FCC Adopts "Plug and Play" Rules for Digital Cable Systems

On Sept. 10, 2003, the Federal Communications Commission unanimously adopted rules implementing the December 2002 agreement between major cable operators and major consumer electronics companies, colloquially known as “plug and play.” The rules set a standard between digital television products and digital cable systems, under which consumers will be able to buy digital TVs (DTVs) that connect to digital cable systems without a set-top box, and enjoy easy access to high-definition television (HDTV) and other digital services offered by cable operators. The regulations prescribe a set of technical standards for cable systems and “digital cable ready” DTV products (with testing procedures to assure compatibility); a proposed regulatory framework for support of digital TV receivers, digital recorders with secure interfaces, and other devices on cable systems; and “encoding rules” regulating the use of copy protection tools by multi-channel video programming distributors (MVPDs) and providing some assurance to consumers that they may continue to make certain home copies of television programming.

With the nearly simultaneous introduction by Panasonic of a unidirectional DTV, certified under a “PHILA” license, cable operators are likely to soon face requests from customers for CableCARDS (formerly known as PODS) for such devices.

The text of this Order is not yet released, however, most of its elements can be gleaned from the FCC’s public meeting, press conference, and additional information we have received. This update will summarize key elements of the new regulations, but will focus on the preparations that cable operators should be making to accommodate the new rules and new devices. (Cole Raywid has been representing the cable interests in the negotiation of the agreement and the development of these rules. We can answer more detailed questions on an individual basis.)

Short Summary of New Regulations

The December 2002 agreement included a set of proposed regulations which the FCC has adopted with only a few changes.

Between the “Memorandum of Understanding” (reflecting a set of private commitments among the parties) and the new rules, the agreement allows set-top box functionality to be built into “one way” digital TV sets and other products (such as digital video recorders) so they may receive scrambled premium programming without a set-top box. A separate security card (now known as a “CableCARD,” which is similar to a smart card) supplied by the cable operator plugs into the DTV (or other device) to enable direct receipt of scrambled services. A set-top box is still needed to access advanced interactive digital cable services such as video-on-demand or a cable operator’s enhanced program guide. (The parties are continuing discussions concerning DTV sets and other devices that can receive cable’s advanced, two-way services without a settop box.)

Manufacturers must include CableCARD slots and specified copy protection tools within these unidirectional DTV devices. The FCC has added the requirement that “digital cable ready” devices also include off-air DTV Broadcast tuners.

Under the new rules, cable operators will be required to supply CableCARDS. They should also prepare CSRs to handle inquiries for CableCARDS; and establish procedures for recording information incident to the authorization of CableCARDS as they bind to the certificates in “Host” DTVs. Effective April 1, 2004, the rules will require, upon consumer request, that MSOs will provide functional 1394 outputs from high-definition (HD) STBs. Effective July 1, 2005, MSOs must include both a DVI (or HDMI) interface and a 1394 interface on all HD set-top boxes acquired by a cable operator for distribution to customers.

There is a considerable consumer education element associated with these regulations. Most significant is the unofficial burden of helping cable customers understand that the TV they bought as “digital cable ready” cannot receive all digital cable services.

Headends and networks may also need to be fine tuned to meet the requirements of the rules. 750 MHz cable systems must meet agreed-upon standards: subsets of existing SCTE 40, 65, 54, with some adjustments, plus a prior (February 2000) agreement covering carriage of certain PSIP information along with digital broadcast signals. The system must also provide a channel map and associated text label from the cable network. All digital cable systems will comply with other complementary technical standards (SCTE 28 and 41).

A new set of “encoding rules” strike a balance between the demand by program suppliers for copy protection, and “home recording rights” of consumers. Affiliation agreements must be reviewed and negotiated with these in mind. The rules also affect the manner in which innovative business models may be deployed.

The manufacturers have warranted that these devices will not technically disrupt, impede or impair delivery of services to cable subscribers, promote theft or cause harm to network or to the CableCARD, and prototypes for these products will be tested at CableLabs. Operators should nonetheless prepare for possible faults in the field.

