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Federal Communications Commission
Washington, D.C. 20554
In the Matter of )
File Number EB-07-SE-352
Oceanic Time Warner Cable, )
NAL/Acct. No. 200932100002
a division of Time Warner Cable, Inc. )
Oceanic Kauai Cable System )
NOTICE OF APPARENT LIABILITY FOR FORFEITURE AND ORDER
Adopted: October 15, 2008 Released: October 15, 2008
By the Chief, Enforcement Bureau:
1. In this Notice of Apparent Liability for Forfeiture and Order ("NAL
and Order"), we find that Oceanic Time Warner Cable ("Oceanic Kauai"),
a division of Time Warner Cable, Inc. (together with Oceanic Kauai,
"TWC") apparently willfully violated Sections 76.1201 and 76.640(b)(1)
of the Commission's Rules ("Rules") in its Oceanic Kauai cable system.
Specifically, Oceanic Kauai apparently violated Section 76.1201 by
moving certain channels to a Switched Digital Video ("SDV") platform
on November 6, 2007, thereby preventing subscribers with
CableCARD-equipped unidirectional digital cable products ("UDCPs")
from using their navigation devices to access these channels. Further,
in its deployment of SDV on November 6, 2007, TWC apparently violated
Section 76.640(b)(1) by failing to provide a virtual channel table
which conforms to the standards required under Sections
76.640(b)(1)(i) and 76.640(b)(1)(v). We conclude, pursuant to Section
503(b) of the Communications Act of 1934, as amended ("Act"), that TWC
is apparently liable for a forfeiture in the amount of twenty thousand
dollars ($20,000). We also require TWC to make appropriate refund of
fees charged to customers affected by TWC's movement of linear
channels to the SDV platform on November 6, 2007.
2. Congress and the Commission have long recognized the importance of
allowing consumers the freedom to purchase their own navigation
devices from sources other than their cable operator, satellite
provider, or other multichannel video programming distributor
("MVPD"). Thus, Congress adopted Section 629 of the Act, which
requires the Commission to ensure the commercial availability of
navigation devices. By separating the security and navigation
functions of equipment used to receive MVPD programming, Congress
hoped to spur competition and expand consumer choice. As the House
Report accompanying Section 629 noted, "competition in the
manufacturing and distribution of consumer devices has always led to
innovation, lower prices and higher quality. Clearly, consumers will
benefit from having more choices among telecommunications subscription
services available through various distribution sources." At the same
time, Congress recognized that MVPDs have "a valid interest, which the
Commission should continue to protect, in system or signal security
and in preventing theft of service."
3. In its order proposing rules implementing Section 629, the Commission
stated that its overarching goal was to assure competition in the
availability of set-top boxes and other customer premises equipment.
The Commission explained that "[a]s navigation devices are the means
to deliver analog and digital communications, competition in the
navigation equipment market is central toward encouraging innovation
in equipment and services, and toward bringing more choice to a
broader range of consumers at better prices."
4. Thus, in adopting Section 76.1201 of the Commission's Rules, which
allows subscribers to acquire, attach, and use any compatible
navigation device with an MVPD's system, as long as that equipment
does not cause harmful interference or facilitate theft of service,
the Commission likened its actions to its Carterfone decision in the
telephone environment. In Carterfone, the Commission allowed consumers
to attach legal devices to the telephone network unless that equipment
would harm the network. The Commission stated that "[a]s a result of
Carterfone and other Commission actions, ownership of telephones moved
from the network operator to the consumer. As a result, the choice of
features and functions incorporated into a telephone has increased
substantially, while the cost of equipment has decreased." The
Commission emphasized that "[f]ollowing the Carterfone principle
adopted in the telephone context would allow subscribers the option of
owning their own navigation devices and would facilitate the
commercial availability of equipment." The Commission stated that
"[t]he steps taken in this Report and Order, if implemented promptly
and in good faith, should result in an evolution of the market for
navigation devices so that they become generally and competitively
available." The Commission recognized that its work on these issues
was not complete, however, and reiterated its commitment to monitoring
developments regarding the compatibility of set-top boxes and digital
5. Five years later, in the Plug and Play Order, the Commission took
further steps to facilitate the direct connection of digital
navigation devices (including commercially available UDCPs) to MVPD
systems. Specifically, the Commission considered standards agreed upon
by the cable and consumer electronics ("CE") industries and adopted a
cable compatibility standard for integrated, unidirectional digital
cable television receivers, as well as other UDCPs, to ensure the
compatibility and commercial availability of UDCPs with cable
television systems. Generally, the Plug and Play Order required MVPDs
to support operation of UDCPs and to ensure the utilization of such
navigation devices in connection with their cable systems. In
addition, the Commission required MVPDs to make available a security
element separate from the basic navigation device. Under this
framework, the Commission sought to enable unaffiliated manufacturers,
retailers, and other vendors to commercially market UDCPs while
allowing MVPDs to retain control over their system security.
6. Consumers with UDCPs access MVPD programming by using a CableCARD
leased from the cable operator. UDCPs employ a standard interface that
permits them to negotiate with the CableCARD. The CableCARD
descrambles the MVPD's encoded digital signal and allows the
subscriber to view the programming. Thus, commercially available UDCPs
can be compatible with cable systems nationwide, while cable operators
maintain their ability to secure programming content from unauthorized
viewing. In theory, this arrangement allows consumers access to all of
a cable operator's linear programming without the need of a separate
set-top box leased from their cable operator, while protecting the
cable operator from theft of its programming services.
7. But recent events have demonstrated the limits of this theory.
Traditionally, cable systems have used broadcast-type technologies
that deliver all programs to all subscribers whether the subscribers
view the programs or not. The programs not viewed nonetheless occupy
system bandwidth, which prevents the use of that bandwidth for any
other purpose. Because of ever-increasing constraints on bandwidth,
many cable operators have begun to test and deploy SDV technology in
their cable systems. In an SDV system, a subset of programming is
delivered in the traditional way to all subscribers regardless of
whether they are viewing the programs. For those channels, the
CableCARD-equipped UDCP works as described above, allowing the
subscriber to view the channels delivered in the traditional broadcast
manner. The remaining channels are switched through the use of SDV
network equipment located at a "hub" (where signals are converted and
placed onto the "last mile" coaxial portion of the network). These
switched channels do not occupy bandwidth, and are not available to
subscribers until a subscriber tunes to that channel by sending a
request, using a remote control or program guide, upstream through the
use of a set-top box to the hub. At the hub, the SDV equipment
directly receives and processes set-top channel change requests for
switched content and responds to that set-top with the frequency and
program number where that content can be found. Once the hub receives
the request, it immediately begins to transmit the channel.
8. A customer who uses a CableCARD-equipped UDCP to receive programming,
however, must have additional equipment with the necessary upstream
signaling capability to obtain the switched (i.e., bi-directional)
channels. The UDCP cannot perform the bi-directional functions
necessary to request delivery of a channel via SDV. Nor can the
CableCARD, which is designed only to provide the separate security
element, provide the necessary interface needed to send the signal to
the SDV server. Thus, in essence, in an SDV system, all subscribers
must have a cable-operator supplied set-top box to view channels
placed on the SDV platform.
9. As noted above, the Plug and Play Order not only adopted standards to
allow commercially available navigation devices to work with MVPD
systems, but also adopted technical rules to ensure that cable
subscribers would be able to view digital cable services while still
enjoying full functionality of their UDCPs. The Commission did so
pursuant to Section 624A of the Act, which requires the agency to
ensure that cable subscribers enjoy the full benefit of available
cable programming as well as the features and functions of their
televisions. To that end, the Commission adopted Section 76.640(b) of
the Rules, which obligates cable operators to support UDCPs through
compliance with certain Program System Information Protocol ("PSIP")
standards put forth by the Advanced Television Systems Committee
("ATSC"). The standards referenced in Section 76.640 were proposed as
part of the 2002 MOU reached between cable operators and consumer
electronics manufacturers to ensure compatibility between consumer
electronics devices and cable systems.
