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ACA Urges FCC To Craft Basic Tier Encryption Rules That Do Not Disadvantage Smaller Cable Operators

Trade Group Fears Cost Burdens Of Related FCC Mandates Would Make Encryption Less Attractive For Small Operators

PITTSBURGH, December 14, 2011 - To ensure that all cable operators, including smaller ones, have an equal opportunity to realize the efficiency benefits of basic tier encryption, the Federal Communications Commission should adopt better-tailored consumer protection measures that take into account the unique cost burdens of the independent cable community, the American Cable Association said.

"Although the FCC's proposed encryption conditions may be suitable for many larger and mid-sized operators, for smaller operators they would impose higher costs and burdens that would reduce the benefit of basic tier encryption," ACA President and CEO Matthew M. Polka said. "By adding some flexibility to its rules to take into account the different circumstances faced by smaller operators, the FCC can ensure that the benefits of basic tier encryption are available to all operators, not just the larger ones."

ACA's latest appeal for regulatory flexibility came in reply comments filed Monday with the agency. Despite FCC proposals to allow all-digital cable systems to encrypt the basic tier voluntarily, ACA is concerned that various consumer-centric safeguards under FCC consideration would come with high and disproportionate costs and would make encryption, which will help operators monitor for signal theft and respond to consumer service requests remotely, a less attractive option than for larger operators.

Among other things, as a condition of encrypting the basic tier, the FCC would like cable operators to offer free set-top boxes for extended periods to consumers that subscribe only to the basic tier and to other customers that have additional TV sets that today can display basic programming without a set-top box.  The FCC has proposed free set-top box offers lasting up to one year in some cases and up to five years in others.  The costs of providing boxes for free for an extended period of time would disproportionately impact smaller and rural-based cable operators because they lack the scale economics enjoyed by clustered cable systems located in some of the largest designated market areas.

In its comments, ACA stated that the FCC can mitigate the disproportionate impact on smaller operators who encrypt the basic tier by reducing the timeframe during which small operators must forgo charging eligible customers for set-top boxes or CableCards and allowing smaller operators to fulfill the requirement to provide free set-top boxes by using the least expensive equipment available for purchase in the market, including refurbished devices that have integrated conditional access security.

Specifically, ACA said basic-tier only customers of small operators should be eligible to receive up to two set-top boxes or CableCards for six months for free and other customers with additional sets currently receiving basic-only service without a set top box should be eligible to receive one set-top box for three months free. Concurring with the National Cable & Telecommunications Association, ACA said the free equipment offer should run from 30 days prior to the moment of encryption to 30 days after it.

"Reducing the timeframes over which small operators cannot charge for set-top boxes distributed to eligible customers and allowing them to use the lowest cost set-top boxes available will help ensure that smaller cable operators are not disproportionately burdened by the conditions compared with larger operators," Polka said, adding that FCC relief for small operators should include companies with 400,000 subscribers or fewer.

ACA also stressed the importance of ensuring that basic tier encryption on all-digital cable systems is purely voluntary.  It said FCC mandates to require encryption would disturb long-established business plans that were premised on the ability of viewers with QAM-equipped TV sets to watch a robust package of unencrypted basic tier services without needing to use set-top boxes.

Furthermore, a basic tier encryption mandate, absent appropriate relief tailored to the small cable operator community, would require ACA members to incur significant costs, such as the acquisition of set-tops boxes, the maintenance of digital addressable control systems, and the deployment of vehicles to install equipment in homes, offices and anchor institutions.

About the American Cable Association

Based in Pittsburgh, the American Cable Association is a trade organization representing nearly 900 smaller and medium-sized, independent cable companies who provide broadband services for more than 7.6 million cable subscribers primarily located in rural and smaller suburban markets across America.  Through active participation in the regulatory and legislative process in Washington, D.C., ACA's members work together to advance the interests of their customers and ensure the future competitiveness and viability of their business.  For more information, visit http://www.americancable.org/

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