Preparations by Cable Operators

CableCARDS

Under the new rules, Cable operators will be required to order and supply CableCARDS. Rules adopted at an earlier stage of this rulemaking required PODs (the predecessor to CableCARDS) to be available by July 1, 2000. We expect the new rules to require that by July 1, 2004, all digital cable systems must provide CableCARDS to consumers coincident to CE Manufacturers product roll-outs, in sufficient quantity to ensure convenient access by customers. In the meantime, however, as the Panasonic DTV begins to show up in retail outlets, consumers may begin asking for CableCARDS. It would be prudent for MSOs to begin to:

• prepare customer service representatives to handle inquiries for CableCARDS
  
  
• establish appropriate means for fulfilling requests for CableCARDS.
  
  
• establish procedures for recording information incident to the authorization of CableCARDS as they bind to the security certificates in “Host” DTVs.

Set-top Boxes

The regulations also affect purchasing and supplying of set-top boxes so that they can output HD through both DVI (or HDMI) and 1394 interfaces. The rules are premised on the assumption that at least some consumer recording devices will rely upon 1394 inputs. In addition, CE manufacturers will add the secure digital DVI/HDCP digital connector to CableCARD-equipped HDTV sets on an agreed-upon schedule. CableCARD-enabled 720p/1080i (HD) grade televisions will include DVI/HDCP ports on approximately the same schedule as the FCC’s new DTV broadcast tuner rule, from 2004-2007. (480p grade televisions may use Y,Pb,Pr interfaces in lieu of DVI.)

• To accommodate these interfaces, effective April 1, 2004, upon consumer request, MSOs must provide functional 1394 outputs to HD STBs, either by downloading the necessary software to STBs with existing 1394 ports, or by replacing a deployed HD STB for one which includes 1394. These leased HD STBs must be controllable by a TV or other device equipped with a 1394 port for the tune function, mute function, restore volume function, power on, power off, and status inquiry. (Under the MOU, the STB will be provided at no additional cost to the customer, but MSOs may charge, as appropriate, for delivery and installation of the new STB.)
  
  
• Effective July 1, 2005, MSOs must include both a DVI (or HDMI) interface and a 1394 interface on all HD set-top boxes acquired by a cable operator for distribution to customers.
  
  
• Operators of small systems may face an incremental HD STB cost to meet this requirement, because copy protected IEEE 1394 and DVI/HDMI interfaces are currently available only on higher-end set-top boxes.

Education

There is a considerable consumer education element associated with these regulations.

• Officially, the rules only require that post-sale information provided with the CE product to purchasers of these one-way devices explain that a CableCARD is needed to receive encrypted digital programming, and that a set-top box is still needed to receive advanced and interactive digital cable services such as video-on-demand, a cable operator’s enhanced program guide and data-enhanced television services.
  
  
• The associated MOU calls for MSOs to offer to educate local retailers regarding the capability of the local cable system to support Unidirectional Digital Cable Products, and on the industry to update and provide support for Go2Broadband.
  
  
• The actual educational program will need to be far more extensive, including the delicate matter of helping cable customers understand that the TV advertised as “digital cable ready” cannot receive all digital cable services. (The FCC is seeking comment on its ability to compel pre-sale education, but in the meantime has exhorted the industries to provide such education voluntarily.)

Headends and networks

Headends and networks may also need to be fine tuned to meet the requirements of the rules.

• Cable systems with an activated channel capacity of 750 MHz or greater shall meet agreed-upon standards (subsets of existing SCTE 40, 65, 54, with some adjustments, plus a prior (February 2000) agreement covering carriage of certain PSIP information along with digital broadcast signals). We expect the deadline to be July 1, 2004. A 750 system must:
  
  
  • Meet Digital Cable Network Interface Standard, SCTE 40 2003, provided however that with respect to Table B.11, the Phase Noise requirement shall be -86 dB/Hz, and also provided that the “transit delay for most distant customer” requirement in Table B.3 is not mandatory.
    
