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&P#Federal Communications Commission`}(#<DA 972591 ă  yxdddy x  @-  -@ X (# #C\  P6QP# IZBefore the  yO FEDERAL COMMUNICATIONS COMMISSION  yO"}Washington, D.C. 20554 #XP\  P6Q9XP# lU` `  hh,  SA-#&a\  P6G; &P#  S-In the Matter of hh,V) ` `  hh,V)  S-MOTOROLA'S HOMECLEARTM SYSTEMV)  S-` `  hh,V)pp xx- X(#(#` `  hh,V)  SQ-Request for Declaratory Rulinghh,V) ` `  hh,V)  S -R ORDER А S -lU  Sa - Adopted: December 10, 1997VppReleased: December 11, 1997 By the  #~ Deputy  #~ Chief, Cable Services Bureau:   S-  1.` ` In this Order we address Motorola's request, by its letter dated May 20, 1997, for a   declaratory ruling asking the Commission to treat Motorola's broadband descrambler equipment, included  Ss-  in its HomeClearTM product offering, as customer equipment for cost recovery purposes.2s*5 {O- ԍSee Letter from Gregory J. Vogt, Counsel for Motorola, and Stuart Overby, Motorola, to Meredith J. Jones,  yO-Chief of the Cable Services Bureau, Federal Communications Commission, May 20, 1997 ("Motorola Letter").(#(#2 We issued a  SK-  public notice on June 11, 1997, seeking comment on Motorola's request.K"*5 {O - ԍPublic Notice, Comment is requested on Motorola's request for treatment of its broadband descrambler  {O-equipment as customer equipment for cost recovery purposes, DA 971225, June 11, 1997. No comments were filed in this matter.  S-  p2.` ` As described below, we grant Motorola's request for cost recovery treatment of the   zbroadband descrambler portion of its HomeClear system. Under Section 76.923 of the Commission's   rules, cable operators can recover from subscribers the cost of customer equipment such as converter boxes   zand remote control units. Based on our review of Motorola's filing in this proceeding, we believe that   Lwhere Motorola's broadband descrambler equipment is located on the customer's residence at or near the   demarcation point or in the customer's residence it can be accorded treatment as customer premises equipment for cost recovery purposes, and therefore, Motorola's request should be permitted.  S-  ~3.` ` HomeClear is a system designed to scramble channels at the headend while at the same   time passing through a number of "in the clear" channels to video equipment used in the subscriber's   premises. Motorola states that the descrambler equipment portion of the HomeClear system: (1) would   be located on the customer's residence at or near the wiring demarcation point or in the customer's  S-  [residence,Z~*5 yO'- ԍIn discussions, Motorola stated that it also plans an inside version of HomeClear in which the descrambler   Lequipment portion of the system will be installed inside the subscriber's home and that in multidwelling units  {O(-("MDUs"), the HomeClear unit may be located elsewhere. This Order does not address such MDU situations. (2) serves the same function, i.e., conditional access to programming in analog cable television",))II9!"   systems, as a set top converter, and (3) will often replace the consumer's set top boxes for viewing multi S-  channel video programming on television sets.ku yO@- ԍSubscribers of HomeClear that do not have a "cable ready" TV or VCR would also require the use of a plain converter box to tune to all the channels offered through the HomeClear system. Motorola asks that the descrambler equipment portion   \of the system be classified as customer equipment consistent with the Commission's policy goal that   similar equipment be regulated in a nondiscriminatory manner and not based on the level of service  S`-received by the subscriber.P` ku {O -ԍSee Motorola Letter at 3.P  S-  4.` ` Our rate regulation rules for equipment that is used to receive the basic service tier are  S-  set forth in Section 76.923.$ku yO: - 2ԍ47 CFR  76.923. We recently amended our equipment cost recovery rules as required by the  {O -  Telecommunications Act of 1996. See Implementation of Section 301(j) of the Telecommunications Act of 1996;  {O -  Aggregation of Equipment Costs by Cable Operators, Report and Order, CS Docket No. 9657, 11 FCC Rcd 6778 (1996).  