WASHINGTON — After weeks of heated opposition, it appears that Federal Communications Commission chairman Tom Wheeler does not have the votes to pass his set-top box reform plan — at least as originally proposed.

The proposal, which would require multichannel video programming distributors (MVPDs) to make their programming and data streams available to third-party devices and app developers, has taken shots from all sides — now including both the Senate majority and minority leader.

Wheeler, a Democrat, has said from the outset that he was willing to tweak the set-top plan if there were a better route to his goal of a competitive market in third-party video access devices — ideally a path that allows for access to both traditional video and the over-the-top video he sees as a key new competitor.

But cable operators were unconvinced, saying they feared Wheeler’s words were more talk than action and the item would pass pretty much as proposed.

The proposal was approved 3-2, on a straight party line vote, and while Democratic commissioner Jessica Rosenworcel voted with the majority, from the outset she said she had issues the plan.

DEMOCRAT CALLS FOR CHANGES

Rosenworcel last week said she remains optimistic that the FCC and the pay TV industry can find a way forward on set-tops to promote a competitive marketplace for navigation devices, but signaled that the problems with Wheeler’s proposal have become clear, as has the need for changes.

Rosenworcel was responding to a flurry of activity that surrounded the proposal, including efforts to block it in Congress via an appropriations bill; “ditch the box,” a National Cable & Telecommunications Association-backed alternative to the chairman’s “unlock the box” proposal; and the Motion Picture Association of America’s support for working with the FCC to resolve copyright issues.

“Set-top boxes are clunky and costly,” Rosenworcel said in a statement provided to Multichannel News. “Consumers don’t like them and they don’t like paying for them.

“Kudos to the chairman for kicking off this conversation [Rosenworcel voted along with Wheeler and Democrat Mignon Clyburn to kick off that conversation], but it has become clear the original proposal has real flaws and, as I have suggested before, is too complicated,” she added. “We need to find another way forward.”

Rosenworcel wasn’t explicitly advocating for the cable industry’s “ditch the box” effort. Rather, she was supporting efforts to find some variant of a compromise proposal that addresses the Wheeler plan’s flaws.

“I am glad that efforts are underway to hash out alternatives that provide consumers with more choice and more competition at lower cost,” she said.

Rosenworcel voted to approve the notice of proposed rulemaking (NPRM) proposing the set-top unbundling, but from the outset she suggested it was a work in progress that needed more work.

The set-top plan suffered another blow when Sen. Harry Reid (D-Nevada), the Senate’s minority leader, wrote Wheeler last week to say he thought the proposal did not sufficiently protect programmer contracts or consumer privacy, points that MVPDs have been making pointedly.

OPEN TO ‘DITCH’ PITCH

Even the chairman seemed eager to seek more common ground.

In his first public statements on cable operators’ proposal to “ditch” the set-top box, Wheeler said he was glad the industry offered up the compromise, but suggested it indicated that many of the problems those same parties had with the initial proposal weren’t problems after all. In a Q&A following a speech at the National Press Club on 5G wireless broadband, Wheeler was asked about the cable-backed effort.

“I think it is absolutely terrific that the cable industry came forward with this proposal,” he said. “I have been asking them to do this, and I think that by coming forward they indicated that a lot of the arguments that had been put up against our set-top box proposal really fell by the wayside.”

But he also said that the cable proposal indicated that copyrights and privacy can be protected, that small networks can continue to thrive and that providers’ networks don’t have to be redesigned to do all that.

Wheeler said he wanted to now engage in “constructive” dialogue on how to write the specific regulations to achieve those ends.

Asked if the set-top proposal was in trouble, FCC press secretary Kim Hart responded: “Chairman Wheeler has repeatedly said he is interested in a constructive dialogue with his FCC colleagues and all stakeholders to reach the best result for consumers. He welcomes the feedback to his proposal to give consumers new options for accessing the content they pay for, and he looks forward to engaging in continued conversations to inform the final rules.”

Internet giant Google, which pushed for the set-top proposal, echoed Wheeler in calling the cable-operator alternative “a constructive effort towards the goal of more competition and consumer choice,” adding, “We hope that it sparks a dialogue between the FCC and interested parties to reach a good outcome for American viewers.”

One MVPD executive said all that activity points to more than just more dialogue.

“I’ll let you determine whether chairman Wheeler’s proposal is dead,” said the executive, who asked to speak not for attribution. “But Google is now giving up the fight, Senator Reid’s letter was pretty strong and Commissioner Rosenworcel from the get-go called it too complicated and recently said it has real flaws.”

Innovation may move at the speed of light, but the agency charged with overseeing much of that innovation, the Federal Communications Commission (FCC), simply does not.

