Daily Rules, Proposed Rules, and Notices of the Federal Government
This is a summary of the Commission's
1. With this Report and Order (
3. In the mid-1990's, cable operators began to upgrade their systems to offer digital cable service in addition to analog cable service (hybrid service). More recently, many cable operators have transitioned to more efficient all-digital service, freeing up spectrum to offer new or improved products and services like higher-speed Internet access and high definition programming. After a cable operator transitions to an all-digital system, most of its subscribers have at least one cable set-top box or retail CableCARD device in their homes. We expect that the percentage of homes with set-top boxes or retail CableCARD devices will continue to increase as more cable operators eliminate analog service from their systems in favor of more efficient digital service.
4. The percentage of homes with set-top boxes or CableCARD devices is high because most cable systems now scramble most of their signals. As cable operators began to transition programming on their cable programming service tier (“CPST”) to digital, many program carriage agreements required cable operators to encrypt that programming as a condition of carriage. In addition, cable operators use encryption as part of their conditional access system to ensure that cable service is available only to those who have paid for it. Particular methods of encryption, however, vary across cable systems, which could lead to incompatibility between consumer devices and cable service. In 2003, the Commission adopted the CableCARD standard to address this incompatibility problem. The CableCARD, which subscribers must lease from their cable provider either as a part of a leased set-top box or separately for use in a compatible retail television or set-top box, decrypts the cable services. At present, over 78 percent of all cable subscribers have at least one leased set-top box or retail CableCARD device in their home. Cable operators who offer only digital service indicate that all of their subscribers have at least one leased set-top box or retail CableCARD device. Some cable subscribers rely on QAM tuners in television sets and consumer electronics devices that allow access to unencrypted digital cable service without additional equipment, but, based on the record before us, we believe that few consumers rely on them for primary access to cable service. The fact that most cable subscribers already have a cable set-top box or retail CableCARD device significantly reduces the number of subscribers who benefit from the prohibition on encryption of the basic service tier in all-digital systems in contrast to systems that carry analog service.
5. Our rules state that requests for waiver of the encryption prohibition “must demonstrate either a substantial problem with theft of basic tier service or a strong need to scramble basic signals for other reasons.” Prior to 2010, the Commission had waived the rule based only on theft of service. Recently, the Commission has received several requests for waiver of the rule prohibiting encryption of the basic service tier based on the argument that the rule imposes more burdens than benefits as cable operators transition to all-digital systems. The petitioners argue that there are very few people who subscribe only to the basic service tier in all-digital systems, and that access to the basic tier would therefore be unaffected by encryption for the overwhelming majority of subscribers to such systems because they already have a set-top box or CableCARD-equipped retail device. Furthermore, they contend, encrypting the basic service tier in an all-digital system would eliminate the need for many service calls because it would allow cable operators to enable and disable cable service remotely, activating and deactivating the encryption capability of set-top boxes and CableCARDs from the headend rather than visiting subscribers' homes. Today, cable operators typically must manually connect and disconnect the cable that runs to a home to activate or deactivate service and use traps to block access to particular channels. If the cable operator were allowed to encrypt every signal, the operator could keep every home connected to the cable plant regardless of whether the home subscribes to cable service. In addition, the operator could ensure that only paid subscribers are able to access the service by authorizing and deauthorizing CableCARDs, or other legitimate devices, as people subscribe to or cancel cable service.
