Modem maker Zoom Telephonics has told the FCC that if it decides to close the set-top box docket--as some high-profile Republican legislators have requested -- it needs to resolve one part of that docket elsewhere.

Zoom points out that the FCC declined to deal with navigation device modem billing and marketing practices--as Zoom has asked it to do--in two other proceedings, noting that it was part of the set-top proceeding.

Zoom notes that the letter from House Energy & Commerce Committee Chairman Greg Walden (R-Ore.) is focused on the changes to the "technical requirements relating to the attachment of set-top boxes." The FCC under then Chairman Tom Wheeler proposed allowing those devices to access and disaggregate cable content and data.

"Should the Commission decide to close, or to defer action, on Docket 16-42, the cable modem billing and marketing issues will remain," it said in a letter to the commission. "Prompt resolution of them will contribute to maintaining what it currently a robust retail market for cable modems, and will remove uncertainty for consumers, cable operators and equipment manufacturers."

FOR MORE:News on the FCC's set-top box plan

At press time midday Thursday (Oct. 18), no one but FCC chairman Tom Wheeler had voted to approve either the set-top box order or business data services (BDS) combination order and Second Further Notice of Proposed Rulemaking, according to an FCC source speaking on background.

Both items were circulated for commissioner votes, and more work in the case of set-tops after not making it onto public meeting final agendas. Set-tops was circulated back on Sept. 29, BDS on Oct. 6. The chairman's "aye" is implicit in his circulating the items for others' approval, so each needs two more votes, likely only from the two Democrats on the panel.

Both the BDS and set-top items got makeovers after pushback from numerous quarters, and both were billed as more in line with alternative proposals offered up by NCTA - The Internet & Television Association and others. But in neither case were critics assuaged, arguing the items' apparent pivots -- toward app-based and more protective of content and contracts in the case of set-tops, less of an opt-in mandate for privacy in the case of broadband -- were deceiving.

The chairman could still add either item to the Oct. 27 meeting for a public vote, or push set-tops to the November meeting if it still needs work. The October meeting already has a planned vote on the chairman's proposal on a broadband privacy regulatory framework, another item that has drawn a lot of heat from industry and the Hill.

With many Hill Democrats calling for more transparency on the set-top item, holding a public vote on set-tops would be the more politic course if and when the chairman lines up two more votes for that item

WASHINGTON — Federal Communications Commission chairman Tom Wheeler may have shifted the agency’s position on new set-top box rules as he works toward an order he has said he plans to put to a vote by year-end.

His office had no comment, but FCC staff conversations suggest he could be moving toward allowing programming from third parties to remain under the control of a multichannel video programming distributor (MVPD) app. That’s according to ex parte conversations from Hollywood studios concerned about protecting their content.

PROGRAMMERS’ PUSHBACK

Wheeler has continued to maintain that whatever the FCC does would honor programming contracts and copyright protections, but programmers have remained skeptical.

Democratic commissioner Jessica Rosenworcel has made it clear that the agency will need to shift gears to get her vote, so a move toward a more programmer-friendly approach could be a way to secure it.

According to 21st Century Fox, The Walt Disney Co. and CBS, in ex parte filings following conversations with top Wheeler aides and other FCC staffers, the meetings were sought by the chairman’s office. FCC staff “indicated that they were seriously considering a revised approach to this proceeding that would ensure that all of programmers’ valuable content would remain inside of, and under the control of, apps developed exclusively by multichannel video programming distributors (MVPDs) with whom programmers have a direct contractual relationship,” the filings said.

Whether cable programming is provided via streams that can be repackaged by third parties or in a separate app that can reside next to others in a search menu has been a major sticking point.

The National Cable & Telecommunications Association describes its approach as “offering a common-denominator app enabling any manufacturer to build a nationally portable device that can receive service from all of the large MVPDs, while continuing to support the market for business- to-business agreements and native apps.”

According to Fox and Disney, which made a joint filing on their meeting, “the commission staff stressed that third-party platforms, when distributing these MVPD apps, would be required to honor and abide by all of the terms and conditions set forth in programmers’ licenses with MVPDs.”

That is the studios’ major ask, so a revised approach with such a guarantee could bring programmers into the set-top rule camp. The chairman’s office declined to comment on the filings or their importance.

But the programmers also said that any third-party content licensing would have to be negotiated directly with programmers.

The FCC’s primary goal, Wheeler has said, is to provide a competitive market for set-tops, given that 99% of boxes are still leased by the cable companies.

A secondary goal, though, is to wed online and traditional video to help make the former a more compelling competitor, another prime component in Wheeler’s mantra of “competition, competition, competition.”

Even as the programmers were meeting with the FCC, the National Cable & Telecommunications Association was taking aim at the force massed against its in-app approach to providing content to third parties. A spokesman declined to comment on whether or not the programmer filings suggested the FCC was moving closer to NCTA’s approach.

“These critics continue to propose complex technology regulations designed to meet their goal of converting copyrighted content into open-source programming for their own commercial use and monetization,” the NCTA said. “Their recommendations would undermine copyright as thoroughly explained by the U.S. Copyright Office, violate consumer video privacy, and impose staggering costs on consumers, networks, program diversity, and innovation.”

COMPROMISE AHEAD?

The Computer & Communications Industry Association — whose members include Amazon, Dish Network, TiVo and Google (a driving force behind the FCC’s “unlock the box” approach to creating a competitive set-top marketplace) — recently offered up what it signaled was its own, more app-centric “compromise” between the FCC’s approach and the NCTA’s app-based plan.

