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Inside the FCC's audacious plan to blow up the cable box

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All the answers are probably right

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FCC Chairman Tom Wheeler dropped a bomb on the cable television1 industry yesterday with his proposal to allow any manufacturer to create cable boxes that can access pay-TV service. (The FCC is calling this plan #unlockthebox, because 1. "competitive head-end navigation" is a terrible name and 2. it learned from the net neutrality fight that no telecom company can apparently withstand the power of social media.)

I’m using "cable" as a shorthand to mean cable, satellite, and telco TV systems. The wonky term is MVPD, or multichannel video programming distributor, so feel free to mentally find-and-replace that if you’re freaking out right now. I see you, lawyers. I am you.

I am not kidding that this was basically a bomb — there have been rumbles about this sort of thing for a few weeks, but basically no one knew it was coming as fast and as furiously as it did. Most of the companies we talked to about it yesterday were still in no-comment mode while they tried to sort things out — even tech companies that should be reflexively cheering any idea that gives them access to the linear TV services that have eluded them for almost a decade now. The industry is going to take a while to figure out where it stands.

This isn't nearly as clear as net neutrality

I'm still talking to a bunch of people and sorting out my thoughts, but from the conversations I've already had, the broad outlines of what's going on are pretty clear — and pretty fascinating. This is going to be a tough, ultra-contested fight, and the battle lines are nowhere near as clearly drawn as net neutrality. Here we go.

1. Basically everyone agrees that our current cable boxes are less than ideal, for one reason or another. Any rational human being knows that using a cable box sucks — and paying the monthly rental fee sucks even more — but cable companies aren't necessarily in love with them either. It's no fun to watch companies like Netflix constantly iterate on their service when you're stuck installing and supporting big pieces of clunky hardware that rely on older cable-specific chipsets few other products use, have physical hard drives battered by DVR usage, and are hard to update to the latest software.

Even the most ambitious attempts to put nicer new hardware in the field, like Comcast's X1 platform, are nowhere near rolled out to the entire installed base, and even then they have to sit next to cheap small streaming boxes like the Apple TV and Roku that make them look slow and backwards.

Everyone knows cable boxes suck

But — and this is a big but — the critical disagreement is how to speed up the rate of innovation in TV hardware and interface innovation. The FCC thinks the best way to do that is to let any company build a front-end interface to cable TV and create a competitive market for cable TV hardware and software, while the cable companies say that they're already facing a ton of competition from streaming apps like Netflix and Hulu, and they have lots of market-based incentives to get rid of cable boxes and move to an app-based model that makes their services better and faster. The FCC is saying it wants anybody to be able to make a cable box. The cable industry is almost saying it just wants to kill the cable box altogether and move to apps.

Both of these answers are probably right! That's what's going to make this so complicated.

2. The FCC's proposal doesn't spell out a specific technical solution for making this happen. Instead, Wheeler says that he wants to form an open industry standards group that sorts out how to provide secure access to channel guides and video-on-demand information, copyright settings, and the actual content itself, and then let an entire industry bloom around those standards.

3. That said, I am told that a working group has already demoed a standards-based solution that featured a modified Google Fiber box accessing Comcast services and sending video to a TV, a tablet, and a Windows PC, so the technical stuff isn't impossible. Just, you know, political.

4. Those politics have already killed a similar idea in the past: the 2000s-era CableCard standard was supposed to let any company build a cable box that authenticated to cableco video services with a special card. A bunch of tech companies tried to build next-gen TV products around CableCard, but the cable companies set up a standards body called CableLabs that had to approve everything and generally tried to get in the way, so progress was slow, and the system was hard to install and maintain. (Surprise!)

Steve Jobs refused to touch CableCard

Microsoft's entire Windows Media Center strategy crashed and burned on these rocks; the only company really left in the CableCard set-top game is Tivo, which has agreements with the big cablecos and straight-up provides leased boxes to the smaller providers. No one else will touch it: both Google and Microsoft went with far shittier and hackier IR blaster solutions for Google TV and the Xbox One instead of trying to deal with CableCard. And Walt Mossberg told a great story on our podcast about Steve Jobs colorfully refusing to deal with the CableLabs middleware when offered the opportunity to build a cable box for Comcast.2

There are a bunch of smaller companies that still make CableCard products, like Hauppage and SiliconDust, but none of them really move the needle on next-gen TV, you know?

5. Let's all take a moment to cheer Tom Wheeler for his idealistic optimism that a second open standards group the cable companies hate will accomplish anything useful in less time than it will take for climate change to wash Miami into the ocean.

