As part of a basic tier cable package, the FCC requires that cable companies provide "the local broadcast television stations carried on the system and all of the public, educational, and governmental (PEG) access channels that the operator may be required to include pursuant to an agreement with the local government." The 1992 Cable Act mandated that these channels remain unencrypted to help ensure compatibility between cable services and CE devices and thus ensure that people had access to the channels. These days, a number of cable companies already have waivers to bypass this rule, and the National Cable & Telecommunications Association (NCTA) and cable companies are hoping to see the rule go away altogether on all-digital cable systems. (Ironically, if you still have an analog cable system, you're fine...unless, of course, this rule change finally motivates your cable provider to get rid of its analog service.) The NCTA's basic argument (as presented in comments to the FCC) is that, "In all-digital cable systems, almost all customers will already have a set-top box or CableCARD to access digital services. And to accommodate the relatively rare cases where customers receive digital basic channels without a set-top box or CableCARD-compatible device, reasonable conditions can protect against consumer disruption." For the FCC, those "reasonable conditions" require the cable company to provide a subscriber who does not use a set-top box or CableCARD the necessary equipment to decrypt the signal for a designated time period (the length of time depends on a variety of factors). The NCTA contends that today's landscape is vastly different from 1994, when cable had few competitors. Now, cable providers must compete with satellite, telco IPTV, and online VOD sources, none of which are required to offer any services in unencrypted form. The NCTA believes the cable companies deserve a level playing field, at least in the all-digital realm.

Not so fast, says the Consumer Electronics Association and companies like Boxee. You see, current cable subscribers aren't the only ones who will be affected by the disappearance of unencrypted cable channels. In addition to public institutions (schools, in particular) that have relied on access to these free channels, the proposed FCC rule change could hinder the functionality of a number of existing devices. Boxee is one of many companies that sells computer-oriented or standalone tuners that pull in both over-the-air ATSC and unencrypted cable channels. Boxee claims that 40 percent of those who use its new Live TV stick are getting their TV signals via the clear-QAM tuner. If encryption is added, the Live TV tuner and products like it would no longer be able to tune in those channels. You might ask, "So what? Why not just by an HDTV antenna and use the free over-the-air transmissions instead?" Well, if you live in an area where it's difficult to tune in over-the-air stations (as I do in the Front Range area of Colorado), then unencrypted cable is the primary way to access free local programming--which is why the FCC rule was created in the first place.

Boxee recently headed to Washington D.C. to make its case before the FCC that the rule should remain in place. Boxee outlines its argument in a blog post. Of course, beyond the Live TV tuner at the heart of the company's argument, the Boxee platform also encourages access to Web-based services like Netflix, and it is these very services that are convincing consumers to cut the cord. Cable subscriptions are leveling out or declining, and cable companies are losing revenue--revenue they could recoup through increased set-top-box lease fees. To this point, Boxee founder and CEO Avner Ronen says in the blog post, "The cable companies don't like the idea of increased competition and in this case they are trying to get the government to help them block alternative devices such as the Boxee Box." He also contends that a rule change serves no benefit at all to the consumer. Naturally, the NCTA responded to Boxee's FCC comments with some of its own: "The proposed rule change will result in substantial consumer benefits for tens of millions of cable customers. Encryption will free cable customers from having to wait at home for a service visit when connecting or disconnecting service. It also will result in improved service reliability for consumers by reducing theft of service, which RCN reports has been a particular problem for standalone broadband customers with QAM-capable devices. Furthermore, in light of these benefits, cable operators have strong incentives to migrate rapidly to all-digital networks, which translates into faster Internet and other services customers value." The NCTA goes on to argue that Boxee chose not to include a CableCARD slot or standard set-top box connectors on the Live TV tuner, so the company has no one to blame but itself for any lack of compatibility.

The CEA also opposes the proposed rule change in its current form. In the trade organization's formal FCC comments, it complains that the rule change is merely reactive and does not take a proactive approach in dealing with the big-picture compatibility questions that linger over the entire digital content delivery business. The CEA argues that the FCC must deal with home-networking, security, and other IP transmission issues before it takes any steps to "degrade TV interoperability." Public Knowledge, which originally supported the rule change, has also taken a step back and encouraged the FCC to seriously consider the effects the change would have on institutions and private companies like Boxee, and it also encourages the FCC to look at the bigger picture. It endorses the FCC's proposed AllVid standard, a CableCARD replacement that could act as a universal adapter for all numerous types of pay-TV content (cable, satellite, IPTV, etc.). Not surprisingly, the NCTA does not support that approach, either.

The FCC has not yet made its final decision, so we'll let you know how the story ends. To get more information, check out these links: ARS Technica, TechCrunch, and
Public Knowledge.