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ACA Seeks Set-Top Box Integration Ban Exemption For Small Cable Operators

The American Cable Association called on the Federal Communications Commission to exempt small cable operators from the set-top box (STB) integration ban, saying the rules have imposed enormous costs without achieving the goal of establishing a consumer retail market for STBs, a policy setback the agency has itself acknowledged.

"The ban has resulted in significantly higher costs to operators to purchase non-integrated STBs using CableCARDs that, other than separating out the security function, provide no greater consumer functionality," ACA President and CEO Matthew M. Polka said. "Given the burden that the integration ban has placed on small operators and the fact that a blanket exemption for a very small subset of the entire cable market would not harm the development of a retail market for set-top boxes, the time has come for relief from the integration ban for small cable systems operated by small operators."

ACA set forth its views in Sept. 16 comments filed with the FCC in connection with TiVo's Petition for Rulemaking asking the FCC to initiate a rulemaking for the purpose of reinstating, with one revision, the encoding and related technical rules for cable operators recently vacated by the U.S Court of Appeals for the D.C. Circuit in EchoStar Satellite L.L.C. v. FCC.

In its comments, ACA said that as part of this proceeding, or any rulemaking that the FCC may choose to launch to consider its navigation rules in light of the EchoStar decision, the FCC should seek comment on whether there is still a need to apply the integration ban to smaller cable operators, and, if not, the FCC should also examine what size system and operator should be considered "small" for purposes of this relief.

ACA's comments underscored several problems with the FCC's rules. The trade group said that not only did the integration ban increase operators' cost of purchasing and deploying STBs (a cost largely passed through to consumers), but it also imposed costs only on cable operators but not on their competitors. DBS providers, and non-cable Internet Protocol television providers like AT&T, are permitted to offer integrated STBs to their subscribers for lease, giving them a regulatory advantage.

For small cable systems operated by small cable operators, the integration ban has had a disproportionate impact, ACA said, adding that small and rural cable operators face higher costs of service due to the lack of scale economies, low density and higher infrastructure deployment costs involved in serving a small and dispersed customer base. ACA noted that no FCC waiver to date has been granted on the grounds the operator was small or rural and therefore unnecessarily and disproportionately burdened by the general integration ban requirement.

Providing a blanket exemption has many advantages, ACA said. It would permit small systems to obtain and deploy more affordably advanced STBs with DVR and other advanced functionalities to their customers than is possible today. And the deployment of more digital STBs would speed the ability of these operators to convert analog services to digital, thereby freeing up channel capacity to offer more services, including more standard and high definition channels, and higher-speed broadband.

ACA stressed that in seeking relief from the integration ban for small systems, the trade group would continue to support STBs manufactured by a third-party, such as TiVo. As a result, consumers will continue to be able to use devices purchased at retail outlets, as well as acquire new devices brought to market. The FCC can relieve small cable systems from the integration ban while still maintaining the requirement that cable operators support customer use of these third-party devices.

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