The video and TV market is constantly changing, offering South Carolina residents more choices than ever before through traditional pay-tv services, integrated devices, apps and the internet. The Federal Communications Commission (FCC) is proposing set-top box mandates to “unlock” the cable box so that third-party companies can repackage programming from TV providers into their own products and services without negotiating or paying for the rights. While the goal of this proposal would be to spur innovation and lower costs for consumers, it would actually have the adverse effect and disrupt a vibrant marketplace, especially for small pay-tv operators like ours and the rural and urban subscribers we serve in the state.
In recent years, many small providers like ours have been entering into pioneering business arrangements with third-party electronic manufacturers like TiVo, Roku and others. As part of these partnerships, we integrate their devices into our systems in order to keep pace with a dynamic, rapidly evolving, and competitive market – all while operating with limited capital and modest profits. Meanwhile, the industry as a whole is moving away from the traditional set-top boxes altogether in favor of more affordable and convenient “boxless” solutions. These innovations give our customers the ability to seamlessly access both pay-tv and over-the-top programming from one device.
Sadly, the FCC’s plan to “unlock” the cable box would prove incredibly disruptive to our companies because of the significant costs of implementing this mandate. The American Cable Association estimates these costs at more than $1 million per system, and many small and mid-sized companies operate more than one system. This estimate is based only on those variables that can be positively identified from the FCC’s vague proposal that relies on many technologies and standards that do not currently exist. The overall cost is likely to be much higher. That does not even include the burden of having to supply our customers wishing to use a third-party navigation device with a separate gateway device that costs at least $350 each at wholesale.
As small operators, we have less capital to work with than our larger competitors and a smaller subscriber base across which to spread costs. As a result, these added costs would cripple many of our businesses, causing at least 200 companies to either go out of business or stop offering video service. For those of us that manage to hang on, we would be forced to forgo investments in other innovations such as broadband expansion and unnecessarily pass on costs to our customers – none of which is good for business or the communities we serve.
Finally, with multiple devices comes added confusion for our subscribers when it comes to addressing technical issues. Subscribers who experience technical issues would likely contact us first, leading to an increase of calls that would overburden our customer service teams as a result. Further, our ability to resolve issues stemming from a third-party device would be limited, leaving our customers frustrated.
The FCC’s proposal is a solution in search of a problem. We believe the new mandates are unnecessary because innovative options are growing, and many pay-TV operators, including small operators like us, already offer customers the ability to access video content anywhere, anytime, and on any device. This government mandate would reverse decades of progress in offering consumers those expanded choices.
If the purpose of the proposal is to promote innovation and lower consumer prices, it fails on both counts. We need to stop the FCC from passing this regulation or from applying the rules to our companies. Otherwise, our residents will ultimately lose out. If the FCC decides to move forward with this proposal, we are asking for relief from complying with the rules.