The FCC seems determined in revisiting and repairing the current CableCard rules fiasco in which it chose to mandate a universal Set-Top-Box for Cable, Telco, and DBS providers. Where does a solution lie, and is the FCC going down another road of improbable acceptance? See (Boucher Backs FCC Set-Top Box Effort)

The problem with a CableCard solution, in an attempt to create more competition, was the opening of current provider STB’s to access other venues, which turned out to be both technically and business concept unfriendly. Video providers are not going to share proprietary technology or a business specific customer experience to comply with such a rule. It did not make for good business economics, and led retail manufacturers down the wrong path of investment in believing providers would accept and adopt such a technology. Fast forward to today, and we are back at the same starting gate with another proposal by the FCC to create more competition within the video and broadband marketplace.

Set-Top-Boxes are uniquely provider centric, and therefore changing that concept is not going to be met with open arms. With that said, the market is moving to more of a gateway consumer experience, although it is not there yet, which should be and seems to be, the focus of the FCC in an attempt to create a better competitive landscape. However, the STB has to remain an exclusively provider experience whether you are a Cable, Telco, DBS, or Over-The-Top provider service. See (Death Row For the Integrated Set-Top)

For a wider acceptance of creating more choices within the home for consumers, the gateway must be specifically designed to accept the (Four Play concept) of phone, Wireless, broadband, and TV. The TV monitor should be accepting an STB signal to differentiate seamless and multiple internet surfing, and TV access. The competition aspect of this design lies within the Set-Top-Box. This device must be company specific and give the consumer a wide variety of choices to various information and entertainment exclusively provided by each competitor.

To clarify, each provider of entertainment would create their own set-top to interface with the gateway. The STB uses the broadband pipeline, from whatever carrier, and integrates the company specific experience to the consumer, whether it is Cable, Telco, DBS, or Over-The-Top providers. However, mandating some type of STB interface to access competitors separately or modifying STB’s to be universal, will just slow competition and go down the path of CableCard inoperability.

To reduce consumer costs, eliminate the need for multiple STB’s within the household. Use the gateway to provide an STB wireless-encrypted signal for each TV interface. Not being an engineer, this concept is predicated on a modified routing system for the STB. Competition remains with multiple providers of content and their unique STB interface. This also means TV manufacturers must be involved in the process while maintaining the integrity of the STB. This concept could reduce both consumer costs and capex requirements for STB providers. See (Analyst: FCC ‘bound and determined’ for STB ban)

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Set-Top-Box Quandary: Let Market Forces Rule

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Cable Industry: at a Cross-Roads

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How can Residential Gateways spur Competition?

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The FCC is addressing the failure of CableCARD‘s in its National Broadband Plan that takes further steps to encourage development of the Home Gateway, a device in which consumers can easily and seamlessly access video programming from all distributors.

In a proposed Network Gateway-NOI and CableCARD NPRM, the commission is seeking input on how to best rework the CableCARD rules to make Set-Top-Boxes more universal in nature and easier for consumers to connect and network throughout the home to any video provider offerings.  The question remains; is the FCC suited to take on another attempt to create competition within the Set-Top-Box market? Or should it leave this to market forces?

A Universal Provider Gateway Concept could be flawed

Most, if not all video providers want control of the user experience in their Set-Top-boxes, or proposed Gateways, and are not willing give up that control universally. That means each provider wants to create its own Gateway and harkens back to the premise of why CableCards did not work. Companies are not willing to share the proprietary customer relationship with other competitors. This is why only a few set-top boxes are in the market. Cable companies created their own devices to offer video content to customers, while investing billions to do so; but as market forces continually change the demand for a more competitive STB/Gateway continues to emerge. See (FCC to “improve” CableCARD rules this month)

A Sub-Market of Over-The-Top competitors

With the advent of Hulu, and YouTube along with NetFlix, Apple TV, Roku, Blu-Ray, and X-Box the concept of a possible competitive residential gateway, or STB if you prefer, has taken hold. Video programmers have accepted these non-traditional video providers as a new pipeline to distribute their wares. See (Park Associates Blog). But should these companies be looking to themselves to have unique home gateways built for home distribution which will connect consumers with mainstream video, Internet, and phone services? I think so, and this also means contracting with an Internet Service Provider-Video Provider-Telephony-Wireless Provider for a residential service interface to their STB. This may be easier said, than done.

