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June 17, 2016

With FCC Set-Top Box Overreach, Time Is Now For Congress to Rein in Agency

  The Hill

As I write this, I’m watching TV. Or am I? I’m not so sure anymore.

I’m watching a philosophy lecture on a Sony smart TV that I bought last year. But I’m not watching the Philosophy Channel—no, even in our age of hundreds of TV channels, there isn’t one of those. I’m watching the lecture on YouTube. On my TV.

This TV, like almost every TV purchased today, features a number of apps that are available at the click of the remote. As quickly as changing channels, the app will launch YouTube, Netflix, Hulu, Amazon Instant Video, Google Play, MLB.TV, TED Talks, and on demand channels like HBO GO—in total, more than 30 different non-broadcast video options. There’s nothing extraordinary about this TV (it was on a clearance sale at Best Buy) and I’m not an early adopter. What I’m describing is the video market today.

Except that’s not all. Just surveying the room I see other devices that will similarly stream video like Apple TV, Blu-Ray player, X-Box 360, Wii-U, an iPhone and an iPad. So many choices.

Then there’s the Frontier (formerly Verizon) FiOS set-top box, through which we can access all of our “cable” programming as well as video-on-demand. But frankly we don’t use the old set-top box as much as we used to, other than for live sports.

Video providers themselves are phasing out the set-top box and moving to apps. Comcast recently announced an app that will give Comcast customers full access to their services without a set-top box, and other video providers have indicated similar plans. We may have more devices than ever connected to our TVs, but soon the set-top box will not be one of them.

Except in an act that illustrates multiple harmful regulatory tendencies all rolled up in a single episode of bureaucratic comedy, the Federal Communications Commission (FCC) has decided to undertake a major new rulemaking on set-top boxes that is actually a Trojan Horse designed to allow the FCC to remake the entire video marketplace. The rulemaking would lock-in the set-top box, strip video providers of their ability to determine how they present their programming to consumers, and commoditize video for the benefit of third parties who sell advertising.

In a command economy, government regulators decide how they think an industry should work, and they decree their decisions to the producers. Command economies don’t work. See Venezuela.

In a market economy, the role of regulation is to intervene when there is a demonstrated problem, but the FCC’s proposed set-top box regulations do not address any problem. Rather, in the spirit of a command economy, the FCC would remake the video industry according to the preferences of its chairman, which, of course, introduces a whole new set of problems.

Chairman Wheeler, who is undoubtedly a smart guy, isn’t smart enough to direct the future of the video marketplace. Markets are simply too complex, and the knowledge and skills that shape markets are simply too widely distributed, for any bureaucrat or group of bureaucrats to direct them from the top down. But when you hand smart people the levers of government power, their inflated estimation of their own wisdom and good intentions often gets the better of them.

Despite the fact that the video market is already doing a spectacular job of innovating and pleasing consumers, the FCC has assumed the unnecessary and impossible task of redesigning it. Though the rulemaking doesn’t solve any existing problems, it will actually create new ones.

That’s because it would require the FCC to abrogate existing legal contracts between content owners and distributors, and rule out similar contracts in the future. Essentially, the FCC would eliminate differentiation between programmers and expose their proprietary programming and information to third parties so they can amalgamate it into a vast sea of grey goo on top of which their advertising will trump the rights of programmers and content owners.

Why, in this Golden Age of programming, should we allow the FCC to force dramatic change upon the business models of programmers and homogenize their creative output? Have consumers been complaining about that? Is that really in the interests of consumers?

The last few years have provided Congress with all the evidence it needs to rein in the FCC and limit its scope and power through federal legislation. The federal government is comprised of three branches, not four, and unless Congress acts to limit the power of the unelected fourth branch of government, the responsibility for the damage will lay at the feet of Congress.


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