Why Haven't CableCards Taken Off?

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There have been 443,000 standalone CableCards put into service in the last five years by the 10 biggest U.S. cable operators.

Meanwhile, in the two years since the FCC’s integrated set-top ban went into effect in July 2007, those same MSOs have deployed 16.7 million CableCard-based set-top boxes. The whole point of that “common reliance” rule, which has required cable operators to spend hundreds of millions of dollars in compliance, was to foster the market for retail cable-ready navigation devices.

Why have only roughly 1% of digital cable TV subscribers opted to use CableCards, then?

Some blame the cable operators. BroadbandReports.com proprietor Karl Bode, for example, accuses cable companies of not promoting CableCards as alternatives to operator-leased boxes. “Not only are they not advertised, we’ve had countless customers tell us that when they’ve called their cable company to inquire about the technology, they’ve been told it isn’t offered,” he wrote in a blog post yesterday.

Note: Countless customers!

Anyway, Bode also claims that CableCards “erode set-top box, VOD and PPV revenues, on top of requiring additional truck rolls for a technology carriers don’t want to offer in the first place.”

Yes, MSOs get a recurring lease fee for set-tops. But that’s meant to recover the initial expense of the box, which takes several years to amortize, and set-top lease fees are closely regulated by the FCC. Moreover, operators also charge a lease fee for CableCards (albeit smaller).

To my mind, Bode’s other point about “VOD and PPV” probably points to the real reason CableCards aren’t more popular: because TVs or DVRs with CableCards don’t deliver the full complement of video services offered by cable providers. All interactive functions are inaccessible — including the on-screen guide, VOD, caller ID on TV, switched digital video, and any other interactive TV applications such as Time Warner Cable’s Start Over.

Tru2way is cable’s solution for providing access to two-way cable services, and the industry is still pushing that rock up the hill. Recently appointed CableLabs CEO Paul Liao (formerly CTO of Panasonic) wants to be more inclusive in working with CE makers and others (see CableLabs ITV Interop Lab Includes Comcast, TWC And Cox Guides and CableLabs CEO Liao Looks To Create Bigger Tent).

But in the meantime, the Consumer Electronics Association is as frustrated by the situation as Bode is. The trade group wants the FCC to take a look at whether new regulations are required — and specifically whether the CableCard rule “in its current form sufficiently safeguards competition in the retail device market as operators roll out new technology platforms and services” (see CEA Asks FCC To Review CableCard Rule).

Here’s my theory about why CableCards aren’t more popular: Most people don’t want to use them. And the reason cable operators don’t more actively promote them is because they don’t deliver all the services that a customer is paying for.

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