Lawyer Article

The Commission acted on several requests for waiver of its integration ban, granting a request by Cablevision with respect to its SmartCard technology; granting Bend Broadband’s request, conditioned on its migration to an all-digital network by 2008; and denied Comcast’s request for a permanent waiver from the integration ban.

Section 629(c) of the Cable Act requires the Commission to waive its regulations on a showing that the waiver is "necessary to assist the development or introduction of a new or improved multichannel video programming or other service offered over Multichannel video programming systems, technology or products."

The Cablevision Waiver
Cablevision explained in its request that it has incorporated a separate-security element into every set-top box currently in service, employing SmartCards rather than CableCards. Cablevision stated that, with the use of an adapter, its SmartCard-based separate-security solution is compatible with CableCard-ready consumer electronics devices. Among other things, Cablevision argued that the waiver is necessary to its effort to deliver new and improved services, e.g., "more digital, switched-digital, high-definition, interactive, and on-demand entertainment services." It also argued that a waiver was necessary to encourage consumers to choose digital cable and that denial of the request would require a redesign of its set-top boxes, thereby increasing the cost of its set-top boxes.

Given that nearly 77% of Cablevision’s subscribers already subscribe to digital, the Commission declined to find the waiver necessary to the introduction of new or improved services. It also noted that the request was not limited in time.

The Commission found that Cablevision’s SmartCard-based approach does provide separated security, but does not completely separate the conditional access functions as required by its rules and also does not provide for common reliance. It nevertheless found good cause to temporarily grandfather Cablevision’s implementation and issued a two-year waiver of Section 76.1204(a)(1) of the Commission’s rules to allow Cablevision to use its separated security, SmartCard, solution until July 1, 2009.

The BendBroadband Waiver
BendBroadband sought a waiver regarding the Motorola DCT-700 integrated digital cable set-top box, a sub-$100 device that it argues is critical to its plans to migrate to an all-digital network by 2008. It also asserted that the DCT-700 is a "low-cost, limited capability" set-top box as envisioned by the Commission in the 2005 Deferral Order (where the Commission said that waiver of the integration ban may be particularly appropriate for low-cost, limited-function set-top boxes), given its inability to output high-definition ("HD") signals, store recorded programs, tune multiple channels simultaneously, or access the Internet (though it does include an electronic programming guide ("EPG"), and can access video-on-demand ("VOD"), pay-per-view ("PPV") services, and other limited interactive television ("ITV") capabilities).

The Commission declined to find that the DCT-700 fit within either the Section 629(c) or the 2005 Deferral Order waiver standards. First, as with Cablevision, it found that many of the claimed new services were already available and that the waiver therefore was not necessary for the introduction of new services. It also found that the DCT-700 was not the type of low-cost, limited-function set-top box referred to in the Deferral Order because it enables subscribers to access EPGs, PPV services, VOD and interactive television. In that regard, it clarified that: "it never contemplated that ‘limited capability integrated digital cable boxes’ would include devices with two-way functionality or the ability to act as functional PVRs. Rather, this category of boxes is confined to those devices whose functionality is limited to making digital cable signals available on analog sets."

Nevertheless, based upon BendBroadband’s commitment to move to an all-digital network by 2008 and the asserted critical nature of a sub-$100 device to that plan, it granted a conditional waiver in order to enable BendBroadband to complete its planned migration.

Further, recognizing the difficulties that small cable operators may face in complying with the July 1, 2007 deadline, due largely to manufacturer prioritization of orders from larger cable operators, it held that BendBroadband can request deferred enforcement of the July 1, 2007 deadline so long as it can demonstrate placement of orders for set-top boxes that comply with the integration ban but that such orders will not be fulfilled in time for it to meet the deadline.

The Comcast Waiver
Comcast sought a permanent waiver with respect to four set-top box models: the DCT-700, Scientific-Atlanta Explorer-940 (which like the DCT-700 will support EPG, PPV, VOD, and ITV capabilities) and Pace Chicago set-top boxes which can be deployed in systems utilizing either Motorola (DC-505D) or Scientific-Atlanta (the DC-501P) conditional access technology. Comcast also sought a waiver for "digital set-top boxes that share the same characteristics" as the foregoing.

Like Bend and Cablevision, Comcast asserted that grant of the waiver would facilitate the deployment of new or improved cable services by enabling more consumers to receive digital picture quality and to access newly developed family tiers, parental controls, digital broadcast programming, and VOD programming and by expanding the number of Comcast households that will have access to digital set-top boxes. Based on Comcast’s report in February of 2006 that all of its subscribers live in markets where it has launched digital cable service and that the digital services it described were not only already available to its entire customer base but subscribed to by a significant portion of its customers, the Commission found that the waiver would not be necessary to the introduction of new services.

Like BendBroadband, Comcast also asserted that these devices fell within the category of devices contemplated in the Deferral Order. Again, however, because the devices enable subscribers to access EPGs, PPV services, VOD and ITV, it found that the devices were not the type of low-cost, limited-function set-top box referred to in the Deferral Order.

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Please contact Mark Palchick (202/857-4411) or Howard Barr if you have any questions regarding this advisory.