6. That said, this proposal kind of looks like the best-case scenario for companies like Apple, Google, Samsung, and Microsoft: all of them have totally failed to lock up the big TV deals they need to launch streaming services, and this would let them skip all that and just get to work making products. And these companies would be light years better at creating next-generation TV interfaces that let consumers watch television from across live broadcast and cable networks, streaming services, and video on demand platforms. If you could buy a smart TV or plug in an Apple TV or Xbox One and have it natively integrate live TV and your DVR alongside games and movie rentals and Netflix, well, hell, that would be the dream. And open competition in the marketplace for these devices would drive prices down for consumers, instead of saddling them with eternal rental fees for decaying Motorola cable boxes.

This kind of looks like the best-case scenario for tech companies, but maybe not

7. The first big problem is that cable companies spend tons of time and money locking up programming deals and making promises to networks, and they probably have a good argument when they say that it's pretty unfair to let other companies walk in and sit in between all that hard work / money and their customers. There's a reason Apple and Google and Microsoft couldn't pull off their deals: they weren't willing to spend the money.3

Google did manage to deliver a TV service with Google Fiber, but it had to build an entire actual fiber network in specific cities to do it, and sign the exact same kind of programming deals as the cable networks. So it's not nearly at the same kind of scale here. But here's a thought experiment: if this goes through, Google would have to let anyone access Google Fiber TV, including Apple. Conundrum!

8. Of course, you'd still be paying for cable service, so the cablecos would still be making money, and they could conceivably just raise prices to ease their hurt feelings. They like doing that.

9. The second big problem is that the cable box interface is some of the most valuable and deal-driven real estate in the game: cablecos make big deals with their programming partners to list certain channels next to each other, promote shows and drive pay-per-view purchases, and generally market content to their subscribers. No cable company wants to give that up and let Apple or Google simply walk in and create their own interface and strike their own marketing deals; this proposal would basically shift that revenue from the the cable companies to the tech companies with the stroke of a pen.

10. Wheeler, again the pure-of-heart optimist, says that all cable companies would have to do to fix that problem is, you know, compete. Literally, he says:

MVPDS and competitors should be able to differentiate themselves and compete based on the experience they offer users, including the quality of the user interface and additional features like suggested content, integration with home entertainment systems, caller ID and future innovations.

Caller ID! That'll do it.

11. Asking a cable company to compete is like asking water to be dry. It is simply not supported by nature.

12. However, unlike CableCard in the 2000s, when the only way cable delivered video to your home was through a box, in 2016 the cable companies have a pretty good response here: they are already competing against services like Netflix and Hulu, and they say their goal is to kill the cable box and simply ship apps that show you cable TV on all your devices anyway. Samsung showed off Time Warner integration at CES and TWC is already offering people a Roku box with a limited selection of channels, Comcast has an X1 app for iOS and Android, Dish Network owns Sling, which is trialing a baby TV streaming service, and so on.

There's no Comcast X1 app for the Apple TV

If the goal is to get TV services on all these new kinds of devices, then just let the market play out and eventually there'll be a Comcast app and a TWC app and a DirecTV app on the Apple TV and the Xbox One and whatever else. Doesn't that accomplish the goal?

13. Of course, there is not currently an X1 app for the Apple TV, and Comcast hasn't even whispered about such a thing.

14. This would be an excellent time for someone at Comcast to leak screenshots of an X1 app for the Apple TV. Just saying. Also my email address is nilay at the verge dot com. Just saying.

15. Even if you accept the idea that cableco apps will accomplish the goal of letting various non-cable-box devices access TV, that doesn't necessarily create a competitive market: Comcast decide to only support the Apple TV and TWC could pick Roku, and consumers still wouldn't have any real choices. The cable companies would be picking winners and losers.

If you're Apple, maybe you want an exclusive on some of these apps

16. And if you're Apple, spending some of that $216 billion in the bank on an exclusive Apple TV X1 deal is probably a great idea.

17. Spin it out one way, and what the cablecos will have to end up promising in order to ensure competition is that they'll build apps for every possible TV platform out there, instead of just letting the platform vendors duke it out themselves. That seems a wee bit silly, especially when you think about some tiny local cable company having to develop a Roku app, an Apple TV app, an Xbox One app, a PS4 app, a Tizen app for Samsung TVs, an Android app for Sony TVs, and on and on.

18. Spin it out the other way and you could also say that Netflix shouldn't be allowed to pick and choose what platforms it supports, and that anyone should be able to build a Netflix app.

19. Hmmm.

20. You can see why everyone is sort of waiting carefully before they respond.

This is going to be a long month

21. Way on the other end of this is the fact that virtually every cable company already has a huge profitable business selling a service that's gleefully bundled and unbundled by tech companies and allows any device to access it: broadband internet. But selling TV isn't exactly like selling internet access. See: time and money to get programming deals.

22. This is going to be a long month of lobbying and vicious op-eds by industry players before the vote on February 18th.

23. Comcast owns NBC, which is a minority investor in Vox Media, which owns The Verge. We have owned Comcast in the past, thus completing the circle.

24. Another excellent way to consume video content is by subscribing to The Verge's YouTube channel, which is free of this drama and available on phones, tablets, laptops, and televisions near you.