Consumer Premises Equipment

213.Consumer Premises Equipment

A.Introduction

215.Internet video has changed consumers’ viewing habits, choices, expectations, and options.⁷⁰⁹ Consumers are now able to view multichannel video programming from a mix of cable/Internet Protocol television (IPTV)/DBS (including video on demand), broadcast, and OVD systems, but almost all of them view MVPD programming using equipment leased from an MVPD.⁷¹⁰ Some suggest that greater competition in the CPE market for devices that can access multichannel video programming would foster development of features such as innovative user experiences and search functions.⁷¹¹ Further, commenters assert that consumers would benefit from having different device options for attaching to networks.⁷¹² Most consumers want to view streaming online video through their television sets by incorporating easy-to-use, integrated technology.⁷¹³ NCTA states that MVPDs and OVDs have developed “apps” enabling consumers to access their video services both inside and outside the home on IP-enabled tablets, smartphones, Smart TVs, game consoles, retail set-top boxes, and personal computers, and NCTA reports that there are over 460 million IP-enabled devices that can receive apps.⁷¹⁴ New business models for viewing content are being introduced, such as MVPDs enabling subscribers to stream programming from their DVRs to their mobile devices via Wi-Fi or to download the recorded content to their devices for viewing when a connection to the Internet is unavailable.⁷¹⁵ Some MVPD operators and cable networks are offering an option of purchasing limited cable programming exclusively for IP-enabled devices.⁷¹⁶

216.In this section, we examine technological, regulatory, and market developments related to CPE since the last report. First, we update advancements in higher resolution video content and televisions. Next we consider the development of navigation devices by MVPDs and third-party vendors. Finally, we review developments in devices used to access online and mobile video services.

A.4K and 8K/UltraHD Televisions

218.The amount of 4K content available to consumers has grown considerably since the last report. All such content at this time is offered through broadband connections from a growing number of OVDs.⁷³⁰ Currently, no U.S. broadcaster is supporting Ultra HD.⁷³¹ Some streaming video providers offering 4K content include YouTube, Amazon Prime Instant Video, M-Go, and Netflix.⁷³² Amazon, Netflix, and a number of Hollywood studios are now shooting all original content in 4K.⁷³³ Netflix recommends an Internet download speed of 25 Mbps of better for Ultra HD quality streams,⁷³⁴ while others recommend as little as 15 Mbps to ensure a good experience.⁷³⁵ CPE offering access to 4K content includes the new TiVo BOLT⁷³⁶, Amazon Fire TV⁷³⁷, and Roku 4⁷³⁸ boxes. Comcast anticipates a 4K capable Xi4 set-top-box.⁷³⁹ Samsung’s 4K Ultra HD Video Pack⁷⁴⁰ and Sony’s 4K Ultra HD Media Player⁷⁴¹ are add-on proprietary boxes that provide pre-loaded and downloadable Ultra HD content to each company’s 4K compatible models.⁷⁴² 4K Blu-ray discs and players are anticipated to hit the market with limited titles and players.⁷⁴³ Akamai’s State of the Internet Report, finds that 19 percent of the United States is prepared to receive 4K services through broadband. ⁷⁴⁴ This is a two percent increase from last year’s report, which is based on a benchmark of an average broadband connection speed above 15 Mbps.⁷⁴⁵

A.CPE Used to Access MVPD Services

219.Leased CPE. Leased CPE, that is, CPE for which consumers pay a monthly fee to their MVPD operators, is by far the most common way that Americans view television programming. Even as consumers increasingly watch television on other devices, they spend on average more than two-thirds of their time viewing video programming on a television.⁷⁴⁶ Comments submitted by Consumer Video Choice Coalition describe an analysis of the top-ten MVPDs finding that leased CPE is used by approximately 99 percent of MVPD customers at an estimated cost of $231 per year per household, or approximately $20 billion dollars of revenue per year to MVPDs.⁷⁴⁷ Verizon offers additional support for this conclusion, noting that CableCARD penetration (CableCARDs are used to enable retail devices to access cable service) never reached significant levels, hovering around one percent of subscribers for the nine largest cable systems.⁷⁴⁸ The result is that leased CPE is a significant cost for consumers and source of revenue for operators.

220.Penetration of DVRs continues to increase. Approximately 54.7 million, or 47 percent of television households, had DVRs in 2014.⁷⁴⁹ In 2013, DVRs were in 50.9 million or 45 percent of all television households.⁷⁵⁰ The availability of DVRs coupled with other technological developments has spurred consumers’ desire and ability to watch video on a time-shifted basis. The table below provides estimates of the numbers of households that have MVPD service, DVRs, and HD televisions.

