January 29, 2016
While the PR cover story of the FCC’s AllVid proposal may be about more consumer choice and competition to reduce the cost of cable set-top boxes, don’t be fooled.
In announcing it, the FCC Chairman admits there’s already consumer choice aplenty: “American consumers enjoy unprecedented choice in how they view entertainment, news and sports programming. You can pretty much watch what you want, where you want, when you want.”
And the AllVid proposal is not about saving consumers money.
If it were, the FCC would not be shunning the obvious, best and cheapest solution of replacing the need for a set-top box entirely, by modernly and naturally transitioning them to the sector norm of easily-downloadable, cheap/free apps.
No, the FCC is choosing the hardest, most-counterproductive, most-regulatory-dependent option imaginable.
The FCC is mandating a de facto industrial policy shell game, where the FCC effectively redistributes revenues and profits from FCC-regulated businesses, to unregulated businesses that do not have the same FCC duties to protect consumers’ privacy/security, or to respect and protect hundreds of billions of dollars worth of copyrighted proprietary property from piracy.
Under the proposal, consumers will still pay for old-style set-top-boxes – but just pay someone else.
How do we know what the real story is here?
Fortunately, the media had little trouble understanding that this is a Google-driven FCC rule, because simultaneous with the FCC Chairman’s announcement and his sharing of his formal AllVid proposal for the first time with his fellow commissioners, Google literally was inviting Hill staffers to their Google Capitol Hill headquarters for an exclusive AllVid demo of their new Google-Box solution.
This is what their Hill briefing invite said: “Test Drive the Future: Demo the Competitive-Video Solution… Please join the Competitive Video Choice Coalition (CVCC) on Friday, January 29th, at Google’s office (25 Massachusetts Ave, N.W., 9th Floor) at 10:45 am for a one-hour demonstration of a competitive set-top box solution. …The competitive solution demo will address key policy questions…” [Bold added]
How could Google enjoy confidential FCC deliberative-process information and timing, that not even all FCC commissioners enjoy, and be so well informed so far in advance to be able to devise an elaborate demo, and to organize a well-orchestrated Hill briefing at Google’s Hill offices, if Google was not intimately involved and driving this regulatory process behind the scenes with special access, and apparently without the meaningful ex parte notices required?
Don’t be fooled by this Googlesque PR story that this is about consumers, when Google users are not their customers, but the product they sell to Internet advertisers, and when the last big FCC rulemaking was puppeteer-ed by Google to successfully exempt, at the last minute, Google’s and the edge’s traffic from the FCC’s Title II reclassification.
The real story here is “The Great Google Ad Grab.”
The FCC is in the process of forcing the pay TV industry to reengineer their video distribution systems, business models, content contracts, security and privacy protections, for the primary commercial benefit of one company, the world’s dominant search and Internet advertising provider – Google – which after dominating Internet search advertising, and then dominating mobile Internet advertising, needs to dominate a new and bigger market, TV advertising, in order to maintain its highly-unusual steady 20% revenue growth rate, and to remain on path to go from being the second most valuable company in the world, to being the most valuable company in the world.
If you need further evidence to believe that this AllVid proposal was tailor made for Google’s search prowess and dominance, consider how the FCC Chairman closed his announcement of this proposal in Re-code: “Innovation will drive more options for user-friendly menus and search functions as well as expand access to programming created by independent and diverse voices. Just as online searches today lead consumers to a breadth of information, so, too, can improved search functions lead consumers to a variety of video content that is buried behind guides or available on video services you can’t access with your set-top box today.” [Bold added]
What has Google said previously that can help inform this issue?
“Ultimately our goal at Google is to have the strongest advertising network and all the world’s information” explained Google Chairman Eric Schmidt.
“Anything that increases Internet use ultimately enriches Google… more eyeballs on the Web lead inexorably to more ad sales for Google” explained Google’s Chief Economist Hal Varian.
The real story here is Google wants to add more ads and TV advertising is their next most coveted market to dominate.
Currently Google generates ~$72b in revenues annually of which 90% are from Internet advertising. Global TV advertising was $173b in 2015, which is 28% of the $612b in total global advertising market per Statista.
At its simplest, what the FCC AllVid proposal does is force the regulated pay TV industry to create a Google-most-friendly IP search interface/portal into their proprietary pay TV offerings.
That way Google would be enabled to index and then monetize their competitors’ most valuable proprietary information for free, by adding Google Internet ads as an overlay to competitors’ ad-supported content, and by skipping the ads of their competitors, to kneecap their competition’s relatively much smaller advertising businesses, and to devalue their competitors’ paid content assets made vulnerable by the FCC proposal.
What most people don’t know, but should, is that Google’s YouTube has long maintained a closed proprietary interface that does not allow others to search index YouTube, Google Books, or Google’s other proprietary content like Google is demanding to search index competitors’ pay TV’s proprietary content.
In sum, the FCC’s AllVid proposal is blatant corporate welfare for predominantly one company, Alphabet-Google, which is worth a half a trillion dollars.
The FCC predominantly would be giving Google access to most of the benefits and business value of their pay TV/MVPD competitors for free, with none of their legal duties to protect user privacy and copyright owners’ content, none of their media ownership and competition limits, none of their EEO responsibilities to be diverse in employees and programming, and none of the their paid programming costs of doing business.
Don’t be fooled. The FCC’s AllVid proposal is not about consumer choice of set-top-boxes.
It’s predominantly about “The Great Google Ad Grab.”
Scott Cleland served as Deputy U.S. Coordinator for International Communications & Information Policy in the George H. W. Bush Administration. He is President of Precursor LLC, an emergent enterprise risk consultancy for Fortune 500 companies, some of which are Google competitors, and Chairman of NetCompetition, a pro-competition e-forum supported by broadband interests. He is also author of “Search & Destroy: Why You Can’t Trust Google Inc.” Cleland has testified before both the Senate and House antitrust subcommittees on Google and also before the relevant House oversight subcommittee on Google’s privacy problems.