FCCs New AllVid Proposal Ignores Growing Internet Streaming Trend

[panteragstk]

Interesting article from audioholics.com

"As the world of Internet streaming expands, the FCC is focusing, astoundingly, on AllVid, a new proposal for creating a retail market for set top box. The industry would have benefited from that about a decade ago, but now the world seems to have moved on. As part of the National Broadband Plan, and in a subsequent Notice of Inquiry, the Federal Communications Commission is attempting to remedy its admittedly failed CableCard regime with a new "AllVid" device to promote a retail market for set-top boxes. In a new study released today entitled Wobbling Back to the Fire: Economic Efficiency and the Creation of a Retail Market for Set-Top Boxes, the Phoenix Center examines the economics of the set-top box market, and finds that the FCC's new AllVid proposal may do more harm than good.

For example, the Phoenix Center's analysis reveals that, contrary to the arguments of some consumer groups, the set-top box conveys no market power to multichannel video programming distributors ("MVPDs"), even under the assumption of monopoly supply for multichannel services. Set-top boxes are necessary appendages (i.e., complements) to subscription video services and, as such, the MVPD provider can obtain all profits from the service itself.

Second, the Phoenix Center's analysis indicates that the MVPD has no anti-competitive preference for self-supply. If the equipment can be produced more efficiently and sold at a lower price in a competitive retail market, then the provider will embrace such a market to the benefit of both provider and the consumer.

Third, the Phoenix Center demonstrates that a government-directed commercial market for set-top boxes is unlikely to provide substantial gains in terms of lower costs, lower prices, or increased innovation. If the set-top box can be made cheaper and sold at a lower price, then the MVPD will embrace the cost reduction; profits are higher and consumers are better off. Also, if the set-top boxes can be made more innovative to increase the value to consumers, then the MVPD is incented to implement that innovation; again, profits are higher and consumers are better off. Since the incentives to reduce prices and increase innovation are intact, the prospects for a forced commercial market leading to lower prices and more innovation are slim. If a commercial market leads to lower costs and more innovation, then there is no reason for the FCC to mandate such a market; it will be willingly adopted by the industry.

Accordingly, the Phoenix Center demonstrates that until the underlying economic reality changes, perhaps due to some technological innovation, the FCC's anticipated aggressive regulatory approach towards set-top boxes is likely - as FCC Commissioner Robert McDowell notes -- to keep the agency in "the Valley of Unattained Goals."

"AllVid is fundamentally no different than the failed CableCard regime. By ignoring fundamental economic realities, the Commission is once again unnecessarily imposing significant costs on consumers in the name of promoting 'innovation.'"

- Phoenix Center President Lawrence J. Spiwak

"Equipment is not a profit center for MVPDs, it is a cost -- and a significant cost," explains study co-author and Phoenix Center Chief Economist Dr. George S. Ford. "If MVPDs could offload these costs on consumers through a commercial market for equipment without affecting the quality of the video services they offer, then MVPDs have every incentive to do so. The fact no such market has developed indicates that the commercial market option is, all things considered, relatively inefficient."

"If the set-top box disappeared tomorrow, the cable industry's capital costs would be cut substantially and their operating margins would improve slightly," echoes study co-author and Auburn University Economics Professor T. Randolph Beard. "The set-top box is a cost and not a benefit to the industry. Whatever arrangement exists for providing equipment should be assumed to be cost-minimizing and not anticompetitive."

"A consumer-friendly implementation of Section 629 requires the FCC to stop viewing the set-top leasing model as an irrational or anti-competitive solution to the service-equipment bundle," says study co-author and Auburn University Economics Professor Michael Stern. "The leasing model may simply be the best, most efficient way to deliver multichannel video services. Thus, a government-forced commercial market for equipment has little to offer."

Phoenix Center Policy Paper No. 41, Wobbling Back to the Fire: Economic Efficiency and the Creation of a Retail Market for Set-Top Boxes, may be downloaded free from the Phoenix Center's web page.

About the Phoenix Center
The Phoenix Center is a non-profit 501(c)(3) organization that studies broad public-policy issues related to governance, social and economic conditions, with a particular emphasis on the law and economics of telecommunications and high-tech industries."

