In a memorandum dated June 11, 1998, we described the adoption of FCC regulations governing retail availability of navigation devices. The new regulations require a segregation of the security and nonsecurity functions of set top converters/decoders and a gradual phase out of integrated units. The FCC has now released the text and additional details of its rules on navigation devices. The operational details include:
Competitive Exemptions
Direct Broadcast Satellite (DBS), C-band dishes, and Open Video Services (OVS) are all exempted from the rules. In addition, most non-cable MVPDs are permitted to bundle together their equipment and service prices, while cable operators are forbidden from doing so, unless they face "effective competition" under the rate rules.
Waivers are also available for a "limited time," particularly for new entrants to differentiate their equipment and offerings from incumbents.
A market-wide "sunset" is available, (e.g., on an SMSA or DMA-wide basis), if the Commission determines that: (1) the market for MVPDs is fully competitive; (2) the market for converter boxes and interactive communications equipment is fully competitive; and (3) elimination of the regulations would promote competition and the public interest.
Grandfathering of Embedded Equipment
Converter/decoders and other equipment which already have been placed in service by an MVPD before the Jan. 1, 2005, phase-out date are not subject to the general prohibition against providing navigation devices which integrate security and nonsecurity functions. The prohibition applies only to the sale, lease, or use of "new" boxes after that date. Accordingly, MVPDs may continue to sell or lease "grandfathered" integrated boxes after Jan. 1, 2005, but new boxes must have a severable security component. The FCC "anticipates" that subscribers who obtain their boxes from their MVPD will obtain the security module at the same time, and will not notice a functional difference between integrated and nonintegrated boxes.
Certain Customer Identification and Copy Protection Functionalities May Be Integrated as Non-Security functions
The security separation required by the new rules applies only to "conditional access" controls directly applied by the MVPD to authenticate subscriber identification. The separation requirement does not apply to:
- encrypted telephone or internet data used to protect the privacy of the communications;
- digital authentication of financial transactions;
- address information to permit "internet protocol" telephony;
- access controls included in hardware for the purpose of allowing subscribers to exclude communications;
- "copy protection" systems that impose a limited measure of data encryption control over the types of devices that may record (or receive) video content. (By contrast, the FCC states that "software" based encryption should generally be separable from the hardware that runs it and thus would not have to be changed based on the rules adopted).
Customer Access to Commercial Devices
The new rules prohibit the exercise of any contract, patent, intellectual property, or other right in a manner which prevents navigation devices from being made available to subscribers from unaffiliated retailers, manufacturers, or other vendors, except for "conditional access" features.
Cable Operator Technical Standards
Apart from the technical standards that the FCC is expecting from CableLabs' Open Cable initiative, the rules permit individual operators to adopt and publish reasonable technical policies to restrict the attachment or use of equipment to their systems where electronic or physical harm would be caused. An MVPD may publish, and provide to subscribers, standards and descriptions of devices that may not be used or attached to their systems because of the potential for harm. These standards shall be used only to prevent attachment of navigation devices that raise legitimate concerns of electronic or physical harm or theft of service, and not as a means to unreasonably restrict the use of navigation devices obtained from a source other than the MVPD. An MVPD may discontinue service if harm to the system is likely to occur. Disputes over restrictions will be resolved at the FCC.
The rules already permit cable operators to require that home wiring meets reasonable technical specifications. Signal leakage issues will be handled under existing Part 15 and Part 76 rules.
In addition to reiterating that none of these rules affect theft of service, the FCC regulations provide that separation of security from non-security functions is not required if it is not reasonably feasible to separate "conditional access" from other functions without jeopardizing security.
Progress Reports
Tele-Communications, Inc., Time Warner Cable, Jones Intercable, USWest Media Group, Marcus Cable, Advance/Newhouse Communications, Cox Communications, and Comcast Corporation, the eight multiple system operators that are involved in CableLabs, and who filed representations regarding the purchase of digital security modules, must file progress reports with the Commission on Jan. 7, 1999, July 7, 1999, Jan. 7, 2000, and July 7, 2000.
Affiliation
The standard cable attribution and affiliation rules of Rule 76.501 will determine whether unaffiliated retailers are providing navigation devices.
The rules, which still await approval from OMB, are available on request.