Perspective: Heading off a potential FCC debacle

A decade ago, Congress decided cable companies and their competitors should allow consumer electronics manufacturers to make "plug and play" set-top equipment that would work with any cable or direct-broadcast satellite service. Rather than leasing it, consumers could buy such equipment from multichannel video program distributors.

So it was that Congress authorized regulations in 1996 to ensure that equipment used to access multichannel video programming would be available at retail from entities unaffiliated with cable or direct broadcast satellite service operators.

Congress' goal may have made theoretical sense then in the staid, still fairly monopolistic world that characterized analog communications. However, the rapid changes in technology and the marketplace spurred by the digital revolution require that the FCC revise its equipment regulations, or their costs to consumers will far exceed their benefits.

With a firm digital-TV transition date, it is counterproductive to deter consumers from switching by raising their price.

First, some history.

In 1998, the FCC directed the cable industry to develop a physical device--now called a CableCard--containing the security functions that could be inserted into the equipment of independent manufacturers.

That made sure that their boxes could be used with cable systems around the country. The FCC thought that this separate security device would allow multichannel video program distributors to retain control over the security function while enabling independent entities separately to market navigation devices.

The cable industry has so far supplied about 200,000 CableCards for use in more than 140 models of digital cable-ready devices. But the vast majority of cable subscribers continue to use equipment leased from their cable companies.

The FCC went further. In 1998, it required that all multichannel video program distributors stop selling or leasing new devices that integrate both security and nonsecurity functions by 2005. This rule meant that all equipment used to access cable services would rely on common technology--like the CableCard.

However, the agency exempted from this integration ban multichannel video program distributors that support the use of equipment available in unaffiliated retail outlets and that operate throughout the United States.

Direct-broadcast satellite service providers were the only multichannel video program distributors that qualified for the exemption. That's because the FCC found that, unlike cable subscribers, users of direct-broadcast satellite services could buy a device and use it anywhere in the country. Thus, cable operators were covered by the ban, while their principal competitors were not.

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.