Via e-mail

June 19, 2013

Dr. David Danielson

Assistant Secretary for Energy Efficiency and Renewable Energy

U.S. Department of Energy

1000 Independence Ave., S.W.

Washington, DC 20585

Subject: Serious flaws in the analytical approaches and models for DOE’s set-top box 

rulemaking (Docket No. EERE–2010–BT–NOA–0067)

Dear Dr. Danielson:

On behalf of the Consumer Electronics Association (CEA) and National Cable & Telecommunications 

Association (NCTA), we write to call your attention to serious flaws and shortcomings in DOE’s analysis 

used in support of its energy efficiency standards rulemaking for set-top boxes.

CEA and NCTA have commissioned a review of DOE’s analytical materials (“Analyzing Potential 

Impacts of Energy Efficiency Standards for Set-top Boxes – June 2013”) and provide a copy of the report

with this correspondence, which we are submitting to the rulemaking docket as well.

DOE’s analysis was announced in a Notice of Data Availability (NODA) published in the Federal 

Register March 7, 2013, inviting public review and feedback. Subsequently, CEA and NCTA 

commissioned a third-party review of the analysis and models DOE uses to estimate the potential 

economic impacts and energy savings that could result from promulgating a regulatory energy 

conservation standard for set-top boxes.

The author of our report is Mr. Everett Shorey, President, Shorey Consulting, Inc. Of particular note, Mr. 

Shorey is the author of the Government Regulatory Impact Model (GRIM) now used by DOE as part of 

the assessment of the potential impact of regulations on manufacturers. In the past, Mr. Shorey has 

provided comments to DOE on its use of incremental markups, experience curves and the causes and 

costs of cumulative regulatory burden. Mr. Shorey’s work experience has covered a wide range of 

industries, with functional experience in strategy development, financial analysis where he has qualified 

as an expert in litigation, and organizational structure. Mr. Shorey’s background also includes a 17-year 

career at management consultancy Arthur D. Little, and he has co-authored Global Warming and

Appliances: Increasing Consumer Participation in Reducing Greenhouse Gases, an article for the Pew 

Center on Global Climate Change.
Dr. David Danielson

June 19, 2013

Page 2

The attached report compounds our existing concerns about DOE’s rulemaking undermining successful 

voluntary programs and harming innovation, which CEA and NCTA reviewed in a meeting with you on 

May 16, 2013.

Sincerely,

/s/ Neal M. Goldberg /s/ Douglas K. Johnson

Neal M. Goldberg Douglas K. Johnson

Vice President and General Counsel Vice President, Technology Policy

National Cable & Telecommunications Consumer Electronics Association

Association

cc: Kathleen Hogan, Department of Energy

John Cymbalsky, Department of Energy

Jeremy Dommu, Department of Energy

settop@ee.doe.gov (Docket No. EERE–2010–BT–NOA–0067)

Enclosure
Analyzing	Potential	Impacts	of	Energy	Efficiency	

Standards	for	Set-top	Boxes

June	2013

A	Report	to:

Consumer	Electronics	Association

National	Cable	&	Telecommunications	Association

Prepared	by:

	Everett	Shorey

Shorey	Consulting,	Inc.
2

Analyzing	Potential	Impacts	of	Energy	Efficiency	Standards	

for	Set-top	Boxes

June	2013

EXECUTIVE SUMMARY 

The	US	Department	of	Energy	(DOE)	is	considering	efficiency	standards	for	set-top	

boxes	used	in	cable,	satellite	and	other	television	systems. However,	the	analytical	

approaches	and	models	traditionally	used	by	DOE	do	not	apply	to	multichannel	

video	services	and	the	associated	Multichannel	Video	Programming	Distributors	

(MVPDs).	It	will	not	be	possible	to	evaluate	standards	with	respect	to	the	factors	

required	by	statute	in	any	meaningful	way	using	DOE’s	current	models	and	

approaches. At	its	core,	DOE’s	traditional	concepts	are	based	around	static	physical	

objects,	such	as	a	refrigerator,	and	not	around	dynamic	reconfigurable	networks.

A	refrigerator	is	a	single,	standalone,	static	object that consumers	own,	rarely	

replace; one	that operates	under	stable	operating	conditions	(Figure	1).	It	performs	

basically	one	function, design	changes	are	infrequent,	and	it	remains	static	in	the	

consumer’s	house	over	its	long	lifetime.	It	can	be	analyzed	with	a	limited	number	of	

models,	projected	and	counted.	

Figure	1:	Traditional	DOE	Regulated	Products

Home	entertainment	is	an	evolving	service	delivered	by	rapidly	changing	networks,	

equipment,	software,	programming	and	other	services,	all	of	which	operate	as	

integrated	components	for	delivering	those	services.	This	situation	is	totally	unlike	

appliances	for	which	the	regulatory	system	was	developed. Set-top	boxes	are	

elements	of	complex	systems	providing	programming	and	information	services	that	

change	dynamically	with	changes	in	software,	changes	in	the	network,	and	changes	

in	network	services	(Figure	2).	
3

Figure	2:	Home	Entertainment

Set-top	boxes	have	a	short	lifetime,	are	bundled	and	modified	with	changing	service	

subscriptions	and	are	returned	to	the	service	provider/owner	when	subscribers	

change	services	or	service	provider,	or	when	the	service	provider	upgrades	its	

delivery	infrastructure.	Set-top	boxes	operate	as	highly	specialized	and	variable	

components	adjusted	to	each	specialized	MVPD	network	and	service	offering.

