Consumers would pay dramatically more to lease digital set-top boxes under a federal rule that is scheduled to take effect in 2005, according to the cable industry's main trade association.
If the rule goes into effect, a digital set-top that leases today for around $3 or $4 a month could cost an additional $3.36 a month, said the National Cable & Telecommunications Association, which is seeking elimination of the rule.
Consumer-electronics retailers, including Circuit City Stores Inc., are challenging the NCTA's position. They claim set-top costs would decline if a retail set-top market were flourishing.
In 1996, Congress ordered the Federal Communications Commission to adopt rules designed to establish a competitive set-top market to give consumers a means of acquisition separate from the cable operator.
The FCC responded in part by banning cable operators from deploying integrated digital set-tops after Jan. 1, 2005. Integrated boxes combine signal security and channel-surfing functions.
Under FCC rules, the security function is be separated and controlled by a removable point-of-deployment (POD) module that looks like the PCM/CIA Ethernet card that slides into laptop computers.
Last month, the NCTA filed a letter with the FCC claiming that if cable is forced to deploy only POD-enabled boxes to new customers, the per-month lease charge is going to skyrocket within two years. According to the NCTA, the PODs will add $93 to the price of a box.
The NCTA called on the FCC to eliminate the Jan. 1, 2005 sunset on integrated boxes — not only in light of the cost concerns but also due to other market developments, including cable's effort to allow retailers to sell integrated boxes in their stores.
A source for consumer-electronics retailers complained that the cable operators have frustrated the emergence of a retail set-top market by denying their set-top suppliers access to the specifications to build boxes equal in quality to the units MSOs obtain from their suppliers.
In its letter to the FCC, the NCTA denied those allegations and accused retailers of attempting to manipulate the regulatory process so that they could make more money in the sale of set-tops.
FCC sources said the agency has the NCTA's set-top rule change request under review and would likely rule on the issue this summer.
In a related issue, the FCC is examining whether some cable operators are complying with federal law if they do not give a price break to high-speed cable modem subscribers that have purchased their cable modems.
Zoom Telephonics Inc., based in Boston, Mass., raised the issue with the FCC in April. The firm, which markets cable modems, claims that discounts for modem owners are necessary in order to comply with federal law designed to promote the retail availability of cable modems.
Zoom did not name cable operators it said were violating the law.