Lawyer Article

The "integration ban," requires cable operators to separate encryption functions from the basic decoding capabilities of their set-top boxes.

The ban was initiated by the 1996 Telecom Act and implemented by the FCC, which initially established a July 2000 deadline for the cable industry to provide encryption in a "point of deployment" module, e.g., CableCARDs, which can be mailed to subscribers for insertion into the set-top box or compatible TV set. The intent was to provide consumers with a competitive market for cable decoders enabling consumers to purchase their own set-top boxes from electronics retailers and take them anywhere in the country. The first integration ban deadline was set for January 2005, then extended to July 1, 2006 and later to July 1, 2007.

A number of waiver requests are now pending with respect to the ban.

Verizon recently requested a waiver until an "interoperable, open downloadable conditional access ("DCAS") solution is developed and deployed," arguing that the waiver is necessary to facilitate the introduction of its FiOS service. Verizon contends that, with its expansive rollout of its FiOS service, provision of a CableCARD compatible system by the July 1, 2007 is a greater burden than it can bear.

It claims that the interactive services offered over FiOS are not compatible with current CableCARD configurations and that, even if they were, compatibility development would detract from the development of other services. Verizon also asserts that as a "new entrant" into the market it has not had the benefit of time to develop CableCARD technology. It also adds that its relatively small customer base means that the waiver will not affect many consumers.

The NCTA has pending a similar waiver request, seeking to defer the ban until after the digital transition deadline or the deployment of downloadable security, whichever comes first. It contends that implementation of the rule will result in an expensive interim solution leading to higher consumer prices without any corresponding benefit. NCTA also asserts that waiver of the rule would assist the development and deployment of new and improved video, voice, and broadband data services and would lead to regulatory parity between cable operators and other multichannel video programming distributors, such as DirecTV.

Others such as Charter Communications and BendBroadband are also seeking waivers, but on different grounds. Both seek a waiver with respect to certain low-cost/limited-function integrated set-top boxes costing less than $100 that are designed to enable cable customers with analog TVs to access digitally-delivered programming services and associated features.

Under the statute, the FCC can grant waivers “for a limited time” upon 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 Verizon and NCTA waivers clearly play to this provision, i.e., that grant of a waiver is necessary to the development of downloadable conditional access. Some have contended that requests such as those posed by Charter and BendBroadband – with their focus on the protection of lower-end consumers – do not fall within the statute's requirement that waivers be granted only to allow for development of "new or improved" programming or services.

BendBroadband counters this assertion with its position that the ban severely hampers its planned conversion to an all-digital network which is an improvement over analog service. Charter has asserted that these low-cost boxes enable cable customers with analog TVs to access digitally delivered programming services and associated features such as access to an electronic program guide, pay-per-view and video-on-demand services and that they support closed captioning, parental controls and copy protection.

The Commission itself has previously recognized that a waiver of the integration ban may be appropriate for low-cost, limited-function set-top boxes.

The Act provides that any waiver grant “shall be effective for all service providers and products in that category and for all providers of services and products.” While the Commission has never specifically addressed the meaning of this provision, it arguably means that a grant of any of the foregoing waiver requests will apply industry wide.

The statute requires the Commission to act on waiver requests within ninety days of their submission. Given the lack of clarity regarding whether and to what extent a waiver grant will apply industry wide, at this point it is advisable for those operators interested in obtaining a waiver of the integration ban to submit their own requests for waiver.

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