Components	of	the	network	are	reconfigurable	in	the	field	so	their	function	and	use	

change	over	time.	Changes	in	one	component	affect	all	other	components,	and	not	

just	the	cost	of	set-top	box	production. Set-top	boxes	change	rapidly	as	services	and	

market	competition	changes,	making	it	impossible	to	develop	meaningful	

projections	within	the	DOE	analytical	process.	

Efficiency	standards	of	the	type	traditionally	developed	by	DOE	apply	to	static	

“things”	that	can	be	touched	and	measured. The	home	entertainment	network	

cannot.	While	there	are	things	involved,	such	as	set-top	boxes,	servers,	television	

sets,	those	things	are	changing	rapidly. It	is	not	possible	to	project	how	the	network	

will	evolve,	what	things	will	be	in	use,	how	those	things	will	be	configured	and	how	

consumers	will	use	them. The	DOE	regulatory	and	analytical	structure	is	fatally	

flawed	with	respect	to	home	entertainment	and	can	neither	be	used	nor	adapted	to	

be	used	for	set-top	boxes.
4

I. SITUATION

The	US	Department	of	Energy	(DOE)	is	considering	whether	and	how	to	set	

minimum	energy	efficiency	standards	for	set-top	boxes	used	in	cable	and	satellite	

television systems1.	By	statute2,	DOE	is	required	to	consider	seven	factors	when	

deciding	whether	and	how	to	establish	energy	conservation	standards	and	it	has	

developed	a	series	of	models	and/or	analytic	tools	to	support	its	consideration	of	

those factors3:

EPCA	Factors DOE	Analysis

1. Economic	impact	on	consumers	and	

manufacturers	

Life-Cycle	Cost	Analysis	

Manufacturer	Impact	Analysis	

2. Lifetime	operating	cost	savings	

compared	to	increased	cost	for	the	

product	

Life-Cycle	Cost	Analysis	

3. Total	projected	energy	savings	 National	Impact	Analysis	

4. Impact	on	utility	or	performance	 Engineering	Analysis	

Screening	Analysis	

5. Impact	of	any	lessening	of	

competition	 Manufacturer	Impact	Analysis	

6. Need	for	national	energy	

conservation	 National	Impact	Analysis	

7. Other	factors	the	Secretary	

considers	relevant	

Environmental	Assessment	

Utility	Impact	Analysis	

Employment	Impact	Analysis	

The	Life-Cycle	Cost	Analysis,	Manufacturer	Impact	Analysis	and	the	National	Impact	

Analysis	depend	upon	inputs	from	the	Engineering	Analysis,	Life-Cycle	Cost	

Analysis,	Government	Regulatory	Impact	Model	(GRIM),	and	National	Impact	

Analysis	spreadsheet	models.	DOE	is	proposing	to	use	these	models	in	its	

consideration	of	the	EPCA	Factors	for	set-top	boxes. However,	these	models	and	

their	intellectual	underpinnings	were	built	around	household	appliances	such	as	

washing	machines	and	refrigerators.	Neither	the	models	themselves	nor	the	

fundamental	concepts	of	the	DOE	Analysis	approaches	are	appropriate	for	assessing	

set-top	boxes.	

																																																							 1 Docket	#	EERE–2010–BT–NOA-0067

2 42	U.S.C.	6295(o)(2)(B)(i)	

3	Slide	17,	2012-01-26	Framework	Meeting	Presentation	Slides,	January	26,	2012,	EERE-2011-BTNOA-0067
5

II. CONCEPTS UNDERLYING STANDARD DOE APPROACH

A. The DOE Analysis was designed for standalone, static hardware 

appliances that operate under stable operating conditions

The	basic	underpinning	of	the	standard	DOE	approach	was	developed	for	home	

appliances	and	similar	products.	This	can	be	understood	by	thinking	about	a	typical	

home	appliance,	such	as	a	refrigerator.	First,	there	is	a	physical	object	(i.e.	the	

refrigerator)	with	definable	components	that	affect	energy	use	(e.g.,	insulation	

thickness,	compressor	efficiency,	etc.).	The	refrigerator	is	ultimately	sold	to	a	user	

who	will	own	and	operate	the	refrigerator,	essentially	unchanged,	for	the	

refrigerator’s	lifetime.	This	situation	remains	static	for	some	reasonably	long	period	

of	time.	

B. The DOE Analysis was designed for long-lived appliances that 

consumers own and rarely replace. 

The	standard	DOE	approach	is	also	premised	on	relatively	infrequent	design	

changes	in	home	appliances	and	similar	products.	The	cost	of	changing	the	design	of	

a	refrigerator	is	substantial	relative	to	the	cost	of	the	refrigerator,	so	manufacturers	

change	designs	infrequently.	The	cost	of	the	refrigerator	to	the	consumer	is	also	

high,	so	the	consumer	rarely	replaces	the	refrigerator	before	the	end	of	its	useful	

life.	Again,	each	element	of	this	situation	remains	static	for	some	reasonably	long	

period	of	time.	

