The FCC is considering a change in its rule on basic tier encryption, which currently requires cable systems to provide their basic service tier “in the clear.” There’s been quite a lot of public discussion of the issue this month and some of the elements can be confusing. We thought it would be helpful to clarify some of the central issues.

At the heart of encryption is the idea of authentication.   Providers need to ensure that only people who pay for the service receive it. In this post from 2009, we discussed the role that set-top boxes and CableCARDs played in controlling authentication.

An old school way of controlling authentication is through the use of filters, also known as “traps.” Back in the mid-70s, cable operators began offering more than just the local over-the-air broadcast stations, with the launch of HBO, the first-ever premium channel.  Some customers chose not to subscribe to this service, so a device was developed called a negative trap or filter to prevent unauthorized reception. These filters let only certain frequencies go through, blocking others.

The issue of authentication has assumed a new urgency now that cable has moved well beyond being simply a television programming provider to a triple-play provider of voice, video and data. Some people subscribe to all of our services, others do not. Today, there are a number of customers who only receive our broadband service and do not subscribe to the cable TV product at all. These non-video subscribers are valued customers, but we need to ensure they don’t get unauthorized access to the video service they’re not paying for.

As RCN reported in a filing with the FCC, traps don’t always work in this new world where broadband services and television programming may be pretty close in frequency. As a result, even traps can let television programming get through to a customer who is only subscribing to broadband.

As RCN explained, “former subscribers, new residents, and Internet-only subscribers” are able to receive programming without paying for it, as long as they have a TV or other device with what’s called a QAM tuner (see here for more information).

RCN notes in this filing, consumers can easily find information online to view unencrypted basic tier channels without paying for them, simply by installing an inexpensive splitter before the router.

Some are advocating the use of traps, as described above, in order to prevent the improper reception of video service. However, there still more problems with using them:

• Traps require a technician to come out to the customer’s home to physically add or remove them. The service technician might also need to enter the home to ensure that the trapping process is not interfering with broadband service.
• Operators need to ensure that the installed traps are physically secured. Otherwise, someone could simply remove the trap and continue receiving an unauthorized signal.
• Traps can also make it difficult to re-arrange channels or launch new services, because channels that might be utilized are being physically blocked by hundreds of traps at customers’ homes.

Let’s say that you’ve been a customer of the XYZ Cable Co. You decide to cancel the video service – maybe you’re “cutting the cord,” maybe you’ve decided to try our competitors’ service. But you appreciate the great broadband service that XYZ provides. After all, cable has the fastest speeds and our customers are really happy with the service. So, you might disconnect the video today, keeping the broadband; you might reconnect video service in the future.

Is forcing cable companies to send out technicians to install or remove traps really the best way to facilitate this – at a time when cable is moving to an all-digital environment? Is larding the network with physical devices invented back in the ‘70s the most effective way to achieve innovation?

By encrypting the basic tier (consisting largely of broadcast stations) and leaving the cable plant “hot” at all times, cable operators will be able to significantly reduce service calls to install and disconnect service. We think this is the best solution, one that doesn’t ask the cable industry to remain stuck in the past.

Boxee should be applauded for their creativity.  For years, they have proudly touted their service as the ultimate answer for consumers who want to “cut the cord” and cancel their cable or satellite service.  We disagree with their premise, but it’s a free country.

But in recent weeks, Boxee seems to have changed its tune.  Instead of telling regulators that its service is a replacement for pay TV service, they now seem to be saying that their service is dependent on subscription TV and that regulators must… wait for it… dictate how cable service is delivered to its customers.

Yes, that is correct.  This cord-cutting, end-of-cable-as-we-know-it dynamo is demanding that the FCC not allow cable systems to scramble its basic service tier (typically limited to broadcast channels, local access and a few others).  Their position is all the more ironic given that all of cable’s competitors – from satellite to Netflix to Boxee itself – already encrypt the programming they send to their customers.  But in Boxee’s world, all video service providers can innovate and compete except cable, which must remain frozen in a 1990s time warp.

What’s in It for Consumers?

But wait, Boxee’s moxie doesn’t stop there.  Their CEO Avner Ronen took to the Boxee blog this week to make the incredible claim that encryption of the Basic Service Tier wouldn’t help consumers at all.  Maybe Mr. Ronen thinks that consumers like to take time off work so they can wait at home for service calls, but I don’t think most American consumers would agree with him.

The simple fact is that basic tier encryption would eliminate the need for many service calls. Customers would be allowed to connect and disconnect service without having to wait at home or take time off work.  Admittedly, fewer truck rolls also permit the cable systems to operate more efficiently and focus service calls on more difficult installations.  But to assert that sparing millions of consumers the need to be at home to activate or deactivate cable service isn’t a consumer benefit is either completely out of touch or intentionally misleading – or both.

Ronen also injected a patently false scare tactic – that the TVs which receive basic channels without a set-top box will “go dark.”  Ronen knows that the FCC has already proposed a solution that will ensure these customers will continue to receive the channels they subscribe to by getting free equipment from their operators.

The Bottom Line with Boxee

In the end, Boxee’s disinformation campaign is nothing more than an attempt to distract attention from the fact that there is a simple technical fix that Boxee refuses to implement.  If Boxee included a CableCARD slot in its device, its customers could access encrypted channels without a set-top box.  Rather, Boxee wants cable operators and their customers to foot the bill for a special fix just for them. And if it doesn’t get what it wants, then no cable customers should get the benefits of basic tier encryption.

It’s time for Boxee to stop dealing from the bottom of the deck and for regulators to recognize that when a “competitor” asks for government help to stop the innovation and enhancement of rival services, such claims belong in the recycle bin, not an FCC docket.