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Scrambling for an answer

The FCC is finally getting serious about offering cable TV customers more choice.

January 18, 2007

TIVo IS ONE OF the most admired consumer products of the last decade -- former FCC Chairman Michael Powell once called it "God's machine" -- and cable TV is one of the most reviled industries. So it's hardly surprising that the Federal Communications Commission wants to provide a more level playing field for TiVo in its battle against the cable-owned set-top boxes in your home. The agency last week ruled that Comcast Corp., the nation's largest cable operator, must use the same anti-piracy equipment that TiVo, cable-ready TVs and other substitutes for Comcast's converter boxes do. The result is likely to be higher costs for many cable subscribers in the short term -- but better service in the long term.

At stake is more than just the public's ability to avoid paying a monthly fee for a converter box. Companies like TiVo are innovating far more rapidly and aggressively than the cable industry on a number of fronts, including the way people find shows they want to watch, the extension of TV to portable and remote devices and the ability of advertisers to target and personalize their pitches.

The issue is the way cable companies scramble their transmissions. In 1996, Congress ordered the FCC to ensure that consumers had alternatives to the converter boxes offered by cable, satellite and other pay-TV services. The idea was to let people buy set-top boxes, video recorders and cable-ready TVs that would work on any cable system. Doing so, however, required cable operators to make descramblers available without a converter box, so customers could plug them into TiVos, TVs or other set-top-box alternatives.

The industry supplied its first plug-in descramblers in 2004, and it was supposed to use them in its own converter boxes the following year. The FCC repeatedly delayed that requirement, however, and the industry sought to postpone the deadline yet again so it could develop a cheaper, downloadable alternative. Last week, the FCC ruled that the mandate will take effect for Comcast -- and probably other large cable operators -- in July. Forcing cable operators to use security cards in millions of new converter boxes annually should at the very least ensure that the cards are plentiful, easy to obtain and well understood by cable employees. It should also reduce the cost of the system, which cable operators estimate at $75 a box but competitors say is closer to $40.

Most important, it will pressure cable operators to finish work on downloadable security, if for no other reason than to cut their own costs. And it may even speed the development of standards for "cable-ready" devices that can do everything that a cable operator's converter boxes do. Refusing Comcast's request for a waiver was a good start for the FCC, but these rules should apply to all pay-TV providers, whether they use cables, phone lines or satellites.

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