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Cable Companies Will Fight Dirty Against FCC To Preserve Set-Top Box Boondoggle

Set top boxes are a ripoff.

The cable bundle itself is far from the only ripoff in cable television.

The average American household spends about $230 a year on cable set-top box rental fees, according to an analysis by Congress released in July. Senators Edward Markey of Massachusetts and Richard Blumenthal of Connecticut, along with the Commerce, Science and Transportation Committee, conducted the query and determined that the set-top box rental market was worth about $20 billion annually.

Given the size of the set-top box market, it should come as no surprise that cable companies intend to fight extremely hard against FCC Chairman Tom Wheeler’s proposal to open up the set-top box market to third-party manufacturers. Already, the cable industry is already throwing some incredulous up-is-down, black-is-white arguments against the idea.

“The proposal, like prior federal government technology mandates, would impose costs on consumers, adversely impact the creation of high-quality content, and chill innovation,” Comcast wrote. “It also flies in the face of the rapid changes that are occurring in the marketplace and benefiting consumers.”

Never mind that those rapid changes that benefit consumers usually involve getting rid of cable TV all together, or that more companies entering a market generally does the opposite of “chilling innovation” — a point that Wheeler himself is emphasizing — or that cable company-supplied set-top boxes have been terrible technology for quite some time. No. This is the government “imposing costs on consumers”, and hey, why allow the government to do something that Comcast already does so well?

Those rental fees aren’t the only set-top box costs imposed on consumers, either. According to the Los Angeles Times, the average cable DVR consumes 35 watts of power and can add roughly $8/month to your electric bill. By comparison, Roku 3 consumes only 3.5 watts of power, the new Apple TV consumes 2.4 watts when streaming and 1.5 watts in sleep mode, and the Chromecast 2 consumes only 1.8 watts. If nothing else, opening up this market to third parties could greatly reduce power consumption in America.

To put into focus what this set-top box battle is really about, though, let’s look at some numbers.

At the end of 2015, Comcast reported having 22.3 million video subscribers. If we presume that $230/year per household is a reasonable number, Comcast would have collected roughly $5.13 billion in set-top box rental fees in 2015.

Comcast’s net income for 2015? $8.16 billion.

Time Warner Cable, meanwhile, has 10.8 million video subscribers. At $230/year per household, the 2nd-largest cable company in America would collect more than $2.48 billion in annual set-top box rental fees.

TWC’s net income for 2015? $1.84 billion.

If Tom Wheeler is going to push a policy that impacts more than half of Comcast’s net income and potentially erases all of TWC’s net income, then you better believe these cable companies will use every dirty trick in the book — including funding minority astroturf groups to argue that an open set-top box market somehow hurts diversity — to protect that income, quality of product be damned… as it usually is with Comcast and TWC.

Look for these cable giants and others — especially AT&T, which now owns DirecTV and will lobby for another satellite TV exemption — to throw a few million dollars at the SuperPACs of Congressional candidates in this election cycle. Congress will help them protect this boondoggle for the right price. This is how cable companies beat the FCC in the CableCARD battle. It will surely be their biggest weapon again in this fight.

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