Verizon Crossing Fingers for FCC Waiver

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Once the Federal Communications Commission signaled in January that it wouldn’t grant many exemptions to the July 1 ban on set-tops with integrated security, cable companies and their vendors scrambled to get ready to meet the deadline.

Verizon Communications does not appear to have done the same.

As it stands now, the set-top boxes Verizon is deploying as part of FiOS TV service -- Motorola’s QIP series -- are not capable of accepting removable CableCARDs to meet the requirements of the FCC ban, according to Motorola.

Motorola vice president of product management for digital-video solutions Larry Robinson confirmed that the QIP boxes are not CableCARD-ready. “The boxes that Verizon is shipping today have embedded security,” he said.

He added, “We’ve obviously talked with them about the implications” of the FCC’s ban. Robinson referred additional questions to Verizon.

Verizon in July 2006 filed a petition with the FCC for a waiver to the set-top ban. The telco said it needed an exemption from the rule “to facilitate the rapid deployment of innovative service offerings that will provide important new competition to the video market.” The fact that it is providing wireline competition to cable, the company said, “places Verizon squarely within both the language and fundamental purpose of the waiver provision.”

But the agency has not yet ruled on the request. Nor has the FCC responded officially to the National Cable & Telecommunications Association’s industrywide waiver request or those filed by nearly two-dozen individual service providers.

Asked to comment on what Verizon will do if denied a waiver, director of media relations Sharon Cohen-Hagar said: “We are hopeful that the FCC will grant our petition for a waiver … We won't have any more to say about this until the FCC publishes its order.”

FCC chairman Kevin Martin has said that he would favorably consider waiver requests from new entrants in the video market, while at the same time opposing “blanket” waivers to large cable operators.

The FCC’s Media Bureau in January denied Comcast’s waiver request for three low-end set-tops ; the agency has granted six requests, including one to Charter Communications on the basis of Charter’s “severe financial difficulties.”

Still, giving Verizon an 11th-hour reprieve while requiring cable operators to meet the rule would be “patently unfair” at this late stage, NCTA CEO Kyle McSlarrow said, speaking at the Society of Cable Telecommunications Engineers’ Cable-Tec Expo 2007 in Orlando, Fla., this week.

“You might have thought [the FCC] would deny our waiver and grant Verizon’s,” McSlarrow said in a question-and-answer session following his keynote speech Wednesday. But with just days to go before July 1, “I think that would give them pause.”

Verizon, then, may suddenly need to comply with the separable-security mandate come July 1.

Gartner analyst Patti Reali said the issue for Verizon is that the hybrid Motorola QIP set-top uses traditional cable quadrature-amplitude-modulation technology for linear TV channels, but uses Internet protocol to access video-on-demand and similar services. Therefore, she added, Verizon couldn’t use an ordinary cable set-top with a CableCARD in its network without disabling at least some of its features.

“Anything on the QIP box that’s interactive has to go over the IP connection,” she said.

Told that Verizon is “hopeful” that its waiver will be granted, Reali said, “That’s an awful lot of hoping for being nine days away from July 1.”

Meanwhile, cable operators are ready to flip the switch over to CableCARD-based boxes.

Comcast VP of engineering, standards and industry affairs Charlie Kennamer said the operator has already deployed CableCARD-enabled boxes in all its markets, at least for trials in employees’ homes.

“We’ve pretty much depleted our inventory of integrated boxes,” he said, speaking on a panel at the SCTE show Thursday. “If we don’t, we’ll have a bunch of bricks in inventory after July 1.”

Kennamer said it will probably be end of this year “before we’re back to ‘business as usual’”-- which, he explained, means “doing things that will actually benefit customers.”

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