Apple’s Dream of Revolutionizing TV Got the Nod from the FCC

29 Oct 2014 | Author: | No comments yet »

F.C.C. Proposal Would Allow á la Carte Internet Video Services.

It’s now more than 3 years since Steve Jobs’ biographer Walter Isaacson recounted the story: “I’d like to create an integrated television set that is completely easy to use,” Jobs told Isaacson. “It would be seamlessly synced with all of your devices and with iCloud… It will have the simplest user interface you could imagine.As Americans begin watching more of their TV online, federal regulators want to even the playing field to make new Internet startups — such as the recently announced CBS streaming app or Aereo — more competitive next to their bigger rivals in the cable and satellite business.

As it prepared to face the Supreme Court, Aereo argued that its streaming television service was fundamentally different from cable TV, and therefore it shouldn’t have to pay broadcasters to transmit their content over the Internet.Online video services would be guaranteed access to the most popular television shows under new rules proposed by the head of the US communications watchdog which risk undermining the business models of cable companies and broadcasters.Online video providers such as Aereo Inc. would be able to relay television programs and help consumers circumvent cable bundles under a Federal Communications Commission proposal. The court rejected that argument, and it looked like Aereo was going to be forced to shut down, so it made a 180-degree turn and started arguing that because it was a lot like a cable company, broadcasters couldn’t simply refuse to license their content to it. The FCC chairman on Tuesday formally asked the rest of the commission to consider new “technology-neutral” rules to update the agency’s definition of what amounts to a pay TV service or a “multichannel video programming distributor (MVPD).” “Today the FCC takes the first step to open access to cable programs as well as local television,” he wrote. “The result should be to give consumers more alternatives from which to choose so they can buy the programs they want.” If approved by the commission, the rules would give Internet-based video providers “the same access to programming” as cable, satellite and telco-delivered pay TV services,” Wheeler said in a blog post on the FCC website.

This month, HBO and CBS both announced that they would be launching Internet apps that allow non-cable subscribers to watch programming for a separate fee. It could also threaten the “retransmission fees” that distributors pay broadcasters for the right to carry their signals, which SNL Kagan expects will grow from $4.9bn this year to $9.3bn by 2020.

The company, which launched two years ago, delivered over-the-air channels via online streaming to computers and tablets for about $8 a month and had brought the service to 11 cities. The FCC rules, if they are adopted, would treat them just like cable companies such as Time Warner Cable, which pays programmers to offer their shows to consumers. A majority of the five F.C.C. commissioners will have to approve releasing a proposal for public comment; after a comment period, they would then have to vote again to adopt a formal rule. Last week, CBS said it would offer is local TV stations over the internet, just days after premium pay-TV network HBO announced it too would launch an online-only service next year. Aereo CEO and founder Chet Kanojia issued a statement supporting Wheeler’s move. “The way people consume television is rapidly changing and our laws and regulations have not kept pace.

By clarifying these rules, the FCC is taking a real and meaningful step forward for competition in the video market,” he said. “The FCC recognizes that when competition flourishes, consumers win.” Wheeler said he also hoped that the measure would spur greater competition among companies offering high-speed Internet service. “Those seeking to deploy new competitive broadband networks tell us that it’s hard to provide new high-speed Internet access without also being able to offer a competitive video package as well,” he said. The rule ensures that big content distributors like Comcast – which also owns a broadcaster in NBC – cannot keep their best TV shows for themselves. The agency has said it distinguishes apps like CBS All Access because it provides programming on a schedule, while the Netflixes of the world offer shows on demand.

But analysts have said what’s really going on here is that the agency does not want to pull Web-based services such as Hulu into its orbit because of the political minefield surrounding the regulation of Web companies. If the rules, which require the support of two of Mr Wheeler’s fellow FCC commissioners, take effect, they could give a new lease of life to Aereo, the digital video service backed by Barry Diller. For example, Comcast might agree to carry not just ESPN, but also ESPN2, ESPN News, Disney, ABC Family and the local ABC affiliate as part of a broad agreement that results in those channels being sold for a package price. Pulling apart the package might result in a higher fee for any one of them, making the “unbundled” version less appealing than it would be otherwise.

It would cost them a few dollars per channel just in licensing.” Robin Flynn, an analyst at SNL Kagan, says the main impact will be to keep pressure on the major players in the industry to offer customers what they want. If Mr Wheeler’s rules were adopted then “innovation will flourish and new video products and services will emerge, providing consumers with more choices in programming and pricing,” he said. And while those that don’t watch sports might be aware that the rights for ESPN are the most expensive of any non-premium channel, it’s also true that parent-company Disney uses that high-ticket offering to make its overall suite look attractive otherwise. Even if Aereo’s specific formula doesn’t work, in other words, the industry is being dragged further toward something that resembles its broader vision.

Even if it chooses to offer an all-but-ESPN bundle to an internet video provider, that package is likely to come with a smaller discount than the upstarts would hope. With new rules in place, Apple, Microsoft, and Google are likely to follow. (Google has been making noise about a subscription version of YouTube lately.) Each has a presence in the living room already and each can reasonably expect to sign up many thousands of the millions that don’t have traditional cable yet could find a smaller, less-pricey package of channels appealing — especially if they’re able to pick and choose. The $99 box hasn’t seen a hardware upgrade in some time (though it recently got new software believed to make it compatible with Apple’s new HomeKit), leading to speculation as to the company’s intentions for it.

What seems certain is the oft-rumored integrated TV, the one of Jobs’ dreams, won’t come along until and unless Apple can load it with channels itself. Cook just yesterday at the WSJD Live Conference said today’s TV was “straight from the 70s” but that it could be much better. “I believe something great can be done.” In a forthcoming post, I’ll take a deeper look into what that great thing be like, what it might cost you and what it could mean for Apple down the road.

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