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http://www.businessweek.com/news/2012-10-12/cable-operators-can-fight-theft-by-encrypting-signals-fcc-rules

Bloomberg News

Cable Operators Can Fight Theft by Encrypting Signals, FCC Rules

October 13, 2012

Cable companies led by Comcast Corp. (CMCSA:US) won U.S. permission to encrypt their basic service to fight theft and reduce service calls.

The Federal Communications Commission voted 5-0 to allow encryption, the agency said in an order released yesterday. Cable companies already encrypt offerings on more expensive channel packages that feature more programming.

The FCC had prohibited encryption on basic service so customers wouldn’t need to rent a set-top box to view local stations. The prohibition didn’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 Systems Corp. (CVC:US), a New York-area provider.

“By permitting cable operators to join their competitors in encrypting the basic service tier, the commission has adopted a sensible, pro-consumer approach that will reduce overall in- home service calls,” Michael Powell, president of the trade group, said in an e-mailed statement. “Encryption of the basic tier also enhances security of the network which reduces service theft that harms honest customers.”

Encrypting basic service 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.

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.

To contact the reporter on this story: Todd Shields in Washington at tshields3@bloomberg.net

To contact the editor responsible for this story: Bernard Kohn at bkohn2@bloomberg.net


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