Some Good, Some Bad in FCC Basic Tier Encryption Order

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Late Friday, the FCC changed its rules on "basic tier encryption." There's some good and some bad in what the FCC did, but on balance, provided the benefits touted by the cable companies actually materialize, I think the Order is more good than bad. But some background is needed to put this in context.

The "basic tier" is not "basic cable." The basic tier consists (pretty much) of just local broadcast stations. (Incidentally, cable companies are required to offer basic tier-only service, and cable customers--you--are not allowed to buy a cable service that doesn't include broadcast stations, even if you can get them perfectly fine over the air.) Until now, cable companies have been not been allowed to encrypt the basic tier. This meant that people who subscribed only to the basic tier--which is comparatively cheap--did not need a cable box. (Of course, if you have an older analog TV you'd need a converter to watch digital channels of any kind, but viewers with a digital TV could watch the digital basic tier unencrypted without a box.) A lot of people would take advantage of this for second and third TVs even if they did have a box on their main TV, and third-party companies like Boxee make devices that can do interesting things with unencrypted broadcast and cable channels, that they can't do with "regular" cable channels.

The cable companies wanted to get rid of the encryption rule, arguing that they could provide faster service without it. Right now, because some channels are unencrypted, cable companies go around installing "video traps" to keep non-subscribers, or broadband-only subscribers, from getting a service they don't pay for. But if they were 100% encrypted, video traps wouldn't be needed. They could just send a cable box to a customer, or the customer could pick it up, and they could turn on service remotely. No need to manually install or remove a video trap. Theoretically, this could lead to faster turnaround times and eliminate the need for people to wait around for the cable guy.

PK supported the idea of getting rid of the encryption rule, provided a few consumer protections were put into place. Since the cable companies argued that the rule change would save them money, it seemed fair to ask them to provide free or low-cost boxes for low-income consumers, and to make some sort of converter box or equivalent solution available for people who use third-party devices like the Boxee box, or media center PCs.

We didn't get everything we asked for. In particular, the FCC frames the low-income program as "transitional," and uses flawed eligibility criteria for it. What happens when this program ends? Are low-income consumers going to be forced to pay extra for box rentals? If so, the FCC--which makes sure that basic tier service remains affordable--should count device rental fees as part of the overall basic tier rate. Still, it's good that such a program exists at all.

The long-term solution to both the low-income and third-party device issues is probably not to continue signals unencrypted, or to require cable companies to offer free converters forever. Rather, a long-term solution would make it so that no subscriber, low-income subscribers included, would need to rent a set-top box at all. AllVid or something like it would be such a solution, making it so that any TV, Blu-Ray player, smartphone or PC could "speak cable" and display programming without needing a separate converter device.

Given the protections the FCC's Order affords to low-income subscribers and third-party devices, and if the faster service times actually materialize, this order is probably more good than bad. But it leaves the underlying problems of box rentals and third-party compatibility in place. A better encryption order isn't the place to solve those problems, but they still need to be solved. The way forward is as clear now as it has been for many months: the FCC should start the transition away from CableCARD and to a more modern and flexible standard like AllVid, that would free people from having to rent cable-provided boxes altogether, and would allow things like the mythical new Apple TV, or smart TVs that were really smart, to actually reach the market.

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