All-digital cable systems subject to the encryption ban are effectively required to physically connect and disconnect a residence from the cable network in order to turn service on and off. In cases where operators do not physically disconnect cable service from a residence, the residents can take measures to receive the cable operator's basic service without paying, particularly those who subscribe to the operator's high speed Internet access service. By contrast, operators permitted to encrypt the basic tier (higher digital tiers are already encrypted) can rely on remote service management capabilities to activate and de-activate service, obviating the need to send technicians in a truck to visit customers or the need for customers to be home at a particular time.
Remote service management is especially important to rural cable operators because their actual costs for truck rolls are even greater than those for carriers in more densely populated areas. In rural areas, the longer distances between customers increase the costs associated with dispatching technicians, increase the time required for technicians to reach the customer premises, and increase vehicle operation and maintenance costs.
Currently, cable operators are allowed to request waivers from the basic tier encryption ban on a case-by-case basis. Cablevision Systems Corp., the fifth-largest cable operator in the U.S., received such a waiver and additional waiver requests by other cable companies are awaiting FCC action. In FCC comments filed Nov. 28, ACA stressed that many independent cable operators lack the resources to utilize the current waiver process, noting the burden of legal fees and costs to collect the data necessary to support a waiver request. These costs, combined with uncertainty about the eventual outcome at the FCC, may be discouraging and can significantly reduce the long-term cost savings of basic tier encryption itself.
"As a result, the current waiver process is not an effective way to ensure that small system operators and their customers obtain the efficiency benefits available through digital remote service management," Polka said. "ACA believes it is essential for the FCC to remove the ban on basic tier encryption for digital systems on a voluntary basis for all providers, not just those with the resources to pursue waivers."
ACA urged the FCC to modify a proposed requirement of providing free set-top boxes for an extended period of time to accommodate consumers that view basic tier channels on a second or third TV set without a set-top box. ACA explained that an FCC requirement lasting a year or more was too long because it would greatly magnify the administrative burden and expense of managing a free set-top eligibility program potentially for many years after an operator had completed its transition to an all-digital, encrypted system.
"The offer should be available only for the period thirty days before and after the date of encryption, and the free set-top box mandate should apply only if the customer had the additional television as of the date of encryption," Polka said.
ACA also encouraged the FCC to take into account the costs the proposed conditions will place on small cable operators and consider alternatives that would meet their consumer-centric objectives in a less burdensome manner. In light of the small number of customers that are expected to avail themselves of a free set top box -- a number that might be no more than a handful for an average ACA member -- the costs incurred in satisfying these conditions could be significant. These costs could include making changes to billing systems, training sales representatives and installers, publishing explanations and notices to subscribers, and responding to customer inquiries.
"To minimize the likely disproportionate impact that these conditions would have on ACA members, we encourage the FCC to consider alternative approaches that would be less burdensome for smaller cable operators to implement and administer," Polka said.
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