On The Set-Top Box, You Know Best

By Chip Pickering

With 900 channels of reruns, you would think it would be hard for the cable industry to pick a favorite show. But listening to the cable companies’ set top box arguments in Washington DC, one would have to assume it’s the 1950’s sitcom “Father Knows Best.”

It’s old, traditional, and predictable. Just like cable’s arguments against allowing consumers the freedom to choose their own video device.

Recently, FCC Chairman Tom Wheeler announced that he would heed the bipartisan Congressional mandate to bring competition to the box, an area where the cable and pay-TV industry controls 99 percent of the market. The FCC wants open platforms that enable consumers to move between traditional cable content and new Internet streaming services without having to change devices. Pretty straight forward.

A wave of consumer support poured into the FCC and across social media through the hashtag #UnlockTheBox. Seen by millions, it became a rallying cry for change. Headlines calling for an end to the tyranny of the box proliferated, and editorials across the nation praised the news.

Predictably, the cable and pay-TV industry responded like a controlling parent, suggesting they and only they know what’s best for you and your television: What you should pay. What you should watch. And what device you watch it on. That’s been their formula for a long time. Prices rise, innovation falls.

This has pushed their customers to revolt by cutting the cord and ranking cable dead last in customer satisfaction.

Is it really that out of the box to suggest changing the set-top box policy might be best for cable as well?

It starts with competition.

Lack of choice continues to be at the heart of cable’s problems. The no-choice set-top box has resulted in a 185 percent increase in box prices since 1994. By contrast, in the same time period, prices for televisions and computers dropped by 90 percent. Innovations, many from brand new companies, have revolutionized phones and televisions as well.

The Department of Justice agrees. They recently welcomed the FCC action, as the old rules do not ensure the benefits of competition and innovation for American consumers.

But the beauty of competition policy is that it’s good for everybody — yes, including the cable and other pay-TV companies. Both incumbents and new insurgent companies — many of which have yet to be invented — can thrive under the FCC’s openness proposal.

Competition policy does two important things. First, it encourages new innovations and new ideas. Once upon a time a little company called TiVo made the first commercially viable video recorder; now those early innovations are used industry wide.

Second, competition expands the market and grows the pool. Truly open and interoperable boxes would mean Comcast could sell their boxes to DirectTV customers, creating a free market scenario where the best box wins. More importantly, the consumer would have the power to choose a box that fits their technology needs and their budget.

History has shown this to be true. We ended AT&T’s ability to force-lease the black rotary dial phone, helping bring new companies with new technology rushing into the space. Today, we have smart phones that power a new on-demand economy. Consumers benefited, prices dropped, and innovation flourished.

And AT&T? Well, they commissioned a report to suggest there would be only 900 thousand cell phones by the year 2000 — far shy of the real number: 109 million. It was a huge new market they didn’t see coming, but have prospered in.

Empowering competition for set-top boxes can do the same for video devices.

Open vs. Closed

It’s clear that the cable industry loves that box the way it is. It provides them with almost $20 billion in revenue each year. That’s $231 dollars per year per family according to US Senate report. Cable responded to that report by raising set top box prices again in 2016.

The closed box also allows cable to control what you see, blocking content from their competitors, mainly new Internet-based streaming companies who want to go directly to the consumer without paying for permission from the cable company.

Ironically, as reported by The Verge, in 2008 the nation’s largest cable company, Comcast, revealed a different vision of the future — one more in line with Chairman Wheeler’s proposal.

In a major address to CES, Comcast declared, “the age of the closed, proprietary set top box is behind us,” stressing the need for an open, national and interoperable structure. They suggested this would lead to a box free world by 2010.

Interestingly, NCTA and its allies never attacked Comcast’s plan to end the “closed proprietary box” over copyright, privacy, ad placement and impact on minority programing as they have done to Chairman Wheeler and advocates for open set top box reform.

But equally important, if an open device policy was good for cable companies then, why not embrace that future again and provide interoperability devices that allow customers the freedom to access streaming content?

Put the Consumer in Control:

While I encourage the pay-TV industry to change the channel, Tom Wheeler’s set-top box plan doesn’t wait for the cable knows best policy to bring innovation.

Wheeler’s proposal puts consumers in control of their device choices, even if they choose no device at all. It is the fastest path to the future. Use of open standards will help bring more content from more places into your home more quickly. In the same way we didn’t allow our streaming services to be throttled by the pipe into the home, we must remove bottleneck of the boxes that block content once it gets there.

It’s time to unlock the box and let competition stream in. It’s a simple solution that incentivizes innovation and lowers prices. The FCC wants to put the future of control in the hands of consumers.

After all, the consumer knows best.