In the United States, 53 million people pay for cable, 2.7 million jobs (direct and indirect) are a result of the cable industry, and the average American adult watches approximately 32 hours of TV a week. Watching TV is an American pastime, but it comes with a cost.
99 percent of pay-TV subscribers rent their set-top box from their cable provider. This results in an annual cost of $231 per household. These rental fees result in a $20 billion yearly revenue for cable companies. The FCC has taken notice and decided that it would like to open the cable set-top box industry to third parties.
FCC Chairman Tom Wheeler proposed new rules in late January that would reduce the barriers for other options to compete with the must lease option on the set-top cable boxes currently used by cable providers. The proposal will go before the full FCC on February 18.
Any changes that the FCC makes will hope to be more successful than earlier attempts at opening the market. The 1996 Telecommunications Act created regulations that assured consumers of the commercial availability of equipment used by consumers to access multichannel video programming. This language meant that, in theory, there would always be an alternative to renting equipment from a cable provider. The FCC implemented cableCARD to be that alternate option. This system allows consumers to purchase cableCARD ready devices and then rent a card from their cable provider for a nominal fee. Even though this system exists as an alternative to the cable box set-top rental market, it is not widely used, and the FCC proposed a successor in 2010 which has yet to take place. Some consumers have reported difficulty getting cable companies to activate their own set-top boxes. The FCC’s goal on February 18 will be to make changes that will have a larger impact for both cable providers and consumers.
Opponents of change have pointed out that any transformation of the market will still be paid for by pay-TV subscribers. On the other hand, the FCC has framed the issue as one of openness with the goal of increasing consumers’ options and compared the situation to land-line telephones, which at one point were only available to be leased until the FCC got involved. The cable TV lobby has framed the issue as the government needlessly interfering in the market and attempting to help large technology companies who are poised to profit off of this cable set-top box market.
Last year, a letter from a small group of Democratic Senators called on the FCC to increase the transparency of the billing practices of cable and internet provides. This letter also pointed out that there are de facto monopolies in many areas of the United States as a result of cable companies increasing concentration. This leaves many consumers with few alternatives for cable and internet, especially in rural areas. Another detail is the low customer satisfaction in the cable TV industry and the number of customers leaving the pay-tv subscription model for online streaming alternatives.
Chairman Wheeler has tapped into a growing dissatisfaction that consumers have with the cable TV industry.
The question remains whether the FCC be any more successful in opening up the cable set-top box market than their attempts in the past have. Their goal is for consumers to have more choices, greater flexibility, increased innovation in ways to view TV, and increased competition which will result in better prices for consumers.
Any change does not necessarily have to come at the detriment of the cable TV industry. Nothing will have to change, and cable providers will still be able to rent out set-top boxes to consumers. As people continue to leave the pay-TV model altogether, an opportunity could emerge for something positive to happen to the cable industry which may result in more customers. Alternatively, this move could turn the cable TV industry, which has largely been left unregulated, against the FCC as they try to find ways to prevent the set-top box market from being opened.
Any change to the current situation will be good for the 99 percent of people who currently rent set-top boxes from their cable provider. Regardless of what happens as a result of the FCC on February 18, consumers do not have anything to lose.