C. The DOE Analysis was designed for products with relatively few 

variables that, if changed, would directly affect only hardware 

production costs. 

The	DOE	modeling	process	flows	from	this	situation	of	defined	objects	and	static	

conditions.	Even	though	the	absolute	numbers	of	products	and	consumers	are	large,	

the	actual	variations	are	relatively	few.	The	number	of	design	options	for	changing

energy	consumption	is	limited.	The	number	of	different	product	variations	(i.	e.	

refrigerator	models)	is	constrained	by	manufacturing	requirements.	The	most	

recent	refrigerator	National	Impact	Analysis	covered	12	refrigerator	types	with	5-6	

design	options	each	for	fewer	than	seventy-five situations.

4	The	anticipated	life	of	a	

refrigerator	is	over	15	years	and	standards	are	anticipated	only	every	7	years,	

allowing	a	lengthy	period	where	the	projected	designs	will	be	in	place.	The

differences	in	distinctly	different	consumer	use	patterns	are	also	limited.	As	a	result,	

the	situation	is	both	countable	and	projectable.	

																																																							 4 2011-03-16	National	Impact	Analysis	Spreadsheet:	Refrigerator-Freezers	from	EERE-2008-BTSTD-0012
6

D. The DOE Analysis was designed for products in which design changes 

are infrequent and predictions could be relatively reliable. 

From	these	basic	underpinnings,	DOE	models	can	count	and	project	within	certain	

constrained	cases	developed	for	appliances	and	the	appliance	market.	The	models

analyze	example	cases	(a	refrigerator	of	a	defined	size	used	in	a	certain	fashion	in	a	

geographic	area	with	a	specified	cost	of	energy	and	expected	to	last	for	a	period	of	

years).	The	models	then	calculate	the	economics	to	consumers	of	that	case	(the	Life

Cycle	Cost	Analysis)	and	add	up	all	of	the	various	options	to	estimate	the	total	

effects	(the	National	Impact	Analysis).	The	Government	Regulatory	Impact	Model	

(GRIM)	performs	a	similar	function	for	manufacturers.	The	GRIM	defines	a	specific	

set	of	cost	assumptions	and	adds	up	the	aggregate	change	in	industry	cash	flows.	

There	have,	of	course,	been	refinements	to	the	models	over	time	to	account	for	

certain	types	of	variations	(such	as	the	expected	lifetime	of	a	product),	which	are	

then	covered	through	probability	analyses.	But	the	core	assumption	of	stable	

objects	and	situations	remains	intact,	and	that	assumption	serves	an	essential	

prerequisite	for	the	model	to	work.	

Because	of	the	relative	stability	of	appliances,	it	is	possible	to	make	reasonable	

determinations	of	consumer	economics	and	to	estimate	national	impacts.	The	

economic	situation	for	consumers	can	be	calculated	around	a	limited	set	of	

refrigerator	design	options	and	standardized	conditions	of	use	(i.	e.	hours	of	

operation)	leading	to	an	estimate	of	payback	periods	for	lower	energy	use.	The	

national	situation	is	an	aggregation	of	energy	and	consumer	savings	from	the	

various	design	options.	There	are	specific	things	to	count	in	a	manageable	number	

of	variations.	The	actual	mathematics	of	calculating	the	energy	and	economic	effects	

can	become	intricate,	but	the	essential	situation	is	quite	straightforward	and	

manageable.	In	the	case	of	a	refrigerator,	12	refrigerator	types	with	5-6	design	

options	and	changes	expected	only	after	7	years,	the	DOE	models	count	seventy	or	

so	scenarios	for	multiple	years.	

III. SYSTEM REQUIREMENTS ON SET-TOP BOXES

A. Set-top boxes are elements of complex systems providing programming 

and information services that change dynamically with changes in 

software, changes in the network, and changes in network services

None	of	the	fundamental	assumptions	underlying	the	DOE	modeling	process	apply	

in	the	case	of	set-top	boxes.	A	refrigerator	stands	alone	–	it	sits	in	the	kitchen	and	

keeps	things	cold	–	for	a	long	period	of	time.	While	the	set-top	box	is	a	physical	

object,	it	is	not	standalone,	static	piece	of	hardware	with	stable	operating	

conditions.	Instead,	the	set-top	box	is	a	component	part	of	a	system	or	network	that	

provides	entertainment,	programming,	and	information	services	to	the	home.	It	

operates	as	part	of	a	system	that	changes	dynamically	with	changes	in	software,	

changes	in	the	network,	and	changes	in	network	services.	Even	as	a	device,	the	settop	box	is	the	product	of	multiple	vendors –	of	hardware,	firmware,	middleware,	
7

guides,	on-demand	services	and	other	applications –	many	elements	of	which	

continue	to	change	over	the	life	of	the	device.	As	the	system	changes,	so	does	the	

role	and	functionality	of	the	set-top	box	and	where,	when	and	how	electricity	is	used	

in	providing	the	home	with	programming	and	information	services.	

