Cable Seeks Assurances Over New Set-Top Rules

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Washington -- The cable industry is seeking assurance from
the Federal Communications Commission that new set-top-box rules won't force
operators to eat losses when the ban on integrated boxes starts in 2005.

Two weeks ago, the FCC ruled that cable operators would be
barred from leasing or selling "new" boxes with integrated security functions as
of Jan. 1, 2005. The question now is: What's a new box?

Last week, the Cable Telecommunications Association (CATA)
and others voiced concern that the FCC ban would harm cable operators with large
inventories of integrated boxes, due to subscriber churn or overestimated demand.

Cable sources said they were hopeful that the FCC -- when
it releases its rules, perhaps this week -- will side with the industry and allow the
distribution of integrated boxes after Jan. 1, 2005, if the boxes have some useful life
remaining.

"We feel pretty strongly that the FCC is going to take
another look at this and answer these questions," said Anne Cowan, CATA's vice
president of communications. "We haven't had any indication yet that they are
going to play hardball on this."

FCC sources said the rules will allow cable subscribers
with integrated boxes to retain them beyond 2005.

"If you were a sedentary consumer, and you wanted to
keep unchanged for the next 30 years, I think you could," said William Johnson,
deputy chief of the FCC's Cable Services Bureau.

Less clear is the destiny of integrated boxes (such as the
General Instrument Corp. DCT-1000, being rolled out by Tele-Communications Inc.) with
years of service left in them that are turned in by cable subscribers after Jan. 1, 2005.

"The reports following the FCC's press release
don't clarify that the old boxes in the field can still be used and leased [in
2005]," Cowan said.

Johnson said the FCC was addressing the issue. In the past,
he said, FCC rules have shown flexibility where the discontinuation of equipment has been
mandated.

"They don't tend to say, 'As of some date,
take all of your equipment and take it to the dump,'" Johnson said.

Johnson and other FCC officials said the commission has
announced that in 2000 -- the year when operators must give subscribers security modules
to operate set-tops bought from retailers -- it will review whether the 2005 sunset should
be retained or modified.

One FCC source said the intent of the 2005 sunset was to
ensure that cable operators ceased distributing integrated boxes -- even boxes that had
been in the field and that could be reissued. The source said the industry is being given
plenty of time to manage its inventory of integrated boxes.

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