FCC ADOPTS RULES FOR ONE-WAY DIGITAL, CABLE-READY TV SETS

The FCC voted unanimously Wed. to adopt rules governing one-way digital, cable-ready TV sets, pushing the digital TV transition one step further. The order largely accepts the technical, labeling and encoding rules in an agreement reached by the cable and consumer electronics (CE) in Dec. However, the FCC made some changes, one of which was to order that the sets include over-the-air digital tuners -- something broadcasters wanted. The order also would allow computer manufacturers and others to hook their wares up to cable systems if the devices complied with the same content protections prescribed by the FCC. FCC Media Bureau Chief Kenneth Ferree said that was “not just a rubber stamp” of the industries’ original agreement.

The order starts a 2nd Further Notice of Proposed Rulemaking (FNPRM) that will delve into how new cable-ready products will be certified as such. It asks for public comment on whether additional methods for approving new technologies should be adopted. In the meantime, the agency said the cable industry’s research consortium, CableLabs, would make preliminary determinations on new outputs and content protection technologies, subject to review by the FCC. People and companies with complaints can file petitions for special relief to resolve disputes.

FCC Chmn. Powell said the action was a “major step” in the digital transition and the agency must now immediately turn its attention to broadcasting. “The viability of our free broadcasting system is a high priority for me, and the government needs to ensure that broadcast television is not disadvantaged as a delivery platform for high value content,” Powell said. He said he planned to deliver a draft decision to his fellow commissioners “in the very near future” on the broadcast flag proceeding. Ferree later said he hoped the bureau would have an item on the 8th floor within weeks.

NAB Pres. Edward Fritts said he was particularly pleased that the FCC had insisted that digital TV tuners with over- the-air reception be included in digital “cable-ready” TV receivers. “The time is ripe for the FCC to complete the loop by adopting cable carriage rules ensuring consumer access to the 1,000 digital broadcast stations on the air and serving their communities,” he said.

Powell specifically thanked Reps. Tauzin (R-La.) and Upton (R-Mich.) of the Commerce Committee for their work in helping the cable and CE industries come together. Tauzin held a series of roundtable discussions to bridge the divide. In a statement, Tauzin said this was an example of how the private sector could resolve consumer issues with minimal govt. intervention. “Chairman Upton and I plan to hold a further roundtable discussion in the coming weeks to build on this success,” he said. Tauzin said he also was pleased the FCC planned to resolve questions involving the broadcast flag soon.

Comr. Abernathy called the rules “critical milestones” in the transition and while she said that she normally would leave encoding rules to the marketplace, she was convinced the cable and CE industries wouldn’t have been able to work out their differences without regulatory intervention. “I take comfort from the fact that our rules are both balanced and narrowly tailored to the governmental interests at stake,” Abernathy said. Comr. Martin said he was disappointed the agency wasn’t able to finish the broadcast flag proceeding at the same time but he was pleased it intended to tackle that issue very soon. He exhorted the cable and CE industries to allow other parties in on future negotiations.

Comr. Copps said this was “not an ideal solution,” but was a step forward. He wants the agency to address consumer confusion on digital devices and said the agency should force manufacturers to give consumers information “up front,” as opposed to after they took the TV home. He also wants the Commission to conduct consumer outreach and education. Comr. Adelstein said that although the agency’s action was “not perfect,” it was a move forward. He encouraged manufacturers and cable operators to work with retailers in a broad outreach campaign to the public.

NCTA Pres. Robert Sachs said the FCC’s action would “hasten the day when ‘digital cable-ready’ television sets will reach the market.” The FCC’s endorsement of the cable- CE agreement “sends a positive signal to all involved in the DTV transition to work together to voluntarily resolve outstanding issues,” he said. The NCTA announced separately that HDTV now was available to 60 million TV households from local cable operators. Cable customers in 83 of the top 100 Designated Market Areas (DMAs) -- including 19 of the top 20 -- were passed by at least one cable operator that provided HDTV service as of Sept. 1, NCTA said.

“History books will mark this as a momentous day in the U.S. transition to digital television,” CEA Pres. Gary Shapiro said. “Consumers now will be able to purchase a high-definition television set, just as they buy analog sets today. They will be able to take it home, plug it into the cable jack in their wall and turn it on to view glorious high-definition programming. This is what many consumers have been waiting for.” Shapiro said that while manufacturers didn’t reveal their plans and production schedules, he believed consumers would begin to see the new sets in stores in the 4th quarter of 2004.

