FCC Adopts Rules for Retail Availability of Navigation Devices
On June 11, 1998, the Federal Communications Commission adopted (4-1) new rules which will mandate a national transition, during the 2001-2005 period, from integrated set-top decoder/converters to modular components in which security functions are unbundled from converters which are available for purchase at retail. The Commission crafted the rules to permit cable operators to continue to provide integrated decoders/converters during the transition period and to provide time for the industry's Open Cable initiative to adopt standards.
Section 629 of the Communications Act was adopted as part of the Telecommunications Act of 1996. It requires to FCC to adopt rules which will permit the commercial availability of "navigation devices" from retailers unaffiliated with multi-channel video programming distributors (MVPD) without compromising the need for security and conditional access.
A related law adopted under the 1992 Cable Act led to the present equipment compatibility rules. Those rules permit compatibility with most consumer devices by requiring cable operators: to provide a consumer education notice; to use the EIA IS-132 channelization plan; to enable infrared remote windows on remote-capable converters; not to scramble the basic tier; and to offer special equipment or converters with multiple descramblers and/or timers to allow simultaneous reception of multiple signals (e.g., to record one program while watching another). The current rules also control the labelling of TV receivers as "cable ready" or "cable compatible."
The New Rules
Under the new rules, cable operators must separate security functions from other functions by July 1, 2000, at which time separate modular security "Point of Deployment" elements (PODs) will be available. However, cable operators may continue to lease integrated decoder/converters after that date. The FCC noted that major cable MSOs had committed to purchase orders of compliant equipment by Sept. 1, 2000. The FCC will require six-month progress reports from participants in CableLabs' ongoing "Open Cable" initiative to adopt the necessary standards. The FCC expects CableLabs to finalize those standards by year-end 1998.
As of Jan. 1, 2005, cable operators would no longer be permitted to lease or sell integrated decoder/converters/navigation devices. (They would be permitted to sell or lease modular units, such as converters with slots for conditional access cards.) This sunset provoked a strong dissent from Commissioner Powell, who argued that cable operators had sufficient market incentives to take such equipment off of their balance sheets; that customers should have the right to choose to obtain integrated devices from cable operators; and that the FCC was unlawfully tipping the balance in favor of retailers. (Circuit City has long been an advocate of rules which would funnel set-top innovations exclusively into the retail consumer electronics market.) Commissioner Ness defended the 2005 ban on integrated boxes as necessary to create sufficient demand for volume purchases of modular navigation devices. The FCC will re-evaluate the viability of the 2005 date after PODs become available.
The new rules nominally cover all MVPDs, including cable, DBS, wireless cable (MMDS), and private cable (SMATV). However, the FCC has exempted DBS from the July 2000 deadline, on the theory that DBS equipment is already available from competing providers at retail outlets nationally. The rules also exempt Open Video Systems (OVS). Others may apply for waivers, which the FCC must process within 90 days. For affected MVPDs, the rules cover all equipment used for multichannel video service or other services offered by MVPDs, including cable set-top boxes, cable modems, DBS receiver decoders, TV receivers, program guide equipment, videocassette recorders (VCRs), and personal computers (PCs) used with a cable modem.
Consumers are provided the right to attach any non-interfering devices to the MVPD network, provided they do not obtain unauthorized services. This regime is modelled on the deregulation of telephone customer premises equipment. However, the FCC reaffirms existing prohibitions against the manufacture, sale, and distribution of equipment designed for reception of unauthorized services.
The FCC did not adopt a proposal to mandate that all navigation devices deliver competing electronic program guides, despite considerable outside pressure to do so. Instead, the FCC will monitor market developments and revisit the issue if required.
Section 629 also mandates that the FCC adopt rules prohibiting the "subsidy" of navigation devices. The FCC concluded that the existing cable rate rules (under which converters are separated from programming and priced at cost) satisfy this requirement.