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FCC to Comcast: 'No Waiver for You'

Phil Harvey
LR Cable News Analysis
Phil Harvey

LAS VEGAS -- Consumer Electronics Show (CES) -- The Federal Communications Commission (FCC) appears determined to enforce its rules requiring cable operators and consumer electronics makers to use the same type of separable security in set-top boxes and cable-ready TVs.

On Wednesday night the Commission announced it had denied a waiver request filed by Comcast Corp. (Nasdaq: CMCSA, CMCSK), though the agency added that Comcast could amend its request. (See FCC Denies Comcast Waiver.)

Only hours earlier, FCC Chairman Kevin Martin made it clear to reporters at CES that he was not in favor of "blanket waivers" and mentioned Comcast by name. "Comcast has a waiver in front of us where they're asking for a waiver, for a delay, without any kind of a date certain on when they'll be able to develop downloadable security," Martin said.

Under the FCC's rules regarding set-top security, cable operators have until July 1 to start relying on CableCARDs -– removable security modules -– to provide conditional access security for TV content. This, the FCC says, is intended to spur competition, providing an even playing field between cable set-top boxes and retail-bought, cable-ready TVs. (See Comcast & Cox Deal Set-Tops at CES and Cable MSOs Fight for Set-top Status Quo.)

"We've got a series of waivers in front of us, and I think that the Commission shouldn't just provide blanket waivers for further delay of a rule that was adopted back in 1998," Martin explained, while chatting on stage with Consumer Electronics Association (CEA) president Gary Shapiro.

Martin's point is that this separable security rule has been delayed for years, and more delays will only stall innovation on the part of device makers.

In his remarks to the media on Wednesday, Martin drew a parallel to the innovation in telephones that occurred when standards were set for all home phones to use the same kinds of wall plugs, etc. Once the end user device was no longer solely provided by the phone company, innovation flourished, Martin said.

A few hours later, the FCC put out statements that Comcast's waiver had been denied and that it would be held to the July 1 deadline for implementing CableCARD security in its set-tops. That means the operator needs to replace any set-tops in its network where the security features are not a removable part of the device's hardware by July 1.

The Commission also commented on two other waiver requests. One was a limited waiver granted to Cablevision Systems Corp. (NYSE: CVC), which is using a SmartCard system that doesn't comply with the FCC's rules. However, the Commission found that "there is good cause to temporarily grandfather Cablevision's use of its separated security solution until July 1, 2009."

A third waiver request, made by Central Oregon's BendBroadband , was granted. The Commission noted that Bend is migrating to an all-digital network by 2008, and that the migration will necessitate set-top technology changes. Also, the FCC was sympathetic to smaller operators in its comments, noting the difficulties that "small cable operators may face in complying with the July 1, 2007, deadline for separated security because manufacturers prioritize orders from the largest providers."

Martin, though, wasn't all smiles following the FCC's work on these waivers. The CableCARD security method only allows for one-way security, and so doesn't address the interactive applications that are becoming more popular with cable operators.

Chairman Martin says he'd prefer the MSOs and consumer device makers to agree on a two-way security method, and not just something that would benefit regular TV viewing.

But that hasn't happened so far, and Martin is determined that shouldn't hold up the set-top rules enforcement. "In the absence of real progress on either of these issues, however, I think the Commission needs to move forward with its current rules," he said in a prepared statement released Wednesday evening.

— Phil Harvey, Managing Editor, Light Reading

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User Rank: Light Beer
12/5/2012 | 3:16:41 PM
re: FCC to Comcast: 'No Waiver for You'
From David L. Cohen, Executive Vice President, Comcast:

GÇ£We are very disappointed in this regrettable FCC Media Bureau decision. The rejection of this waiver means millions of American consumers wonGÇÖt have the opportunity to enter the age of digital television easily and affordably. Access to digital programming services like VOD, the family tier and electronic program guides will be denied to countless cable customers. This amounts to an FCC tax of hundreds of millions of dollars on consumers with no countervailing benefits. We will seek full Commission review immediately.GÇ¥
Michael Harris
Michael Harris,
User Rank: Light Beer
12/5/2012 | 3:16:40 PM
re: FCC to Comcast: 'No Waiver for You'
Thanks seven. Sports are indeed only part of the issue, but an easy target for industry columnists. :)

Programming line-up expansion is a major part of the equation. As are requirements from programmers that MSOs, DBS providers and telcos carry networks -- often multiple channels -- on their basic or digital tiers.

As long as this is the competitive basis then costs will continue to soar.

Well said!
User Rank: Light Beer
12/5/2012 | 3:16:40 PM
re: FCC to Comcast: 'No Waiver for You'

The CDN post on cable scapegoatting does not allow for messages. So, I am posting it here.

I agree and disagree. Clearly Michael has an issue with sports programming. He needs to set that bias aside. Remember, DBS satellite has doubled in penetration basically due to the NFL Sunday Ticket.

So, I agree programmming costs have gone up and that is both a push cost and a pull cost. Go back to 1995 and go find yourself a 150 channel digital cable system. You can't. They didn't exist. Cable and Satellite have set the competitive landscape around the amount of content available. Programming has become more important as you have to fill up 3x the number of channels that you used to. It is scarcer now by a large degree than 10 years ago.

Take a look at U-verse. What are they selling? More channels? Are there more targeted packages? Not really. There are simply more channels. As long as this is the competitive basis then costs will continue to soar.

User Rank: Light Bulb
12/5/2012 | 3:16:39 PM
re: FCC to Comcast: 'No Waiver for You'
I'm sick of Comcast whining about the consumer. They don't care about the consumer, they care about their bottom line.

Comcast is putting off CableCard as long as it can so they can continue to charge for their set top boxes. They want to go all digital so they can add monthly fees for all the boxes they can install. And having to support CableCard means that can't do that, and they have to spend money on infrastructure to support it.

Comcast, don't cry for the consumer when it's just tears for yourself.
Michael Harris
Michael Harris,
User Rank: Light Beer
12/5/2012 | 3:16:37 PM
re: FCC to Comcast: 'No Waiver for You'
It's fair to say that consumer-centered altruism is not likely to be Comcast's primary motivation here. However, this issue isn't really about their ability to charge consumers set-top rental fees. The amount MSOs can charge for boxes is regulated through cost-basis calculations. The deeper drivers are 1) MSOs wish to keep control of the consumer interface. While there is a dark side of this, the legitimate concerns are ensuring a consistent experience and minimizing support costs. This is why you can only by a cell phone that is pre-integrated with a particular mobile carrier. 2) Implementing CableCARD increases set-top box costs, hitting MSOs in the pocket. So, as an alternative to CableCARDs, MSOs like Comcast are advocating downloadable conditional access technology (DCAS). The problem is, it's not ready for deployment.

The whining about this is somewhat disingenuous as the FCC issued its set-top security separation rules in 1998, calling for a July 2005 implementation deadline, which the FCC postponed until July 2007. So, it's not like Comcast and the rest of the industry hasn't had time to work on the issue.
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