Policy

No Waiver for Comcast

1/12/2007 7:00 PM Eastern

Las Vegas — Comcast's quest to avoid deploying just CableCard-enabled set-top boxes fizzled last Wednesday when the Federal Communications Commission refused to grant waivers for a class of boxes lacking all the digital-age bells and whistles.

Federal Communications Commission chairman Kevin Martin, addressing a 2007 International Consumer Electronics Show audience here just hours prior to the release of the Comcast decision, signaled an imminent ruling by declaring his opposition to “blanket” waivers, including those sought by Comcast, the largest U.S. cable company with 24.1 million subscribers.

AIM: RETAIL CHOICE

The FCC's goal, as mandated by Congress in 1996, is to drive retail competition for cable set-top boxes, a realm historically dominated by cable operators. As set-tops continue to evolve from mere channel-surfing devices into multipurpose minicomputers, consumer-electronics players have been clamoring for a piece of the action.

The FCC's key mandate, which kicks in July 1, is a ban on cable-operator deployment of new “integrated” set-top boxes, which house channel-selection and signal-security functions. After July 1 passes, cable operators without FCC waivers may not deploy new integrated boxes.

Instead, cable companies must rely on set-tops that use CableCards (an anti-theft technology the size of a credit card that slides into set-tops and TVs) or set-tops that download signal security software. The FCC is not forcing consumers to surrender their integrated boxes.

Cable-industry leaders expected the FCC to reject Comcast's waiver under Martin, who has been the industry's harshest critic to lead the regulatory body in at least a decade. The FCC sat on Comcast's request for 266 days, even though Congress appeared to want the agency to make decisions within 90 days.

“I think the [FCC] should be saying no to some of the largest carriers. Comcast has a waiver in front of us where they are asking just for a further delay without any kind of a date certain on when they will be able to develop downloadable security. I think it's time for us to move forward,” Martin said at CES here.

Comcast, the FCC said, sought permanent waivers by name for the Motorola DCT-700, the Scientific Atlanta Explorer 940 and the Pace Chicago. It didn't for more expensive and sophisticated boxes, such as those that can output HDTV signals, provide digital video recording services, tune multiple channels at the same time or access the Web.

Comcast wanted waivers for these low-end, low-cost boxes because they would help the company migrate millions of customers to digital services in the same way that the entire TV industry is trying to terminate analog service.

For years, the National Cable & Telecommunications Association has been saying that CableCards are more expensive than integrated boxes and would, in the aggregate, add hundreds of millions of dollars to cable equipment bills.

The FCC's ruling was issued by Media Bureau chief Donna Gregg.

“We are very disappointed in this regrettable FCC Media Bureau decision,” Comcast executive vice president David Cohen said in a prepared statement. “This amounts to an FCC tax of hundreds of millions of dollars on consumers with no countervailing benefits. We will seek full commission review immediately.”

At some point, Comcast can take the FCC to court but the company would likely need a stay since July 1 is just a few months away. Congress, always an unpredictable option, could intervene in the months ahead.

The news from the FCC wasn't all negative. Cablevision Systems Corp. could continue to use its SmartCard security card until July 1, 2009. Although the FCC ruled the SmartCard didn't comply with the rules, Cablevision ensured that SmartCards work with all CableCard devices.

“We appreciate the chairman's positive response to Cablevision's request and believe this action is in the interest of all Cablevision customers,” Cablevision said in a prepared statement.

A television-industry lobbyist, who asked not to be identified, suggested that Cablevision got a waiver because company chairman Charles Dolan has supported Martin on one of his pet causes: the retail sale of cable channels on a one-by-one or a la carte basis. Comcast, by contrast, has rejected a la carte as harmful both to the industry and consumers.

Martin argued that Congress ordered the FCC to promote consumer choice in the acquisition of set-tops and digital TVs that plug directly into any cable system without a set-top. He suggested that forcing cable operators to rely on CableCards would achieve both goals.

“I think [denying waivers] will allow for more innovation on the consumer-electronics side, and that's what consumers want and that's what Congress expected,” Martin said in a sit-down discussion with Consumer Electronics Association president Gary Shapiro. “We've got a series of waivers that are in front of us. I think the commission shouldn't just provide blanket waivers to the whole industry at this point for further delay of rule that was really adopted back in 1998.”

MERIT TO SMALL FEARS

Martin said small cable operators having problems procuring CableCard boxes merited waivers, as did cable operators planning to go all-digital before local TV stations had to on Feb. 17, 2009.

“I do think the commission should be sympathetic to some of the burdens we might end up placing on some of the small cable operators,” he added.

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