[Editor’s Note: Federal Communications Commission chairman Thomas Wheeler today released a compromise proposal hoping to get the cost of set-top box equipment down for millions of Americans forced to lease equipment to watch cable television.

Wheeler originally proposed requiring an open standard for set-top box equipment that would open the market to competition by allowing manufacturers to directly sell equipment to consumers and compete for their business. Cable operators, programmers, and various special interest groups that depend on financial contributions from those operators immediately launched an unprecedented pushback claiming set-top box reform was racist, anti-minority, promoted copyright theft, and was illegal and unconstitutional. Small cable operators claimed they might be driven out of business, and programmers claimed companies like Google might fundamentally change the channel lineup on new equipment that would leave them in a disadvantaged position.

In fact, the hundreds of millions of dollars in annual revenue earned by cable operators charging the same price for equipment fresh out of the box or handed down in beat up condition to the fifth customer in eight years was more likely the driving factor.

Mr. Wheeler capitulated and released a more modest proposal promising cable operators would be forced to offer free “apps” for devices like Roku and Apple TV. But cable operators will likely own and manage those apps and have direct control of authentication methods and anti-piracy measures that are likely to be proprietary. Still, apps like TWC TV which covers Time Warner Cable’s lineup on devices like Roku have allowed consumers to ditch expensive set-top equipment and irritating Digital Adapters that don’t function well and have almost tripled in price since their introduction. Making sure these apps provide comparable functionality with set-top boxes and are released to a variety of devices will be key to whether Wheeler’s proposal, delivered in full below courtesy of the Los Angeles Times, has a measurable impact on cable bills.]

FCC chairman: Here are the new proposed rules for set-top boxes

There’s never been a better time to watch television in America. We have more options than ever, and, with so much competition for eyeballs, studios and artists keep raising the bar for quality content. But when it comes to the set-top-box that delivers our pay-TV subscriptions, we have essentially no options, creating headaches and costing us serious money in rental fees. That makes no sense, which is why I’m sharing a proposal with my fellow commissioners at the Federal Communications Commission to change the system.

Wheeler’s compromise

Ninety-nine percent of pay-TV subscribers currently lease set-top boxes from their cable, satellite or telecommunications provider, paying an average of $231 a year for the privilege, according to a recent analysis. The collective tab is $20 billion annually in rental fees. In a recent study, 84% of consumers felt their cable bill was too high. What they may not realize is that every bill includes an add-on fee for their set-top boxes. We keep paying these charges even after the cost of the box has been recovered because we have no meaningful alternative.

Pay-TV providers will be required to provide apps — free of charge — that consumers can download to the device of their choosing.
Earlier this year, the FCC launched a process to unlock the set-top-box marketplace. We were motivated by the desire to give consumers relief, but we were also mandated to take action by Congress and the law, which says that consumers should be able to choose their preferred device to access pay-TV programming.
Over the past seven months, the Commission conducted an open proceeding where we heard from pay-TV providers, programmers, device and software manufacturers, consumers groups, and, most important, the American people. We listened.

Now, I am proposing rules that would end the set-top-box stranglehold. If adopted, consumers will no longer have to rent a set-top box, month after month. Instead, pay-TV providers will be required to provide apps – free of charge– that consumers can download to the device of their choosing to access all the programming and features they already paid for.

If you want to watch Comcast’s content through your Apple TV or Roku, you can. If you want to watch DirectTV’s offerings through your Xbox, you can. If you want to pipe Verizon’s service directly to your smart TV, you can. And if you want to watch your current pay-TV package on your current set-top box, you can do that, too. The choice is yours. No longer will you be forced to rent set-top boxes from your pay-TV provider.

One of the biggest benefits consumers will see is integrated search. The rules would require all pay-TV providers to enable the ability for consumers to search for pay-TV content alongside other sources of content. Just type in the name of a movie, and a list will come up with all the places it is scheduled for broadcast and where it can be streamed (like Amazon Prime or Hulu).

