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ACA: FCC Set-Top Proposal Is Illegal

The American Cable Association says it thinks the FCC's new set-top box proposal is an illegal overreach of its authority and warns the commission not to proceed, but adds that if it does, it should only apply that illegal proposal to larger MVPDS, not its smaller members.

ACA did not promise to sue the FCC if it does exempt smaller MVPDs from the proposal, but signaled that was the likely outcome.

That came in a call with reporters Thursday (April 21) in advance of comments it will be filing by the April 22 deadline. ACA SVP Ross Lieberman said he wanted to make it clear that the FCC should not adopt the proposal, period. But that if it does, it could still achieve the NPRM's goals by applying the regs only to larger MPVDs.

He pointed out that those larger players serve 93% of pay TV subs, which is more than enough to make a new technology self sustaining, and that those players were historically the ones to roll out new devices.

Asked whether ACA was saying it was OK with illegal regulations so long as they were applied to larger MPVDs, Lieberman said no. "We're saying the FCC should not adopt its proposal. But if the FCC moves forward with what we believe is an unlawful proposal, it should only apply the unlawful proposal to larger MVPDs."

He added that he was sure the larger MVPDs would then take the FCC to court.

Asked whether ACA would take the FCC to court if it did not carve out smaller operators, Polka said they had not been shy in the past, but did not take such a challenge lightly given the cost expense and use of resources. Polka said he was hopeful he would prevail with their arguments at the FCC, though he conceded it was an uphill battle, and the "rebuttable presumption" was that the FCC would pursue its illegal course. "Look, we're not going to hesitate to take this to court if we need to," added Liberman, with Polka strongly seconding that.

ACA does not want the FCC to apply the rules to any system serving 600,000 or fewer subs and not affiliated with an MVPD serving more than 1% of all MVPD subs nationally, or to MPVD that does not have a market cap over $100 million.

FCC Chairman Tom Wheeler, joined by the other two Democratic commissioners, have proposed requiring cable operators to make programming and data from set-top boxes available to third party device and app makers to promote competition.

ACA President Matt Polka, a hockey fan, said the FCC's set-top box proposal "needs to be sent to the penalty box."

He also said ACA members, contrary to FCC assertions, already make "cutting edge and reasonably priced" boxes available to their customers.

The FCC has suggested leased boxes are a cash cow being shielded from competition, but ACA says that is hardly the case. Thomas Cohen, an attorney with Kelley Drye counseling ACA, said that ACa members are making "little if any margin on these boxes. It is just not the case that we are overcharging."

But on the subject of the cost of boxes, Cohen said that they had a hard time determining the cost of compliance, and that there were a lot of unknowns. But given that, it said that most of its members, who use QAM digital technology not IP, would need to put a $350 gateway device in each home to accommodate the third-party navigation device the FCC is proposing, plus the "nontrivial" cost of developing the box, plus the cost of truck rolls or servicing the equipment, in addition to which each system needing the gateways would have to pony up between a half-million and a million dollars for a compliance security system.

For smaller operators, that would come out of capital expenditures not being spent on other things, and could even cause some systems to shutter.