6. In January 2010, the Media Bureau granted a conditional waiver of the rule that prohibits encryption of the basic service tier to Cablevision with respect to Cablevision's New York City systems, which are all-digital. The Bureau based its decision on the fact that encryption of the basic service tier on Cablevision's all-digital systems would allow Cablevision to enable and disable cable service remotely. The Bureau also found that remote activation and deactivation of cable service would “reduce[ ] costs for Cablevision, improve[ ] customer service, and reduce[ ] fuel consumption and CO2 emissions.” Remote activation and deactivation, the Bureau concluded, would reduce installation costs for Cablevision's subscribers and also benefit these subscribers by reducing the number of occasions when they must wait at home for a service call, as compared to unencrypted cable systems. The Bureau reasoned that Cablevision would sufficiently address the problem of incompatibility with consumer electronics “by providing basic-only subscribers with set-top boxes or CableCARDs without charge for significant periods of time.” Finally, the Bureau also concluded that the waiver would “provide an experimental benefit that could be valuable in the Commission's further assessment of the utility of the encryption rule,” and therefore required Cablevision to file three reports detailing the effect of encryption on subscribers. Four cable operators have filed similar petitions for waiver with the Commission's Media
7. In the wake of these petitions as well as requests from Public Knowledge and Media Access Project for the Commission to deal with the basic service tier encryption issue by launching a rulemaking proceeding, the Commission issued a Notice of Proposed Rulemaking in October 2011. The Commission proposed to allow cable operators to encrypt the basic service tier in all-digital systems, subject to conditions that would minimize disruption for affected subscribers by providing a transition period in which to make informed choices about purchasing or leasing new equipment to continue accessing service. Based on the reports that Cablevision submitted as a condition of its waiver, the Commission in the Encryption NPRM predicted that the rule change would reduce truck rolls and service calls with modest adverse effects on few subscribers. We received comments or reply comments on the Encryption NPRM from 34 parties, and a number of subsequent ex parte filings. The parties' positions are described in the ensuing Discussion.
10. Commenters suggested several substantive changes to our proposed rule. Several commenters suggested that we extend encryption eligibility to cable operators that offer unencrypted analog “barker channels.” Mikrotec and Inter Mountain Cable suggested that operators should be allowed to encrypt the basic service tier as long as all “programming” on the basic tier is transmitted digitally and “if that condition is met, then there should be no concern that the system otherwise uses analog modulation.” They also suggest that eligibility to encrypt should be determined subscriber-by-subscriber, not on a system-by-system basis, because cable operators may elect to transition portions of systems to all-digital piecemeal, and the rule should not discourage that practice.
11. We believe the best criterion for eligibility to encrypt the basic service tier is that the system carries only digital signals aside from unencrypted analog barker channels. Encryption on hybrid systems (that is, systems that transmit signals in analog and digital) would not generate the benefits associated with encryption on all-digital systems because the analog portion of the system will still require truck rolls to activate and deactivate service and the Commission does not have a separated security solution like CableCARD to ensure that retail devices can access scrambled analog cable programming. Therefore, permitting hybrid systems to encrypt would not result in the type of benefits that justify easing the encryption requirement for all-digital systems. We do not believe that it is practical to adopt Mikrotec and Inter Mountain Cable's proposal to determine eligibility for encryption on a consumer-by-consumer basis, because encryption disparity on a consumer-by-consumer basis could lead to consumer confusion: Under this proposal, one subscriber could be subject to encryption (and the commensurate consumer-protection measures described below), while his neighbor could face no encryption and be able to access channels on the basic service tier. The administrative burdens of determining the applicability of the rule would also make such a proposal unreasonable. Therefore, we believe that our rule, which determines eligibility for encryption on a system-wide basis, is more reasonable and will better serve the public interest.
13. In addition to the projected time savings for subscribers because of remote activation and deactivation, the record is replete with secondary benefits that cable operators and their customers will realize as a result of remote service change. These include savings for cable operators because of a reduction in the need to dispatch service technicians to customers' homes. For example, commenters assert that reduced costs due to truck rolls and system maintenance will save cable operators money that they can use to “invest in innovative new products that customers demand and highly value.” In addition, Comcast states that, with remote activation and deactivation,
20. To mitigate any harm to the small group of consumers that may use such devices, NCTA's six largest incumbent cable members—serving 86 percent of all cable subscribers—have committed to adopt, prior to encrypting, a solution that would provide basic service tier access to third-party provided IP-enabled clear QAM devices. Pursuant to this commitment, these six cable operators will make basic service tier channels available either via connection from operator-supplied equipment or by providing access to the operator's security technology. Specifically, these cable operators have proposed to either (i) provide a converter box with “standard home networking capability” that can provide IP-enabled clear QAM devices access to basic service tier channels on the same terms proposed in the Encryption NPRM (“Option 1”), or (ii) enable IP-enabled clear QAM devices to access basic service tier channels without any additional hardware through the use of commercially available software upgrades (“Option 2”). NCTA proposed to sunset these commitments three years after we adopt this Order unless the Commission extends them. Boxee and CEA argue that these commitments do not sufficiently support the operation of IP-enabled clear QAM devices. Instead, they advocate that all cable operators should be required to make the basic service tier available to IP-enabled devices without additional hardware. CEA further encourages the Commission not to sunset the commitments after three years. The AllVid Alliance suggests that the Commission initiate a Notice of Proposed Rulemaking seeking comment on “a nationally-portable common IP-based interface from MVPD services to consumer devices.”
