Cable MSOs, set-top makers, and silicon suppliers were breaking open the bubbly today with news that the Federal Communications Commission (FCC) had voted in an exemption that lets operators buy and deploy a new class of hi-def Digital Terminal Adapter (DTA) devices with embedded security.

The FCC originally considered an HD-DTA exemption that would apply only to systems with 550MHz or less of activated capacity ("upgraded" systems typically have at least 750MHz), but was won over by arguments that the low-cost, limited function devices would accelerate cable's broader all-digital migration strategies. (See FCC Chews on HD-DTA Exemption .)

The FCC has already granted waivers to several standard-definition DTAs, but the new rule essentially gives blanket approval to models that can also render HD signals. DTAs, by design, are one-way, so they're unable to communicate upstream and support native interactive applications. However, the new rule does appear to offer some wiggle room for the addition of an IP interface, which theoretically could be used as a backchannel. (See FCC Shoots Down TiVo's SDV Proposal and FCC Approves CableCARD Fixes .)

Cable ONE led the way
The cable industry owes a debt of gratitude to Cable One Inc. , which started the HD-DTA ball rolling in 2008 by arguing that high-def video services should no longer be viewed as "advanced" because they are now competitive table stakes for small- and mid-sized operators as they grapple with HD-heavy services from Dish Network LLC (Nasdaq: DISH) and DirecTV Group Inc. (NYSE: DTV). (See HD No Longer an 'Advanced' Service?)

Cable ONE claimed that the only way it could reclaim analog spectrum and reuse it for more hi-def content and Docsis 3.0 services cost-effectively was through the use of HD-DTAs, which are expected to cost in the neighborhood of $50 per unit when volume shipments ramp up. (See Cable ONE Looks to Pump Up HD-DTA Volumes .)

The FCC eventually granted CableONE a condition-filled waiver to use the devices in one small system in Tennessee. Today's rulemaking will give the same opportunity to other operators that were pushing hard for the blanket exemption, including Comcast Corp. (Nasdaq: CMCSA, CMCSK) and Charter Communications Inc. . (See Cable ONE Snares HD Set-Top Waiver and Scoop! Cable ONE Makes HD-DTA Picks .)

The American Cable Association (ACA) , which represents the interests of Tier 2/3 MSOs, applauded the exemption on the low-cost HD boxes because it will "provide small cable operators with an affordable avenue to continue the transition of their analog channels to digital" and pave the way for more HD programming and a suite of IP voice, video, and data services.

Arguments from the Consumer Electronics Association (CEA) that one-way DTAs could crimp the market for more advanced, interactive boxes fell on deaf ears. (See CEA Attacks Cable One HD Plan.)

"We find that even if cable operators are allowed to deploy integrated one-way devices they still have incentives to ensure that CableCARD devices are able to receive their services because all two-way, digital video recorder... and Internet-connected devices deployed by cable operators will still be subject to the integration ban," the FCC said in the just-published order.

However, the FCC did not agree with the NCTA's request that the Commission scotch the integration ban altogether.

Possible boon for vendors
The rule should open the floodgates for HD-DTA models that utilize chips from suppliers such as Broadcom Corp. (Nasdaq: BRCM) and Zoran Corp. (Nasdaq: ZRAN). [Ed. note: Broadcom's HD-DTA chipset is a 2010 Leading Lights finalist in the Cable Product category.] (See Broadcom Breaks Out HD-DTA Chipset and Leading Lights Finalists: Cable Products .)

More than a dozen box makers have expressed interest in making HD-DTAs, including Cisco Systems Inc. (Nasdaq: CSCO), Evolution Digital LLC, EchoStar Corp. LLC (Nasdaq: SATS), Coship Electronics Co. Ltd. , Huawei Technologies Co. Ltd. , Homecast Co. Ltd. , Technicolor (Euronext Paris: TCH; NYSE: TCH), Nagravision SA , Pace plc , Motorola Inc. (NYSE: MOT), and Ubee Interactive .

Evolution president Brent Smith said via email that his company has been anticipating the FCC decision and has completed the development of an HD-DTA that embeds the Conax AS security system, and has already sold "hundreds of thousands" of them outside the US. Evolution's also working on a "universal" DTA that would work on cable systems that use Motorola or Cisco security and support Enhanced TV Binary Interchange Format (EBIF) applications. (See EBIF Coming to DTAs .)

However, the fear among some box makers is that uDTAs will do little to undo the box and conditional access "duopoly" enjoyed by Moto and Cisco, and could allow them to dictate pricing on those products.

Count Evolution, the first manufacturer to obtain a waiver for an SD-DTA, among that group. Without imposing a "reasonable license fee" on security or requiring support for SimulCrypt (a technique that allows more than one conditional access system to operate on the same video stream), the FCC could be "giving the keys back to the inmates," Smith warned.

— Jeff Baumgartner, Site Editor, Light Reading Cable