B. Set-top boxes have a short lifetime, are bundled and modified with 

changing service subscriptions and are returned to the service

provider/owner as subscribers change services or service provider

A	cable,	satellite,	or	telephone	multichannel	video	programming	service	

accomplishes	six	principal	functions:

1. It	acquires	and	aggregates	content	and	information	services	for	retail	service	

offerings.	Content	and	services	change	during	the	service	period.	

2. It	deploys,	maintains	and	changes	its	distribution	network	as	services	evolve.

3. It	encodes	and	protects	content	for	distribution	to	subscribers	who	subscribe	

to	a	variety	of	retail	offerings.

4. It	delivers	and	decodes	authorized	content	for	presentation	at	the	subscriber	

premises.	This	may	also	include	recording	of	programming	for	later	

subscriber	playback,	and	transcribing,	re-encoding,	or	otherwise	processing	

content	for	distribution	to	additional	devices.	

5. It	uses	one	or	more	home	networking	and	other	technologies	to	distribute	

content	to	additional	devices	(typically	in	the	home).	

6. It	enables	the	display	of	content.	

The	multichannel	video	program	distributor	(MVPD)	conventionally	performs	the	

first	four	functions	and	may	perform	the	fifth.	Subscribers	conventionally	own	their	

own	television	sets	for	the	sixth	function:	display.	Although	the	set-top	box	is	often	a	

component	in	delivering	these	services,	the	subscriber	purchases	this	package	of	

functionalities,	not	a	specific	piece	of	hardware.	In	fact,	the	set-top	box	is	frequently	

bundled	with	the	monthly	service	rate	for	the	MVPD	subscription	service.	Almost	all	

set-top	boxes	are	leased,	rather	than	owned,	as	part	of	this	service.	In	sharp	contrast	

to	appliances	that	are	rarely	replaced	over	a	long	lifetime,	set-top	boxes	are	

frequently	returned	to	the	MVPD	as	customers	change	services,	order	additional	

features,	or	change	residence	or	service	provider.	
8

C. Set-top boxes operate as highly specialized and variable components 

adjusted to each specialized MVPD network and service offering. 

Changes in one component of the network affect all other components, 

and not just the cost or performance of set-top boxes. 

Set-top	boxes	do	not	operate	as	individual	products	but	as	integrated	parts	of	very	

specialized	MVPD	networks	and	services.	They	are	components	of	a	complex	

network	of	electronics,	software,	and	distribution	infrastructure	that	varies	not	just	

from	provider	to	provider,	but	often	from	local	cable	system	to	local	cable	system

owned	by	a	single	MVPD.	There	are	more	than	1100	cable	operators	operating	more	

than	7000	headends.	Though	six	cable	operators	now	provide	service	to	

approximately	85%	of	cable	subscribers,	they	operate	systems	with	often	

substantial	diversity	in	their	networks	and	with	different	set-top	box	configurations.	

For	example,	cable	operators	have	chosen	different	video-on-demand	approaches	

and	vendors.	Some	operators	have	deployed	switched	digital	video,	which	delivers	

certain	channels	only	when	consumers	tune	them,	while	others	have	not.	While	

these	cable	systems	share	some	common	features,	such	as	MPEG-2	compression	and	

QAM	modulation,	they	have	many	more	distinct	proprietary	elements:	different	

conditional	access,	out-of-band	communications	channels	used	for	command	and	

control	of	the	set-top	box,	operating	system	(OS)	and	processor	instruction	sets,	

network	control	architecture	in	support	of	interactivity,	and	electronic	program	

guide	applications	and	guide	metadata	formats.	

There	is	not	only	substantial	variation	among	these	six	operators,	but	also	within	

their	companies	as	well.	Due	to	consolidation	in	the	cable	industry,	there	is

considerable	variation	among	systems	owned	by	the	same	company.	Cable	

operators	that	were	once	among	the	ten	largest	 –	TCI,	MediaOne,	Adelphia,	Century	

and	Marcus	–	have	been	acquired	(sometimes	in	parts)	by	other	operators,	leaving	

the	owners	today	with	a	wide	variety	of	system	architectures	and	technologies	

within	single	companies.	Today’s	cable	systems	thus	encompass	“a	set	of	legacy	

digital	video	delivery	systems	that	have	a	huge	installed	base	of	tens	of	millions	of	

digital	cable	set	top	boxes,”	and	system	technology	that	“spans	over	a	decade	of	

technology	advances	resulting	in	a	broad	range	of	set-top	capability	and	

performance.	” 5 Variation	is	even	greater	when	other	types	of	video	service	

providers	are	considered.	Four	of	the	eight	largest	MVPDs	are	telephone	companies	

and	DBS	providers,	with	varying	implementations.	Verizon’s	FiOS	is	very	different	

from	the	IPTV	network	of	AT&T	and	CenturyLink,	and	DISH	and	DIRECTV	operate	

satellite	systems	that	are	very	different	from	one	another.	And	each	of	these	

separate	ecosystems	is	far	from	static.	System	architectures	and	networks	are	

constantly	in	flux.	

