WASHINGTON
Another deadline came and went July 1 as the ban on integrated set-top boxes—those without a separable security system such as a CableCARD—went into effect. Scientific-Atlanta and Motorola say they are ready with the new boxes MSOs demand, and new entrants are poised with separable-security boxes they hope will replace some of the tens of millions of the doomed integrated boxes now in American homes.
Just two days before the ban, the FCC slowed the CableCARD era a bit more, giving many operators breathing room and creating some winners and some losers. Many smaller cable operators will benefit from the decision that allows systems committing to an all-digital lineup of services to continue using low-cost, low-featured boxes (without HDTV or DVR functions) such as the workhorse Motorola DCT-700. MSOs whose CableCARD orders are pending can apply for a deferral. And telcos like Verizon and Qwest, plus many new entrants who use IP and other nontraditional systems, won a big break with a one-year extension.
Among the losers are the big cable companies, for whom the National Cable and Telecommunications Association sought, but were denied an industry-wide waiver.
“It’s certainly unjustified in terms of giving the waivers, even a one-year waiver, to companies who purportedly use a different technology, who should have been able to anticipate the separable-security rules that were staring them in the face when they decided to get into the cable business,” said Neal Goldberg, NCTA’s general counsel, speaking of the big telcos. He plans to appeal the denial to the full commission.
Large cable operators say they have massive architectures to contend with, along with customers who are happy with analog tiers and no set-top boxes. The NCTA has argued that the separable-security mandate—a ruling nearly a decade old, and one which the industry came up with in the first place—is a counter-productive diversion of resources from the industry’s greater goal of a Downloadable Conditional Access System.
Comcast is livid with the FCC, where for more than a year it has sought a waiver, at least for its low-cost boxes. The company told the FCC that giving Verizon a waiver for all boxes—advanced and basic—while denying any waiver for Comcast (which has, in fact, taken steps to deploy compliant boxes) is arbitrary, capricious and “raises serious questions about the integrity of the waiver process.” What’s more, Comcast says, Verizon’s claim that no non-integrated HD or DVR boxes exist for its technology is “preposterous.”
NO IMPROVEMENT
Despite the administrative setback, the big cablers say they have been preparing for the deadline and are deploying the new boxes. Ultimately, millions of CableCARD boxes will reach American homes. Operators say the transition will be almost invisible to viewers, although they’ll be a cost—some $600 million in higher box prices, the industry says—with no improvement in services and a diversion of resources that could be used to develop DCAS.
To avoid having to send old integrated boxes to the landfill, companies may continue to use previously deployed boxes (though some were blindsided by a June 29 FCC ruling that refurbished devices are considered “new” devices and thus subject to the ban.) And some companies have offered special incentives, such as very inexpensive rentals, to encourage people to use or keep older digital boxes.
As for the June 29 Media Bureau denial of the industry-wide waiver requested by NCTA, Time Warner Cable, like most companies other than Comcast, seemed unfazed.
“So far, so good, as far as performing as expected,” TWC spokesman Alex Dudley said of the new boxes, which the company started deploying well before the deadline.
Some companies appear to have fallen through cracks in the FCC process, at least for a short time. Although the FCC promised to grant temporary deferrals to small operators that have ordered, but not received CableCARD devices, there are approximately 10 companies whose requests for such deferrals remain pending, according to a person familiar with the process.
One of these, WEHCO, a small, rural cabler headquartered in Little Rock, Ark., has been told by its supplier not to expect to receive CableCARD boxes until at least October. In its request for deferral, WEHCO told the FCC that it’s had to refuse customer orders for new boxes and even to cancel pending orders. At press time, the deferral had not been granted.
BEST OF 2003
The intentions were to promote competition in cable boxes, possibly by allowing customers to make choices from a wide variety of cutting edge technology products, just as cable customers in other countries do. But some figure that developing CableCARDs is not the straightest path.
“It’s an outdated technology with no additional functionality for leased boxes, and that’s why downloadable security is the next technology on the horizon,” said Goldberg. The cable industry says it has spent $30 million and committed $100 million toward developing DCAS.
“If I had my druthers about it, I would have not liked to utilize a lot of resources to develop the CableCARD,” said Dave Clark, director of Product Strategy and Management at Scientific-Atlanta, which reports that it’s filling all its orders with no problems. “DCAS is a cleaner solution. And it’s clearly a lower-cost solution, but it’s just not there yet.”
Clark foresees trials in 2008, but warns it’s not simple. The various cable operators have to be involved, along with third-party technology companies as well as content owners who have concerns about protection.
Richard Doherty, an analyst with Envisioneering, a Seaford, N.Y.-based research outfit, said the FCC action—and the cable industry’s resistance to removing its old boxes—are almost guaranteed to bring more business to the telcos, with their promise of advanced new features.
Cable companies have dropped the ball on consumer choice, Doherty said, offering only limited lines of boxes, while systems abroad, not to mention cell phone providers and computer makers, roar ahead.
The lifespan of a digital box is typically some eight years, he said.
“A cable digital box at the present gives you the best technology of 2002 or 2003,” Doherty said. “You want a guide [electronic program] that will scroll down before you go on Social Security.”
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