TIVO TiVo Corporation

By John D. McKinnon 

Federal regulators soon are expected to propose overhauling rules for television set-top boxes, a move aimed at lowering bills for cable viewers and providing more access to Internet-based programming.

The proposal by Tom Wheeler, chairman of the Federal Communications Commission, likely would involve giving cable and satellite customers more choice in whether to use their service provider's set-top box and cable app, or instead choose competing devices and apps, according to consumer advocates pushing for the change.

That could open more of the market to alternative set-top-box providers, such as TiVo Inc. and Alphabet Inc.'s Google unit.

Pay-TV customers now generally rent devices from their service providers, often at prices that consumer advocates regard as inflated. Critics also say those set-top boxes tend to favor content from the cable company that provides them.

The service providers are planning to resist the initiative, warning of government overreach. More than 40 telecommunications, media and other groups are expected to announce a coalition as soon as Wednesday to oppose Mr. Wheeler's anticipated plan.

Cable and media companies, which face a potential loss of billions of dollars in rental fees for set-top boxes, are concerned that a plan to open up that market could disrupt their business.

At a minimum, they say, it could upend the way the channel positioning they have carefully negotiated, providing certain programmers premium spots in their lineup in exchange for higher payments.

They also warn that tech companies could gain unfair access to valuable consumer data--such as which channels they watch and when--and sell their own ads against the programming. Cable companies say they operate under stricter privacy standards.

Given the opposition, Mr. Wheeler's plan faces a tight timetable if it is to be enacted by the end of the year, before an expected change of leadership at the FCC as a new president takes office.

For years, consumer advocates have complained that the market for set-top devices has been effectively controlled by the cable companies, despite congressional efforts to boost competition.

Customers could be overpaying for these devices by $6 billion to $14 billion a year, according to the Consumer Federation of America. Critics say that other technologies have plummeted in price while cable-box rental fees have soared. They say the current system, in some cases, has limited customers' access to emerging Internet media, stifling alternative programming.

Some minority-oriented companies have been particularly outspoken. In a recent opinion piece in the Hill newspaper, Black Entertainment Television founder Robert L. Johnson urged the FCC to make changes that would give viewers more access to alternatives.

"If you have a good program idea, some financing, and access to the Internet, you can find your audience," wrote Mr. Johnson, chairman of RLJ Entertainment Inc. "But your audience can find you only if they have a modem or a set-top box or software that lets them know you are there and gives them access to your programs unconstrained by the network gatekeeper."

Access now varies considerably, depending on the pay-TV provider, experts say. And some cable companies say they are eager to get out of the set-top-box business.

Still, "the fact remains that you're in a walled garden controlled by the cable company," said John Bergmayer, a senior attorney at Public Knowledge, a consumer group.

Those pushing for the change are getting support from some big names in the technology sector. Google, in a recent FCC filing, said the agency "should commence a rule making quickly to unleash competition in the retail navigation-device market."

"We see great consumer benefits in choice, including lower cost [and] increasing desirability of cable service," said Matt Zinn, TiVo's senior vice president and general counsel, in an interview Tuesday.

But foes of the FCC plan have drawn support from more than two dozen members of the Congressional Black Caucus, who argue that the overhaul could raise costs and complexity, requiring some customers to acquire another device. Unlike RLJ's Mr. Johnson, they worry that with a more wide-open system, minority programming could be relegated to "the bottom of the pile," as they wrote in December to the FCC.

Pay-TV industry officials said the plan would be more far-reaching than it seemed.

"They say it's just a box, [but] it's allowing another company to build an entirely different offering" in addition to the traditional cable service, said Michael Powell, a former FCC chairman and now president of the National Cable & Telecommunications Association.

He said that the FCC's approach also might focus too much on devices in an age when apps are increasingly important.

The issue could be one of the most significant policy debates of Mr. Wheeler's final year in office.

Write to John D. McKinnon at john.mckinnon@wsj.com

(END) Dow Jones Newswires

January 26, 2016 20:28 ET (01:28 GMT)

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