21. We believe that the commitments from the six largest incumbent cable operators will be sufficient to address the compatibility issue concerning IP-enabled devices and achieve the objectives of section 624A of the Act—i.e., to ensure compatibility between cable service and consumer electronics equipment. We do not extend the additional equipment requirement to smaller cable operators because we do not believe it is necessary at this time. As noted above, based on the current record, only a small number of consumers rely on IP-enabled devices to access the basic tier and thus we expect this particular compatibility problem to be extremely limited in scope. Because the six largest incumbent cable operators subject to the rule serve 86 percent of all cable subscribers nationwide, we expect most consumers that use such devices will have ready access to the necessary equipment. Moreover, large cable operators generally dictate equipment features to manufacturers and commonly get priority in delivery of that equipment. We anticipate that the large operators' demand for this equipment eventually will lead all equipment to include this functionality in the marketplace, and thus the equipment small cable operators provide will eventually include the IP functionality as well, regardless whether they specify this particular feature. Nonetheless, we may revisit this issue if the equipment market does not develop as expected or if we find that small cable operators do not make their service compatible with these consumer devices.
22. Contrary to Boxee's argument, nothing in section 624A requires that consumer equipment compatibility be
23. We adopt these commitments as required preconditions to encrypting by the top six incumbent cable operators with slight modifications and clarifications. These conditions will automatically sunset three years from the release date of this Order unless the Media Bureau (“Bureau”) determines prior to this date that the IP-enabled device protections remain necessary to protect consumers. We believe that a future review of these rules is warranted because the market for these IP-based devices is nascent and it is unclear whether consumer demand for this equipment will flourish. Accordingly, we delegate authority to the Bureau to initiate a review two years after the release of this Order to decide whether these IP-enabled device protections remain necessary to protect consumers or whether it is appropriate to sunset the IP-enabled device protections. If the Bureau does not release an order extending these protections within three years from the release date of this Order, then the consumer protection measures concerning IP-enabled devices detailed above will no longer apply to the top-six cable operators for purposes of encryption of the basic service tier. In deciding whether the sunset is appropriate, the Bureau shall consider the costs to cable operators and the benefits to consumers, whether competitive services are available, regulatory parity between cable and other MVPDs, the state of technology and the marketplace, and cable operators' efforts to meet these commitments and ensure compatibility. The Bureau shall also consider whether the IP-enabled device protections should be extended to small cable operators.
24. Second, we add some clarifying language to address Boxee and CEA's concerns that cable operators could use licenses to limit retail device manufacturers from building compatible devices. Any license terms that cable operators require for the “standard home networking capability” used to offer access to the basic service tier in Option 1 and the “requirements necessary (including any authentication processes)” in Option 2 must be made available on a good faith basis. In adopting this “good faith” licensing requirement, we intentionally do not specify any particular technology or technology licensing model (e.g., we do not require or specify “fair, reasonable, and non-discriminatory” licensing, as that term has been interpreted in other contexts, as urged by Boxee and CEA). Third, we require the operators that choose to offer access to the basic service tier using Option 1 to “publicly disclose the DLNA profile or other protocol that is being used for the home-networking capability on such operator-supplied equipment.” Such a requirement is necessary to ensure that third-party manufacturers have the information necessary to build a device that works with cable-provided equipment. We also remind cable operators that § 76.640(b)(4)(iii) of our rules, which goes into effect in December of this year, requires all high definition set-top boxes (except for one-way, non-recording set-top boxes) to include an IP-compatible output based on an open industry standard that provides for audiovisual communications including service discovery, video transport, and remote control command pass-through standards for home networking. We believe that these additional consumer protection measures will ease the transition to encrypted service for the vast majority of the small subset of customers that rely on third-party provided IP-enabled devices to access the basic service tier.
