted at millennials where the pay-TV provider is depicted by a series of kid bullies who force customers to sign long term contracts, pay for channels they don’t watch and offer poor customer service. 

It should be noted that while the spots have shown up on ABC, CBS and Fox, those three networks don’t own distribution and therefore don’t compete with Sling TV. Comcast in contrast, owns the largest cable operator in the country with about 22.4 million customers. Other media companies have refused to carry ads from competitors in the past – in 2007 News Corp. pulled ads by business cable network CNBC from the websites of the Wall Street Journal after the company launched a rival business channel, Fox Business Network.

At the time, News Corp. chairman Rupert Murdoch said pulling the ads was well within its rights – its channels didn’t run ads for ABC, NBC or CBS either – but said it could have been perceived as “heavy handed.”

Fox has since split its programming and print operations in two, with its publishing unit housed in News Corp., and its broadcast, cable network and movie studio properties in 21st Century Fox. 

Sling’s Lynch sees Comcast’s refusal to air the ads is proof of the central premise of the ads – that traditional pay-TV players “don’t get it.”

In his blog, Lynch said it is the fact that traditional pay-TV providers don’t understand that innovation benefits customers.  

“Sling TV exists because we recognize the need for a new live TV model that is simple,” Lynch said. “Many of us are tired of long-term contracts, expensive programming bundles, high prices and poor customer service. Instead, we want TV on our terms. To come and go as we like. To watch great content, including sports, on the devices we own and use. And perhaps most importantly, we want rational pricing. This is what our new commercials call out. This is what Comcast doesn’t want you to see.”

Comcast could argue that the whole TV when you want it, where you want it and on whatever device you want it on, could be answered in part by its and other cable operators’ TV Everywhere initiative. Even satellite companies have embraced the authenticated approach to watching outside of the living room. But the rollout of TV Everywhere has been slower than expected and it only comes with a traditional pay-TV subscription. Sling TV, launched in February, includes about 20 core networks (including ESPN) for $20 per month. The streaming service, which is available on just one device per subscription, also has other tiers of networks available by genre (like news & entertainment, movies and sports) for an additional $5 per month.

Looking to unify advertising across screens and devices, FreeWheel, the online ad tech firm acquired by Comcast last year, said it has kicked off a video-on-demand pilot that enables programmers to manage ads delivered via IP/digital and set-top boxes via the same platform.

The initiative, delivered within FreeWheel’s FourFronts Premium Marketplace, is being conducted with Comcast; programmers such as ABC and A+E Networks; and Canoe, the MSO-backed advanced joint ad venture. FreeWheel said other MVPDs will be joining the pilot. In addition to Comcast, Canoe’s other MSO partners include Time Warner Cable, Bright House Networks and Cox Communications.

FreeWheel said the pilot marks a “critical step” toward the unification of digital, VOD and linear.

In addition to managing their own direct sold unified campaigns on digital and cable VOD ad impressions, FreeWheel said pilot participants will also have the ability to grant sales rights on unified digital and cable VOD ad impressions via the FourFronts Premium Marketplace.

"Since we launched ABC Unified three years ago, our goal has been to make it easy for advertisers to engage with ABC audiences across screens," Geri Wang, president of ABC Sales, said in a statement. "VOD viewers are a highly valuable audience and core part of that initiative, and our ability to include VOD inventory as part of ABC Unified via Freewheel’s solution is a great next step."

“As television viewing fragments, it is increasingly important for publishers to be able to deliver ads across multiple screens and devices using a single strategy and platform,” added Jon Heller, co-founder and co-CEO, FreeWheel. “The VOD pilot fully unifies VOD ad inventory with digital, including OTT, avails into a single fully dynamic audience while also bringing inventory unification within the FourFronts Premium Marketplace.”

“This partnership is a great step forward for our programmers and MSOs as VOD becomes an increasingly significant component of a marketer’s media mix,” said Joel Hassell, CEO of Canoe. “Canoe is committed to making it easier to include VOD in media plans looking to get premium video content at scale.”

NBC says commercials for the Super Bowl are 95% sold out and that the network expects record-setting revenue for Super Sunday despite an ad market that shows weakness.

NBC executive vice president Seth Winter said the network is ahead of its sales pace from the last time it aired the Super Bowl in 2012 and that just a handful of spots remain unsold.

NBC has been seeking between $4.4 million and $4.5 million per Super Bowl spot, and price has not been a negotiating issue.

The auto category is not in gear for this Super Bowl, according to Winter. He said that more than 20 spots went to automakers in 2012 and this year it would be in the low teens.  Making up for auto slowdown are 15 new Super Bowl advertisers, most in relatively new digital businesses.

Winter said that at the prevailing rate, Super Bowl spots are a bargain. Citing NBC research, he says the value of the exposure that Super Bowl advertisers get before, during and after the game is closer to $10 million.

Read more at B&Chere.