Cable ONE Snares HD Set-Top Waiver

Despite fierce opposition from the Consumer Electronics Association (CEA) , the Federal Communications Commission (FCC) has, for the first time ever, granted a special waiver for high-definition-capable, one-way, digital set-tops with integrated security.

The waiver, awarded to Cable One Inc. on Thursday for its system in Dyersburg, Tenn., could benefit other small U.S. MSOs that are seeking ways to deliver a larger menu of hi-def broadcast TV services without having to pay for more expensive two-way boxes that separate out security using CableCARD slots and modules. (See Cable ONE Gets HD Waiver.)

The FCC ban on set-tops with integrated security took effect July 1, 2007, although some operators have been able to sidestep the rule by obtaining special waivers on the condition that they go all-digital. (See Countdown to 'Seven-Oh-Seven' and Verizon & Others Get Their Waivers.)

Cable ONE filed for the waiver in October 2008, asking the FCC to allow the MSO to purchase and deploy so-called "HD-capable all-digital devices" (HD-ADDs), which are inexpensive, one-way boxes with integrated security.

At the time, Cable ONE said Evolution Broadband LLC and other vendors had indicated they could produce HD-ADDs in volume for as little as $50 per unit. The MSO contended that a CableCARD-equipped box with similar capabilities would cost between $300 and $400 per unit, making it cost-prohibitive for Cable ONE to go all-digital and expand its HD menu. (See Cable ONE Seeks Hi-Def DTA Waiver and HD No Longer an 'Advanced' Service?)

An Evolution spokeswoman confirmed to Cable Digital News that the Colorado-based company does indeed have an HD-ADD product under development, but declined to say whether it has any official deal in place with Cable ONE or when such a device would be ready for mass production. "We're putting final touches on the feature set," she said.

Although Cable ONE has the waiver in hand, it's now under the gun to hit a number of pre-determined conditions. Among them, the operator has pledged to: migrate the Dyersburg system to all-digital within one year of receiving the waiver; provide a minimum of 50 HD channels alongside a tier that carries those same channels in standard-definition; and provide one hi-def box to subscribers at no cost and offer additional HD boxes for a monthly fee of no more than $1 each.

Fighting the CEA
Cable ONE's waiver was not a slam dunk. The CEA opposed it, arguing that a pass on one-way HD boxes would endanger the development and deployment of retail-ready, two-way set-tops and televisions that use CableCARDs. (See CEA Attacks Cable One HD Plan.)

But in the FCC's final analysis, the Commission sided with Cable ONE, holding that the HD-ADD the MSO plans to deploy "is unlikely to have a significant effect on the retail market for navigation devices." This "narrow waiver," as the FCC put it, "will strike the proper balance between our goal of a thriving retail market for navigation devices and the goal of preserving a low-cost set-top box option."

Still, the FCC acknowledged that the waiver for a low-cost HD device marks a first, and reserved the right to change its mind if conditions warrant it.

As part of its ongoing review of the situation, the FCC is requiring Cable ONE to file an annual report showing how many HD-ADDs it has deployed in Dyersburg, how many CableCARDs the MSO has deployed in that market for leased set-tops, and how many CableCARDs Cable ONE is supporting in retail tru2way set-tops and TVs.

"If we determine that the data that Cable ONE submits demonstrates a larger effect on the retail market for navigation devices than we expected, then we will consider revocation of this waiver going forward," the FCC said.

The American Cable Association (ACA) , which filed comments in favor of Cable ONE receiving the waiver last fall, said the decision could open the door for other small systems that are trying to expand their HD lineups cost-effectively.

"We hope the ruling means that the FCC is prepared to grant similar waivers filed by ACA members that want relief from costly set-top box design mandates," ACA president and CEO Mathew M. Polka said, in a statement.

— Jeff Baumgartner, Site Editor, Cable Digital News

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