The MSOs backing the PolyCipher LLC downloadable conditional access (DCAS) joint venture have opted to shut down the unit's downtown Denver office at the end of this month and assume full control of the JV, or what's left of it, Cable Digital News has learned.

Industry sources familiar with the situation say PolyCipher is down to three full-time employees -- CEO Tom Lookabaugh, VP of business development Jim Esserman, and VP of operations Shannon Johnson. All three are expected to depart the organization by month's end, leaving PolyCipher as a completely distributed operation run by its trio of MSO bosses. Comcast Corp. (Nasdaq: CMCSA, CMCSK) and Time Warner Cable Inc. (NYSE: TWC) each have 40 percent stakes in PolyCipher; Cox Communications Inc. owns the remaining 20 percent.

Those MSOs originally created PolyCipher to develop a DCAS that, at least in theory, would be more elegant and less expensive than CableCARD modules and interfaces, which most U.S. MSOs use today to separate set-top security and adhere to a Federal Communications Commission (FCC) mandate that took effect in July 2007. (See Countdown to 'Seven-Oh-Seven'.)

That PolyCipher's operation will no longer be run by a dedicated staff is not a huge surprise. Word leaked out last year that PolyCipher had handed the implementation of the DCAS to Cisco Systems Inc. (Nasdaq: CSCO), Motorola Inc. (NYSE: MOT), and NDS Ltd. , although they have yet to produce any commercial DCAS products for the JV. (See Cisco, Moto Take Control of DCAS . NDS, however, has created a downloadable security system for Cablevision Systems Corp. (NYSE: CVC), which isn't part of PolyCipher. (See Cablevision Seeks Extended Security Waiver and Cablevision Scores Set-Top Waiver Extension .)

CableLabs is expected to maintain its role with the DCAS, which includes the distribution of licenses.

Although there's no word that the DCAS effort might be scuttled, another dose of doubt was heaped on the project's near-term prospects in January when TWC EVP of technology policy and product management Kevin Leddy lamented during a panel on the topic of tru2way at the Consumer Electronics Show that the "economics of downloadable security are challenging" while CableCARD costs continue to slide downward. (See DCAS Can Wait .)

During a more optimistic moment in mid-2007, PolyCipher had indicated that field trials could begin by 2008. (See PolyCipher Targets '08 Trials .)

PolyCipher officials and those from its MSO partners were not available for immediate comment Friday, but industry sources say the implementation components of the DCAS project remain in the hands of the vendors, and the decision to get rid of the Mile High City office was partly driven by the desire to scale back spending.

"The scope of [PolyCipher] is quite diminished," said a person familiar with the move, noting that the MSOs "don't need office space in downtown Denver for what they are trying to accomplish."

The three firms have already spent a king's ransom on the PolyCipher project. No recent figures are publicly available, but an FCC document filed in 2006 revealed that they had already invested more than $30 million on the project.

With the Denver office going away and the remaining dedicated employees set to depart, PolyCipher, sources say, will revert to its initial configuration and mode of operations, meaning it will be run by a part-time staff and contractors.

As for the future of a PolyCipher DCAS, there's been no public declaration as to whether it will ever reach deployment, which is probably welcome news for Motorola and Cisco, which are set to benefit the most if the U.S. cable industry continues to largely rely on CableCARDs.

Industry observers also point out that the PolyCipher effort came about during a time in which the FCC's attitude toward the cable industry, and the major MSOs in particular, was considered hostile.

The FCC, however, has previously acknowledged that an "open" downloadable security system developed by Beyond Broadband Technology LLC (BBT) lives up to the spirit of the set-top security ban. The Consumer Electronics Association (CEA) , however, has generally been opposed to any separable security effort that's not centered on the CableCARD. (See Cable Group Faces DCAS Debate.)

But lately, the Commission has been a bit more lenient with its waivers, even approving Cable One Inc. 's request to deploy a hi-def box with integrated security. So there's some hope in cable circles that the DCAS developed by the original PolyCipher team may still see the light of day if that trend continues. (See Evolution Guns for HD Box Waiver and Cable ONE Snares HD Set-Top Waiver .)

— Jeff Baumgartner, Site Editor, Cable Digital News

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