Cable Requests Box Summit

Cable lobby guns are itching to face-off with TV and chipmakers in front of FCC FCC over CableCARDS. The National Cable Telecommunications Association fired off two ex parte filings to the commission this week over the July 2006 deadline that would prohibit cable companies from distributing set-tops boxes that include CableCARD functions; aka, the separate security requirement.

NCTA Chief Robert Sachs beseeched FCC Chairman Michael Powell to convene a meeting between cable and consumer electronic techies.

"The purpose of such a face-to-face meeting would be to clarify a number of issues as the commission considers whether to maintain, eliminate or defer the separate security requirement," Sachs wrote.

Sachs and Co. are on a tear because the FCC previously said it would reassess the requirement this month.

The separate security requirement came out of the 1996 Telecom Act, which directed FCC to make cable set-tops (or something comparable) available as a retail item. Cable set-top boxes have traditionally been the proprietary domain of cable operators, at monthly leasing fees of $4 to $7 a pop. Based on the number of "premium" cable subscriptions for which a box is necessary (50 million, according to Kagan Research), set-top leases generate from $2.4 billion to $4.2 billion annually across the cable industry.

In general, CableCARDS lease at less than $2 a month, although consumers can also buy them. CableCARDS contain the conditional access functions of a set-top box and work with plug-and-play TVs, i.e., those with built-in, non-secure set-top features.

Ironically or otherwise, the cable and CE industries engaged in a big group hug in 2003 over reaching the CableCARD agreement. Now, CE makers say neither the cards nor the TVs are going to sell worth a hoot until the separate security requirement kicks in. Cable begs to differ, for more than just a few billion reasons.

Neal Goldberg, chief counsel at NCTA, followed up the Sachs entreaty with a nine-pager to his counterpart at the FCC, Jonathan Cody, legal advisor to Powell.

"Intel, Microsoft and TiVo argue that the retail cost to consumers for [plug-and-play devices] will decline dramatically if cable operators are required to rely on and make volume purchases of CableCARDS for their leased set-tops," Goldberg wrote. "That argument bears no relationship to reality. The actual retail devices that CE manufacturers are bring to market cost $1,000, $2,000 and up – a market on which the lease cost of a CableCARD has no effect."

And another thing, Goldberg wrote, the cost of CableCARD deployment far exceeds the price of the card -- "The per-unit cost to a cable operator of a CableCARD-Host combination would be at least $73 more than the cost of an integrated set-top box with the same functionality."

Goldberg did not say if that included truck rolls or the absence thereof. CableCARDS offered the promise of eliminating truck rolls, but because the cards don't always work flawlessly in different brands of TVs, cable operators have been stuck with fixing them.

Goldberg reiterated the NCTA's desire to eliminate the separate security requirement, or "at the very least" postpone it for 18 months.