We often talk about the power of cable lobbying in the context of big proceedings like network neutrality. But where the real power comes, and where consumers routinely get screwed the most, happens off-screen. Because people hardly ever know what is happening, cable lobbyists play an outsized role in working their magic and making it legal to find new ways to screw over subscribers. Nothing illustrates this better than the fight over the Satellite Television Access and Viewers Rights Act (STAVRA). As my Public Knowledge colleague John Bergmayer explains in this blog post, unless Congress passes STAVRA, a lot of satellite TV subscribers will lose access to some of their broadcast channels. Since Americans totally freak out if they cannot watch their favorite show, and channel this rage to their members of Congress, that makes STAVRA “must pass” legislation.
The cable industry lobbyists have managed to append this bill designed to protect consumers a little gift to themselves. Cable operators make over $1 billion a year on equipment rentals to subscribers. Section 203 of STAVRA eliminates the FCC rule (“the integration ban”) that makes it even vaguely possible at the moment for people to avoid these rip off rental fees and actually buy your own cable set top box (STB) or digital video recorder (DVR) using something called CableCARD.
From a policy wonk perspective, I have to say that Section 203 of STAVRA is a work of art. Unless you know what to look for, you will never find it by flipping through the bill. And unless you know the whole background on how the cable industry has frustrated the effort to get competition in the STB and cable device attachment business, you would never know how the cable arguments about how CableCARD doesn’t work are self-serving baloney. And, best of all, Section 203 contains a fake solution so members of Congress and the cable lobby can pretend this will make things better, rather than continue to screw consumers out of hundreds of millions of dollars in cable fees annually.
Hence the need for two insanely long posts. But since we are talking about consumer rip offs of over $1 billion a year, I kinda hope you will consider it worth reading. Here in Part I, I will give you everything you need to know about the history of how cable has ripped us off on equipment rental fees despite Congress passing two separate laws (here and here) to make it possible to actually own equipment and avoid this nonsense (which worked from 1992 until we went digital), what the heck the “integration ban” is, and why CableCARD — lame as it is — actually does make things mildly better and is picking up steam as a result of stuff the FCC did back in 2010.
In Part II, I will cover the current fight over the Section 203 of STAVRA, what makes Section 203 such an amazing work of art and how Senator Ed Markey (D-MA) is standing up for consumers on this. With help, Markey can actually flip this around and convert this from a gift to the cable industry to something that would genuinely help consumers by making the promise of stand alone STBs and other cable equipment real. But, at a minimum, Markey needs help getting the bad provision stripped from the bill so we can at least keep what we have and keep working to make it better.
Let the Ridiculously Long Background Story Begin!
Some of you like me may be old enough to remember that, back in the 1980s and 1990s, you had to rent a set-top box (“STB”) from the cable company AND pay a separate rental fee for the remote. Then, like magic, in 1993, it suddenly became possible to get “cable ready” televisions and videocassette recorders (VCRs) that did not need a set-top box at all! People saved lots of money on their cable bills by buying new equipment (or rented the STB from the cable company if they didn’t feel like buying the equipment – since the cable company stopped jacking up rental fees once you could buy this stuff on the market). We even started to get “digital video recorders” (DVRs) like TiVo plugging into the phone system.
And then, again as if by magic, all that went away. As cable upgraded to digital, we suddenly magically lost our ability to buy STBs and had to rent them again. It got much harder to connect TiVo, and cable operators began offering a crappier version of DVR service which they leased to us.
That Wasn’t Really Magic, Was It?
No it wasn’t. As anyone familiar with the history of networks will tell you, network operators love to control what attaches to the network so they can charge the customer rental fees. It generally takes a law or regulation to force network operators from claiming all those yummy monopoly rents. In the telephone world, AT&T used to make you rent your phone from them and wouldn’t let you attach things like answering machines. Then we had this thing called Carterfone which established that you could attach any device you wanted to the network, the FCC adopted rules establishing a standard telephone jack/interface so anyone could build a device to work with the phone network. After that, we not only got to own our own phones and answering machines, but innovative stuff like dial-up modems got developed.
Congress drew on this history when it passed the Cable Competition and Consumer Protection Act of 1992] (1992 Cable Act). Congress included a provision that required cable operators to use a standard interface for encrypted and scrambled channels – and made the FCC adopt rules to make compliance law. Because Congress understood that the FCC Cable Bureau were, even then, the cable industry’s happy little lap dogs (srsly, read the legislative history on the 1992 Act someday), Congress mandated some pretty stiff timelines for the FCC to get its act together and issue the proper rules.