																																																							 5 Ralph	W.	Brown,	Tackling	the	US	Cable	Set-top	Legacy:	Middleware	in	a	Sea	of	Proprietary	Systems	at	

1.
9

Among	appliances	for	which	the	DOE	model	was	developed,	there	are	few	variables	

in	commodities—for	example,	12	refrigerator	types	with	5-6	design	options	each,	a	

15-year	anticipated	life,	and	infrequent	changes	in	production that	affect	only

production	costs.	With	set-top	boxes,	there	are	a	high	number	of	variables,	a	large	

number	of	models,	frequent	changes	and	a	change	in	hardware	affects	not	only	settop	box	production	but	also	the	network	and	services	supported.	The	number	of	

variations	cannot	be	analyzed,	assessed	or	counted	in	any	reasonable	process.

D. Set-top boxes change rapidly as services and market competition 

changes, making it impossible to make meaningful projections within 

the DOE appliance model

As	component	parts	of	MVPD	services,	set-top	boxes	change	rapidly	as	services	

change.	Set-top	boxes	initially	just	offered	an	expanded	channel	tuning	range,	a	

remote	control,	or	descrambling	of	secured	and	optional	channels.	Set-top	boxes	

have	added	new	and	innovative	features	to	meet	new	consumer	demands:	HD	

resolution;	simultaneous	watching	and	recording	of	different	channels;	on-demand	

movies;	digital	video	recording	capability,	and	then	more	and	more	storage	capacity	

for	all	those	recorded	shows;	more	advanced	applications	and	more	processing	

power	and	memory	to	run	them.	They	have	evolved	also	to	support	other	devices,	

with	multi-room	playback	of	recorded	shows	on	the	main	DVR,	and	home	

networking	to	other	set-top	boxes	in	the	home,	and	to	devices	that	travel	with	

subscribers.	They	are	now	incorporating	social	networking	into	the	viewing	

experience,	and	efforts	are	now	underway	to	make	the	set-top	box	a	hub	for	home	

energy	management,	home	security	or	home	automation.	Competing	service	

providers	deliver	their	services	in	different	ways.	One	MVPD	has	moved	the	DVR	

itself	back	into	the	network;	another	uses	the	primary	set-top	box	to	“sling”	

recorded	content	to	additional,	remote	devices.	Many	MVPDs	are	delivering	service	

using	Internet	Protocol	(IP)	directly	to	iPads,	Android	tablets,	Roku	devices,	and	

other	customer-owned	devices.	

Among	appliances	for	which	the	DOE	model	was	developed,	design	changes	were	

infrequent.	With	set-top	boxes,	the	only	certainty	is	that	designs	will	change	rapidly.	

The	means	for	performing	each	of	the	six	functions	performed	by	MVPDs,	the	

technologies	in	use,	and	the	location	and	type	of	hardware	involved	are	virtually	

certain	to	continue	to	evolve	at	a	rapid	rate.	For	example,	where	storage	takes	place	

is	a	matter	of	system	design,	not	an	inherent	characteristic	of	the	service.	How	

content	is	encoded,	transmitted	decoded	and	distributed	changed	as	systems	have	

moved	from	analog	to	digital,	from	Standard	Definition	to	HD	programming,	from	

DVRs	to	network	DVRs	and	home	networking.	The	system,	service,	and	set-top

boxes	will	continue	to	evolve	with	ultra-HD,	IP	delivery	or	IP	transcoding,	and	cloud	

delivery	to	tablets	or	other	non-traditional	displays.	The	very	nature	of	service	

delivery	may	change	with	the	evolution	of	streaming	video	from	broadcaster	

websites,	YouTube,	and	“over-the-top”	(OTT)	video	service	providers	like	Netflix	

and	Hulu.	The	nature	of	the	home	entertainment	service	is	in	flux,	and	the	role	and	
10

physical	structure	of	a	“set-top	box”	has	continued	to	evolve	so	as	to	adapt	to	these	

changes	in	technology.	

It	is	impossible	for	DOE	models	to	project	how	the	future	of	home	entertainment	

will	continue	to	evolve. History	shows	that	home	entertainment	can	and	does	take	

unpredictable	paths. For	example,	over	the	past	five	years	home	entertainment	has	

incorporated:

• The	emergence	of	consumers	watching	programs	on	tablet	computers,	such	

as	the	iPad,	using	streaming	video	over	home	wireless	networks. The	

emergence	and	growth	of	tablets	was	completely	unpredicted	prior	to	

Apple’s	introduction	of	the	iPad	in	2010.

• The	advent	of	TV	Everywhere	services	to	computers	where	the	computer	has	

replaced	the	television	set	and	the	Internet	is	the	distribution	network. In	the	

early	2000s,	the	efforts	and	expectations	were	for	computer	functions	to	

migrate	to	the	television,	not	the	reverse.

• The	decline	of	“appointment	viewing”	of	television	programming	where	

consumers	watched	programming	as	a	set	time. Increasingly,	consumers	

store	programming	to	watch	at	their	convenience. The	approaches	

consumers	take	to	manage	time	shifting	are	still	evolving.

