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How Can Residential Gateways Spur Competition?

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The FCC is addressing the failure of CableCARDs, which allow non-cable company provided devices to access their networks, in its National Broadband Plan, an ambitious goal to connect all Americans to fast broadband service. The plan takes further steps to encourage development of the home gateway, a device in which consumers can easily and seamlessly access video programming from all distributors.

In a proposed Network Gateway-NOI, (a Notice of Inquiry seeking comment on best approaches to assure the commercial availability of smart video devices and other equipment used to access the services of multi-channel video programming distributors), and CableCARD NPRM, (Notice of Proposed Rulemaking that proposes changes to the CableCARD rules for set-top boxes used with cable services, to improve the operation of that framework pending the development of a successor framework), the commission is seeking input on how to best rework the CableCARD rules to make set-top boxes (STBs) more universal in nature and easier for consumers to connect and network throughout the home to any video provider offerings. The question remains — is the FCC suited to take on another attempt to create competition within the set-top box market? Or should it leave this to market forces?

A Universal Provider Gateway Concept Could Be Flawed

ATT U-Verse ClosetMost, if not all, video providers want control of the user experience in their set-top boxes or proposed gateways, and are not willing give up that control universally. That means each provider wants to create its own gateway and hearkens back to the premise of why CableCARDs did not work. Companies are not willing to share the proprietary customer relationship with other competitors. This is why only a few set-top boxes are in the market. Cable companies created their own devices to offer video content to customers, while investing billions to do so; but as market forces continually change the demand for a more competitive STB/Gateway continues to emerge. (See FCC to “improve” CableCARD rules this month)

A Sub-Market of Over-The-Top Competitors

With the advent of Hulu and YouTube along with Netflix, Apple TV, Roku, Blu-Ray, and Xbox, the concept of a possible competitive residential gateway, or STB if you prefer, has taken hold. Video programmers have accepted these non-traditional video providers as a new pipeline to distribute their wares. See (Park Associates blog) But should these companies be looking to themselves to have unique home gateways built for home distribution which will connect consumers with mainstream video, Internet, and phone services? I think so, and this also means contracting with an Internet service provider/video provider/telephony-wireless provider for a residential service interface to their STB. This may be easier said than done.

Drive Private Sector Competition

Near term competition does not lie in building hard-line infrastructure, although Google is testing those waters; it lies in the sub-market of over-the-top competitors willing to create their own unique consumer experience, and compete with traditional providers with a superior customer interface that delivers video-wireless-Internet-telephony to the hardware within homes. It will not work to have a mandated universal gateway that all competitors must share. This means that competitors must contract with video programmers, wireless and telephony providers, or build their own networks to compete. Cable-telecom providers have a huge advantage on that market segment. That is to say they have invested billions in infrastructure, hardware, wireless, and telephony products to offer consumers through their networks and STBs. This is where potential competitors must look to have a chance at capturing an all-in-one home gateway market share. (See Hot Boxes: The Explosive Potential for Residential Gateway Devices)

Solution

View the residential gateway as a unique way for all providers to connect with their customers. It should be specific to the company with all the applications consumers demand, one that is easily interchangeable to all home hardware. This requires competitors to take on risk and invest in new ideas and concepts that will capture that market segment. As new markets unfold, the best and the brightest will be there to take advantage of any changing landscape in residential gateways to the consumer.

This again goes back to whether the FCC should involve itself in manipulating the market to create more competition. It should encourage competition; it should incentivize competition within the marketplace by tearing down barriers to compete. But it should never mandate private companies to compromise their markets by opening up their STBs or consumer gateway.

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