FCC Rule Change Could Turn Apple TV into A Cable TV Competitor

FCC Chairman Tom Wheeler has proposed a change to the rules controlling who broadcasters sell content to, and would bar them from refusing to sell to Internet-based providers. That translates to a big opportunity for Apple to add new channels to Apple TV without cutting deals with cable providers like Comcast.

FCC rule changes could mean you'll watch all your TV shows on Apple TVFCC rule changes could mean you'll watch all your TV shows on Apple TV

The change is really more of a reinterpretation or extension of existing rules to include companies wanting to offer TV channels over the Internet. Currently, broadcasters sell their content to the likes of Comcast and Dish, but refuse to do the same for Internet-based services — and are currently within their rights to do so.

Should the proposed rule change go through, Apple, Aereo, and other companies looking to offer a wide range of shows through Internet streaming would be able to swing their own deals instead of working through cable TV providers. The change could also open the door for a la carte channels instead of the forced channel bundles cable and satellite providers offer today.

Mr. Wheeler said,

Consumers have long complained about how their cable service forces them to buy channels they never watch. The move of video onto the Internet can do something about that frustration – but first Internet video services need access to the programs. Today the FCC takes the first step to open access to cable programs as well as local television. The result should be to give consumers more alternatives from which to choose so they can buy the programs they want. 

The proposed rule change is essentially the same thing that happened when satellite providers wanted to get in on the TV programming game, and it seems to have worked out well for them. He added, "I am proposing to extend the same concept to the providers of linear, Internet-based services; to encourage new video alternatives by opening up access to content previously locked on cable channels."

The change would open the door for Apple to negotiate independent deals with broadcasters, and then add their content to Apple TV as new channels. Users could subscribe to those channels without having to buy a multichannel bundle, and they wouldn't need to have a cable TV subscription to see content like they do now for many Apple TV channels.

Mr. Wheeler is hoping to push through a new interpretation of what "multichannel video programming distributor" means that frees it from specific technologies. That, in turn, would make it possible for Internet-based content distributors to get in on the game, and future distribution technologies would be preemptively included, too.

Reinterpreting the rules would also ensure cable providers won't have a loophole to avoid FCC regulation.

"Over-the-air TV has already moved from analog to digital transmission. And cable systems – already the dominant providers of high speed broadband – are moving their traditional services to IP-based delivery," Mr. Wheeler said. "This proposal recognizes that a cable system would continue to be regulated as a cable system, even if it migrates to IP delivery."

For Apple, this could play into its Apple TV plans nicely. Before his death, Apple co-founder and CEO Steve Jobs said he figured out how to give TV viewers a better interface and experience, but so far we haven't seen what he had in mind. The FCC rule change could help make his vision a reality and put Apple in head-to-head competition with Comcast and Time Warner.

If so, Apple would have a big advantage in that it could sell channels to customers a la carte, which is something the cable and satellite companies have avoided. If Apple TV put enough pressure on the big players, however, that could change, although it wouldn't happen overnight.

While some of that pressure would come from Apple, the rule changes would bring other players to the game, too. Google and Amazon, for example, both offer Internet streaming content devices, just like Apple. Roku and TiVo could strike up their own deals with broadcasters as well, and Microsoft could turn Xbox into a true cable TV alternative.

The idea that we may finally be able to break free from the stranglehold cable and satellite TV providers have over us is welcome, but it isn't a sure thing — at least not yet. Mr. Wheeler has only proposed the change, and before it becomes official there's a chance it could be shot down by the FCC Commissioners.

With the momentum from companies like HBO and CBS launching their own streaming services, however, it's clear the ball is already rolling. The rules are changing even without Mr. Wheeler's proposal, and it's too late to go back. Next stop: goodbye Comcast, hello Apple TV.