26. Public Knowledge and Media Access Project also suggest that we tie the low-income condition to Lifeline/Linkup eligibility because Medicaid eligibility can vary from state to state. We reject that suggestion as unnecessary. As several commenters point out, Medicaid eligibility presents an easily verifiable, bright-line test, and is less likely to cause confusion among subscribers and cable customer service representatives.
27. We also reject calls from some commenters to require free equipment in perpetuity for existing subscribers, and not to limit free boxes to existing subscribers. The consumer protection measures we adopt are intended to mitigate the disruption that may be experienced by current cable subscribers. We do not agree that free equipment is necessary for new subscribers: Given the movement to digital services, many subscribers have become accustomed to leasing set-top devices, and that trend seems likely to continue. Furthermore, we agree with NCTA that unnecessarily burdensome conditions such as free devices for all new subscribers could discourage cable operators from encrypting and prevent the public from realizing the benefits that stem from cable operators' ability to remotely activate and deactivate service which benefits most subscribers. Accordingly, we do not condition this rule change on cable operators' supplying free devices in perpetuity to existing subscribers or to new subscribers.
28. Certain commenters express concern about the impact that basic service tier encryption could have on institutional subscribers and schools in particular. They suggest that the Commission extend the free-device consumer protections to institutional subscribers to prevent the rule change from placing a financial burden on them. Cable operators, however, suggest that these commenters conflate encryption with digitization, and we agree. As cable operators transition to all-digital service, these institutional subscribers will need devices to convert digital signals to analog regardless of whether the service is encrypted unless the institutional subscribers use television sets with clear-QAM tuners and only use those televisions to access the basic service tier. Furthermore, Comcast argues that cable operators establish agreements with local institutions on a case-by-case basis, and that each franchising authority negotiates consumer protection measures to meet its needs. We are persuaded that it is unnecessary to adopt consumer-protection measures
29. ACA and BendBroadband express concern about the effect that the conditions will have on small cable operators. We agree with ACA and BendBroadband that in some instances the benefits of encryption may be outweighed by the burdens of administrative upgrades to account for the new billing procedures needed to offer free devices for a limited period of time. We note, however, that the decision to encrypt the basic service tier will be a voluntary decision made at the sole discretion of the cable operator under the rules we adopt here. Thus, each cable operator may use its business judgment to decide whether, and when, the benefits of encryption outweigh the costs of upgrading billing software and providing equipment to its subscribers to ease the transition to encrypted service.
31. NCTA proposed that our rules require cable operators to notify their subscribers about encryption and free device offers at least 30 days prior to the date encryption of the basic service tier commences. Several commenters supported NCTA's proposal, and we agree that it is important to identify when cable operators must notify their subscribers about encryption. Therefore, we will require cable operators to notify their subscribers that they will encrypt at least 30 days before the date encryption of the basic service tier commences, at which time they must also include information about the transitional device requirements set forth in Section 76.630. The notice must state:
On (DATE), (NAME OF CABLE OPERATOR) will start encrypting (INSERT NAME OF CABLE BASIC SERVICE TIER OFFERING) on your cable system. If you have a set-top box, digital transport adapter (DTA), or a retail CableCARD device connected to each of your TVs, you will be unaffected by this change. However, if you are currently receiving (INSERT NAME OF CABLE BASIC SERVICE TIER OFFERING) on any TV without equipment supplied by (NAME OF CABLE OPERATOR), you will lose the ability to view any channels on that TV.
