Research: Set-Top-Boxes For Everyone? Not So Fast!
Wobbling Back to the Fire: Economic Efficiency and the Creation of a Retail Market for Set-Top-Boxes
Phoenix Center
T. Randolph Beard, George S. Ford, Lawrence J. Spiwak, Michael Stern
December, 2010
The authors look at a new push by the FCC to promote a retail market for set-top-boxes as directed by Congress in Section 629 of the Communications Act. The authors point out the failure of the previous attempt, CableCard, and examine the new attempt, “AllVid”. With AllVid, any multichannel video program distributor (MVPD) would provide some type of adapter which would be a proprietary connection for all retail market televisions, DVRs, media PCs, Internet television devices, or any other device for use in this arena.
The authors analysis shows that there is no additional market power gained by the MVPD in the current MVPD – set-top-box market structure. i.e. STBs are designed for the MVPD and the MVPD distributes the STBs to their customers in some fashion. They could be included with standard monthly fees, cost additional fees, leased, or purchased.
An additional point is made that there is no evidence that a retail market for set-top-boxes could not be self-sustained. If it was economically feasible for a company to produce retail market STBs they would be doing so. The authors also indicate that there is no evidence that a government-directed program is not necessarily a solution–if there is a problem to begin with. There does not seem to be evidence showing that such a program would decrease costs or pricing. The authors feel that if the retail market could produce STBs at lower cost, lower price, and if it would encourage greater innovation then there is evidence that MVPDs would embrace this change in the marketplace.
You can find the full paper here.
Nick,
Of course there isn’t a value add yet because there is no innovation or market incentive for set top boxes! You could probably publish this same article about phones previous to the carterphone decision concerning the need for that too have come about as well.
Monopolies breed stagnation because good enough means saving money on R&D and therefore higher profit margins. We probably can’t even fathom the innovation which would happen if there was an access method into the monopoloies of STB’s which is why this research came out as it did.
Very Respectfully,
Garrett Heaton
Thanks for the comments Garrett.
I’ll have to reinforce that research posts are summary posts of others research. So realistically you’d have to take up your disagreements with the Phoenix Center.
However, if you take a look at their research there is compelling evidence regarding two things that you might want to consider against your POV:
1) There is nothing preventing a company from making an STB to sale in the retail market.
2) CableCard was a failure, so what evidence do we have that AllVid will be successful?
Also consider two examples:
1) TiVo screamed to market in 1999 and was very successful. Their STBs were innovative at the time and can be used with all MVPD’s accept for DirecTV. It can even be used with DirecTV who owns ReplayTV because TiVo ran ReplayTV out of business and they sold themselves to DirecTV who uses their tech in DTV branded STB DVRs.
TiVo has since completely quit innovating. They has refused to move away from a $20/month service fee. So arguably, even if they had a better or more innovative product, which just by way of quick review they don’t, consumers would still be hard pressed to use them because not only do they have to buy the STB but they have to pay a $20/month service fee. Most MVPDs offer their boxes free of charge or rent them for about $5-$10/month.
If an MVPD offered you their box that had more innovation for $10-$15 less a month and in some cases you did not have to purchase the STB, what consumer in their right mind would choose TiVo?
2) The second example is GoogleTV. GTV has come on the market and is being placed in several types of STBs and STB Add-On boxes. The product is very innovative. So we will be able to witness right now if consumers are willing to part with $250 for STB Add-On boxes like the Logitech Revue, or if the demand increases for GTV enabled STBs in both retail or from OEM sources. So there’s your test. There is both innovation and market incentive in this particular recipe.
Leave your response!
Twitter Feed
About Us
Digital Society is a digital think tank that believes culture and commerce are inseparable, that the digital economy flourishes when people are free and rights are secure, and that free markets free people.
Digital Society is an independent 501(c)3 non-profit organization, funded by donations from Jon Henke and from Arts+Labs. We advocate for a pro-culture, pro-commerce digital society through research, analysis and debate on emerging technology issues.
Reply Comments
Transparency and interactivity are trademarks of the Internet era, and we aim to foster them here at Digital Society. It is inevitable that some people will disagree with the technology policy positions we take. We want to have that constructive debate.
The Reply Comments feature gives our critics a chance to respond to our viewpoints and the Digital Society audience convenient access to competing arguments. Any time we directly challenge the views of an individual or a group on this site, the party in question may substantively respond in a guest post.
Please contact executive director Jon Henke by e-mail.
Subscribe
Daily Digest Email
Recent Posts