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FCC: Repeating what fails

Perhaps, not surprisingly, the FCC has launched a bid to require a new universal gateway device to replace the failed CableCARD program. According to the commission, the action would encourage the adoption of broadband and develop new retail sales of set-top boxes (STBs). The program is called AllVid.

The commission’s new AllVid proposal would regulate the marketplace for remote controls that drive cable/satellite/IPTV devices. The platform would connect proprietary MVPD networks through a common interface for connection to televisions, DVRs and other smart video devices.

Sounds like a good idea doesn’t it?

On Dec. 14, the Phoenix Center released a paper, "Wobbling Back to the Fire: Economic Efficiency and the Creation of a Retail Market for Set-Top Boxes." The center’s basic conclusion is that the FCC ought to keep its big mitts off the retail STB market, saying, “ [We] find that the FCC’s new AllVid proposal may do more harm than good."

Stupid is as stupid does

The Phoenix Center’s report states that the FCC’s anticipated aggressive regulatory approach toward set-top boxes is likely, as FCC Commissioner Robert McDowell notes, to keep the agency in “the valley of unattained goals.”

The study’s co-author and Phoenix Center president Lawrence J. Spiwak said, “AllVid is fundamentally no different than the failed CableCARD regime. By ignoring fundamental economic realities, the commission is once again unnecessarily imposing significant costs on consumers in the name of promoting ‘innovation.'”

The study supports the position that leasing remains a best-fit option to the cable/satellite industry. Auburn University Economics Professor Michael Stern said, “The leasing model may simply be the best, most efficient way to deliver multichannel video services. Thus, a government-forced commercial market for equipment has little to offer.”

The Phoenix Center study notes that despite the commission’s mandate to require CableCARD on most TV sets, and after spending a billion dollars (if not more) to implement the agency’s CableCARD mandate, the FCC recently conceded that its “efforts to date have not led to a robustly competitive retail market for navigation devices that connect to subscription video services.”

Robust competitive market? I think not! Only about 1 percent of remote controls are purchased at retail. The rest are provided as part of MVPD services. A rational person would call the FCC’s effort a failure. But not government bureaucrats. To them, failure simply represents another “crisis” to which more money is the solution.

One size fits all

The left-leaning organization Public Knowledge has long pushed for intrusive government action in this arena.

“We advocate interoperability standards and a 'video gateway' approach, which would not only allow for more control and more choice for the consumer, but also open up an entirely new market for innovation by reducing barriers to entry for third-party device manufacturers.”

While that sounds good, there are sufficient technological and operational challenges that should first be considered before another set of rules is dropped on the industry.

MVPD services must have proper control over the devices connected to their networks. Uniform STBs make network management easier, less costly and more reliable. Rolling out new features is more efficient if every STB on the system uses the same OS. Support and service is easier and less costly.

Imagine if your company was required to permit every employee to bring in their own computer, software and printer to work and you had to make it all function properly on the company’s enterprise system. Think of the headaches such divergence in technology would cause. Your IT department’s entire bandwidth could be consumed just trying to get box A to work with computer B. It's not the best way to run a business.

The other side of the coin

You may be old enough to remember the court decision that overturned AT&T’s prohibition on the connection of non-AT&T devices to phone lines. Because I worked for SWB (that’s Southwestern Bell for your newbies) at that time, I recall hearing company staff predictions of the disaster that would follow. Instead, the result was more innovation, lower costs and a huge expansion in the telecommunication industry with new products, services and features.

The difference with yesterday’s court decision and today’s FCC AllVid proposal is that the courts simply said that as long as the devices met certain criteria and did no harm, they could be connected to the phone lines. That’s not what the FCC is saying. The FCC wants to require the entire consumer marketplace to implement a specific technology — one that could inhibit innovation, network reliability and increase costs.

So, while the FCC admits its CableCARD project failed, and despite that it cost $1 billion and had a measly 1 percent adoption rate, these same government bureaucrats are ready to double down.

Why should we not be surprised?