Drive Private Sector competition

Near term competition does not lie in building hard-line infrastructure, although Google is testing those waters; it lies in the sub market of Over-The-Top competitors willing to create their own unique consumer experience, and compete with traditional providers with a superior customer interface that delivers video-wireless-Internet-telephony to the hardware within homes. It will not work to have a mandated universal gateway that all competitors must share. This means that competitors must contract with video programmers, wireless and telephony providers, or build their own networks to compete. Cable-Telecom providers have a huge advantage on that market segment. That is to say they have invested billions in infrastructure, hardware, wireless, and telephony products to offer consumers through their networks and STB’s. This is where potential competitors must look to have a chance at capturing an all-in-one home gateway market share. See (Hot Boxes: The Explosive Potential for Residential Gateway Devices)

Solution

View the Residential Gateway as a unique way for all providers to connect with their customers. It should be specific to the company with all the applications consumers’ demand, one that is easily interchangeable to all home hardware. This requires competitors to take on risk and invest in new ideas and concepts that will capture that market segment. As new markets unfold, the best and the brightest will be there to take advantage of any changing landscape in residential gateways to the consumer.

This again, goes back to whether the FCC should involve itself in manipulating the market to create more competition. It should encourage competition; it should incent competition within the marketplace by tearing down barriers to compete. But it should never mandate private companies to compromise their markets by opening up their STB’s, or consumer gateway.  

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Set-Top-Box Quandary: Let Market Forces Rule

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Why Quality Applications, not Quantity Bundling is the future of Video

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Broadband Competition and Pricing: Lessons Providers must Learn

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The FCC has just issued a Public Notice: Comment Sought On Video Device Innovation NBP Public Notice # 27, to spur innovation within the set-top-box market currently being served by individual Cable & Telecom companies as monthly rentals to consumers. First, these providers have invested in their own versions of set tops which interface their products with consumers for a wide variety of enhanced services.

The problem the FCC sees in this configuration is that it somehow stifles competition within the marketplace therefore making it difficult for consumers to delve into the now wide range of new services like Internet TV from different providers. This makes for a hodge-podge of connection/interface devices consumers must rent or purchase to experience what they want. Examples would be X-Box, Blu-Ray, Apple TV, Netflix, and others which connect consumers to Internet content through their TV’s.

The FCC moved to solve this problem through CableCards that mandated providers to modify their equipment to be CableCard Ready. It is probably in understatement to say that this mandate has failed without bringing inter-connectively any closer to the consumer than what we have today, individual provider set-top-boxes. So, where does the solution to this quandary lie?

To say that Cable-Telecom companies are not aware, stifling competitors, or not working on solutions that will take advantage of IPTV seems ludicrous within a competitive market realm. The last thing this market needs is more regulation or mandates to companies on how they should run their businesses, or how they should spend capital to give products that market forces will demand on its own.

Personally, I would like to see Home-Gateways as a solution to this problem. Each provider could custom design their own device to interface with the Gateway, therefore routing different services to each entertainment or communications platform within the home. It would be much simpler and efficient in handling the needs of consumer demand. And this should not be mandated, but left to the innovators to come up with a device which would take any companies encryption product as a plug-in; problem solved.

Being realistic, this solution is much easier said, than done. My point is that innovation, competitiveness, adoption, and lower prices do not come from mandates, they come from market forces where demand and supply rule. With unencumbered innovation the market will solve the set-top-box dilemma the FCC is delving into from a regulatory stance. In essence, let market forces rule, not the FCC.

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• Comcast Vs FCC: Implications in throttling BitTorrent (thecablepipeline.com)

How can Residential Gateways spur Competition?

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Why Quality Applications, not Quantity Bundling is the future of Video

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Set-Top-Box Revisited: How does the Gateway solution increase competition?

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