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Slow Progress for Open Cable TV Competition

U.S. regulators have denied a request by the cable television industry to delay new rules designed to open up the market for cable TV set-top boxes -- and in the process have started to unravel the longtime duopoly of Motorola (owner of General Instrument) and Cisco (owner of Scientific Atlanta).

According to a Reuters report, the Federal Communications Commission (FCC) said it would not postpone an order that requires cable companies to separate the security functions from set-top boxes and put them into a CableCard that can be easily used in TVs and set-top boxes made by other manufacturers (not owned by the duopoly).

"In a new era with a competitive set-top box market, consumers will enjoy greater choice and reap the benefits of exciting and innovative features -- such as the ability to watch Internet videos or view slideshows of family vacations on their TV sets," FCC Chairman Kevin Martin said in a prepared statement.

I believe that Chairman Martin should have gone farther, and mandated unbundling so that cable TV subscribers could purchase individual channels from an a-la-carte menu and create a customized tier -- as consumers in leading pay-TV markets, such as Hong Kong, can already do freely. He, and the FCC commissioners, talk about the obvious benefits -- but it's all talk and no action.

Current restrictions in the U.S. market force consumers to purchase channel-tiers that often contain many "filler" channels they never watch. It's one of the primary reasons that the pay-TV sector is so lucrative. Furthermore, cable companies closely track the usage of channels that are trending upwards, and then remove these channels from the "Standard" tier.

Such was the case with Time Warner Cable in Austin, Texas, as an example. When the Independent Film Channel (IFC) and the Sundance Channel gained in popularity, they pulled these channels from the Standard channel tier, essentially forcing non-digital subscribers to upgrade. Moreover, all consumers now had to subscribe to a "Movie Pak" tier that included eleven channels -- even if they were only intending to watch the IFC or Sundance.

To date, the FCC did nothing to intervene after they deregulated cable TV services and rates began to skyrocket -- meanwhile municipal governments continue to grant a monopoly to just one cable TV company in most markets. Meaning, Chairman Martin's "new era" has actually proven to be a disaster for most American consumers.

The "channel shuffling" game was merely an incremental byproduct of the apparent lack of federal regulatory oversight. Clearly, local municipalities have no incentive to contain rising cable TV rates, since their own tax windfall is based upon a percentage of pay-TV revenues.

This scenario is the real reason that U.S. Telcos have been so keen to enter the pay-TV market. It's considered yet another government-protected marketplace that has tolerated blatant restraint of trade, while at the same time ensuring that consumer choice is restricted. Add to this the consolidation of the radio and television broadcast sector, and it's apparent that the FCC has forgotten a key part of its charter.

Therefore Chairman Martin's announcement is hardly grounds for consumers to believe that substantive progress in being made to make the pay-TV market progressively more open and competitive. It's more like a token gesture effort to deflect ongoing criticism that Americans must endure a system of government that clearly hasn't protected the consumer's interest.

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