Cable Plug and Play/Set Top Boxes
Back in the day, consumers had to lease their telephones from the phone company. AT&T got rich, while consumers had to pay a lot of money for an ugly black rotary phone that did only one thing. Now it’s different. The phones that used to cost $96 per year to rent now can be purchased for $18 and they do lots more than just dial, like redial automatically, store numbers, switch to speaker phone, or mute, etc. That’s because public policy ended AT&T’s monopoly, preventing it from using special advantages to dominate and control the devices that used the network. The resulting competition unleashed both declining prices and rapid innovation—things like dial-up Internet, and fax machines.
A similar situation exists today with cable set-top boxes, the technology that translates digital cable signals to TVs. Consumers can’t go to an electronics retailer and buy this technology, but rather must rent the boxes from the cable company at a significant cost each month – about $5-$10 each month for each box. In the Telecom Act of 1996 Congress recognized this problem, and directed the FCC to put rules in place to open up this technology to consumers.
The Right Rule Is In Place
In 1998, the FCC adopted rules to do so. Together, the cable and electronics industries responded with CableCARD, which helps prevent signal-theft of digital cable channels.
Unfortunately, devices using CableCARD technology—and even the CARDs themselves—are high-priced and remain unavailable to many cable consumers. Only more competition can bring down prices.
Through an aggresssive lobbying campaign, the cable industry convinced the FCC to delay implementation of these rules, which were supposed to take effect July 1, 2006, until July 1, 2007.
This limits competition, with only consumers able to afford the highest-end TVs able to take advantage of this technology. The right rule is in place. The FCC should reject the cable industry's claims and open up this technology to consumers immediately.
Level Playing Fields Mean New Features, Lower Prices
Today, consumers wanting digital cable have very limited choices Buy an expensive new TV that has a CableCARD slot, or rent an integrated box—without CableCARD—from the cable company for around $100/year. Consumers would benefit if the FCC implemented the rules it already has in place. A competitive market would spur choice and drive down prices for consumers.
The FCC’s 1998 rule gave cable companies seven years to comply with the equal competition rules. Cable companies later won an 18 month extension, and another one-year delay last year. Any further delay in implementation of the CableCard rule makes no sense and would only lead to further consumer harm from a monopolistic industry. Currently, there is not enough competition. Boxes from cable companies can do more than third-party boxes because they are not limited to the CableCARD’s features. With little demand and few companies making CableCARDs, costs and prices are higher than they would in a market when every device relied on them.
The best way to make CableCARDs better in the future is to make sure that cable companies stick to the original plan and start living under the same rules as other manufacturers.
Innovation, Competition Threatened
Until cable companies are obligated to use CableCARDs themselves, they have no real incentive to make sure that those devices work on their networks. If a third-party CableCARD device offers new innovation or lower prices, and competes with a cable company’s offering, a cable operator is likely to do everything it can to steer customers away from competing devices toward their own.
This CableCard rule has been made, challenged, and delayed. The FCC should implement immediately. Cable hasn’t made the case that consumers benefit from exclusive platforms,
limited competition and unequal playing fields. Instead, consumers benefit when many companies have the chance to compete and innovate.
