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Death to clunky, creaky rip-off cable boxes – here's how it will happen

FCC proposes blowing open the market to competition

By Kieren McCarthy, 27 Jan 2016

The US Federal Communications Commission (FCC) is trying to kill off one of life's most frustrating rip-offs: the clunky, outdated cable box that you are pressured to "rent" from your cable provider.

Under a new "notice of proposed rulemaking" put forward by the regulator's chairman Tom Wheeler, all cable companies will be obliged to allow other manufacturers to create set-top boxes that provide the same services and work with the same networks.

He is confident there is a market for this, largely because cable companies have been ripping off millions of consumers for so long with their high rental prices. An incredible 99 per cent of cable customers rent their cable boxes – the vast majority because they have no choice otherwise. And that has made them a captured market with little choice but to pay ever-increasing rental rates.

The average American household now pays $231 a year in rental fees for their cable box. That's $20bn a year. Not only that, but the price has increased far beyond inflation: 185 per cent since 1994. So a box worth $100 in 1994 would now cost $285. This compares to an actual inflation rise over that time of 60 per cent, or the equivalent of $160.

Or, to look at it another way, cable companies have been charging nearly five times inflation on old technology – something that is especially stark since technology costs almost always go down over time.

The proposal [PDF] would pull cable companies into an equivalent position as ISPs – where you can still rent your supplier's equipment or you can buy third-party equipment. In the case of ISPs, a huge percentage of internet subscribers purchase third-party equipment even though it costs more up front because it is typically cheaper and better quality.

Upgrading the old-fashioned way

When it comes to cable boxes, cable companies use the fact that their boxes can often be a decade old to push subscribers into upgrading to a more expensive service that comes with a more modern and feature-full box.

The fact that there is enormous financial incentive for cable companies to maintain this wholly unsatisfactory situation helps explain why it has taken the FCC so long to act. And the fact that the FCC has effectively been at war with big cable for two years thanks to net neutrality rules may have finally given the independent regulator the impetus to act.

Under the proposal, it is possible we may see an end to the huge ugly box altogether and have it replaced with far smaller boxes – similar in size to the Apple TV or the Roku – and accompanying apps.

"MVPDs (multichannel video programming distributors) and competitors should be able to differentiate themselves and compete based on the experience they offer users, including the quality of the user interface and additional features like suggested content, integration with home entertainment systems, caller ID and future innovations," said a proposal published by the FCC Wednesday.

Although the proposal will not impact cable companies' rights to bundle whatever services and channels they want at a price that they set, the move – if successful – would open up the cable market like never before. Currently cable boxes are locked down to a single provider and offer only those services that each company offers.

It is not hard to imagine a future Apple TV or Roku that includes the ability to subscribe to a whole raft of different channels offered by different cable companies with the click of a button.

Apple has long been trying to get cable companies to connect to its Apple TV and make its content available through it. Discussions to make that happen, which ultimately failed, were thought to be behind the delay to the most recent four iterations of its black box. With these new FCC rules, that situation would be flipped on its head and Apple would be in a position to include which cable company offerings it wished on its platform.

Or, in other words, the future of TV.

Industry response

Somewhat inevitably, the cable industry is not excited about the plan, presenting Wheeler with a proposal to open up the market as an effort to regulate "video navigation devices."

The Free State Foundation – which promotes itself as a non-profit, non-partisan think tank but which is largely funded by the cable industry and also vehemently opposed the FCC's net neutrality proposals – swiftly put out a press release claiming that the proposals violate the First Amendment.

As for Wheeler himself, he is, according to the foundation, Captain Ahab pursuing Moby Dick. "The FCC appears intent to keep pursuing the big White Whale – but in this case, the White Whale has long since become extinct," it reasons (if that the right word). "The video marketplace indisputably is now subject to effective competition, and this includes the navigation device market segment. To think otherwise, the agency would have to bury its head in the sand."

It goes on to argue that "consumers will be the ultimate losers from another attempt by the Commission to 'fix what ain't broken.'"

Meanwhile, the rest of America has been spotted celebrating. The proposal will be voted on at the FCC meeting on February 18. ®

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