Integrated search also means expanded access to programming created by independent and diverse voices on the same platform as your pay-TV providers. Consumers will more easily find content even if it’s not on the pay-TV service to which they subscribe.

These rules will open the door for innovation, spurring new apps and devices, giving consumers even more choice and user control.

While our primary focus during this proceeding was to promote consumer choice and fulfill our congressional mandate, we recognize that protecting the legitimate copyright interests of content creators is also key to serving the public interest. To ensure that all copyright and licensing agreements will remain intact, the delivery of pay-TV programming will continue to be overseen by pay-TV providers from end-to-end. The proposed rules also maintain important protections regarding emergency alerting, accessibility and privacy.

Large pay-TV providers, which serve more than 90% of subscribers, will have two years to fully implement the new requirements.  Medium-sized providers will have an additional two years to comply, and the smallest providers would be exempt.

This is a golden era for watching television and video. By empowering consumers to access their content on their terms, it’s about to get cheaper — and even better.

Windstream will bring its fiber to the neighborhood service Kinetic TV to around 50,000 homes in 13 suburban and exurban communities surrounding Charlotte, N.C., to stay competitive with Time Warner Cable/Charter and a publicly owned cable system serving Mooresville.

The independent phone company submitted a formal application for a cable television franchise with North Carolina’s Department of the Secretary of State to begin offering television service in Albemarle, Badin, China Grove, Concord, Harrisburg, Hemby Bridge, Indian Trail, Kannapolis, Matthews, Mooresville, Mt. Pleasant, New London and Oakboro.

Windstream claims Kinetic TV leverages “a 100 percent fiber-backed network,” which leaves customers with the impression they are getting fiber optic delivery of television, broadband, and phone service. In fact, for many communities Windstream is constructing a network similar to AT&T U-verse. The phone company brings fiber optic cables into each neighborhood, but relies on existing copper wire infrastructure connecting individual homes to a nearby fiber optic-connected neighborhood hub. The upgrade allows Windstream to expand broadband capacity to support concurrent use of television, phone and internet access. For many Windstream customers complaining about the poor performance of Windstream’s DSL service, that offers a significant improvement. But Windstream does provide even better upgrades in some communities. In April 2016, Windstream launched gigabit speed internet service for seven North Carolina towns: China Grove, Concord, Davidson, Harrisburg, Kannapolis, Lewisville and Matthews. By applying for a statewide video franchise agreement in North Carolina, Windstream will be able to sell cable television service along with gigabit broadband speed.

Kinetic TV is now an exceptionally good deal for new customers.

Kinetic TV is already available in Lincoln, Neb., Lexington, Ky., and Sugar Land, Tex.

Windstream aggressively prices its most deluxe double play package of 50Mbps broadband and 270+ channels and Whole House DVR service at a one-year introductory price of $89.99 a month with a one-year service commitment. Customers can upgrade to a triple play package with the same 12 month commitment that includes a phone line with unlimited long distance calling for just $2 more — $91.99 a month. New double/triple-play customers also receive a one-time bill credit of $250, which will generally cover the first two months of service. This promotion is by far the best value for money. Unfortunately, after the promotion expires your price increases by $72.99 to $162.98 a month.

Kinetic TV operates with wireless set-top boxes that can be moved to different televisions as needed. The DVR can handle recording four channels at the same time and Windstream promises no lag while channel changing. The usual $80 installation fee is waived when new customers sign up under a promotional offer. Anyone can register to be notified about Windstream’s promotional offers on the company’s website and will likely receive an invitation as Kinetic TV becomes available in your area.

Earlier this year, Windstream debuted Kinetic TV in Sugar Land, Tex., joining the communities of Lexington, Ky. and Lincoln, Neb. The 13 small cities and communities in North Carolina will be Windstream’s fourth service area for Kinetic TV.

