How Much Does a Cable Box Really Cost? The Industry Would Prefer You Don't Ask (latimes.com)

The FCC chairman insists that he is driven by a market-based approach to regulation. In a story, published Tuesday, an LA Times columnist uses the simple example of set-top boxes to argue the agency has, instead, been captured by the industry it regulates. From the story: Spectrum TV and internet customers will see their rates go up again in November. Among other increases, the broadcast TV surcharge will rise to $9.95 from $8.85 a month, and the monthly fee for a set-top box will jump to $7.50 from $6.99. It was that last charge that got my attention -- and got me thinking about the economics involved. How much do cable boxes actually cost? Why do their monthly fees keep going up when the cost of similar technology, such as TVs and computers, goes down over time? Not surprisingly, my attempts to answer these questions were met with stonewalling from industry players.

Spectrum, owned by Charter Communications, the dominant pay-TV company in Southern California, clammed up real fast when I asked how much they pay for the boxes they lease to subscribers. Nor would it comment on how much cash flow the boxes generate, or why fees keep rising even as the number of residential TV subscribers dwindles (down 66,000 more in the third quarter). Dennis Johnson, a company spokesman, said only that the 7.3% higher box charge in November -- more than three times the inflation rate -- represents a "modest increase" that is "comparable or even lower than our major competitors."

Comments

Comparables

[Mr D from 63]

There is nothing complicated about a cable box. Comparable electronics with a tuner and an HDD for DVR storage would likely run in the $35 to $55 range wholesale. Maybe lower.

Re: Comparables

[Anonymous Coward]

I used to work for a cable company, a large one. The cost of the boxes varies by features and manufacturer and how many the company purchases in a batch. But roughly speaking:
A basic single tuner Adaptor with limited output ports is around $40. A full blown set top box with two tuners and multiple outputs (i.e. hdmi, component, a dedicated audio, etc.) is closer to $100 . A DVR can be anywhere from $150 up to $400 depending on if it has 3 or 4 tuners, and the size of the internal HDDs.

But that's only part of the story. They also roll in hidden costs, for example the cost of inventory and staging the equipment, basic repairs and cleaning of repurposed units, etc. And they also have to estimate the lifespan of the box... keep in mind if your box fails you don't have to pay to replace it but they do.

There are basically two companies who make the vast majority of boxes on the market, and cable companies would love to be free of them. And most are already in the process of moving to IP based video and Apps which can run on any device, cloud based DVR, etc.

Right in the first sentence of the summary

[Anonymous Coward]

The FCC chairman insists that he is driven by a market-based approach to regulation.

Oh, he is driven by a market-based approach. Whatever the market will bear that allows more money to be funneled directly to his and his crony's pockets is what he'll let slide. If he were smart enough to realize that there's a tipping point as you up the ante where people will stop paying in, he might have a different outlook, but he's a typical politician/businessman and sees the next quarter only. And he can only calculate the next quarter by taking the direct results of the previous quarter and multiplying them by whatever increased price has been decided on. Nobody ever thinks about the potential for the market to shrink, despite countless years of evidence that this market is, in fact, shrinking.

Comcast won't give a static IP without their modem

[t0qer]

Had this issue pop up recently.

A few years back customer opens shop. After 3 shitty comcrap modems, we buy our own. Comcast at the time has no issue, we have a static IP set and it's set for 3 years. FF to last week. Customer can't connect via VPN, lotta other people depending on that static IP can't connect. I call comcast and they start troubleshooting.

Apparently they changed their policy. No static IP if the customer is using their own modem. Nope, we can't have our old IP back, big FU. We have to pay $19.95@mo + $10 modem lease to get a static from them now. Never mind that this is a bonafide business account. Cable companies are worse than lawyers and politicians, and that's a pretty low bar as is.

Re:Comcast won't give a static IP without their mo

[omnichad]

Charter (Spectrum) is worse. No static IP without a business account. No customer-owned modems allowed for business accounts at all. They claim it's to "maintain the quality of their business network" as if they're using different channels or nodes for business customers.

Re:I used to work for Comcast.

[tlhIngan]

No one really knows but it's between $750 and $1200 per box. The amount they charge you for not bringing the box back is less then how much it costs to make it.

I'm fairly certain you're off by an order of magnitude - $75-120 seems much more reasonable for what you get, and what comparable devices cost; Especially true in Canada where you can rent or buy the cable box (but you can only use theirs). The buy option is free and clear - you go to the store, pick up the box and pay. They don't ask if you're a subscriber or anything. You can do anything with them - use them, blow them up, disassemble them, etc.

If those boxes really cost several hundred bucks to make, the cable companies would certainly not make it possible to you to buy it for 1/10th the cost with no obligations to be a subscriber.

Re:I used to work for Comcast.

[hey!]

While it's always *possible* to build something more expensive than it needs to be, you used to be able to buy a CableCard tuner retail for around $100.

According to the old regs at least, the cable companies were banned from providing equipment with integrated encryption. They had to use a removable CableCard, so that instead of leasing a device from them you could purchase your own device and transfer the CableCard to your own equipment. The thing is, very few people knew about this, and the cable companies didn't go out of their way to inform them. The kind of people who knew are the kind of people who are cord cutters anyway.

The ban expired in 2015, which not coincidentally was when a new, encryption integrated cable box appeared on my doorstep -- which was quite manifestly a cheap P.O.S.; I'd be amazed if it cost the cable companies more than $20 to acquire in bulk. CableCard boxes are no longer available from retailers.

Re:This is why cord-cutting has become common

[michael_cain]

A bunch of that time the box is waiting for the downstream feed with channel lineup and content to arrive. It's a legacy national feed, tied down by a bunch of ancient business contracts, so your box waits while Cleveland and Boston and Salt Lake City's lineups go by.

A channel change means frequency change for the analog tuner, dynamic gain adjustment, sync to the MPEG transport stream, sync up the decryption hardware, start extracting the particular content stream, wait for a B frame to come along, and finally start putting up the image. All spec'ed out by the standards bodies 25 years ago.

Change it? It took more than a decade of lobbying to get the FCC to approve dropping analog NTSC carriage.