Time to Deregulate Cable Navigation Devices

By all means, let’s consider doing something about television violence. But why don’t we start with the obvious?

Digital set-top boxes will allow parents to buy specialty tiers of programming as well as make use of more powerful parental control technologies. Trouble is, not enough families have them. The Federal Communications Commission emphasized this fact yesterday when it issued a report concerning television violence. The report noted that a significant problem with parental controls is “it does not appear that cable operator-provided advanced parental controls are available on a sufficient number of cable-connected television sets to be considered an effective solution at this time.”

There’s a shortage of parental controls mainly because consumer electronics manufacturers have been concentrating their efforts on high-end devices that incorporate high-definition and recording features, forsaking the low-cost, limited capability devices that generate less profit. Congress unintentionally created this market failure when it ordered the FCC to eliminate proprietary or “integrated” set-top boxes provided by the cable companies to their customers via Section 629 of the Telecommunications Act of 1996, enacted to give a boost to consumer electronics manufacturers who wanted to produce cable set-top boxes and market them directly to consumers.

But wait.

Comcast, the nation’s largest cable operator, recently asked the Federal Communications Commission for a waiver of the ban so it can distribute low-cost, limited capability set-top boxes to subscribers who don’t want higher-end devices costing several hundred dollars (see this and
this.

With digital set-top boxes, parents will be able to access family-friendly programming without being required to subsidize objectionable content. Comcast is developing a Family Tier that it expects will have an average of 35-40 channels, including PBS Kids Sprout, Disney Channel, Toon Disney, Nickelodeon, and Discovery Kids.

Digital set-top boxes will also provide an easy user interface for parents to limit the programming the family watches – they will be able to block programs by title, by TV or MPAA ratings, by channel, and (for many systems) by time of day.

Despite these pro-consumer and pro-family benefits, the FCC denied Comcast’s waiver request on technical grounds (but granted the company leave to file an amended request, which it has). Among the reasons: Consumer electronics manufacturers oppose a waiver. They would naturally prefer that consumers purchase their higher-end, higher-priced offerings. They do, however, hasten to predict that lower prices are around the corner if only regulators remain vigilant. Thus, a regulation intended to protect consumers instead mainly exists to protect competitors.

Now Congress and the FCC are contemplating interfering with free speech – such as limiting or “channeling” objectionable content to the hours between 10:00 p.m. and 6:00 a.m. or mandating “consumer choice” in cable television (e.g. family tiers or à la carte pricing) – although viewer-initiated blocking and program ratings are fully practicable and less restrictive. Thus, the seemingly mundane skirmish between the nation’s largest cable operator and certain manufacturers of cable navigation devices underscores how regulation tends to beget more regulation.

Competition, not regulation

Set-top box regulation is supposed to sunset as soon as the markets for the delivery of cable programming and for the manufacturing of navigation devices are “fully competitive,” and when elimination of the regulations would “promote competition” and the public interest.

That time is now.

Cable rate increases planned for 2007, according to the Wall Street Journal, “are going to be the most moderate in years,” thanks to competition from telephone companies. The same article cites an estimate from Kagan Research that there were 65.4 million cable subscribers at the end of 2006 compared with 29 million satellite subscribers.

There never was a market failure to justify regulating set-top boxes in the first place. The rationale was simply, “as we seek to break the bottleneck in the local loop, we must ensure that we do not create another bottleneck in the set-top box,” according to Rep. Ed Markey (D-MA). He added that set-top regulation “is very important in ensuring that all consumers have an on-ramp to the information superhighway.” But in the last several years it has become clear that the cable industry is anything but the fortress some members of Congress feared. Cable operators now face competition from satellite and telephone companies – not to mention iPods and iTVs – to an extent many never imagined.

Cable operators in most cases aren’t going to deny access to equipment their customers want given the dynamic market that exists today, where customers can take their business somewhere else. There is no possibility of a set-top “bottleneck” that worried Rep. Markey at one time, nor can the prospect that some consumers won’t have access to an information superhighway on-ramp be taken seriously.

So rather than flirt with new regulation — which will be complicated to draft, implement and defend in court, for reasons Adam highlights, and which could endanger liberty in the long run — the FCC should sunset set-top box regulation, or Congress ought to repeal it. In the meantime, there is no reason for the FCC to deny any request for a waiver of its ban on integrated set-top boxes.

SHARE: 2 comments