[Spectrum]

Nice to see that there is a (somewhat?) official study, but the Government attempting to legislate a market is nothing new. It has been happening unsuccessfully for centuries.
<optimistic>New gov officials seem to think they can be the ones to make this strategy work.</optimistic>
<pessimistic>New gov officials keep doing it to make their friends rich who provide donations (bribes) and in turn make themselves rich.</pessimistic>

Either way you look at it, government continues to do it and we're the ones left paying the bills and getting crud in return

[panteragstk]

I think that the fcc is attempting to create competition when it is too late. If the companies are forced to support this standard and sagetv get approval to use the allvid devices the cablecard debate becomes pointless. Of course this could take years so who knows if this will change anything. Everyone seems to think that streaming video is the future and pay services other than data will become extinct. I don't think that will happen as fast as people think. There are still people using VHS to record off of their 100' tall ota antenna.

[OneOfMany]

Originally Posted by panteragstk

"Equipment is not a profit center for MVPDs, it is a cost -- and a significant cost,"

When our local cable providers are renting these sub-$200 boxes at anywhere from 12-30 a month, I find this hard to believe.

[panteragstk]

Originally Posted by OneOfMany

When our local cable providers are renting these sub-$200 boxes at anywhere from 12-30 a month, I find this hard to believe.

Wow, sub $200. They quote the box as costing $750 for a terrible motorola box with a p3 processor...I guess it depends on who you ask...

I think what they mean is if they didn't have to make stb's that it would save them money...Maybe

[OneOfMany]

To clarify, they charge $500 outright to buy them, they cost them sub-200 to buy from Motorolla etc. The reason they charge so much to buy them is they don't want you to

[reggie14]

I'm not sure how much STBs cost. I've seen them sold for around $200, but those were pretty basic models. I mean, you can even go on the Canadian Best Buy site and see some boxes for $150. But CableCard does seem to have a non-negligible impact on the cost of boxes, which wouldn't be reflected in the Canadian boxes.

Still, I agree with the report that cable companies probably aren't raking in lots of money from STB rentals. I pay $7 per month for each of my boxes from Comcast. I similarly pay Sprint $7 per month for insurance on each of my cell phones. Not quite the same thing, given that my phone probably cost more than the STB, and I don't carry it around in my pocket all day, but it seems like it would be hard for cable companies to make a killing on STBs.

In general, while I agree with some of the claims, and perhaps even the conclusion of the report, I'm not persuaded by their arguments. Given that cable companies enjoy near-monopoly status, some formulas are not going to convince me that cable companies have an incentive to create better STBs. Cheaper STBs, sure, but not better ones with innovative features.

I'm also not sure the authors always knew what they were talking about. They completely missed the point with the FCC's comparison of AllVid to cable modems. It just went completely over their head. The FCC wasn't saying you should be able to buy video programming devices at Best Buy just like you can with cable modems. They were saying having a gateway device that bridges your home network with the cable network allows innovative solutions on the customer end to develop (e.g., the prevalence of wifi devices) independently of what goes on with the cable company. Maybe they didn't understand that because they didn't have any techies working on the report.

Still, I think AllVid is doomed to fail. I see little reason to believe it can succeed where CableCard failed. I can see why it would be a bit easier to develop for AllVid than cablecard, but I don't see why it would be so much easier that a market would suddenly emerge. DRM would be just as much a part of AllVid as it is CableCard, unless the FCC makes a sudden, and very unlikely, shift in direction. I can see how that would hurt tiny companies like Sage, but bigger companies shouldn't have much of a problem shelling out $100-200k if they think they can actually sell a few hundred thousand devices. You can probably get away with selling less than that given we're talking about fairly expensive devices. And if you can't move something close to 100,000 units, that probably means you're not going to have enough impact to warrant influencing national policy.

I really it comes down to a lack of consumer demand. People don't care enough to switch to anything besides their provided STB/DVR. And AllVid isn't going to change that.

By the way, I didn't see anything in the report about video streaming, but I think that's a good point. The FCC may be wise to give up on traditional cable/satellite TV entirely and shift its focus to streaming video. Though, I'm not really sure how. It seems like tiered/metered (preferably metered) billing of Internet access it a prerequisite to that ever really working on a large scale, and they seem to be carefully going down that path. Until that happens there might not be any use regulating things.

