Securing control of the set-top box

The main political fault line at Wednesday’s hearing before the House Communications and Technology subcommittee on reauthorization of STELA concerned a Republican proposal to short-circuit a move by the FCC to crack down on joint sales agreements (JSAs) between local broadcasters in their retransmission negotiations with cable operators. Democrats panned the proposed provision that would block the FCC from enforcing a ban on JSAs or requiring existing agreements to be unwound.

In terms of the future of the digital living room, however, the more urgent fight concerns another GOP proposal that would rescind the FCC’s rules requiring cable operators to separate the conditional access and navigation modules in their set-top boxes. How that battle comes out could have a significant effect on the future integration of linear and over-the-top video services into a single platform.

The issue is a typical Washington clusterf#%k. The FCC originally imposed the ban in 2007 as part of a congressionally mandated effort to spur the market for retail set-top boxes that could interoperate with cable services by enabling those devices to descramble cable-delivered content. The rules require that cable operators use the same CableCARD security plugin in their own STBs that they’re required to make available for use in third-party boxes. The idea was to ensure the operators would continue to have an incentive to support CableCARDs by putting everyone in the same boat.

Since then, almost nothing has gone right about CableCARDs. Some interactive cable services are still not supported by the plugins and only about 600,000 of them are currently in use in third-party devices, mostly TiVo machines. Cable operators complain the non-integration requirement adds as much as $50 a year to the cost of their boxes and has cost the industry upwards of a $1 billion a year.

Meanwhile, most of the innovation in the living room since 2007 has focused not on accessing and manipulating linear TV content as on bringing in over-the-top services that get delivered to Roku boxes, Apple TV and game consoles.

Then, in December 2013, in a case that did not involve the integration ban, a federal appeals court vacated an FCC order concerning the right to record scrambled programming. As it happened, that FCC order also contained regulations regarding the implementation of the CableCARD requirement on cable operators.

In vacating the entire order, the court inadvertently also threw out the rules on CableCARDs, even as non-integration ban itself, as well as the third-party requirement, remain in place, leaving CableCARDs in a legal and regulatory limbo.

Republicans on the House subcommittee, with the strong backing of the National Cable & Telecommunications Assn., headed by former FCC chairman Michael Powell, now want to get rid of the integration ban altogether, which would render the legal status of CableCARDs moot.

Recently, however, the industry has begun to move — haltingly but nonetheless — toward greater integration of linear and OTT services. How that integration happens, however, and on whose platform, and through whose UI, are no small questions.

Right now, it’s happening ad hoc, such as through one-off deals like Time Warner Cable’s bespoke integration with the Apple TV set-top, or through kludgy hacks like the Xbox One’s HDMI pass-through.

Eliminating the requirement, or even just the incentive, for linear pay-TV providers to support universal, separable security could tip the playing field decidedly in their direction, by forcing OTT platform providers to come to them if those third-party platforms want to ensure future interoperability.

The FCC’s CableCARD policy has been an unqualified disaster on its own terms, making it difficult to defend. In principle, it should be possible to eliminate the non-integration ban while preserving the requirement that pay-TV operators make available and continue to support a separable conditional access module, such as downloadable security. Until that new system is developed, agreed to and adopted, however, eliminating the integration ban could cement in place a practical and regulatory status quo that could be very difficult to later dislodge.