    
  • Meet Service Information Delivered Out-Of-Band For Digital Cable Television, ANSI/SCTE 65 2002. The Source Name Subtable, which is currently optional as defined by ANSI/SCTE 65 2002 for profiles 1-3, is made mandatory so CE products can receive a textual name associated with each service.
    
    
  • Meet Digital Video Service Multiplex and Transport System Standard for Cable Television, ANSI/SCTE 54 2003.
    
    
  • Meet the February 2000 NCTA/CEA PSIP agreement. Because Profiles 1-3 do not support the carriage of PSIP information such as EIT data, the rules defer to the PSIP Agreement to detail the requisite conditions necessary to carry, when available, PSIP information from the content provider. Profiles 4 and higher as defined ANSI/SCTE 65 2002 do support the carriage of EIT data. When a cable operator chooses to send EIT data out-of-band, the operator would follow one of these profiles.
    
    
  • Provide the channel map and associated text label from cable networks.
    
    
• All digital cable systems will comply with other complementary technical standards (SCTE 28 and 41), including support of retail devices intended for use with operatorsupplied PODs.
  
  
• Small systems may seek waivers.
  
  
• The FCC is seeking comment on whether the rules applicable only to 750 systems should apply to 550 systems.

Affiliation agreements

The MOU and regulations require “digital cable ready” DTV sets and set-top boxes to have secure digital connectors to permit copy-protected display and recording of high value digital content. Devices built to standard must recognize and respect the copy-control signals needed to protect high-value digital content (for example, video-on-demand movies) as such content passes through the digital connectors. In order to assure parity in the program acquisition by Multichannel Video Programming Distributors (MVPDs), the “encoding rules” apply to all MVPDs (such as cable and DBS). The rules are modeled on standards used in private licensing agreements between studios and consumer electronics companies (the “5C” license for the DTCP protection applied to secure 1394 ports.).

The encoding rules provide generally that a higher state of copy protection may (but need not) be applied to content that is closer to the theatrical release window under conventional release windows.

Specifically:

• Subscribers may make at least one copy for their private and personal use of any digital program sold by monthly subscription.
  
  
• Programs sold individually (pay-per-view and video-on-demand) may be marked as “copy never,” but cable subscribers may pause or store them (on PVRs) for 90 minutes (or longer, if agreed to by the program provider).
  
  
• A prohibition on “selectable output controls” is applied to all MVPDs. It appears that the FCC has left open the possibility that such a tool may be used in the future, but at this time, it is unclear exactly what the FCC has in mind.
  
  
• Free over-the-air broadcast signals may be copied freely, and may not be reduced in resolution (“down-res’d”) when output from unprotected high definition analog ports.
  
  
• The FCC has left open the ability of MVPDs to “down-res” non-broadcast programming. In the meantime, it has opened a further rulemaking to explore this issue. We anticipate that the compliance rules associated with the DFAST license will be amended to require these tools to be included in the devices to be built under these rules.

The Commission’s decision not to prohibit down-resing of non-broadcast programming is a response to concerns by program owners over the “analog hole.” The concern is that the value of technological tools designed to secure digital programming from unauthorized copying is undermined if devices also output analog signals over high definition analog ports that enable high-definition copies that may later be digitized. One solution is to reduce the resolution of such programming.

The Commission also adjusted the proposed rules to treat Subscription Video-on-Demand (SVOD) as a new, developing service that may be encoded in any manner negotiated between program suppliers and MVPDs, subject to complaint at the FCC under the procedures applied to new business models.

Despite the boundaries established by these encoding rules, there remain multiple paths to innovate in business models.

• These encoding rules will not apply to cable operator (or affiliate) use of cable modem or the Internet for content distribution. The Internet and other technologies are left to Congress.
  
  
• Cable operators are assured of the right to transport and store any digital program within the confines of a secure home domain, as long as consumers are provided at least the same home recording rights once the program is released to consumer control.
  
  
• Cable operators may launch any service under any or no encoding rules on a bona fide trial basis without notice.
  
