“CableCARDs have failed to stimulate a competitive retail market for set-top boxes.”
[Editor’s Note: This is the first of a series of articles exploring the impact of the FCC’s Broadband Plan on the US Video Market]
Speed and Access Only Part of the Story: While most of the press attention on the FCC’s recently released Broadband policy plan focused on increasing broadband speed and availability, little attention has been paid to some significant changes proposed for in home internet access equipment. This includes home gateways and set top boxes.
Can You Say Anti-Trust?: Sections of the plan fall just short of accusing US Cable providers of collusion with Motorola and Cisco to prevent innovation from upsetting their enormous market share of the US set top box business. Since Congress first passed Section 629 of the Communications Act in 1996, US Cable companies and their chosen CE device providers have dragged their feet in implementing CableCARD devices which, in the FCC’s opinion, stifled innovation and new technology in the US retail market. By contrast, there are multiple approved cell phone manufacturers and an ever growing list of suppliers of approved software applications for those devices.
CableCARD First Mandated in 1998: The order established rules requiring MVPDs (Multi-channel Video Programming Distributors) to separate their CA (Conditional Access) security elements from the device used to navigate programming. The CableCARD, a credit card sized device which acts like a cell phone SIM card, was the solution agreed to by the US Cable industry to comply with the FCC orders. The FCC “required” cable operators to use CableCARDs in the set top boxes they leased to their subscribers.
Slooooooow Implementation of CableCARD: Six years after the order, the first CableCARD enabled devices hit the retail stores. What could have taken so long? If you had millions of subscribers paying you anywhere from $2.50 to $5.00 per month to lease a 20-year-old cable box, would you want to spend millions of dollars to upgrade your customers’ equipment? And why on earth would you agree to allow a retailer to SELL your customers a new cable set top box if it meant loosing millions of dollars PER MONTH on box lease fees? Where is the capitalist greed in that equation?
The Current State of the Market: According to the FCC’s plan, currently Motorola and Cisco together captured 95% of the cable set top box market shipments in the first three quarters of 2009. Only 1% of the set top boxes for cable homes was from a retail outlet. The state of affairs in EMEA markets is far more competitive; the top two competitors shared only 39% of the cable set top business in their markets. This prompted the FCC to declare; “Despite Congressional and FCC intentions, CableCARDs have failed to stimulate a competitive retail market for set-top boxes.” They go on to state; “A national or global market with relatively low costs of entry, like that for many consumer electronics markets, should support more than two competitors over time.” Hmmm…I wonder why no one else has been successful? I’m sure it has nothing to do with Motorola’s IP for CA or the fact that CableLabs is the only “independent” testing facilities to ensure that the Motorola CA is not compromised. “The two companies [Cisco and MOT] continue to control both the hardware and the security on the [US] cable set-top box through their proprietary conditional access systems.”
Broadband Home Gateways to be Mandated by FCC: Along with including satellite and telco providers in future regulations which affect cable operators, the FCC is recommending that Home Gateways replace set top boxes as a method of improving innovation and access in the US markets.
Recommendation 4.12: The FCC should initiate a proceeding to ensure that all multi-channel video programming distributors (MVPDs) install a gateway device or equivalent functionality in all new subscriber homes and in all homes requiring replacement set-top boxes, starting on or before Dec. 31, 2012
WOW!!!: This should have everyone in the OTT, STB and CE Devices industries really excited. If this recommendation becomes a mandate, the set top box, as we have known it, may have just been handed its expiration date. And now we aren’t just talking about cable boxes anymore. As they point out, 4 of the top 10 TV providers in the US (satellite and telco) representing 41% of subscribers, are not cable companies. So we may be headed toward the all-in-one, multi-hybrid, home gateway device. The goal is to provide for seamless access to traditional subscriber (cable and satellite) TV, along with ATSC (free digital) AND Over The Top video content. And least we forget, seamless transition to your PC, game platform and Mobile TV on your cell phone….but we’ll save those aspects of the plan for another article.
Keep pushing forward.
[You may contact Jeff directly for consulting and full-time employment opportunities.]