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Former FCC Chief Economist Pans Set-Top Proposal

The FCC's set-top box Notice of Proposed Rulemaking (NPRM) is "likely to artificially distort competition to the detriment of consumers," according to former FCC chief economist Steven Wildman.

That is according to a new paper commissioned by the National Cable & Telecommunications Association to be submitted with its official comments on the proposal. Unofficially, it has already clearly shared its belief that the proposal to share set-top info and content with third parties would distort competition and hurt consumers.

In his paper, Wildman challenges the assertion that the lack of a retail market for set-tops—99% are still leased from MVPDs the FCC has pointed out on many occasions—is evidence of market failure that harms consumers.

"Economic theory tells us...that it is sometimes more efficient – and reflects consumers’ preferences – to sell consumers a product system’s components as an integrated bundle. That is likely to be the case with respect to set-top boxes," Wildman concludes.

He also says the studies that showed pricing of set-tops as not competitive were inaccurate.

He also says that the proposal would encourage navigation device makers to repack programming and sell access to that new package to advertisers, which would diminish ad dollars available to MVPDs, distort competition and "promote inferior services and diminish the quantity, quality and diversity of video programming."

"The NPRM assumes that consumers would be better served by allowing retail device suppliers to use an MVPDs programming in these new ways, but it does not rigorously examine this assumption," said Wildman. "This paper shows that this assumption is seriously flawed and that the proposed rules, far from promoting a competitive marketplace, are likely to artificially distort competition to the detriment of consumers."

Wildman was chief economist at the FCC in 2013-2014.

NCTA is putting on a full-court press against the set-top proposal, lining up demos of competitive devices, lawyers to talk about the legal flaws, and getting aid from diversity groups concerned about the impact on repackaged and re-monetized independent programmer content.