"Regulation that Works"
Here in Washington, DC and no doubt in the rest of the country as well, Comcast Cable offers a cable box that includes high-definition DVR capabilities. It works pretty well, but the service they provide is markedly inferior to that offered by the TiVo HD DVR. But of course for your TiVo device to work at all, it needs access to the cable channels provided by, well, the cable company. So why doesn’t Comcast rig things so that you have to use Comcast’s box in order to get HD channels? You wouldn’t need to pay them extra for DVR service if you didn’t want it, but if you did need DVR service you’d have to get Comcast’s service.
Instead of pursuing that seemingly lucrative strategy, instead Comcast offers a CableCARD that plugs into your TiVo box. Why do they do it? Well, the answer turns out to be Big Government. Section 629 of the Telecommunications Act of 1996 requires the FCC to “assure the commercial availability to consumers of multichannel video programming and other services offered over multichannel video programming systems, of converter boxes, interactive communications equipment, and other equipment used by consumers to access multichannel video programming and other services offered over multichannel video programming systems, from manufacturers, retailers, and other vendors not affiliated with any multichannel video programming distributor.”
That led to the CableCARD and the CableCARD leads to the viability of TiVo. And of course it’s the viability of TiVo that gives cable companies the incentive to offer their own DVR services. Then, thanks to the magic of market competition, the rival firms compete on price and features and consumers have choice. But the magic of market competition only works in the first place thanks to savvy regulations.