Table IV.C.1 Television Household CPE Estimates (in thousands)751
	2013-2014	2014-2015
Total U.S. Households	120,160	121,000
U.S. Television Households	115,800	116,400
Broadcast Only	11,390	12,400
MVPD	104,410	104,000
DVR Owner	54,210	56,100
HD Households	94,700	102,100

221.MVPDs also are focused on developing products and services to meet the trend toward mobile and IP-delivered content.⁷⁵² While non-television-based platforms are not currently seen as a replacement for television viewing,⁷⁵³ consumers continue to increase the time they spend viewing on non-television platforms.⁷⁵⁴ So while televisions will likely remain a mainstay in consumers’ homes for years to come,⁷⁵⁵ MVPDs currently appear to be focusing their resources on applications for use on mobile devices then on CPE for televisions.⁷⁵⁶ NCTA states that all of the top-ten MVPDs have applications for iOS and Android tablets, but only five have applications for the Microsoft Xbox 360, despite its being more common than either tablet. According to NCTA, no MVPD has developed an application for the 12 million Vizio TVs currently deployed, and only one MVPD has an application for the 10 million Roku devices.⁷⁵⁷ Recently, however, Comcast announced that in 2016, “Xfinity TV customers will be able to enjoy their cable subscription in the home via the new Xfinity TV Partner app designed specifically for Roku TVs and Roku streaming players.”⁷⁵⁸

222.Commenters highlighted some developments in the market for leased CPE over the previous year. For example, AT&T and DIRECTV both highlight their extensive suite of leased CPE offerings, which they have deployed over the previous five years.⁷⁵⁹ NCTA notes that the primary, ongoing trend in leased CPE is the migration of functionality previously implemented in the leased CPE to cloud-based operation, especially DVR storage and user interfaces.⁷⁶⁰ Comcast details new leased CPE features, drawing attention to its first-of-a-kind accessible “talking guide,” voice-control features for accessibility and ease of use, ability to restrict leased CPE to children-friendly programming, and other enhancements.⁷⁶¹

223.Small MVPDs express concerns about a lack of access to the same leased CPE provided by larger MVPDs, particularly because large MVPDs drive the market for CPE that MVPDs lease to consumers. Smaller MVPDs believe their lack of scale prevents them from accessing advanced, innovative video navigation devices at competitive prices and remains an impediment to new entrants in the video programming marketplace.⁷⁶² The Consumer Video Choice Coalition argues that large MVPDs benefit from economies of scale and that set-top box manufacturers have an incentive to focus on larger MVPDs, while small MVPDs face high costs if they want to offer devices different from those of the major operators due to their smaller subscriber bases over which to defray costs.⁷⁶³

224.Section 629 of the Communications Act and the STELA Reauthorization Act. Section 629 of the Communications Act directs the Commission to “adopt regulations to assure the commercial availability . . . of converter boxes, interactive communications equipment, and other equipment” that consumers use to access MVPD services.⁷⁶⁴ In past reports we have provided the history of the Commission’s implementation of Section 629 via the separation of security requirements and CableCARD.⁷⁶⁵ Consistent with the content of prior reports, current year data shows a continued gap between the number of CableCARDs deployed for use in retail devices and the number deployed for use in operator-supplied boxes.⁷⁶⁶

Table IV.C.2 Deployment of CableCARDS (Cumulative)767
Year (as of June)	CableCARD Deployment for Use in Retail Devices – Top 10 Cable Operators	Operator-supplied Set-top Boxes With CableCARDS
2006	170, 000	-
2007	271,000	-
2008	372,000	6,232,800
2009	437,800	14,085,000
2010	520,000	21,000,000
2011	582,000	29,300,000
2012	618,000	36,000,000
2013	603,000	42,000,000
2014	620,000	48,000,000
2015	617,000	53,000,000

225.The STELAR terminated the integration ban effective December 4, 2015, and directed the Commission to establish a committee (the Downloadable Security Technical Advisory Committee or DSTAC) to “identify, report, and recommend performance objectives, technical capabilities, and technical standards of a not unduly burdensome, uniform, and technology- and platform-neutral software-based downloadable security system designed to promote the competitive availability of navigation devices.”⁷⁶⁸ The DSTAC filed its report on August 28, 2015.⁷⁶⁹ The report presented two proposals for system security⁷⁷⁰ and two proposals for non-security elements that would be necessary in order to build a device that is compatible with all MVPD systems and services.⁷⁷¹ The DSTAC’s report, and the record developed in response to it, informed a Notice of Proposed Rulemaking adopted by the Commission on February 18, 2016.⁷⁷² In the Notice of Proposed Rulemaking, the Commission proposed to require MVPDs to provide data in a published, transparent format that would allow an unaffiliated device or application to access multichannel video programming, and to support at least one content protection system that is licensable on reasonable and nondiscriminatory terms.⁷⁷³

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attachmatch -> Before the Federal Communications Commission Washington, D
attachmatch -> Before the Federal Communications Commission Washington, D
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