The Federal Communications Commission (FCC) is considering an exemption that would allow bandwidth-strapped cable systems to use HDTV-capable Digital Terminal Adapter (DTA) boxes with baked-in security.

According to multiple industry sources, the FCC is looking at such an exemption for cable systems with capacities of 552MHz or less that are considered prime candidates for all-digital cutovers. Going all-digital would help to free up headroom for hi-def services that can compete with satellite TV. Most "upgraded" cable plant has activated capacity of at least 750MHz.

Communications Daily first reported Tuesday that the FCC was looking to include such a recommendation in a Notice of Proposed Rulemaking (NPRM) expected to emerge during an April 21 open meeting. In addition to that NPRM, which will recommend ways to fix some shortcomings of the CableCARD regime, the FCC is expected to open a Notice of Inquiry into the development of a gateway device (or something similar) that would apply to cable operators, telcos, and satellite TV service providers. (See FCC Floats 'Simple' Gateway, CableCARD Rules .)

The FCC's separable set-top security rule, put into play in July 2007, bans MSOs from buying set-tops with integrated security, requiring most to purchase more expensive boxes that separate out that element using CableCARD modules.

The FCC has awarded waivers for several standard-definition DTAs. The only HD-DTA waiver so far has gone to Cable One Inc. for its Dyersburg, Tenn., service; the company recently asked for an extension that will help it drive unit costs down to less than $50. (See Cable ONE Snares HD Set-Top Waiver and Cable ONE Looks to Pump Up HD-DTA Volumes .)

The exemption the FCC is mulling now could give Cable ONE and other MSOs the ability to deliver high-definition programming to inexpensive devices with integrated security. However, those MSOs would still be required to support any CableCARD-based devices (including digital TVs and some TiVo Inc. (Nasdaq: TIVO) DVRs) that end up on their cable systems.

What still isn't known is whether such an exemption would benefit any cable system with 552MHz or less of capacity. A source says Comcast Corp. (Nasdaq: CMCSA, CMCSK), which still operates some 552MHz systems, is eager to use HD-DTAs. But the exemption might be intended for Tiers 2 and 3 operators, not the nation's largest MSO.

Regardless, such an exemption could spawn a new market for HD-DTA products. Evolution Digital LLC and Nagravision SA have formally requested waivers for their products, but the FCC has yet to put those requests out for public comment. (See Nagra Seeks HD-DTA Hall Pass and ACA Wants Action on Evolution's HD Box Waiver .)

Several other suppliers -- including Cisco Systems Inc. (Nasdaq: CSCO), Humax Co. Ltd. , Coship Electronics Co. Ltd. , Huawei Technologies Co. Ltd. , and Homecast Co. Ltd. -- have expressed interest in developing HD-DTA boxes for the Cable ONE project, and Broadcom Corp. (Nasdaq: BRCM) is sampling an HD-DTA chipset called the BCM7572. (See Broadcom Breaks Out HD-DTA Chipset .)

The FCC declined to comment. However, a Commission official told Light Reading Cable last week that the agency remains hesitant to act on any pending HD-DTA waiver requests until it can properly evaluate the Cable ONE deployment and get the new CableCARD rules proposal off the ground.

If the FCC makes the recommendation, expect plenty of static from the Consumer Electronics Association (CEA) . It opposed Cable ONE's original HD-DTA waiver request on grounds that it would endanger the development and deployment of retail-ready, two-way, digital set-tops and TVs that use CableCARDs. (See CEA Attacks Cable One HD Plan.)

— Jeff Baumgartner, Site Editor, Light Reading Cable