Competition: In the Cards

The following is an excerpt from testimony TiVo CEO Tom Rogers delivered to the House Subcommittee on Telecommunications and the Internet on May 10.

We’ve gone from an era of consumer choice in distributing more and more channels, to an era of consumer control. That means allowing viewers to view content on their schedule, at their convenience, when and where they want, be it at home, on a laptop or an iPod. The consumer controls the experience, not the distributor. To provide a sense of the scale of this trend towards choice and user control, digital video recorders are used in over 17% of American households today and over 10 million iPods were sold in the last three months alone.

In order for that type of consumer control to be maintained in a digital world, independent consumer-electronic companies like TiVo must continue to have access to the cable and broadcast television signals provided by cable, satellite and other multichannel video programming distributors. CableCards have been a key step taken to guarantee that devices like TiVo have access to those television signals and continue the ability for consumers to control their television experience in a digital world. Congress recognized in 1996 that, with television signals beginning to become scrambled, consumer-electronics companies would not be able to make devices that received television signals without access to descrambling technology. … And without competitive alternatives, there would be nothing to drive innovation and consumer choice.

Section 629 of the Telecommunications Act was thus enacted to ensure that consumer electronics companies could make set-top boxes that could access all cable television channels, whether scrambled and unscrambled, which consumers could purchase at retail. As part of the implementation of Section 629, the Federal Communications Commission required the cable industry to separate the security module from the rest of the set-top box and make this security module available to consumer electronics companies so that consumers could purchase a competitive television receiving device at retail, bring it home, plug it in to their television source and it would work. The CableCard is what the cable industry developed to fulfill this requirement.

One of the biggest threats that we see to innovation and consumer choice that the Committee must focus on is the prospect of CableCards being rendered useless by the implementation of technologies by video distributors that limit the number of television channels that can be received by consumers with retail CableCard devices. … So the first step in guaranteeing that consumer choice and control is not frustrated at the outset is to make sure that CableCards are adequately supported and consumers have confidence that that they’ll receive the television channels they want to receive.

We are entering a world of consumer control where independent set-top boxes with access to television signals which require CableCards that actually work is a critical underpinning of providing consumer choice and control. The whole notion of CableCards, in fact, should be extended to the satellite industry.

Finally, through the opportunity to connect broadband directly to the television set, the era of true a la carte on-demand television is here. … We are at a critical stage where all of that promise must be allowed to flourish and be protected against incumbent interests that are threatened by innovation and competition.