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Progress on Basic Tier Encryption

July 25, 2012

In previous posts, we’ve highlighted why the FCC should change its rules and enable cable operators to encrypt the basic service tier (BST) — the tier that includes local broadcast stations and a few other channels.

It’s worth remembering how we got here.  When the FCC acted two decades ago to create the current rule that prevents encryption of basic tier programming, all cable programming was almost exclusively delivered in unencrypted analog format.  As a result, customers could generally connect their cable wire directly to their “cable ready” television sets and watch everything their operator offered without a set-top box.

But the situation today is vastly different.  Cable operators have digitized most of their linear channels, and now offer interactive services such as video-on-demand and interactive program guides.  Some cable systems have completely transitioned to all digital and no longer transmit analog channels.  In this digital world, most cable customers have set-top boxes or other devices to access encrypted cable services– and almost all channels are delivered that way, except for the basic service tier which, by FCC rule, must be delivered “in the clear.”

Equally as important are the changes in the competitive landscape for video distribution.  Two decades ago, cable faced little competition.  Today, DBS and telco IPTV providers – none of whom are subject to the current encryption ban and provide programming on a fully encrypted basis – serve about 40 percent of the market.  And online video distributors like Netflix, AppleTV and Boxee also deliver video to customers on a fully-encrypted basis.

For consumers, allowing full encryption of the cable programming lineup will let most customers connect and disconnect service without having to schedule an appointment with a cable company’s tech, plus it will dramatically reduce cable signal theft which is costly to honest customers. FCC Chairman Genachowski has touted the BST encryption rulemaking as a prime example of the Commission’s “Retrospective Analysis of Existing Rules,” an initiative called for by the Obama Administration and aimed at “address[ing] changes in technology or market structure, when it appears that existing rules are disproportionately or overly burdensome or otherwise not operating as intended at the time of adoption ….”

Last fall, however, a small number of companies that built – or were planning to build – devices capable of accessing the BST “in the clear” raised concerns that they wouldn’t be able to access these channels if the encryption ban were lifted (notwithstanding the ongoing availability of the Commission-approved CableCARD solution for retail devices).   The unique issues raised by these companies stalled progress at the FCC.

In an effort to break the current stalemate, NCTA today wrote to FCC Chairman Genachowski outlining new solutions for accessing basic tier programming on such retail devices while respecting the need for flexibility among cable providers who operate different networks with different capabilities.  Under this framework, the six largest cable operators – which serve over 84 percent of cable customers – would, prior to encrypting, facilitate access to basic tier programming through one of two means – 1) by the provision of operator-supplied equipment with home-networking capability, or 2) by an alternative technical solution that would deliver basic signals using commercially available security technology without the need for operator-supplied equipment.

Both of these solutions will enable consumers to enjoy access to cable’s basic tier on these third-party devices.

As NCTA President Michael Powell concluded in his letter to Chairman Genachowski:

“We hope that the above commitments resolve any remaining concerns regarding access to the Basic Service Tier by certain retail devices. …. The fact is that encryption is ubiquitous in the video marketplace.  All satellite and IPTV providers encrypt all of their programming, and the same is true for online video distributors.  There is no valid basis for continuing to hold back cable innovation in today’s dynamic and competitive marketplace.”