As if they aren’t hurting enough, cable companies may soon face another serious blow (please, hold your schadenfreude). FCC chairman Tom Wheeler (News - Alert) wants to end the cable company monopoly on set-top cable box production. If he has his way, any independent manufacturer will be able to create and sell cable boxes that can access cable subscriptions.
Currently, consumers have to lease their cable boxes through their cable provider. That means the set-top box in your living room is probably significantly inflating your monthly cable bill. According to a position piece Wheeler wrote for re/code, that leasing model stifles innovation and disserves consumers, who are paying artificially high prices on simple hardware.
As Wheeler pointed out, “Over the past 20 years the cost of cable set-top boxes has risen 185 percent while the cost of computers, televisions and mobile phones has dropped by 90 percent.”
That’s an unjustifiable rise in cost, and it has probably contributed to the great migration to streaming that’s terrifying cable execs.
Fortunately, this could turn into good news for the cable companies. Cable companies don’t exactly love installing cable boxes, which are clunky and relatively ineffective hardware (despite their high cost). Cable boxes are kind of like vestigial organs; they were once necessary to access content, but now they’re an unnecessary and redundant piece of technology from a bygone era, and cable companies know it.
In fact, as reported by Nilay Patel over at The Verge, “the cable companies say that they're already facing a ton of competition from streaming apps like Netflix and Hulu (News - Alert), and they have lots of market-based incentives to get rid of cable boxes and move to an app-based model that makes their services better and faster…The cable industry is almost saying it just wants to kill the cable box altogether and move to apps.”
So opening set-top boxes to open market competition may not produce more boxes; in fact, it may put a final nail in the set-top coffin.
And obviously, even if this initiative is pushed through and the set-top box survives, we won’t see an idealistic free-market rise of unknown startup cable box companies. The big tech players will most likely produce their own, tailored boxes with familiar interfaces. Google (News - Alert), Apple, Microsoft, Amazon, Roku, maybe even content producers like Netflix and YouTube may all swoop in when the dust settles.
But that dust could be settling for a while. This is a weird and unexpected development in a market that’s already in flux, and the market isn’t as cut-and-dry as Wheeler wants us to believe.
In his open letter, Wheeler compared his proposal to the regulation of the phone industry: “Decades ago, if you wanted to have a landline in your home, you had to lease your phone from Ma Bell. There was little choice in telephones, and prices were high. The FCC (News - Alert) unlocked competition and empowered consumers with a simple but powerful rule: Consumers could connect the telephones and modems of their choice to the telephone network. Competition and game-changing innovation followed, from lower-priced phones to answering machines to technology that is the foundation of the Internet.”
That’s a bit of a broken analogy. People are already competing with cable boxes via internet content, streaming services, and mobile apps. We can still access cable content from their websites, from Hulu, even illegally. That recourse didn’t exist during Ma Bell’s time.
Even if Wheeler can pass this proposal and open cable box production to the masses, who would really want to participate? Consumer trends are migrating to apps and smart TVs. The set-top box is a vestigial technology that needs to be removed, much like an inflamed appendix. Wheeler’s plan may be the right move, but it’s the right move fifteen years too late.