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FCC Open to Changes in Proposed Pay-TV Set Top Box Rules

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Chairman of the U.S. telecom regulatory body Federal Communications Commission (FCC), Tom Wheeler has indicated that he is open to changes in the recently proposed set top box rules for the pay-TV industry. Notably, the FCC has recently revised its rules for the “Unlock the Box” NPRM (Notice of Proposed Rulemaking), wherein it suggested terms for licensing new devices that would pose competition to traditional set top boxes. The new licensing policy would also put a check on innovation in the set-top box industry. The proposal is aimed at cutting the cost for average consumers, who presently spend around $231 per annum for leasing set top boxes.

The Proposal

The original proposal required pay-TV operators to provide three streams of information – programming information, programming permissions including the ability to record, and TV programming to third-party device makers like Roku, Amazon.com Inc. AMZN and TiVo Inc. TIVO. As per the revised proposal, pay-TV operators would have to offer subscribers a free app that allows them to view programs they have already paid for on separate devices including tablets, mobile phones, gaming consoles, streaming devices (like a Roku or Apple TV) and smart TVs. Subscribers will no longer have to pay monthly rentals for set-top receivers since the app will be both mandatory and free. As per the FCC, if approved, the new rules will allow subscribers to lower their pay-TV bills by $10–$15 per month. The proposal is scheduled for a final vote on Sep 29.

Criticism


The proposal drew a lot of flak from pay-TV biggies like Comcast Corp. CMCSA, AT&T Inc. T and Charter Communications Inc. CHTR. These companies argued that the idea of establishing a central licensing body to implement a single license for programming over applications is in conflict with the present licensing practices. As of now, programmers do not offer uniform rights to all devices and uses.

Open for Further Revisions

While the FCC chairman has defended the new proposal, he also mentioned that he was still willing to make changes. Although the revised proposal is facing a lot of criticism, parts of it should provide support to the pay-TV industry. The existing business model used by operators, programmers and advertisers will remain intact under the new proposal. Moreover, pay-TV operators will be able to control users’ TV viewing experience through the apps that they will provide. Pay-TV operators will have until Sep 2018 to comply with the new rules, if approved.

All of the major players in the pay-TV industry – Comcast, AT&T and Charter – have a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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