Policy Documents

Research & Commentary: FCC Set-Top Box Regulation

Marc Oestreich –
March 25, 2011

Section 629 of the Telecommunications Act of 1996 authorized the Federal Communications Commission to regulate the television hardware market. On June 11, 1998, the FCC first mandated that cable companies provide a separable security access device (later “CableCARD”) to open the hardware market to third parties. The device would allow consumers to purchase their own cable boxes rather than leasing one from their cable provider.

The CableCARD has seen limited use, with just 14 third-party devices utilizing the technology and a small fraction of consumers requesting the cards. In April 2010 an FCC Notice of Inquiry proposed replacing the CableCARD mandate with a new set of hardware and signal regulations called AllVid.

As the National Cable and Telecommunications Association puts it, AllVid would force multichannel video programming distributors (MVPDs), such as cable and satellite networks, to “disassemble the programming, data, and program guide metadata used to create and provide each MVPD’s service, so that each consumer electronics (“CE”) manufacturer may remake them into a service of its own design.” NCTA argues AllVid would turn cable companies into wholesalers of content, which would violate many of their contracts and licenses. Complying with the new standards would result in a substantial cost to cable companies, which would be passed on to consumers.

In creating AllVid, the FCC aims to bring traditional cable and Internet programming into one format. “The idea of accessing the Internet through the TV screen is certainly attractive,” noted Robert M. McDowell, an FCC member who opposes the regulations, “so attractive, in fact, that the marketplace already appears to be delivering on that vision without any help from the government.” Ventures such as GoogleTV and AppleTV show the market is already supplying innovative alternatives to MVPD-provided cable set-top boxes.

Instead of imposing additional government mandates, deregulating the television hardware market would allow cable companies to provide cheaper, more innovative products. Seth Cooper of the Free State Foundation said, “If there is any provision in the 1996 Telecom Act relating to set-top boxes that the FCC should be invoking, it is the sunset provision.”

The following documents offer additional information on AllVid and the set-top box market.


Apple TV Still Flying Off the Shelves at Amazon
www.businessinsider.com/apple-tv-sales-2011-3
This BusinessInsider article reports that a supply of alternative television hardware already exists, without government mandates. “Meanwhile, it’s not just Apple’s digital video box performing well on Amazon,” reports BI. “A similar device, the $80 Roku box, is #8 right now, selling better than the Apple TV.”

NCTA to FCC: Google Proposal Would Wreak Havoc with MVPD Model
http://www.broadcastingcable.com/article/463709-NCTA_to_FCC_Google_Proposal_Would_Wreak_Havoc_With_MVPD_Model.php
The National Cable and Telecommunications Association argues the FCC’s AllVid proposal would unfairly favor new technologies such as GoogleTV, infringe on copyright law, and put an economic burden on traditional cable companies.

FCC’s AllVid Regulation of Video Devices All Wrong
http://freestatefoundation.blogspot.com/2011/01/dynamic-market-makes-fcc-regulation-of.html
The Free State Foundation’s Seth Cooper argues, “The FCC should respond to staggering innovation and vibrant competition with deregulation, not more regulation.”

The FCC’s Continuing, Costly Video Navigation Device Regulation
http://www.infotech-news.org/article/29515/
Free State Foundation research fellow Seth Cooper argues the FCC’s past failures--CableCARD, FireWire mandate, etc--have been costly for cable companies and AllVid would be far more devastating.

Letter from Content Providers to FCC on Set Top Box Regulation
http://www.infotech-news.org/article/29516
Susan Fox of the Disney Company calls on the FCC to reconsider its proposed regulations on television hardware: “The video marketplace is evolving so quickly that any government-set standard will freeze innovation, including innovation in new programming services.”

Of Set-Top Box Industrial Policies & Self-Serving Interests
http://techliberation.com/2010/10/14/of-set-top-box-industrial-policies-self-serving-interests/
Adam Thierer of the Mercatus Center at George Mason University argues that support for AllVid and other set-top box regulations is “just another example of what Milton Friedman once called the ‘Business Community’s Suicidal Impulse’: the persistent propensity to persecute one’s competitors using regulation or the threat thereof.”

FCC Notice of Inquiry--Set Top Boxes & AllVid
http://www.infotech-news.org/article/29517
The FCC’s official Notice of Inquiry on AllVid and redevelopment of the CableCARD regime.


For further information on this subject, visit the InfoTech & Telecom News Web site at http://www.infotech-news.org or The Heartland Institute’s Web site at http://www.heartland.org.

Nothing in this message is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. If you have any questions about this issue or The Heartland Institute Web site, please contact Marc Oestreich, legislative specialist in telecommunications, at 312/377-4000 or moestreich@heartland.org.