Perspective: Heading off a potential FCC debacle

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The pace of technological developments has only accelerated since 1998. In March 2005, the FCC extended the integration ban implementation date to July 2007. Now the FCC again is considering requests by cable operators to extend the date. But since the last extension, the landscape has changed even more dramatically.

Verizon Communications and other telephone companies are rushing into the video business. Meanwhile, the two direct-broadcast satellite service operators have done an about-face and are now supporting equipment containing mainly proprietary features. And Congress finally has set a firm February 2009 date for the transition to all-digital broadcast television transmission.

With the changed landscape, this is a case crying out for regulatory relief. Downloadable security should be deliverable within the next few years, but not by July 2007. Implementing the integration ban in the meantime would be very costly to consumers with no real benefits.

Both the cable industry and Verizon estimate that the re-engineering required to enable their leased equipment to work with separate security devices will increase the cost for each box by $72 to $95, adding another $2 to $3 to monthly lease charges.

With a firm digital-TV transition date, it is counterproductive to deter consumers from switching by raising their price. Congress has authorized a fund to subsidize the purchase of non-multichannel video program converter boxes in anticipation of the analog-broadcasting cut-off.

But much less funding will be needed if more consumers already have the capability to receive digital transmissions using digital set-tops supplied by multichannel video program distributors. Moreover, requiring cable companies and Verizon to implement physical separation in the coming months would divert technical resources away from the task of implementing a downloadable security solution as quickly as possible.

Competitors should not be treated in a disparate fashion. Even though direct-broadcast satellite service operators--which account for more than 25 percent of all multichannel video program distributors' subscribers--have moved almost completely to proprietary set-top boxes, they remain exempt from the ban.

Fortunately, Congress recognized in 1996 that developments might well outrun any FCC mandates. It said the agency must waive any regulation if "necessary to assist the development or introduction of a new or improved multichannel video programming or other service offered over multichannel video-programming systems, technology or products."

While agencies have considerable inherent authority to waive regulations, Congress usually doesn't include such express waiver authority in particular statutory provisions, unless to make a point.

In the interest of consumers, the FCC should act quickly to extend the integration ban's implementation date for all multichannel video program distributors while closely monitoring the technological developments in a dynamic marketplace.

Biography
Randolph J. May is president of the Free State Foundation, a Maryland-based think tank. The views expressed here are his own.

More Perspectives

[paulreid99]

Leave the ban in place

This is just more whining by the cable companies, who make a fortune on renting cable boxes and on using their monopoly on them to force even more ads our way.

They will do anything, including moving channels to Switched Digital Video (SDV) (rendering them incompatible with CableCard) to keep competitors like the TiVo S3 out of the marketplace.

If the cable companies had to use the cards themselves, they would finally get around to making them work properly with all the channels on their systems. As it is, they have made a mockery of the FCC and the whole CableCard program. Ask anyone who returned a CableCard. They're not hard to find.

Consumers want real choices and most would gladly pay an additional $2 a month to get them. The cable company raises the rates $2 a month every year anyway. At least let us use our own boxes to get the functionality that we want. That's competition and that's good for the marketplace.

[jtbowers]

how does this help consumers?

wouldn't being able to buy a media management box be better
that renting one for $10 a month? Once a box could be used
anywhere the resale value of the equipment would dramatically
rise and it only takes 30 months to get in the black on a $300
box. Right now the state sponored monopolies (cable
franchises) are forcing consumers to spend more money for the
same content (is 70 cents a month a fair price to charge to every
single subscriber for NFL network?) Your thoughts on
California's statewide franchise for AT&T seem a lot more
consumer conscious than this column. Isn't it time that the
cable DRM be opened up? (Now all we need is a cable-card for
the iPod.)

[d_anders]

NO! Leave the Ban In Place

I wonder where the Free State Foundation gets their funding? Hmm...go check it out.

The underlying tenets that Free State Foundation are appropriate and admirable, but they're utilizing free market arguments to justify the cable industry to remain closed.

CableCard enables CHOICE for consumers. Period.

The reasons why Cable Companies don't like cablecard is because they want to control the full experience with video on demand services, etc.

If anything cablecard reduces churn and locks in consumers more into cable because at this point, they only work with cable. People can jump from leased equipment anyday.

Devices like the TiVo S3 (which rely on cable card to allow access to digital hd content) allow consumers the choice to have DVR experience that is far better and greater than what the cable companies can provide. That's more of a free market notion any day.

And for satellite, and services like Verizon's FIOS. Make them support a universal card (cable card) too, and then consumer will then have the true freedom and choice to move their value add equipment to any provider they want.

No one is telling cable, sat companies that they won't be able to continue to innovate.


cable card

[dn06]

Unbiased opinion??

Is this an unbiased opinion? I have heard that this foundation has strong ties to Comcast.

[mclips123]

Oh please

"In 1998, the FCC directed the cable industry to develop a physical device--now called a CableCard."

"The pace of technological developments has only accelerated since 1998."

Incidental? I think not. Only after FCC prodded the turtle-speed cable started to "innovate."

You ask the consumer electronics industry to develop the so-called "downloadable security," they'll probably come up with it in a year. You ask Microsoft -- who are notorious in delaying just about everything -- to develop such technology, they'll probably do it in a year. Only when you ask the cable industry to develop it, you get the answer that it "should be deliverable within the next few years, but not by July 2007."

Technology-wise it is not that difficult. It's just that there's nothing in it for the cable guys. There's competition in consumer electronics as well as PC industry, so they move faster. Cable providers are really enjoying their quasi-monopolies, so they keep asking FCC to delay this and that, and oh yes, slap the cost to follow regulations to the customers and conclude that's "counterproductive" and not to the best interest of the customers.

So if they really want to be "in the interest of consumers," how about... free cable for everybody?

[ADent01]

Choice

How does limiting a consumers choice help them?

The new CableCard TiVos were just released and many people are having problems activating them, plus the current std does not support PPV, VOD, SDV.

If the Cable Cos used CableCards on their boxes this would work much more smoothly and all the features would by supported likety split.

I personally think the CableCard ruling should be extended to DirecTV and E*, since both providers are single supplier/brand on all their boxes now.