CableCARDs will again be a topic of discussion in D.C. this week as the FCC on Thursday is expected to approve some revisions to the CableCARD rules, smart-card like devices which facilitate the ability of retail  cable-ready “video navigation devices” to access cable services.

We largely agreed with the proposals the Commission made in its CableCARD Further Notice and want to ensure that customers who utilize these devices have a satisfying experience.  We also support the Commission’s efforts in the “AllVid” Notice of Inquiry to examine fresh approaches to implementing Section 629 that involve all video providers – not just cable – and we have proposed a set of principles that can serve as a foundation for these efforts.  But since the AllVid item is still in early stages, we are committed to working with the Commission on targeted revisions to the CableCARD rules.

You can review this previous post on the history of CableCARDs for a refresher on how we got to our current point. Quite simply, the CableCARD approach failed largely due to rational consumer choices. The original one-way retail devices worked only with one-way cable services, cost more than other devices, and made consumers assume the risk of obsolescence.  Instead, consumers chose to lease devices at government-mandated rates which offered Video on Demand and other valuable interactive services and which also provided them the flexibility to swap boxes when the next model was released or return boxes if they terminated service.

We agree that consumers should have a self-installation option, if their cable operator allows self-installation of leased set-top boxes and the device’s manufacturer provides adequate installation support, as Moxi and TiVo do today. We also think it’s a good idea for professional installers to arrive at the home with no fewer than the number of CableCARDs (specifically, M-Cards) that have been requested by the customer. And we agree that operators can provide more transparency regarding CableCARD pricing by including relevant information on an operator’s website, in rate cards and in other notices.

On a broader level, we don’t think that onerous new CableCARD requirements should be imposed on cable operators; instead, the focus should shift towards new solutions that cover all multichannel video programming distributors.   As we said in an earlier post, “the only way a retail video device marketplace can fully work for consumers is if all MVPDs participate.”

To that end, we’re happy to work with manufacturers like TiVo, but as we noted previously, we feel that TiVo’s proposal for mandating a standardized IP backchannel approach – in lieu of tuning adapters, so that one-way devices can access two-way switched digital video channels – would be costly, time-consuming and unnecessary.

Instead, all parties should work together to make the viewing experience better for consumers. We hope that tomorrow’s FCC meeting will help move us in that direction.

The FCC has released its tentative agenda  for its next open meeting scheduled for October 14 (“FCC Tees Up CableCARD Fixes”).  Among the items to be addressed is a revision of the FCC’s CableCARD rules with respect to “video navigation devices” for cable services.

The meeting is almost three weeks off, but it’s probably worth reviewing the history of CableCARDs to prepare you for what transpires.

I’ll remind you that a CableCARD is a smart-card like device that plugs into a TV, computer or other equipment which allows consumers to receive digital cable services without a set-top box.  The CableCARD provides the same security/descrambling function as a set-top box, but is inserted into a “cable ready” digital device (like digital TVs or a TiVo).  The CableCARDs themselves have two-way functionality, but many of the devices they are inserted in only permit one-way communications, which means users can’t access cable’s interactive program guides, VOD or DVR services.

There’s a lot of misunderstanding of how CableCARDs work and especially of the history of how they came to the marketplace. I recommend you read this 2008 post that reviews the history of CableCARDs in depth. I’ll also point you to this recent post which rebuts TiVo’s proposed “IP backchannel fix,” which is likely to be discussed at the October 14 meeting.

Several major cable operators are making new deployments of switched digital video – see here and here – which provides a timely opportunity to explain how SDV works and how consumers will benefit.

Standard cable service, both analog and digital, works on a “broadcast” model, in which every available channel is sent to every subscriber all of the time, regardless of what is actually being watched. Sending more channels than you’re actually watching just takes up more of the capacity on the cable pipe – capacity that could be used for other important purposes.

As this article succinctly puts it:

One of the primary benefits of SDV is that it frees up bandwidth because it only delivers the channel a customer is viewing.

