Cable systems that have converted to all-digital transmission will be allowed to encrypt their basic-tier programming, the Federal Communications Commission decided last week. The FCC on Friday released its full Report and Order, which explained the decision and outlined transitional protections for existing subscribers who might be affected.

Background 

Previously, FCC rules prohibited cable operators from encrypting their basic-tier service, while allowing encryption on higher service tiers.  Cable operators typically encrypt most of their programming as a way of ensuring only paying subscribers have access. Subscribers can decrypt the signals with operator-provided set-top boxes or with third-party equipment that complies with the CableCARD technical standard.  The FCC’s prohibition on basic-tier encryption meant that subscribers could view basic-tier programming — usually consisting mostly of broadcast and public-access channels — on standard televisions simply by connecting the cable to the TV, without the need to lease or buy set-top boxes or other equipment.

In recent years, cable operators have argued that all-digital systems should be allowed to encrypt all service tiers, given that almost all digital subscribers generally need at least one set-top box or CableCARD device regardless of whether the basic tier is encrypted. Cable operators also argued that allowing all programming to be encrypted would make the process of connecting customers much more convenient and environmentally friendly because operators usually would be able to activate and deactivate service remotely rather than dispatching technicians to physically connect or disconnect service. The FCC in 2010 granted a waiver allowing Cablevision to encrypt basic-tier service in New York City, in part out of a desire to test whether the basic-tier encryption ban still was necessary.

Some consumer electronics manufacturers opposed allowing basic-tier encryption, arguing that encryption would make it harder for basic-tier subscribers to use third-party devices. The most prominent commenter opposing basic-tier encryption was Boxee, which makes a set-top box that allows consumers to watch video from various online-streaming services on their televisions. Boxee sells a “Live TV” accessory that allows the Boxee device to integrate over-the-air broadcast or unencrypted cable signals into its interface.

Transitional Protections for Existing Subscribers

The FCC concluded that the benefits of allowing basic-tier encryption outweighed the burden imposed on “the few digital cable subscribers who access the basic service tier without a set-top box or CableCARD.” To help these subscribers make the transition, the FCC imposed several requirements on cable operators seeking to encrypt their basic-tier service:

• Free set-top boxes: All cable operators that encrypt basic-tier service will have to provide free set-top boxes to certain existing subscribers for a limited time. Existing basic-tier subscribers who do not currently use set-top boxes or CableCARDs will be entitled to up to two free boxes or CableCARDS for two years from the date of encryption.  That requirement lasts for five years for subscribers who are on Medicaid. Subscribers to non-basic tiers who use the unencrypted basic-tier signal to connect secondary TVs will be entitled to receive one free set-top box or CableCARD for one year.
• IP-enabled devices: Six large cable operators — Comcast, Time Warner Cable, Cox, Charter, Cablevision, and Bright House — will additionally be required to make basic-tier programming accessible to IP-enabled devices like Boxee’s using either a converter box or “commercially available software upgrades.” That requirement will sunset in three years unless the Media Bureau finds the requirement still is necessary.
• Notice: Any cable operator that decides to encrypt its basic tier must notify subscribers at least 30 days in advance, and must include an explanation of the free devices subscribers are entitled to. Subscribers can request the devices up to 120 days after basic-tier encryption begins. Cable operators also must remind subscribers between 30 and 60 days before the subscriber’s free-device period ends.

The FCC took the unusual step of specifying that “the rule changes adopted in this order are interdependent and inseparable,” and therefore none of the changes will be effective if any of the order’s provisions are struck down by a court. In separate statements accompanying the order, Commissioners Robert McDowell and Ajit Pai criticized the non-severability provision, but both commissioners nonetheless voted to approve the order in part and to concur in part.