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Networks Back Cable's Basic-Tier Encryption Push

Companies representing the four biggest broadcast networks -- CBS, NBCUniversal, News Corp. and The Walt Disney Co. -- urged the FCC to enact a rule change allowing cable operators to encrypt basic-tier programming in all-digital systems.

"Encryption will provide significant public interest benefits by ensuring the secure delivery of high-value broadcast content on the basic service tier and facilitating further innovation in cable systems," the media companies wrote in a March 8 letter.

The Federal Communications Commission last October proposed letting MSOs encrypt basic-tier digital TV, citing the consumer-friendliness of remote service activation and deactivation and the advantages to the industry of more easily preventing theft of service.

The CEOs of the largest U.S. cable companies sent a letter to the FCC last week on the issue, telling the agency that the change would provide them greater incentive to migrate to all-digital networks and that nearly all subscribers would have equipment necessary to receive the signals.

The media companies said it is "clearly in the public interest and in the national interest to protect basic tier content with encryption."

"The public will benefit because failure to protect basic tier content could lead to the migration of high-quality video programming to other distribution channels outside of the basic tier where the content would be better protected but unavailable to those consumers who subscribe only to the basic tier," the companies wrote.

The FCC has proposed that cable operators provide subscribers devices that can decrypt the basic service tier for a period of time following a cutover to encryption.

CBS, Disney, News Corp. and NBCU pointed out that pay TV is already ubiquitously encrypted by satellite, telco, IPTV and online video providers.

"As content companies, we support allowing cable operators to have the same ability to fully encrypt their digital programming, including the basic service tier," they said.

Critics of the rule change contend that putting MSOs on parity with other providers by allowing basic-tier encryption would force consumers to rent set-tops and limit choice, because they would no longer be able to receive "clear QAM" digital TV.

For example, Internet-video startup Boxee has claimed in filings with the FCC that as many as 40% of its customers who use the Live TV adapter with the D-Link set-tops based on its software would be forced to pay more for cable set-tops if the encryption ban were lifted. The New York-based company markets its products as an alternative to paying for cable TV.

To prevent theft of service without digital encryption, MSOs must install "traps" at a customer's premises, which block access to nonsubscribers. That requires costly and time-consuming truck rolls that would be eliminated with encryption in all-digital systems, according to the industry.

Boxee and others have questioned the consumer benefits of allowing the FCC rule change, noting that traps are installed outside of a customer's actual residence. But the National Cable & Telecommunications Association has said technicians frequently must schedule customer service visits anyway to ensure service is working properly.

Cablevision Systems partially converted its New York City system to encrypted basic in July 2011 after receiving an FCC waiver of the encryption ban. In a filing with the commission, Cablevision said less than 0.1% of approximately 400,000 subscribers affected by the change -- about 400 -- requested a free set-top or CableCard.