Read the rest of this entry »

During The Cable Show last week, Light Reading’s Jeff Baumgartner interviewed NCTA President & CEO Kyle McSlarrow. FCC Chairman Julius Genachowski had spoken earlier that day (coverage here) and so Jeff asked Kyle about proposed Title II regulation of broadband. They also discussed the AllVid NOI and the CableCARD fix (see this previous post for background). Finally, they talked about the SOC waiver recently granted by the FCC.

In the early days, cable television didn’t use set-top boxes, since only over-the-air broadcast channels were being carried. With the advent of cable programming, which was transmitted on midband frequencies, came the initial wave of basic converter boxes that were necessary to convert the cable feed to an analog RF signal so it could be displayed on a TV set. But today’s digital set-top boxes are quite different, as they allow the reception of hi-def signals, protect against signal theft, enable the use of an on-screen guide and parental controls, provide a DVR for time-shifting of programming, and more.

But despite the advanced features that today’s boxes offer, and their broad consumer use, not everyone is a fan of these devices. Washington Post tech columnist Rob Pegoraro apparently falls into this camp and recently wrote a column expressing his frustration with boxes – explaining that “three digital-cable technologies have failed to usher the cable box and its button-strewn remote from most living rooms.”

Pegoraro focused on the cable industry in his column, but did note that other video providers also require set-top boxes, certainly an important point in a competitive marketplace. As I was quoted in a story on the TV Barn blog last year:

If you switched to DirecTV or Dish, you have to have a new box. If you switch to Verizon FiOS or AT&T’s U-verse, you have to have a new box. It baffles me to no end why there are four companies competing with cable and nobody has ever complained that you have to have a set-top box for them.

The Progress of CableCARDs

Set-top boxes are necessary in many circumstances, but the cable and consumer electronics industries have been working for years on providing cable customers with ways to receive service without them. The first approach was one-way Digital Cable Ready TV sets – also known by the unfortunate legal term Unidirectional Digital Cable Ready Products or UDCPs (the history of them was discussed in this post from last year) – which utilize CableCARDs to provide security, ensuring that only paying customers can receive cable service.

NCTA periodically reports to the FCC on the number of CableCARDs that have been issued to customers for use in UDCPs purchased at retail. Last week, we reported: “As of August 31, 2009…there have been over 443,000 CableCARDs deployed for use in retail devices by the ten largest incumbent cable operators who serve approximately 90% of the cable subscribers in the country.” When compared against the cable’s 63 million video subscribers, my math shows that CableCARDs are being used in retail devices by well under one-percent of the overall base (.0008 to be exact).

Some blame cable operators for the low number of CableCARDs in use in retail devices, but that fact is that one-way Digital Cable Ready devices do not support Video-on-Demand (VOD), electronic program guides (EPGs), and other two-way services that cable customers want.

As the FCC has recognized more than once: “market demand for UDCPs is not strong”; “it is apparent that consumers have not shown significant interest in one-way devices, which cannot access features such as EPGs, VOD, PPV, and other ITV capabilities provided by cable operators“; and “many consumer electronics manufacturers have discontinued the manufacture of UDCPs because consumers are more interested in advanced two-way functions that UDCPs by definition cannot perform.” (Also, see this related article.) In fact, with the exception of certain TiVo digital video recorders, the consumer electronics industry isn’t building one-way Digital Cable Ready devices for the retail market.

There is another explanation for the low level of consumer interest in these devices. As Consumer Reports said as far back as its November 2006 issue, it makes no sense for most consumers to buy DVRs (“cable ready” or not), let alone “Plain Jane” digital boxes, when they can rent them from their cable company for a low, government-regulated monthly fee and exchange those boxes for more advanced models when they become available. Multichannel News’ Todd Spangler also recently examined the question “Why Haven’t CableCards Taken Off?”

