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Comcast Appeals CableCARD Ruling

With a stinging appeal, Comcast Corp. (Nasdaq: CMCSA, CMCSK) has made good on its threat to challenge the upcoming Federal Communications Commission (FCC) ban on integrated digital cable set-top boxes.

Three weeks ago, the FCC's Media Bureau rejected Comcast's request for a partial waiver of the ban. As expected, Comcast formally requested today that the full five-member Commission review the decision.

The 33-page application asks for an "expedited review" of the Media Bureau ruling, arguing that "timely action is of the essence" because of the issue's importance to the cable industry and its customers.

"We believe we have made a strong case that our waiver request will benefit consumers, and we hope the full Commission will grant the waiver in a timely basis," said Comcast executive VP David Cohen in a prepared statement.

The unusual move paves the way for Comcast to take the FCC to court if it rejects the waiver request. Although Comcast officials insist that they haven't decided to do that, they say they want to keep the option open.

"The most important thing is to get a full Commission vote up or down," said a Comcast spokeswoman. "We can't appeal a Media Bureau decision."

But the full Commission is not obligated to act on Comcast's request. So the matter could sit for months while the FCC's set-top deadline approaches.

Under the FCC's rules, cable operators have until July 1 to start using CableCARDs -- removable security modules -- to provide conditional access to their TV programming.

Comcast, Charter Communications Inc. , Verizon Communications Inc. (NYSE: VZ), RCN Corp. , Suddenlink Communications, National Cable & Telecommunications Association (NCTA) , and others have sought full or partial waivers, seeking time to develop a cheaper, downloadable security option. Comcast's request got turned down, with FCC chairman Kevin Martin saying he opposes "blanket waivers" of the rules. (See FCC to Comcast: 'No Waiver for You' and Comcast Cries CableCARD Foul.)

In seeking a full FCC review of the decision, Comcast uses harsher-than-usual language to assert its case. The MSO accuses the Media Bureau of flouting previous Commission policy, violating its own rules, and adopting new policies that go well beyond its statutory authority, among other things.

Comcast also bashes the agency for taking nearly 10 months to act on the waiver request, which was filed in mid-April. Under communications law, the Commission is supposed to rule on waiver requests within 90 days.

"In decades of experience with the Commission, Comcast has never found itself placed in such a difficult position, forced to incur (and to pass along to its customers) substantial costs that are counterbalanced by no public benefit," the filing states. "The failure of the Bureau to act in a timely fashion on a soundly reasoned request for waiver, where the costs of delay were manifest, is inexplicable."

Comcast officials said they will continue to lobby the FCC for support. They plan to start meeting with Commission officials next week.

But with the prospects for overturning the Media Bureau decision uncertain at best, Comcast plans to step up its installation of low-cost digital set-tops in cable customers' homes before the deadline hits. The company now boasts about 12.1 million digital cable subscribers, giving it a 50 percent penetration rate. But it hasn't disclosed how many of its digital customers now have the cheaper, no-frills boxes.

Comcast executives also say they will abide by the integration ban if their waiver request fails. The industry's two main set-top suppliers, Motorola Inc. (NYSE: MOT) and Scientific Atlanta , said earlier this week that they will begin mass production of CableCARD-enabled set-tops before the end of March.

— Alan Breznick, Site Editor, Cable Digital News

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