The Federal Communications Commission has ditched its original proposal to reform the set-top box industry and accepted an alternative plan put forward by ca­ble companies, but is making changes that cable TV lobbyists aren’t happy about.

In February, the FCC voted 3-2 for a tentative proposal that would have forced cable companies to provide video and programming information to makers of third-party hardware or applications. Under that plan, makers of other software or devices could have created their own software and user interfaces through which cable customers could watch the channels they subscribe to.

Comcast and other cable companies claimed the original FCC proposal was too difficult to comply with, and sought to maintain control over the user interface. The industry pitched an alternative plan in which TV providers would build their own applications for third-party devices.

After months of behind-the-scenes talks, the FCC’s Democratic majority has accepted the core concept of the industry proposal, but with key changes that the cable industry does not like. FCC Chairman Tom Wheeler announced the near-final plan today, and a final commission vote is scheduled for September 29.

Cable companies had urged the FCC to adopt the industry proposal without making any changes, and continued their opposition in meetings with FCC officials leading up to today’s announcement.

Changes to the industry apps plan

The cable industry proposal would have only required cable company apps to include linear and on-demand TV content, leaving customers without the ability to record unless they buy or rent a traditional set-top box. The FCC will instead require cable companies to provide the same recording functionality in apps that they provide in set-top boxes.

Secondly, cable companies proposed building their applications using HTML5 only. The FCC will instead require the pay-TV operators to use whatever type of technology is necessary to reach the devices being used by consumers. Cable companies can still use HTML5, but if a major platform requires a different standard, cable TV companies will have to use whatever is needed.

Pay-TV operators won’t have to build apps for every conceivable device, but the FCC will require apps for "all widely deployed platforms." The FCC hasn’t yet said how many users a platform must have to qualify, but this would likely include major operating systems like Windows, iOS, Android, and macOS. Cable companies could potentially support desktops and laptops with browser-based apps instead of native applications.

Brand new device makers that want to build set-top boxes with industry apps would probably have to use Android or something similar to get cable TV apps on their devices. If you have a popular third-party set-top box already, there’s a good chance it’ll be supported.

“Pay-TV providers must provide their apps to widely deployed platforms, such as Roku, Apple iOS, Windows and Android,” an FCC fact sheet on Wheeler’s plan said. “Doing so will spur competition in the marketplace to develop new competitive products like next-generation streaming devices, smart TVs and tablets.”

Cable companies that prefer not to build their own apps will have the option of “provid[ing] the necessary code to a third-party developer to develop an app on behalf of the pay-TV provider.”

Cable operators with at least 1 million subscribers, which covers more than 90 percent of the US market, will have to comply within two years. Companies with 400,000 to 1 million subscribers will get four years to comply. Pay-TV operators that still use analog instead of digital technology or have fewer than 400,000 subscribers will be exempt from the rules.

Small and medium-sized cable operators represented by the American Cable Association initially argued that no new rules should apply to companies with 1 million or fewer subscribers. When that failed, they urged the FCC to provide an extra three years for companies with 400,000 to 1 million subscribers; instead, they got an extra two years.

Licensing controversy

Licensing of the apps to devices or platforms remains controversial. The FCC said its plan requires the industry to come up with a standard license that “will give device manufacturers the certainty required to bring innovative products to market.” With a standard license, device makers won’t have to comply with different terms for each pay-TV operator.

Pay-TV operators and programmers will have to work together as part of a licensing body to create the license, with the FCC reviewing the licensing terms to make sure they comply with the rules.

Wheeler described the proposed rules in a Los Angeles Times op-ed today.

“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,” Wheeler wrote. “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.”

Wheeler touted the proposal’s requirement for integrated search. Customers will be able to type the name of a movie or show and see where it can be viewed, whether from a cable provider’s channel lineup or an online service like Amazon Prime or Hulu.

Wheeler also wrote that all copyright and licensing agreements will remain intact, since “the delivery of pay-TV programming will continue to be overseen by pay-TV providers from end-to-end.”

The apps would also have to provide access to the Emergency Alert System, and comply with privacy and accessibility rules.

Cable lobbyists urged the FCC to change course in a meeting last week, according to an ex parte filing submitted by the National Cable & Telecommunications Association and AT&T. The proposed licensing body in particular raised objections from the NCTA and AT&T.

The FCC should have accepted the industry proposal to offer HTML5 apps "on commercially reasonable terms," which the NCTA and AT&T claimed makes a central licensing body “unnecessary.”

The FCC proposal “is also unworkable as it does not reflect how licensing is handled in the marketplace today,” the NCTA and AT&T wrote. “Programmers today do not pool and offer uniform rights across all platforms and uses. They segment the market, license some rights to OVDs [online video distributors] and other rights to [pay-TV operators], and make refined judgments about devices, device security, and how to distribute their content on various platforms. This market-driven licensing process is providing enormous choice to consumers in how they access content, and it is unclear why this successful model should be displaced with a totally unproven government-driven process.”

The NCTA issued a statement after today's FCC announcement claiming that "The work of this licensing body would be subject to intrusive FCC oversight, creating a bureaucratic morass and improperly involving the FCC in private licensing arrangements in a way that will slow the deployment of video apps, ignore copyright protections and infringe on consumer privacy."

Programmers including Disney, CBS, Viacom, and Time Warner also objected to a licensing process controlled by the commission or a third party.

Today, the Motion Picture Association of America called the proposed licensing system "a compulsory copyright license that the FCC does not have authority to grant."

New plan earns praise, and ridicule

Cable companies and programmers could try to stop the rules by suing the FCC after the vote. But Wheeler’s most pressing concern was making sure he had enough votes to approve his plan. He had to ditch his original proposal to gain the vote of Democrat Jessica Rosenworcel, who said the original was “too complicated” and raised copyright concerns.

Republican Commissioner Michael O'Rielly blasted Wheeler's new proposal today, saying "it appears to exist within a fantasy world of unlimited Commission authority. The Commission is and must remain in the business of licensing spectrum and infrastructure, not content."

Consumer advocates didn't get everything they asked for, but advocacy group Public Knowledge is pleased with the FCC's new plan. “Since his initial proposal, the Chairman has worked assiduously to address all the legitimate concerns raised by some programmers and the pay-TV industry," Public Knowledge Senior Counsel John Bergmayer said. "The modified approach the Chairman has described today addresses the legitimate concerns raised by these parties while preserving the benefits to the public, and fulfilling the Congressional directive that requires the FCC to ensure that viewers do not need to rent set-top boxes from their providers."

US Senators Edward Markey (D-Mass.) and Richard Blumenthal (D-Conn.) supported the new FCC plan. Markey and Blumenthal last year conducted a survey of pay-TV providers, and said it found that about 99 percent of US customers rent set-top boxes directly from their providers and pay an average of $231.82 a year in rental fees.

“We’ve seen an explosion of choice and innovation in consumer electronics in everything from mobile phones, to personal computing, to music players. Yet for two decades, there has been almost no choice in the pay-TV video box marketplace," Markey said. "The FCC is using authority clearly provided by Congress to better allow consumers to choose which device to watch programming for which they have already paid."