A spokeswoman for Public Knowledge said the group was glad the FCC acknowledged that computers had a part in the DTV transition, but was unhappy the commissioners didn’t allow further comment on the encoding rules. “To the extent that they say that consumers will have the same abilities in the digital world as in the analog world, that’s just untrue,” she said.

The Satellite Bcstg. & Communications Assn. (SBCA) called the decision misguided and said none of the alternatives to the agreement provided by SBCA or DBS companies were included: “Without reasonable explanation, the DBS industry was not part of the ‘plug-and-play’ agreement deliberations. The exclusion of the SBCA and its member companies from the negotiation process only limits all players in the MVPD market to a lower cable standard, instead of raising the standards and quality of cable to those of the DBS industry.” SBCA said the Commission shouldn’t have taken any action without considering noncable interests.

The new rules will allow consumers to plug their cable directly into their digital TV without the need for a set-top box and will allow one-way services, which include basic cable programming services and premium channels such as HBO or Showtime. Consumers will have to get a security card from their local cable operators to be inserted into the set.

Consumers still will need a set-top box if they want 2- way services such as video-on-demand (VOD), pay-per-view or enhanced electronic program guides. But the cable and CE industries are negotiating for 2-way plug-&-play capability that would eliminate the need for the boxes. One of the biggest criticisms of the 2 industries during the process was that other players didn’t have a seat at the bargaining table. Those complaining included the DBS industry, broadcasters, the MPAA and computer manufacturers such as Microsoft. As cable and CE move forward on this 2nd agreement, the FCC encouraged them to consult with others.

As part of the package of agreements, the cable and CE industries filed a model license for the DFAST scrambling technology to protect content for unauthorized use. They didn’t seek regulatory action on the license, but the model would have the FCC review certain issues in case of dispute.

The order says all digital cable systems must conform to certain technical standards, and small cable systems can obtain waivers where the requirements would be overly burdensome. The FNPRM will look at whether rules that apply to 750 MHz cable systems also should apply to 550 MHz systems. Under the order, cable operators must keep a sufficient supply of the point-of-deployment (POD) security cards, and beginning April 1, 2004, upon request must supply high-definition (HD) set-top boxes with functional 1394 “firewire” connectors. By July 1, 2005, all HD set-top boxes must have a digital visual interface (DVI) or HD multimedia interface (HDMI).

The order includes labeling requirements. Manufacturers that label their DTV receivers “digital cable ready” must meet certain technical standards, complete a testing and verification process and equip their receivers with DVI or HDMI interfaces using high-bandwidth digital content protection (HDCP) technology. The interface requirement would be phased in gradually based on receiver screen size, along a similar time frame as the DTV broadcast tuner phase- in schedule. The FCC said it was encouraging manufacturers and cable operators to provide detailed information about the functions of the sets before the sale occurred, but at this stage it wasn’t requiring the industries to do so. Instead, they're required to include post-sales material, such as an owner’s guide with language informing consumers about the functions of the device and the need to obtain a security card from a cable operator. The FCC is asking in the rulemaking whether it should require presale notification.

The Commission stressed that its rules weren’t intended in any way to affect the copyrights and remedies of consumers and content owners. The order bans the use of selectable output controls by multichannel video programming distributors, but Ferree said the agency wasn’t closing the door to new technologies in the future. Reducing the resolution of HD programming to standard definition is prohibited for broadcast programming by all MVPDs. The FCC said down-resolution of nonbroadcast programming would be addressed in the rulemaking. In the meantime, MVPDs that want to use down-resolution for nonbroadcast programming must notify the FCC at least 30 days in advance.

The encoding rules were modeled on the Digital Millennium Copyright Act, with “copy never” for pay-per-view and VOD, “copy once” for basic and extended basic cable and no restrictions on copying of broadcast TV. The agency said the rules didn’t extend to distribution of content over the Internet or an MVPD’s services offered by cable modem or DSL.

The order includes a petition process for new services or business models that might be developed in the future. That would involve case-by-case determinations of whether specific encoding rules were in the public interest.