FCC Aims to Expand Consumer Welfare

WASHINGTON, October 15, 2010 – The recent Federal Communications Commission recent open meeting looked to progress the chairman’s goal of improving consumer welfare. The issues spanned the range of the FCC’s authority from cable to broadband and mobile telephony.

One of the long-term goals of the FCC has been to increase competition among the set-top box market. The market has inherent problems since most individuals often rent the boxes from their television provider rather than purchasing a third-party box. While the FCC has mandated that cable/satellite providers give users cable cards to insert into their choice of boxes, the companies often charge installation and rental fees on the cards. Today’s order sought to increase the use of cable cards.

Consumers will now be able to install their own cable cards rather than having to pay for installation from the cable company. Additionally. cable companies will have to limit the amount they subsidize their set top boxes. See yesterday’s story on BroadbandBreakfast.com.

One of the more exciting provisions is “streamlining requirements for manufacturers who build CableCARD devices.” This provision will allow manufacturers to more easily integrate cable cards into their set top boxes. Currently there are a number of internet enabled set top boxes which allow users to directly stream content from the web but they all lack a cable card slot.

Public Knowledge responded to the order with this comment: “Now, consumers will be able to install their own CableCard s provided that manufacturers include instructions and, importantly, the commission will limit the ability of cable systems to subsidize their own boxes with service costs, which puts competitive devices at a disadvantage.”

The National Cable & Telecommunications Association also supported the order; “We agree with the Commission that implementing these changes – including increasing options for self-installation, providing more transparency and properly equipping technicians – will assist customers who use retail devices that rely on cable cards.  Our industry will work diligently to implement these changes.  We also will continue working constructively with TiVo and other providers of retail ‘cable ready’ products to assure that our mutual customers can seamlessly enjoy all of the cable services available to them. “

The FCC also issued a notice of public rulemaking on bill shock that looks to simplify mobile phone billing. The commission is troubled by the fact that often consumers are charged large overage fees. “The FCC’s proposed rules would require customer notification, such as voice or text alerts, when the customer approaches and reaches monthly limits that will result in overage charges.”  Customers would also have to be notified when they leave the country if they will be charged a higher fee.

FCC Chairman Julius Genachowski said, “I know that some will argue this is unnecessary or burdensome.  But consider what I heard yesterday from a business executive. He said that a couple of months ago he had incurred $2,000 in extra data charges while on a trip overseas. Despite buying an “international plan” – he was billed for “more than 15 times what I had expected to pay.”  He said: “It took hiring a lawyer to get the charges waived – cost me almost as much as the charges, but I did it for the principle.  Most Americans would not have this luxury.”

The last notice of proposed rulemaking which was adopted was on the mobility fund. This fund was proposed in the National Broadband Plan and would provide Universal Service Fund to help expand 3G wireless services. The cost of installing wireless is much lower than fixed lines. The notice proposes using $100 million to $300 million from the USF.

It also suggests the use of reverse auctions. “To use a reverse auction – in which the potential providers of services in identified areas without 3G service compete for support from the Mobility Fund by proposing the lowest amount of USF support they would require to serve areas that are currently unserved – to determine which providers get support, which specific geographic areas will receive support, and at what levels.”

Reverse auctions for wireless service have been successfully applied in other nations such as India and Peru but they have faced serious problems. The main difference between success and failure is if an existing provider is in the area. When there is already, an incumbent they are able to decrease costs much lower than any new entrant.

Commissioner Michael Copps supported the NPRM and relayed the following story: “The new Mobility Fund will provide a much-needed down payment on closing America’s digital divide.  We’ve got a ways to go. That was brought home to me over the past couple of weeks as my wife and I vacationed in China. Even as we toured the treasures of Chinese antiquity, like the Great Wall, the Terra Cotta warriors and the Forbidden City, we also were able to take advantage of some pretty impressive telecommunications technology. We sailed down the Yangtze River, surrounded on both sides by mountains, and as we floated down those long and beautiful river valleys, I was almost never without 3G service. The sight of that 3G signal along the top of my BlackBerry screen almost everywhere we went on our trip made quite an impression on me. I dare say there are many places in the United States—and they’re not just river valleys, either—where I wouldn’t find that kind of service. That’s one example of why moving ahead with a Mobility Fund and comprehensive USF reform is so important”