Low-Cost Cable HD Boxes: Who Is Harmed, Exactly?
There continues to be perplexing logic employed by consumer-advocacy group Public Knowledge in its fight against the cable industry’s request to be allowed to provide low-cost HD boxes to their subscribers.
Cable operators want to be able to use inexpensive HD digital terminal adapters that have integrated security, in an exemption to the FCC’s separable-security rule mandating CableCards in operator-supplied set-tops. Such a waiver would let operators more quickly reclaim analog spectrum and deliver HD services to more subscribers (see Comcast, NCTA Want FCC To Exempt HD DTAs For All Operators).
Public Knowledge remains staunchly opposed to this.
Why? According to the group’s comments to the FCC filed yesterday: “Creating exceptions to set top box rules that would allow operators to offer high-functioning boxes would undermine any efforts to create a viable consumer market for set-top boxes.”
So let’s get this straight. Public Knowledge’s position is that cable providers must be forced to deliver a more expensive solution to their subscribers, so that those consumers will therefore… have an incentive to buy an even more expensive TiVo HD DVR or similar product at retail.
That actually sounds completely anti-consumer to me.
This only harms the vast majority of cable customers who prefer to lease their set-tops from their provider. Meanwhile, after forcing operator-supplied HD boxes to be more costly by including CableCards, Public Knowledge can claim that competitive third-party solutions are needed because, gosh, look how expensive it is to lease an HD box from your cable company!
But check this out: Public Knowledge also claims that the FCC’s previous waivers for standard-definition DTAs, granted to Evolution Digital, Motorola, Cisco Systems, Pace and others, have “injured companies who, in good faith, invested in developing compliant set top boxes with the intention of bringing them to market.”
What is that about? It’s a reference to IPCO LLC, an entity that has claimed it’s trying to sell CableCard-compliant equipment to U.S. cable operators. Public Knowledge previously asserted companies like IPCO would “go bankrupt” as a result of the DTA waivers, because the pricing of IPCO’s allegedly FCC-compliant solution would be undercut.
IPCO now claims it has developed an HD DTA system of its own that uses an Arris digital headend, as described in an April 6 FCC filing. While IPCO has never manufactured or sold any set-top boxes anywhere in the world, the company continues to claim it can offer HD DTAs for less than $75 that comply with the FCC’s integration ban. However, that price point is apparently only possible because the separable security module is “only required for premium service subscribers”; to encrypt cable HD channels, an operator would need to pay extra for a CableCard.
Meanwhile, IPCO owner Jim Gee asserted his company owns a patent that covers “relevant and material” aspects of CableCard and CableLabs’ Tru2way technology. IPCO was described as “shell entity that owns and manages a portfolio of intellectual properties owned by Mr. Gee” according to documents filed in IPCO’s 2007 dispute with Alaskan cable operator General Communications Inc. (GCI), which had sent a cease-and-desist letter to Gee after he attempted to trademark “GCI” for one of his companies, Global Cable Inc.
I’m not sure whom Public Knowledge is trying to protect from being “injured” with its opposition to the cable industry’s HD DTA waiver requests, but it doesn’t seem to be U.S. cable subscribers.
Todd Spangler commented:
Bob Teatow,
Sorry - what?
You're talking about broadband-delivered video content. I was talking about devices that interface with traditional pay-TV service. The FCC separable-security regulations for cable govern the latter.
Bob Teatow commented:
Todd,
thanks for letting my post go up and responding.
Roku is perfectly compatible with my CableModem, which runs on Comcast or Cablevision, etc, etc.
I call it a prototype, because it needs a few more buttons on the remote and a bit more software before I can punch in channel number 301 and bring up an HBO stream (or whatever).
(Also we have Hulu.com as a prototype replacement for the "free" network channels.)
Thus IPTV completely bypasses the more traditional Cable set-top box and still delivers HD video with surround(DD5.1 or whatever) sound. Which scares the XXXX out of the cable guys.
See? They got into Internet (IP) business to keep customers and add revenue -- now this pretty-much "open" video over Internet technology is displacing their traditional money-making over-priced cable subscriptions and over-priced on-demand movies. Similar to the big telco's problem with VOIP, cell companies with data plans that make Skype cheaper to talk on the iphone, etc, etc.
ChefJoe commented:
If I bought a DRM encoded format from somewhere I would not expect convenience. That's why I have only purchased DRM-free digital downloads (MP3) and only started doing that in the past few years.
In your example, that file has to be purchased via an installed itunes and could play through that itunes install or itunes on another pc or mac, may ipod models, the ipad, the itv, or drm could be removed from the file using software tools (that one's illegal but possible). That's pretty open in my book - I have had a computer hooked to my TV for 6 years.
We treat cable like a utility here and trade monopoly for infrastructure. I think we should get more of a say in accessibility of the media in exchange for that monopoly. I ask this, are there versions of the current cable DTAs (that come with built in decryption) available for retail purchase with a cablecard slot (separable security)? These need not be full DVR systems that cost $400, just the basic DCT700.
