One Set-Top to Rule Them All

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CableCard, by all accounts, has bombed big time.

The cable industry estimates it has spent $935 million complying with the FCC’s rule requiring CableCards in operator-supplied set-tops. Despite the government’s efforts, “a fully-competitive retail navigation device market has not yet developed — despite the persistent efforts of the Commission, the cable industry, and consumer electronics manufacturers and retailers,” as NCTA chief Kyle McSlarrow put it in a Dec. 4 letter to FCC officials.

Now the FCC poses an interesting idea: Could it somehow foster a market for “nationally portable video devices that will work across all delivery platforms, including MVPD [multichannel video programming distributor] platforms and broadband-based video platforms”?

That would conceivably advance two separate FCC policy goals — to (1) promote broadband adoption, by opening an avenue for online video content to the TV, and (2) give a push to retail set-tops (see FCC Requests Information On How Set-Top Boxes Can Spur Internet Viewing). Comments on the FCC’s inquiry into “video device innovation” are due Dec. 21.

This two-birds-with-one-stone concept got a thumbs-up from the NCTA. McSlarrow said the cable industry supports the FCC’s effort “to develop fresh approaches — especially approaches that cross multiple industry lines” for encouraging innovation in retail video devices.

But how can that be? According to The New York Times‘ Saul Hansell, the FCC is trying to “pry open the cable set-top box” by making it “easier for anyone who makes a video program to send it directly to your television set, without having to cut a deal with a cable company.” Why would Big Cable be in favor of that?

The short answer: cable operators want a level playing field.

The NCTA has advocated an “all-MVPD solution” that would work across cable, satellite and telco TV — an approach, incidentally, also favored by consumer-interest groups. McSlarrow writes that “despite the fact that the Section 629 mandate applies to all multichannel video programming distributors (’MVPDs’), the burdens imposed by the FCC’s rules implementing Section 629 are currently not being imposed on DBS providers, AT&T, and other telco video providers.”

So, what would an all-MVPD solution — that also provides access to broadband-delivered content to the TV from the likes of YouTube, Netflix, Pandora, Flickr, etc. — look like?

You might start with either a TiVo or Digeo Moxi HD DVR, both of which provide access to cable programming (via CableCard) as well as a slew of Internet-delivered stuff.

But those only work with cable. To make those available across all pay-TV service providers, the cable industry has proposed a device about the size of a paperback book that would have a coax and Ethernet input, and HDTV outputs. This little black “set-back” box could run tru2way, plus whatever else would be needed to access DirecTV, Dish, AT&T U-verse or other services, cable execs have suggested.

What the actual mechanism will be to provide “universal” access to TV services, and how explicitly that’s defined by the FCC, remains to be seen. In general, I’m still skeptical that a government agency is the best way to promote this kind of innovation — particularly given the hundreds of millions of dollars already thrown away on CableCard.

But the FCC has smart people working for it who do seem to understand it’s better for government to remove obstacles rather than create them.

As FCC chairman Julius Genachowski, speaking at the The Innovation Economy Conference in D.C. earlier this week, said: “Our work at the FCC is guided by the firm belief that promoting competition is one of government’s most powerful tools for spurring innovation because competition is the mother of invention. Throughout its history, the agency has done best for the country when it has encouraged free and open markets, when its rules have empowered consumers to pick winners and losers, and when it has enabled innovators to innovate without permission.”

Well said! Here’s hoping the FCC’s actions follow those principles.

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