On Friday, President Obama announced he would sign an executive order directing 12 agencies of the federal government to spur more competition and innovation. His first initiative: calling on the Federal Communications Commission (FCC) to open up the set-top box business to competition.
The intent is for American families to have options to own -- not lease -- a less costly device that would integrate their cable content and streaming apps in an easier, streamlined piece of hardware.
Yahoo Finance’s Nicole Sinclair spoke with the President exclusively on the topic, and it’s clear that this initiative won’t be embraced by all.
The number one detractor? The National Cable and Telecommunications Association (NCTA).
“We are disappointed that White House political advisers are choosing to inject politics and inflammatory rhetoric into a regulatory proceeding by what is supposed to be an independent agency,” NCTA CEO Michael Powell said in a statement this morning.
The NCTA is a trade association that represents more than 90% of the U.S. cable market and more than 200 cable program networks. An ad hoc group called The Future of TV Coalition, whose members include the NCTA, AT&T (T), Comcast (CMCSA) Dish Network (DISH) and Verizon (VZ), opposes unnecessary technology mandates that threatens innovation in television.
The Future of TV Coalition, in a statement, said Obama’s intention to spur more innovation is misguided. “A FCC technology mandate will decimate the creative industry, rip up licensing protections, tear down the value of content, and strip away consumer privacy protections. The market is already moving toward a boxless future powered by apps. The Google proposal the White House endorsed today will box consumers into yesterday’s technology and impede the innovation consumers so desperately want.”
Powell highlighted that the White House’s intervention is actually “undermining the independence of the FCC and shattering any faith in impartiality and fundamental fairness.”
In February the FCC voted to begin the process of creating rules that could give consumers new devices and apps. The White House initiative is essentially piggybacking and giving additional weight to the plan.
“The FCC is looking, independently of anything we do here at the White House, at whether it makes sense to open that up to competition,” Obama told Yahoo Finance.
Set-top box rental fees can cost over $200 annually and there are 95 million paid TV subscribers. S&P Global intelligence analyst Tuna Amobi says though this initiative won’t happen overnight, once the framework is there, “people are going to drop set-top boxes right away to create their own customized experience.”’
Amobi says this move will mean losses of billions of dollars for the entire cable industry. Most of the cable companies’ capital expenditure is spent on boxes, the physical equipment for consumers. He notes that power players like Comcast will hit the hardest because of vertical integration.
“Comcast already dominates the market since they acquired NBC Universal,” Amobi said. “But Time Warner Cable (TWC), Cablevision (CVC), and even privately traded companies like MediaCom are not exempt.”
With the surge of over-the-top experiences like Google (GOOG) Chromecast, AppleTV (AAPL), Amazon (AMZN) FireTV, and Roku, consumers are finding ways to cut the cord and handpick their content.
Powell says the issue with Obama’s order is that by trying to spur innovation, it’s giving the tech behemoths an upper hand.
“By reading the White House blog, you have to wonder how they could ignore that the world’s largest tech companies — which are often touted in other Administration initiatives — including Apple, Amazon, Google, Netflix (NFLX) and many others are providing exactly the choice in video services and devices that they claim to want,” Powell said.
Currently, the executive order is still a proposed rule in public comment period, which means that the administration is required to respond to issues and comments that the public is submitting. This period could last up to 180 days.
Watch our full interview with President Obama here.