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NCTA Draws Up Cable STB Retail Initiative

Washington, D.C. – The National Cable & Telecommunications Association touched off a firestorm when it announced what it called an ‘industrywide initiative’ for the sale of cable set-top boxes at retail.

The association said its proposal for the distribution of cable boxes would provide ‘customers with the option of purchasing rather than leasing set-top boxes,’ but also gives cable companies the right to choose manufacturers and distribute boxes through their traditional direct leasing programs. Critics, including the Consumer Electronics Association said the new initiative promotes proprietary systems and not an open market.

The plan also does away with the use of point of deployment (POD) security cards, opting instead to use embedded security systems made available to cable operators in decoding equipment. This would effectively keep consumers from taking the boxes with them when the move. To lessen criticism to that weakness, the NCTA proposal adds a provision stating that cable companies would buy back the equipment at reasonable depreciation levels.

Operators will authorize and support these retail boxes in their systems. Set-top box makers will offer warranties on equipment, while retailers can sell optional extended warranty programs.

In a letter to Federal Communications Commission chairman Michael Powell, NCTA president Robert Sachs said ‘The immediate retail availability of integrated set-tops and the development of OCAP [OpenCable Application Platform, or middleware] specifications should foster a retail market envisioned by Section 629’ of the Telecommunications Act, passed by Congress in 1996.

However, the CEA quickly objected to the proposal saying it eliminates drafted OpenCable specifications that would allow for competing manufacturers to enter the market. This would limit competition and hinder the development of a selection of products, lower prices and better products. Further, a CEA spokesman said, the provision fails to address portability from market to market, adding that it would place a burden on consumers to negotiate with cable operators for the sale of their cable boxes.

The proposal also disregards ‘the intent of Congress, which calls for the creation of a competitive retail market for cable set-top boxes,’ CEA said.

‘I can’t imagine any reasonable person would look and this and say it meets the spirit of the Telecommunications Act,’ stated Jeff Joseph, CEA spokesman.

The initiative, adopted by the NCTA’s board, includes the following four key elements:

  • Manufacturers of digital set-top boxes will be encouraged to make available to retail outlets the same converter boxes with embedded security that are made available to the local cable operator.
  • Cable operators will authorize and support the retail boxes in their systems.
  • Set-top manufacturers may offer warranties and retailers may offer optional extended maintenance contracts for the devices.
  • For cable customers who purchase a set-top box at retail, and subsequently move to another city where the set-top may not be compatible, the cable operator will offer to buy back the set-top on a depreciated basis prior to the customer’s move.