Of Set-Top Box Industrial Policies & Self-Serving Interests

by on October 14, 2010 · 5 comments

If you want another prime example of how self-serving Washington interests often seek to wield the stick of Big Government to their advantage, look no further than the effort the FCC is currently undertaking to extend its “CableCARD” set-top box industrial policy.  The regulatory shenanigans here got started 14 years ago with Section 629 of the Telecommunications Act of 1996, which included authority for the Federal Communications Commission (FCC) to meddle in the video equipment marketplace. The FCC used that authority to impose a variety rules on the cable TV industry, such as CableCARD mandates, in the name of expanding device competition and consumer choice.  Those regulations haven’t done much other than impose added costs on consumers for very little corresponding benefit. And whatever growth we’ve seen in the market for video devices and services has been more organic and unplanned, and it has come from unexpected quarters (think of Apple and Google’s TV efforts, and television distribution via video game platforms). Nonetheless, the FCC plowed forward today with additional layers of red tape in the hope of extending the CableCARD regulatory regime.

The Consumer Electronics Association (CEA) has long served as the prime cheerleader for this high-tech industrial policy since it would hobble video providers and benefit some of CEA’s members in the process. Indeed, to read through the CEA’s filings on this matter through the years, one is led to believe that CEA views cable systems as a sort of essential facility to which access must be granted in the name of preserving innovation by consumer electronics companies.  With the CableCARD mandates, therefore, CEA is asking the FCC to impose a light form of common carrier regulation on the cable industry becuase that would help their interests in the end, regardless of what it meant for innovation at the core of networks.

Now, don’t get me wrong.  There are plenty of self-serving people and organizations around Washington.  Let’s face it, screwing over your competitors with regulation is what makes the “parasite economy” inside the Beltway tick!   But what I find so interesting about this case study is how CEA has vociferously opposed (quite rightly, in my opinion) so many other high-tech industrial policies — the V-Chip, the so-called “broadcast flag,” HDTV tuner mandates, proposals to embed FM tuners in cell phones, and so on — and yet they wholeheartedly endorse the CableCARD industrial policy because the consumer electronics industry would benefit from this particular industrial policy.  Sadly, it’s just another example of what Milton Friedman once called the “Business Community’s Suicidal Impulse”: the persistent propensity to persecute one’s competitors using regulation or the threat thereof.

Nobody said capitalists were consistent, folks.  It’s capitalism for me, but not for thee.

  • Guest

    Cable companies are no champions of capitalism and free markets, either. But for their buying off local governments, the landscape would be entirely different now; even today, non-market processes give them free or cheap access to public and private land in the form of utility easements and public rights of way.

    Cable companies also benefit from an unprincipled, special interest exception to copyright law (Section 111) and constantly petition the government for relief from another government-dependent industry, the broadcasters.

    I'd love to see you take them to task more, instead of calling out the competitive CE and web industries whose agenda mostly calls for less competitive industries that are already regulated to be regulated in a more principled way. (CEA also supports net neutrality.) For example, what is your take on the continual retransmission consent battles? Who should win in a fight between a broadcaster who gets free spectrum and must-carry rights and a cable company that is legally forbidden from importing distant signals (so can't negotiate with someone else if the broadcaster is unreasonable) but turns to government every time its negotiations break down?

  • Mwendy

    Shameless CEA shenanigans.

  • http://www.techliberation.com Adam Thierer

    Thanks for your comment, but perhaps you missed the part above where I said “There are plenty of self-serving people and organizations around Washington.” That would absolutely include the cable industry and the compulsory license exception to copyright law that they benefit from. And broadcasters have must-carry rights, another shameless example of gaming the regulatory system to one's advantage. And the list goes on and on. I've called out these companies and sectors here and elsewhere many, many times before. No one in the tech or media sector has clean hands on this front.

    As for the retrans wars… I want them fought in the marketplace, not the halls of Congress or the FCC. Lawmakers should clean up the mess they have made by reversing earlier misguided interventions on things like the compulsory licensing and must-carry rules. And then they should step out of the way and let the big boys hammer out agreements.

    Will those negotiations got heated and messy? You better believe they will ! But I have no problem with that. If content companies want to play hardball by holding out on a carriage deal, so be it. And if the video distributors want to fight back by enlisting their customers in the battle by trying to put pressure on the content companies to sign a carriage deal at a lower rate, then I say go for it. This is called free-market capitalism. It's a shame we don't have more of it on this front instead of all this special interest pleading with the regulatory overlords for favorable treatment.

  • Guest

    While I would have preferred that something like CableCARD had come into the marketplace through hardware vendor and/or cable-satellite industry initiatives, I must say that if it weren't for CableCARD and my Tivo HD STB, I wouldn't even bother with cable – as the interface/GUI on the company provided equipment is god-awful. By the way, getting a CableCARD from Cox is like pulling teeth. I'm still waiting to get a second CableCARD – this is after the first one took more than 90 days to get and three technician visits. I was more than willing to pick it up at Cox's office, as they allow with all of their other equipment, but they said “we're not set up to do that”.

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