Kinetic TV’s Whole House DVR

The service has received generally positive reviews from those not expecting to place a lot of demand on the service. The fastest internet package tops out for most at 50Mbps and some customers report their actual speeds are sometimes slightly lower. Windstream currently offers Kinetic customers unlimited, uncapped data plans. If you cancel service before the end of your contract, the penalty as stated in Windstream’s terms and conditions is among the steepest we have ever seen: 100% of the charges you would have paid had you kept the service through the rest of your contract.

There is other fine print:

• Kinetic TV cannot support more than four Standard Definition video streams (television sets in use concurrently). HD channels for recording or viewing are limited to between one and four, depending on the capacity of your connection. If you exceed it, the remaining video streams or recordings will be in Standard Definition.
• Kinetic TV will not allow pay per view or video on demand charges to exceed $200 in a calendar month.
• Prices above include one Kinetic TV receiver. Each additional box is billed at $7 a month, and may be limited in quantity. A Windstream gateway, also required for service, is assessed a separate monthly charge.
• Your internet speeds may be affected by how many televisions are concurrently in use in your home.
• Windstream collects information about programming watched, recorded, or accessed. Currently, they use this information to make general programming recommendations to all customers and/or specific recommendations to you based on your personal viewing habits.

(Windstream pricing information gathered by entering a residential street address in Sugar Land, Tex., Zip Code 77478.)

Hulu’s still-to-be-announced live TV streaming service designed to give subscribers an alternative to bloated and expensive cable-TV packages will lose “real money” if it is priced at around $40.

BTIG Reseach analyst Brandon Ross’ research note to investors (reported by Fierce Cable) claims Hulu faces big expenses to include sports and CBS programming — the one network that isn’t a part-owner of Hulu — into its forthcoming package of live and on-demand programming. With most sources claiming Hulu intends to price the service starting at prices as low as $35-40 a month for a slimmed down package of cable television and over-the-air stations viewable on one device and $50 a month for those wanting to watch on multiple devices, Ross predicts the service will rapidly run into the red because of programming costs.

Hulu’s live streaming service could be a real game changer for online cable TV alternatives, because it is expected to contain a robust assortment of popular cable networks and regional sports channels that could appeal to a wider marketplace than even slimmer packages from Sling TV.

Video margins are dropping as programming costs continue to grow. Cable operators are turning to broadband to make up the difference, but virtual providers like Hulu don’t have that option.

“The ramifications of success could have an effect that goes far beyond just Hulu’s partners, from [competing cable TV providers] to cable networks to Netflix. A failed Hulu virtual [cable-TV provider] could dispel the idea of widespread competition for incumbent bundles from virtual bundled competitors,” Ross wrote in his research note. “We are skeptical that the Hulu bundle will meaningfully impact the [cable-TV] landscape from a subscriber standpoint. We simply wonder whether the price/value will be strong enough to attract customers at ~$40, with much less content than the current larger bundles.”

Ross predicted Hulu will bundle several expensive sports networks, as indicated in surveys Hulu sent to potential customers. Those surveys suggested Hulu’s service will include a variety of Regional Sports Networks from Hulu’s owners, which include Fox and Comcast-NBC. One potential exclusion is Madison Square Garden Network (MSG), a potential omission that concerned MSGN investors enough to drive the share price down after a significant spike in mid-August.

The issue of MSG could open an interesting new front in the war on cable television pricing. MSG’s viewership is focused in New York, New Jersey and Connecticut and one of the largest cable providers in the region is cost-conscious Altice USA, which took over Cablevision. Ross states MSG Network’s addition on the Hulu lineup could give Altice more leverage to force better contract renewal terms.

“For instance, Altice could theoretically tell those that want MSGN to switch their video provider to Hulu, while staying on Altice for broadband,” Ross wrote. “We do not believe this would be an ideal approach for either party, but it is possible.”

Apple TV

Apple’s ability to successfully force its way into the pay television business with a cord-cutter’s streaming TV solution has been left languishing since 2009, thanks to some of America’s largest cable and entertainment companies who think Apple is arrogant and out of touch.

The Wall Street Journal today published a story showing how Apple’s plans to challenge the cable TV industry much the same way it revolutionized digital music has rubbed the big and powerful the wrong way. Apple’s desire to launch a cheaper streaming video service with a slimmed down TV lineup and robust on-demand options has flopped, because executives have no interest in bending to Apple’s way of thinking.

In 2009, Apple decided it wanted in on the streaming pay-TV business. At the same time Time Warner Cable began experimenting with data caps, Apple was approaching local stations and broadcast networks and offering them premium payments — higher than what the cable industry itself paid — for Apple’s choice of stations and cable networks. The deal meant Apple would alone be free to pick only the channels it wanted to carry, a major departure from the industry practice of contract renewals that bundled popular networks with spinoff and lesser-known channels cable operators didn’t want to carry. Apple’s hard-charging negotiator, Eddy Cue, seemed to believe that if Apple was at the negotiating table, that alone would be enough to get a deal done. It wasn’t.

Two years later, Time Warner Cable approached Apple seeking to launch a joint TV venture that could compete nationwide with satellite and phone company competitors. The talks were at the highest levels at both companies, involving Time Warner Cable’s then-CEO Glenn Britt, Cue, and Apple CEO Tim Cook. Cook also approached Brian Roberts, CEO of Comcast, promising him the service would only be sold through cable operators — good news for Comcast but bad news for open competition.

This time, Apple sought money from the cable companies, not the other way around. Cable operators were told they would need to pay $10 a month per subscriber to Apple, with no guarantee that fee would not increase in the future. Just as concerning was Apple’s insistence that subscriber authentication would require customers to use their Apple IDs, a departure from the cable industry’s push to adopt TV Everywhere, where customers could unlock streaming video from any cable network simply by logging in with the username and password they set up with their pay TV provider. Apple was also characteristically secretive about their user interface and left cable industry executives flummoxed when they asked Apple to sketch out what the service would look like on a napkin. An Apple official would only respond that their interface would be great and “better than anything you’ve ever had.” The fact Apple refused to answer the question did not go unnoticed.

Nor did Cue’s unconventional way of negotiating with some of the most powerful entertainment executives in the country. When Jeff Bewkes, CEO of Time Warner (Entertainment) agreed to meet with Cue about Apple licensing Time Warner’s critical networks — which include HBO, CNN, and TNT — Apple’s negotiator showed up 10 minutes late. While Time Warner’s negotiators were smartly dressed in business attire, Cue turned up wearing jeans, a Hawaiian shirt, and sneakers with no socks. It went downhill from there, because Apple insisted on valuable on-demand rights to full seasons of hit shows and permission to let viewers store their favorite recordings on a massive cloud-based DVR that included features like automatic recordings of hit shows and advanced ad-skipping technology.

Crickets.

More than a few programmers used to having their way with cable operators were shocked by Apple’s ‘arrogance’ and unconventional way of doing business. The newspaper reports one former Time Warner Cable executive watched with amusement as stone-faced programmers were unimpressed with Apple’s demands.

Jon Lovitz offers a visual hint what Mr. Cue must have looked like meeting with high-powered execs at Time Warner (Entertainment)

“[They] kept looking at the Apple guys like: ‘Do you have any idea how this industry works?'” said the former executive.

Apple responded ‘doing new things requires changes that often are unsettling.’

A year later the negotiations were on life support, as Apple struggled with the arrival of 2015 with no slimmed down streaming TV package to offer Apple TV owners.

Apple’s demands flew in the face of decades of cable industry business practices, which give channel owners virtual guarantees of rate hikes with each contract renewal, the right to force their spinoff networks on the cable lineup in return for a comfortable renewal process, and the cable industry’s right to an assurance everyone was getting the same kind of deal (except volume discounts). Any deviation from this would result in panic on Wall Street, as investors’ dependence on perpetually improving quarterly financial results based on revenue boosts from new or higher fees would come crashing down if a company like Apple got a better deal.

