Grover C. Magnus 
Increased competition, consumer choice and falling prices are the main topics of discussion in the latest clash between the Federal Communications Commission (FCC) and cable and satellite TV service providers. While the FCC as a regulator wants to break provider control over the set-top box that brings their programming into households, providers reject the idea. In an unusual act, US President Barack Obama recently endorsed the three-month-old FCC proposal.
The “big question” is whether the FCC’s proposal would actually benefit consumers, even if it were successful, said Marc Tayer, president of MediaTech Insights, a consultancy and author of Televisions, a book that documents the history of digital television. Google, Amazon and other tech companies would benefit “enormously” from opening up the set-top box market, he noted.
“The battlefield is widening,” said Wharton marketing professor Peter Fader, who is also co-director of Wharton Customer Analytics Initiative. He noted that many of the existing cable-satellite telecommunications companies are branching out beyond television to the Internet, telephone service, home security and the Internet of Things. “Victory is going to be the hub of the household.”
Tayer and Fader discussed the broader market dynamics that form the backdrop for the FCC’s set-top box proposal on Knowledge @ Wharton. on Wharton Business Radio on SiriusXM channel 111. (Listen to the podcast at the top of this page.)
The choice argument
“Ninety-nine percent of pay-TV subscribers are chained to their set-top boxes because cable and satellite operators have locked the market,” FCC Chairman Tom Wheeler said in late January in a statement. proposal to “unlock the decoder”. He noted that American households have little choice and pay “high prices” on average of $ 231 per year to rent set-top boxes, which works out to $ 20 billion per year. Citing a recent analysis, he added that since 1994, the cost of set-top boxes has increased by 185%, while the cost of computers, televisions and cellphones has fallen by 90%.
“The battlefield is widening. Victory will be the hub of the household. ” –Pierre Fader
The FCC wants consumers to decide how they receive their programming – through set-top boxes or through devices like tablets or smart TVs using an app or other software. In order to make this possible, he wants cable, satellite and telecom companies to share certain critical information with creators of competing devices, including the programming available to consumers and device features such as capacity. recording.
On the same day that Wheeler unveiled his proposal, service providers formed a coalition called “The future of televisionTo resist the changes the FCC wants by launching a signature campaign with consumers. “The proposal, like previous technology mandates from the federal government, would impose costs on consumers, negatively impact the creation of high-quality content and hold back innovation.” Comcast wrote.
The National Cable & Telecommunications Association (NCTA) wrote about its website: “By imposing new government mandates on network providers and content creators, the FCC may intend to generously reward Google, but in the process, it will ignore contractual freedoms, weaken content diversity and security,” undermine important consumer protections like privacy and block creation and technical innovation that drives positive change in today’s television market. Google, in a recent FCC filing, said the agency “should begin swift regulation to free up competition in the retail navigation device market,” according to a the Wall Street newspaper report.
Try, try, try again
Tayer noted that the FCC’s latest proposal is its third attempt in the past decade to free the set-top box, and that two previous attempts have failed. The first was in 2007, called CableCard, which he described as an “outright disaster. [that] wasted R&D budgets and worse yet, increased the cost to the consumer. This plan also aimed to provide third parties with transparent access to consumers on existing set-top boxes. “This effort failed because the cable companies controlled the platform and made it extremely difficult to use. was finally scrapped, said a report in The edge.
The second attempt came in 2010, called AllVid, which sought to replace existing set-top boxes with something like a universal adapter that allows users to access pay TV content and Internet TV. Again, Google and companies like it were seen as the ultimate beneficiaries. “If you open up the set-top box market and make it available in a retail store, it should lower the price to the consumer, but the opposite has happened,” Tayer said.
“A real concern here is the law of unintended consequences. In this case, that makes Google play. –Marc Tayer
“A real concern here is the law of unintended consequences,” Tayer warned, referring to the latest FCC proposal. “In this case, that makes Google play. Be careful if this poses serious privacy concerns. We don’t have that problem with cable companies because they’re much more regulated by the FCC in areas like privacy, while Google is much less regulated by the Federal Trade Commission.
Unsurprisingly, this is one of the main criticisms of the Future of TV coalition against the FCC’s decision. “These are companies that profit from content for which they have not paid”, he wrote on his site. In addition, he said the proposal endangered the survival of independent and minority programmers.
Time to open the garden gate?
Tayer said that much of the FCC’s decision is to “bring together … two worlds that sit side by side today.” One has cable-satellite-telco service providers with their set-top boxes, and the other has Internet content providers such as Google, Roku, and Apple TV. As he said, cable-satellite-telco television companies operate behind a “walled garden” in the United States with approximately 100 million TV households paying monthly subscription fees. Obviously, they have a lot to protect.
Fader said the term “walled garden” is perfect. “It refers to a determined actor trying to protect their own interests – and unfortunately hurting and hampering their own ability to innovate,” he added. “They don’t want to disrupt their proven business model, even if it [are] lots of interesting technologies are knocking on the garden door. Opening this door could [mean] short term success for anchored providers, but long term could be good for anchored actors if they learn to coexist with them.
Having said that, there are no clear angels or villains. Tayer stressed that the FCC’s decision is not intended to break a monopoly. In fact, cable-satellite-telco service providers do not have a monopoly and are in a competitive market where most US households can choose from three or more service providers, he said. Innovation in set-top boxes has also happened, although some of the set-top boxes installed in homes are old equipment, he added.
“At the center of it all is high speed internet,” Tayer said. Netflix, Amazon and others may now have a small market share, but this business is growing, he added. “Television is slowly making its way to the Internet, and there are concerns about who is controlling these broadband pipes. He also pointed out that there is much less competition in broadband pipelines than there is in the multi-channel pay television industry. “Consumers in the United States typically have one or two choices for broadband internet,” he said. “It gets better over time, but there is no law to impose broadband internet for everyone. “
“Millennials are averse to the cordon and never sign up for a membership.” –Marc Tayer
The cable-satellite-telco industry is also responding to these changes by innovating business models, but this process is slow, Tayer said. He noted that major program creators like Disney and Time Warner are now negotiating with distributors like Comcast or AT&T to consolidate multiple channels.
The “cable cut” phenomenon, where subscribers cancel their existing cable or other service and switch to the Internet for content, is also forcing some changes. These days, channels like HBO, Showtime, Star and others are offering pay-per-view content, and Verizon and others are offering consumer bundles in anticipation of the cord cut, Tayer said. “Millennials are averse to the cordon and never sign up for a membership.” In addition, Comcast is rolling out its X1 set-top box application and broadband internet nationwide, he added.
Presidential motives
These underlying issues aside, the immediate speculation is why Obama would want to get involved in this crash. “We wouldn’t be talking about this issue if the FCC had [merely] issued a statement, ”Fader said. “But when the president steps in, it just adds a little seriousness that you wouldn’t see otherwise.” Tayer saw Obama’s intervention as consistent “with his general vision of an open Internet, [of being] pro-consumer and also by limiting the power of large companies.
