Boxee should be applauded for their creativity.  For years, they have proudly touted their service as the ultimate answer for consumers who want to “cut the cord” and cancel their cable or satellite service.  We disagree with their premise, but it’s a free country.

But in recent weeks, Boxee seems to have changed its tune.  Instead of telling regulators that its service is a replacement for pay TV service, they now seem to be saying that their service is dependent on subscription TV and that regulators must… wait for it… dictate how cable service is delivered to its customers.

Yes, that is correct.  This cord-cutting, end-of-cable-as-we-know-it dynamo is demanding that the FCC not allow cable systems to scramble its basic service tier (typically limited to broadcast channels, local access and a few others).  Their position is all the more ironic given that all of cable’s competitors – from satellite to Netflix to Boxee itself – already encrypt the programming they send to their customers.  But in Boxee’s world, all video service providers can innovate and compete except cable, which must remain frozen in a 1990s time warp.

What’s in It for Consumers?

But wait, Boxee’s moxie doesn’t stop there.  Their CEO Avner Ronen took to the Boxee blog this week to make the incredible claim that encryption of the Basic Service Tier wouldn’t help consumers at all.  Maybe Mr. Ronen thinks that consumers like to take time off work so they can wait at home for service calls, but I don’t think most American consumers would agree with him.

The simple fact is that basic tier encryption would eliminate the need for many service calls. Customers would be allowed to connect and disconnect service without having to wait at home or take time off work.  Admittedly, fewer truck rolls also permit the cable systems to operate more efficiently and focus service calls on more difficult installations.  But to assert that sparing millions of consumers the need to be at home to activate or deactivate cable service isn’t a consumer benefit is either completely out of touch or intentionally misleading – or both.

Ronen also injected a patently false scare tactic – that the TVs which receive basic channels without a set-top box will “go dark.”  Ronen knows that the FCC has already proposed a solution that will ensure these customers will continue to receive the channels they subscribe to by getting free equipment from their operators.

The Bottom Line with Boxee

In the end, Boxee’s disinformation campaign is nothing more than an attempt to distract attention from the fact that there is a simple technical fix that Boxee refuses to implement.  If Boxee included a CableCARD slot in its device, its customers could access encrypted channels without a set-top box.  Rather, Boxee wants cable operators and their customers to foot the bill for a special fix just for them. And if it doesn’t get what it wants, then no cable customers should get the benefits of basic tier encryption.

It’s time for Boxee to stop dealing from the bottom of the deck and for regulators to recognize that when a “competitor” asks for government help to stop the innovation and enhancement of rival services, such claims belong in the recycle bin, not an FCC docket.

In a recent debate on CNBC, my friend Gary Shapiro – head of the Consumer Electronics Association (CEA) – said the Obama Administration was “the most anti-business” of his lifetime.  He went on to condemn the large number of proposed regulations and said of regulators, “They don’t care about business or the consequences of the rules they are proposing.”

I applaud Gary for speaking his mind, but feel a need to call his bluff.  Because while he is vehemently condemning some 200-plus new regulations that would cost industry hundreds of millions of dollars if implemented, Gary and CEA are leading an effort to push the FCC to adopt new regulations that would impose substantial costs on cable and other video providers, and that would have the very government bureaucrats that he so disdains set technical standards on a marketplace that is exploding with innovation.

And yes, I’m referring to the “AllVid” proceeding that has been hanging, like Damocles’ sword, over the industry for more than a year.  If implemented as Gary and CEA would like, an All Vid mandate would force video providers (job-producing business owners) to break up their services in a manner that would strip away valuable (and popular) content and allow competitors to pick and choose which pieces they want.  Such regulation would not only rip apart the fabric of a market that 100 million consumers participate in, it would also drive up costs in an economic era when consumers are already feeling pinched.

And why do we need these rules?  Video providers and services are already bringing new and innovative services to market – from streaming live TV to iPads, enabling consumers to watch video on multiple devices in and out of the home and delivering video straight to “smart” TVs without needing a set-top box – without government mandates.

The AllVid proceeding is the classic example of the jobs-killing, cost-raising, innovation-crushing regulation that Gary blasts as anti-business.   He should be true to his principles and walk away, and the FCC should shut down the proceeding and let the market continue working.

Back in June, on the eve of NCTA’s annual conference, it was clear that a theme had emerged for The Cable Show.  As I wrote on this blog, we were entering “a new world in which Consumer Electronics, Information Technology and Hollywood” have come together into order to deliver our customers new and powerful ways of consuming entertainment and information.

To be more technical about it, as industry observer Leslie Ellis put it:

…we’re moving to a world where stuff can be done without set-top boxes, at least as they exist in hardware. Now, it’s set-tops; next, it’s gateways that bridge between set-tops and cable modems, and ultimately, it’s video delivered completely over IP, from the network, to the end devices.

I bring this up because NCTA’s President and CEO Michael Powell sent a letter last week to FCC Chairman Julius Genachowski about these new developments and what they mean for our ability to achieve a fully competitive and innovative retail video device marketplace.

This issue has been discussed for some time, but 2011 has brought a host of services entering the marketplace.  See some of our previous posts:

• Consumers Reaping Benefits of Smart Video Device Revolution
• Connected TV… Here to Stay

All of that was before The Cable Show. As Michael Powell’s letter pointed out, the various demos and panels from our event help show how the cable industry “is providing American consumers with powerful, personal, and portable services and networks that support unprecedented mobility of content to multiple devices both in and out of the home.”

The Cable Show demonstrated that Congress’s and the Commission’s video device goals are already being achieved in the marketplace.  …there is broad-based momentum in the cable industry to deliver cable services to consumers on any device.

Today, consumers have more sources of video programming and content on more devices than ever before, and the choices are only growing through a variety of market-based approaches: smart TVs, iPads and other tablets, TV from the “cloud,” set-top boxes that can combine TV with Internet content, the growing role of home networking and connected devices. All of these approaches are playing a role.

As quoted in this write-up in Multichannel News, NCTA is suggesting that regulatory efforts intended to encourage innovation may instead impede.

“The problem that remains in this marketplace is not the need for a single guiding regulatory prescription,” like the FCC’s proposed AllVid solution, wrote Powell. “The marketplace is at a critical juncture, inviting participants to make major bets and even more major investments in technology to meet rapidly developing consumer demand with rapidly changing technological tools. This kind of innovation is about risk taking. The environment that invites the greatest risk taking is one with the certainty that regulators will not step in and displace new technologies or new investments.”

FOOTNOTE: There was a lot of activity at The Cable Show along these lines, but you get a taste of what’s happening in this area, watch some videos from The Park, such as the demos from Comcast, Cablevision and HBO.

During The Cable Show last week, Light Reading’s Jeff Baumgartner interviewed NCTA President & CEO Kyle McSlarrow. FCC Chairman Julius Genachowski had spoken earlier that day (coverage here) and so Jeff asked Kyle about proposed Title II regulation of broadband. They also discussed the AllVid NOI and the CableCARD fix (see this previous post for background). Finally, they talked about the SOC waiver recently granted by the FCC.