Set-top Competition is the Medicine Cable Needs

The FCC has been trying, after last decades attempts fell flat, to open the set-top box market to competition. Cable companies make a lot of money off of forcing subscribers to rent boxes, which are often underperforming and ill-equipped to serve the modern video consumption habit.

Cable is in a bad position as streaming continues to expand, with advertising and subscriber revenues expected to continue falling. The one thing that could help the market transition smoothly, the advent of the all-comer hardware device, is being actively resisted by the industry that needs it the most.

The proposal was already corrupted in a switch from an API-based model where access comes to the companies to an App-based model where the companies go to the devices. Now it is stalled completely.

The cable company is protecting its box rental revenue and its subscriber revenue at a time when it has enough of both to take a hit and resettle its place in the content delivery field. Instead, as entrenched industries are wont to do, it is fighting against the inevitable. It will see its revenues dwindle anyway, and its corpses (or at least the cable-related appendages; the ISP parts may survive) will then be swallowed by the new generation of media companies.

It is the same sort of short-sighted behavior that threatens our planet when major energy conglomerates don’t buy into the next generation of renewable energy. We may not see the pattern repeated with the auto industry, but that will likely depend on how fast they can merge as fleets of autotaxis become the norm.

What is clear is that the Republican seats on the FCC are actively blocking competition, which is antithetical to the Republican charge that free markets rule. The anti-regulation strain of so-called conservativism is stronger than the free market strain, when the two principles find themselves in opposition.

The lack of easy, integrated media devices will continue to drive consumers away from cable, as most streaming services are available through a single device. Media consumption is largely a social behavior, with people watching content those around them also watch. A generation is growing up without caring about traditional content delivery, and cable is basically ignoring that and fighting against a shift that’s already happening.

The best choice for cable would be to embrace the FCC’s original plan, lobby for the door to be two-way (allowing them to support streaming content on their own hardware offerings), and fight to make the best interface they can at the best price they can. They could even try to strike some subscription deals with streaming services, offering their subscribers the ability to add streaming packages in exchange for a finder’s fee.

Unfortunately, the bigwigs in the cable companies think that this is a very different year, where they can afford to weather the storm. They are betting that the unfathomable will come to pass and their ship will magically right itself. They are foolish for thinking this.

Value in Television

Happened to see a repost about an old (2011) report by the Natural Resources Defense Council (NRDC) finding high electrical costs associated with cable boxes. The environmental cost of rented equipment often gets overlooked, along with the economic losses it perpetrates. Mostly, renting helps the environment. But chronic/long-term renting, where the energy costs or other negative environmental factors are obscured, should not be confused with short-term, purposeful renting.

But, of course, we went down the equipment rental road with Ma Bell for decades before the government finally stepped in and ruled their scheme illegal. Today most people own their own telephones; the few that still have landlines, anyway.

Still, adoption of subscriber-owned equipment appears negligible in television. Digging around turned up a speech/statement from then-commissioner Susan Ness, 11 June 1998 (that’s 15 years ago) (see FCC: Text document: stsn816.txt). It discusses the FCC implementation of Section 629 of the Communications Act. That section charges the FCC with adopting regulations allowing consumers to replace their rented set-top boxes with commercially-available devices. That section was enacted in 1996.

To date, the adoption rate is dismal. It remains a work in stasis: the government has no ability to bootstrap markets in the manner the law dictates.

We see this pattern repeated. Industry, happy with their oligopolies (hell, just look back at Ma Bell, she never did voluntarily sell phones; it took the government breaking the company up to get it done), maintain them. And that’s what we see with cable. And that’s what we’ve seen with tobacco’s sluggish entry into the electronic cigarette market. And so on.

But given enough time, evolution takes its course. The advent of Internet Protocol video services has begun to foster new set-top boxes. New services. Although still developing, it seems clear that before long the industry that didn’t want to evolve will become extinct. Or will likely use whatever cash they have left to buy some small piece of the new industry just as their mast splinters and their sails (and sales) fall to the sea floor.

Ahoy, but a new raider appears on the horizon. We’ve been reading about self-driving cars, and that the ownership of cars will die off. That’s both good and bad, depending on how quickly an oligopoly develops. We will face the same sort of shipwreck of capitalism that cable has been. Like Michael Caine in The Island, stranded on a desert island of bloodthirsty, inbred swashbucklers.

Does the rental racket, per se, mean oligopoly? Not hardly. The oligopoly of phone and cable came not out of necessity but the desire for an extra subscriber fee. Maybe with a provision similar to the Affordable Care Act’s 80% rule (that 80% of premiums go to actual care), it could have been avoided: if all rental fees had to be at least 80% provisioned for equipment replacement/upgrade.

But for cars, as long as the fleet-ready regulations are low enough, anyone could likely purchase and maintain a vehicle that could generate revenue. That is, if the requirements for an autonomous car to be rentable are low enough (some simple quality test system, payment/route system, etc.), it will thwart the ability for some few companies to simply control the market, excluding competitors.