FCC set-top regulation concerns 'overblown,' New Street Research says

A new report from New Street Research says the FCC's proposal to "unlock" pay-TV's proprietary set-top boxes is a "non-issue" for the cable industry. 

While investors are concerned that the FCC's notice of proposed rule making may put 11 percent of industry revenues at risk, New Street analyst Jonathan Chaplin states three reasons why they should chill.

For one, he said, "STB revenue is just video revenue in disguise and, if required, the industry would reclassify it as such, just as the wireless industry did during a similar transition."

That similar transition, he noted, occurred in 2012, when voice and text revenue was threatened by regulators. 

Secondly, Chaplin said, while a study conducted by several Democratic senators backing the FCC's proposal suggested that operators make as much as $14 billion a year annually on leasing set-tops, the figure probably isn't really that high, by a longshot.

"Cable margins would likely improve if households self-sourced boxes," Chaplin said. 

Thirdly, he added, there probably won't be that much demand for set-tops not provided by the operator itself. "Households have been able to buy their own boxes for the last 10 years under the CableCard regime and penetration remains low," Chaplin noted.

Overall, Chaplin things cable has "more to gain than lose" by implementation of the proposal.

"We think consumers ultimately want all of their content, whether they purchase it from their  cable company or some other source like Netflix, integrated into a single user interface that they can search across seamlessly (like Sonos for video)," he said. "Cable is well positioned to deliver a great product with the requisite functionality. If they do, they would have some data on household viewing across all content; not just cable content. This would be valuable data that cable can monetize."

For more:
- read this New Street Research report

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