Watch out: Here comes the “Son of CableCard.”
The cable industry invented the CableCard to meet federal requirements that TV sets and other electronic devices sold by companies independent of cable operators be able to access digital-cable programming. And, at the insistence of the consumer electronics industry, cable operators must now use CableCards in nearly all of their own set-top boxes.
Now, operators are warning that if some consumer-electronics makers have their way, CableCard Jr. could sprout into a much nastier beast than its dad — and could this time gobble up hundreds of millions of dollars, they claim.
Baloney, say consumer-electronics companies: Cable is, as usual, simply loath to give up its control over which devices consumers can hook up to a cable system.
A key question now before the Federal Communications Commission is this: What's the right way for cable operators to provide access to their interactive services — such as video-on-demand and pay-per-view channels — to independently made TVs and set-top boxes?
Cable has proposed one model. The Consumer Electronics Association has floated another. What's up in the air is how the FCC will come down.
That has become no routine matter. In the past two years, agency chairman Kevin Martin has pursued an activist agenda that tried to force cable operators to make basic-cable networks available for sale to consumers on an a la carte basis.
Then last month, Martin tried to make the case that the industry was in need of wider regulation, citing a set of statistics that seemed to indicate cable operators' grip on multichannel-video customers across the country had for the first time exceeded 70%. The rest of the panel did not go along.
Now, the “two-way” cable issue is on the agency's plate. What happens if the Martin FCC decides against cable in this case?
The CEA says consumers will win. But cable lobbyists say the industry would be forced to spend a big chunk of change to comply — resulting in confused, irritated customers who'll find that TVs or DVRs touted as “cable-ready” can't deliver all the services they expect.
Cable has proposed that if the FCC codify rules for two-way access, those regulations should be based in the near term on the OpenCable Platform. CableLabs has developed that set of specifications over the past 10 years for middleware that runs in set-top boxes, TVs or other related devices.
The cable industry said it has lined up support for the technology from several CE companies, including LG Electronics, Panasonic and Samsung Electronics, as well as from major movie studios and other content owners. It says major operators have committed to revamping their systems by the end of 2008 to work with any OpenCable-compliant device.
The technology is supposed to let, say, a TV embedded with OpenCable code access all the same features and interactive applications that are available to an operator-supplied set-top box, such as the on-screen program guide, video-on-demand or interactive ads.
In the other corner: the Consumer Electronics Association is pitching something it is calling Digital Cable Ready Plus.
“DCR Plus” is envisioned as an extension to the CableCards. The proposal would standardize access to four cable services that require two-way communication: video-on-demand, on-screen program guide data, switched digital video channels and pay-per-view. CEA says DCR Plus is a lightweight complement to OpenCable and contends that the two plans aren't mutually exclusive.
NO COMMON GROUND
There's been virtually no common ground between the two camps. Cable and consumer-electronics companies have been trying to hash out the details of providing two-way cable products since 2003 without success. Last fall, the CEA said the talks were at a “stalemate.”
In June, the FCC issued a notice of proposed rulemaking, seeking comments on standards for two-way, plug-and-play devices for cable systems. The indication is that the agency is prepared to intervene in the stalled negotiations and establish new regulations.
The notice elicited a deluge of comments — on all sides of this contentious issue — with more than five years of exasperation splashed across hundreds of pages. CEA's proposal is a lobbying tract, not a practical solution,” the National Cable & Telecommunications Association said Sept. 10.
Among the NCTA's objections: DCR Plus would be able to access only a subset of digital cable services, excluding such products as interactive advertising, caller ID on the TV, digital video recorder programming via the Web or services such as Time Warner Cable's “Start Over” (which provides replays of some shows within a short window of time).
For that reason, the NCTA said, a DCR Plus device would be “obsolete even before it rolls off the assembly line.”
Cable's lobbying group also claimed the plan does not adequately protect content, won't be ready by the February 2009 digital-TV transition and relies on “standards” that have not yet been created.
A fundamental problem with DCR Plus is that it would require cable operators to build totally new headend-based infrastructure to support the services — but with no guarantee any devices will actually use it, said NCTA vice president and general counsel Neal Goldberg.
“If all the risk were on the CE manufacturers, we'd say, that's fine, the more kinds of devices the better,” Goldberg said. “The problem is that under their proposal CE manufacturers aren't required to make a single device.”
On the CEA side, Sony Electronics complained in a Nov. 29 filing that the cable industry's OpenCable Platform is a “one-size-fits-all/take-it-or-leave-it solution that is designed to further entrench cable's market power by all but foreclosing competition and innovation.”
OpenCable requires too much processing power and memory to feasibly use in low-end and mid-range consumer electronics, said CEA vice president of technology and standards Brian Markwalter. “OpenCable is a Swiss Army knife,” he said. “There's a whole middle ground — 80% of the customer base — that doesn't need what is essentially a computer in the device.”
In addition, he said, CE manufacturers need a timeline for when cable will support OpenCable. “How else can you market a TV unless you know when one of its biggest features will actually plug in and work?” Markwalter asked.