As a result, in 1993, we had a standardized interface, equipment you could buy started flooding the market, and consumers started saving great gobs of cash. We also had more of that innovation thingie from third party companies like TiVo, since cable operators suck pretty badly at innovating on their own and usually rely on taking other people’s stuff, repackaging it, selling it back to you, and claiming that they invented it.
So Why Am I Stuck Renting A Cable Box Again?
By the time Congress got around to writing the Telecommunications Act of 1996, it was clear that cable was going to evolve into some kind of interactive digital service. Congress wanted to replicate the success it had with the 1992 Cable Act and make sure we could have competitive devices and services. At the same time, however, because Congress wasn’t sure how the technology would evolve, and because of a lot of high-powered cable lobbying, Congress didn’t just repeat the same language requiring the cable industry to have a standard interface for all future devices.
Instead, Congress came up with Section 629 of the Communications Act, codified at 47 U.S.C. 549. This provision requires that the FCC make sure that consumers can buy and attach devices to cable systems for accessing cable programming, interactive services, or anything else offered over the cable system “from manufacturers, retailers and other vendors not affiliated with any multichannel video programming distributor.” The FCC cannot stop cable operators from offering a competing device, and the FCC needs to ensure that the mechanism used doesn’t violate the security of the cable system.
And, because we were legislating for future services, the statute has absolutely no timelines for the FCC to promulgate rules or remedies.
You can guess what happened next, can’t you?
The Cable War of Attrition to Sabotage Your Right To Buy Your Own Set-Box, As Enabled By the FCC’s Own Cable Bureau!
Yup. You can get lots of background from these 2 D.C. Circuit cases upholding the FCC’s rules: General Instrument Corporation v. FCC (upholding integration ban) and Comcast Corp. v. FCC (upholding the FCC determination that, after 10 years of bickering, forcing Comcast to actually install and support CableCARD did not violate the law or constitute a “vendetta” by the FCC against Comcast. Yes, Comcast and the cable guys really are so privileged that they think being told to obey the law is a “vendetta.”)
(Sadly, the D.C. Circuit recently rejected the effort to apply the rules to satellite TV providers. As I have oft observed, I used to live in a country with a Rule of Law, now I have the D.C. Circuit. Happily, however, nothing in the Echostar case impacted application of existing CableCARD rules to cable. Sadly, the cable industry’s happy little lap dogs at the FCC, aka “The Media Bureau,” have rather deliberately misconstrued this in the context of an unrelated waiver request. Happily, however, the CableCARD rules remain in effect for the industry generally.)
So What Is The “Security Integration Ban” I Keep Hearing About and What Does It Have To Do With CableCARD?
The FCC spent several years wrangling with the cable industry to try to develop a common standard to make it easier for other people to compete with cable operators and deprive cable operators of high rental fees. Needless to say, the cable operators slow rolled this. Sadly, the Cable Bureau (now a part of the Media Bureau) pretty much enabled this since, as cable’s happy little lap dog, the mere presence of cable industry lobbyists prompted them to forget everything but happy running in circles, wagging their tails, and peeing all over consumers and competitors in their ecstasy at seeing their cable overlords again. But eventually, in 1998, the Commission adopted a rule that said:
1. Set-top navigation devices and other devices have to have 2 components, a general “functional” component and a “conditional access” component that makes sure the subscriber only gets services the subscriber paid for and generally protects the security of the system.
2. Because allowing the cable operator to control both the conditional access and the key to the conditional access makes it just too easy for cable operators to totally bugger any attempt to create rival equipment, the functional piece and the conditional access piece cannot be “integrated” into one device.
Hence were born 2 things: the “security integration ban,” and “CableCARD” to address the security integration ban. The idea being that if cable operators could only control the security ‘lock’, but were not allowed to own their own separate ‘key,’ they would have to make the key more generally available. Or, at a minimum, it would be easier to tell when cable operators were favoring their own devices with better “keys” and easier access to the system than stand alone third party devices. The “integration ban” (when it’s in effect and not delayed or waived or whatever) therefore prevents anyone from offering devices integrates both the functionality of the device and the security access for the cable system. By making every one, cable and competitor, go through the same interface, the FCC hoped to prevent cable operators from buggering rival devices and services.
