One of the benefits of the cable industry’s $130 billion investment to build a nearly nationwide fiber optic network is the ability of customers to enjoy digital cable services without the need for a set-top box.  Such “one-way” devices have been in the marketplace since 2004 but some manufacturers in 2008 are beginning to introduce TVs and other devices that can receive cable’s interactive services without a set-top box.  This two-way interaction is enabled through cable’s deployment of the tru2way software platform.

A CableCARD is a small device (about the size of a credit card) that allows consumers to view cable programming on a TV or other equipment once the card has been activated. The CableCARD plugs into a slot built into a digital television or other device, allowing for digital cable services without a set-top box.  The CableCARD provides the same security/descrambling function as cable’s set-top boxes but can be plugged directly into “cable ready” digital devices (like digital TVs).

At the end of 2007, 26 consumer electronics manufacturers have had over 579 one-way digital cable ready devices certified for use with CableCARDs, and the top ten cable operators have deployed over 300,000 CableCARDs for use in these devices.

Integration Ban

While CableCARDs were intended to spur the introduction of devices that could receive cable services without a set-top box, the FCC has adopted an unnecessary regulation – known as the “integration ban” – that requires all cable-supplied set-top boxes to be re-designed so a CableCARD can be inserted.  This regulation will likely cost cable consumers more than $600 million dollars per year in higher prices while offering no tangible benefits.

The end result of the integration ban – essentially a tax on all new digital set-top boxes – is that consumers will pay $2 to $3 more per month for new equipment (a set-top box with a CableCARD inserted into it) that provides exactly the same functionality as their existing set-top box.

To save consumers the millions of dollars required by this unnecessary regulation, the cable industry has asked the FCC for a waiver of the ban on providing integrated set-top boxes until downloadable security technology can be fully deployed, or until the end of 2009, whichever comes first. Such a waiver would save consumers hundreds of millions of dollars and will help usher in the next generation of digital technologies.

Background on the Integration Ban

The integration ban was one of two rules adopted by the FCC to encourage independent manufacturers to build and sell digital set-top boxes and other “cable ready” devices at retail outlets by requiring cable operators to separate the security functionality of cable set-top boxes from the “non-security” functions such as tuning capability. The first rule required cable operators to develop technology that would separate the security/descrambling functions of a set-top box from the remaining features and functions of the box.  The cable industry supports this separate security requirement and is not seeking any changes in that regulation.

However, in addition to adopting requirements that cable operators develop, provide and support CableCARDs in retail devices, the FCC went one step further by requiring cable operators to re-engineer all of their new set-top boxes (deployed after June 30, 2007) so the security/descrambling function is physically removed and delivered via the same CableCARD technology that is used for cable ready equipment consumers can purchase at retail.

Despite the cost of this re-engineering – which will add $70-$90 to the cost of each cable box – cable’s set-top boxes will function identically to the boxes that most customers already use. That makes the integration ban a costly and puzzling requirement.