The next step in cable’s set-top box evolution was the development of tru2way, which is a middleware stack that is being installed in cable headends nationwide and allows retail devices to access cable’s two-way services. Last year, the six largest cable operators concluded a landmark agreement with major consumer electronics companies (including Sony, Panasonic, Samsung, LG and Funai Electric (which trades products in the United States under the brand names Philips, Magnovox, Sylvania, and Emerson)) laying the foundation for development of two-way digital cable ready devices which would not need a set-top box to access cable’s two-way services. Those tru2way devices also use CableCARDs for security.

Panasonic has been selling, and cable systems are supporting, tru2way digital TVs in three major markets: Atlanta, Chicago and Denver (as we reported last year).

Clearing Up QAM

Another method for cable reception without a box is through the use of a device with a built-in QAM tuner. QAM (pronounced “kwam”) stands for quadrature amplitude modulation and is a method for putting digital signals onto a carrier so that it can travel from your local cable company to the home.*

You might recall a FiOS commercial from a few years ago where the tech rattles off a bunch of technical stuff and then refers to “true QAM.” Cable systems have been using QAM for years because it’s faster and more efficient than some other digital modulation techniques.

But there is a catch to consumers counting on QAM tuners. Currently, some QAM signals are sent in the clear and others are encrypted, but, increasingly, channels are being moved to the digital tier and are being encrypted. In some circumstances, with the right TV, you could receive the “clear QAM” signals, but you’d need a set-top box or a CableCARD-enabled device to receive the encrypted signals.

Pegoraro referred to “Hollywood’s paranoia about shows being shared online” and said that “this encryption doesn’t stop shows from being shared online.” I think that’s the point: Not all programming is encrypted at this point and it’s fairly easy to digitally copy a television program (or movie) and distribute it online. The proliferation of content online will require a level of confidence by content owners that their shows won’t end up being widely digitally bootlegged.

Protecting channels through encryption also allows cable companies to offer the opportunities to consumers to buy different tiers of service – such as basic, expanded basic and digital, as well as your pick of premium channels – or to select among packages of programming, such as kids, sports and news.

The Correct Approach to Ditching the Box

While the pace of progress hasn’t been rapid enough for some, cable has been leading the way on the development of solutions to serve customers who don’t want boxes. But there are other multichannel video programming distributors (MVPDs) than just cable companies (services like DirecTV and Dish, and telephone company offerings like FiOS and U-verse) and, as mentioned earlier, they also require set-top boxes.

To help achieve a universal “box-free” solution for all providers, NCTA has suggested an “all-MVPD” solution. Under this scenario, the consumer could buy a TV set or other device at a retail outlet and successfully connect it to any MVPD without a set-top box from that provider.

I’ll quote from a 2008 NCTA letter:

Verizon also expresses support in its [July 31, 2008] ex parte for an “all-provider” plug-and-play solution (i.e., a solution that uses a standard network interface that is platform agnostic). This is something that NCTA and traditional cable operators spent more than a year advocating. In the summer of 2007, the cable industry asked the FCC to encourage an all-provider solution, and actively sought support for the concept from AT&T, Verizon, and satellite providers during the summer and fall of 2007, including numerous high-level contacts among the parties. Unfortunately, AT&T, Verizon, and satellite all declined cable’s invitation, and cable proceeded with its plan to negotiate and conclude the Two-Way MOU with major consumer electronics and information technology companies. When we announced the MOU in June, 2008, we specifically renewed the cable industry’s invitation to collaborate on a voluntary all-provider solution. We are pleased that Verizon is now calling on the Commission to encourage all parties to work towards that goal.

More recently, TiVo has supported an “all-MVPD” solution as well. We would welcome further discussion of this concept.

Undeniably, there are challenges to providing service without a traditional set-top box. It involves issues of technology, regulatory policies, innovation, and consumer choice. For those who are deeply interested in getting rid of the box, we suggest that effort should focus on developing an effective solution for the reception of multichannel video that would work for all consumers and all providers.