FCC ruling on TV set top boxes a major blow for cable companies, new opportunity for tech giants
Today’s ruling could be just the opening Apple, Google and other technology companies have been hoping and waiting for
The Federal Communications Commission (FCC) today may have just blow wide open the market for cable Tv set top boxes – those damn devices Comcast and others force on consumers, and that consumers generally think are technologically antiquated.
The ruling today, approved on a 3-2 vote, says consumers should be able to choose their own TV equipment. The two “No” votes, by the way, were from the Republican commissioners. This same 3-2 vote occurred over the issue of net neutrality.
“Today, the Commission begins the process of unlocking the set-top box marketplace and unleashing the benefits of competition,” said FCC Chairman Tom Wheeler.
According to the FCC, the Congress has mandated that there should be competition in markets including phone services and TV. As an example, you can have your cell service with Verizon or AT&T, but they can’t force the consumer to use their phones – hence Apple, Samsung and others now dominate the market for smartphones (and before them Blackberry and Nokia).
But if you are a cable TV customer you lease the TV set top box from the provider. Those days may be over soon.
“Ninety-nine percent of pay-TV customers lease set-top boxes from their cable, satellite or telco providers. There is no competitive market, contrary to statutory mandate,” Wheeler said. “U.S. consumers, are paying $231 a year to rent those boxes; collectively, these consumers are spending $20 billion annually. And, according to one analysis, over the past 20 years, the cost of cable set-top boxes has risen 185 percent while the cost of computers, televisions and mobile phones has dropped by 90 percent. One of these markets is competitive; the other is not.”
Companies are now weighing in on the ruling.
“We are hopeful that this proceeding results in a competitive environment that increases choice, both for consumers and operators, and protects the business models that operators and device makers have created under the current CableCARD system,” TiVo said in a statement.
Comcast, you might not be surprised, was less than thrilled.
“The FCC’s action is disappointing – but not because the Commission voted to consider how to increase consumer choice in retail devices,” said David L. Cohen, Senior Executive Vice President and Chief Diversity Officer in Public Policy. “That’s a worthy goal that we support as well. The Commission’s divided action is flawed because it ignores the FCC’s own technical advisory committee report and instead puts the Commission’s thumb on the scale by endorsing a government-mandated technology solution.”
“It is really not clear to us that any new regulation is needed to encourage innovation and in fact would actually hinder it,” Stanton Dodge, general counsel of Dish Network Corp, said.
Obviously, the cable industry had two advocates at the FCC.
FCC commissioner Ajit Paj, one of two who voted “No”, objected to the ruling by saying that the goal “should not be to unlock the box; it should be to eliminate the box,” saying that the FCC’s solution was “a 20th century approach to this 21st century problem.”
But the commissioner did sympathize with consumers.
“As someone with three set-top boxes in my home, I share the frustrations felt by millions of Americans across this country. These boxes are clunky and expensive, and I feel the pain each and every month when I pay my video bill. And as an FCC Commissioner, I know that the current set-top box marketplace is the product of an intrusive regulatory regime. Something has to change,” Paj said.
Michael O’Rielly’s objection was with the ability of the FCC itself to make any ruling. But commissioner Mignon L. Clyborn pointed to Section 629 to the Communications Act that he said mandated that the FCC ensure “that a competitive navigation device market exists for access to multichannel video programming.”
“While the costs of other technologies have fallen as competition increased, the cost of the set top box has risen by more than three times the rate of inflation for American pay-TV subscribers over the same period,” Clyborn said.
“This item proposes, not adopts, but proposes, to provide a technology neutral means for consumers to choose how they interact with the multichannel video programming services they pay for. If a consumer wishes to purchase a device or application to access this programming, this proposal will empower that choice. If a consumer chooses to continue to rent a box or app from their MVPD, they have the option to do that too.”