  
• Cable may apply different encoding rules for permanent new business models, but is subject to challenge on complaint to the FCC. If a new service falls outside of the current business models, notice must be given and the FCC may decide (after the fact) whether the encoding rules applied are in the public interest. If a new service falls inside the current business models, different encoding rules may be applied only with advance approval from the FCC that the proposal is in the public interest. The dispute is resolved at the FCC, rather than in arbitration between studios and DTLA, as is the structure under 5C today.

The FCC has made it clear that these encoding rules do not affect copyrights in programming. Instead, they limit the application of certain copy protection tools by MVPDs, but do not prevent a program owner from pursuing copyright claims if content is copied in violation of underlying copyrights and distribution agreements. As a practical matter, the encoding rules will provide constraints on the negotiation of copy protection clauses in affiliation agreements. It is important that affiliation agreements with program suppliers be negotiated with these limits in mind.

How secure are these devices?

A fundamental need addressed in these rules is to protect the security of the cable network, in order to provide an environment in which high value programming can be distributed to consumers. In a world where cable operators can use conditional access to secure programming from headend through the set-top box, security and copy protection tools can be installed and refined as needed to meet changing requirements and business models. It is more complex to provide adequate security and copy protection tools when retail devices purchased by consumers are attached to the network.

The rules and associated agreements provide a number of points where these security needs are addressed.

• DFAST. The encryption technology used at the POD-Host interface is known as DFAST. The patent license for DFAST will be provided for use in unidirectional DTV products with fewer conditions than are required from the current “PHILA” Agreement under which DFAST is also licensed. The new DFAST license does not include detailed receiver or other specifications, relying instead on general warranties that the devices will not technically disrupt, impede or impair delivery of services to cable subscribers, promote theft or cause harm to network or to the CableCARD, and on the adoption of the remainder of the package of agreements and rules.
  
  
• Compliance Rules. The DFAST license also contains a set of “compliance rules” which detail the outputs and associated security permitted in unidirectional DTV devices. These rules may be changed by CableLabs under an agreed upon process, subject to review at the FCC. For example, CableLabs may approve new outputs and/or new security measures for approved outputs. The FCC is opening a further rulemaking to explore whether this process should be adjusted to provide more public participation or specific objective criteria.
  
  
• Robustness rules. The DFAST license also contains a set of “robustness rules” which detail how hack-proof unidirectional devices must be. These rules may also be changed by CableLabs under an agreed upon process, subject to review at the FCC.
  
  
• Testing and Certification. Prototypes for these products will be tested at CableLabs (or an approved third party lab) under a negotiated Joint Test Suite to assure that DTVs can tune and display scrambled digital services. The tests will also assure that all CableCARD-enabled products will not technically disrupt, impede or impair delivery of services to cable subscribers, promote theft or cause harm to the cable network or to the CableCARD. The testing and certification process has been streamlined, utilizing a consensus testing process and CableLabs’ participation, while providing self-certification by manufacturers for all subsequent models.
  
  
• Revocation. Despite these protections, operators should nonetheless prepare for possible faults in the field. The industry has retained rights to withdraw support for or revoke authorizations for products that do not adhere to the compliance, robustness and other security requirements.
  
  
• Role of the Personal Computer. The Commission has made clear that PCs are not categorically excluded from qualifying for CableCARDS, but they would need to meet the same compliance and robustness rules as any other unidirectional DTV device. Because PCs are designed to have user-accessible buses, IT interests will need to develop new secure profiles for PCs that can meet these requirements.

What is Next for the FCC?

The FCC has opened a further notice of proposed rulemaking to explore:

• Whether down-resing should be restricted for non-broadcast content.
  
  
• The process for approving outputs and new forms of security.
  
  
• Requirements for pre-sale consumer education.
  
  
• Applying the transmission standards set for 750 MHz systems to 550 MHz systems.

The FCC has also promised to turn promptly to address pending requests for a “broadcast flag” that could secure broadcast programming from unauthorized internet retransmission. This will be handled in a separate proceeding.

What is Next for the Industries?

The cable and consumer electronics industries have been working much of the year to reach agreement on bi-directional devices. The FCC had urged the parties to resolve that agreement quickly, but also to find ways to involve other affected industries (e.g., DBS or IT).

Feel free to contact us for more information.