CableCARDs Didn’t Meet Goal of Congress, All FCC Members Agree

CableCARDs didn’t meet the goal of Congress in Section 629 of the Telecom Act because they failed to create much of a market for consumers to buy devices from retailers that they could use to get pay TV, all five FCC members agreed Wednesday. Some expressed hope that newer gateway devices letting cable, telco-TV and DBS subscribers get online and subscription video using devices other than set-top boxes will gin up the retail market while boosting broadband use. A rulemaking on fixes to CableCARDs and an inquiry on setting standards for gateway devices to be used by all pay-TV providers was approved at Wednesday’s meeting, where Commissioner Meredith Baker voted remotely to approve all six items because of a death in her family. (See obituary in this issue.)

In a part of the CableCARD item subject to much lobbying by the cable industry, the regulator as expected (CD April 13 p3) proposed that cable operators of all sizes be exempt from CableCARD rules so they can use inexpensive set-top boxes for HD video, commission officials said. That’s a change from earlier language that would have limited the proposed exemption to lower-capacity systems. The gateway notice of inquiry appeared to largely follow the lines of the initial draft. Final versions of both items weren’t publicized by the commission by our deadline. Cable, satellite and consumer electronics officials all found something to like in the items.

People want devices to get not just pay TV but also online and broadcast video, Chairman Julius Genachowski said. “Consumers want devices that can navigate the universe of video programming from all of these sources and present the choices to them in a simple, integrated way. They also want to know that they can buy a device and not have to replace it if they change video providers” which would be allowed by gateway devices, he said. CableCARDs didn’t achieve their legislative objective, he said: “Only a tiny fraction of all set-top boxes in use in American homes include CableCARDs, and only two companies -- TiVo and Moxi -- today sell CableCARD-enabled video devices through retail outlets that integrate pay TV programming or Internet content.”

CableCARDs are in about 500,000 devices that cable subscribers bought from retailers, said Chief Bill Lake of the Media Bureau. That compares to 18.5 million devices provided to customers by cable operators deployed since CableCARD rules took effect in 2007, Commissioner Mignon Clyburn said: The regulator “is taking important steps towards retooling a set-top box regime that has long been broken.” A written statement from Baker said Wednesday’s actions “signal something that consumers and consumer electronic manufacturers decided some time ago: The retail CableCARD market has not worked as we intended.” Commissioner Robert McDowell said he hopes the FCC will “remain humble” in dealing with technology after the experience with CableCARDs.

The CableCARD item seeks comment on a TiVo proposal that IP ought to be used for delivery of switched-digital channels to plug-and-play devices such as those made by the company, commission officials including Brendan Murray of the bureau said. The rulemaking was changed during editing to make clear the section on IP transport dealt with switched digital video and not other types of channels, another official said. TiVo is happy the regulator recognized “the importance of providing set-top box choice” and began a rulemaking “to address issues that have plagued consumers who are using competitive products,” said General Counsel Matt Zinn.

The gateway item seeks comment on intellectual property issues and how one-way transmission platforms such as DBS can be accommodated, and envisions gateway devices replacing CableCARDs, bureau engineer Alison Neplokh told the meeting. DirecTV is pleased the FCC members “recognized that there are specific issues related to DBS’s one-way architecture to consider, and are open to consider[ing] alternative approaches that achieve their goals,” the company told us. As the most ubiquitous media device with TV screens in the home, sets can be used by consumers without broadband access on computers to get Internet video and participate in social networking, Neplokh said. Copps expects that “video content will clearly be an important driver of broadband adoption,” he said. “The CableCARD endeavor has produced more consumer frustration -- not to mention agency travail -- than it has competition.”

Groups representing large and small cable operators alike praised the CableCARD rulemaking for proposing to let them use what are called digital terminal adapters. “Low-cost digital adapters are a vital tool for all cable systems to recapture bandwidth that can be used to provide consumers with faster broadband speeds, more HD channels, and other interactive service,” said NCTA President Kyle McSlarrow. The American Cable Association believes “operators can provide better service to their customers, including faster broadband speeds, by having greater flexibility under existing set-top box rules to offer low-cost” HD boxes, it said. Vice President Julie Kearney of CEA declined to comment on the DTA issue since the text hadn’t been released. The Consumer Electronics Retailers Coalition is happy the FCC “unanimously moved ahead with these items and has assigned them such a high priority in the implementation of the National Broadband Plan,” it said.

Both items approved Wednesday “clearly” aim “to make Section 629 a reality,” Kearney said.

"The resolve on the part of the commission to enforce the rules and to hold industry’s feet to the fire” on CableCARDs, as waivers were granted, “probably has a lot to do” with the state of the market, she said. CEA is “very pleased the commission has put this on their top list of things to accomplish quickly,” she said. “But we are all going to need to roll up our sleeves and cooperate, this can’t be another many months of filing” paperwork at the commission, she said: The CE and pay-TV industries must work together “and the commission has to be actively engaged throughout the entire process.”