How Much Does a Cable Box Really Cost? The Industry Would Prefer You Don't Ask

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.'

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