One industry insider suggested once a company like Apple got a deal on sweetheart terms, every other distributor would demand the same deal (and many have contract provisions that require it). Apple may have assumed that because it managed to get the recording industry to agree to its iTunes digital music distribution deal 15 years earlier, so the cable industry would go. Except the road to cut-throat deals for entertainment programming is littered with dead-end business plans that had to be quickly modified when the discounts ended.

Netflix and Starz both learned expensive lessons when early discounts on licensing deals ended after Hollywood saw how much money those companies made from streaming. When licensing contracts expired, entertainment companies sought massive increases in licensing fees to “fairly share” the proceeds. Netflix ended up walking away from several studios, seriously impacting their online streaming catalog. Eventually, Netflix decided if they cannot beat the studios, they should join them, creating original programming to attract and keep subscribers.

Cue in real life

After almost a decade spent trying to get into the online cable business, Apple now seems more likely to follow Netflix, Amazon, and Hulu, and devote time and money on developing its own original programming. Instead of trying to license and bundle network programming, Apple TV today supports independent apps created by various networks. Viewers still get to watch their favorite shows, Apple does not have to pay for streaming rights, and there is a joint effort to create and support a single login so viewers can get access to content without constantly re-entering usernames and passwords.

Apple’s original shows include “Planet of the Apps,” a reality series, a miniseries being developed by Dr. Dre, and a spinoff of CBS’ “Carpool Karaoke.” The shows serve a dual purpose — entertaining viewers and helping push sales in Apple’s App Store and streaming music service.

Also under consideration are big budget, critically acclaimed original shows and series that could generate positive buzz for Apple TV, like “House of Cards” has done for Netflix.

Developing programming keeps negotiators like Apple’s Mr. Cue from having to challenge a very profitable pay television industry on their terms and spares Apple from creating a cable package of linear TV channels subscribers increasingly don’t care about. Viewers want on-demand access to the shows they want to see and don’t care that much about who supplies them and how.

So in the end, the intransigence of Big Cable and Hollywood studios that are now worried about cord-cutting may have done Apple an enormous favor, sparing them from being entangled in a business that buys and sells channels to fill a bloated and expensive cable television lineup more and more consumers are now deciding they can do without.

Updated: Link to WSJ story corrected.

Sony PlayStation Vue has added live streams of CBS stations in nine new markets, expanding the reach of CBS-affiliated stations on the cable TV online alternative.

Effective immediately, subscribers can watch these CBS affiliates if you are located within the local coverage area (thanks to Cord Cutters News):

• California: KFMB San Diego
• Florida: WPEC West Palm Beach
• Michigan: WWMT Grand Rapids/Kalamazoo
• North Carolina: WBTV Charlotte
• Ohio: WKRC Cincinnati, WOIO Cleveland
• Pennsylvania: WHP Harrisburg
• Texas: KEYE Austin
• Utah: KUTV Salt Lake City

PlayStation Vue isn’t just for game consoles, available on PlayStation 4, PlayStation 3, Google Chromecast, Roku, Amazon Fire TV/Stick, and also available on the PlayStation Vue mobile app (iOS/Android). A seven-day free trial is available to U.S. viewers.

The service appears to be a more direct competitor to traditional cable television, offering a substantial number of traditional cable networks and an increasing number of local over the air stations:

PlayStation Vue Packages:

• Access: 55+ channels, including an assortment of cable, movie and sports channels for $29.99 per month ($39.99 if local stations are provided)
• Core: 70+ channels and regional sports networks for $34.99 per month ($44.99 if local stations are provided)
• Elite: 100+ channels, including all channels noted above plus Epix Hits and two other entertainment channels for $44.99 per month ($54.99 if local stations are provided)

Showtime is available a-la-carte. In smaller cities without live local station streaming, the service offers on-demand access to selected network shows.