That hasn’t changed since 1998 when I was chief of its Cable Services Bureau charged with drafting the first cable set-top box order. At the time, the FCC voted to “unlock the box” by requiring companies to separate the security feature that protects encrypted, copyrighted content from the box itself. The hope was that separating security and the box would spur lots of different companies to build boxes consumers could buy from Circuit City, Radio Shack or Crazy Eddie.

Here’s the problem: The FCC policy never really took with consumers.  Only a few thousand cable customers ever bought a box with the FCC's fix. Finally, in 2015, Congress got rid of the integration ban. Over the years there were various failed attempts at a better solution to making the box commercially available, but the box ceased to be a high priority on the FCC’s agenda.

Now, in an inexplicable bout of déjà vu, a lame-duck FCC chairman, Tom Wheeler, is making another run at creating a market for set-top boxes through a catchy sales pitch, “Expanding Consumers’ Video, Navigation Choices—Commercial Availability of Navigation Devices.”  The cable industry and Hollywood say this FCC proceeding is a giveaway to Silicon Valley. It requires programmers to allow behemoths like Google access to their proprietary content that can be streamlined, repackaged, and wrapped around new packages of advertising.

Breaking with the tradition of not commenting on pending FCC matters, President Obama made a bold televised announcement on April 15 declaring the unlocking of the box one of his core competitive priorities. The White House boldly claims the proposal now pending before the FCC “will promote innovation and lead to positive results for consumers” such as lower costs. Unfortunately, the FCC and this administration have missed an important development: innovation has already evolved beyond anything the FCC could mandate.

I, for one, would prefer big pharma as a core competitive priority because my Advair prescription costs substantially more than a monthly set-top box fee -- and that’s not something I can cut.

Internet-edge providers such as Netflix, Hulu, Roku, Apple TV and others have become disrupters in the video marketplace. Cable subscribers are cutting or shaving the cord in droves. The set-top box is no longer the gatekeeper of video in the home. The future of TV will be tablets, smartphones, smart TVs and other devices that today are unimaginable. In fact, Comcast just announced a deal with Roku where it will offer InfinityX video streaming through Roku devices without a box.

So what does the FCC’s rulemaking actually do for consumers? In the near term; nothing-In the long term, probably nothing good. When the dust settles, the government has no ability to forcibly lower the cost of the box.

A close look at the president’s pledge reveals neither the White House nor the FCC offers any real proof that anyone other than the Googles of the world will benefit from new rules. The FCC’s rules are at risk from a lengthy court challenge, so consumers shouldn’t rush to Best Buy, HH Gregg or Target stores anytime soon to purchase streaming devices enabled by new FCC rules.

Furthermore, the box has a hidden price. The president’s intrusion into this regulatory matter threatens public confidence in the FCC, which Congress established as an independent expert regulatory agency. Clearly, just as every citizen has the right to participate in public proceedings, so, too, does the president. But he is no ordinary citizen. Highly charged public comments by him may unduly influence the FCC’s rulemaking process, thereby subjecting the agency to charges of bias. This is especially true, given this administration's close ties to the main beneficiary of the order -- Google

By highlighting this issue in an election year as a component of his core competition agenda, Obama has politicized it. Scoring political points through a pending regulatory matter weakens the FCC’s stature as an independent expert agency.  It also places FCC commissioners, who are appointed by the president, in a precarious position.

The three Democrats on the commission who hold the majority must decide whether to obey the White House or exercise their independent judgment and expertise that their oath of office requires. If their opinion is not in accord with the president’s, do they disobey him and risk jeopardizing their careers or do they obey and violate their oath? This is a quintessential Hobson’s choice that a commissioner should not have to make. The damage to the agency’s reputation and resulting loss of consumer trust is too high a price to pay for a set-top box.

Deborah Lathen, former senior executive at the FCC, is an independent telecommunications consultant, a member of the District of Columbia Board of Ethics and Government Accountability and a former non-executive director of BT (British Telecom).

Stay tuned for this important message: Advertisers, more than 700 of them, oppose the FCC's set-top box proposal in its current form.

One of MVPDs' big concerns is once third parties get access to their content and data, it will be re-monetized, including new ads placed on top or around that content and data, without their permission.

But advertisers, who theoretically would have a new platform for their ads, are no less concerned than MVPDs at the prospect, if an FCC filing by the Association of National Advertiser is any indication.

The ANA told the FCC that the proposal would have "significant and undesirable" consequences, including jeopardizing advertising's contributions to the economy, which equates to some $3.4 trillion to the GDP and $25 billion annually for MVPDs. The ANA said the proposal threatens the rights and obligations of protected material, and interferes with free expression. In short, it does not serve the public interest.

The organization also noted it was not against navigation device proposals per se, but about ensuring, whatever device is used, that ad interests are protected.

The FCC proposal, the ANA said, does not do that. Instead, it has potential draconian effects including less content, fewer distributors of programming, higher consumer costs and less innovation.