[Fuzzy]

While I'd agree in the lack of a current market for third party STB's, I'd also like to mention that part of the reason for this lack of a market is the cost benefit to the consumer. The only viable example is the Tivo boxes, which I believe are currently running at $300, PLUS $20/month... for really just a bit smoother interface than what the provider PVR would provide. I know that doesn't work out in Tivo's advantage in my gut comparison.

Innovation, on the other hand, is something smaller companies like sage are very good at. Unfortunately, Sage's innovation is greatly held back by the steep learning curve the products require. A large part of the learning curve is source setup. It, really, is the reason you don't see turn-key sagetv servers available to the general marketplace. There are just far too many variables for an off-the-shelf component to easily handle.

Now, if there WAS an single gateway device in the home, that presented a standardized interface to any compatible viewing/recording device, which also presented standardized configuration information, and guide data - how much easier would it be for sage to handle initial setup, and bring a SageTV packaged server to market? It truly WOULD be plug-n-play configuration. Plug it in, and in the setup wizard, it will search for the gateway. After finding it, it will query it for your available content, and get EPG data. done.

This model would work great for Sage (which, not coincidentally) is why they have been pushing the FCC in that direction. But it would also work for a large number of other hardware developers.

[panteragstk]

Originally Posted by reggie14

I really it comes down to a lack of consumer demand. People don't care enough to switch to anything besides their provided STB/DVR. And AllVid isn't going to change that.

You are correct. I don't think people care enough about how horrible the dvr they are paying $7 a month to rent and also a $5 a month "DVR" fee. If people knew that they could use that money to use an stb that didn't have to be replaced frequently due to the crappy parts they might want other options. Of course you are talking about the general population that doesn't realize you have to at least try to restart your computer before you call tech support, and no there is no magic "fix it now" button that they all seem to think exists. That and the fact that people need their computer right now doesn't make me able to fix it much faster than if they didn't care...rant over...

The fact is that the FCC "too late" is trying to make it to where people have options. What they don't know is that this should have happened 10 years ago to actually matter. CableCard has been out for how long and we are just now seeing good cablecard solutions for the pc?

[reggie14]

Originally Posted by Fuzzy

While I'd agree in the lack of a current market for third party STB's, I'd also like to mention that part of the reason for this lack of a market is the cost benefit to the consumer.

Sure, that's exactly what it is. I don't see how AllVid would change that. I don't think CableCard itself is holding things back. There really shouldn't be any new magical consumer device that could exist that couldn't before. Sure, the architecture changes a bit, but I don't see why the user experience would change much.

Cost might change, but really it would probably just move from the STB/DVR to the gateway device. And the total cost when considering both items would probably go up.

Originally Posted by Fuzzy

Innovation, on the other hand, is something smaller companies like sage are very good at. Unfortunately, Sage's innovation is greatly held back by the steep learning curve the products require. A large part of the learning curve is source setup. It, really, is the reason you don't see turn-key sagetv servers available to the general marketplace. There are just far too many variables for an off-the-shelf component to easily handle.

If that's really the case, then why can't Sage package a system with a Ceton card, preinstall some software with nice configuration wizards, and sell it? Either way Sage would probably need to piggy back on MS Windows for the DRM.

When it comes down to it, the gateway device would be roughly equivalent to the HDHR right now. I don't see how a device like that magically changes things. It doesn't seem like supporting a CableCard tuner should be significantly harder than an AllVid gateway. All the complexity is going to be in the handling of the DRM system anyway. I wonder if Sage was so interested in it because they think maybe DRM won't be included.

Originally Posted by Fuzzy

Now, if there WAS an single gateway device in the home, that presented a standardized interface to any compatible viewing/recording device, which also presented standardized configuration information, and guide data - how much easier would it be for sage to handle initial setup, and bring a SageTV packaged server to market? It truly WOULD be plug-n-play configuration. Plug it in, and in the setup wizard, it will search for the gateway. After finding it, it will query it for your available content, and get EPG data. done.

Again, why can't you do this with a Ceton card now? The main thing I don't know about it is if you can get your subscribed channel lineup through the card, or if you'd have to manually set it up. Even if you do have to manually set it up, there's no particular reason you couldn't create a database of typical channel combinations for each major cable company and incorporate it in the wizard (e.g., Do you have HBO? [If yes-> automatically enable all HBO channels]).