CableCARD is the little doohickey that supposedly provides the key to the access. Over the course of setting the standard for CableCARD, the cable industry did lots to make it (a) easy to make CableCARD difficult to use as compared to equipment the cable operator just rents you, and (b) generally slow down actual application of CableCARD. It helped that then-Commissioner Michael Powell, who dissented from the FCC adopting the “integration ban” in 1998 (and objected to reaffirming it in 2000), became Chairman of the FCC in 2001, so he could continue to make sure it never happened. (And, in what is all part of the great circle of life here in D.C., Michael Powell is now head of the National Cable Telecommunications Association (NCTA), which continues to object to the integration ban. At least Powell has the virtue of consistency.)
Finally, in 2005, Kevin Martin became chairman of the FCC. and informed the cable industry that to celebrate the 10th anniversary of Section 629, the FCC would now start actually enforcing the integration ban and cable operators needed to start supporting CableCARD installation no later than 2007. The cable industry filed for yet more waivers, because why on Earth would anyone want to rush into complying with the law and letting consumers actually buy their own equipment rather than forcing them to rent it. To everyone’s shock and amazement, the FCC denied the waiver requests and the D.C. Circuit affirmed the FCC’s decision to actually enforce the law ‘n stuff.
As this old Ars Technica piece and primer on CableCard show, we all expected that, finally, after ten years of waiting, we would see the law enforced and actually be able to buy own devices rather than pay rental fees for crappier devices and services.
So Why Doesn’t CableCard Let Me Buy My Own Stuff Instead of Renting From The Cable Company?
Needless to say, the cable operators did not quietly surrender. While most people trying to make equipment to connect to cable systems had long since given up and gone away (a favorite Media Bureau strategy for enabling cable industry shenanigans – don’t do anything and eventually new entrants will die or move on to other things). Nevertheless, a few brave companies like TiVo kept trying to make CableCARD work and sell stand alone devices.
The cable guys responded by making it supremely difficult to install a CableCARD and making devices that used CableCARD stop working at annoying intervals. As we have learned again in recent days with the nightmare tales of Comcast Craptastic Customer Care, cable operators can make life a living Hell for customers even when they don’t try hard. When they actually put their mind to making your life miserable for daring to have the presumption to buy a set-top box or DVR of your own rather than rent one from the cable company, they can be amazingly creative rat bastard sadists.
Cable operators insisted that only a trained technician, coming to your house between Whenever and WeDontCare, could install a CableCARD. Assuming the technician showed up, they often had “problems” that required lots of consulting with the home office, which occasionally did not even solve the problem. When CableCARD did get installed, it would often experience mysterious issues that would require even more technician visits and phone calls. At every stage in this process, the helpful cable customer representatives and service people would tell you that if you just stopped trying to actually own your devices and would just rent from the cable company instead like a “normal” customer your life would just be ever so much easier.
And of course, even though they weren’t supposed to charge for supporting CableCard and it didn’t actually cost them anything (if they weren’t spending money to screw it up), some cable operators charged various set-top box fees and other charges to ‘make up’ for your owning your own device and not renting one — thus totally defeating the point of owning your own device. Because, y’know, cable operators are entitled to that rental fee regardless of whether or not you actually rent their equipment.
Why? Don’t Network Providers Want Customers To Have a Happy Experience, Fear Competition, etc.?
Dude, have you seen how much customers hate their cable company? Pissing off their customers is basically the cable business model. That and steeling other people’s stuff and selling it back to you – like DVRs (stolen from Tivo) and interactive set-top boxes (stolen from Google, Apple and a bunch of others).
Nevertheless, this does not prevent worshippers of the Gods of the Marketplace from repeating the tired catechism that consumers must not really want their own equipment like an Apple TV or a Google set-top box because if customers really did want these things then the market would produce them — despite all obstacles and incentives to the contrary.
The problem is consumers want television content, so they will put up with a lot of crap. Much the same way people hate everything about flying, but because people want to go places without spending several days driving, they fly anyway. That does not mean that consumers love cramped airline seats and lots of additional fees. Similarly, while people may want to buy their own equipment and have Apple TVs that can offer them seamless, integrated cable programming, DVR and Internet browsing, they will put up with ridiculous set-top box fees and lousy DVR interfaces and reduced functionality so they can watch the season premier of Game of Thrones and see sports programming in real time.
How Much Money Do Cable Operators Make From Forcing Customers to Lease Equipment Instead of Buying it?
Cable operators make great big heapin’ piles of dough from making it hard to buy your own equipment and forcing you to rent stuff – while hard to say for certain, estimates put total rental fees for the industry above $1 billion a year. For example, it is estimated that Comcast makes more money from leasing cable modems than it did from showing the Olympics, an estimated $300 million per quarter. And that covers only a single device. When a cable operator raises a rental fee attached to multiple devices – like a fee on each set-top box or DVR service for each TV in your house – the customer ends up paying double or triple the fee because most consumers have more than 1 TV set hooked up to cable and the fee increase applies to every single device you are renting.