10. The deployment of SDV technology has implications for cable operators'
compliance with certain subparts of Section 76.640(b). First, Section
76.640(b)(1)(i) provides, in relevant part:
(b) No later than July 1, 2004 cable operators shall support
unidirectional digital cable products, as defined in S:15.123 of this
chapter, through the provision of Point of Deployment modules (PODs) and
services, as follows:
(1) Digital cable systems with an activated channel capacity of 750 MHz or
greater shall comply with the following technical standards and
(i) SCTE 40 2003 (formerly DVS 313): "Digital Cable Network Interface
Standard" ...,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
SCTE 40 2003, Section 5.5 states that "[w]hen one or more scrambled
services are offered on the cable system, System and Service Information
for all services (both scrambled and in-the-clear) shall be carried in an
out-of-band Forward Data Channel, as defined in section 3.3.3 above, using
the formats described in SCTE DVS/234 (rev.2)." ...
11. In essence, Section 76.640(b)(1)(i) requires cable operators to send
UDCPs a one-way stream of data that is separate from the video
programming (the "out of band Forward Data Channel"). That data stream
includes channel lineups and other programming information otherwise
known as "service information tables." This requirement applies to all
services, both scrambled and in the clear.
12. Second, Section 76.640(b)(1)(v) further provides, in relevant part:
(v) When service information tables are transmitted out-of-band for
(A) The data shall, at minimum, describe services carried within the
transport stream carrying the PSIP data itself;
(B) A virtual channel table shall be provided via the extended channel
interface from the POD module. Tables to be included shall conform to
ANSI/SCTE 65 2002 ... "Service Information Delivered Out-of-Band for
Digital Cable Television"....
13. Together, Section 76.640(b)(1)(i) and Section 76.640(b)(1)(v) require
a cable operator to provide information to UDCPs allowing them to find
and display a scrambled programming service on a particular channel.
Section 76.640(b)(1)(i) is the basic requirement regarding service
information tables, and Section 76.640(b)(1)(v) provides the more
detailed specifications for how cable operators should format and
transmit a particular service information table -- the "virtual
channel table." That table acts as a legend for the UDCP. When a cable
operator transmits its digital cable services, those services are not
necessarily transmitted on the channels listed on a subscriber's
programming guide. The virtual channel table enables a UDCP to display
the programming services on the channels on which the subscriber
expects to see them. As noted above, virtual channel table information
is sent on a data channel separate from the video programming
("out-of-band") via a communication path agreed upon by cable
operators and CE manufacturers (the "extended channel interface").
14. Because of the bi-directional nature of SDV technology, however, UDCPs
cannot view programming provided on such a platform. If a cable
operator transmits a virtual channel table that includes SDV
programming to a UDCP, the UDCP will indicate that SDV programming
should appear on certain channels but will be unable to display it. To
avoid such a scenario, some cable operators may have unilaterally
excluded SDV programming from the virtual channel tables transmitted
to customers with CableCARD-equipped UDCPs.
15. On November 8, 2007, the Spectrum Enforcement Division of the
Enforcement Bureau ("Bureau") issued a Letter of Inquiry ("LOI") to
TWC based on complaints that the company had moved certain cable
channels that previously had been accessible to subscribers using
CableCARD-equipped UDCPs, such as digital cable ready television sets
and digital video recorders, to an SDV platform. Specifically, one
complainant alleged that TWC had deployed SDV and moved a large number
of channels to an SDV platform, including popular high definition
("HD") sports and entertainment channels. According to the complaints,
TWC's implementation of SDV necessarily required customers using a
CableCARD to obtain additional equipment, i.e., a set-top box, from
the cable company to continue to receive all cable channels available
to them prior to the change to the SDV platform. The LOI sought
information on a number of issues, and asked the company to explain
how its implementation of SDV was consistent with Section 629 of the
Act, Commission rules implementing that statute, the 2002 MOU, and in
particular, the policies and rules established by the Commission in
the Plug and Play Order. The Bureau issued its first supplemental LOI
on August 25, 2008 and a second supplemental LOI on October 3, 2008 to
TWC to obtain additional information concerning the company's
deployment of SDV.
16. TWC responded to the LOI on November 30, 2007, and responded in part
to the first supplemental LOI on September 12, 2008 and in full on
September 23, 2008. TWC responded to the second supplemental LOI on
October 14, 2008. In its response, TWC admits that its Oceanic Kauai
cable system deployed SDV for its Kauai customers on November 6, 2007,
moving 62 linear channels to an SDV platform. For CableCARD customers
affected by its SDV deployment, TWC offered set-top boxes at the same
price as the customers' CableCARDs for two years from the date of SDV
deployment. TWC states that it had planned to deploy SDV on several
other Hawaiian islands, but has deferred that action until it has
provided 30 days notice to the relevant Local Franchising Authority
17. With respect to the technical requirements described above, TWC admits
that it does not provide its subscribers using CableCARD-equipped
UDCPs with a virtual channel table that includes programming on its
SDV platform. Rather, it enables its CableCARD subscribers to navigate
only to "all one-way services provided to the UDCP." TWC asserts that
its actions are consistent with Section 76.640 of the Commission's
Rules because - according to TWC - Section 76.640(b)(1)(v) does not
require that UDCPs be able to navigate "two-way programming streams
delivered using SDV technology."
A. TWC Apparently Willfully Violated Section 76.1201 By Requiring
Subscribers To Obtain A Set-Top Box To View Previously Accesesible Linear
18. Section 76.1201 of the Rules prohibits an MVPD from "prevent[ing] the
connection or use of navigation devices to or with its system" unless
such devices would cause electronic or physical harm or allow the
unauthorized receipt of service. Based on the record before us, we
find that TWC apparently willfully violated Section 76.1201 by moving
certain linear channels to an SDV platform in its Oceanic Kauai cable
system on November 6, 2007. In so doing, TWC prevented subscribers
with UDCPs, such as "digital cable ready" televisions and TiVo
recorders, from viewing the switched linear channels that were already
part of their subscription package without the use of a TWC-supplied
set-top box, thus impairing the use of those UDCPs within the affected
cable system. Additionally, because customers now must have a
TWC-leased set-top box to view many of their channels, even on UDCP
devices, TWC's migration of channels to an SDV platform has prevented
the use of some functions available on those UDCPs, such as the
abilities to view picture-in-picture and to record one channel while
viewing another channel.
19. Notwithstanding its effect on CableCARD-using UDCP owners, TWC
contends that its movement of existing linear channels to an SDV
platform is fully consistent with the Act and the Commission's rules
and policies, including the Plug and Play Order and the 2002 MOU
between the cable operators and the CE industry. TWC states that the
Plug and Play Order, which adopted specific provisions of the 2002 MOU
with certain modifications, established a regulatory framework for the
commercial introduction of unidirectional navigation devices, and
explicitly recognized that all two-way services, including SDV
service, would require a set-top box. TWC submits that the Commission
fully anticipated and accounted for the deployment of new interactive
services like SDV, and sought to ensure that the standards adopted in
the Plug and Play Order would not freeze technology or stifle the
innovation of new technology. According to TWC, neither the 2002 MOU
nor the Plug and Play Order prohibit cable operators from deploying
new services or restrict the development or deployment of SDV or other
bi-directional technologies and services. TWC argues that rather than
prohibiting the deployment of new technology and services by cable
operators, the Commission sought to safeguard consumers' interest by
promoting outreach and consumer education. TWC claims that it has
fulfilled its responsibilities to subscribers with UDCPs by informing
them of the need for a set-top box to receive two-way services, and,
for the SDV deployment at issue here, has accommodated consumers using
a CableCARD-equipped UDCP by offering to lease a set-top box at no
additional charge for two years. In short, TWC argues that the
Commission's rules leave cable operators "free to innovate and
introduce new products and services without regard to whether consumer
electronics manufacturers are positioned to deploy substantially
similar products and services."
20. We reject TWC's arguments as inconsistent with the language and the
intent of the Commission's rules and orders. Taken to its logical
conclusion, TWC's reasoning would permit an MVPD to move all of its
programming to an SDV platform without regard for the impact its
actions would have on customers using or wishing to use
CableCARD-equipped UDCPs. Such an outcome would be fundamentally at
odds with the Commission's goal of protecting cable subscribers'
ability to view signals through the use of commercially available
navigation devices offered in a competitive market. TWC's movement of
linear channels that were previously accessible with a
CableCARD-equipped UDCP to a switched digital platform that can only
be accessed with a TWC-provided set-top box conflicts with the
Commission's rules and policies designed to promote competition and
consumer choice of navigation devices.
