FCC Rules on Encryption of Basic Tier Cable

Cable providers have wanted to encrypt basic cable for some time now, allegedly so that service can be enabled and disabled from head end instead of having to roll a truck and to reduce theft, which was estimated to be $5 billion in 2004. Funny how they always fail to mention it will fatten their nest eggs somewhat.  

Part of the Cable Television Consumer Protection and Competition Act of 1992 prohibits cable operators (but not satellite operators) from scrambling or encrypting signals carried on the basic tier of service, but the FCC has now ruled that this encryption is permitted, as long as certain consumer protection measures are put in place, but there are a several caveats.

Basically the FCC ruling says that the six largest (caveat one) cable providers (who service 86% of subscribers) are “to comply with additional requirements that are intended to ensure compatibility with certain third-party-provided equipment used to access the basic tier”. These “additional requirements” boil down to offering equipment (or technology to third parties) that is compatible with IP-enabled clear-QAM devices provided by third parties.

In order to limit costs, the cable companies are required (for a limited time—caveat two, and to existing subscribers—caveat three) to:

(i) offer to existing subscribers who subscribe only to the basic service tier and do not use a set-top box or CableCARD, the subscriber’s choice of a set-top box or CableCARD on up to two television sets without charge for two years from the date of encryption;

 (ii) offer existing subscribers who subscribe to a level of service above “basic only” but use an additional television set to access only the basic service tier without the use of a set-top box or CableCARD at the time of encryption, the subscriber’s choice of a set-top box or CableCARD on one television set without charge for one year from the date of encryption; and

(iii) offer existing subscribers who receive Medicaid,82 subscribe only to the basic service tier, and do not use a settop box or CableCARD, the subscriber’s choice of a set-top box or CableCARD on up to two television sets without charge for five years from the date of encryption.

In addition the six largest cable providers have committed to adopt, prior to encrypting, a solution that would provide basic service tier access to third-party provided IP-enabled clear QAM devices (such as Boxee, Hauppage, etc.)

These six cable operators will make basic cable available either via connection from operator-supplied equipment or by providing access to the operator’s security technology. This will be accomplished either by:

(i) Option 1 - providing a converter box with “standard home networking capability” that can provide IP-enabled clear QAM devices access to basic service tier channels

(ii) Option 2 - enable IP-enabled clear QAM devices to access basic service tier channels without any additional hardware through the use of commercially available software upgrades

The fact of the matter is that all this does is potentially defer costs as a sunset in proposed on these commitments three years after the Order is adopted unless the Commission extends them. On a positive note, the FCC has committed to reviewing this in future: “We believe that a future review of these rules is warranted because the market for these IP based devices is nascent and it is unclear whether consumer demand for this equipment will flourish. Accordingly, we delegate authority to the Bureau to initiate a review two years after the release of this Order to decide whether these IP-enabled device protections remain necessary to protect consumers or whether it is appropriate to sunset the IP-enabled device protections.”

Manufacturers, such as Boxee, are offered some protection, as they will be provided a license for any technology to access the basic service on a “good faith” basis and cable operators must “publicly disclose the DLNA profile or other protocol that is being used for the home-networking (Option 1) capability on such operator-supplied equipment.”

Any telecom or cable bill is always peppered with additional fees, but the FCC is clear on this when it comes to having to hand out free devices: “Out of an abundance of caution, however, they suggest we affirmatively state that cable operators may not impose service fees (such as “digital access fees” or “outlet fees”) in lieu of rental fees for the free devices. Consistent with Public Knowledge and Media Access Project’s suggestion, we clarify that boxes provided by cable operators that choose to encrypt the basic service tier must be provided without any additional service charges related to the equipment.”

For existing cord cutters who may rejoice, don’t get too excited. If a box is required, you’re not getting it for free. The change clearly states: “We do not agree that free equipment is necessary for new subscribers: given the movement to digital services, many subscribers have become accustomed to leasing set-top devices, and that trend seems likely to continue”.

While Boxee, who have a new DVR coming to market, rejoices, for the most part all the changes do is defer costs and force cable providers to provide free basic service for a few years. After that, unless the review extends the sunset date, you’ll be looking at a monthly fee. My advice: if you live near a transmitter, get a digital antenna, or better still a Dishtenna. I put up a new antenna and cut the cord a few years ago and have never looked back. I also get a much better picture to boot. Of course, the cable companies are also trying to kill OTA altogether under the guise of “freeing up that part of the frequency spectrum”, so who knows how long anything will be free.

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