June 27, 2016 - 3:29 pm
By Michael O'Rielly | Commissioner

Unless the path is altered soon, the FCC is on course to force adoption of a set-top-box (STB) technology mandate that will harm U.S. video distributors, content producers, local advertisers, and ultimately consumers – without any assurances of saving one thin dime.  Even if this plan is adopted by the Commission, it will be multiple years, if ever, before anything actually materializes.  During this time, video delivery innovation will be slowed, if not halted altogether, as the industry muddles through the Commission’s latest edict.  In other words, it will stunt the deployment of video programming Internet applications, or apps, as providers are obligated to deal with Commission mandates contained in its convoluted scheme.       

It doesn't have to be this way.  The common-sense, technology-friendly replacement for STBs is presently before the Commission in the form of downloadable apps used daily by millions of American consumers.  The argument in support of apps has been strengthened further by new details offered by various video providers, including firm commitments on timing and price,[1] offering further comfort to those worried about an app-centric solution.  However, given the substantive debate and political winds shifting away from the Commission’s illogical regime, advocates have started to attack the apps solution as a counteroffensive tactic.  It seems only appropriate to address some claims made, debunk inaccuracies, and see if any legitimate objections remain. 

Claim: Apps aren't good enough and/or consumers don’t know how to use apps

To examine this claim, it seems appropriate to review consumers’ experience with mobile apps.  While mobile apps are just eight years old, there is little doubt about their availability.  Today, there are over 2.2 million Google Play apps, 2.0 million Apple Store apps, and another 1.3 million or so in the Amazon, Microsoft and Blackberry stores.[2]  Even with overlap, that puts the overall apps marketplace at over 2 million.  Further, consumers seem very familiar with app operations.  In fact, the average consumer’s mobile phone contains over 30 apps,[3] with usage of over 40 hours per month[4] and mobile smartphone penetration at nearly 70 percent with tablets at almost 50 percent.[5]  Globally, apps have been downloaded hundreds of billions of times in their short history.  In terms of their importance to daily lives, consumers are using apps to obtain health information, navigate educational materials, manage their financial accounts and conduct banking activities, interact with friends and family, provide entertainment through video and gaming capabilities, and all sorts of other helpful purposes.[6]  Apps are also having a dramatic impact on the everyday lives of those Americans with disabilities.[7]  The importance of the app economy even has been recognized and touted by the current Administration, which has launched efforts to further stimulate innovation and growth in this area.[8]

Collectively, these data points – plus hundreds of others – help demonstrate that consumers are familiar with apps, have a general knowledge of how to download them, and do in fact use them.  Moreover, nothing in the move to an app-centric video distribution approach requires consumer adoption; they would be free to retain their current STB if desired.    

Claim: Apps won't provide unified search

It should be noted that nothing in the statute actually requires any search function, let alone a unified search capability between an existing video provider and content outside of its system, such as edge provider programming.  Section 629 of the Communications Act, on which the overall STB approach is based, does not mention anything remotely close to some type of integrated, unified search requirement.  It just isn’t there.  Additionally, no one knows that consumers are actually seeking such functionality.  Specifically, consumers (e.g., the cord cutters and cord nevers) are moving away from traditional video providers, so why obsess over a feature that may or may not have little to no consumer value? 

Setting aside those facts, making an app that allows integrated search is achievable.  Indeed, cable providers are already working to develop the precise code to make this function a reality, as demonstrated during my recent visit to the INTX Show in May.  And some devices like Roku, or TiVo already offer some version of an integrated search function.  Accordingly, video providers will be able to offer apps with unified, integrated search abilities for most content in the near to immediate term.    

Claim: Apps won't fix unreliable equipment

To the extent that consumers voluntarily move to the apps environment, equipment – reliable or not – would no longer be an issue.  On point, there is never any physical equipment to acquire from video providers; never any equipment to be serviced; never any reason for technician visit; and never any equipment to be returned at service termination.  Consumers would just need to download an app via Internet access, which they may or may not obtain from their video provider.  Past consumer experiences of broken cable boxes, dealing with “customer service” to get an appointment, and questionable service tech visits during the generally unreliable service window are completely eliminated with app usage.  And like other apps today, video programming apps can be updated at the consumers’ convenience – day or night.     

Claim: Apps won't drive down monthly rental prices

In an all-app world for video distribution, there is no need for a STB, meaning no monthly rental or separate purchase is required.  This would result in consumers saving most or all of the money they spend today to rent or buy devices they generally loathe.  To the extent that estimates are accurate that consumers spend $231 per year and a cumulative $20 billion annually for STB rentals (and there are real reasons to question these figures),[9] these funds would go back into the pockets of consumers who chose the app route. 

Some have argued that video providers are likely to charge a monthly fee for any video app.  That seems like a farfetched assumption given the shrinking demand for their overall product.  However, this seems like a point on which to work with the industry as a whole to ensure that these apps are offered to consumers for free, just like Comcast’s XFINITY app is today.      

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As a firm believer in the ability of Internet apps to transform everyday interactions, I find it hard to fathom that people would attack apps with such specious claims.  More importantly, it is troubling to think that the Commission would reject this modern approach in favor of one that leads us down a regulatory black hole.  It’s time for the Commission to discard the effort outlined in the NPRM and embrace an apps-based future for video distribution.  If that means that this approach becomes a resolution point for the entire issue, so be it.  For me, getting it right is better than getting the credit.