21. While we recognize that the Plug and Play Order does not prohibit
cable operators from developing and deploying new technology and
services, it does not permit TWC's actions here. In recognizing that
cable operators are free to innovate and introduce new products and
services, the Commission cautioned that such development and
deployment of new products and services should not interfere with the
functioning of consumer electronics equipment or the introduction of
such equipment into the commercial market for navigation devices.
Indeed, the Commission has continually emphasized that its navigation
device rules are an important tool for promoting competition and
bringing more choices to consumers. Yet the manner in which TWC has
opted to administer its SDV programming effectively negates the
concerted efforts and advances made thus far to achieve a competitive
pro-consumer environment for such equipment.
22. Specifically, by moving linear programming to an SDV platform, TWC has
prevented CableCARD-equipped UDCPs from receiving previously available
channels and impaired the usefulness of competitive commercially
available navigation devices, in violation of the Commission's Rules
and the intent of Section 629. The Commission recognized that devices
made pursuant to the standard adopted in the Plug and Play Order
lacked upstream or bi-directional capabilities and therefore could not
receive certain programming or services, but that recognition did not
extend to services that consumers traditionally experienced as one-way
services or programming that was part of the package for which they
were already paying. At no point did the Commission authorize MVPDs to
modify their transmission of linear programming such that UDCP devices
could no longer receive such programming without a set-top box. TWC
states that its activation of SDV technology did not prevent its
customers with UDCPs from receiving switched channels; but rather,
these customers simply needed to obtain a set-top box to view such
programming. Such a situation is fundamentally at odds with the policy
and regulatory objectives of the Plug and Play Order.
23. Section 76.1201 was adopted to achieve the statutory requirement of
alternative sources of navigation devices and to ensure the commercial
availability of navigation devices. The Plug and Play Order sought to
provide further assurance of the commercial availability of navigation
devices by requiring that cable operators support the operation of
UDCPs in connection with their cable systems. TWC's movement of linear
programming to an SDV platform clearly impairs the use of
CableCARD-equipped UDCPs and fundamentally limits the commercial and
competitive viability of those devices. After TWC's movement of linear
programming to an SDV platform, customers who use CableCARD-equipped
UDCPs can no longer receive that programming without leasing a set-top
box from the company. Those customers who choose to lease a set-top
box not only must bear the additional cost, but also lose many
features of their UDCPs, such as picture-in-picture viewing and the
ability to record one channel while watching another. Accordingly, TWC
is preventing its customers from using their UDCPs and undermining the
policy goals of Congress and the Commission to ensure the commercial
availability and use of navigation devices. Thus, we find TWC's
November 6, 2007 migration of linear channels to an SDV platform in
its Oceanic Kauai cable system apparently constitutes a willful
violation of Section 76.1201 of the Rules.
24. TWC also stresses the importance of the development and deployment of
SDV. TWC claims it is pro-competitive, pro-consumer, vital to the
digital television transition (especially for carriage of broadcast
signals in both analog and digital format as required by the
Commission), and critical for expanding the number of HD programming
and increasing broadband transmission speeds. Finally, TWC claims that
halting or reversing the migration of channels to SDV would harm not
only TWC's legitimate business interests, but the public interest more
25. The deployment of SDV technology may provide public benefits. It is
not TWC's deployment of SDV technology that violates Section 76.1201,
but TWC's migration of existing linear programming to an SDV tier that
we find inconsistent with the Commission's Rules. For example,
charging for channels not presently accessible to subscribers with
CableCARD-equipped UDCPs undermines the policy and regulatory
objectives of the Plug and Play Order. TWC's movement of linear
programming to an SDV platform is particularly troubling because no
bi-directional navigation devices are commercially available at this
time. We understand that a major impediment to the availability of
such devices is the cable industry's insistence on licensing
conditions that go beyond the protection of the network from physical
or electronic harm or theft or service. For example, limitations on
the ability to integrate broadband capability into competitive
navigation devices and the ability to integrate web-based or IP
content with cable-provided programming are not related to Congress'
recognition that MVPDs have "a valid interest, which the Commission
should continue to protect, in system or signal security and in
preventing theft of service." We consider such restrictions to be
contrary to Congress and the Commission's shared policy goal of
expeditious commercial availability of bi-directional navigation
B. TWC Apparently Willfully Violated Section 76.640(b) by Failing to
Comply with the Commission's Technical Rules Regarding the Provision of a
Virtual Channel Table for SDV Programming
26. TWC readily admits that it does not populate the virtual channel table
with its two-way services. In its defense, TWC claims that Section
76.640 only applies to unidirectional digital cable services; on its
face, however, Section 76.640 applies only to unidirectional products.
Section 76.640(b)(1) makes no distinction between unidirectional and
bi-directional services. Indeed, by its own terms, the standard
incorporated by reference in Section 76.640(b)(1)(i) applies to all
services - there is no exception for bi-directional services.
Therefore, TWC is required to describe programming on an SDV platform
in the out-of-band forward data channel and populate the virtual
channel table with all of its programming services. As TWC did not
provide a complete virtual channel table, TWC violated Sections
76.640(b)(1)(i) and 76.640(b)(1)(v) of the Commission's Rules.
27. Pointing to the inability of UDCPs to view two-way services, TWC
claims that Section 76.640, by its "text and history," does not apply
to SDV, which is a bi-directional service. But TWC fails to cite any
language in the rule, the adopting order, or Commission precedent in
which the Commission stated that 76.640 did not apply to such
services, including SDV. Including the SDV programming in the virtual
channel table would make it clear to TWC subscribers using
CableCARD-equipped UDCPs that their cable operator is charging them
for programming that they cannot see.
28. In any event, Commission regulatees may not pick and choose with which
of the Commission's Rules they wish to comply. If TWC believed it had
a legitimate reason to exclude two-way programming from the virtual
channel table provided to customers with CableCARD-equipped UDCPs, the
company should have sought a waiver of the relevant rules.
Accordingly, based on the record before us, we find that TWC
apparently willfully violated Section 76.640(b) by failing to provide
a virtual channel table as required by Section 76.640(1)(b)(i) and
76.640(b)(1)(v) in its Oceanic Kauai cable system.
C. Forfeiture Calculation
29. Under Section 503(b)(1)(B) of the Act, any person who is determined by
the Commission to have willfully or repeatedly failed to comply with
any provision of the Act or any rule, regulation, or order issued by
the Commission shall be liable to the United States for a forfeiture
penalty. To impose such a forfeiture penalty, the Commission must
issue a notice of apparent liability and the person against whom such
notice has been issued must have an opportunity to show, in writing,
why no such forfeiture penalty should be imposed. The Commission will
then issue a forfeiture if it finds by a preponderance of the evidence
that the person has violated the Act or a Commission rule. We conclude
that TWC is apparently liable for a forfeiture in the amount of twenty
thousand dollars ($20,000) for its willful violation of Sections
76.1201, 76.640(b)(1)(i), and 76.640(b)(1)(v) of the Rules.
30. Under Section 503(b)(2)(A) and Section 1.80(b)(1) of the Commission's
Rules, we may assess a cable television operator a forfeiture of up to
$32,000 for each violation or each day of a continuing violation, up
to a statutory maximum forfeiture of $325,000 for any single
continuing violation. In exercising such authority, we are required to
take into account "the nature, circumstances, extent, and gravity of
the violation and, with respect to the violator, the degree of
culpability, any history of prior offenses, ability to pay, and such
other matters as justice may require."
31. The Commission's Forfeiture Policy Statement and Section 1.80 of the
Rules do not establish a specific base forfeiture for violation of
Section 76.1201. In a similar case, the Commission proposed
forfeitures for each cable system involved in the violation. Thus, we
propose to establish a base forfeiture amount for each cable system in
which linear programming has been moved to an SDV platform, thereby
impairing customers' use of navigation devices such as UDCPs to view
such programming. As noted above, this case involves one of TWC's
Hawaii Division cable systems - Oceanic Kauai.
32. TWC contends that enforcement action is inappropriate here because the
number of subscribers that rely on CableCARD-equipped UDCPs is small.
According to TWC, less than 0.3 percent of its subscriber base relies
on UDCPs and more than 63 percent of those subscribers also utilize
one or more set-top boxes. TWC contends that because a large percent
of its subscribers benefit from the deployment of SDV, the Commission
should encourage the deployment of SDV rather than conduct enforcement
proceedings against operators for such deployment.