[Fuzzy]

Originally Posted by reggie14

Sure, that's exactly what it is. I don't see how AllVid would change that. I don't think CableCard itself is holding things back. There really shouldn't be any new magical consumer device that could exist that couldn't before. Sure, the architecture changes a bit, but I don't see why the user experience would change much.

Cost might change, but really it would probably just move from the STB/DVR to the gateway device. And the total cost when considering both items would probably go up.



If that's really the case, then why can't Sage package a system with a Ceton card, preinstall some software with nice configuration wizards, and sell it? Either way Sage would probably need to piggy back on MS Windows for the DRM.

When it comes down to it, the gateway device would be roughly equivalent to the HDHR right now. I don't see how a device like that magically changes things. It doesn't seem like supporting a CableCard tuner should be significantly harder than an AllVid gateway. All the complexity is going to be in the handling of the DRM system anyway. I wonder if Sage was so interested in it because they think maybe DRM won't be included.



Again, why can't you do this with a Ceton card now? The main thing I don't know about it is if you can get your subscribed channel lineup through the card, or if you'd have to manually set it up. Even if you do have to manually set it up, there's no particular reason you couldn't create a database of typical channel combinations for each major cable company and incorporate it in the wizard (e.g., Do you have HBO? [If yes-> automatically enable all HBO channels]).

The biggest difference here between allvid and cablecard is the certification process, which is what has hindered small-company development. The DRM scheme for cablecard is not really defined. It's up to the hardware developer to create the DRM scheme and have it certified by CableLabs - this is why MS had to go so overboard in their implementation, just to get a chance of approval - even though they've sense been able to relax it a bit. AllVid, as currently proposed, on the other hand is far more defined, and actually much simpler, using DTCP-IP, as part of DLNA.

[panteragstk]

this is a comment posted under that article. Has some good points

"I'm highly suspicious of this "Phoenix Center" report. It sounds a little too much like MVPD trying to sow fear and doubt.

There is no conflict between AllVid and Internet streaming video. In fact, the two can play very nicely together.

The AllVid gateway (forget the "adapter" as it is a single TV solution) allows MVPDs to use any technology they want in their distribution infrastructure while standardizing an interface which consumer equpment can use to access this content. As the consumer side interface proposed is based on existing Internet standards the majority of Internet connected televisions out there have a big leg up on working with AllVid infrastructure. Streaming and AllVid are just two sources of content available to the end user device.

It gets better than this when you add a PC into the mix. When the AllVid standard is set it is a sure bet that there will be Media Center application created which will make a PC look like another AllVid gateway. This will allow the PC to repackage Internet streams with a front end interface and present it to every AllVid capable receiving device within one's home.

MVPDs are spreading as much fear and doubt as possible because they don't want to loose the end to end control of content. They would be far better served by working to make an effective AllVid standard instead of dragging their feet the whole time.

Anyone interested in the topic shouuld read the original FCC NoI and comments filed by various parties. There is a very clear difference in views between MVPDs and CE companies. You can read it all at the FCC website (can't post links yet). Do a search on "FCC proceeding 10-91" and you should be able to find it.

fjallfoss.fcc.gov/ecfs/proceeding/view?name=10-91 "

[reggie14]

Originally Posted by Fuzzy

The biggest difference here between allvid and cablecard is the certification process, which is what has hindered small-company development. The DRM scheme for cablecard is not really defined. It's up to the hardware developer to create the DRM scheme and have it certified by CableLabs - this is why MS had to go so overboard in their implementation, just to get a chance of approval - even though they've sense been able to relax it a bit. AllVid, as currently proposed, on the other hand is far more defined, and actually much simpler, using DTCP-IP, as part of DLNA.

Certification processes always hinder small-company development. And certification programs where security features are implemented in software almost always have requirements that are more vague and generally more painful to test.

So far I haven't seen anything in the FCC's statements about AllVid that are likely to change that. Basically, the requirements haven't been written yet, so its tough to know what the certification program will look like. But the FCC doesn't have the expertise to create a standard like this, nor are they likely to actually administer the certification program. So, it will probably fall back to either CableLabs again, or some new group heavily influenced by NCTA.

I'm not sure what will happen with DRM. It's not clear where they want to go. You're right that they've talking about going down the DTCP-IP route, but that's really just for the communications channel. Once the data is on a host device you'll probably have to do something else to protect the content. With a specialized device like a TiVo that's not quite as big of a problem as an open platform like a PC.

