Granting Waivers Would Make Integration Ban ‘Dead Letter,’ TiVo Says

In a debate that broke predictably along partisan lines, CEA, Sony Electronics and an IT coalition of Dell, Hewlett- Packard, Intel and Sony joined TiVo in urging denial of the Charter and Verizon petitions. But Charter’s and Verizon’s defenders were united in telling the FCC that to reject the waiver requests would obstruct the DTV transition and run counter to the public interest. They included American Cable Assn., BigBand Networks, Motorola, NCTA, Pace Micro and Terayon Communications.

NCTA hailed Verizon’s “strong case” that a CableCARD waiver is “appropriate” because a better solution -- downloadable security -- is “on the horizon.” But NCTA also warned the FCC to beware Verizon’s motives. Verizon’s “purported status” as a new market entrant and its small market share don’t justify a waiver, NCTA said. Any FCC waiver granted Verizon for those reasons alone would be “arbitrary and capricious” and violate the Commission’s congressional mandate, NCTA said.

Verizon’s waiver “isn’t necessary for the introduction of new video services” and doesn’t qualify for the “limited circumstances” under which the Commission should grant them, TiVo said. Verizon’s petition also concedes a downloadable security system won’t be ready for “the foreseeable future,” TiVo said: “Therefore, petitioner’s waiver request is not for a ‘limited time,’ as required by the rules, but rather is for an extended, if not indefinite, period.”

In urging denial of Charter’s request, TiVo called itself “a small company that has invested over $12 million of its scarce resources” in R&D that last year developed the Series3 CableCARD-based HD PVR, just introduced. TiVo “desires to provide competitive navigation device alternatives to Charter subscribers,” and so “is intensely interested in this proceeding,” it told the FCC. If the Commission grants Charter relief, “it should be limited to those devices that receive only linear (or ‘one-way') channels that unidirectional CableCARD devices supplied by independent manufacturers can receive today,” TiVo said. Moreover, any relief granted to Verizon should be limited to new entrants and not apply to MSOs like Charter and Comcast, TiVo said: “Applying any Verizon waiver to all MSOs would make the integration ban a dead letter.”

Charter’s waiver request is based on flawed assumptions, CEA said: (1) Conditional access devices are needed to further the DTV transition. (2) CE and IT makers have shown no interest in offering competitive conditional-access devices. Charter’s own failed suit against the FCC in U.S. Appeals Court, D.C., should weigh against its waiver request, not for it, CEA said. As for Verizon, CEA said that nothing about the Bell’s service entitles it to a CableCARD waiver. Verizon has been or should have been well aware of CableCARD rules “since the inception of its plans to become an MSO,” CEA said: “Moreover, it chose a vendor that has been experienced with CableCARDs since their inception.”

That vendor, Motorola, said it supplies 4 set-tops for Verizon’s FiOS network. Granting Verizon the waiver will ease “the deployment of new and innovative services over Verizon’s high-capacity fiber-optic plant,” Motorola said. For example, Verizon’s network will be able to carry a “substantial” number of HD and digital channels, it said. Not granting the waiver will result in “significant public interest harms,” it said. Imposing a CableCARD requirement would deprive Verizon customers “the full benefit” of FiOS TV services, including EPGs and VoD, it said. Even assuming a CableCARD could be developed for the FiOS TV set-top in the 9 months before the integration ban takes effect, it would add “substantial costs” to the Verizon service, Motorola said.

Granting Verizon’s waiver “would necessarily extend the same relief to all cable operators, including NCTA’s members,” NCTA said. Therefore, granting Verizon’s waiver “automatically results in the effective grant of NCTA’s waiver,” it said. NCTA’s waiver request is the only one the FCC has yet to post for comments. At the same time, Verizon’s suggestion that it alone should be granted a waiver “on the basis that it is a ‘new entrant’ to the video distribution market and currently has a small market share” is “without merit” NCTA said. “Verizon has greater market capitalization than that of the entire cable industry combined and boasts that within a few years it will become one of the largest MVPDs in the nation. With its massive financial and technical resources, Verizon hardly fits the notion of a ‘new entrant’ that would merit special regulatory treatment.”