4.21.16 4:38 PM EDT By Chris Morrani">>@themorrancave
Yesterday, only weeks after the FCC voted to draft rules that would require pay-TV companies to open up the set-top box market to competitors, Comcast announced a deal with Samsung that will allow owners of certain TVs to access their cable TV without the need to pay for a cable box every month. The industry and its supporters are heralding the news as a clear demonstration that the FCC should just shut up and stop all its regulating, but the reports of the set-top box’s death are greatly exaggerated.
This is not to say that the Comcast app is a bad thing or that it’s not a step in the right direction. In fact, we confirmed the positive aspects of the app with Comcast.
It could be used to replace set-top boxes. Unlike many current pay-TV apps, which generally require the subscriber to have at least one receiver in their home, Comcast claims the new app will only require the modem (which you probably also lease from Comcast; but one step at a time, right?).
Comcast also says the app will have cloud DVR capability, meaning you wouldn’t need a set-top box to record programming. We’ve heard some complaints from readers about the quality and reliability of Comcast’s cloud-based DVR, so that might be something to take into consideration. We also don’t know if there will be any monthly charge for DVR service using the app.
The bad news: C
omcast will be charging for that cloud DVR service. We don’t know how much, but it’s not free.
Not surprisingly, the Comcast-connected Future of TV Coalition — a fake grassroots organization that continues to make patently false statements about the FCC plan — has put out an effusive statement effectively claiming the Comcast app as the Holy Grail of pay-TV.
“If the FCC’s set-top box proceeding is truly just about freeing consumers from monthly box fees, today’s announcement underscores how absurd the arguments for government intervention are,” reads a statement from the Coalition. “Apps, not federal box mandates, are the fastest and most effective way to expand consumers’ options for video devices.”
First off, the FCC rules are not “federal box mandates.” Instead, they would require that pay-TV companies make their content available for distribution through boxes and apps that compete with the boxes and apps that have almost solely been accessible through the cable providers.
Second, the Coalition statement conveniently glosses over the timing of this news and its relation to the FCC actions. Comcast has been in busy for more than four decades, but the company just happens to release the news about this app shortly before the open comment deadline on the FCC’s set-top box rulemaking process.
It’s amazing how industry tends to do pro-consumer things whenever regulators step up with the threat of new rules — and just as amazing how they tend to claim that they were planning this all along.
Regardless of whether this announcement is a well-timed effort to derail the FCC’s rules or just a happy coincidence, the fact remains that there are several reasons that a single app is not sufficient to discount the entire idea of set-top box reform.
1. Access Is Still Limited
Comcast may have partnered with a popular TV maker in Samsung, but the app will not be retroactively available on all existing Samsung Smart TVs, only on those made this year. So in order to avoid paying upwards of $10 per month for a set-top box, you’ll have to pay hundreds — possibly thousands for a new Samsung. If you have multiple boxes in your house, it could be quite some time (or cost you quite a lot of money) to rid yourself of these monthly lease fees.
Roku also announced that the Comcast app will be coming to its devices later this year, but that appears to be an over-the-top streaming service, as opposed to the Samsung app which is an actual live cable TV feed and should not suffer from the stutters, lags, or other hiccups often associated with livestreaming video.
And as we noted above, if you want the DVR aspect of the Comcast app, you’ll have to pay something to Comcast each month, so it may replace your box, but it’s not letting you get rid of the cost.
2. Limited Portability
One of the ideas behind offering competing set-top box devices and apps is that consumers would someday be able to take that device or app from one pay-TV provider to another. If you drop Comcast and switch to DirecTV or FiOS, you wouldn’t need to be able to buy a new box or switch to yet another app. The same would be true if you moved out of Comcast territory and into an area with a different provider.
In the Samsung case, only Comcast customers benefit, and only if they remain Comcast customers in the Comcast footprint. Switch providers and you’ll need a box to go with that fancy new TV; ditto if you relocate to Cablevision country.
3. An App From Comcast Is Not Competition
Competition is a good thing, often resulting in innovative and affordable products. In most of the country, Comcast only faces competition in the pay-TV market from the satellite providers, Dish and DirecTV. But each of these providers have their own proprietary set-top boxes that only work on their feeds. And they all charge a lot of money for these boxes, as we’ve shown in our recent detailed looks at various companies’ monthly bills.
The Comcast and DirecTV bills we looked at each charged $10 for a single DVR, with additional fees for multiple boxes and whole-home DVR service. The Dish bill we’re currently breaking down (and will post in the coming week) charges $12/month for a single DVR.
When Sens. Blumenthal and Markey tried to get the pay-TV companies to provide detailed information about their set-top box revenue, no cable company offered up anything close to a complete picture, leading the senators to do their best guesswork. They came up with a figure of $20 billion a year in fees spent by consumers.
For an opinion piece in The Hill, economist George Ford used generously conservative numbers — he appears to have used pricing solely for non-DVR receivers and doesn’t include estimates for things like whole-home DVR service or cloud DVR — in an apparent attempt to politicize the issue.
Even Ford’s industry-friendly math comes out to a total of more than $13 billion — $145/year per cable subscriber that goes into the hands of pay-TV companies. Yes, that’s less than the rough $20 billion figure from Blumenthal and Markey (and the actual figure is likely somewhere in the middle), but it’s no “get out of regulation free” card for the pay-TV industry.
Some cable providers have long contended that set-top boxes are not a profit center for the industry. A recent, non-partisan, analysis of box fees calculated that they result in around $1.2 billion a year in free cash flow for Comcast, which is not really a figure to brush off. The analysis also contends that these fees are “just video revenue in disguise,” meaning they are a way for cable companies to pad bills without raising the advertised price of their services. Sadly, that report also concludes that cable operators will just make for any lost box revenue by raising rates.
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