Friday, February 19, 2016

Open Cable Boxes? Less Impact Than You Might Think

The recent move by the U.S. Federal Communications Commission to “open up” set top box information flows to third parties ostensibly leads to consumer ability to buy and use third party boxes instead of renting such decoders from their linear video suppliers.

The three information flows include service discovery (information about what programming is available to the consumer, such as the channel listing and video-on-demand lineup, and what is on those channels).

Information on customer entitlements (information about what a device is allowed to do with content, such as record it) also would be provided to third parties.

Finally, content delivery information (the video programming itself, along with information necessary to make the programming accessible to persons with disabilities) would be available to third party devices.

On its face, the move creates more potential competition for the conditional access function, which also represents perhaps $20 billion in annual rental fees paid by consumers to their video providers.

At one level, it is hard to argue that authorizing more competition is a bad thing. But the move might also not be so consequential, long term, much as the Telecom Act of 1996, in defining competition as “competition in voice services” missed the mark.

Over time, more consumers are going to use services and appliances that are Internet based, obviating the use of any such decoders. In the interim, however, as the FCC earlier had tried (and failed) to create a third party market for decoders, there could be some opening for use of existing devices (game players, mobile phones or dongles) as functional substitutes for the “cable box.”

Scale always is an issue, as the actual market for decoder hardware is fairly small, by consumer electronics standards. So it is unlikely many new suppliers really would want to enter the market for stand-alone decoders.

One reason existing decoders are relatively costly, compared to many other consumer devices, is that volume is limited.

The upside might come for app providers who could leverage existing mass market devices such as smartphones or cheap dongles to provide the tuning and access functions, while also garnering more information about consumer behavior.

That is one reason why Google supports the rule change.

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