In East Germany the communists produced one automobile which was built to fit the needs of all Germans. The car, the Trabant, was the ugly stepchild of an inherently failing communist economy and the tail end of a 3-wheeled motorcycle project from WWII. Nevertheless 3million Trabis were built, with nary a significant change in technology or styling, over 30 years. The cars were comically underpowered, prone to failure, and incredibly dangerous. The idea that the technical specs didn’t change significantly over 30 years tells us everything we need to know about government-powered innovation.
I like to use the story of the Trabant to illustrate a point: The government and technological innovation are worse than mutually exclusive, they are competing ideas.
So, it shouldn’t surprise us to hear that the FCC, the body that has been self-appointed to regulate internet and television technologies, has had a history of failures. The question is, why do they insist on continuing to try, even at the expense of both consumers and manufacturers of new technologies. But they do. At their April 2010 meeting, the FCC decided to plow forward with one burdensome, old technology mandate, and create a few more for good measure. Let’s examine:
The Firewire (1394) Mandate
The FCC’s 1394 (Firewire) mandate—forcing MVPDs to put Firewire ports on all set top devices—has cost the cable industry over $400 million, yet the ports have seen use by only 5 customers. Similarly, FCC’s CableCARD regulation has and will be too costly, providing almost no return for consumers.
The CableCARD Regime
The market for cable set top boxes, those bulky devices that unscramble cable signals for your television, has been the victim of FCC regulation for almost fifteen years. The FCC has always found it particularly troubling that set top boxes showed the potential to be monopolized by their cable provider if not regulated. The Telecommunications Act of 1996 created a space for the FCC to interfere with the television hardware market. Thus far that regulation has meant the CableCARD which has been more burden than boon for consumers and content providers alike.
At its April 2010 meeting, the FCC reaffirmed its dedication to imposing CableCARD technology requirements on multichannel video programming distributors (MVPDs).
“Estimates to add a CableCARD slot to a device vary from between $50 and $100, but either way the prices haven’t come down much (if any),” reports engadget’s Ben Drawbaugh. The FCC’s rhetoric on this issue has always been increased consumer choice, but since CableCARD devices first became available in 2004, “there are only 14 3rd party certified devices” furthers Drawbaugh.
The FCC should be tasked with at least demonstrating the need for CableCARD technologies, before reinventing the regulations. Seth Cooper, of the Free State Foundation, argues that the technology was designed for a market that is static and monopolistic, while the television content delivery market has been anything but.
The Future of Stifled Innovation: “AllVid”
In April 2010, paired the failed “CableCARD” technology mandate with a new set of regulations called “AllVid.”
“AllVid” is not a piece of hardware (like its CableCARD predecessor), but rather a set of burdensome compliance standards that forces multichannel video programming distributors (MVPDs) to provide all of their information, free of charge, in a completely new way by year end 2012. The new standards punish traditional cable companies, force legally questionable data sharing, and puts a stranglehold around an incredibly quickly-evolving, dynamic industry.
“AllVid” would, as the NCTA puts it, “require MVPDs to disassemble the programming, data, and program guide metadata used to create and provide each MVPD’s service, so that each consumer electronics (“CE”) manufacturer may remake them into a service of its own design.” The NCTA argues that “AllVid” would turn cable companies into wholesalers of content, which would violate many of their contracts and licenses. Just to comply with the new standards would incur a substantial cost on cable companies who have already been tasked with new CableCARD regulations.
Among other problems, the FCC has yet to illustrate the need for AllVid technology, let alone their ability to create it. “The idea of accessing the Internet through the TV screen is certainly attractive”, noted Robert M. McDowell, FCC member against the new regs, “so attractive, in fact, that the marketplace already appears to be delivering on that vision without any help from the government.” GoogleTV and AppleTV have shown that the supply of innovative alternatives to cable set top boxes has not been stifled. In fact, according to Business Insider, AppleTV sales are on consistently on the rise.
Deregulating the television hardware market will allow cable companies to provide cheaper, more innovative products. This is truer now that ever, when online content providers have created a wealth of competition in the entertainment media market. As Seth Cooper of the Free State Foundation suggests, “If there is any provision in the 1996 Telecom Act relating to set-top boxes that the FCC should be invoking it is the sunset provision.”