The equipment regulated under this section consists of "all equipment in a   Lsubscriber's home, provided and maintained by the operator, that is used to receive the basic service tier,   yregardless of whether such equipment is additionally used to receive other tiers of regulated programming  Sp-  service and/or unregulated service."Gpku yO-ԍ47 CFR  76.923(a).G Our rules permit categorization of customer equipment costs into  SH -  >broad categories, limited only by the requirement that equipment so aggregated be of the same type.H . ku yO- zԍThe 1996 Act added new  623 (a)(7)(A) to the Communications Act of 1934, requiring the Commission   to allow operators to aggregate equipment costs into broad categories regardless of the level of functionality within   each such broad category. We eliminated the language in  76.923 (f), (g) of our rules, which required separate   charges for each significantly different type of remote, converter box, and other customer equipment, because we  {O6-found it would prevent the broad categorization intended by Congress. See 11 FCC Rcd 6778 (1996).    jGenerally, our rules set out three types of customer equipment: (1) converter boxes, (2) remote controls  S -  and (3) inside wiring.i ku {Ox-ԍSee 11 FCC Rcd 6778 (1996); 47 CFR  76.923(a).i Customer equipment costs should be aggregated into one of these broad  S -  categories.q rku {O -ԍSee 11 FCC Rcd 6778, 6783 (1996); 47 CFR  76.923(c)(1)q The converter box category can include advanced boxes. x ,ku yO- ԍ11 FCC Rcd 6778, 6783, (1996). In amending our equipment cost recovery rules we were guided by   wCongress' intent that the rules be designed to promote the development of a broadband two-way telecommunications   infrastructure. Thus, we were cognizant of the need to maintain a flexible approach with respect to categorization   of new technology. For example, we stated that when new types of advanced boxes are designed and developed for   use in cable systems, operators may broaden the "converter box" category and aggregate such new technology with   other boxes that are used to receive services delivered over the cable system, notwithstanding the fact that the new equipment may perform other functions as well. 11 FCC Rcd 6778 (1996).  We found that flexibility was   Mconsistent with the express language of Section 623(a)(7) of the Communications Act, and stated our   belief that our amended rules would reduce the cost of advanced technology for consumers and permit  SX-  <manufacturers to more easily implement future technical innovation in the broadband industry.b Xlku {Od'-ԍSee Communications Act,  623 (a)(7)(A).b Operators"X ,>(>(IIZ"  S-  are allowed, but are not required, to classify any of their equipment into these categories; ku {Oh- zԍSection 623(a)(7)(A) of the Communications Act permits an operator to aggregate equipment costs.  See 11 FCC Rcd 6778, 6783 (1996). but must  S-charge rates for equipment and installations based on actual costs.b"ku {O- ^ԍSee Communications Act,  623(b)(3), 47 U.S.C.  542(b)(3); 47 CFR  76.923. Under the Cable   YTelevision Consumer Protection and Competition Act of 1992, rates for equipment and installations are required to   be based on actual costs. Rates for equipment used to receive residential cable service generally are regulated by  {O-  the local franchising authority pursuant to rules promulgated by the Commission. See 47 CFR  76.92276.923, 76.94476.945. b  S-  25.` ` A subscriber requires the use of customer premises equipment such as a set top converter   box/descrambler to receive cable signals that are delivered scrambled to the subscriber's home from the  S8-  cable operator's headend.8ku yO - ԍIn cases where a subscriber does not have a "cable ready" TV, VCR, or where direct pickup interference occurs, a converter is required to receive signals or reduce interference even if the signals are not scrambled.  When signals are sent from the headend and delivered scrambled to the   subscriber, a set top converter box/descrambler would be required to be located at each television set at   the subscriber's premises to descramble and allow the subscriber to receive the authorized signals. The   lsubscriber is charged separately for the use of each set top converter box/descrambler as customer   premises equipment under Section 76.923 of our rules. Signals may also be sent unscrambled or "in the  Sp-  Lclear" with the use of clear channel delivery systems such as traps, interdiction, and addressable filters.p. ku {O>-ԍOur rules prohibit the scrambling of signals that are carried on the basic service tier. See 47 CFR  76.630.   