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FCC Reverses SDV Ruling

Jeff Baumgartner
6/29/2009

The Federal Communications Commission (FCC) has "vacated" a ruling by the Commission's Enforcement Bureau that would've had a chilling effect on switched digital video (SDV).

The agency opted not to fine Time Warner Cable Inc. (NYSE: TWC) and Cox Communications Inc. some $60,000 over allegations that they "willfully" prevented unidirectional CableCARD-based devices from accessing channels that were moved to a SDV tier. (See FCC Levies More SDV-Related Fines and SDV Fines Dropped? )

"We base this decision on a plain reading of our rules, the potential consumer benefits of SDV deployment, and other factors that limit the potential scope of consumer disruption," the FCC said in a statement (Word document) released Friday.

The original ruling centered on some one-way CableCARD-capable "hosts," a category that includes unidirectional "Plug & Play" digital TV sets and stand-alone TiVo Inc. (Nasdaq: TIVO) DVRs. These hosts were incapable of accessing channels in the SDV tier without requiring the customer to use a separate, interactive set-top box, or a new piece of gear called the "Tuning Adapter" supplied by the MSO. (See CableLabs Stamps SDV Tuning Adapters and NCTA Sees Solution to Switching Snag.)

Despite the ruling reversal, the cable industry did not win on every SDV-related count at the FCC. In the same revised order, the Commission affirmed an earlier ruling against Time Warner Cable, finding that the MSO's Hawaii division failed to give local franchise authorities (LFAs) adequate notice that some channels were being moved to a switched tier. The FCC originally hit TWC with a $7,500 fine for that. SDV, the FCC reiterated, constitutes a "change in service" that requires 30-day advanced written notice to the relevant LFA. (See FCC Dings TWC Over SDV .)

Still, the reversals are considered much more important because they could lift a dark cloud that's been hanging over the future of SDV. The FCC's revised view on the technology could embolden other MSOs to deploy SDV, a bandwidth-saving technique that delivers networks in a "switched" tier only when a customer in a given service group selects them for viewing.

In addition to TWC and Cox, other U.S. MSOs that have deployed or tested SDV include Cablevision Systems Corp. (NYSE: CVC), Charter Communications Inc. , Bright House Networks , Buckeye CableSystem , and Comcast Corp. (Nasdaq: CMCSA, CMCSK). (See Comcast Reveals SDV Test Beds, Charter Charts First SDV Course , Comcast Expands SDV Test Pool, Buckeye Picks BigBand for SDV , and BigBand Lights Bright House.)

If more MSOs adopt SDV in the wake of the FCC's reversal, that could also serve as good news for major SDV system suppliers such as BigBand Networks Inc. (Nasdaq: BBND), Cisco Systems Inc. (Nasdaq: CSCO), and Motorola Inc. (NYSE: MOT).

At the same time, one industry analyst doesn't believe the news at the FCC means the SDV deployment floodgates will open up right away.

"It [the reversal] should remove at least one deterrent to SDV deployments," says Heavy Reading senior analyst Alan Breznick, noting that some MSOs are still concerned about the costs and complexity of deploying the technology or have decided in the short term to go with analog-reclamation strategies that use simple digital terminal adapters (DTAs). (See Comcast's $1B Bandwidth Plan .)

"I think they'll all eventually do SDV, but not everyone has felt the urgency to deploy it like they did about two years ago," Breznick adds.

FCC calls out SDV benefits
The FCC agreed with the TWC and Cox argument that SDV has a disruptive effect on only a relatively small percentage of unidirectional devices in use, and that the technology provides "public interest benefits" because it's designed to clear up spectrum for more high-definition programming and faster Docsis 3.0 cable modem services.

Although SDV deployments constitute a change in service, "the broader ramifications of our decision here for the industry's deployment of SDV technology, which has largely been on hold since the enforcement proceedings became public, justify resolution of these issues now," said FCC Commissioner Robert McDowell, in a statement.

— Jeff Baumgartner, Site Editor, Cable Digital News

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