33. While the number of subscribers that were prevented from using their
CableCARD-equipped UDCPs to access certain programming may be a
relatively small percentage of all cable subscribers, we consider the
consumer harm resulting from actions here, which frustrate the
Commission's broader goal of achieving a competitive navigation device
market, to be significant. Moreover, it is impossible to determine the
injury actions like those at issue here may have inflicted on the
market for one-way devices such as UDCPs. The movement of linear
programming to an SDV platform, without having in place standards to
ensure bi-directional compatibility of cable television systems and
consumer electronics equipment without unnecessary licensing
conditions, significantly harms the Commission's policies to move
navigation devices toward a fully competitive market. Consumers have
little incentive to purchase a UDCP and lease a CableCARD when their
cable provider already has moved more than a dozen channels to a
platform inaccessible to such equipment.
34. One analogous violation for which the Commission has already
established a base forfeiture is violation of the cable broadcast
signal carriage rule, which has a base forfeiture of $7,500. Given the
number of channels involved and the effect of actions like those here
on the Commission's policy objectives, however, we find that a more
significant penalty is appropriate. We conclude that $10,000 per cable
system in which linear programming is moved to an SDV platform is an
appropriate base forfeiture for violation of Section 76.1201. In this
case, TWC moved linear programming to an SDV platform in one cable
system, Oceanic Kauai. Accordingly, we conclude that TWC is apparently
liable for a $10,000 forfeiture for its willful violation of Section
76.1201 of the Rules.
35. Additionally, we conclude that TWC is apparently liable for a
forfeiture in the amount of $5,000 for its willful violation of
Section 76.640(b)(1)(i) of the Rules and $5,000 for its willful
violation of Section 76.640(b)(1)(v) of the Rules. The Commission's
Forfeiture Policy Statement and Section 1.80 of the Rules do not
establish a specific base forfeiture for violation of Section
76.640(b). However, we note that Section 1.80(b) establishes a base
forfeiture of $5,000 for unauthorized discontinuance of service. We
find that the actions of TWC effectively discontinue a portion of the
services for each of its CableCARD subscribers who choose to view
content via a UDCP. We also conclude that the amount of the proposed
forfeiture for each violation is commensurate with the harm imposed
upon cable subscribers. Because the violation of Section 76.640(b)(1)
coincides with the migration of linear channels to an SDV platform, we
will also apply this base forfeiture amount of $5,000 for each
technical violation of Section 76.640(b)(1) on a per cable system
basis. Accordingly, we conclude that TWC is apparently liable for a
forfeiture in the amount of $10,000 for its willful violation of
Sections 76.640(b)(1)(i) and 76.640(b)(1)(v) in its Oceanic Kauai
36. TWC's implementation of SDV in its Oceanic Kauai cable system, in
which previously available linear programming was moved to an SDV
platform, resulted in the removal of channel information and the loss
of access to those switched channels for its subscribers using
CableCARD-equipped UDCPs. Moreover, such implementation of SDV,
without having in place standards to ensure bi-directional
compatibility of cable television systems and CE equipment,
effectively harms the Commission's policies to move navigation devices
toward a fully competitive market. We note that TWC could have sought
a waiver of these rules under Section 76.1207, but failed to do so.
Accordingly, we conclude that TWC is apparently liable for a total
forfeiture amount of twenty thousand ($20,000) for its willful
violation of Sections 76.1201 ($10,000), 76.640(b)(1)(i) ($5,000), and
76.640(b)(1)(v) ($5,000) of the Commission's Rules.
D. TWC Must Issue Refunds To Customers Harmed by its SDV Implementation
37. TWC's implementation of SDV has harmed its customers who opted to
purchase and use television receiving equipment that does not require
a cable operator-supplied set-top device to receive cable service.
Many consumers purchased expensive UDCPs, such as "cable ready"
televisions and digital video recorders like TiVos, based on the
reasonable assumption that no set-top box would be necessary to
receive linear programming. In effect, TWC's movement of linear
programming to an SDV platform has substantially diminished the value
of its customers' UDCP devices. Moreover, CableCARD customers affected
by TWC's SDV deployment now must pay higher prices to lease set-top
boxes than they would have paid for CableCARDs. Those CableCARD
customers who chose not to obtain the TWC-supplied set-top boxes after
the implementation of SDV nevertheless have paid the same monthly rate
for their cable service even though they can view significantly fewer
channels. Most importantly, however, TWC's movement of linear
programming to an SDV platform set back the shared goal of Congress
and the Commission of a competitive market for commercially available
navigation devices, as required by Section 629 and the Commission's
38. In calculating the harm to TWC's customers who use UDCP equipment, we
recognize that TWC has made offers to its CableCARD customers to
offset the costs of obtaining a set-top box. TWC states that to
mitigate the impact of its SDV deployment, it offered subscribers with
UDCPs in its Hawaii Division the opportunity to lease an interactive
set-top box for two years for the same monthly charge as a CableCARD.
Specifically, TWC's notice to its customers states that the customer
can exchange each CableCARD for a digital cable box at no extra charge
and encourages customers to call to schedule a free visit. The notice
also states that "[d]iscounting the digital box(es) in exchange for
the cable card(s) will continue for a minimum of two years." While
TWC's offer to provide a free set-top box to its CableCARD customers
may provide temporary relief to its customers, it is not a permanent
solution - the benefits promised by TWC are, at best, limited in
duration. TWC's offer does not address the critical problem concerning
the company's interference with its customers' use of independently
obtained UDCPs, i.e., the loss of service to the extent customers can
view fewer channels than they did before the movement of linear
programming to an SDV platform, nor does it address the loss of
functionality of the device in question.
39. Thus, we order TWC, within ninety (90) days of this NAL and Order, to
issue refunds to CableCARD customers affected by the November 6, 2007
implementation of SDV in its Oceanic Kauai cable system. Specifically,
TWC must provide refunds as follows:
a. For former CableCARD customers that began to lease any set-top boxes
from TWC following notice of a possible SDV deployment, TWC must
refund the difference in cost (if any) between the charges for the TWC
set-top boxes and the CableCARDs previously leased by such customers;
b. For CableCARD customers that kept their CableCARDs even after notice
of the SDV deployment, TWC must refund the customers' subscriber fees
based on the diminished value of their service following the movement
of linear programming to an SDV platform and reduce their rates on a
going-forward basis accordingly.
40. In addition, we require TWC to submit to the Enforcement Bureau an
explanation of the method the company plans to use to determine the
appropriate amount of refunds, the number of customers receiving
refunds, the total value of such refunds, and the planned timing of
such refunds. TWC must submit this information to the Enforcement
Bureau for review and approval within thirty (30) days of the release
of this decision and must proceed with its proposed refund plan within
sixty (60) days of such submission provided the Enforcement Bureau
approves TWC's proposed refund plan within thirty (30) days of TWC's
IV. ordering clauses
41. Accordingly, IT IS ORDERED that, pursuant to Section 503(b) of the
Act, Section 1.80 of the Rules, and the authority delegated by
Sections 0.111 and 0.311 of the Commission's Rules, Oceanic Time
Warner Cable, a division of Time Warner Cable, Inc. is NOTIFIED of its
APPARENT LIABILITY FOR A FORFEITURE in the amount of twenty thousand
dollars ($20,000) for willful violation of Sections 76.1201,
76.640(b)(1)(i) and 76.640(b)(1)(v) of the Rules.
42. IT IS FURTHER ORDERED that, pursuant to Section 1.80 of the Rules,
within thirty days of the release date of this Notice of Apparent
Liability for Forfeiture and Order, Time Warner Cable, Inc. SHALL PAY
the full amount of the proposed forfeiture or SHALL FILE a written
statement seeking reduction or cancellation of the proposed
43. IT IS FURTHER ORDERED that, pursuant to sections 1, 4(i), 4(j), 601,
and 629 of the Communications Act of 1934, as amended 47 U.S.C. S:151,
154(i), 154(j), 521, 549, Time Warner Cable, Inc. must take the steps
set forth in paragraphs 39 and 40 of this NAL and Order.
44. Payment of the forfeiture must be made by check or similar instrument,
payable to the order of the Federal Communications Commission. The
payment must include the NAL/Account Number and FRN Number referenced
above. Payment by check or money order may be mailed to Federal
Communications Commission, P.O. Box 979088, St. Louis, MO 63197-9000.
