Cable-Box Rentals: The Needless $19 Billion Industry

Given the state of technology and cable's financial and operational vulnerabilities, it is reasonable to surmise that whatever lobbyists are being paid to support the industry, they are probably under-compensated. JL

Bouree Lam reports in The Atlantic:

American households pay $231 a year on average renting cable boxes. Further, the report estimated that 99 percent of cable customers rented their equipment. This dependable rental revenue gave the industry little incentive to innovate and make better cable boxes.

One of the least glamorous realities of the American cable industry is a relic invented in 1948: the cable box. The box has become a fixture in the American household, not least because it is surprisingly profitable. Earlier this year, a U.S. Senate study found that American households pay $231 a year on average renting cable boxes. Further, the report estimated that 99 percent of cable customers rented their equipment, and, across the country, that added up to a $19.5 billion industry just renting cable boxes.
The senators who commissioned the study, Ed Markey of Massachusetts and Richard Blumenthal of Connecticut, noted that this dependable rental revenue gave the industry little incentive to innovate and make better cable boxes. Which begs a really good question: Why aren’t more people purchasing their cable boxes?
That’s one of the concerns of a recent report from the Federal Communication Commission (FCC), in an effort to encourage competition in the cable box realm. The report found that for most consumers, choosing not to rent a cable box can be an IT nightmare—one that involves lots of time, research, and up-front costs—that most would rather not deal with. Renting a cable box has become the path of least resistance, even if it’s costly and generally terrible.

But if companies were required to make their services compatible with other equipment, all that might change. Some are hoping that the FCC will finally pry this beloved revenue source from the cable industry the way it did the telephone industry. Before the 1968 Carterfone decision, consumers had to lease phones from AT&T to have a landline. But then, the FCC ruled that the Carterfone—a third-party made device—could be connected to the AT&T network as long as it didn’t do any harm. The decision led to a flurry of innovation for the telephone, and some are hoping that by requiring cable companies accommodate competing devices—a similar revolution might take place. (Though the cable industry has tremendous lobbying power, and it’d be interesting to see how they’d react to this regulation.)
One solution proposed in the report is that cable services could simply be accessed through an app. Consumers would buy their own devices and access cable services the way they would access Netflix. Some budget-conscious consumers are cutting their ties to cable (and the hassle that comes with it); there are already those who opt for streaming services such as Apple TV, Roku, or Amazon Fire. But if cable became an app—and companies made it easy to own a box without sinking huge amounts of money and time—it might just be the best of both worlds.