Although a lot of ink was spilled to put the CableCARD mandate into effect in 2007, two federal legislators are now trying to kill the ban on embedded set-top box security, much to the delight of the cable industry.
Representatives Bob Latta (R-OH) and Gene Green (D-TX) have introduced a bill to repeal the set-top security integration ban. The proposed bill maintains the authority of the Federal Communications Commission (FCC) to regulate set-tops, but it would allow cable operators to embed conditional access technology once again in their set-tops rather than rely on removable CableCARD modules.
The goal of the 2007 integration ban was to open up the US set-top market to greater competition. In theory, by removing the security component that kept most operators locked in to Cisco Systems Inc. (Nasdaq: CSCO) and the former Motorola as hardware providers, the mandate was supposed to encourage new vendors to enter the set-top business. It was also supposed to create a retail market for boxes that could access cable TV services through operator-provided CableCARDs.
As it has turned out, though, very few CableCARDs have been shipped for use in retail products over the last six years: Only 603,000 CableCARDS have been shipped, as opposed to 42 million CableCARDs embedded in operator-leased set-tops. Only TiVo Inc. (Nasdaq: TIVO) has managed any real success with CableCARD-supported retail boxes, and ironically, the popular DVR provider has now shifted much of its business to the cable industry. (See TiVo Scores Big Profits.)
Not surprisingly, the National Cable & Telecommunications Association (NCTA) is cheering on the new bill in Congress. The NCTA argues that the integration ban has already cost cable customers more than $1 billion in hardware expenses. It also contends that the rule places an undue burden on cable operators; one that doesn't apply to AT&T Inc. (NYSE: T) with its U-verse IPTV service or to satellite TV operators Dish Network LLC (Nasdaq: DISH) and DirecTV Group Inc. (NYSE: DTV).
Cable companies also point out that competition in the TV hardware market has increased significantly over the last six years, thanks to IP video delivery and new multi-screen services. Many operators now offer TV programming over laptops, smartphones, and tablets. Some of the largest providers have also developed apps for access on smart TVs, media streaming boxes, and game consoles. (See Xbox Puts Time Warner App on Tap.)
— Mari Silbey, Special to Light Reading Cable