FAQ: How Obama plans to fix cable TV and why it matters to you
President Obama is signing an executive order that would push federal agencies to identify sectors of the economy where growth has stalled due to lack of competition. The first target of that order: your cable box.
Before you freak out: No, Obama isn’t trying to take over your TV, monitor what you watch, or keep you from tuning in to The Real Housewives of New Jersey (though you really shouldn’t be watching that anyway).
Instead, the order will attempt to open up cable and satellite providers’ set-top box systems so that third-party companies can create competing boxes and apps.
Read more: Big cable to FCC: Kiss our apps
So what does this order do exactly?
Under Obama’s order, the Commerce Department is calling on the Federal Communications Commission (FCC) to do what it can to increase competition in the set-top box market.
Why is this important to me?
It matters because increased competition over which set-top box you use could help cut your cable or satellite bill by more than $200 a year.
According to a report by Massachusetts Sen. Ed Markey, cable and satellite companies have been pulling in up to $20 billion a year from rental fees for consumers’ boxes.
The majority of Americans who have cable or satellite rent their set-top boxes from their TV providers. With an average of two boxes per house, that adds up to more than $200 per year per customer in rental fees.
Why can’t I just buy my own box already?
Mainly because there aren’t that many alternatives on the market.
Sure, you can use a CableCard that slides into a cable box you’ve purchased. But you still have to pay a fee for the card, and the setup isn’t exactly intuitive.
TiVo, meanwhile, has a set-top box alternative, but that also comes with its own monthly fees.
As a result, the vast majority of Americans still rent their cable boxes.
Didn’t the FCC just do something like this?
Sort of. Back in January, FCC Chairman Tom Wheeler proposed new regulations that would open up the set-top box market to third parties. It’s essentially the same idea that the Commerce Department is pushing now.
But there needs to be time for the public to comment on that FCC proposal; the commission would likely move to adopt some kind of final rule by the end of the year.
How will increasing competition help me?
If third-party companies are able to build and sell their own set-top boxes, that would eliminate the need to pay your TV provider that monthly rental fee. After a few months, your new third-party box would pay for itself.
You may already do the same thing — you bought your own instead of renting — with the cable modem and router you use to get Internet service from your cable company. (If you aren’t doing so, I’d strongly recommend looking into it.)
More competition could also lead to software developers building apps for your Roku and Apple TV or even your smartphone and tablet that would let you watch cable or satellite programming without even needing a box.
Currently, if you want to use a cable or satellite provider’s apps, you usually need at least one set-top box in your home. That could change, though, if Wheeler and Obama have their way.
Sounds cool. What are the cable and satellite companies saying?
They’re predictably unhappy with the proposed changes. Their argument is that if we move forward with Wheeler’s proposed changes, consumers will have to buy new devices, and innovation would hit a roadblock. You’ll notice that’s the exact opposite of what the plan intends.
See, even if the rule changes go into effect, you don’t have to buy anything. If you’re happy paying a monthly rental fee for your cable box, you can go right ahead and do so. But if you want to eliminate that fee from your bill, you’ll be able to do that too.
Similarly, it’s hard to fathom how allowing third-party manufacturers and app developers to create new ways for you to watch TV will negatively impact innovation.
Basically, what this comes down to is that cable and satellite providers don’t want to lose out on that sweet $20 billion they’ve been getting. And that’s understandable: No industry would want to lose that kind of revenue. But I’ve got a feeling they’ll figure out some other way to make up for it.
Email Daniel at dhowley@yahoo-inc.com; follow him on Twitter at @DanielHowley.
