OPINION:
Streaming sticks were some of the hottest gifts this Christmas season. Ironically, when I received a Roku several years ago for Christmas, I had no idea what it was. Today, I find it indispensable — and am looking for a second, to supplement a Google Chromecast that I got last year. Now, a Federal Communications Commission vote expected soon may deliver online consumers another advantage previously provided only by satellite and cable television providers. Yet this same agency is forcing television consumers to pay for an outdated standard that many will never use.
The FCC is attempting to stay on top of the streaming media trend as more and more devices connecting your TV to the Internet hit the market. After several years of questions over whether the old multichannel video programming distributor rules should apply to the content providers delivering programming over the Internet, the commission reportedly has the votes needed to update its rules, giving “over-the-top” streaming services the same access to programming that traditional providers offer.
“Consumers have long complained about how their cable service forces them to buy channels they never watch,” Chairman Tom Wheeler said. “The move of video onto the Internet can do something about that frustration — but first Internet video services need access to the programs.” The rules could even help resurrect Aereo, the innovative company that got walloped at the Supreme Court after broadcasters refused to let it stream signals via dedicated antennas over the Internet.
Unlike its moves on “net neutrality” — in which the agency is once again attempting to insert itself as the arbiter of Internet speeds — the FCC should be commended for trying to reform outmoded rules in the face of relentless technological progress.
Unfortunately, its attempt to save consumers money will be offset by an antiquated standard that charges consumers for an old technology that many no longer use. Years ago, the Advanced Television Systems Committee, an international standards body most people have never heard of, set the technical standard for digital over-the-air broadcasts. The agency requires every TV set sold in this country to include an ATSC receiver. The sole purpose of this equipment is to display digital TV signals sent by a cable box or picked up by an antenna. However, as the FCC chairman acknowledged, there’s a massive sea change away from such traditional methods of watching video. Nielsen has long documented the rise of online video as a substitute for cable and over-the-air broadcasts. Even more telling is that 75 percent of people who cut the cord still kept a television in their house. Why? Sometimes that 13-inch laptop won’t do when you’re streaming blockbusters from the Internet.
Now, while one hand of the FCC is trying to lessen the financial burden of consumers by revamping rules for the software side of streaming, its other hand is perpetuating an unneeded tax on the hardware side. Every TV sold carries a de facto tax of $5 per set. This may not seem like much — until you do the math. American consumers buy 40 million new TVs per year. That means this government-mandated standard increases the price of TVs by $200 million per year. Plus, as the price of televisions continues to drop, this tax makes up a larger percentage of the overall product cost. The per-set cost is exorbitant compared with a similar charge in Europe and Asia, where licensing fees cost around $1.
Where does all this money go? To a privately run company in Denver known as “MPEG LA,” which serves as a patent pool administrator. The ATSC tuner requirement was put into place during a 2009 refresh of regulations dealing with digital transmissions. At the time, the mandate might have made sense, but technology moves quickly. A quarter of the individual patents within the ATSC standard have expired. Under normal circumstances, the laws of supply and demand would push manufacturers toward a competing standard. But because the FCC granted monopoly power to MPEG LA, there are no alternatives.
In 2009, the world didn’t know what an iPad was. Today, as consumers stream video from their iPads to their AppleTVs — or directly from the Internet to a Roku or Chromecast — they’re paying a tax for a standard that technology and the market have long since left behind. The practice of including patent licenses in the cost of products is in no way objectionable; the prices of consumer goods always include research and development costs. What’s troubling is that the FCC is exclusively granting licensing privileges to the for-profit MPEG LA. Without FCC action, consumers will continue paying the inflated tab for a license filled with expired patents many will never use. It’s time to update the law to reflect the today’s tech world.
• Andrew Langer is president of the Institute for Liberty.
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