Box Maker Blames FCC for Everything

Set-top maker IPCO LLC is blaming FCC rules for its inability to gain market share, secure investors, and retain executives, and for pretty much everything but the weather.

IPCO, which claims to make cheap, CableCARD-compliant boxes that adhere to a Federal Communications Commission (FCC) rule banning set-tops with integrated security, is pushing the Commission to dismiss or at least sunset a smattering of waivers already awarded to Digital Terminal Adapter (DTA) devices that use embedded encryption.

Why?

IPCO says its CableCARD-complaint devices can't compete in a market full of FCC-approved, non-compliant DTAs.

IPCO, in a "declaration" from managing member James Gee dated November 24, claims to have invented a line of boxes under the "Global Series G" umbrella that fully complies with the FCC rules.

IPCO's box lineup starts with the Model G-6000, an entry-level, one-way box that houses a separate conditional access interface "that can be software upgraded to support a single CableCARD." IPCO also offers two other DTAs with the CableCARD upgrade feature: a one-way HD model with dual MPEG-2/MPEG-4 capabilities, and a two-way HD box that can support an external DVR. IPCO says the low-end, base model sells for $54.75 per unit, but envisions a sub-$40 price when orders reach high volume levels.

IPCO also claims to hold a key patent covering "material aspects" for CableCARD and tru2way, so its position is that the FCC's box waivers are hindering its ability to sell and distribute its line of compliant boxes.

IPCO's complaining comes after the FCC granted temporary, three-year waivers for more than a handful of DTAs with embedded security.

The FCC first green-lit two DTA models from Evolution Broadband LLC . Then it approved standard-def DTAs from Motorola Inc. (NYSE: MOT), Thomson S.A. (NYSE: TMS; Euronext Paris: 18453), Cisco Systems Inc. (Nasdaq: CSCO), Pace Micro Technology , and Nagravision SA .

Huawei Technologies Co. Ltd. is also seeking a waiver on two DTA models, but the FCC has yet to act on that request. Evolution, meanwhile, has gone back to get the FCC's blessing for a one-way hi-def DTA model. Depending on the DTA model, those products can be had for as little as $35 per unit. (See Nagravision Joins DTA Waiver Parade, DTA Waiver Mania, Evolution Guns for HD Box Waiver , FCC Believes in Evolution-ary DTAs, and Huawei Breaks US Set-Top Seal .)

Comcast Corp. (Nasdaq: CMCSA, CMCSK), Mediacom Communications Corp. , and other MSOs are deploying these digital-to-analog converter boxes (presently without security enabled) to fuel important analog reclamation projects. (See Comcast's $1B Bandwidth Plan and Comcast's DTAs: Security Optional .)

Now that the game is seemingly over, IPCO says life's not fair. The company has set up distribution of the devices through Global Cable Inc. (Gee is president of that company, which he established in 1995) and Adams Global Communications LLC. The plan is to sell the boxes directly to consumer electronics outlets and cable operators, though IPCO also envisions distributing them to other vendors under a private-label model.

The FCC has taken no formal action on IPCO's request yet, but it is presently seeking comments on how the Commission can accelerate the development of a retail market for set-tops and other "national portable video devices." (See Whither the CableCARD?)

Everyone is to blame
IPCO's Gee also claims that the original waiver order awarded to Evolution has resulted in the loss of two executives he considered key to the execution of IPCO's strategy, as well as a "sharp reduction of interest from investors."

In December 2008, before the recent wave of DTA waiver activity, Gee said he engaged with Black Diamond Capital Partners, which introduced him to two cable vets -- John Suranyi and Scott Brown -- who later agreed to come on board as CEO and COO, respectively, and assist him with IPCO's set-top manufacturing effort.

Gee said a subsequent meeting between Suranyi and Brown and execs from Evolution Broadband dissuaded the TV tech vets from joining IPCO due to Evolution's confidence that it would be successful in obtaining a waiver from the FCC, a decision that "would substantially weaken [IPCO's] business model." Following that meeting, Suranyi, Brown, and Black Diamond Capital backed away from IPCO, Gee said. Suranyi, by the way, was named CEO of Sencore Inc. in April 2009.

According to Gee, the FCC's Evolution order has also impaired IPCO's subsequent attempt to raise $15 million from Katalyst Securities LLC. He said IPCO engaged that venture capital firm in February of 2009, but Katalyst's interest in funding Gee's box effort waned after the FCC awarded a waiver to Evolution four months later.

Evolution principal Chris Egan on Wednesday declined to address Evolution's previous discussions with Suranyi and Brown, but did call Gee's aggregate comments "off-base," noting that Evolution fully supports the industry's use of the CableCARD.

CableLabs certified Evolution's CableCARD in August. Evolution is also working with TiVo Inc. (Nasdaq: TIVO) to bring the company's CableCARD-capable HD-DVR to Tier 2 and Tier 3 MSOs. (See CableLabs Blesses Evolution's CableCARD and TiVo Covers Its Cable Bases .) — Jeff Baumgartner, Site Editor, Cable Digital News