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                                   Before the

                       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.   )                               
                                                 FRN 0018049841              
     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:

   I. INTRODUCTION

    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.

   II. BACKGROUND

    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
       televisions.

    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
   requirements:

   (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
   mandatory.

   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
   scrambled services:

   (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
       ("LFA").

   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."

   III. DISCUSSION

   A. TWC Apparently Willfully Violated Section 76.1201 By Requiring
   Subscribers To Obtain A Set-Top Box To View Previously Accesesible Linear
   Programming

   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
       broadly.

   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
       devices.

   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
       cable system.

   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
       rules.

   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;
       and

    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
       submission.

   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
       forfeiture.

   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
       and Kevin.Pittman@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
       documentation submitted.

   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

                                  ATTACHMENT A

               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   
                                        use                                  

                                        Anticompetitive behaviour            
                                        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     
                                        this matter.                         

                                        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         
                                        cableCARDS. Help!                    

                                        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         
                                        interactive programming).            

                                        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    
                                        FCC's Order.                         


   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).

   Id.

   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
   provider").

   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
   Response").

   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.
   Id.

   In its most recent offer, TWC limited the period for affected CableCARD
   customers to receive a free set-top box to six months. Id.

   Id.

   Oct. 14 Supplemental LOI Response at 7 (emphasis added).

   Id. (emphasis in original).

   Id.

   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,
   P:35).

   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
   programming.

   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,
   P: 30.)

   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.

   Id.

   "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
   SDV platform).

   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,
   7591 (2002).

   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
   CableCARD-equipped UDCPs.

   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.")
   (emphasis added).

   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
   usage).

   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:
   76.1207.

   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

                                       2

   Federal Communications Commission DA 08-2300