FCC Extends RCN's Set-Top Waiver To December 2009


The Federal Communications Commission's Media Bureau granted RCN an extension to a waiver allowing the overbuilder to deploy low-cost Motorola set-tops, with the agency citing the company's ongoing financial difficulties.

RCN originally received a waiver from the FCC in July 2008, which the agency later extended until Jan. 31, 2009. The exemption allows the operator to continue to deploy the Motorola DCT-700, a low-cost digital set-top with integrated security features.

"RCN has demonstrated that its financial condition has weakened in the months since the release of the July 2008 Financial Hardship Order," the Media Bureau said in the order released Monday. "In light of the further deterioration of petitioner's financial condition, we conclude that a limited extension of waiver is justified."

The order was signed by Robert Ratcliffe, acting chief of the FCC's Media Bureau. A copy is available here: http://hraunfoss.fcc.gov/edocs_public/attachmatch/DA-09-1388A1.pdf

Specifically, the Media Bureau noted, although the company's operating cash flow is positive, cash flow from financing is negative and RCN still does not hold enough liquid assets to cover its current debt.

For the first quarter of 2009, RCN posted better-than-expected results, with revenue of $189 million, up 5% from $180 million a year prior, and earnings before interest, taxes, depreciation and amortization (EBITDA) up 20% over the first quarter last year.

In a statement, Richard Ramlall, RCN senior vice president of strategic external affairs, programming and international marketing, said, "RCN appreciates the commission's extension of our set-top box waiver through the end of the year. The initial waivers granted by the FCC were critical to our ability to complete an all-digital rollout to five of our six markets. Our customers in those markets are now enjoying the additional HD and other expanded channel offerings that all-digital service provides, and this extension will enable us to move forward in the remaining market so that 100% of our subscribers will be able to share these benefits."

The FCC's so-called integrated set-top ban, which went into effect for most MSOs July 1, 2007, requires operators to deploy set-tops that include the same separate security that the industry makes available to consumer-electronics manufacturers. As of March 23, the top 10 MSOs had deployed more than 12.35 million CableCard-based boxes to comply with the rule, according to the National Cable & Telecommunications Association.

More recently, the FCC approved the use of two low-cost, limited-function digital terminal adapters from Evolution Broadband that include integrated security functions. Subsequently, four vendors - Motorola, Cisco Systems, Pace and Thomson - filed requests to allow operator customers to deploy DTAs, also called digital transport adapters.