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Wheeler Hammers 'Noncompetitive' Set-Top Market

FCC chairman Tom Wheeler read emails from a widow and an angry cable customer to make his point that there was no competition in the set-top market. He said that contrary to MVPD assertions, his proposal changes nothing about the MVPD business model but is instead "all about whether the standard for set-top boxes should be a closed standard or an open standard."

"Ninety-nine percent of pay-TV customers lease set-top boxes from there cable, satellite, or telco providers. There is no competitive market." MVPDs concede the FCC's CableCARD hardware regime has not produced that market, but Wheeler's proposal is not the solution either, they argue.

Wheeler said that reality was contrary to the statutory mandate—that the FCC promote a retail market for set-tops.

The chairman held up a chart from a filing on the issue by Public Knowledge and Consumer Federation of America to illustrate how the price of set-tops had skyrocketed (by 185%) while the price of computers and mobile phones had plummeted (80%), saying that was the difference between a competitive and noncompetitive market.

He was speaking to reporters in a press conference following the FCC's public meeting Thursday (Jan. 28), talking about the proposal he is circulating to the other commissioners on set-top boxes.

In addition to holding up the chart, Wheeler read some emails he had received after his set-top proposal was briefed to reporters Wednesday (Jan. 27). One was from a widow on a reduced income who said her cable company told her there was no a way for her to purchase set tops. He read another that branded leased boxes a "rip-off."

"The bottom line is the America people get it. They are literally paying the price for the lack of alternatives."

Wheeler likened his proposal to open up set-top content to third parties to the FCC requiring phone companies to open their networks to non-Bell phones, and wireless companies unlocking phones. Functionality went up, prices went down, he said.

Wheeler said, contrary to assertions by cable and satellite operators, the proposal was not akin to the 2010 AllVid proposal, would not create the need for a second box, did not affect programming contracts, or how cable operators tier their service, or do their pricing or bundling.

As to the suggestions that his proposal is akin to the 2010 AllVid proposal, Wheeler said the cable industry was trying paint his new proposal as AllVid and "it is not." He said it does not require a second box. "It is about open standards rather than the closed standards for CableCARD that kept that from being available.

In a separate press conference, Republican commissioners Ajit Pai and Michael O'Rielly declined to comment on the proposal, pointing out they had yet to see it. But O'Rielly said he was not sure that set-tops were even needed anymore.