It’s often the regulation you’ve never heard of that costs you real money. One such rule increases Americans’ cable and energy bills. This regulation from the Federal Communications Commission is known by the unwieldy name of the “integration ban.” We believe that it’s time to repeal this outdated technological mandate.
But first, the basics: Many consumers are familiar with set-top boxes that cable companies commonly use to deliver video to our television screens. Those boxes are used to combine two kinds of features: a navigation function, which allows consumers to do things such as change channels, and a security function, which prevents customers from viewing channels they haven’t paid for.
What is the integration ban? It’s a 1998 rule that prohibits cable companies from combining, or integrating, those features in the set-top box. Instead, the security function must be performed by an external “CableCARD” — a device about the size of a credit card or cellphone battery — that is inserted into the box.
Why? The idea was to foster more competition in the market for set-top boxes and offer consumers greater choice to select their preferred device. However, even though FCC rules already required cable companies to provide CableCARDs to consumers using third-party retail devices, the agency decided that more nudging was needed to alter the market. Thus, the FCC required cable companies to use CableCARDs in their set-top boxes as well. That way, the theory went, third-party manufacturers such as TiVo would be able to sell devices at retail that could compete on a level playing field with those provided by cable companies — because both types of devices would require a CableCARD.
The commission adopted the integration ban with the best of intentions, but the end result has not been good for consumers. By forcing cable companies to include CableCARD technology in their equipment, the FCC has increased consumers’ cable bills. Specifically, the integration ban adds about $56 to the cost of each set-top box, hiking the monthly rental fees charged to customers. We haven’t heard anyone complaining lately that they are paying too little for cable service. So regulators should prioritize measures that will lower prices, not raise them.
That’s not the only harm to consumers, though. This ban is also driving up our electric bills. Based on Environmental Protection Agency figures, CableCARDs increase cable customers’ energy consumption by 500 million kilowatt hours each year, enough to power all the homes in Washington, D.C., for about three months. At a time when the federal government is trying to promote conservation and reduce carbon emissions, the integration ban is driving us in the opposite direction.
What have Americans received in exchange for higher cable and electric bills? Unfortunately, not much. The integration ban has done little, if anything, to create a retail market for set-top boxes. The statistics tell the tale. As of this year, the nation’s largest cable companies have supplied 45 million of their own CableCARD-enabled set-top boxes to their customers. How many CableCARDs have been deployed for use in third-party retail devices? Only 606,000. That means that less than 1.4 percent of customers are choosing to purchase their set-top boxes through the retail market.
Like so many other regulations, the integration ban has quickly become outdated. Today, there are myriad avenues for consumers to access video content without using a set-top box supplied by a cable company or a CableCARD. Roku, Google, Amazon and Apple all offer streaming set-top boxes. Consumers can now access cable programming through mobile applications, personal computers and tablets, and gaming consoles. The growing ubiquity of broadband can directly connect creators and consumers (think YouTube channels) without the need for any video distributor at all.
In a market with so many options for video delivery, and so many unique market players, there is simply no need for an integration ban. Competition has developed in the video market organically in ways that regulators did not envision. The CableCARD didn’t spur any of this progress. If anything, the FCC’s rigid technological mandate has inhibited innovation in this space.
Government regulations must keep pace with the times. FCC rules that might have made sense in the 1990s do not necessarily make sense today. The integration ban is a good example.
By ending the integration ban, we can kill two birds with one stone. We will take a step toward reducing consumers’ cable and energy bills. We will recognize the marketplace as it is today, not how the government theorized and planned it to be more than a decade ago. That’s something that everyone in Washington should support.
Rep. Bob Latta, Ohio Republican, is vice chairman of the House Energy and Commerce communications and technology subcommittee. Ajit Pai is a member of the Federal Communications Commission.