Cable Encryption Requests Seen Being Supplanted by FCC Order For Entire Industry

The bureau, still hoping to finish work on an encryption order soon, appears to want to get commissioners to approve that order before acting on any individual waiver requests, industry and public interest officials said. Cable and CE interests, meanwhile, continued to bicker over whether any industrywide encryption order ought to be put entirely on hold. Boxee and Hauppauge Computer Works are concerned their clear QAM (quadrature amplitude modulation) products won’t be able to get cable programming that’s scrambled. RCN joined the NCTA in saying such clear QAM concerns shouldn’t slow down commission work on encryption. The order the bureau is working toward would allow encrypting, and so clear QAM devices like Boxee wouldn’t work without CableCARDs that CE companies say are too expensive and cumbersome.

RCN and several smaller operators that sought permission to encrypt channels before the commission issued late last year a rulemaking notice on the practice likely won’t get their individual waivers approved. Instead, industry officials said, RCN, Mikrotec and Inter Mountain Cable would be able to do encryption under the general order. Since the bureau still may finish work on the industrywide order in the next month or so, those operators would face the rules in that coming document, industry officials said. A bureau spokeswoman declined to comment.

"I'm not really seeing much evidence that it’s going to be a huge delay” in FCC staff finishing drafting the encryption ruling, said attorney John Bergmayer of Public Knowledge, which asked the commission to look at the clear QAM concerns. Since the order seems close to being done, it doesn’t make sense to approve individual companies’ waivers, he said. “It should be a pretty uniform set of rules” for all operators, so that Cablevision, which got a waiver in 2010, won’t face “one set of rules, while another operator in the market is under a different set of rules,” Bergmayer said. For rural operators, he said, “I understand they are under special constraints, though those constraints should probably be dealt with on an industrywide basis."

Inter Mountain and Mikrotec “don’t want to dedicate effort to case-by-case waivers if they can just establish a rule that provides the relief without further FCC action,” said communications lawyer Thomas Dougherty of Fletcher Heald, which represents those companies. He “was a little surprised to hear that the significant benefits of scrambling might be trumped by the business plans of what seems to me to be the equivalent of a start-up Remora who is far from being a household name,” he said of Boxee’s concerns. “As I see their argument, they want an entire, established multi-billion dollar industry, with significant theft problems and a need to control subscriber access remotely, to be held back in 1990s technology for sake of a company that may never see a public funding? Ridiculous."

RCN also took issue with Boxee, in asking the commission to disregard that CE company’s requests. “If action on the rulemaking is delayed, the Media Bureau [should] grant RCN’s request for a waiver with respect to its all-digital systems in New York and Chicago,” the cable operator said in a filing posted Tuesday in docket 11-169 (http://xrl.us/bmr9u4). “The economics of Boxee’s Live TV product benefit greatly from -- indeed, may depend upon -- basic tier cable theft,” which encryption cuts down on, RCN said. “A Boxee customer who has RCN internet access -- and the Boxee Box requires a broadband internet connection -- can illegally view broadcast basic channels using the Boxee Live TV and a ten-dollar cable splitter,” something the CE company’s subscriber message board acknowledges, the operator said. “This is no secret to Boxee’s customers."

RCN noted its not aware that Boxee ever encouraged customers to steal cable service. But “Boxee’s own advocacy raises questions as to whether the viability of the Boxee Live TV depends on basic service theft,” the operator said (http://xrl.us/bmr9n3). “Boxee would have the Commission believe that its potential customers would pay for the basic tier -- which for RCN, for example, is $18.50 per month in New York and $22.50 in Chicago -- but that if those customers were required to pay $7.50 per month for a basic set-top converter ($4.95 in Chicago), they would refuse to buy Boxee’s product. This is not credible.” RCN “is confident” that Boxee can “readily engineer a solution” so its Live TV works with encrypted content, the operator said. But cable and CE executives said they knew of no way that Boxee or other clear QAM products would work with encrypted content unless a CableCARD port was installed or other dramatic and possibly costly steps are taken.

Boxee said RCN is singling it out. “RCN could be making the same argument against Samsung for providing a Smart TV that both connects to the Internet and has a ClearQAM tuner,” Boxee General Counsel Melissa Marks told us. The operator could point to “TiVo for providing a DVR that connects to the Internet -- or against pretty much any TV which is currently mandated to support Clear QAM,” she said. “Cable companies in general are trying to pull the wool over the eyes of anyone who will listen and specifically singling out Boxee to squash competition to ensure they can milk consumers for as much as possible.”

Boxee’s website and an installation guide for Boxee Live TV (http://xrl.us/bmr9pt) suggest “users with bad reception” call “their cable companies to sign up for basic cable,” Marks noted. “While we do position Boxee Live TV as a cord-cutting device, we are upfront with users who have bad reception that they will need to sign up for the basic tier of cable to get broadcast stations.” Marks said cable operators can install filters, or traps, to prevent unencrypted programming from going into the homes of subscribers getting broadband service. Other CE and cable executives noted such a solution might be very expensive for all operators, and said the FCC doesn’t seem likely to require it for systems doing encryption. “If RCN does not find it cost effective to install these filters to protect the basic tier from Internet subscribers, that is their decision,” Marks said. “It has nothing to do with Boxee.”