By Cheryl Lee
Consumers who were frustrated by the high cost of renting set-top boxes filed class-action lawsuits against several cable TV operators. The antitrust class action filed against Cox Communications was the first to go to trial. The complaint, in that case, alleged that Cox violated the Sherman Act by illegally tying its premium cable service to its set-top box rentals. It also alleged that Cox created barriers preventing other companies from offering third-party set-top boxes. The jury returned a $6.3M verdict against Cox Communications.
But on November 12, 2015, U.S. District Judge Robin Cauthron overturned the jury verdict. Judge Cauthron wrote that while the Court agreed that Cox required customers to rent a set-top box to receive premium cable, there was no evidence to determine that such an arrangement barred competition in the set-top box market. She also stated that the jury did not hear evidence of manufacturers refusing to enter the market because of Cox’s actions and that no harm to Cox’s customers was demonstrated to warrant the judgment against Cox.
While the plaintiffs have appealed the court ruling, the relief for the consumer frustration has come from the Federal Communication Commission. On February 18, 2016, the FCC voted to allow for greater competition in the cable set-top box market. According to the FCC’s press release, “99% of pay-TV subscribers have limited choices and lease set-top boxes from their cable and satellite operators. Lack of competition has meant few choices and high prices for consumers – on average, $231 in rental fees annually for the average American household.” The FCC’s proposal would give consumers choices to access programming through the set-top box provided by their cable provider, set-top boxes offered by third party providers, or through devices such as a tablet or smart TV. The proposal creates a framework that will provide the necessary information to device manufacturers and app developers to develop new technologies. Once the proposal takes effect after the 60-day stakeholder review and comment period, the industry will have two years to comply.
FCC’s proposal is exciting on many fronts. It will not only break-up the set-top box market, which has been monopolized by cable operators, but the competition will drive innovation and lower prices for consumers. According to the FCC’s proposal, US consumers spend $20 billion each year to lease the set-top boxes from cable service providers. Since 1994, the price of set top boxes has risen 185% while devices like computers, TV sets and mobile phones have fallen 90%. Compared to innovation in the design and function of TV sets and mobile phones, the cable boxes and remote controls are clunky and ugly and the user interface is archaic. However, the price of these boxes has continued to rise due to the monopoly enjoyed by the cable companies. The FCC’s proposal is a break-up of cable companies’ anticompetitive measures that provides a pathway for innovative software and devices solutions to compete with the set-top boxes. This could allow innovators like Google, Amazon and Apple to expand into the media industry by providing devices and applications that blend internet and cable programming which will ultimately give consumers freedom of choice. And, that will “force” the cable TV companies to innovate and reduce prices on their set-top box and applications. Consumers will no longer be “tethered” to their cable companies for set-top boxes that are in need of major design and functional transformation.
Image source: ubergizmo.com.