Verizon is Latest to Seek Integration Ban Waiver at FCC
Verizon’s FiOS TV is “precisely the type of innovative offering” that waivers of the July 1, 2007 integration ban on set-tops were designed for, the company said in a waiver request filed Tues. at the FCC. Like Comcast, which has sought a CableCARD waiver on low-cost cable set-tops (CD May 2 p4), Verizon said being forced to comply with the integration requirement would stifle innovation and siphon development money better spent elsewhere.
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But that’s where the similarities with Comcast’s waiver request end, according to Verizon’s petition and a July 7 ex parte company filing at the Commission. Verizon said there: (1) It doesn’t believe the integration ban should apply to new entrants in the multichannel video market. (2) Though it, like cable, prefers a “competitively neutral downloadable security option” to a mandatory integration, the Commission “should not accept a downloadable security approach that is cable-centric.”
On that point, Verizon believes NCTA’s proposed downloadable security access system (DCAS) “will unfairly and unnecessarily benefit traditional cable companies,” it told the FCC. Instead, Verizon favors an “open DCAS” regime using “a non-proprietary chipset based on standards developed in an open forum,” it told the Commission. Verizon’s other conditions for supporting open DCAS: (1) It must use a “transport-agnostic solution” such as IP over Ethernet for its return path, rather than an architecture such as DOCSIS that favors cable. (2) Its “root trust authority” must be competitively neutral and “not beholden to any particular competitor or group of competitors” -- an apparent allusion to CableLabs. (3) Standards must be limited to the hardware and software necessary for conditional access support and mustn’t require providers or CE makers “to implement extraneous, unrelated technologies.”
The best way to increase competition in set-tops is “not to force new entrants to engage in inefficient and expensive physical separation of security components, but instead to ensure the creation” of an open DCAS, Verizon said in its petition. DCAS is “now on the horizon,” but it can’t be in use by the July 2007 deadline, Verizon said. Requiring Verizon to comply with the integration ban would force it to implement new security measures twice, it told the Commission. The costs would ultimately harm consumers because they make set-tops more expensive, and so impede the rollout of FiOS TV, Verizon argued. Moreover, “given that the technology to provide DCAS is presently maturing, Verizon can bring a truly open, technology-neutral, set-top box solution to the consumer electronics market together with its important new video services, such as IP-enabled video features,” the Bell said. Forcing compliance with the integration ban will delay delivery of such services, it said.
Verizon’s “relatively small” FiOS TV customer base and the fact that its set-tops uniquely combine QAM and IP architectures means it’s unlikely CE makers will build “Verizon-specific boxes until a common standard can be developed that would allow such equipment to work for other providers as well,” the petition said. A waiver is unlikely to affect “generic” boxes, it said. Further, Verizon already offers CableCARDs to customers who prefer generic boxes, it said.
CableCARDs and the hardware necessary to accommodate them are “relatively complex and expensive on a per-unit basis,” Brian Whitton, Verizon exec. dir.-technology, said in a declaration attached to the petition. Including CableCARD in a device can raise its wholesale cost as much as $25 a unit, apart from the costs of the CableCARDs themselves, which can boost wholesale prices another $50-$70, he said. Though economies of scale can drive down the costs of the CableCARDs, there’s “little prospect” the same can be said of CableCARD-ready devices even after the integration ban takes effect, Whitton said. “If Verizon is forced to commit the substantial technical and economic resources necessary to design and produce a physically compliant set-top box, the company’s aggressive rollout schedule for FiOS TV will be jeopardized,” he said.
A spokesman for NCTA -- which supports Comcast’s waiver request and vehemently opposes the integration ban -- said his group agrees with Verizon “that the integration ban stifles the development of innovative services and imposes unnecessary costs on consumers.” The solution, however, “is not to grant Verizon a special dispensation, but to remove this requirement from all providers,” the spokesman said. CEA -- which opposes Comcast’s waiver bid and any additional extensions in the integration ban deadline -- declined to comment while it studies the Verizon filing.