White House Call for Set-Top Competition Strikes Nerves

The Obama administration last week called on the Federal Communications Commission to open the cable TV set-top box market to competition.

Doing so would let companies create innovative, higher-quality and lower-cost products, the White House said.

“Instead of spending nearly (US)$1,000 over four years to lease a set of behind-the-times boxes, American families will have options to own a device for much less money that will integrate everything they want — including their cable or satellite content, as well as online streaming apps — in one, easier-to-use gadget,” wrote Jason Furman, chairman of the Council of Economic Advisers, and Jeffrey Zients, director of the National Economic Council.

“Maybe the White House and the FCC are worrying about the wrong thing,” suggested Mike Jude, program manager at Stratecast/Frost & Sullivan.

The real issue is that the set-top box “is becoming less of a point of interconnection for video and other services,” he told the E-Commerce Times.

Services “are moving to broadband, which comes through your modem, not your set-top box. And a data connection allows multiple service providers to provide competitive services without a dependence on a proprietary device. It may be that set-top boxes won’t be that important in the future,” Jude suggested.

Cable Industry’s Reaction

The White House proposal would lock consumers into antiquated technology and hamper innovation, according to theFuture of TV Coalition, which the cable TV industry launched in January to protect its interests.

There is widespread concern about the FCC’s plan to open up the set-top box market to competition, said Michael Powell, CEO of theNational Cable & Telecommunications Association.

“Perhaps the strategists at the White House believe their intervention is good politics,” he said, “but it is bad government.”

“I’m no lover of the present cable TV system,” Jim Jones wrote in reaction to Powell’s statement, but “if the government is involved, John Q. Public gets screwed.”

“Guess what, cable companies, we the consumer are tired of getting gouged,” wrote greysave. “Your prices are non commensurate with the times. … I’d take a Roku or Apple TV any day.”

Unstoppable Force

The argument in favor of competition is that set-top boxes are outdated, and customers are paying too much for them.

The set-top box rental market may be worth nearly $20 billion a year, according to Sens. Edward Markey and Richard Blumenthal.

Consumers are, in essence, being overcharged,Public Knowledge and theConsumer Federation of America contended.

“The cable television industry uses these boxes for two reasons: income and tracking,” said technology industry analystJeff Kagan. “They track every show every user watches.”

Competition will be beneficial to consumers because “there will be many competing makers, which will keep prices low, and quality and innovation high,” he told the E-Commerce Times. “Of course, there will be plenty of [garbage] as part of the mix as well, so it will be up to the consumer to choose well.”

However, “we asked consumers if they want to own their own set-top boxes, and they say no,” Stratecast/Frost & Sullivan’s Jude said. “Most don’t even know who makes their set-top box, so I’m not sure that competition in this space will yield many benefits.”

Still, boxes introduced because of competition “will cost less and save the customer money,” Kagan argued. They will be innovative and will give the customer the ability to do much more.

“This is the direction the industry is heading, and there’s no stopping it,” he added. “Then again, there’s no real reason to stop it.”