Cable TV box rental could go way of boxy desk phones

Todd Shields

Imagine watching TV without paying the cable company for the blinking set-top box, using a gadget of your choice that makes it easy to switch between cable channels, streaming programs and online shows.

The idea, simple in concept, is proving difficult in execution.

U.S. Federal Communications Commission Chairman Tom Wheeler is pushing a plan to force cable companies to give up their control over set-top boxes, “unlocking” the marketplace as he puts it. But on Thursday, the regulators canceled the vote, saying they had run out of time to discuss last-minute changes.

Wheeler has drawn opposition from lawmakers in both parties, not to mention some of the most active corporate lobbyists in Washington. Comcast Corp. and the cable industry — which stands to lose $20 billion a year in box rentals — say it’s unnecessary and are fighting it. So are Hollywood studios, DirecTV owner AT&T Inc., and CBS Corp. Even a fellow commission Democrat said Wheeler’s plan, set for a Sept. 29 vote but was put off by Wheeler, is flawed.

“This issue is a classic inside-the-Beltway versus the people of America issue,” Sen. Richard Blumenthal, a Connecticut Democrat, said at a Sept. 15 congressional hearing. “Inside the Beltway there’s this hand-wringing and, ‘my goodness, what are we doing.’ Outside the Beltway there is no question that consumers deserve to save money through more choice and more competition.”

The TV and film industries say they’re fine with competition and fine with new ways to distribute their programming. But they say Wheeler’s plan would slow movement toward making shows available via apps on tablets and mobile phones, because cable providers and content owners will struggle to satisfy new federal licensing requirements.

Wheeler said 99 percent of subscribers rent boxes from cable and satellite TV providers “because they don’t have meaningful alternatives.” Previous attempts to spur competition left consumers with devices that didn’t get all channels and were hard to install, with cable companies offering poor support, the FCC said in February, adding that consumers pay more than $231 annually to rent boxes.

Under Wheeler’s plan, pay-TV companies would have to provide online applications that grant access to their programming to independent device makers, such as Alphabet Inc.’s Google, Inc., TiVo Corp. and Roku Inc.

Set-top boxes saddle consumers today with “antiquated” ways to interact with video programming, said Nicholas Economides, a professor at New York University’s Leonard N. Stern School of Business who studies the economics of networks.

Companies such as Microsoft Corp., Google and Apple Inc. could come up with search functions that outperform today’s typical set-top box experience, which features tabular formats that list programming in a grid that doesn’t extend beyond a week or two, Economides said. One likely result: easier access to programming outside cable’s bundle of channels.

“The set-top box being independent of the cable company will make a big difference,” Economides said in an interview. “Because then you would be able to use the set-top box itself to download — to connect to Netflix, to connect to Hulu or anyone else. ”

Unless cable companies offer “very aggressive” competitive moves such as slashing prices, “the introduction of new set-top boxes will accelerate the movement away from cable and toward direct downloads,” Economides said.

Bringing in nimble, innovative companies could open possibilities just as ending AT&T’s telephone monopoly in the 1980s finished the era of boxy desk phones that were available only for rent, not purchase, said Ed Black, president of the Computer & Communications Industry Association.

“When we got rid of the black AT&T phones, nobody really could tell you there’s going to be a fax machine and cellphones and all the things that came after,” Black said in an interview. “When you do not have dominant company control, when you have lots of companies trying to get into this space — there’s an explosion of creativity and products.”

Comcast, the nation’s biggest cable provider, says regulation isn’t necessary because it already makes its TV service available without a set-top box. In April, the company said customers will be able to watch channels via Roku devices and Samsung Electronics Co.’s smart TVs. Charter Communications Inc. has also tested making its service available as an app on Roku devices.

“It’s an environment where the amount of choice for consumers is high and accelerating,” Comcast Chief Financial Officer Michael Cavanagh said at a conference in May. “So the idea that there’s a need for a government mandate in that space strikes us as odd.”

Some doubt Comcast can stem the tide toward sleeker devices.

“The day of the traditional big, heavy company-controlled set-top box is over,” Roku’s founder and chief executive officer, Anthony Wood, said in an interview.

Jessica Rosenworcel, a Democratic FCC commissioner, told senators at the hearing the agency lacks authority to carry out parts of Wheeler’s plan. He needs her vote to win a majority, because two Republicans at the five-member agency have expressed opposition.

“It’s time to inject competition into our set-top box market,” Rosenworcel told senators. “Nobody has ever written me telling me that they love their set-top boxes.”

Wheeler stressed Thursday that he intends to “get something done” before the end of the year.