The FCC sought comment on the economics of the multichannel video programming distributor (MVPD) navigation device marketplace (i.e., set-top boxes). The FCC is concerned that the limited retail market for set-top boxes is a sign of market failure that requires government intervention. The report explains why most consumers prefer to lease their set-top boxes from their MVPD rather than purchase the device at retail, and that the low demand for retail set-top boxes is a result of rational consumer preferences and not a sign of market failure. The FCC also proposed a concept whereby all MVPDs would have to provide an adapter (in the FCC’s terminology, an AllVid device) to connect proprietary MVPD networks to new televisions, DVRs, and other video devices via a standard interface. While the FCC asserts that such a device will help promote competitive alternatives in the video navigation marketplace and encourage broadband adoption and use, the paper discusses the shortcomings and problems with the FCC’s proposal.
Drs. Baumann and Gale have extensive experience in the mass media industries. They have analyzed competition and the impact of government regulation in the radio, television and cable industries. Report in PDF