Cable Cards

Its been a busy few weeks since my last post.  Paris Hilton was sprung from the big house, twice, the iPhone was finally launched, albeit to the displeasure of purchasers who had difficulty connecting to the AT&T service (is anyone surprised?) and the Cable and CE industries continue to face off over the issue of cable cards.  Ok, so the first two received more press than the last, but the latter could be more important.  Why? Cable Cards are the solution reached between the CE and Cable industries, at the behest of the FCC, to separate the security and program guide functions of the traditional set top box (STB).  The CE industry has clamored for the right to provide a set top box and the program guide, often referred to as the EPG, to consumers through their traditional CE distribution channels.  All the while the cable MSOs have countered that the impact of separating the program and channel control functions from the security, or conditional access, functions would increase the cost of STBs to consumers.  Many pundits believe this to be another attempt by the Cable companies to thwart the efforts of the FCC and the CE Industry and to blame the FCC for the increased cost of STBS, in what they are calling a "tax" on consumers.  So what's the real deal?   The first screen a consumer sees when they turn on the TV, and the billions of dollars of advertising and transaction fees that this real estate can produce via a service tied to this "home page", like VOD, PPV and other impulse purchases by consumers.

The cable industry has claimed this as their own even though the physical asset used to view programming is manufactured by the CE industry.  There has never been a debate as to who owns the customer as the Cable industry has provided the digital cable service into the home AND the STB.  The Digital STB is the key to incremental revenue generating services like VOD and SVOD programming.  It also controls access to pay cable services like HBO.  Separating the security function from the program guide function opens the door for CE and other STB, or Home Media Center, manufacturers to offer a CE Device for the home to compete with the Cable STB.  I have only read of one company planning to enter this market, Digeo, but I imagine the CE Manufacturers and companies like TiVo have plans to offer a retail device.  The Digeo service claims it will provide movie downloads via internet services as well as other revenue generating features.  You can be sure the first screen to appear when a consumer turns on their TV will not have a cable company's logo affixed.  And thus, the battle for the "little screen" will commence.

The dance with the FCC also continues.  Cable companies continue to ask for waivers to delay the implementation of the cable card in their markets and the phone companies, especially Verizon, are petitioning the FCC to be excluded as they claim their STB and service is "different" and a competing service to the encumbent cable operator.  All the while the CE industry sits on the sidelines waiting patiently for their opportunity to participate and offer product through the traditional CE retailers.  While the FCC has the best interest of the consumer in mind, or is supposed to, in the end its usually the little guy who gets hurt by the turf wars of the major corporations and government regulatory bodies.  Can't wait to see what my cable bill looks like when the dust settles.  I'm sure the Cable industry will use the FCC mandate as the rationale for their next round of price increases instead of the exhorbitant cost of cable programming for channels many consumers don't even know exist.  What happened to the a la carte pricing initiative anyway?