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FCC OKs Modified Plug-and-Play Deal

Consumers should be able to buy cable-ready digital-TV sets starting next
spring under rules adopted Wednesday by the Federal Communications Commission
that largely codified last December's compatibility agreement between top cable
and consumer-electronics companies.

In a unanimous vote, the agency laid the groundwork for the purchase of TV
sets that display digital-cable programming, including scrambled premium fare
from Home Box Office and Showtime Networks Inc., without the need for set-top
boxes -- devices many consumers refuse to lease.

The FCC's hope is that consumer acceptance of cable-compatible digital-TV
sets will drive the transition to all-digital television and hasten the return
of valuable analog spectrum licensed to 1,600 local TV stations.

"This is a great result for consumers. It's one less remote control for
high-definition TV," said FCC chairman Michael Powell, who has pushed cable and
other distributors to expand the rollout of HDTV since April 2002.

Both the National Cable & Telecommunications Association and the Consumer
Electronics Association, key members of which brokered the deal, applauded the
FCC vote.

"The FCC's endorsement of these agreements sends a positive signal to all
involved in the DTV transition to work together to voluntarily resolve
outstanding issues," NCTA president Robert Sachs said.

Although both the NCTA and the CEA asked for as-is adoption of the agreement,
the FCC didn’t comply.

For example, the agency bowed to complaints from broadcasters that the MSO-CE
agreement contemplated cable-ready TV sets that did not include off-air digital

"The FCC deserves enormous credit for adopting today's plug-and-play decision
and, particularly, for insisting that digital-TV tuners with
over-the-air-reception capability be included in digital 'cable-ready'
television receivers," National Association of Broadcasters president Edward
Fritts said in a prepared statement.

Kenneth Ferree, chief of the FCC’s Media Bureau, indicated that the agency to
some extent accommodated the concerns of Starz Encore Group LLC, which attacked
the MSO-CE agreement for classifying subscription-video-on-demand as a service
that consumers would be barred from copying even once.

Ferree said that whether SVOD is a "copy-never" service will be decided
between copyright owners and distributors, with both entitled to file complaints
at the FCC.

"The question will be answered in individual cases when you'll be able to see
what the SVOD service is. Does it look more like a traditional cable service, or
is it something that might warrant a higher level of copy protection?" said
Ferree, adding that the agency was determined not to adopt rules that somehow
altered copyright law.

EchoStar Communications Corp. and DirecTV Inc. wanted to be able to opt out
the agreement because they were excluded from the industry negotiations.

The agreement bans the use by cable or satellite of selectable output
controls. The CE firms insisted on the ban because they wanted to ensure that
millions of external analog devices (such as VCRs) could capture converted
digital programming provided by cable and direct-broadcast satellite.

"Consumers will be the victims of this hasty decision as they will be unable
to acquire equipment with the kinds of features that are beneficial to everyone,
and they will be forced to shoulder the burden of hidden costs," EchoStar
spokesman Steve Caulk said in a statement.

Ferree said the DBS industry was not excluded from the debate at the FCC.

"The parties-at-the-table thing doesn't move me," he added. "The notion that
somehow the DBS industry was frozen out of our rulemaking process is just