CableCARD’s Viability at Stake in Comcast Waiver Bid, CEA Says

CEA urged the Commission in comments last week not to approve the waiver request. Doing so would make the FCC “complicit” in Comcast’s aim to commercially “isolate” CableCARD-ready products when any further such isolation could be “fatal to their prospects.” Comcast has sought to reassure the FCC its petition wouldn’t harm CableCARD because it’s populated mainly in high-end HD devices, while the waiver request applies only to low-end set-tops with limited functionality.

Complicating the debate, Panasonic and Thomson -- 2 major CEA members that fought vigorously against cable’s attempts at the FCC to delay the implementation ban -- have now backed Comcast’s waiver request. Both support Comcast’s arguments that granting the waiver will speed deployment of low-cost digital set-tops as the Feb. 2009 analog cutoff approaches. Both also have forged agreements to supply set- tops to cable, telco and satellite, while Thomson has said it no longer views CableCARD with the same importance because it has gotten out of the TV set production business.

In the middle is Microsoft, which joined with cable last year to urge the FCC to extend the integration ban another year to allow for development of a downloadable conditional access system for digital cable set-tops. In comments filed at the Commission 2 weeks ago, Microsoft said it believes Comcast’s waiver request should be approved, provided that it’s “narrowly crafted” to assure that the decision “also advances the goals of achieving a marketplace in navigation devices,” as Congress and the FCC intended.

The FCC has recognized “that the deployment and support of CableCARDs remains an essential component of creating a market and one that requires continual monitoring,” Microsoft said. “Unconditionally granting the Comcast request risks furthering this history,” it said. Microsoft called into question Comcast’s assertions that CableCARDs have been confined to a higher class of devices that wouldn’t be affected by a waiver. “If that argument were to carry the day,” Microsoft said, “it would call into question the entire regulatory reason for the development of CableCARDs -- namely, to bridge the gap in the marketplace created by integrated devices until the Commission’s ban became effective or conditional access solutions emerged that rendered the ban moot.” Microsoft said it doubts Congress ever intended to limit CableCARDs to high-end devices.

Set makers such as Sharp and Sony called for an outright rejection of the waiver request. To date, cable operators’ support for CableCARD devices “has been spotty and fraught with pitfalls, which would have been comprehensively avoided if only the operators were themselves relying upon the same removable security technology and system,” Sharp told the Commission. “Any change that would reduce the number of models of leased set-top boxes that rely on CableCARD would drastically reduce the effectiveness of common reliance.” Sony argued that Comcast and its supporters have overstated the cost of CableCARD deployment even in low-cost set-tops. Moreover, the waiver request doesn’t have enough information about the impact granting the request would have, Sony said: “In the absence of hard data, however, simple mathematics suggests that the impact of the waiver would be staggering.” Not only would it perpetuate the lack of economies of scale in CableCARDs but also compound the support problems documented by the consumer electronics industry for years, Sony said.

Even so, the American Cable Assn. (ACA) has joined with other cable interests and Panasonic and Thomson to urge that the waiver be granted. In the smaller markets served by ACA members, the low-cost set-top allows operators to provide affordable digital services such as local VoD, themed tiers and digital music to subscribers, and is the only feasible means of moving to an all-digital network,” the ACA said. “Consumers benefit by receiving additional services they desire at lower costs.” At the same time, ACA said, “consumers in these markets have shown very little interest in CableCARDs. Requiring operators to deploy a CableCARD- enabled box would raise the cost of digital services to consumers and slow the digital transition while providing little to no corresponding consumer benefits.”