FCC

FCC Offers ’06 Set-Top Compromise

1/30/2005 7:00 PM Eastern

A Federal Communications Commission staff plan would retain the agency’s ban on integrated set-tops but provide an exemption for low-cost digital boxes, according to FCC and industry sources.

The FCC staff has offered a compromise apparently designed to bridge the differences between the cable and consumer-electronics industries over the need to ban cable companies from issuing integrated set-top boxes to subscribers after July 1, 2006.

IT’S A DRAFT

Sources cautioned that the FCC plan has not been reviewed by all five commissioners, that it is one of several drafts in the works and that it is always subject to change.

At issue is an FCC rule, first adopted in 1998, that bans integrated set-tops and forces cable operators to lease boxes that work with external CableCARDs to provide conditional access to scrambled content.

The consumer-electronics industry, supported by Microsoft Corp. and Intel Corp., argued the ban is necessary to establish a competitive set-top market and to allow consumers to buy units at retail outlets such as Best Buy Co. Inc. and Circuit City Stores Inc.

Cable MSOs currently obtain set-tops from a few vendors, and boxes are generally not available in retail outlets. However, since July 2000, cable operators have been required to provide CableCARDs to consumers who have obtained set-tops from third parties.

In addition, cable operators generally lease CableCARDs to consumers who’ve purchased cable-ready digital-TV sets to receive one-way services, including HDTV programming, but not including interactive program guides, video on demand or pay-per-view services.

The National Cable & Telecommunications Association has repeatedly told the FCC that the ban would raise set-top costs by $93 per unit without providing subscribers any offsetting benefits.

The NCTA has asked the FCC to drop the ban or postpone for 18 months its July 2006 implementation date.

The idea of exempting low-cost boxes is an apparent attempt to address concerns raised by Comcast Corp. that the ban would hurt the industry’s transition to all-digital transmission.

The MSO has told the FCC that it plans a digital simulcast of all analog services, with consumers able to use their analog sets by connecting $50 digital converters that do not include many analog components.

HOW LOW IS LOW?

Comcast officials told the FCC in a Jan. 19 filing, “It is hard to have any 'low-cost box’ that must pay the cost penalty of a separate CableCARD solution.”

Sources said they did not know whether the staff draft identified a dollar level that would serve to define a low-cost box.

Public Knowledge — which described itself as an “advocacy group working to defend [consumer] rights in the emerging digital culture” — joined Consumers Union last week in urging the FCC to enforce the integration ban.

The two groups compared cable’s resistance to the integration ban to the era when AT&T Corp. forced phone customers to lease an “ugly black rotary phone” in order to make calls.

“The rule has been made, challenged and delayed. The FCC should let the existing rule stand. Cable hasn’t made the case that consumers benefit from exclusive platforms, limited competition and unequal playing fields,” CU and Public Knowledge told the FCC.

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