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Cable Monopoly of Set-Top Boxes Poised to End?

Of all the “smart” things we have these days – cellphones, homes, the Smart Grid, utility meters – there’s one big area that hasn’t fully joined the party.

Our televisions.

Sure… we have “smart TVs” – but the technology around them is still pretty dumb.

You know the problem: You’ve got one remote for the TV itself, another for the cable, one for the DVD player, and another for your streaming service.

Figuring out what to watch means finding all the remotes first, and then it’s a process of elimination!

There are universal remotes, of course. But good ones are expensive and sometimes difficult to program, and cheap ones often don’t work very well.

Nascent technologies, including Apple (AAPL) TV, are starting to correct this user-unfriendliness… but there’s still one barrier to a perfect all-in-one solution.

The [insert your choice of expletive here] cable company…

The Dumbest $90 You’ll Spend This Year

As with so many things in the television realm, cable companies are the culprits.

They maintain an iron grip on the programming that comes into your home and make it difficult or even impossible for other devices to lend a helping hand.

And they charge a healthy price to do it, too.

The “rental” of set-top boxes is a large and growing part of a cable bill. The average subscriber pays nearly $90 per year just to have a cable box in their home.

Even as the price of many other consumer electronics devices have come down in price recently, cable box prices have risen over time.

And the Federal Communications Commission (FCC) has had enough…

Goodbye to Pricey Set-Top Box Rental

Last Wednesday, FCC Chairman Tom Wheeler floated a proposal that would remove the cable companies’ monopoly over set-top boxes.

It would essentially force cable companies to make their signals “open source,” so that other companies can also make the devices that control the signal.

If the proposal is successful, it would mean that a single device – an Apple TV, your computer, even a smart TV itself – could integrate cable programming with streaming programming and your DVD collection.

It would allow you to find, choose, and record your programming all at once.

Parents would have one-device control over their children’s programming, both in terms of the content itself, as well as the total amount of time spent in front of the tube.

A single device could scan all your streaming subscriptions and cable channels to find a program you want to watch. If it’s available from multiple sources, it could choose the one with the best transmission quality, or the fewest commercials.

In fact, under this proposal, Apple TV could suddenly be catapulted from a niche product to a mainstream one, perhaps loaded with earnings power not seen since the iPhone.

Needless to say, the cable companies won’t take this lying down. Far from it…

Cable Companies Will Cry About It… But There’s a Benefit for Them, Too

Given that cable companies are scooping up billions of dollars from charging an average of $90 per year for set-top box rental (a box that retails for around $150 and is a fraction of that at the wholesale prices that cable companies get), expect plenty of resistance.

Their protests won’t be entirely without merit, though. After all, it’s the cable company’s signal. Shouldn’t they be able to control it?

Technically, yes, But their complaints will probably fall on deaf ears, as the high (and increasing) cost of leasing the boxes offsets the argument and merely draws attention to the fact that they’re abusing their monopoly over so much programming.

What’s more, the move could actually help save cable TV as an industry.

While the benefits are obvious for companies that will make competing devices, cable companies could benefit too. How?

Well, it’s no secret that the cable monopoly on programming is disappearing… and quickly.

With so much programming that was previously only available on cable or satellite now becoming available through streaming and other outlets, many consumers are cutting the cord on cable.

Indeed, over the past 12 months alone, 500,000 former cable subscribers have kissed goodbye to cable completely.

Clearly, there’s a risk for cable companies here – one that’s significantly bigger than losing a $90-per-year set-top box rental fee.

The risk is that they become irrelevant entirely.

But by throwing their programming into a mix that makes it more user-friendly to customers, cable companies may end up benefiting in ways they don’t currently imagine.

Stay tuned for further developments as the FCC’s proposal moves forward.

To living and investing in the future,

Greg Miller

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