Did the dam just open for internet TV? What the FCC news means for the cable industry and you

Why can no one figure out how to sell TV over the internet? Some of the biggest names in tech have tried and flamed out, like Intel, or offered only half-hearted solutions, like Apple TV. The reason these companies have come up short has less to do with technology than it does with a business and regulatory logjam that protects incumbents.

Now, that logjam is about to break. This week, the FCC announced a process that is poised to change the TV business and let everyone from [company]Apple[/company] to Aereo line up to compete with the cable companies.

What exactly did the FCC announce?

FCC Chairman Tom Wheeler said in a blog post he is passing around a proposal that would allow would-be internet TV providers to operate the same way that cable and satellite companies do. The goal is to create a “technology-neutral” regime for TV.

Why is this a big deal?

This is important because, right now, internet services are shut out of a special law that lets the cable guys offer broadcast channels like CBS and Fox — which are the core ingredient of any pay TV package. If Wheeler’s plan works, it will “break open the dam” for internet competitors, in the words of one person familiar with the industry, by letting them offer those channels too.

Will it change the price I pay for TV?

Possibly. But keep in mind that any new breed of internet TV companies that come under the same legal umbrella as the cable and satellite companies would also have to pay “retransmission fees,” which broadcasters can demand as the price to air their signals. Various reports suggest those fees are $1 to $2, meaning a fledgling internet TV provider might have to pass along $8 in retransmission fees every month just to offer the four big broadcast networks (CBS, NBC, ABC and Fox).

Add in the internet TV providers’ own costs, and price of any speciality channels (such as $7.72 for ESPN or $1.92 for TNT) they might offer, and the final figure could look a lot like a cable bill. But the difference is that, with the arrival of more competitors, consumers could have the option of getting only the channels they want. (It’s also likely that internet TV companies would include other offerings, such as DVR storage or music subscriptions, along with the channel packages.)

Who are the winners and losers?

If the proposal passes, consumers will have more choices to escape their cable companies — making them clear winners. Also among the winners are tech companies like [company]Apple[/company] and [company]Google[/company] and would-be disruptors like Aereo: if they have access to broadcast channels, and predictable regulatory regimes, they can go full-speed with new TV investments.

Meanwhile, count cable companies like Comcast among the losers. The current Cable Act restricts who can come to the TV table, and Wheeler’s plan for “technology-neutral” TV platforms would undercut that advantage.

As for the broadcasters, their statement suggests they are happy with the FCC proposal. This is likely because “technology-neutral” will mean more companies paying retransmission fees, which are an increasingly important revenue source at a time when advertising dollars are moving away from live TV.

When will we know more details about how this will work?

It’s still early days. Wheeler has yet to publicly release the proposal itself, and for now is circulating it internally among other FCC Commissioners. If they support it, the agency will publish a draft in the next few weeks that will be the subject of a public comment process.

Will this actually happen?

The process could take up to a year to wind its way through the FCC process. Meanwhile, Congress could step in and start writing a law that supersedes the whole thing. But for now, Wheeler’s plan appears to be a popular one — meaning there’s a good chance that consumers in 2015 could have a bevy of new TV choices.