Best of all from the cable operator’s perspective, raising the fee has nothing whatsoever to do with cost. It’s basically free money for the cable operator. When Time Warner Cable announced massive new set-top box fee increases for all their subscribers from $10/month to $11.25/month, that translated into an additional $170 million in revenue for the year for doing absolutely nothing and giving you nothing. (Or, as the article linked to above wryly observed: “I don’t know about you, but I haven’t noticed my box performing any better.”)
According to the FCC’s 2014 cable report, in 2012 (the year covered by the report), cable operators raised the rental fees on equipment by 4.4%. That is on top of the 5.5% increase in the actual subscription fee. And, that’s 4.4% increase on average per device. Multiply that by the number of devices you must rent from the cable company for each TV and you are probably looking at gouging subscribers by an additional $20 or so a month. And again, because the cable operator is not actually spending any money to upgrade the equipment as part of the fee increase, that is pure price-gouging profit.
You begin to see why cable operators fight so hard to keep CableCARD from working, and why they work to stall any improvements that could make it easier for customers to actually buy their own equipment from someone else. Failure to enforce Section 629 of the Communications Act does more than stifle abstract innovation. This constant failure to enforce Section 629 gives cable operators a license to perpetually rip off consumers to the tune of over a billion dollars annually.
So, naturally, Congress is now set to pass a law that will make it even easier for cable operators to rip people off, stifle competition, and struggle to say “we are in a highly competitive industry and put customers first” with a straight face.
If CableCard Sucks So Badly, Why Are Cable Operators Calling In Lobbying Chips to Get Rid of CableCard?
In 2010, for a variety of reasons, the Genachowski FCC actually had a brief surge of interest in trying to protect consumers. Despite the best efforts of the cable industry’s happy lap dogs in the Media Bureau, the 2010 CableCARD Order exposed most of these abuses and did a bunch to correct them. You can see your rights under the reformed CableCARD rules here. Cable operators also had to put up information about CableCARD on their websites and made it clear that yes, you can install it yourself. (They can still charge a rental fee for your actual CableCARD, alas, but they can’t stop you from buying your own CableCARD and installing it yourself.) The FCC also issued an enforcement alert just to show they were serious.
With enforcement of CableCARD actually handled by the Enforcement Bureau rather than the Media Bureau (official slogan: ‘overworked and understaffed, but at least we actually give a crap’), and with no significant market for competing products, cable operators generally complied. When the new rules became effective in 2011, it became significantly easier to actually use CableCARD. Companies like TiVo started making interesting and popular new products, like the Tivo Roamio. All of which consumers love, but cable operators loath beyond imagining.
Mind you, I am not claiming CableCARD is the ultimate panacea of wonderfulness. CableCARD was always meant as an “interim” solution until the industry developed a superior two-way solution. (My employer, Public Knowledge, has been pushing a comprehensive solution called “AllVid” for about 5 years now.) Among the various ways cable operators crippled it, CableCARD only works for information transmitted from the cable system to the device. To make things interactive, unless the device is rented from the cable operator, the device needs a broadband return path. This is just another way your friendly local cable giant makes your life more difficult so you won’t do something radical like watch Netflix on your TV instead of your laptop or buy an independent streaming device like Roku.
But as lousy as CableCARD is, as much as we need to do more if we want to actually liberate the devices that connect to your cable system and stop getting gouged every month by needless and ever-increasing fees, CableCARD is at least doing something today. To the extent we have any green shoots of competition in set-top boxes, DVRs, and other cable attachments, CableCARD is it. And it is actually starting to work. So, of course, the cable industry is using their lobbying power to get CableCARD killed.
Are We Finally Up To This “STAVRA” Thing And All The Sleazy Politics Stuff? Because We’re 3500 Words Into This Blog Post And I Still Don’t Know What We’re Talking About Or Why I Need To Support Senator Markey Or Block STAVRA Or Whatever.
Sorry, but it’s not like y’all would have known what the “integration ban” was or appreciate the true, magnificent special interest sleaze artistry that is Sec. 203 of STAVRA.
So we will now close on Part I. Click here for Part II: STAVRA Section 203.
Or if you prefer a somewhat shorter version, see several blog posts written by my Public Knowledge colleagues, particularly John Bergmayer. See here, here, here and here. Also this cool letter PK wrote with Free Press and Consumers Union.
Stay tuned . . . .