Cable companies led by Comcast Corp. (CMCSA:US) are close to winning U.S. permission to start encrypting basic- tier signals, two regulatory officials said, in a move to fight theft and reduce service calls.
Federal Communications Commission Chairman Julius Genachowski has asked fellow commissioners to lift an encryption prohibition in place since 1994, the agency officials said yesterday. They asked not to be identified because the request hasn’t been made public.
The agency last year proposed allowing encryption following requests from companies, including New York-area provider Cablevision Systems Corp. (CVC:US) and closely held RCN Telecom Services Inc.
Almost one-fifth of 134 households whose cable connections were cut off by RCN during an audit in Chicago last year subsequently contacted the company to subscribe, “clear evidence that they had previously been viewing cable without paying,” the company told the FCC in a filing last year.
Cablevision found that, when it encrypted basic service under a waiver from the FCC, it almost eliminated the need to send crews in trucks to disconnect service, the Bethpage, New York-based company told the agency in a filing.
“Cablevision’s experience proves the environmental benefits of eliminating the encryption prohibition,” Cablevision told the agency.
Encrypting the basic tier would let Comcast start and stop service remotely, which customers prefer to scheduling an appointment with a technician, Philadelphia-based Comcast said in a filing at the FCC.
RCN, based in Herndon, Virginia, said in a filing it was seeing rising levels of theft as cable systems replace analog service with digital signals that are easier to steal.
Television sets with modern tuners can receive the unencrypted basic-service package which is sent in digital format and includes local broadcast stations.
Cable companies already encrypt offerings on the more expensive programming tiers that aren’t regulated by the FCC and include a wider array of channels.
The FCC prohibited encryption at a time cable dominated the pay-TV market, so customers wouldn’t need a set-top box to view local stations. The requirement doesn’t hold for satellite providers DirecTV (DTV:US) and Dish Network Corp. (DISH:US) or for cable competitors such as TV services offered by AT&T Inc. (T:US) and Verizon Communications Inc.
The National Cable & Telecommunications Association in 2004 estimated that about 5 percent of homes near cable lines accessed service without paying, resulting in almost $5 billion in lost revenue. That was more than 8 percent of industry revenues that year, according to a filing at the FCC by the Washington-based trade group. The organization’s members include the biggest U.S. cable operator, Comcast, No. 2 provider Time Warner Cable Inc. (TWC:US) and Cablevision.
Genachowski’s proposal includes methods for third-party equipment makers such as Boxee Inc. to relay unscrambled basic programming to customers, the two officials said. Boxee had expressed concern its customers wouldn’t be able to access basic-cable TV channels.
Genachowski’s proposal faces a vote and no deadline for action at the five-member agency where he is part of the 3-2 Democratic majority. Neil Grace, an FCC spokesman, in an e-mail declined to comment.
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