In my experience, government mandates typically lead to pain for someone. This time, the victims might well be the cable guys, including Comcast (Nasdaq: CMCSA ) , Time Warner Cable (NYSE: TWC ) , and Cablevision (NYSE: CVC ) .
It seems that the longtime practice of the cable multisystems operators (MSOs) buying set-top receiver boxes (from the likes of Motorola (NYSE: MOT ) and Cisco's (Nasdaq: CSCO ) Scientific Atlanta division) and then renting them to subscribers is being challenged by the FCC. The commission wants consumers to be able to purchase their own boxes, theoretically to reduce the MSOs' control over the entire subscription process.
In part because of this administrative prodding, the operators simultaneously are contending that since more and more boxes now possess high-definition capability, digital video recorders, and other still relatively new wrinkles -- they'll be forced to raise the rates on those boxes that they continue to rent. The order of magnitude being discussed appears to involve an additional $2 to $3 a month for some boxes.
I suppose I have two significantly different reactions to this series of events. On the one hand, the cable operators obviously became default box suppliers, in part, as a necessary inducement to subscribers to move from analog to digital feeds. But if you think about it, we don't expect our cable companies to provide us with television sets, so why should we expect them to set us up with set-top boxes?
At the same time, anything that ratchets up monthly cable charges could be negative to the operators and their investors. While telephone companies AT&T (NYSE: T ) and Verizon (NYSE: VZ ) have given the cable companies a substantial programming headstart, those telcoms nevertheless are improving their own video and related offerings in many parts of the country. And with cable hardly an inexpensive service already, the telephone companies would be the logical beneficiaries of widespread concern about higher cable rates.
While this situation bears scrutiny, the stronger cable operators appear to provide continued solid investment opportunities. Indeed, when it comes to management quality and franchise strength, it's difficult to improve upon Comcast and Time Warner Cable -- two companies that Foolish investors would be well advised to monitor carefully.
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Fool contributor David Lee Smith does not own shares in any of the companies mentioned. He welcomes your questions or comments. The Motley Fool has a disclosure policy.
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