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Opening Pandora’s Set-Top Box

Towards the end of January, FCC Chairman Tom Wheeler made a surprise announcement about regulations regarding set-top boxes, or what many refer to as their PVR. Mr. Wheeler announced that his agency would make cable providers “open” their set-top boxes to allow third-parties access to the designs and programming, essentially allowing them to compete in the set-top box market. While, at face value, there doesn’t appear to anything too nefarious, cracking open Mr. Wheeler’s plan reveals entirely different intentions and potential costs on consumers.

Unbeknownst to many, the prices for most set-top boxes are regulated using FCC formulas that limit what cable companies charge their customers. These formulas include the costs of the physical equipment, installation, and a reasonable rate of return. For most companies, this comes out to about $7.50 a month, with very similar prices for unregulated companies (In 2008, regulated companies charged $8.26, while unregulated companies charged $8.06).

In reality, the FCC’s move to change regulations on set-top boxes has more to do with industry pressure by those seeking access to cable content. By allowing third-party developers to access and utilize set-top box programming, they can create new products that serve as a hub for all media content, without needing to build the infrastructure and negotiate with programmers. As if concerns over security threats and potential piracy in accessing a company’s code weren’t enough, this proposal, played off as being “highly innovative”, is merely replicating technologies that are already emerging through legitimate marketplace innovation. Think Apple TV, Roku, and other media hubs, combining traditional TV programming with different apps like Netflix and Hulu. These streaming centers allow for much greater media access, on TVs as well as laptops and mobile devices, like phones and tablets. The FCC’s new rulemaking, on the other hand, would lock in mandated technologies in a rapidly changing market.

The question remains: why is the FCC getting involved with a rapidly-aging technology? If producers’ prices aren’t extortionary, and consumers have access to massive media centers through different sources, what good would these new regulations even do? By opening up the source-code through which cable providers and customers exchange information, the FCC is allowing third-parties to access this extremely valuable information without first making a connection with customers purchasing the product. Third party set-top box providers can exploit these newly opened platforms to get more advertising revenue and expand their control of the market.

Even more troubling, the FCC can use this new-found authority over media streaming as a jumping-off point to regulate and restrict the rapidly-developing realm of Internet services. Yet this is not the first time the FCC has attempted such regulations, and all their previous efforts ended up as total flops. Given this track record, should we really believe that the FCC just wants to increase available consumer options, or are they really trying to find new entry points into the world of online video programming? In light of the recent debates on net neutrality and special access regulation, a “simple” proposal to open up set-top boxes can actually be the tool by which the FCC inserts itself even further into the cyber sphere.

The FCC’s box has been opened, and the contents don’t look very good for media producers and consumers alike. The FCC has no business in trying to provide “innovative products” in the media market, and certainly shouldn’t use that as a disguise for more regulations and secret benefits to a select few. So, for the good of 21st century customers and content producers, keep this box shut.