But in a white paper filed with the FCC, the CCIA appeared to keep a thumb squarely on the FCC’s side with the title Unlock the Box: How to Address Opposition and Boost Competition. The CCIA said one solution could be a “digital certificate” for third-party boxes “tied to contractual language pertaining to advertising, channel number preservation, and privacy compliance.”

The white paper reads mostly like a defense of the FCC proposal, echoing old criticisms of the NCTA alternative as “light in detail and heavy with loopholes” and likely to “box out” competition, while the FCC proposal is described as a solution that gives consumers “real choice.”

The CCIA’s plan would still require programming streams to be provided outside an MVPD-controlled app, which is a nonstarter for cable operators.  

Shares in Arris were up more than 7% in after-hours trading Wednesday after the company turned in a solid Q2 and announced revised guidance that comes in at the higher end of previous revenues expectations and net income that’s trending above earlier guidance.

Q2 was Arris’s “best quarter ever,” company chairman and CEO Bob Stanzione declared on the company’s earnings call.

Q2 results, which include Arris’s acquisition of Pace plc in January, saw revenues climb to $1.73 billion, from $1.26 billion a year ago, and GAAP net income of 44 cents per diluted share, up from 11 cents. For Q3, Arris expects revenues of $1.7 billion to $1.75 billion, and GAAP net income of 28 cents to 33 cents.

“I'd say that the macro environment for our business is looking good and holding steady,” Stanzione said, holding that U.S. cable consolation “seems to be done” for the time being.

He also sees U.S. telco and satellite markets improving as AT&T/DirecTV look to regain momentum, Verizon gets past the disruption of its wireline workers strike, and Frontier digests its acquisitions of FiOS properties and looks to accelerate marketing programs.

Long  Live The Set-Top Box

Arris saw a 40% surge in customer premises equipment sales in Q2 versus the prior year period, driven by the Pace acquisition.

Broadband CPE slumped 8%, but video CPE revenues soared 85% year-on-year amid solid demand across telcos, cable operators and satellite TV operators.

Stanzione said the debate centered on the FCC’s pursuit of new set-top rules have cast a cloud on the set-top market that isn’t warranted.

“I think the evidence right here [in the financial results] is that set-top boxes are not going away,” Stanzione said. “We are designing new, next-generation set-tops for major cable operators around the world as we speak. We believe that video set-tops will remain a significant component of our business for quite some time into the future." 

On the network side, sales of Converged Cable Access Platform (CCAP) and PON products were up year-on-year, but down from record levels in Q1. Notably, shipments of downstream software licenses down significantly  as capacity previously purchased was being deployed and utilized across our customer networks, according to Bruce McClelland, president of Arris’s Network and Cloud division.

He said Arris has begun lab and certification testing on a new “Gen2” upstream linecard that is on track for full field trails later this quarter.

McClelland also said Arris has made “great progress” on remote PHY products that place the physical access layer of the DOCSIS CMTS into the fiber node.

That module can either go into an existing Arris fiber node and connect via the E6000 chassis, or ultimately to a “virtual DOCSIS core” that is under development, and will likely compete with a virtual CCAP that Nokia will be offering following its acquisition of Gainspeed.

Arris-Comcast Warrants Agreement 

Arris also shed some light on a warrant agreement with Comcast announced earlier this month that spans the supply of products for the MSO’s video (including X1), high-speed data and voice services, including wireless gateways.

Dave Potts, Arris’s CFO, said the warrants are for up to 8 million shares over 2016 (up to 3 million shares) and 2017 (up to 5 million shares) based on sales and product mix targets. It has some accounting impacts, as Arris must record a fair value as a reduction to revenue. In Q2, Arris recorded $4.3 million related to the first six months of sales. 

Even if Comcast were to earn the full lot of shares, its "ownership postion would still be below 5%," Arris told Light Reading when the warrants agreement was announced. 

Warrants agreements are becoming more common between Comcast and its key vendors.

In March, Universal Electronics struck a warrants agreement with Comcast as an extension of the vendor’s arrangement to develop new products in partnership with the MSO. That followed a development and supply collaboration renewed earlier in the year in which UEI supplies the voice remote for Comcast’s X1 platform (Comcast announced today that it has deployed about 8 million of those), and positions it to provide products for Xfinity Home, the MSO’s home security and automation service, as well.

The Digital Living Network Alliance (DLNA) this week released the 4.0 version of its guidelines for secure, in-home streaming to interoperable TVs, PCs, mobile devices.

The latest version, it said, solves a “media format not supported” problem between devices, addressing a long-standing complaint from consumers found with some media files stores on their servers.  DLNA said it’s addressing that by mandating transcoding on the media server.

The 4.0 version, which has been submitted for adoption as a global standard by the International Electrotechnical Commission (IEC), also adds support for Ultra HD video streaming  and HEVC video compression, IPv6, and elements that make supported devices more energy-efficient.  

Products that support DLNA 4.0 will be marked with a new logo.

“With the new Guidelines and logo, consumers will be able to buy products that they know will work together to the highest levels of compatibility while supporting the latest high-definition media formats and energy-saving features,” Duncan Bees, VP of technology and strategy at DLNA, said in a statement.

Comcast, Verizon, Broadcom, AwoX, Dolby Laboratories, Intel, LG, Panasonic, Time Warner Cable (now part of Charter Communications), and Sony are among leading members of DLNA.

MSOs, Cox Communications and Comcast in particular, have been focusing on VidiPath, DLNA guidelines that enable  MVPDs stream their services associated interfaces securely over the home network to other VidiPath-compatible, customer-owned devices through a downloaded MVPD app. VidiPath was one of several options presented to the FCC during the Commission's pursuit of new set-top rules aimed at succeeding the CableCARD.