This month, the Federal Communications Commission announced that it is backing off its ambitious goal of ‘unlocking the box,’ where its main tenets were:

  • Allowing hardware manufacturers, application developers and other technology and retail organizations to create and market their own STBs.
  • Ostensibly fostering greater competition in the STB market; currently, 99 percent of pay-TV subscribers lease a box from their service providers.
  • Lowering the average price of customer premises equipment, which has risen by 185 percent since 1994, according to the FCC.

What was once legislation that sought to spur diversity in the marketplace, with new apps and boxes from third-party retailers, has now been deemed infeasible and a disaster in the making. Chairman Tom Wheeler has acknowledged that set-top box alternatives will likely be severely restricted, leaving a lot to be desired. Additionally, not everyone has third-party set-top box alternatives, such as Google and Apple TV.

“The FCC’s proposed rulemaking introduces fresh challenges for smaller cable operators.”

The FCC now proposes that pay-TV operators will be mandated to make free apps available to customers on connected TV devices including tablets, phones, gaming consoles, streaming devices and smart TVs. But, pay-TV operators only have to make the app available on devices that are deployed in excess of 5 million units nationwide, which really means that, at this time, the revised FCC proposal, if passed, will require cable operators to make apps available mainly on mobile devices.

Why Tier 2 and Tier 3 MVPDs Would Face a Challenging App Transition

The FCC’s proposed rulemaking introduces fresh challenges for smaller cable operators at a time when they are already under substantial pressure to adapt to a rapidly changing market:

  • Pay-TV providers will have two years to comply with the FCC proposal, a rapid timeline given the arduous task of building an app that works on various devices.
  • Traditional pay-TV is becoming an increasingly tenuous business model. A 2016 Convergence Consulting report estimated that 1.1 million Americans cut the cord in 2015 and that a similar number were expected to do so in 2016.
  • Virtual MVPDs including Sony (via its Vue service that started on the PlayStation gaming consoles), Layer3 and Sling TV are slowly eroding the premium pay-TV subscriber base because they offer nontraditional bundles along with high portability of video content.
  • To survive under the initially proposed FCC rules, small MVPDs would need to upgrade their headend equipment in addition to introducing many fresh operational complexities by shifting to a novel apps-based approach to content offerings.

In order to make a live stream of television available through a connected device, an operator must move its streams to all-IP. For operators that deliver service in QAM (a large majority do), this migration is no easy feat and, not to mention, extremely costly when using traditional hardware vendors, or when using multiple vendors. The plan for operators, as it exists today independently from the FCC’s new proposed plans, is to begin to gracefully migrate to IP over the next few years. This is due to limited resources, decline in subscribership, money needed to make this change and time/manpower that is simply unavailable to complete a task in two short years.

The FCC’s proposed urgency in forcing operators to offer IP linear so that they can reach mobile devices and launch their own apps is unnecessarily cumbersome. For larger Tier 1 operators that already have streams in IP, this proposed legislation shouldn’t be a huge issue. However, the FCC must recognize that mid-sized operators do not have the luxuries of abundant resources, revenue and technological capabilities, and should be allowed to transition to IP distribution over a reasonable amount of time.

Small cable operators face pressure from proposed FCC rules to offer streams through apps on connected devices including tablets.Small cable operators face pressure from proposed FCC rules to offer streams through apps on connected devices including tablets.

Evolution Digital eVUE-TV™ Enables a Graceful Transition to IP for MVPDs to Offer Apps

Traditionally, to transition to IP distribution, cable operators would need to invest in capital equipment and integrate products from a variety of vendors. While technologically feasible, it requires complex engineering, software development and hardware integration expertise that many smaller cable operators don’t currently have in place. With Evolution Digital’s eVUE-TV™ platform, operators can transition to IP distribution through a fully-managed service on a per-subscriber basis and deliver live linear, Video on Demand and network DVR not only on the main television in the home, but also on connected mobile devices. The solution makes complying with the FCC’s proposal an easier hurdle to overcome at a price point that makes sense.

Importantly, with eVUE-TV, operators can offer apps which not only comply with the proposed FCC legislation, but will also appeal to consumers’ growing need to watch live TV on the go. For operators, eVUE-TV is a win-win situation, and Evolution Digital is committed to making this transition as pain-free, seamless and affordable as possible. And with its per-sub business model, eVUE-TV allows operators to increase IP capabilities as the market develops.
The FCC wants to give consumers more options and eliminate set-top box rental fees. However, to efficiently comply with the FCC mandate, MVPDs require options in the current challenging regulatory and competitive landscape. Evolution Digital gives them what they need to retain customers, grow revenue and adapt to changing market conditions.