• The	introduction	of	products	like	AppleTV	and	GoogleTV	to	support	OTT	IP	

video	services	to	the	home by	players	that	are	traditionally	not	considered	

MVPDs.

• The	potential	for	viewing	of	audio/video	content	on	alternative	platforms	

such	as	gaming	devices.

Each	of	these	changes	was	either	unforeseen	or	lost	in	the	sea	of	other	alternative	

futures	that	did	not	occur. There	is	no	reason	to	believe	that	the	future	from	today	

onwards	will	be	more	predictable	than	the	past	several	years. Attempting	to	predict	

which	of	a	virtually	infinite	set	of	future	situations	will	emerge	is	an	impossible	task.

Trying	to	do	so	in	order	to	add	an	appearance	of	rigor	or	accuracy	to	a	set	of	

projections	obscures,	but	does	not	eliminate,	the	inherent	unpredictability	of	the	

situation,	providing	a	veneer	of	accuracy	where	none	exists.

The	only	likely	constant	in	this	process	is	the	requirement	to	change	and	adapt.	The	

likelihood	that	the	functionality	and	design	of	a	set-top	box	being	deployed	a	year	or	

two	from	now	will	be	what	is	in	a	box	today	is	approaching	zero	unless	artificially	

constrained	by	regulation.	Even	then,	non-regulated	systems	may	encroach	in	the	

regulated	arena	and	entirely	alter	the	market.	
11

IV. IMPLICATIONS FOR THE USE OF DOE’S TRADITIONAL MODELS

The	actual	in-use	situation	for	home	entertainment	and	the	corresponding	outlook	

for	on-premises	hardware	(the	set-top	box	or	alternatives)	could	hardly	be	more	

different	from	that	of	a	static	home	appliance.	There	is	no	physical	object	with	stable	

operating	characteristics.	There	is	no	stable	operating	environment	from	which	to	

project	electricity	usage.	There	is	a	continually	evolving	“product”	with	the	potential	

for	thousands	of	variations	depending	on	the	overall	system	choices	of	the	MVPDs	

and	on	the	need	to	adapt	to	the	thousands	of	legacy	system	combinations	of	

technologies	in	place	across	the	country.	The	variations	and	options	are,	for	all	

practical	purposes,	uncountable	and	are	unstable.	A	modeling	process	based	on	

counting	stable	objects	is,	thus,	unsuitable	for	analyzing	the	dynamic	situation	of	the

home	entertainment	industry.	

The	temptation	may	be	to	try	and	force-fit	the	home	entertainment	industry	and	its	

component	hardware	into	the	traditional	DOE	modeling	approach.	This	might	entail	

treating	the	set-top	box	as	a	product,	the	set-top	box	manufacturer	as	a	

manufacturer,	the	MVPDs	as	a	distribution	channel	and	a	homeowner	as	the	end	

customer.	However,	this	structure	is	unwieldy	and	not	capable	of	capturing	the	

dynamics	of	the	home	entertainment	situation.	

1. The	set-top	box	is	not	a	physical	article	of	commerce	where	individual	energy	

savings	options	can	be	added	through	hardware,	measured,	counted	and	

costed.	The	set-top	box	is	part	of	an	evolving	system	with	multiple	

opportunities	to	provide	the	same	function	either	locally	or	remotely,	

through	hardware	or	through	software/firmware.	In	addition,	the	set-top	

box	must	fit	within	a	broader	system	interacting	with	the	headend	and	other	

systems.	For	example:

a. A recent	feature	change	at	DIRECTV	was	the	introduction	of	

addressable	TV	advertising.	All	DIRECTV	branded	DVRs	in	the	field	

have	been	upgraded	with	the	capability	to	seamlessly	insert	

advertisements	that	are	targeted	to	a	desired	audience	into	live	and	

recorded	programs.	The	many	changes	to	DVRs	included	capabilities	

to	receive	targeting	attributes,	record	and	store	the	relevant	ads,	

choose	ads	for	playback	based	on	broadcast	announcements	and	

insert	the	chosen	ads	into	in-progress	programs	with	frame-accurate	

timing.	Each	of	these	changes	required	intensive	modifications	

throughout	the	DIRECTV	broadcast	infrastructure	adding	new	work	

flow,	bitstream	conditioning	and	trigger	handling	functions,	as	well	as	

integrating	new	systems	designed	to	manage	profiles,	schedule	the	

ads,	and	perform	audience	measurement.	The	impact	to	headend	and	

business	systems	to	implement	this	new	capability	was	an	order	of	

magnitude	greater	than	the	impact	on	the	receivers	themselves,	and	it	

took	months	of	comprehensive	testing	to	get	all	of	these	parts	

working	in	concert	to	deliver	the	desired	result.
12

b. Likewise,	satellite	television	did	not	convert	from	MPEG-2	to	MPEG-4	

set-top	boxes	for	HD	programming	services	with	only	a	box	change.	

