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Cable Tech

TiVo Seeks CableCARD Cost Probe

TiVo Inc. (Nasdaq: TIVO) has called on the Federal Communications Commission (FCC) to conduct a probe into the economics of the CableCARD and uncover why costs associated with the separable security platform have failed to drop much in the wake of volume deployments by MSOs.

TiVo execs, including SVP and general counsel Matthew Zinn, pressed that idea this week during a meeting with Brad Gillen, legal advisor to FCC Commissioner Meredith Attwell Baker. TiVo presented its case as the FCC gets ready to propose new rules aimed at "fixing" the current CableCARD regime next week. (See FCC Floats 'Simple' Gateway, CableCARD Rules .)

It's been reported that the FCC, as part of the proposal, is considering an exemption that would allow cable MSOs to buy and deploy a new breed of hi-def-capable Digital Terminal Adapter (DTA) boxes with integrated security. The argument holds that such boxes, which are expected to cost $50 per unit once volumes ramp up, will give MSOs a low-cost HD box option to counter the higher costs associated with CableCARD-based set-tops. (See HD-DTA Battle Heats Up and FCC Chews on HD-DTA Exemption .)

Per its ex parte filing, TiVo, which has invested in CableCARD-capable boxes and remains grumpy about cable's level of support for them, suggested that the FCC "first examine the economics purportedly underpinning waiver requests" before considering any more exemptions for boxes with integrated security. (See TiVo Gives Cable Both Barrels .)

TiVo also wants the FCC to check out what can be done to drive down CableCARD costs. It's likewise frustrated that those costs have not dropped much even after the top 10 US cable MSOs have deployed almost 20 million CableCARD modules since the FCC's ban on integrated set-top security took effect in July 2007. (See CableCARD Update.)

Many of those costs are already known, so it appears that TiVo merely wants to shine a brighter light on them as the FCC gets ready to put new CableCARD rules out for comment.

In fact, one of the most recent documentations on CableCARD module costs originates from the FCC itself. The FCC Media Bureau has already suggested that a CableCARD adds about $56 in cost to a set-top box, according to a National Cable & Telecommunications Association (NCTA) filing made in November 2009. With current CableCARD deployment figures in mind, that means the industry has incurred at least $1.1 billion just to comply with the integration ban.

While that does offer an stark indication on how wasteful the integration ban has been thus far, TiVo is likewise wondering why such volumes haven't caused CableCARD costs to fall off the table yet.

Several industry sources confirmed that CableCARD modules still cost at least $50 each. They also blame that on the fact that competition for those cards, and the security features and licensing requirements found therein, are still largely limited to just two suppliers -- Motorola Inc. (NYSE: MOT) and Cisco Systems Inc. (Nasdaq: CSCO) -- and hold that the situation has allowed those vendors to maintain a hammerlock on the market and keep costs artificially high.

"When the separable security ruling came into effect, the CableCARD price was in the $55 to $60 range. Now, after 20 million units have been deployed, the going price for a CableCARD is... $55 to $60. That's what you get when there is no effective competition," says an industry source who is familiar with the economics of the CableCARD market.

Despite the high cost of those cards, cable operators charge consumers much less to lease them, with monthly rates typically in the $2 range. On-site installs, however, can run as high as $35.

But the CableCARD isn't the only economic component to consider. The Personal Computer Memory Card International Association (PCMCIA) slots in the boxes are believed to cost at least $25 when the hardware and license fees are factored in.

And getting retail TVs and boxes tested at CableLabs isn't free, either. According to a CableLabs fee schedule, getting a unidirectional cable product (a one-way TV or set-top, for instance) tested costs $30,000. Testing an OpenCable Unidirectional Receiver (OCUR) -- a CableCARD-based product that turns PCs into digital set-tops -- costs about $80,000. Other fees and licenses tied to OpenCable can approach $90,000. (See Ceton Pitches Cable Set-Top Alternative .)

— Jeff Baumgartner, Site Editor, Light Reading Cable

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