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Integration BanPublic Policy

What You Need to Know About the Integration Ban

September 26, 2013

Right now, inside your cable set-top box is a CableCARD – a device about the size of a credit card that is inserted into the box and decrypts the content delivered to your home so that you can receive the channels you subscribe to. But the set-top box itself was originally designed to perform this exact same function without using a separate piece of costly equipment. It did perform that function until the FCC banned such “integrated” security from cable operators’ leased boxes. The FCC rule requiring cable operators, and cable operators alone, to use CableCARDs instead of built-in security in their set-top boxes is called the integration ban. The FCC adopted it in 1998 when it implemented the 1996 Telecom Act, even though the Act itself didn’t require it. We’ve detailed the inconsistencies of the integration ban before.

Yesterday, a bipartisan bill was introduced in the U.S. House of Representatives by Congressman Bob Latta (R-OH) and Congressman Gene Green (D-TX) to repeal the integration ban. Deciding whether to end the integration ban is a complex issue that brings up a lot of questions and concerns.

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Here are four of the most popular questions (and answers) revolving around CableCARDs and the integration ban.

IF THE INTEGRATION BAN ENDS, WILL THAT MEAN CABLECARDS WILL NO LONGER WORK?

No. Eliminating the integration ban will have no impact on cable operators’ support for CableCARDs in retail devices. Cable operators will continue to ensure that CableCARDs work in these devices. As the marketplace has shown, cable operators are eager to let their customers access their programming on as many retail devices as possible. Cable operators made CableCARDs work for retail devices that use CableCARDs but the marketplace has demonstrated that consumers want to access programming on retail devices that do not use CableCARDs, including consumer-owned tablets, smartphones, PCs, game consoles, and other video devices. Cable companies are making that desire a reality.

HOW DOES THE INTEGRATION BAN CURRENTLY AFFECT CONSUMER COSTS?

The integration ban has forced operators to include CableCARD technology in operator-supplied equipment, even though less expensive technology could perform the same functions. These added costs are ultimately borne by consumers.  By one estimate cited by the FCC, CableCARD technology adds approximately $56 to the cost of an operator’s box. We estimate that the costs attributable to the integration ban exceed $1 billion for cable customers.  Repeal will allow operators to use less costly decryption solutions and provide lower-cost device options to consumers.

CableCARD boxes also add to the energy consumption of set-top boxes.  Based on EPA figures, cable subscribers collectively foot the bill for roughly 500 million kilowatt hours consumed by CableCARDs each year that are not necessary in operator-leased devices.  Repeal of the integration ban will result in significant energy savings for consumers.

IF IT’S SO UNNECESSARY AND WASTEFUL, WHY HASN’T THE FCC REPEALED THE INTEGRATION BAN?

NCTA asked the FCC to end the integration ban in its 2010 CableCARD rule-making, but the FCC declined to do so, instead relying on waiver processes that are lengthy, costly, and that subject cable operators alone to a “mother-may-I” approach to innovation.  Most importantly, the FCC’s decision ignored the substantial changes that have occurred in the video marketplace over the past 15 years.  Even assuming there was a reasonable basis for the integration ban when it was first adopted in 1998, that is no longer the case.  Today over 42 million CableCARD-enabled set-top devices have been deployed by cable operators in the marketplace, while a mere 600,000 CableCARDs have been requested by cable customers for use in third-party devices purchased at retail.  With 42 million CableCARD devices in customer homes, cable operators have a strong incentive to continue to support CableCARDs, but also want the freedom to support new forms of navigation devices that do not rely on CableCARDs.

WHY DOES CONGRESS NEED TO STEP IN WHEN MANY CABLE COMPANIES HAVE SOUGHT AND RECEIVED WAIVERS FROM THE FCC? WHY CAN’T CABLE COMPANIES GO GET A WAIVER?

The waivers that the FCC has granted have been generally limited to small and mid-sized operators, and the FCC has previously rejected a broader industry-wide waiver filed by NCTA. The fact is that over 90 percent of cable customers are served by operators still subject to the integration ban. And, of course, only cable operators among all video providers are subject to the integration ban.  Continuing to apply the integration ban to cable operators and no other video distributor is unfair and only serves to harm consumers who ultimately bear the burden of unnecessary costs.

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The bottom line is video competition is fierce and content is accessible across multiple platforms operating on almost any device with a screen. In the words of the FCC itself in its recently released video competition report, “Today the [set-top box] marketplace is more dynamic than it has ever been offering consumers an unprecedented and growing list of choices to access video content.”

Cable operators should be freed from onerous, expensive, and unnecessary rules like the integration ban and be allowed to compete fairly in the dynamic video marketplace.

The case for eliminating the integration ban is clear, and Congress should act swiftly to promote innovation and recognize a dramatically changed marketplace.