The	satellite	industry’s	HD	transition	was	accomplished	with	changes	

throughout	the	network,	including	new	receiver	dishes,	DIRECTV’s

increase	in	satellite	capacity	through	the	launch	of	new	satellites	into	

new	Ka-Band	orbital	slots,	and	new	compression	and	other	

equipment	installed	in	uplink	centers.	All	told,	billions	of	dollars	were	

spent	in	effecting	this	transition.

c. As	set-top	boxes	operate	with	more	intelligence	and	functions	moved	

into	the	network	(such	as	program	guides)	and	move	to	entirely	IP	

operations,	they	can	reach	lower	wattage	states.	Some	of	these	

offerings	are	available	today	to	serve	tablets	and	personal	computers.	

But	to	support	IP	set-top	boxes	at	scale	requires	far	more	than	

purchasing	and	deploying	IP	client	set-top	boxes.	A	cable	operator	

would	need	to	invest	in	additional	network	servers	and	encoders,	

additional	distributed	CDN	(content	delivery	network)	resources,	

clear	additional	distribution	bandwidth	for	IP	transport,	and	add	

more	CMTS	(cable modem termination system)	resources	to	support	

such	set-top	boxes.	Current	estimates	add	well	over	a	billion	dollars	in	

network	costs	to	execute	such	a	change	across	the	cable	industry,	

without	even	accounting	for	set-top	box	costs.	These	network,

operational	and	other	costs	are	not	readily	captured	in	the	DOE	

modeling	process.	

2. The	rapidly	evolving	nature	of	the	MVPD	and	home	entertainment	industries	

makes	projecting	a	“Base	Case”	virtually	impossible. The	traditional	DOE	

approach	is	to	project	shipments	of	products	and	adjust	those	shipments	for	

expected	changes	in	product	mix	and	efficiency	to	establish	a	Base	Case	

without	standards.	The	proliferation	of	potential	future	scenarios	for	home	

entertainment	services	renders	this	approach	useless. Participants	in	the	

industry	adjust	flexibly	to	changing	conditions,	not	to	static	forecasts.

Developing	and	assessing	alternative	futures	is	a	futile	exercise	that	adds	

uncertainty	rather	than	insight. There	is	no	basis	for	determining	the	

probability	of	any	potential	future	scenario. The	expected	value	and/or	

distribution	of	consumer	or	national	impact	results	are	not	calculable.

3. Set-top	boxes	are	part	of	a	service	and	are	changed	out	regularly	by	

consumers	or	by	the	MVPDs.	Therefore	the	expected	life	is	short --

depreciable	lives	for	set-top	boxes	range	from	2-6 years.

6	This	complicates	an	

analysis	of	consumer	payback	for	two	reasons.	First,	the	lifespan	at	the	

consumer	for	any	set-top	box	will	be	short	and	often	shorter	than	even	the	

presumptive	5-year	payback	period	considered	in	DOE	consumer	analyses.	

																																																							 6	Annual	reports	for	Comcast,	Cablevision,	DIRECTV	and	Dish	Network
13

Second,	the	Base	Case	for	any	consumer	analysis	would	need	to	evolve	

continually	to	reflect	the	fact	that	consumers	get	different	set-top	boxes	with	

different	characteristics	many	times	over	the	course	of	a	complete	analytic	

cycle.

4. Even	if	it	were	possible	to	determine	Base	Case	scenarios,	they	would	need	to	

incorporate	the	effects	of	any	voluntary	agreements	or	other	situations	that	

will	affect	future	energy	consumption	for	home	entertainment	services.

These	will	reduce	the	potential	gains	that	would	accrue	from	any	possible	

standards	or	other regulations.

7

5. In	addition,	the	lifetimes	can	be	highly	variable	due	to	changes	in	feature	sets	

and	technologies.	This	is	not	well	captured	in	the	DOE	models	and	the	DOE	

approach	of	Monte	Carlo	simulations	for	equipment	life	does	not	reflect	the	

high	level	of	uncertainty	and	the	potential	for	disruptive	innovation.	Monte	

Carlo	simulations	used	by	DOE	are	based	on	continuous	probability	functions	

that,	in	themselves,	need	to	be	derived	from	data.	In	the	absence	of	a	

continuous	function,	the	Monte	Carlo	simulation	would	need	some	sort	of	

discrete	but	defined	set	of	outcomes	and	probabilities,	for	which	there	is,	by	

definition,	no	foundation	for	projection	in	the	case	of	disruptive	innovation	

that	characterizes	the	set-top	box	market.	

6. The	proliferation	of	technologies	and	technological	variations	will	strain	any	

accumulation	process	past	the	breaking	point.	The	range	and	variability	of	

the	imbedded	assumptions	on	installed	mix,	operating	conditions,	product	

lifecycle,	etc.,	will	introduce	error	factors	into	the	calculations.	In	2013,	

MVPDs	have	myriad	choices	for	the	future:	network	and	cloud-based	

delivery;	conversion	to	HEVC;	Ultra-HD;	wired	or	wireless	home	networking;	

gateways	or	standalone	devices;	limited	functionality	devices	like	DTAs	or	

switched	digital	video;	and	delivery	to	current	and	to-be-invented	customerowned	devices.	It	is	not	possible	to	predict	which	technologies	will	be	

implemented	or	in	what	mix.	Trying	to	address	this	problem	with	Monte	

Carlo	simulations	will	only	demonstrate	that	the	confidence	level	in	the	

ultimate	results	is	very	low.	It	will	likely	not	be	possible	to	distinguish	

between	the	energy	and	economic	consequences	of	the	post	and	the	preregulatory	scenarios	with	any confidence.

