Cable ONE, a mid-sized MSO headquartered in Phoenix, filed the documents with the Federal Communications Commission (FCC) in late October, claiming the device is necessary to fuel an all-digital transition and to clear up the required headroom for a competitive menu of HD programming.
The operator argues that 60 percent of its 700,000 customers are served by systems with capacity of 662 MHz or less -- enough only to offer a "limited amount of HD programming." Most "upgraded" cable systems have capacity of at least 750 MHz.
Cable ONE wants the waiver for a new breed of low-cost, one-way "HD-capable all-digital devices" (something the operator refers to as "HD ADDs") with embedded security. Under rules that went into effect last July, U.S. cable operators are banned from purchasing and deploying set-tops with integrated security without a special waiver from the FCC. (See Countdown to 'Seven-Oh-Seven' and Son of 'Waiver Central' .)
If Cable ONE is successful in obtaining the waiver, it could open up similar opportunities for hundreds of other small- and mid-sized MSOs that lack the spectrum today for HD programming lineups that are large enough to compete with those offered by DirecTV Group Inc. (NYSE: DTV) and Dish Network LLC (Nasdaq: DISH)
According to documents supplied to Cable Digital News, Cable ONE wants such a waiver for its system in Dyersburg, Tenn., which today offers an HD lineup of about 20 channels.
"We focused [the waiver request] on a single system since there is much work to do," a Cable ONE official said via email, noting that the MSO wanted to "get it right" and gauge pricing before trying it out in other systems. "If this did not work as planned or provide the benefits we needed, we have limited our exposure to a just the single system," the official added.
Cable ONE's commitment
Cable ONE said it would meet the following conditions if the waiver, which seeks a length of at least five years, is granted:
- To complete the transition to all-digital within one year of receiving the waiver.
- To offer a minimum of 50 HD networks to customers at no additional service charge beyond what's being paid for the service tier presently containing the analog or standard-definition versions of those networks.
- To provide each customer with one HD ADD at no charge, and to provide additional HD ADDs for a monthly lease fee of no more than $1 per unit.
- To continue to support removable CableCARDs and all compatible electronic devices purchased by consumers at retail (digital set-tops and TVs) and on all "high-functionality" devices (i.e. two-way devices) offered for lease by Cable ONE.
Cable ONE says it needs the waiver because it cannot afford to go all-digital and expand its HD menu using currently available hi-def boxes that comply with the FCC security ban. The MSO says Evolution Broadband LLC and other vendors have indicated they can produce HD ADDs in volume for as little as $50 per unit. In comparison, the least expensive HD-capable CableCARD-based set-top costs in the range of $300 to $400 per unit, Cable ONE said.
Cable ONE held that one-way, standard-definition DTAs being used by Comcast Corp. (Nasdaq: CMCSA, CMCSK) sans security are not the answer because those boxes will rapidly become obsolete as consumers upgrade their television sets to HD. (See Comcast Seeds Digital Shift With Free Boxes, Comcast IDs First DTA Market, and Comcast's DTAs: Security Optional .)
Waiver foreshadowed, opposition likely
That Cable ONE is formally seeking a waiver for HD ADDs does not come as a big surprise. In June, the operator suggested that the FCC consider updating its set-top waiver rules to allow for simple one-way converters capable of supporting HD. (See HD No Longer an 'Advanced' Service?) Cable ONE, which argued that HD should no longer be considered an "advanced" service, filed the comments in support of a three-year waiver being sought by Evolution Broadband for standard-def digital terminal adapters that embed the Conax AS conditional access system. The FCC has yet to act on Evolution's request. (See Evolution Thinks Small .)
The Consumer Electronics Association (CEA) came out against Cable ONE's plan even before the MSO filed a formal waiver request, arguing that such a "sweeping change in policy" based on a "hypothetic product" should not be granted without a proper hearing from all affected parties. (See CEA Attacks Cable One HD Plan.) Now that Cable ONE has a waiver request in the FCC docket, it's more likely now that the CEA will formally oppose the Cable ONE proposal and argue that it stands to threaten the development of a retail market for digital boxes and TVs based on the tru2way platform.
Cable ONE claims the waiver serves the public interest because the HD ADD is "necessary to assist the development or introduction of a new or improved multichannel video programming or other service" as defined by FCC rules.
It likewise argues that the low-cost HD ADD won't endanger the retail market envisioned by the separable security rules because more advanced devices based on tru2way will still require operators to support CableCARD technology.
The HD ADDs "are in no sense 'high end' pieces of equipment," Cable ONE wrote, likening the devices to the government–subsidized digital-to-analog converter boxes consumers are buying now in preparation for the February 2009 digital TV transition.
— Jeff Baumgartner, Site Editor, Cable Digital News