If you are affected, you should contact (NAME OF CABLE OPERATOR) to arrange for the equipment you need to continue receiving your services. In such case, you are entitled to receive equipment at no additional charge or service fee for a limited period of time. The number and type of devices you are entitled to receive and for how long will vary depending on your situation. If you are a (INSERT NAME OF CABLE BASIC SERVICE TIER OFFERING) customer and receive the service on your TV without (NAME OF CABLE OPERATOR)-supplied equipment, you are entitled to up to two devices for two years (five years if you also receive Medicaid). If you subscribe to a higher level of service and receive (INSERT NAME OF CABLE BASIC SERVICE TIER OFFERING) on a secondary TV without (NAME OF CABLE OPERATOR)-supplied equipment, you are entitled to one device for one year.
You can learn more about this equipment offer and eligibility at (WEBPAGE ADDRESS) or by calling (PHONE NUMBER). To qualify for any equipment at no additional charge or service fee, you must request the equipment between (DATE THAT IS 30 DAYS BEFORE ENCRYPTION) and (DATE THAT IS 120 DAYS AFTER ENCRYPTION) and satisfy all other eligibility requirements.
32. We believe that 30 days' notice will provide a reasonable opportunity for affected consumers to avail themselves of free device offers in advance of basic service tier encryption without unduly burdening cable operators. In addition, at least 30 days, but no more than 60 days, before the end of the free device transitional period, a cable operator that encrypts must notify subscribers that have taken advantage of the transitional period that the period is ending as follows:
You currently receive equipment necessary to descramble or decrypt the basic service tier signals (either a set-top box or CableCARD) free of charge. Effective with the (MONTH/YEAR) billing cycle, (NAME OF CABLE OPERATOR) will begin charging you for the equipment you received to access (INSERT NAME OF CABLE BASIC SERVICE TIER OFFERING) when (NAME OF CABLE OPERATOR) started encrypting those channels on your cable system. The monthly charge for the (TYPE OF DEVICE) will be (AMOUNT OF CHARGE).
33. While our rule prescribes the language that cable operators must use to notify their subscribers about encryption and the device-based protection measures, we leave open the option for cable operators to supplement this notice as they see fit. We will not require the six largest incumbent cable operators to provide special notice to their subscribers about the availability of IP-enabled device compatibility, though they must comply with existing notice requirements. Third-party IP-enabled device manufacturers have an economic incentive to ensure their customers are aware of the functions and features of their devices, e.g., provide notice to their customers in marketing materials about the need to obtain IP-enabled equipment from their cable operator and the special equipment the six largest incumbent cable operators are required to offer their subscribers under Commission rules.
34. Public Knowledge and Media Access Project proposed that we require operators to notify subscribers when their free device period is ending on each monthly bill for the three months preceding the end of the transition period. We agree that preventing “bill shock” is important, and § 76.1603(d) of our rules requires cable operators to provide written notice of any increase in price to be charged for equipment necessary to access the basic service tier at least 30 days before the increase is effective. We do not believe that the three notices that Public Knowledge and Media Access Project propose are necessary. But we are concerned that cable operators could notify their subscribers too early in the transition period to render notification essentially meaningless. Therefore, we believe it is important to define the window for notices more precisely so that affected subscribers are notified no more than 60
35. The New York City Department of Information Technology and Telecommunications (NYC DoITT) argues that, because Cablevision's encryption of its New York City systems is nascent, the Commission cannot be sure of the long-term effects that basic service tier encryption may have. Therefore, NYC DoITT encourages the Commission to make this rule change temporary. We agree that we cannot predict how our rule change will affect the cable industry and subscribers with absolute certainty. The information before us indicates, however, that this rule change will result in the substantial public interest benefits discussed above and that any additional burdens imposed on a limited number of subscribers will be tempered by the consumer protection measures adopted herein. The Commission will keep apprised of the consequences of the rule change and, if the situation develops differently than predicted, we can revisit the issue on our own initiative or in response to a petition for rulemaking. In the future, we may seek information from the operators that have chosen to encrypt to ensure that the expected benefits are being achieved and any burdens to consumers are being minimized. However, nothing in the record persuades us that it is necessary to build a sunset into the rule.