8

																																																							 7 Voluntary	Agreement	for	Ongoing	Improvement	to	the	Energy	Efficiency	of	Set-Top	Boxes	(Dec.,	

2012),	available	at	http://www.ce.org/CorporateSite/media/ce_news/FINAL-PUBLIC-VOLUNTARYAGREEMENT-(12-6-2012).pdf 8	DOE	has	already	seen	this	problem	in	the	error	bands	introduced	by	its	use	of	experience	curves	

such	that	there	is	often	a	substantial	overlap	in	the	distribution	of	outcomes	between	base	and	

standards	cases:	US	Department	of	Energy,	Preliminary	Technical	Support	Document:	Energy	

Efficiency	Program	For	Consumer	Products:	Refrigerators,	Refrigerator-Freezers,	And	Freezers,	

November,	2009,	Table	5.9.1,	p.	5-54.
14

7. The	MVPD	is	not	a	manufacturer	who	creates	a	static	appliance,	places	it	into	

commerce,	and	leaves	continuing	responsibility	to	the	end-user	consumer.	

Nor	is	it	a	channel	of	distribution	for	such	appliances.	It	owns,	maintains,	and	

changes	the	set-top	boxes	with	changes	in	its	network	and services.

9 The	

current	DOE	notion	of	an	incremental	markup	through	a	distribution	channel	

does	not	and	cannot	be	adapted	to	the	case	of	an MVPD.

10

8. While	not	explicitly	a	part	of	the	DOE	regulatory	analysis,	any	DOE	standard	

requires	a	testing	and	reporting	structure.	DOE	is	already	finding	limitations	

in	its	testing	and	reporting	process	for	products	with	a	wide	variation	in	

features	and	with	either	customization	or	rapid	evolution.	The	concept	of	

basic	models	and	related	testing	and	performance	is	proving	unwieldy	for	

commercial	air	conditioners	and	computer	simulation	programs	are	not	

proving	to	be	a	full	answer.	This	same	or	greater	complexity	will	be	present	

in	set-top boxes.

11

These	are	examples	of	the	issues	DOE	will	face	if	it	attempts	to	shoehorn	set-top	

boxes	into	the	existing	regulatory	analytical	framework.	That	framework	is	simply	

designed	around	a	completely	different	factual	situation.	DOE	should	abandon	any	

attempt	to	apply	its	traditional	analytical	approaches	and	models	to	set-top	boxes.	

																																																							 9 DOE	and	others	have	noted	that	the	MVPD	ownership	of	the	set-top	boxes	creates	an	“agency	

problem”	where	the	MVPDs	own	the	boxes	but	the	homeowners	pay	for	the	energy.	While	this	is	too	

complex	a	topic	for	full	discussion	here,	MVPDs	do	have	an	incentive	to	use	energy	efficient	set-top	

boxes. Set-top	boxes	that	offer	more	features	and	services	require	increased	processing	power	and	

memory.	Pay	TV	providers	own	and	maintain	tens	of	millions	of	devices	in	consumer	homes.	If	these	

devices	fail,	it	means	customer	dissatisfaction,	expensive	customer	service	calls,	and	additional	truck	

rolls.	Lower	power	consumption	generally	means	less	heat	and	lower	operating	temperatures	for	

devices,	which	can	increase	reliability,	reduce	service	calls,	and	improve	performance	and	device	

longevity.	Energy	efficiency	helps	meet	customer	expectations	in	a	highly	competitive	environment.

This	is	why	the	industry	has	devoted	substantial	resources	that	have	already	resulted	in	dramatic	

improvements	in	energy	efficiency	even	as	set-top	boxes	are	being	called	upon	to	deliver	more	and	

more	functionality.

10	First,	the	notion	of	incremental	variable	costs	would	be	hard	to	compute	in	this	situation	and	

would	need	to	accommodate	a	wide	range	of	software,	firmware,	hardware	and	other	costs	at	the	

MVPD	as	well	as	installation	and	other	costs.	Second,	the	incremental	margin	concept	requires	the	

existence	of	“perfect	competition”	in	the	marketplace	between	the	MVPD	and	the	consumer.	Again,	a	

full	discussion	of	this	topic	is	too	complex	for	this	paper,	but	regulatory	agencies	have	not	concluded	

that	perfect	competition	applies	to	the	multichannel	video	marketplace	and	there	are	a	variety	of	

reasons	why	these	assumptions	and	conclusions	will	not	apply.

11	As	of	late	2012,	DOE	has	proposed	extending	the	compliance	date	for	new	commercial	air	

conditioner	certification	programs	and	has	organized	a	convening	to	negotiate	a	new	approach	in	the	

face	of	strong	criticism	from	commercial	air	conditioner	manufacturers:	EERE-2012-BT-CE-0048.