Today's guest post is written by Kyle McSlarrow, President and CEO of the National Cable and Telecommunications Association.
While Michael is away, he asked if I’d be willing to share some of my thoughts on what is happening right now with the cable industry. We at NCTA have been running our own blog – www.cabletechtalk.com – since January. We’ve frequently recognized Michael’s posts, and I am happy to contribute here.
With this week’s announcement that LG and Funai have signed the tru2way Memorandum of Understanding (MOU), it is probably worth taking a moment to reflect on what this MOU really represents for consumers.
And, while Michael has discussed tru2way here before, some background is probably useful because there are lessons to be learned. (News flash: they don’t involve the government picking technology winners and losers).
Our vision for consumers is very simple: we want anyone to go into any retail store, buy a flat screen high-definition television, take it home and access any service – including interactive services yet to be created – without having to use a set top box, and do all that with just one remote control. This vision can be reality by using the Java-based tru2way solution as the national “plug-and-play” standard, allowing consumers to buy two-way digital TVs and other devices that connect to digital cable.
Hard to argue with that, right? So, what took so long?
Back in 1996, Congress wanted to spur competition in the retail market for cable television set-top boxes, so it ordered the FCC to adopt rules to make that happen.
In 1998, the FCC adopted rules requiring cable to separate the security element of a set-top box into a removable module known today as the CableCARD. Cable did so by 2000 as mandated by the FCC, but CE companies did not build set-top boxes or other devices to be used with the CableCARDs because they had concerns about the required specifications for manufacturers to build set-top circuitry into retail devices, particularly the CableLabs licensing and testing regime. Following a series of instructive meetings with legislators and regulators, the cable and CE industries signed the landmark “one-way MOU” in 2002. Under the one-way MOU, the two industries proposed rules to the FCC under which retail equipment using CableCARDs could receive “one-way” linear programming, including premium services such as HBO and HD services as well.
The FCC adopted those “one-way” rules in 2003 and immediately encouraged the industries to sit down and reach agreement on a “two-way” solution so that consumers could receive cable’s interactive services such as video-on-demand and interactive program guides without a set-top box. In doing so, the FCC cautioned that all potentially affected industries should have seats at the table. That meant that not only the CE and cable industries would be negotiating a two-way solution, but also satellite video providers, content providers such as movie studios and cable program networks, broadcasters, IT companies and a host of others would be there as well. Needless to say, nothing came of these meetings – some with upwards of 90 participants – except a resolve to seek a “two-way” solution through smaller groups.
We and the Consumer Electronics Association eventually agreed that we each would pick two representatives to try and reach agreement on these complicated issues, and then build from there. As it turned out, a Sony representative was one of the people representing the CE side. Those meetings led to further discussions and resulted in the Two-Way MOU announced by Sony and cable companies in May (cable companies then signing the MOU were Sony Electronics, Comcast, Time Warner Cable, Cox, Charter, Bright House and Cablevision). Once we got down to a manageable number, constructive discussions really took off, and we could really start “listening” to each other.
But while some call the agreement the “Sony-cable” MOU, the tru2way MOU is much broader than the name implies. It really is a legally binding inter-industry agreement that resolves the controversies over how two-way retail products may be brought to market, receive interactive cable services, and be supported by cable systems across the country.
Other major companies have now signed the MOU including consumer electronics manufacturers Panasonic, Samsung, LG Electronics, Funai (which trades products in the United States under the brand names Philips, Magnavox, Sylvania, and Emerson); set-top makers ADB and Digeo, and chip manufacturer Intel. Of major significance, the cable operator participants, who represent companies serving over 82 percent of U.S. cable subscribers, agreed to support tru2way devices in their systems by a date certain – something CE companies have insisted on for years. We also found ways to reach common ground for handling program guides, equipment testing, and making sure that all parties may keep innovating—all issues that had been in long and complicated disputes.
With the MOU in place, we now have a national framework for cable operator deployment and support for tru2way products that is attracting additional manufacturers and will allow us to deliver the benefits of this technology to consumers.
This is a great result for consumers, and a useful model for the future. While there has been a government nudge or two along the way (which often does not hurt), the tru2way MOU was a product of good faith and sustained inter-industry negotiations.
So, lesson one: really hard to negotiate anything with more than 10 attorneys in the room.
Lesson two: even with contentious business negotiations, so long as the industries keep the consumer first and foremost, it is more likely than not that you end up with a result that keeps pace with and anticipates new innovation and the deployment of new services and technologies. Government is simply not equipped to move that fast or to understand the business and consumer realities in a sector of the economy that is changing this quickly. And, to their credit, most of the policymakers at the FCC and on Capitol Hill understood this point, and used their influence to encourage all of us to stay at the negotiating table.
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