If you’re a pay-TV subscriber, there’s a 99 percent chance that you’re leasing a set-top box from your cable or satellite TV provider in order to access the TV channels you subscribe to. The amount the average American household pays to access the programming they’ve already paid for: roughly $231 a year. You pay these rental fees each month—even after the cost of the box has been recovered—because cable, satellite and telecommunications companies have locked up the set-top box market. Consumers have limited third-party alternatives, such as TiVo.
Since 1994, the cost of cable set-top boxes has risen 185 percent while the cost of computers, televisions and mobile phones has dropped by 90 percent.
The Federal Communications Commission has launched an effort to open up the set-top box market to competition and tear down the barriers that currently prevent innovators from developing new ways for consumers to access and enjoy their favorite shows and movies on their terms. The Commission is seeking public input on our proposal, and I recently visited the Daily Dot’s hometown of Austin, Texas, to talk with digital entrepreneurs, innovators, and consumers about how best to achieve these goals. But perhaps the best blueprint for unlocking competition and unleashing innovation in the communications sector was provided half-a-century ago by a Texas cattle rancher, with an assist from a UT-Austin-trained attorney.
Thomas F. Carter was a cowboy, both literally and figuratively. In the 1950s, this rancher wanted a way to stay in touch when he was out in the field, so he developed a device that connected a two-way radio transmitter to his telephone at home, allowing him to make and receive phone calls from a portable radio transceiver. He called it the Carterfone, and he eventually sold more than 3,500 of these devices, largely to the operators of Texas oil companies.
But there was one problem: It was unlawful to use your own device on AT&T’s phone network. How absolute was Ma Bell’s control? You had to lease your landline phone from AT&T at a price they controlled, and the only choice consumers had was whether to pay extra for a color other than black. Sound familiar?
Tom Carter challenged the prohibition on “foreign attachments” to the telephone network—selling his ranches and business to pay the legal bills. In 1968, the FCC ruled in his favor, and the majority opinion was written by Commissioner Nicholas Johnson, who earned both his undergraduate and law degree at UT-Austin. The Carterfone decision unlocked competition and empowered consumers with a simple but powerful rule: Consumers could connect the telephones of their choice to the telephone network. Competition and game-changing innovation followed, from lower-priced phones to answering machines to technology that is the foundation of the internet.
It’s time that we did the same for innovation in the set-top box marketplace. Not only are U.S. consumers spending $20 billion a year to rent these devices, but, since 1994, the cost of cable set-top boxes has risen 185 percent while the cost of computers, televisions and mobile phones has dropped by 90 percent.
It’s not just time to introduce competition into the set-top box marketplace, it’s the law. Congress has directed the FCC to assure consumers can use the device they prefer for accessing programming they’ve paid for.
The FCC’s proposal is designed to promote greater consumer choice. Just as consumers shop for a smartphone today or choose to purchase a cable modem instead of leasing one, under the proposal consumers would have the same choice to use a device they select to access their video. Or, if they prefer, consumers would be free to retain the setup they have today.
In addition to driving down consumer costs, we also expect a competitive marketplace will lead to greater innovation. It would create an open system for accessing pay-TV content, so that software developers can create apps and other tools that would let consumers access all of their content—the content they’ve already paid for—in one place. Having met recently with entrepreneurs at Austin’s Capital Factory startup incubator and seen some amazing demos at Techstars Austin, I have no doubt that if given the opportunity, U.S. innovators will develop new user-friendly interfaces and other services to delight video consumers.
No doubt, there are issues like security and copyright that any effective rule must address. Fortunately, advances in encryption technology may allow us to craft a framework to fully protect content. Plus, we’ve seen companies like Comcast, Samsung, and Roku announce deals that are evidence the technology exists to protect content and contracts and preserve the economic ecosystem video content creators rely on without a set-top box.
The FCC’s proposal asks extensive questions about how best to resolve these and other matters. But the bottom line is simple: The set-top box marketplace isn’t working for U.S. consumers. Instead of being led around like a blind herd, we need to cowboy up and open this market to competition. As history has shown, when we let innovators compete, consumers win.
Gigi Sohn is counselor to Federal Communications Commission Chairman Tom Wheeler. Ms. Sohn served from 2001-2013 as the President and CEO of Public Knowledge and, from 2011-2013 as the Co-Chair of the board of directors of the Broadband Internet Technical Advisory Group (BITAG). She has served on the board of the Telecommunications Policy Research Conference (TPRC) and on the Advisory Board of the Center for Copyright Information. In October 1997, President Clinton appointed Ms. Sohn to serve as a member of his Advisory Committee on the Public Interest Obligations of Digital Television Broadcasters.
