As chief U.S. communications regulator in 2003, Michael Powell called TiVo Inc. (TIVO:US)’s pioneering video recorder “God’s machine.”
Now Powell, leading a lobbying campaign for cable providers led by Comcast Corp. (CMCSA:US), is pushing for legislation that TiVo says could threaten its reign as the cult favorite for fast forwarding past commercials.
TiVo, outspent more than 60-to-1 by the cable industry on lobbying for all issues, says the change would make it impossible for its users to view some programs. Anxiety levels rose as cable won a preliminary vote in the House last month.
“You cannot sell a consumer a retail device that doesn’t get all the cable channels, no matter how good the device is,” Matthew Zinn, general counsel of San Jose, California-based TiVo, said in an interview. “We would have to adjust. We might go into other businesses.”
Powell leads the National Cable & Telecommunications Association, a Washington-based trade group trying to kill a 16-year-old requirement that cable providers’ set-top boxes have the same anti-signal-theft technology used by independent device makers.
The mandate was designed to ensure subscribers can buy boxes at retail and not only from their cable provider, just as wireless customers can buy many brands of telephone.
Friction over the mandate sheds light on a behind-the-scenes battle over the future of television viewing. As more programming switches to Web delivery, TiVo, Apple Inc., Roku Inc., Amazon.com Inc., Google Inc. and a half-dozen other players are jockeying to deliver inexpensive devices that sell services in competition with cable and satellite offerings.
New cable boxes such a Comcast’s X1 could deliver premium programming such as Time Warner Inc.’s HBO network over the Internet, if unchained from the mandate to share access-control technology. Competing boxes would have access only to basic cable programming through traditional networks, TiVo contends.
Cable operators reap an estimated $7 billion per year from set-top box leasing, giving them “little reason to accommodate retail devices,” Zinn told FCC officials in a March 25 meeting.
Cable-backed language killing the technology mandate is part of legislation to let Dish Network Corp. (DISH:US) and DirecTV continue offering out-of-market TV stations to 1.5 million satellite subscribers. Those viewers would lose their signals if no bill passes by year’s end, a consideration that lends urgency to the debate.
The bill is a version of satellite legislation that expires every five years. Congress has renewed it five times.
Powell has been on the telephone repeatedly looking to end the requirement, said Representative Anna Eshoo, of California, the top Democrat on the telecommunications subcommittee that advanced a draft bill including the cable-favored provision on March 25.
The mandate adds $40 to $50 to the cost of each set-top box the industry rents to consumers, totaling more than $1 billion since the regulation was approved in 1998, Powell told senators April 1. About 57.7 million U.S. households use digital video recorders, according to data compiled by Bloomberg Industries.
“The consumers that choose the cable operator’s leased box are paying a penalty,” Powell said. The cable industry wants to develop “another box of a different choice that would also lower cost and lower energy consumption,” Powell said.
TiVo sells some of its boxes at outlets such as Best Buy Inc. and Amazon.com Inc., and leases others through cable providers, for a total of 4.2 million users, according to a January filing (TIVO:US) by the company. More than 2 million users are in Europe.
Without a mandate, cable companies could switch technology standards “and everybody else is shut out” because their gear would be incompatible, Cathy Sloan, vice president at the Computer & Communications Industry Association, said in an interview. Members of the trade group include TiVo, Google and Facebook Inc.
Cable companies have made it “a hassle” to use independent set-top boxes, Sloan said.
In 2010, the FCC found that only 1 percent of set-top boxes were bought at retail rather than leased from a cable company. The result “could reflect indifference or reluctance by cable operators” to help customers use a competing box, the agency said.
Two companies together supply most boxes that cable companies lease to customers, Bruce Leichtman, president of Durham, New Hampshire-based Leichtman Research Group, said in an interview. Those are Cisco Systems Inc. and Arris Group Inc. (ARRS:US), which last year bought (ARRS:US) the Motorola Home business that makes set-top equipment from Google Inc. for $2.4 billion.
Arris has no position on ending the mandate, Bob Puccini, a spokesman, said in an e-mail. Cisco also has no position, according to Scott Gerber, a spokesman.
The NCTA cable group, where Powell has been president since 2011, spent $19.9 million in lobbying in 2013, and its member Comcast spent $18.8 million, according to the Center for Responsive Politics, a Washington-based research group that tracks money in politics.
Together Comcast and the cable trade group would make up the second-biggest lobbyist by spending, according to the center. Comcast has let the trade group take the lead on the lobbying around the equipment mandate, Sena Fitzmaurice, a spokeswoman, said in an interview.
Cable’s spending compares with $632,500 spent on lobbying last year by TiVo and its ally in the mandate fight, the Computer & Communications Industry Association, according to the center.
The bill including the provision advanced on a voice vote without being formally introduced.
It was based on legislation by Representative Bob Latta, an Ohio Republican. Latta and his bill’s co-sponsors received at least $39,500 last year in campaign contributions from employees of Powell’s cable trade group and Comcast, according to data compiled by the Center for Responsive Politics.
The FCC rule “is a prime example of the many over burdensome and unnecessary federal regulations,” Latta’s spokesman, Sarah Criser, said in an e-mail.
Tom Rogers, TiVo’s chief executive officer, told senators Powell’s proposal would Balkanize the set-top box market as operators set up new access-control systems of their choice.
“We can’t create a retail national device based on a hodgepodge of different standards,” Rogers said. “We need a single standard.”
If the mandate dies, cable operators still would support independent set-top boxes that use today’s shared technology, Powell told senators. There are more than 45 million leased boxes using the technology and “a mere 600,000” boxes sold at retail that do so, he said.
Powell told senators at the April 1 hearing he stands by his remark about TiVo being “God’s machine,” for the power it gives consumers to control their viewing preferences and share shows.
“It’s a terrific device,” he said.
To contact the reporters on this story: Todd Shields in Washington at email@example.com; Cliff Edwards in San Francisco at firstname.lastname@example.org
To contact the editors responsible for this story: Bernard Kohn at email@example.com Elizabeth WassermanTiVo' boxes during the DigitalLife Technology Expo in New York in this Oct. 14, 2005 file photo. Photographer: Ramin Talaie/Corbis