Payment by overnight mail may be sent to U.S. Bank - Government
Lockbox #979088, SL-MO-C2-GL, 1005 Convention Plaza, St. Louis, MO
63101. Payment by wire transfer may be made to ABA Number 021030004,
receiving bank TREAS/NYC, and account number 27000001. For payment by
credit card, an FCC Form 159 (Remittance Advice) must be submitted.
When completing the FCC Form 159, enter the NAL/Account number in
block number 23A (call sign/other ID), and enter the letters "FORF" in
block number 24A (payment type code). Requests for full payment under
an installment plan should be sent to: Chief Financial Officer --
Financial Operations, 445 12th Street, S.W., Room 1-A625, Washington,
D.C. 20554. Please contact the Financial Operations Group Help Desk at
1-877-480-3201 or Email: ARINQUIRIES@fcc.gov with any questions
regarding payment procedures. TWC will also send electronic
notification on the date said payment is made to JoAnn.Lucanik@fcc.gov
45. The response, if any, must be mailed to the Office of the Secretary,
Federal Communications Commission, 445 12th Street, S.W., Washington,
D.C. 20554, ATTN: Enforcement Bureau - Spectrum Enforcement Division,
and must include the NAL/Acct. No. referenced in the caption. The
response should also be e-mailed to JoAnn Lucanik, Deputy Chief,
Spectrum Enforcement Division, Enforcement Bureau, FCC, at
JoAnn.Lucanik@fcc.gov and Kevin Pittman, Esq., Spectrum Enforcement
Division, FCC, at Kevin.Pittman@fcc.gov.
46. The Commission will not consider reducing or canceling a forfeiture in
response to a claim of inability to pay unless the petitioner submits:
(1) federal tax returns for the most recent three-year period; (2)
financial statements prepared according to generally accepted
accounting practices; or (3) some other reliable and objective
documentation that accurately reflects the petitioner's current
financial status. Any claim of inability to pay must specifically
identify the basis for the claim by reference to the financial
47. IT IS FURTHER ORDERED that a copy of this Notice of Apparent Liability
for Forfeiture and Order shall be sent by first class mail and
certified mail return receipt requested to counsel for Time Warner,
Inc.: Arthur H. Harding, Esq., Fleischman and Harding LLP, 1255 23rd
Street, N.W., Eighth Floor, Washington, D.C. 20037 and Matthew A.
Brill, Esq., Latham & Watkins LLP, 555 Eleventh Street, N.W., Suite
1000, Washington, D.C. 20004-1304.
FEDERAL COMMUNICATIONS COMMISSION
Kris Anne Monteith
Chief, Enforcement Bureau
Representative Customer Complaints Received by FCC
Concerning Time Warner Cable's Implementation of SDV
in its Hawaii Division
Date Received Complaint Number Consumer Complaint
Oceanic Time Warner is not
providing equal access to "cable
card" customers, as stated in the
FCC act of 1996. Customers with
cable cards can not access
"switched video signals" which is
the preferred method of broadcast
08/13/2008 08-C00045550-1 for most digital channels by
Oceanic. Other cable companies now
provide "Tuning Adapters," "Tuning
Resolvers," or "Dongles," to
resolve this problem. However,
Oceanic seems to continue to be
above the law, and does not provide
anything for it.
I signed up for service with
Oceanic Time Warner Cable today,
and told them I wanted a Cable Card
so that I could use my Tivo to
record programming. While they will
provide a Cable Card, they limit
the cable card in so many ways in
order to limit it as a viable
choice. There are many many
channels that the Cable Card does
not receive, including all high
07/31/2008 08-C00042096-1 definition channels. Even basic
channels such as the Weather
channel are not available to Cable
Card users. While they may be
operating within the law by
offering a Cable Card alternative,
it's clear that they have limited
the Cable Card in such a dramatic
way such that it is unusable. This
type of action should certainly be
addressed by the FCC in order to
protect consumer choice.
Oceanic Time Warner (OTW) cable is
in violation of the spirit of the
Telecommunications act of 1996.
They are supposed to provide equal
access to Cable Card users who do
not wish to use OTW's cable boxes
or DVR's. Currently, OTW provides
something called "switched video"
access to all users who wish to
receive High Definition signals on
their tv's. Unfortunately for Tivo
users, this "switched video" signal
does not allow for Tivo boxes to
receive these signals and the Tivo
04/24/2008 08-C00016147-1 is "locked out" of the High
Definition service (30 Channels). I
called OTW and their claim is that
the "switched video" service is a
benefit to its customers because it
provides access to more channels at
a lesser band width. I understand
how this can be considered
beneficial, however in doing this,
they violate the Act being that the
only customers who can receive
these signals are customers WITHOUT
Cable Cards only giving access to
Customers using their boxes. This
is a break down of what a non-Tivo
including, but not necessarily
limited to, disabling of HDTV
broadcast for CableCard customers,
instead making these available only
via Cable tuner boxes or Digital
12/26/2007 07-W13616500 Video Recorders supplied by Oceanic
Cable. Competing products such as
TiVo Series3 are [sic] no longer
able to receive the majority of
HDTV broadcasts. I am concerned
that this monopolistic behavior
that may violate sections of the
Telecommunications Act of 1996.
On November 6, 2007, Oceanic Time
Warner Cable will change to
Switched Digital Video (SDV),
effectively making useless cable
cards and my Tivo series 3 DVR in
which the cards are installed. This
change will shut off at least 15
channels of HD programming and at
least 60 channels of digital
programming that I currently
receive. All new channels after the
change, according to Oceanic TW,
will only be available via SDV.
About 6 months ago I decided to
purchase a Tivo Series 3 after
speaking with at least 3 different
Oceanic customer service
representatives about Tivo's
compatibility. They all assured me
that the Tivo with Cable Cards
would work, and that I'd receive
11/02/2007 07-W13507006 all programming except pay per view
and other limited content. Never
did anyone mention that most
programming received now would be
blocked from cable cards when
switching to SDV. I am aware that
technology is in development to fix
this situation, however, SDV should
not be implemented until the
technology catches up. If the FCC
mandated that cable companies use
cable cards, then how can the FCC
allow these cable companies to
indiscriminately shut off
programming to cable card users -
especially programming that we've
been receiving up to this point?
Could the FCC ask Oceanic Time
Warner Cable to reconsider delaying
this change until technology allows
cable cards to function with SDV? I
look forward to your response in
Oceanic Time Warner is ceasing to
support CableCARD HD programming as
of 9/24/07. This is clearly an
antitrust issue, to force customers
to rent their cable boxes if they
want to receive HD programming. Is
this not in clear violation of the
9/21/2007 07-W13394299 FCC rulings over the past few
years, which have been meant to
uncouple decoding issues from
access issues? Furthermore, this
essentially eliminated TIVO as an
alternative to the cable company's
boxes, since TIVO works with
At the beginning of August 2007, I
called Oceanic Time Warner (located
in Hawaii) to request cable cards
that carried High Definition
package to go along with a HD-Tivo
DVR that I wanted to purchase. The
customer service representative
stated that the cable cards would
allow me to watch and record HD
programs on the HD-Tivo. I made an
agreement with the customer service
representative and I ordered the
cards. Then I spent $300 for the
HD-Tivo DVR and $300 for a Tivo
Service subscription package and I
made an appointment for an Oceanic
cable technician to come out and
install the cards. After three
weeks, on August 24, 2007, the
technician came out and tried to
install the cards. Everything
worked on the TV except the HD
package. After two hours of making
calls, the technician learned that
over the last few weeks, Oceanic
8/27/2007 07-R522759 Cable (without telling their
workers) decided to stop allowing
the HD package available on the
cable cards (it is available on
their cable boxes). On the same
day, I then made a call to the
technician's supervisor who told me
that there was nothing that he
could do because it wasn't his
decision. He said that he would try
and work out an alternative
solution, but there was no way that
they were going to offer the cable
cards with HD. My complaint is
this: I entered into an agreement
with Oceanic Cable to purchase
cable cards with an HD package, and
I ended up spending a great deal of
money and time towards a product
they never intended to honor. I
need to know whether the standard
cable packages (specifically HD
programming) that cable companies
offer on their cable boxes MUST
also be offered on their cable
cards (with the exception of
According to Oceanic Time Warner
Cable's CSR I spoke to yesterday
(after an installer was unable to
provide access to HD programming
via Cable Card) Oceanic is now
going to a SDV (Switched Digital
Video) system and requires the
Cable Card to have two way
communication. This type of Cable
Card technology has not been
created yet and is not available
for any Cable Card device on the
market today. Also that as of
August 13, 2007, all of Oceanic's
HD programming was moving to this
8/20/2007 07-W13296545 SDV and I could no longer purchase
it from them for use on my cable
card device. They explained to me
that cable card is less than 2% of
the market. They needed the SDV
upgrade to supply more channels and
that cable card was in the way of
that progress. Over the last 24
hours I have familiarized myself
with only a small portion of the
Telecom Act of 1996. But I feel
that Oceanic Cable/Time Warner is
clearly disregarding the Federal
Mandates by not including all
programming via Cable Card
especially HD programming.
Despite the July 1, 2007 effective
date of the FCC's Order regarding
cable card enabled (non integrated)
digital set top TV cable boxes,
Time Warner in Hawaii will only
issue a cable card enabled box (1)
as part of its PVR box and (2) if
you agree to upgrade to HD. Despite
the Order, Time Warner Hawaii will
7/20/2007 07-W13208259 not issue any other cable card
enabled (non integrated) set top
box and will not allow cable cards
to be used with non-HD service.
Please investigate as I would like
to use cable cards as soon as
possible and Time Warner is clearly
making up "rules" for its consumers
in Hawaii that are at odds with
both the letter and intent of the
47 C.F.R. S:S: 76.1201, 76.640(b)(1).
The term "navigation devices" refers to "converter boxes, interactive
communications equipment, and other equipment used by consumers to access
multichannel video programming and other services offered over
multichannel video programming systems." 47 C.F.R. S: 76.1200(c). The
UDCPs at issue in this proceeding include certain "digital cable ready"
televisions and TiVo digital video recorders.
47 U.S.C. S: 503(b). This NAL and Order is issued through the coordinated
effort of the Commission's Enforcement Bureau and Media Bureau. See 47
C.F.R. S:S: 0.61(f)(5), 0.111(15).
TWC's notice to its customers, as well as technical papers submitted by
the company to the Bureau, support our characterization of TWC's actions
as "moving" or "migrating" linear programming to a SDV platform.
47 U.S.C. S: 549. Section 629 was adopted as part of the
Telecommunications Act of 1996. Pub. L. No. 104-104, 110 Stat. 56 (1996).
H.R. Rep. No. 104-204, at 112 (1995).
Implementation of Section 304 of the Telecommunications Act of 1996,
Commercial Availability of Devices, Notice of Proposed Rulemaking, 12 FCC
Rcd 5639, 5641 (1997).
See Implementation of Section 304 of the Telecommunications Act of 1996,
Commercial Availability of Navigation Devices, Report and Order, 13 FCC
Rcd 14775, 14776, P: 2 (1998) ("Navigation Devices Order").
47 C.F.R. S: 76.1201.
See Navigation Devices Order, 13 FCC Rcd at 14778 (citing Use of the
Carterfone Device in Message Toll Service, Decision, 13 FCC 2d 420, 424-25
(1968), recon. denied, 14 FCC 2d 571(1968)).
Navigation Devices Order, 13 FCC Rcd at 14780, P: 11.
Id. at 14786.
Id. at 14780, P: 11. The Commission acknowledged that "the parallel to the
telephone has limitations" and specifically stated that the rules it
adopted in implementing Section 629 of the Act sought to accommodate the
differences from the telephone model. Id. at 14780, P: 12.
Id. at 14781.
Implementation of Section 304 of the Telecommunications Act of 1996,
Commercial Availability of Navigation Devices, Compatibility Between Cable
Systems and Consumer Electronics Equipment, Second Report and Order and
Second Further Notice of Proposed Rulemaking, 18 FCC Rcd 20885 (2003)
("Plug and Play Order"). "The term `plug and play' refers to a device's
ability to plug into a cable system and receive digital cable programming
without a cable-operator provided set-top box." Third Further Notice of
Proposed Rulemaking, 22 FCC Rcd at 12025, n.9.
See December 2002 Memorandum of Understanding Among Cable MSOs and
Consumer Electronics Manufacturers. Plug and Play Order, 18 FCC Rcd at
20887, n. 3 (citing Letter from Carl E. Vogel, President and CEO, Charter
Communications, et al., to Michael K. Powell, Chairman, FCC (Dec. 19,
2002) ("2002 MOU")). The MOU "reflects a compromise agreement among the
parties [cable and consumer electronics industries] on a specification
that will permit the manufacture of unidirectional cable television
receivers that include [the same] ... navigation functionality [that
currently exists for set-top boxes]." Plug and Play Order, 18 FCC Rcd at
20890, P: 7.
In most cases, the MVPDs have employed CableCARDs as their
separate-security solution to enable non-integrated conditional access.
But see Cablevision Systems Corporation's Request for Waiver of Section
76.1204(a)(1) of the Commission's Rules, Memorandum Opinion and Order, 22
FCC Rcd 220, 221-222 (2007). The Commission granted Cablevision a waiver
of the ban on cable operator deployment of set-top boxes with integrated
security to allow Cablevision to use a Smart-Card-based separate-security
solution, which is CableCARD-compatible with the use of an adaptor.
The term "linear programming" is generally understood to refer to video
programming that is prescheduled by the programming provider. Cf. 47
U.S.C. S: 522(12) (defining "interactive on-demand services" to exclude
"services providing video programming prescheduled by the programming
Third Further Notice of Proposed Rulemaking, 22 FCC Rcd at 12025 P:P: 3-4.
See Carriage of Digital Television Broadcast Signals: Amendment to Part 76
of the Commission's Rules, Third Report and Order and Third Further Notice
of Proposed Rulemaking, 22 FCC Rcd 21064, 21095, P: 60 (2007)
("Viewability Order") ("Cable operators continue to develop ways to use
their available capacity more efficiently. For example, cable operators,
in order to keep pace with their competitors, are beginning to deploy
`switched digital'-capability in their networks. In a switched digital
environment, a channel is transmitted via coaxial cable to a subscriber's
premises only when the subscriber tunes to that channel.").
See Plug and Play Order, 18 FCC Rcd at 20892.
47 U.S.C. S: 544a.
See SCTE 40 2003, Section 5.5, page 16.
47 C.F.R. S: 76.640(b).
See Letter from Kathryn S. Berthot, Chief, Spectrum Enforcement Division,
Enforcement Bureau, Federal Communications Commission to Mark
Lawrence-Apfelbaum, Esq., Executive Vice President and General Counsel,
Time Warner Cable, Inc. (Nov. 8, 2007) ("Nov. 8 LOI").
See Letter from Robert A. Flatt to Kevin J. Martin, Chairman, Federal
Communications Commission dated Nov. 7, 2007 (available as a comment in CS
Docket No. 97-08) ("Flatt Complaint"). According to the August 21, 2007
notice that TWC sent to its Hawaii subscribers, Oceanic planned to move
certain channels to a two-way switched digital platform on September 24,
2007. TWC ultimately delayed its deployment of SDV until November 6, 2007.
See Letter from Arthur H. Harding, Fleischman and Harding LLP and Matthew
A. Brill, Latham & Watkins LLP, counsel for TWC, dated September 12, 2008
("Sept. 12 Supplemental LOI Response") at Exhibit A.
Id. at 1. In addition to the Flatt Complaint, the Commission has received
several other complaints from TWC customers about Oceanic's SDV
deployment. We have provided relevant excerpts and identifying information
for those complaints in Attachment A. Unlike the Flatt Complaint, these
complaints were not filed in a public Commission docket, so we will treat
the complainants' names as confidential for privacy reasons.
The Nov. 8 LOI stated we were investigating possible violations of Section
629 of the Act, 47 U.S.C. S: 549, and Sections 76.640, 76.980(f), 76.984,
76.1204, 76.1206, and 76.1603 of the Commission's rules, 47 C.F.R. S:S:
76.640, 76.980(f), 76.984, 76.1204, 76.1206, and 76.1603.
See Plug and Play Order, 18 FCC Rcd at 20885 n.3.
Id. at 20885.
See Letter from JoAnn Lucanik, Deputy Chief, Spectrum Enforcement
Division, Enforcement Bureau, Federal Communications Commission to Arthur
H. Harding, Fleischman and Harding LLP and Matthew A. Brill, Latham &
Watkins LLP, counsel for TWC, (Aug. 25, 2008) ("Aug. 25 Supplemental
LOI"). The Aug. 25 Supplemental LOI noted that the investigation now
included possible violations by TWC of Sections 76.1201 and 76.1202 of the
Rules. 47 C.F.R. S:S: 76.1201, 76.1202. Id., at note 3.
See Letter from JoAnn Lucanik, Deputy Chief, Spectrum Enforcement Divison,
Enforcment Bureau, Federal Communications Commission, to Arthur H.
Harding, Fleischman and Harding LLP and Matthew A. Brill, Latham & Watkins
LLP, counsel for TWC, (Oct. 3, 2008) ("Oct. 3 Supplemental LOI").
See Letter from Arthur H. Harding, Fleischman and Harding LLP and Matthew
A. Brill, Latham & Watkins LLP, Counsel for Time Warner Cable, to Kathryn
S. Berthot, Chief, Spectrum Enforcement Division, Enforcement Bureau,
Federal Communications Commission (Nov. 30, 2007) ("Nov. 30 LOI
See Sept. 12 Supplemental LOI Response.
See Letter from Arthur H. Harding, Fleischman and Harding LLP and Matthew
A. Brill, Latham & Watkins LLP, Counsel for Time Warner Cable, to Marlene
H. Dortch, Secretary, Federal Communications Commission (Sept. 23, 2008)
("Sept 23 Supplemental LOI Response"). TWC provided clarification on the
Hawaii cable systems affected by the November 6, 2007 SDV implementation
on October 6, 2008. See e-mail from Matthew Brill to JoAnn Lucanik October
6, 2008 ("Oct. 6 E-mail").
See Letter from Arthur H. Harding, Fleischman and Harding LLP and Matthew
A. Brill, Latham & Watkins LLP, Counsel for Time Warner Cable, to Marlene
H. Dortch, Secretary, Federal Communications Commission (Oct. 14, 2008)
("Oct. 14 Supplemental LOI Response").
Sept. 12 Supplemental LOI Response, Exhibit A.
TWC reports that its Hawaii Division, which includes its Oceanic Kauai
cable system, had 415,534 subscribers at the time of SDV deployment. The
company does not have a precise estimate of the number of CableCARD-using
UDCPs affected by its SDV deployment, but believes it to be less than 583.
In its most recent offer, TWC limited the period for affected CableCARD
customers to receive a free set-top box to six months. Id.
Oct. 14 Supplemental LOI Response at 7 (emphasis added).
Id. (emphasis in original).
47 C.F.R. S: 76.1201.
Section 312(f)(1) of the Act defines "willful" as "the conscious and
deliberate commission or omission of [any] act, irrespective of any intent
to violate" the law. 47 U.S.C. S: 312(f)(1). The legislative history of
Section 312(f)(1) clarifies that this definition of willful applies to
both Sections 312 and 503(b) of the Act, H.R. Rep. No. 97-765, 97th Cong.
2d Sess. 51 (1982), and the Commission has so interpreted the term in the
context of Section 503(b). See Southern California Broadcasting Co.,
Memorandum Opinion and Order, 6 FCC Rcd 4387, 4388 (1991), recon. denied,
7 FCC Rcd 3454 (1992).
TWC states that in its Hawaii Division, TWC deployed SDV for the islands
of Oahu and Kauai on November 6, 2007; and that the Maui, Kona and Hilo
SDV deployment, scheduled for September 2, 2008, was being delayed. Sept.
12 Supplemental LOI Response, Exhibit A.
We are aware that other TWC cable systems have implemented SDV and will
address the legality of those actions in future proceedings.
Section 624A of the Act expressly mandates that the Commission "minimize
interference with or nullification of the special functions of
subscriber's television receivers or video cassette recorders," and thus
ensure the full compatibility of these devices with the cable system. 47
U.S.C. S: 544a(c)(1)(B).
Nov. 30 LOI Response at 1, 14-17.
Specifically, TWC states that "[j]ust as the Plug & Play Order expressly
recognized that a set-top box would be required to receive any interactive
services, the MOU made clear that the unidirectional products it covered
`do not utilize the return path of the cable system.' As a result the MOU
recognizes that UDCPs would require a set-top box to access services such
as VOD or IPPV. Since SDV - like VOD and IPPV - does utilize the return
path of the cable system, it falls outside of the MOU's description of
covered products and services." Id. at 16 (internal citations omitted).
Id. at 15. TWC cites to Implementation of Section 304 of the
Telecommunications Act of 1996: Commercial Availability of Navigation
Devices; Compatibility Between Cable Systems and Consumer Electronics
Equipment, Second Report and Order, 20 FCC Rcd 6794 (2005) ("2005 Deferral
Order"). In the 2005 Deferral Order, TWC states that the Commission
explained its "objective ... has been `to ensure that the goals of Section
629 are met without fixing into law the current state of technology." Nov.
30 LOI Response at 4-5 (citing to 2005 Deferral Order, 20 FCC Rcd at 6812,
Id. at 14. Rather, TWC states, the Commission's Plug and Play Order
explicitly recognized that all two-way services, including SDV, would
require a set-top box.
Id. at 5. According to TWC, the Commission "encouraged cable operators to
`ensure that subscribers and local retailers are both aware of the
availability of digital cable service in their area and of the
compatibility of unidirectional digital cable products with operators'
systems,' and further called on the consumer electronics industry `to
collaborate with both their retail partners and the cable industry to
develop consumer awareness campaigns about unidirectional digital cable
televisions and their functionalities, particularly with regard to the
need for set-top boxes in order to receive interactive services.'" Id.
(citing Plug and Play Order, 18 FCC Rcd at 20904, at P:41). Once again, we
note that the Commission clearly indicated its understanding that UDCPs'
problems were limited to "interactive services" and not linear
Id. at 15. As noted earlier, however, TWC has offered only six months of
discounted fees for its set-top boxes for its upcoming planned deployment
of SDV in Hawaii. See Sept. 12 Supplemental LOI Response at Exhibit A.
Many other TWC divisions have not offered any discounts.
Nov. 30 LOI Response at 5 (citing 2005 Deferral Order, 20 FCC Rcd at 6809,
TWC also argues that "curtailing TWC's ability to deliver its programming
of choice based on its selection of the most efficient technology
available would likely run afoul of the First Amendment." See Oct. 14
Supplemental LOI Response at 5 (citation omitted). We reject this
argument. The requirements at issue are content neutral and are narrowly
tailored to further the substantial federal interest of maximizing
commercial availability of navigation devices to the consumer. See Turner
Broadcasting System, Inc. v. FCC, 512 U.S. 622, 662 (1994).
2005 Deferral Order, 20 FCC Rcd at 6809-10.
"Due to the unidirectional nature of this receiver specification, an
external navigation device would still be needed to receive advanced
features such as cable operator-enhanced electronic programming guides
(`EPGs'), impulse pay per view (`IPPV') or video on demand (`VOD')." Plug
and Play Order, 18 FCC Rcd at 20890, P:7. See also Third Further Notice of
Proposed Rulemaking, 22 FCC Rcd at 12025-26, P: 4 ("Devices made pursuant
to this standard have the ability to receive encrypted digital cable
programming, but do not have any upstream, or bi-directional, capabilities
(i.e., consumer electronics manufacturers can only make unidirectional
devices under the technical standard adopted in the Plug and Play Order).
For example, such devices cannot support two-way services such as EPGs,
VOD, PPV, and other ITV [Interactive Television] capabilities.").
TWC's Nov. 30 LOI Response cites an ex parte letter it filed in the Plug
and Play docket in 2006. In that letter, TWC states that it informed staff
from the Commission's Media Bureau "that SDV would impact some subscribers
using [UDCPs], but noted that these subscribers would continue to receive
nearly all the same channels as subscribers using digital set top boxes.
Contrary to the suggestions of the Consumer Electronics Association in its
March 23, 2006 ex parte, the use of SDV by TWC in no way contravenes our
support of UDCPs." Letter from Steven N. Teplitz, Time Warner Cable, Inc.
to Marlene Dortch, Secretary, Federal Communications Commission dated May
11, 2006 (filed in CS Docket 97-80) ("TWC Ex Parte Letter") (emphasis
added). As the facts of this case demonstrate, TWC's removal of more than
60 channels, including popular HD channels, is inconsistent with the
company's ex parte letter more than a year beforehand.
See Nov. 30 LOI Response at 4, 9-10.
See Navigation Devices Order, 13 FCC Rcd at 14786.
