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TiVo fighting FCC over CableCARD, Verizon’s FiOS service

Background: the FCC’s “integration ban”

The FCC’s set-top box “integration ban” requires cable operators to deploy set-top boxes that meet certain criteria standards, separating proprietary encryption from basic decoding functions. More specifically, this regulation effectively forces cable operators to support CableCARD, a technology incorporated into digital TVs and DVRs (e.g., TiVo Series3) that makes such devices compatible with the cable operator’s encryption scheme without a set-top box.

By separating decryption from other functions, the ‘integration ban’ facilitates the introduction of third-party devices that compete with and can eliminate the need for the set-top boxes leased or provided by the cable companies. As a practical matter, however, relatively few consumers have availed themselves of the CableCARD option (see ACA Comments, CSR-7012-Z, CS Docket No. 97-80). This may be due to the fact that cable companies require consumers to take special steps to acquire a CableCARD (and also because the technology is not yet incorporated into many consumer devices). The FCC, therefore, has promulgated C.F.R. 76.1204(a)(1), requiring cable operators to implement CableCARD technology into their set-top boxes, so that every box has a CableCARD slot and will need a CableCARD to operate. This eliminates the need for consumers to take any special action to obtain a CableCARD. As it should be!

Requests from cable operators to waive C.F.R. 76.1204(a)(1)

Verizon recently (late August, 2006) filed a request for the FCC to temporarily waive 47 C.F.R. 76.1204(a)(1) until an “interoperable, open downloadable conditional access (“DCAS”) solution is developed and deployed,” arguing that waiver is necessary to facilitate the introduction of Verizon’s own FiOS TV service. Verizon argues that this DCAS solution would render CableCARDs obsolete, and making their current set-top boxes compatible with the CableCARDs would be a waste of money. By waiving the CableCARD requirement and speeding Verizon’s implementation of its cable service, Verizon argues, the FCC will increase competition in the cable TV market, ultimately helping consumers. The FCC then sought comment on Verizon’s request (FCC reference).

Verizon’s request follows similar requests from Comcast and the National Cable & Telecommunications Association (“NCTA” is the cable companies’ lobbying group), in early August, to exempt certain set-top boxes from the ban. One common argument amongst the cable companies is that the FCC should delay the July 1, 2007 commencement of the integration ban because of the changing nature of the technology. Many cable companies argue that if given more time to work on the security technology, costs will be avoided which would otherwise be passed along to consumers.

TiVo’s opposition to waiver requests by cable oOperators

In the October 12 letter filed by TiVo’s counsel with the FCC, TiVo reiterates its position opposing the waivers petitions filed by the various cable companies mentioned above. For the producers of CableCARD-ready equipment, such as TV manufacturers and TiVo, the need for proprietary set-top cable boxes to decode cable signals hinders the sales and marketing of their products. Thus, TiVo here urges the FCC “not to undermine the effectiveness of its rule establishing the integration ban or further delay its implementation. TiVo also urged the Commission [the FCC] to examine closely the CableCARD cost figures being cited by the cable industry, since the figures appear high and are not adequately explained in the record.” What, the cable industry industry using skewed figures to undermine open standards? Perish the thought.

This latest response by TiVo is concerned, in part, with the definition of “low-end” in referring to set-top boxes. TiVo’s concern is that the cable companies wish to define “low-end” so expansively as to encompass a wide variety of boxes with seemingly high-end DVR functionality that would compete with TiVo’s product. Without knowing what set-top models the cable companies wish to consider “low-end” and what percentage of households with digital cable use such models, it is difficult to say what the practical implications of this question are. TiVo argues that the cable companies’ definition of low-end set-top boxes encompasses so many boxes that a low-end exemption would make the integration ban into a nullity.

STLR legal commentary

Congress passed an act requiring cable companies to adopt CableCARD technology more than ten years ago. It’s intent was to provide consumers with a competitive market for cable decoders. The cable companies have tried to invalidate the law in court, but have been unsuccessful (Charter Communs., Inc. v. FCC, 460 F.3d 31; General Instrument Corp. v. FCC, 341 U.S. App. D.C. 367). Since the act’s passage, the FCC has extended the deadline multiple times at the request of cable operators to give the companies more time to implement the technology and develop potentially lower cost solutions.

Verizon is not asking for a general extension of the deadline for everybody (the FCC seems to be done with such requests), but rather it is asking for a specific temporary waiver of the deadline for itself. According to the act, the FCC can grant these waivers if “necessary to assist the development or introduction of a new or improved multichannel video programming.” (47 C.F.R. 76.1207). So Verizon wisely has linked their waiver request to the rollout of FiOS. Verizon argues that providing a CableCARD compatible system that is able to support FiOS by the July 1, 2007 deadline is too much to ask (FCC reference). The problem, Verizon claims, is that the interactive services offered over FiOS are not compatible with current CableCARD implementations and, even if they were, developing CableCARD compatibility would take away from their development of other services. Verizon also argues that its status as a “new entrant” into the market means that it has not had the same ten years that other cable providers have had to develop CableCARD technology, and that its relatively small customer base means that the waiver will not affect many consumers. If Verizon can convince the FCC that FiOS services will be impacted if the deadline is enforced, their waiver request may be granted.

Charter Communications is also seeking a waiver, but for a different reason. Charter claims that it offers low-end cable decoder boxes that are cheaper than can ever be built using CableCARD technology. Requiring the transition to CableCARD would increase the cost to the low-end consumer “just to reduce by a few cents the $1.50 lease cost of CableCARDs that plug into high-end HDTVs” (FCC reference). This argument has met opposition from decoder box makers, like TiVo, who claim that Charter’s definition of “low-end” is too expansive and would undermine the intent of the law (FCC reference). One issue with Charter’s argument is that the company seems to be asking for a permanent waiver, and the FCC only has the authority to grant waivers for a limited time under 47 C.F.R. 76.1207. Also, Charter’s desire to protect the low-end consumer does not fall within the statute’s requirement that waivers be granted only to allow for development of “new and improved” programming.

It will be interesting to see how the courts handle these waiver requests in light of the opposing arguments promulgated by TiVo and others.

Legal analysis courtesy of Matt Dobbins, Zachary Sharpe, and Trevor Adler. Reprinted from Engadget.

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