When signals are sent using clear channel delivery systems, the equipment necessary to descramble   signals, and allow the subscriber to receive the authorized signal, is located in the cable distribution   network between the headend and the subscriber's premises. The equipment used to descramble signals   is not required at the subscribers premises, and the subscriber is not subject to a separate equipment charge.  SX-  6.` ` The HomeClear system is designed to permit cable operators to scramble channels at the   .headend while at the same time passing through other channels "in the clear" to video equipment used in   the subscriber's premises. The cable operator can remotely address the broadband descrambler portion  S-  Lof the HomeClear unit that is at the subscriber's premises.fZ ku yO@- ԍMotorola claims that such remote control provides advantages to the operator since there will be no need   -to deploy technicians to the homeowner's site, with the attendant scheduling problems associated with residence  {O-visits.  See Motorola Letter at 2.f To selectively descramble channels, a single  S-  descrambler unit could be located at or near the cable home wiring demarcation point,Xku yO:"- ԍA demarcation point generally is the point at which a service provider's system wiring ends and the   customercontrolled wiring begins. For single family homes, the cable demarcation point generally is at (or about) 12 inches outside of where the cable wire enters the subscriber's premises. 47C.F.R.76.5(mm)(1).  on the wall  S-  .outside a customer's residence,ku {O2&- ԍIndoor locations such as garages or attic are also feasible for installation. See Attachment to Motorola Letter at 3. and in some cases inside the customer's premises. The HomeClear unit"\,>(>(II"   will not interfere with a customer's ability to use any feature of a television set such as, pictureinpicture,  S-  parental control, stereo and remote control.hku {O@- yԍSee Motorola Letter at 2. Section 624A of the Communications Act seeks to achieve compatibility between   cable systems and consumer electronics equipment. The Commission is addressing equipment compatibility issues  {O-  hin a current proceeding, ET Docket No. 937, In the Matter of Implementation of Section 17 of the Cable Television   Consumer Protection and Competition Act or 1992, Compatibility Between Cable Systems and Consumer Electronics  {Md-Equipment.h It will also permit a customer's television sets and video  S-recording devices to simultaneously tune different programming channels.P|ku {O-ԍSee Motorola Letter at 2.P  S`-  7.` ` Our rate regulations for customer equipment apply to all equipment "in a subscriber's  S8-  home provided and maintained by the operator, that is used to receive the basic service tier."E8ku yO -ԍ47 C.F.R. 76.923(a).E In the case   kof Motorola's HomeClear system, the descrambling occurs on the subscriber's premises using a single   jdescrambler unit that will be located at or near the cable home wiring demarcation point, or in some cases   yinside the customer's premises. Once installed, the single HomeClear unit descrambles authorized signals   for receipt at each television and video cassette recorder in the home, eliminating the need for individual  Sp-set top converter box/descrambler units for each piece of video equipment on the customer's premises.Rpku {O-ԍSee Motorola Letter at 23.R  S -  8.` ` We believe that, consistent with the flexibility of our rules allowing broad categorization  S -  of equipment in order to advance technical innovations,f 0 ku {O-ԍSee supra. at n.10 and accompanying text.f there is good cause to permit Motorola's   ybroadband descrambler unit to be accorded treatment as customer equipment for cost recovery purposes,   and we will not strictly apply the requirement under Section 76.923 that the equipment be located "in a  S -  subscriber's home." ku yO- ԍAny provision of the rules may be waived by the Commission on its own motion or on petition if good  {O-cause therefor is shown. See 47 CFR  1.3. Our cost recovery treatment is premised on the HomeClear unit being located on   the subscribers' premises at or near the cable wiring demarcation point, i.e., near the outside wall of the  S0-  >subscriber's residence,i0ku {O-ԍ See Motorola Letter at 3, and Figure 1 of Attachment A. i or in the subscriber's premises. Additionally, our treatment is subject to the   jcondition that where the HomeClear unit is installed on the outside wall of the subscriber's residence, the  S-  subscriber will not be responsible for losses in cases of theft or tampering of the unit.ku yO."