Let Cable Operators Compete

by on October 26, 2007 · 0 comments

I want to comment on Adam Thierer’s recent paper, “Unplugging Plug-and-Play Regulation,” which makes several excellent points. Adam briefly summarized his thesis (i.e., there is no need for government “assist” in private standard-setting) here a couple days ago and generated a couple comments.

The cable industry and consumer electronics manufacturers are touting competing standards initiatives. The pros and cons of each approach, from a technology perspective, are somewhat bewildering to a non-engineer like myself. But there appears to be one clear difference that matters a lot. Adam points out that under the initiative sponsored by the consumer electronics industry,

the FCC would be empowered to play a more active role in establishing interoperability standards for cable platforms in the future. [It's] a detailed regulatory blueprint that specifies the technical requirements, testing procedures, and licensing policies for next-generation digital cable devices and applications.

Why would ongoing assistance be required from the FCC, which mainly consists of lawyers?


It’s that same old argument we hear over and over: Cable companies are big, therefore they must be regulated, right? Back before the emergence of DISH Network, DIRECTV, FiOS, U-verse, the iPod and who knows what else may be coming over the Internet, that argument was hard to refute. The world has changed, as can clearly be seen in how Wall Street is valuing the cable companies versus phone companies who offer comparable programming .

Already Wall Street has gone negative on cable stocks because of concern over FiOS as well as the slowing growth of the high speed Internet business and the rollout of more high definition TV stations by satellite companies. Comcast is now trading in the $23 range, down from its 52-week high of over $30 a share in January. Verizon’s stock, on the other hand, is trading in the $45 range, its highest level since early 2002, with some on Wall Street partially crediting FiOS. Shares of Verizon rose 48 cents, or 1.1%, to $44.81 in 4 p.m. in New York Stock Exchange composite trading yesterday.

Cable companies need to be able to respond to the competition — they need to be able to raise capital, which requires that investors earn a return which meets or exceeds the return available somewhere else — yet the FCC is on the path of regulating the navigation devices used by cable companies but no one else.

Is this a big deal? Yes. The motion picture association points out that the CE manufacturers’ favored approach “fails to adequately address content creators’ reasonable concerns regarding content protection, presentation and interactivity.” I’m not going to get into a discussion about the level of content protection the motion picture industry is seeking, only comment on the inappropriateness of placing cable operators in the middle of that dispute without a paddle.

MPAA’s ominous warning, that “high value programming will be made available for bidirectional navigation devices only if content is adequately protected from unauthorized copying and redistribution,” has enormous implications for broadband competition.

The FCC ought to take a step back and completely reassess what it is doing here. In my view, mature consideration leads to the conclusion that government has no business in this space at this time.

Previous post:

Next post: