When consumers are ready to purchase cable-ready digital-TV sets starting next spring, it just will be part of a bigger-picture move by the Federal Communications Commission.
Last Wednesday, the FCC largely codified last December's compatibility agreement between top cable and consumer-electronics companies. In a unanimous vote, the agency laid the groundwork for the purchase of TV sets that display digital-cable programming, including scrambled premium fare from Home Box Office and Showtime Networks Inc., without the need for set-top boxes — devices many consumers refuse to lease.
Moreover, the FCC's hope is that consumer acceptance of cable-compatible digital-TV sets ultimately will drive the transition to all-digital television and hasten the return of valuable analog spectrum licensed to 1,600 local TV stations.
"This is a great result for consumers. It's one less remote control for high-definition TV," said FCC chairman Michael Powell, who has pushed cable and other distributors to expand the rollout of HDTV since April 2002.
Both the National Cable & Telecommunications Association and the Consumer Electronics Association, key members of which brokered the deal, applauded the FCC vote.
"The FCC's endorsement of these agreements sends a positive signal to all involved in the DTV transition to work together to voluntarily resolve outstanding issues," NCTA president Robert Sachs said.
Although both the NCTA and the CEA asked for as-is adoption of the agreement, the FCC didn't comply.
For example, the agency bowed to complaints from broadcasters that the MSO-CE agreement contemplated cable-ready TV sets that did not include off-air digital tuners.
"The FCC deserves enormous credit for adopting today's plug-and-play decision and, particularly, for insisting that digital-TV tuners with over-the-air-reception capability be included in digital 'cable-ready' television receivers," National Association of Broadcasters president Edward Fritts said in a statement.
Kenneth Ferree, chief of the FCC's Media Bureau, indicated that the agency to some extent accommodated the concerns of Starz Encore Group LLC, which attacked the MSO-CE agreement for classifying subscription video-on-demand as a service that consumers would be barred from copying even once.
Ferree said that whether SVOD is a "copy-never" service is a matter to be decided between copyright owners and distributors, with both entitled to file complaints at the FCC.
"The question will be answered in individual cases when you'll be able to see what the SVOD service is. Does it look more like a traditional cable service, or is it something that might warrant a higher level of copy protection?" said Ferree, insisting the agency was determined not to adopt rules that somehow altered copyright law.
Starz Encore, an aggressive player in the SVOD market, feared the FCC was about to adopt rules totally at odds with its business model.
"We are delighted with what the FCC did today. They have taken us out of the 'copy-never' category," said Thomas Southwick, the premium programmer's vice president of corporate communications.
Direct-broadcast satellite providers EchoStar Communications Corp. and DirecTV Inc. wanted to opt out of the agreement because they were excluded from the industry negotiations.
The agreement bans the use by cable and satellite of selectable output controls, which can be used to prevent digital programming from transiting unsecured analog plugs. The CE firms sought the ban to protect millions of HDTV sets and VCRs with analog inputs.
Cable MSOs agreed, provided the ban covered all pay-TV distributors. The MSOs didn't want the DBS industry to obtain high-value HDTV programming by default because cable was banned from using selectable output controls, but DBS wasn't.
"Consumers will be the victims of this hasty decision, as they will be unable to acquire equipment with the kinds of features that are beneficial to everyone, and they will be forced to shoulder the burden of hidden costs," EchoStar spokesman Steve Caulk said in a statement.
Ferree said the DBS industry was not excluded from the debate at the FCC.
"The parties-at-the-table thing doesn't move me," he added. "The notion that somehow the DBS industry was frozen out of our rulemaking process is just hooey."
Regulators hope that plug-and-play DTV sets will introduce competition to set-top makers Scientific-Atlanta Inc. and Motorola Inc. They also hope that cable MSOs and CE firms will quickly conclude a second agreement that will encompass DTV sets compatible with cable's interactive features.
FCC officials said they intended to focus next on the broadcast flag rulemaking, which involves technology that bars the illegal retransmission of off-air programming over the Internet. The CEA, however, is concerned the flag might be used to trample hard-won home-recording rights of consumers.