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Cable Set Top Box Ruling Favors Verizon FiOS
02 Jul, 2007The much anticipated deadline for the FCC’s integrated cable set top box initiative (officially labeled Commercial Availability of Bidirectional Navigation Devices) has come and gone, and it appears as if Verizon is the biggest winner. The integrated set top box initiative is a mandate from the FCC to try to spur competition for cable set top boxes, by disaggregating the security features from the set top box, and thus making them more suitable for retail distribution through consumer electronics retailers. The new rules went into effect on July 1st and only apply to new set top boxes. Cable providers will now have to offer a separate security card, labeled CableCard by CableLabs, which gets inserted into set top boxes to provide necessary conditional access. The FCC’s thinking is that the current lease model for STBs, employed by most MSOs, is harmful to consumers, whereas these new rules will now allow consumers to pick and choose STBs on their own. The ultimate goal is to create competition for STBs, which hopefully leads to lower pricing and better features. The cable industry argues otherwise, and claims these rules will have the opposite effect.
Verizon was able to gain a waiver from these rules for FiOS video service. In fact the FCC issued a blanket waiver for all multichannel video operators who are either all-digital already, or who have committed to going all-digital by the February 2009 transition deadline for digital broadcasting. This conceivably gives Verizon and other TelcoTV operators who are digital ready, a competitive advantage, because they have one less significant burden which is now faced by their competitors, including Comcast, Cablevision, and other cable MSOs. The FCC also granted conditional waivers to smaller cable companies who can demonstrate that they have placed orders for compliant STBs, but were unable to take delivery before the July 1 deadline.
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Should Telephone Service be Free?
12 Oct, 2008
Comcast announced a new promotion last week that offers 12 months of free basic cable service for new customers who also sign up for an additional service. Customers who don’t want an additional service can get Comcast’s basic service of about 20 -30 channels for $10/month. The promotion is tied to the digital TV transition of February 2009 and entices potential customers to avoid the transition “hassle” by getting “free” cable service. “The simple fact is that basic cable is the easiest path through the digital transition and now consumers can get it for free,” said Derek Harrar, General Manager and Senior Vice President, Video Services for Comcast in a company statement. This move is similar to strategies pursued by other video service providers, who are hoping to leverage the digital TV transition for new subscriber additions.
But is this strategy a leading indicator for the future? Should basic core services like basic cable and basic telephone service be offered for free, used as a “carrot” to entice customers to buy “more important” services like broadband? Maybe a very basic phone service, with no LD, access to landline 911, and maybe outgoing service only (to avoid telemarketers) should be a free component of a bundled offering. Such a wireline service may appeal to a customer who previously cut the cord for wireless only, but also needs broadband. There is a growing portion of the population who find the value of traditional wireline phone service elsewhere – either through wireless or broadband/IP services. But, if they could get the security of landline 911, and an extra dial tone in their home as a free value add for subscribing to broadband (or video from a telco’s perspective), maybe a telco’s bundled offering may look more attractive than a comparable cable offering. I realize this idea is not appealing to the hundreds of ILECs who are a part of the current access/settlement system (in fact, it couldn’t work in the context of today’s regulatory structure), but I wonder whether it’s inevitable. In this possible future scenario, the current settlement system adapts to broadband as the underlying service, as opposed to voice.
This scenario cuts both ways. From a cable company’s perspective, a growing portion of the population is turning to the Internet as a source for their video content, and no longer see value in paying for a broad package of video as a part of a traditional subscription pay-TV service. But, if they could receive basic TV (which includes local broadcast affiliates) as a free value add for buying broadband, maybe the cable bundle is more attractive. In a true IP/broadband world, very basic phone and video service is relatively easy to deliver, and has little impact on bandwidth and network performance. Maybe the digital transition is opening the door to a future where free basic services are a regular component of a bundled offering. Thoughts?