To which cable responds: We have. By the end of 2008, the NCTA said, Comcast, Time Warner Cable, Cox Communications, Cablevision Systems and Bright House Networks will have OpenCable deployed in all their divisions, representing 91 million homes (of the nation's approximately 113 million TV households) in 145 markets. Time Warner said it's already rolled out more than 150,000 OpenCable-based set-tops.
The CEA, in effect, said it will believe that when it sees it.
Amid the sniping, how will Martin and the FCC's other commissioners come down on this issue?
If recent history is any guide, when cable is in favor of an issue, Martin is against it, with rare exception. In 2008, cable may find itself facing a mandate to implement DCR Plus, and could even be required to ensure at least 20% of its set-tops use those protocols as indicated under the “common reliance” requirement of the CEA's plan.
But the FCC is a different place today. Martin overplayed his hand in attempting to invoke the so-called 70/70 rule.
And the chairman can't impose the CEA-backed approach through the agency's Media Bureau, which administered the “integrated set-top ban.” That's the rule mandating that, as of this past July 1, almost all the digital set-tops cable deploys must have a removable CableCard to control access to programming.
In the case of CableCard Jr., getting DCR Plus put into effect would require a vote by all five FCC commissioners. Martin would need to get Democrats Michael Copps and Jonathan Adelstein, as well as Republicans Robert McDowell and Deborah Taylor Tate, to unite.
Cable has pressed the issue in the flesh. In late October, the CEOs of the two biggest cable operators — Comcast's Brian Roberts and Time Warner Cable's Glenn Britt — personally lobbied Martin and other FCC commissioners to reject DCR Plus and emphasized the industry's commitment to OpenCable.
As part of its lobbying efforts, the NCTA has for the past two years trumpeted the early participation of three major manufacturers in OpenCable: LG, Panasonic and Samsung. Cable has signed 28 OpenCable licensees to date. Panasonic, for one, has pledged to introduce OpenCable-based TVs in time for the 2008 holiday shopping season.
This summer, OpenCable won the support of chipmaker Intel, which had opposed the specification's licensing terms. And last month, cable secured support from another erstwhile OpenCable foe: TiVo.
The DVR maker reached an agreement with cable on a plan for a retail digital video recorder that will use OpenCable after cable agreed to make certain “clarifications and adjustments” to the technology, TiVo said in a Nov. 27 FCC filing.
TiVo said an OpenCable-based TiVo DVR would have a “TiVo mode,” including switched digital video channels, with the TiVo user interface and full DVR functionality, as well as a “cable mode” displaying all cable programming services with the cable operator's user interface but without DVR functionality.
With those adjustments, the company said, OpenCable will provide faster time-to-market and allow TiVo devices to receive all of cable's two-way services — making the cable solution preferable to DCR-Plus.
The issue of which interface is displayed — the CE device's, or the cable operator's — is a bone of contention. Sony, for example, asserted that OpenCable “disenfranchises consumers by continuing to allow cable to dictate the 'look and feel' and many of the features and functions of consumer-owned plug-and-play devices.”
Said NCTA's Goldberg: “The only control cable wants is to ensure cable services are presented in a way they're intended.”
Also last month, TiVo and the NCTA announced that major operators will offer TiVo customers an adapter that will allow the digital video retrievers to access switched digital video channels. CEA's Markwalter said he was encouraged by cable's development of the switched-video resolver. “That indicates that if they wanted to get it done, they could,” he said.
But providing standardized access to existing switched video services is different from doing the same thing for VOD, pay-per-view or electronic program guides, which are far less standardized than switched video, said NCTA senior vice president of science and technology Bill Check.
Different cable systems “all have different ways of approaching VOD — and they have intellectual property associated with it,” Check said. “You have a huge mess to work out all the architectural issues.”
Ultimately, cable operators back an “all-MVPD” approach, covering all “multichannel video-programming distributors.”
Comcast senior vice president of strategic planning Mark Coblitz in October showed a mocked-up design of an all-MVPD device. About the size of a paperback book, it would have inputs for different video sources (e.g., a coaxial cable or Ethernet wire) and an output to an HDTV. The hypothetical device would provide a way for CE devices such as TV sets to access interactive services from any video distributor, including satellite or telco operators.
Some policy-makers believe innovation will result from uncoupling cable devices and services. To FCC commissioner Copps, letting third-party devices access cable networks is analogous to the agency's Carterfone decision in 1968 that freed consumers from the having to lease AT&T's black rotary-dial phones.
“This reform unleashed a flood of less-expensive phones and paved the way for innovations like the fax and answering machine,” he said.
Cable operators, though, say the Carterfone comparison is specious. First, the telephone system in the late 1960s was a nationwide monopoly with well-defined standards, unlike today's cable systems, which diverge from one another in their design and technical underpinnings.
What's more, in the Carterfone decision, “the commission left it to telcos to design their own services in whatever manner they chose,” Comcast said in FCC comments, “a right that CE interests brazenly ask the commission to take away from cable operators.”
Ted Hearn contributed to this report.
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