According to the TWC notice announcing the deployment that ultimately took
place on November 6, 2007, more than 40 channels would be moved to the SDV
platform and no longer available without the use of a TWC-supplied set-top
box: Digital Cable Service: (CSPAN-3, CSPAN-2, CNBC World, Bloomberg TV,
The Weather Channel, AZN TV, Imaginasian, The Outdoor Channel, Country
Music TV, VH1 Classic, BET On Jazz, Ovation), Sports Pak: (Fuel, NBA TV,
The Tennis Channel, Fox College Sports-Atlantic, Fox College
Sports-Central, Fox College Sports-Pacific, College Sports TV), Encore
Service: (Fuse), Spanish Pak: (Galavision, Fox Sports World Espanol, CNN
Espanol, Discovery en Espanol, CNN Espanol, ESPN Deportes), Premium:
(Chinese Channel), HD Entertainment Pak: (HD Golf/HD Versus, HD Versus &
Golf, HD FSN, HD National Geographic, HD Net, HD Net Movies, INDemand HD,
ESPN HD, ESPN2HD, HD Universal), Jewelry Channel, Pentagon Channel, KOAM,
Ocean Network, and Inspirational TV. See also TWC Sept. 12 Supplemental
LOI Response, Exhibit A (stating that 62 channels ultimately were moved to
Nov. 30 LOI Response at 1-2, 12-13.
Id. at 12 & n.25.
TWC argues that the only way it can create additional capacity using SDV
is to move existing programming to an SDV platform. See Letter from Arthur
H. Harding, Fleischman and Harding LLP, and Matthew A. Brill, Latham &
Watkins LLP, Counsel for Time Warner Cable to William Davenport, Assistant
Chief, Enforcement Bureau, Federal Communications Commission (Oct. 6,
2008) ("Oct. 6 Supplemental Response") at 1. Even if this point had some
relevance to whether TWC has complied with Commission Rules, the company
fails to provide any evidence to support its claim that it had no channel
capacity available at the time of the SDV deployment in the Oceanic Oahu
cable system such that it had no choice but to move existing linear
programming to the SDV platform.
See supra note 2.
Id. at 7.
See 47 C.F.R. S: 76.640 ("Support for unidirectional digital cable
products on digital cable systems.").
Id. at S: 76.640(b)(1)(i) (incorporating by reference SCTE 40 2003,
Section 5.5, which states that "[w]hen one or more scrambled services are
offered on the cable system, System and Service Information for all
services (both scrambled and in-the-clear) shall be carried in an
out-of-band Forward Data Channel...").
Oct. 14 Supplemental LOI Response at 2.
47 C.F.R. S: 76.1207.
47 U.S.C. S: 503(b)(1)(B); 47 C.F.R. S: 1.80(a)(1).
47 U.S.C. S: 503(b); 47 C.F.R. S: 1.80(f).
See, e.g., SBC Communications, Inc., Forfeiture Order, 17 FCC Rcd 7589,
47 U.S.C. S: 503(b)(2)(A); 47 C.F.R. S: 1.80(b)(1). The Commission has
repeatedly amended Section 1.80(b)(1) of the Rules to increase the maximum
forfeiture amounts, in accordance with the inflation adjustment
requirements contained in the Debt Collection Improvement Act of 1996, 28
U.S.C. S: 2461. Most recently, the Commission raised the maximum
forfeitures applicable to cable operators, broadcast licensees, and
applicants for such authority from $32,500 to $37,500 for a single
violation, and from $325,000 to $375,000 for continuing violation. See
Inflation Adjustment of Maximum Forfeiture Penalties, 73 Fed. Reg. 44663,
44664 (July 31, 2008). The new forfeiture limits took effect September 2,
2008, apply to violations occurring after that date, and accordingly do
not apply to this case.
47 U.S.C. S: 503(b)(2)(E). See also 47 C.F.R. S: 1.80(b)(4), Note to
paragraph (b)(4): Section II. Adjustment Criteria for Section 503
Forfeitures. We consider TWC's apparent violations of Section 76.1201 to
have begun on the date its cable system moved previously available linear
programming to an SDV platform. TWC's apparent violations continue each
day that such programming remains unavailable to customers using
See The Commission's Forfeiture Policy Statement and Amendment of Section
1.80 of the Rules to Incorporate the Forfeiture Guidelines, Report and
Order, 12 FCC Rcd 17087, 17115 (1997) ("Forfeiture Policy Statement"),
recon. denied, 15 FCC Rcd 303 (1999).
The Bureau has substantial discretion in proposing forfeitures. See, e.g.,
InPhonic, Inc., Order of Forfeiture and Further Notice of Apparent
Liability, 22 FCC Rcd 8689, 8699 (2007); Globcom, Inc. d/b/a Globcom
Global Commun., Order of Forfeiture, 21 FCC Rcd 4710, 4723-24 (2006). We
may apply the base forfeiture amounts described in the Forfeiture Policy
Statement and the Commission's rules, or we may depart from them
altogether as the circumstances demand. See 47 C.F.R. S: 1.80(b)(4) ("The
Commission and its staff may use these guidelines in particular cases[,
and] retain the discretion to issue a higher or lower forfeiture than
provided in the guidelines, to issue no forfeiture at all, or to apply
alternative or additional sanctions as permitted by the statute.")
See, e.g., Cablevision Systems Corporation, Forfeiture Order, 15 FCC Rcd
24298 (2000) ("Cablevision Forfeiture Order") (imposing forfeitures
against Cablevision on a cable system basis).
Nov. 30 LOI Response at 3.
While the number of customers using CableCARD-equipped UDCPs may be a
relatively small percentage of the overall number of MVPD customers
nationwide, see Third Further Notice of Proposed Rulemaking, 22 FCC Rcd at
12025, the absolute number is significant - more than 374,000 among the
ten largest incumbent cable operator as of September 22, 2008. See Letter
from Neal Goldberg, General Counsel, National Cable & Telecommunications
Association, to Marlene Dortch, Secretary, FCC dated Sept. 22, 2008 (filed
in CS Docket No. 97-80) (compiling ten cable system reports on CableCARD
In addition, complaints received by the Commission and comments filed in
CS Docket No. 97-80 suggest that consumers have been extremely frustrated
by a multitude of cable operator-related problems with CableCARDs,
including availability, pricing, and service quality issues. See also
Letter from Julie M. Kearney, Senior Director and Regulatory Counsel,
Consumer Electronics Association to Marlene Dortch, Secretary, Federal
Communications Commission dated March 23, 2006 (filed in CS Docket 97-80)
(listing difficulties of manufacturers in producing UDCPs due to alleged
cable operator actions).
47 C.F.R. S: 1.80(b)(4)(Note). See also Cablevision Forfeiture Order, 15
FCC Rcd at 24298.
47 C.F.R. S: 1.80(b)(4)(Note). Violation of the broadcast signal carriage
rule is also analogous to TWC's failure to provide the SDV programming
information in its virtual channel table. In contrast with violations of
Section 76.1201, however, violations of Section 76.640(b)(1) do not affect
the viewability of actual programming. Therefore, it is appropriate to
impose a somewhat lesser penalty for such technical violations.
Under Section 629(c) of the Act, 47 U.S.C. S: 549(c) and Section 76.1207
of the Commission's Rules, 47 C.F.R. S: 76.1207, the Commission may waive
rules adopted under Section 629(a) of the Act for a limited time "upon an
appropriate showing by a provider of multichannel video programming and
other services offered over multichannel video programming systems, or an
equipment provider, that such waiver is necessary to assist the
development or introduction of a new or improved multichannel video
programming or other service offered over multichannel video programming
systems, technology, or products. See 47 U.S.C. S: 549(c), 47 C.F.R. S:
For instance, one complainant stated that after talking to a customer
service representative who stated that the CableCARDs would allow access
to HD programming on a HD-Tivo DVR, the consumer spent $300 for the
HD-Tivo DVR and $300 for a Tivo Service subscription package. Three weeks
later, when the technician came to install the CableCARDs, the customer
could not receive the HD package because TWC no longer "offered the cable
cards with HD." See Complaint No. 07-R522759 at Attachment A.
See Nov. 30 LOI Response at 4.
Id. at Attachment 1, Hawaii Division, Notice dated August 20, 2007.
Federal Communications Commission DA 08-2300
Federal Communications Commission DA 08-2300