This actually might be a case where its better if the standard is vague, like just a requirement to use an approved DRM scheme. If you actually wrote requirements for the DRM system, then the certification program will probably have to include evaluating all hardware and software components. At least as the OCUR spec is written now there's some hope that if a big company like Microsoft gets a DRM system approved, smaller companies can ride their coattail and get through simply by licensing the DRM system. Obviously that can backfire too. If for some reason they don't want a particular class of device to get through the certification program, they can arbitrarily say they reject the DRM scheme.

It's clear the original cablecard specifications were not written with all-software platforms in mind. It will not be a painless process to include those platforms in the next certification program. Test labs are going to have a really hard time deciding whether or not software is doing enough to enforce the restrictions imposed by whatever copy protection are set.

[Fuzzy]

Part of the difference with AllVid, is it also is potentially including more than just cable providers in it's umbrela, which, happily, removes most of cablelabs power of enforecement. They will still have a lot of influence, as they will likely represent the majority of the affected parties, but they will still have only a limited official role in its implementation. It will most likely end up falling to an FCC created committee to handle approvals.

[reggie14]

Originally Posted by Fuzzy

It will most likely end up falling to an FCC created committee to handle approvals.

Perhaps, but I think you better be careful what you wish for. I don't know of any government-administered certification programs that are held up as a model for all others to follow.

That being said, I think the FCC does administer the emissions testing program, though testing is actually conducted by private labs accredited by the FCC to conduct testing. It seems like that works pretty well. I don't hear complaints about the cost/time of testing. I think that testing program is locked down enough that really all the FCC has to do is push paper around. The bigger the testing program, the more important it is to have a strong group that will review test reports from accredited labs, have some authority to provide interpretations to vague requirements, and serve as the certifying authority.

Everything I know about the FCC tells me they have neither the expertise nor inclination to write a standard themselves. So, I'm fairly certain it will be an industry-driven effort given that I don't think there are any other federal agencies that are likely to get involved. And since certification programs can be painful and expensive to administer, I doubt the FCC would sign up for that when federal agencies' budgets are tight. Though, its more likely that they'll run the certification process than creating the standard.

Still, I doubt the approval process for certification is the problem. The strength of the requirements will largely dictate the cost of implementations and testing. The level of specificity of the requirements will either limit innovation (with more specific requirements) or create confusion in the testing and certification process (with less specific requirements). Neither outcome is good, and its difficult to strike a good balance.

The biggest difference might be satellite TV providers might get/have to play in this game too. But I don't see them acting much differently than the cable companies. And their inclusion might only serve to weaken the Consumer Electronics Association's position in this process.

Gee, the more I think about AllVid the more I think its probably a waste of time and money.

[src666]

The problem is that they are letting the private industries set the technical requirements and act as gatekeepers for certification. CableLabs is not a dis-interested party in the market, and acts primarily in the interest of the cable industry.

We need a 3rd party to handle technical specification and certification, one which won't tilt the field towards vested interests.

Not gonna happen, but as long as we are dreaming.

[panteragstk]

Originally Posted by src666

We need a 3rd party to handle technical specification and certification, one which won't tilt the field towards vested interests.

Isn't that what the FCC is supposed to be?

[src666]

Originally Posted by panteragstk

Isn't that what the FCC is supposed to be?

Not really, but even if they were with the "hands off our corporations, it's supposed to be a free market" push that's been driving the system for so long, it has been impossible for them to do anything close to actual market regulation, much less taking over specification/certification.

[panteragstk]

Originally Posted by src666

Not really, but even if they were with the "hands off our corporations, it's supposed to be a free market" push that's been driving the system for so long, it has been impossible for them to do anything close to actual market regulation, much less taking over specification/certification.

Then what is the reason for their existence? Seems like they are kind of a pointless regulatory agency. "We want your company to do things this way...but only if it's OK with you."

[src666]

Originally Posted by panteragstk

Then what is the reason for their existence? Seems like they are kind of a pointless regulatory agency. "We want your company to do things this way...but only if it's OK with you."

Not going to get into a big political thing here, but remember, the FCC is empowered by Congress. Their power waxes and wanes over time. They used to be able to do a lot more regulation.

Frankly, your description happens to fit just about exactly the way many would like to see regulation work.