Outdated cable box rule harms the data-driven economy

Innovating in the digital age requires flexible rules that keep pace with the latest technology. This is especially true in the video services market, where change has been fast and furious. That’s why Congress should act to repeal an expensive and innovation-restricting requirement on the design of set-top cable boxes — without limiting the choice of retail devices that consumers enjoy today.

Currently, the Federal Communications Commission (FCC) mandates that each cable box — the electronic device in your home that links your TV with your cable provider — use a particular type of technology known as a “CableCARD.” This is a credit card-sized security device that enables the box to access the channels and other services to which you subscribe. The FCC’s rule, formally known as the “integration ban,” requires that these security functions cannot be hard-wired or otherwise integrated within boxes leased to consumers by their cable company.

The CableCARD requirement is a good example of how not to regulate in the dynamic data-driven economy, a topic on which the Progressive Policy Institute (PPI) has written extensively. In this case, the intention behind requiring CableCARDs was to foster a retail marketplace for set-top boxes, similar to telephones. Customers who decided to buy cable boxes instead of leasing them could use the box across different cable providers by obtaining a CableCARD from their provider to access its services. To ensure that cable operators would support CableCARDs, the FCC also required operators to include the cards in their leased set-top boxes.

{mosads}But a robust retail market for set-top boxes never developed around the CableCARD. Consumers just didn’t want to mess around with another piece of electronics that could potentially become outdated. Instead, the overwhelming majority of consumers lease their set-top boxes through their cable provider and also can access cable services from smart retail devices that don’t rely on CableCARD, such as computers, tablets and smartphones. And, of course, consumers are accessing video from a wide and growing array of non-cable sources, including traditional pay TV providers like DirecTV and Dish Network as well as online video distributors like YouTube, Hulu, Netflix and Amazon Prime — none of which are required to use CableCARD.

The integration ban may have been well-intentioned, but the rule now accomplishes little more than imposing needless costs on cable customers, wasting energy and slowing innovation. Rather than paying for an outdated and unnecessary technology, cable operators could invest in innovative security solutions for their boxes that are cheaper, more energy efficient and better aligned with modern IP-based technologies.

Fortunately, there is an opportunity to repeal this outdated rule, with fresh momentum in Congress. The House passed the repeal with bipartisan agreement, and the Senate Commerce Committee approved similar legislation on a bipartisan basis. Some repeal opponents have argued that the current proposal would undermine the limited marketplace for third-party retail CableCARD devices. That is not the case. The current proposal does not affect cable operators’ ongoing support for retail CableCARD devices; it only eliminates the CableCARD requirement for leased boxes. In other words, customers who have or want to buy a TiVo or similar retail CableCARD device can still do so, and cable operators would still be required to provide CableCARDS for those purchased set-top boxes.

These same repeal opponents also want Congress to keep the ban in place while the FCC undergoes a lengthy and unrelated proceeding to adopt a successor standard to CableCARD, even though the market clearly never embraced that standard and instead produced alternatives that the FCC never envisioned. But rather than encouraging continued innovation of the set-top box and cable content delivery, this strategy just doubles down on the failures of CableCARD by encouraging a new requirement that will soon be just as outdated. Congress would be well-served to recognize that technology mandates do a poor job of predicting consumer preferences and keeping up with marketplace changes.

The world of digital programming no longer revolves around the cable box — or even cable companies. It is time policymakers recognize the new face of competition in the video industry and embrace the tremendous pace of investment and innovation. Repealing the set-top box integration ban would be a positive step forward in modernizing regulation for the data-driven economy.

Carew is an economist with the Progressive Policy Institute, an independent think tank.