FCC Okays Proposal To Boost TV Set-Top Box Competition

(Reuters) -- The Federal Communications Commission approved on Thursday a proposal to let consumers swap pricey cable boxes for cheaper devices and apps, to boost competition in the $20 billion television set-top box market.

The proposal passed in a 3-2 vote, with commissioners Ajit Pai and Michael O'Rielly dissenting.

The Commission just passed the #UnlockTheBox proposal. The set-top box – and app—markets need more competition.

— The FCC (@FCC) February 18, 2016

Commission Chairman Tom Wheeler said the proposal, a revamped version of a 2010 measure, is the beginning of an "information-gathering process."

"Technology allows it, the industry at one point proposed something similar to it and the consumers deserve a break and the choice," Wheeler said.

Pai, however, described the proposal as a "20th century approach to a 21st century problem."

The proposed regulation, which Wheeler unveiled in January, will allow customers to obtain video services from providers such as Alphabet Inc, Apple Inc and TiVo , instead of cable, satellite and other television providers such as Comcast Corp and Verizon Communications.

The proposal has set off a frenzied lobbying battle pitting a tech industry eager to tap into the lucrative market against cable and TV companies, which could lose billions of dollars in rental fees for set-top boxes.

More than 99 percent of U.S. customers now must get their boxes from their cable companies, and they pay on average $231 a year to lease the devices.

The FCC has said opening the set-top box market to alternatives such as a smart TV or tablet would help lower prices for consumers, noting that set-top box rental fees have risen 185 percent since 1994.

But the cable companies vehemently oppose the initiative, saying the video marketplace is already evolving as more customers replace traditional pay TV services with streaming Internet video.

Underscoring the fierce industry battle and the FCC's concerns about it, the agency on Tuesday abruptly canceled a Twitter town hall at which it was slated to detail the proposal and its impact on minority and independent programmers.

An FCC spokeswoman said the Sunshine Act prohibits outside parties from lobbying it on a pending item during the week before a full commission vote, and added the town hall will be rescheduled after the proposal was voted on by the commission and released publicly.

The proposed rule would require cable and satellite providers to give alternative device makers - their eventual competitors - access to cable and satellite programming.

While that is currently possible, cable and satellite companies often impose restrictions on third-party device makers, resulting in a virtual lockup of the market.