- MԍFurther discussions with Motorola acknowledged that risk of damage and theft to outside units should not be the responsibility of the subscriber. We accord this   treatment because, as with set top converter box/descrambler units, customers will be aware that the",>(>(II"   HomeClear unit is installed on the subscriber's premises, unlike equipment installed on a pole or pedestal.{ yOh- ԍPedestals are ground level enclosures installed by cable, telephone and electrical companies to allow access   to network electronics and individual customer connections in those systems that have underground wiring. Equipment installed on a pole or pedestal receive powering from the cable network.{ In addition, the HomeClear unit will be powered from the subscriber's home, as with set top  S-converter box/descrambler units located in a subscriber's home.Pku {O`-ԍSee Motorola Letter at 1.P  S`-  9.` ` In treating HomeClear units as customer equipment for cost recovery purposes, we note   [that it is our understanding that the cable operator will follow similar procedures regarding installation of  S-  zHomeClear units as it does for customer equipment installed in a subscriber's homeku {OR - ԍSee Motorola Letter at 3. Further discussions with Motorola indicate that installations of HomeClear units and removal of unnecessary customer equipment would be performed by the cable operator. and our ruling is   premised on that understanding. Subscribers who have converter boxes/descramblers at the time the   HomeClear unit is introduced may not be charged for the installation of the HomeClear unit. Cable   operators may not impose a monthly charge until the HomeClear unit is activated to receive service.   .Existing customer equipment no longer needed to receive cable services may not be subject to a monthly  SH -  charge.xZH ku {O- ԍId. We also note that where a subscriber uses the HomeClear system to receive service and also requires   additional equipment in conjunction with the HomeClear unit in order to receive service or to eliminate interference, the additional equipment will not be subject to monthly charges. x In instances where the subscriber wants only the basic service tier, the cable operator will not   jcharge for the HomeClear unit because it will not be necessary for the delivery of such basic service. For   >operators that choose to aggregate equipment costs under Section 76.923 of our rules, the cost of the  S -HomeClear descrambler units should be aggregated as a converter box.q Z  ku yO- {ԍOperators have the flexibility to aggregate or not aggregate various converter boxes into one or more   categories. We note that in treating HomeClear units as converter boxes, operators will be permitted this same  {O-flexibility. See 11 FCC Rcd 6778, 6784, (1996).q  S -  10.` ` We believe that providing cost recovery treatment to the descrambler equipment portion   of Motorola's HomeClear system will encourage the implementation of an advanced broadband   descrambling technology that will provide benefits to consumers and cable operators. As indicated above,   Aa single HomeClear unit will eliminate the need for customers to install a set top converter   box/descrambler unit at each television set and video cassette recorders and will enable customers to use   all the features of a television set. Further, the HomeClear system will permit cable operators to scramble   and descramble channels remotely from the headend, encouraging efficiencies in scheduling customer services and reducing overall service costs. "@@ ,>(>(IIc"  S-  11.` ` Accordingly, IT IS ORDERED that Motorola's request for a declaratory ruling asking   the Commission to treat Motorola's broadband descrambler equipment, included in its HomeClear product  S-offering, as customer equipment for cost recovery purposes IS GRANTED .  S`-  12.` ` This action is taken pursuant to delegated authority under section 0.321 of the  S8-Commission's rules.F!8ku yO-ԍ47 C.F.R.  0.321.F ` `  hh,FEDERAL COMMUNICATIONS COMMISSION ` `  hh,John E. Logan ` `  hh,Deputy Chief, Cable Services Bureau