Todd Spangler commented:
Perhaps you think the correct answer is an "all-MVPD" IP gateway interface, as proposed by the FCC? True, that could work - it could potentially give the CE industry greater incentive to deliver products that would work across *all* cable, satellite and telco TV providers.
But as I've written before - this idea is totally speculation. What is the guarantee that an IP gateway mandate wouldn't fail to get consumer/CE interest for the same reasons CableCARD has bombed as a policy?
Todd Spangler commented:
cypherstream - great post, thanks.
You pose an interesting question. What explains the lack of investment/innovation by CE companies with respect to cable-ready devices, whereas there are scores of wireless devices? I suspect a big part of the answer has to do with the fact that most people just want to watch TV.
Also many of the advanced features with digital cable (VOD, IPG, SDV) are accessible only via Tru2way/OCAP, not CableCARD alone. OCAP is a complex software stack that is, as one of the earlier commenters pointed out, not fully deployed by the cable industry.
Is there a better solution to this whole issue? What is it?
Todd Spangler commented:
Hi Bob Teatow, thanks for your comments. You misspelled "lackey," but I'm not offended.
Tell me: Why hasn't Roku come out with a cable-compatible version of its box then? Sounds interesting.
cypherstream commented:
Why is the set top marketplace so barren in terms of customer choice and features, when compared to the mobile phone industry?
Let's look at the similarities first...
In the mobile phone world, at least in most GSM style carriers, a SIM card acts as the security module to grant access to the 'network'. One can purchase any GSM compatable handset they want, and simply get a SIM card from the mobile operator to start subscription. The IMEI number and SIM card ID are paried to create a secured access to the network.
Why can't the Cable Card be considered the "SIM" card in this case? John Doe could go out and purchase any set top box with the UI that he likes, and simply go to the operator of choice to get the Cable Card (or SIM card in this comparison). The IMEI serial of a mobile phone is much like the Host ID of the set top box. The Sim ID in the mobile world is much like the Cable Card pairing ID.
Very similar procedures to control secured access to the subscriber network. Although the security is not complete without the Cable Card / SIM card, which can only be obtained by the operator.
Look at how diverse the mobile marketplace is! You have the different IPhones, Palm devices, a multitude of Android phones from different manufacturers. You have your Windows Mobile devices and the upcoming Windows Phone 7 platform. You have the Blackberries and the Symbian devices, and there is just so much choice out there. Small phones, flip phones, touchscreen phones, you name it - there's so much choice, from a $20 phone with 2 year commitment, to a device that costs over $200 with (or without) commitment. If you are used to the Blackberry interface, then get a blackberry. If you like the IPhone and the whole Apple app store environment, along with it's fluid UI, then get one of those. Maybe you don't really care, you could just get a "dumbphone".
So with all of this user interface and feature innovation in the mobile marketplace (and amongst many providers globally), why couldn't this similar business model exist with Cable companies? As long as there's at least some communication standards in place (and there already are ie QAM, Authorization, Cable Cards, etc..), there shouldn't be as VAST of a difference between these service provider industries. Right now you have Moxi or Tivo. Soon you'll have the Ceton and SiliconDust PC Cable card tuners. But thats it! The Apple TV doesn't do DVR functionality with a cable card. The Roku box doesn't have cable TV access. Popcorn hour doesn't... BlueRay players don't, etc...
There's an oppurtunity here that would blow away the industry. People wouldn't be so negative when speaking about the Cable industry. Where's the problem here? I can only hope that the FCC remedies this.
By the way, I'm not opposed to an HD-DTA waiver. Some people don't want all the bells & whistles (like those who get a simple $20 trac phone). I just want to see innovation. Tivo's unfinished slow UI is not for me. The Moxi Crossbar interface is not for me. The squished 1995 4:3 Comcast interface is not for me. The only thing left is potentially the complicated Windows Media Center solutions. This sector really needs some help. Especially with Gen-Y getting their dollars out into the market. Gen-Y grew up on the internet. We're expecting more out of our TV experience.
Bob Teatow commented:
The technology to do this is here already and pretty darned cheap -- witness the Roku box - retails for $80 - it's a kind of an IPTV device - and not quite mass market yet, so there's plenty of room to drive the price lower. On the cable side, my cable/Internet modem cost me $30 retail (a refurb CM100) -- Meanwhile Comcast is charging me an extra $7/month for a lousy HDTV box (no recorder) that doesn't work as well...
So, TODD, once again, you've written another "I'm a CableCompany Lacky" column....
I dare you to post this... You seem to deep-size anycriticism of Cable. Who pays your salary?
Todd Spangler commented:
ChefJoe,
Thought experiment for you: You buy a TV show from iTunes. If you want to watch it on your TV without a lot of rigamarole, you have to buy the Apple TV set-top box.
