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FCC will allow encryption of basic cable, offers measures to protect open access

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Verizon FiOS TV DVR Remote (STOCK)
Verizon FiOS TV DVR Remote (STOCK)

The days of plugging a TV into the wall and getting cable are coming to an end. After a lengthy review process, the FCC has granted cable operators permission to encrypt their most basic cable programming. But the commission is inserting a number of measures it's hoping will prevent the public from suddenly finding themselves without access and open the door for third-party set-top boxes like the upcoming Boxee TV. That's a major breakthrough for a cable industry that has notoriously been locked down over the years. In order for the six largest US cable providers — Comcast, Time Warner Cable, Cox, Verizon, Charter, and AT&T – to get the go-ahead for encryption, they'll need to meet one of two requirements.

The first involves issuing a network-connected converter box to consumers that would allow other devices in the home to receive the encrypted signal. This equipment would be provided free of charge for two years, though cable operators would be permitted to implement rental fees thereafter. In a letter to FCC Chairman Julius Genachowski, the National Cable & Telecommunications Association (NCTA) didn't seem thrilled with this idea and argued that supporting the all-but-defunct CableCARD standard gives third-party manufacturers a sufficient option for interoperability. It ultimately conceded to go along with the plan however. In fact, Comcast and Boxee have already reached an agreement to partner up.

Cable operators will need to provide hardware or software workarounds

Perhaps a better fit for Boxee though is option two, which skips extra hardware in favor of software updates. Should operators opt against handing out converters, they'll need to instead produce software-based solutions for third-party IP components like those from Boxee. The FCC grants them permission to license this technology for a fee under a “good faith” requirement: there's no policy set in stone, but charging exorbitant licensing fees will likely draw the ire of regulators. This is perhaps the more exciting of the two choices and the FCC envisions a future where such a model could permit consumers to access cable without a coaxial connection. Better still, while the industry is initially only supporting basic programming, it could theoretically expand that to premium content down the road.

Smaller providers get a free pass

Unfortunately, smaller operators like Cablevision and Bright House (each of which tally millions of customers) are exempt from these restrictions for now. The FCC believes they'll eventually follow their larger competitors in embracing IP functionality but warns that it may "revisit the issue" should these providers block compatibility with consumer devices.

Both the cable operators and Boxee seem pleased with the FCC's rulemaking but for very different reasons. NCTA applauds the measure for hastening the industry's transition to an all-digital framework and shielding providers from cable theft. Boxee believes the FCC's provisions will protect innovation and says it's eager to partner with operators to build "next-generation experiences that will delight customers and push the industry forward." But Boxee and other companies hoping to reinvent the TV experience only have so much time to do so. Describing demand for IP-based devices as "nascent" and admitting it's "unclear whether consumer demand for this equipment will flourish," the FCC says its policies will lapse after three years unless it can establish a reason for these consumer protections to continue.