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CableCARDs Likely to Still Carry Lease Fee

When the cable industry and consumer-electronics makers sat down to hammer out a plug-and-play agreement, one of the end-game benefits was that consumers would not need a digital converter in order to receive cable service.

That will soon be true for consumers who only want analog and digital services, including basic-cable networks and even premium channels such as HBO and Showtime.

But a couple of things are missing from that picture. First, those consumers won't have access to such interactive features as video on demand — that will have to wait until an accord on two-way services is reached.

And consumers won't be able to get the cable operator's interactive programming guide: Gemstar-TV Guide International Inc.'s TV Guide Interactive (in most cases), Pioneer Inc.'s Passport or Scientific-Atlanta Inc.'s SARA guide.

Consumers who choose plug-and-play devices will be able to get a guide that resides in the TV built by a consumer-electronics manufacturer, and some of those companies have contracted with Gemstar, for instance, to include TV Guide Interactive.

But the deployed version of those guides will likely be more elementary than the server-based guides available via set-top.

And one more thing: Consumers shouldn't necessarily expect not to see all those lease-type costs on their cable bills.

True, consumers won't have to pay a converter fee. But it appears likely there will be some sort of charge for use of the CableCARD.

Operators don't yet know what that price will be, and Motorola Inc. and S-A have been tight-lipped about how much CableCARDs will cost MSOs.

It's conceivable that if the costs are low, MSOs might not pass them along. But anything above $20 or more will likely cause MSOs to charge for the card to recoup the expense.

Unlike set-tops, CableCARDS have not been classified as a "regulated" item by the FCC. All set-tops that cable operators deploy are considered part of an "equipment basket," under FCC rules.

Those rules provide a formula that gives MSO an idea of what they can charge for the set-top. Typically, monthly fees range between $2 and $5.

A National Cable & Telecommunications Association spokesman said: "We expect that the CableCARDs will be leased because they do contain embedded security, and under the FCC's navigation device rules, the operator provides a separate security device to the customer for use in a retail device."

"We're going through the steps as if [CableCARDs are] a regulated item," said Cox Communications Inc. director of marketing for video services Kevin Hill.

Hill said the card will be listed as a separate line item on bills, and will likely be cheaper that current set-top lease fees "depending on card costs, but their will be a cost, and thus a charge."

Cox doesn't expect many subscribers will be hit with that charge, because most people will take a higher-level digital package and it plans to waive the fee for those customers.

"We believe 90% of our customers are going to want our interactive features, so they will still need a cable box," Hill said. "Of the 10% that won't want a cable box, we think 90% will want a sports tier or premiums. We are going to put those guys in the same pricing structure for their programming packages as those customers with set-tops and deduct the price out of that."

That would mean about 10% of subscribers might see a CableCARD line item on their bill, "and we'll try to incent them to take more channels," Hill said.

MSOs plan to help train retail sales staffs on options and packages.