From a policy perspective: Should the government force Apple to "open" iTunes to other devices? Or do you think (as I do) that would be unnecessary market intervention?
ChefJoe commented:
I am not sure who IPCO is exactly, but in the world of the cablecard market that's nothing new. If not for the Win7 keynote, you would probably say very similar things about Ceton and their InfiniTV, yet there's quite a buzz to get that out because of people like me, with homebuilt DVR computers, getting tired of project calvary and similar digital conversions resulting in blocking access to channels I was paying for. I was ready for clear QAM just fine, but then they encrypted QAM and the only way to access was via the virtually unobtainable PC cablecard or some leased box with analog outputs.
ChefJoe commented:
If I could buy a box rather than lease I would have to consider it. Truth is, it'd probably be good for most consumers, but it's just one more special eception that allows cable companies to skirt really implementing cablecard and true2way systemwide.
There's no reason to need a TiVo to use a cable card, interfacing with a cablecard isn't that much more advanced than the electronics in your old VCR or DVD... things you've paid less than $50 for when they were being mass produced. Currently, by having built in security, you can't buy the same box you'd rent from the cable company and, if you did manage to get one, the cable companies refuse to let you hook them up to their network.
Speaking of which, wasn't true2way supposed to be nationally supported by the 4 major cable companies by now... or a year ago... by their own pledges ?
Todd Spangler commented:
UPDATE: Mr. Weinberg wrote back to me with answers to my two questions. Public Knowledge's reasoning for why a waiver for HD DTAs would inhibit a retail STB market still seems illogical to me.
In reply to the 1st question he wrote in part: "These boxes are crippled because they cannot be taken from one cable operator to another, as they do not comply with the CableCARD standard."
But given that these are leased by the cable operator – they could not be used with any other MVPD **anyway**.
On the 2nd question he wrote in part: "The more features you allow to be put into the operator-owned boxes, the harder it becomes for independent vendors to compete. Customers may be unhappy with their operator supplied set top box, but unless there is a reasonably priced alternative they will stick with it."
So why haven’t CE manufacturer delivered STBs that are competitively priced? I believe the answer is the CE manufacturers don’t see enough margin in selling inexpensive STB products at Best Buy. Why should MVPDs (and their customers) be penalized for this market reality?
It’s been almost 3 years since the FCC’s integrated set-top ban went into effect... and the CE industry still has not “flooded” the market with cable-ready STBs or anything else. Not even a trickle!
Todd Spangler commented:
Thanks for your comment, Michael.
The two questions I have for you:
1. What do you mean by “crippled”? In your ex parte filings in the last few days the language used is “high-functioning boxes.” Are these DTAs “crippled” or “high-functioning”?
2. How would a waiver for HD DTAs undermine the retail-navigation mandate? I still don’t understand PK’s leap of logic there. If consumers are unhappy with the DTAs –- isn’t that in fact a *great* incentive for them to seek alternatives at retail?
Michael Weinberg commented:
Todd,
Public Knowledge is not opposed to low cost set top boxes. We are opposed to crippled low cost set top boxes, which is all we are going to get if the cable operators have their way.
One of the goals of the Telecommunications Act that Congress passed in 1996 was to create a market for set top boxes not tied to an individual cable company. At Cable’s insistence, the FCC originally tried to implement the law by separating the security function of cable (in the CableCARD) and the user interface function (the set top box). For a variety of reasons this was never implemented properly. If it had been implemented properly, anyone would have been able to build a set top box full of innovative features. It would also create a national market for set top boxes, driving down prices.
Having undermined this goal to the point where only a few (TiVO and Moxi) real independent set top boxes exist, NCTA is now insisting that they should be exempt from the CableCARD system because today’s boxes are too expensive. We think just the opposite should happen. Cable (and every other MVPD like satellite, FiOS, and U-verse) should really commit to supporting a single, universal standard connection to other devices. That way consumer electronics manufacturers could build set top boxes with a nationwide market, driving prices down and forcing innovation in the market. As it stands the cable operators are trying to use this waiver as a way to kill independent set top boxes, locking consumers into the same expensive poorly designed boxes that most are forced to use today.
Todd Spangler commented:
Some further clarification on STB lease rates:
Lease rates are determined by an FCC equipment rate formula based on the actual cost of the box; cable ops and the FCC jointly determine what the rate is depending on the actual cost of the equipment.
However: The FCC does not regulate equipment rates of cable operators that have been deemed subject to effective competition.
Todd Spangler commented:
mpheadley - Set-top box lease rates are regulated by the FCC. Cable companies are not allowed to set those rates.
mpheadley commented:
To disagree with Public knowledge and agree with the cable companies, I'd have to be reassured that the cable companies would drop the extra cost they charge customers, and me, for having HD rather than SD.
roger commented:
What? not pay more for monthly cable box and their modem rentals?