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Wednesday, May 11, 2016

“We’re from the FCC, and We’re Here for Your Netflix.”

National Micromanagement of Video Apps to Save Us from... Something

In the Golden Age of Television, video consumers don’t have much to complain about. We have cable, satellite, and telco providers; Netflix, Hulu, and Amazon; smart TVs, Chromecasts, and tablets.

There have never been more devices, more content, and more ways to watch. So what problem is the Federal Communications Commission (FCC) trying to solve by meddling in this market?

The purpose of regulation, at least in theory, is to protect consumers from marketplace harms. And while robust competition is usually the best antidote, government can fill the gaps by regulating in a smart, neutral way — e.g. rooting out fraud, preserving clean water, etc.

Who better to address this national crisis than the forward-thinking FCC?But for an overzealous regulator like the FCC, the definition of “harm” needs to keep up with the times so the agency can stay relevant. In an age of technology innovation and increasing consumer benefit, trivial inconveniences are the new consumer harms.

So what does that look like in the Golden Age of Television? Too many remotes. The FCC thinks you have too many remotes, and that government intervention is the solution.

Having one remote for Xfinity but a different one for Netflix? What a nightmare! Having to rent a set-top box from your cable company to watch TV? FCC to the rescue.

To be fair, hassling with multiple remotes and renting a set-top box might not be the ideal experience, and cable companies have a checkered history with customer service to say the least. But to the extent that these First-World problems need solving, the market is already on the case.

Just recently, Comcast announced that its entire Xfinity X1, set-top box interface will soon be available through an Xfinity app that can be used on a Roku or any device that meets a basic set of specifications. Its competitors already have similar offerings, and they will surely work to one-up each other.

This means no more having to rent a box from your cable or telco video provider, and no more juggling remotes. The set-top box will fade, as cable and telco video providers continue to move to an app-based universe.

It’s often said that technology regulation inevitably fights the last battle. By the time the dust settles from years of litigation, the market has already solved or mooted the problem. In this case, we don’t even have to wait. The market has already crashed the FCC’s party.

Despite that, the Commission is moving ahead with plans to “open up” the set-top box by forcing multichannel video programming distributors (MVPDs) — think cable, satellite, and telephone companies — to allow other companies like Google and Amazon to reconfigure and carry their signals in third-party apps and set-top boxes. Currently, MVPD subscribers can access their content only through a rented set-top box or the MVPD’s app.

Technology regulation inevitably fights the last battle. The agency argues that its proposal will increase competition, spur innovation, and lower prices for set-top boxes. But you might be thinking: why bother? The market is already solving the problems of rental fees and “too many remotes.” And services like Amazon Video are already licensing content directly and fiercely competing to have the best programming and attract the most eyeballs.

Where the market solves problems, the FCC invents new ones. The crisis is no longer that you have to rent a box or that you have too many remotes. The market may solve those problems.

Now, in the FCC’s view, the real problem is that you have too many apps — the dystopian nightmare of having to close one app and open another in order to search for content. Who better to address this national crisis than the forward-thinking FCC?

Shortly after Comcast’s announcement, an FCC official said:

While we do not know all of the details of this announcement, it appears to offer only a proprietary, Comcast-controlled user interface and seems to allow only Comcast content on different devices, rather than allowing those devices to integrate or search across Comcast content as well as other content consumers subscribe to.

In other words, “too many apps.”

In its flippant dismissal, the FCC is willfully ignoring why companies like Comcast and Netflix want to manage their user experience. MVPDs negotiate with programmers on matters like where to place channels and how to display advertising.

These may seem like trivial things to a consumer, but they’re key to copyright protection and the business model of broadcasting, especially for independent and minority-owners programmers.

That’s why the Multicultural Media, Telecom and Internet Council (MMTC), members of the Congressional Black Caucus, a bipartisan coalition in Congress, and others are asking the FCC to hit “pause” on its proposal.

Allowing third-parties to circumvent negotiation with programmers and to present content however they want poses serious concerns with respect to licensing terms, copyright protection, privacy, and piracy. In contrast, the apps-based approach respects the programmers’ business model while still allowing both consumers and MVPDs to ditch clunky, expensive hardware.

If consumers really want integrated search, companies are free to negotiate and find an innovative way to bundle their content — without government intervention. But the FCC’s meddling overreach is counter-productive and ultimately doomed to fail in court.

The Golden Age of Television has been a boon for consumers. The FCC should grab some popcorn, relax, and enjoy the show.

This post first appeared first on CapX.