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FCC Proposed Rule for 2-way Cable Services

July 1, 2007

Starting today, the "integration ban" goes into effect.

Regular readers will know what that means. Your cable company will no longer be able to distribute or lease any new set-top-boxes that integrate both navigation and security functions. "Navigation" being finding and selecting programs; "security" keeps track of what programming you've paid for and does decryption for scrambled channels.

Overlaid on this issue of separation of navigation and security functions (to foster competition and provide choice for the consumer) is the cable industry's migration from one-way (unidirectional) services to two-way (bidirectional) services. One-way means programming flows to the subscriber's TV; two-way lets your equipment send information to the cable company's computers.

Two-way communications are necessary for switched digital video, electronic programming guides, video-on-demand, and pay-per-view. Switched digital is important to the cable company because it allows them to send to your house only the programming you are watching, and not all channels all of the time. It saves them bandwidth, which they can use for broadband data, voice services, etc.

Which brings us to the CableCARD, which right now is the only way to separate the security function and the navigation function in set-top-boxes and TVs. The CableCARD itself contains the security function--you plug it into either a CableCARD-enabled TV (that has the navigation function built-in) or a set-top-box.

There have not been set-top-boxes in retail stores because they would not be competitive while the cable industry was still allowed to provide its own integrated boxes (which have all been bi-directional). This will likely continue to be the case until the government adopts a two-way interface standard.

Thing is, CableCARDs are one-way. Which is why fewer TVs are available these days with CableCARD slots; the cable industry does not like them and does want to support them. The cable industry has been dragging its feet on developing an acceptable (to everyone else) two-way technology, and so now the government has stepped in to force a solution.

The FCC released on Friday (6/29) a proposed rule seeking comment on standards "to ensure bidirectional compatibility of cable television systems and consumer electronics equipment."

In other words, how do we find a way to having digital televisions that can communicate interactively with any cable system without the need for a set-top-box? We need a two-way cable programming navigation function built into the TV. It should be as simple to use as in years past when you bought your TV and simply plugged the cable in the back. It just worked. Plug and play.

The underlying technologies are now much more complex, but still doable. It's the financial issues that are causing the problems.

Cable companies want to sell new services, and they're now allowed to compete with the telephone companies in broadband data and voice services. They're looking for profits--increasing revenues and cutting costs. They have been happy to be the exclusive provider of leased proprietary two-way set-top-boxes, but as of today, the "integration ban" and the impending bidirectional standards mean good things are coming for consumers. It's been a long time coming. As FCC Commissioner Copps noted in his statement:

"This is a rulemaking that can wait no longer. It has been 11 years since Congress directed the Commission to assure that equipment used to access video programming and other services offered by multi-channel video providers are available to consumers at retail. And yet today consumers cannot walk into their local retailer and purchase a television set that will receive two-way digital cable services like VOD, PPV, and EPGs--as well as other acronyms that haven't been invented yet--without renting a set-top box from their local cable operator."

The FCC years ago sent the affected industries off to develop a solution to the problem, but all they have been doing is talking at each other with no agreement in sight.

The cable industry, represented by the National Cable and Telecommunications Association (NCTA) sent its proposal to the FCC in November 2005. Its OpenCable Application Platform ("OCAP") was presented as the foundation for two-way plug and play products. OCAP is a middleware software layer (based on the Java Execution Engine), which allows software developers to write applications and programs that would run on any OCAP-enabled device.

Unfortunately, it was written to handicap would-be competitors.

On November 7, 2006, a group of TV manufacturers and IT/computer companies presented an alternative two-way plug and play solution.

This non-OCAP approach could function with either a hardware-based conditional access technology like CableCARD, or a software-based technology. The software solution would eliminate a physical CableCARD-like device in favor of a downloadable "conditional access system" (DCAS). An "open" DCAS appears to be the goal of all parties. "Open" meaning the standard is maintained by an independent agency.

A two-way CableCARD might be an interim security function step on the way to a software-based conditional access system. Hopefully we'll go directly to the downloadable system.

The CE and IT manufacturers' proposal would also allow OCAP technology for the more sophisticated devices, but would not require it. The objective of the CE/IT proposal is to permit them to build devices that, from the consumer's perspective, are functionally equivalent to proprietary leased products.

Of note, the CE/IT proposal is premised on the proposition that "consumers should be able to view, move, store, and access cable content that they legally obtain without restriction, other than as necessary to protect theft of service, electronic or physical harm to the network, and in accordance with reasonable content protection requirements." Further, they believe that consumers should have "a right to expect that the digital cable ready products that they purchase will continue to operate as expected for a reasonable period of time."

In other words, they don't want a standards body controlled by the cable industry to obsolete a retail manufacturer's products in favor of their own. For instance, that 50" flat-panel you just bought (oops, we just changed the standard--you're going to need a set-top-box to make it work again).

The FCC is seeking comments on both of these proposals. They also are considering whether to make other video providers (satellite, telephone company systems, etc.) subject to any rules they adopt to promote bidirectional compatibility between cable television systems and consumer electronics equipment.

Comments will be due in August, and "reply comments" two weeks later. We should then know better how this is going to shake out, or at least understand the magnitude of the FCC's task.

The Commission is expecting a lot of people will be replacing their analog TVs with new digital sets during the final count-down to the end of analog, rather than opting for converter boxes. They feel the urgency: "Ideally, we would like consumers to be able to purchase two-way digital cable ready devices at retail by Q4 2008, in time for the final holiday season before the February 17, 2009 over-the-air digital television transition."

They know people would rather not have cable boxes.

Buy that big widescreen TV, take it home, plug the cable in the back and turn it on.

- - -

The FCC this past Friday also released an order granting additional conditional waivers to the "integration ban" to many other mostly small cable companies as an incentive for them to build-out all-digital distribution systems. The FCC is concerned that many cable systems that are partly or all analog cannot distribute digital/HD broadcast programming to their subscribers who have purchased digital TVs. The continued use of inexpensive integrated set-top-boxes allegedly frees up money for the cable companies to make the switch to digital.

As most all cable companies already had plans to switch to digital distribution systems, it was a no-brainer to put that in a waiver application.

The waivers would also seem to be an implicit acknowledgement that the cable companies are unable to comply with the integration ban because most all of them have done nothing to make the switch to non-integrated boxes in advance of the deadline. And there's that one-way/two-way mess.

Once a universal plug and play standard has been adopted for bidirectional services, expect to see the situation start to change. Most people who already have digital cable service will not see anything different for years; the old integrated boxes now in subscribers' homes have been grandfathered.