37. Relaxing the encryption rule in this manner will not impede section 624A's goal of compatibility between consumer electronics equipment and cable systems. The Commission has adopted a standard that allows for “plug and play” compatibility between consumer electronics devices and cable systems. This standard provides a clear path for device manufacturers to follow if they wish to build devices that are compatible with digital cable systems and can access all linear digital cable services. Montgomery County, Maryland argues that the CableCARD standard is not successful, and that the Commission should endeavor to relieve compatibility problems, rather than compound them. According to Montgomery County, relaxing the encryption rule will lead to compatibility problems because consumers will no longer be able to use clear-QAM tuners on non-primary television sets. However, the Commission has already adopted a solution for compatibility between consumer electronics equipment and digital cable: The CableCARD standard is intended to allow consumers to buy compatible retail devices to access all linear digital cable services as opposed to the basic-only service that clear-QAM tuners can access without additional equipment. Indeed, the Commission's cable-ready labeling rules prohibit device manufacturers from labeling their devices as “digital cable ready” unless they comply with the CableCARD standards. Thus, under our existing rules, manufacturers should not have indicated to consumers that devices could receive digital cable service unless those devices were, in fact, CableCARD-compatible. Therefore, we disagree with Montgomery County's characterization that encryption will lead to an abundance of compatibility problems due to the rule changes adopted herein. Section 624A(c)(1)(B) expressly directs the Commission to consider “the costs and benefits to consumers of imposing compatibility requirements on cable operators.” As discussed above, the costs associated with a blanket encryption prohibition in all-digital systems greatly outweigh the anticipated benefits to consumers, particularly in light of the consumer protection measures we are also adopting. Furthermore, in 2010, the Commission adopted changes to the CableCARD rules, including streamlined device approval procedures, a self-installation option, and a prohibition on price discrimination against CableCARD devices, that should increase the retail availability and the quality of experience for CableCARD devices and further increase compatibility between consumer electronics and cable service by ensuring that retail devices can access all linear digital cable services. Given these technological and rule changes, we conclude that a complete prohibition on basic service tier encryption in all-digital systems is no longer necessary to ensure compatibility between consumer electronics devices and cable service, provided certain consumer protection measures are satisfied.
38. We also conclude that the requirement in section 623(b)(3)(A) of the Act to base any price or rate standards for equipment installation and leasing on actual cost does not bar the Commission from imposing the consumer protection measures set forth in § 76.630(a)(1)(ii)-(vi) of our new rules. The commenters who addressed our legal authority agree that the consumer protection measures—which are adopted as a transitional measure and implicate a limited number of affected customers—do not run afoul of section 623 of the Communications Act, and we did not receive any comments claiming that the consumer protection measures, as structured, would violate section 623. These measures are not being imposed as a regulation of equipment rates under section 623. Rather, the consumer protection measures are being adopted pursuant to section 624A(b)(2)'s broad grant of authority to the Commission to determine “under what circumstances
44. Ordering Clauses. Accordingly,
49. As required by the Regulatory Flexibility Act of 1980, as amended (RFA), an Initial Regulatory Flexibility Analysis (IRFA) was incorporated in the Notice of Proposed Rule Making (NPRM). The Commission sought written public comment on the proposals in the NPRM, including comment on the IRFA. No commenting parties specifically addressed the IRFA. This present Final Regulatory Flexibility Analysis (FRFA) conforms to the RFA. The Commission will send a copy of the R&O, including this FRFA, to the Chief Counsel for Advocacy of the Small Business Administration. In addition, the R&O and FRFA (or summaries thereof) will be published in the
51. The need for FCC regulation in this area derives from changing technology in the cable services market. When the Commission adopted technical rules in the 1990s, digital cable service was in its infancy, and therefore the rules were adopted with analog cable service in mind. Today, digital cable service is common, and the encryption rule does not translate well in systems that offer all-digital service. Therefore, the Commission will allow all-digital cable operators to encrypt the basic service tier.
52. We recognize that some consumers subscribe only to a cable operator's digital basic service tier and currently are able to do so without using a set-top box or other equipment. Similarly, there are consumers that may have a set-top box on a primary television but access the unencrypted digital basic service tier on second or t