The FCC Calls for a Standard Set-Top Box: Open Box, Open Market, Open Mind?

1/8/10

I may be in the minority, but I think the FCC’s recent call for an open, retail-ready set-top box standard could be a boon for incumbent service providers, their technology partners, and consumers. The cable companies, who charge a nice little fee for set-top box rentals, may say that regulation will cost them the revenues that drive innovation and support network build-out and that the current market is fine as it is. That said, it’s a mistake to assume that video service providers aren’t also embracing the Internet video revolution–all you have to do is look at Comcast’s Excalibur announcement. Either way, no one in the industry expects to wake up anytime soon to a world where the majority of their existing customers have “cut the cord” in favor of over-the-top internet delivered video services.

The reasons for this are articles on their own, but a new era of scalable Internet video services from cable/telco/satellite providers is absolutely coming. Why? They realize that Internet technologies are more flexible than their existing closed technology offerings, that they can deploy competitive offerings to consumers much more quickly, and that making these investments now prepares them delivering their services outside their traditional network footprint. They also know that Apple/Google/Microsoft will nibble away at their subscribers as broadband speeds grow and the FCC continues its current support of net neutrality. As this evolves, they are preparing to change their model to head off this new competitive threat.

In this light, the wide availability of a consumer-friendly Internet set-top box should be music to their ears. While it won’t convert meaningful numbers of existing pay-TV customers on day one, it will allow these companies to compete with other organizations who can amortize a hardware investment against a much larger target customer base (e.g. Apple/Google/Microsoft). If a standards-based set-top box allows the incumbent service providers to bridge competitively into the new world order, they’ll readily embrace it. Meanwhile, if traditional providers of proprietary set-top boxes can preserve their lucrative service provider contracts and also pursue a new, global retail opportunity, they will build them too. Finally, if these new devices provide a compelling feature set, tied to a competitive content offering, the consumers will come as well.

I look forward to the day when I can purchase my set-top box at retail and freely choose a la carte service offerings from existing providers who are today hemmed into their own geographies as well as a new slate of competitive upstarts. That said, whether or not we see a regulated, open set-top box standard, the world of truly a la carte Internet-delivered video services is coming. This week at the Consumer Electronics Show, we will undoubtedly see another wave of connected TVs and consumer boxes from folks like Boxee, Blu-ray player manufacturers and others. A successful reference design set-top box would dramatically accelerate this inevitable shift by lending itself to incorporation into even more devices.

Far from the competitive nightmare some would suggest, a standards-based set-top box will allow service providers to focus on their real assets and differentiators—multiple customer touch points (TV, mobile, broadband), recurring billing relationships, customer service, and the massive scale to deploy and deliver multi-screen video to millions of users. So I don’t think it is a stretch to think this scenario can become a reality fairly soon. And when it does, it could make a lot of people happy.

Keith Kocho is founder and president of Boston-based ExtendMedia, a provider of software and services for delivering and monetizing online video. Follow @

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