**Before the**

**Federal Communications Commission**

**Washington, D.C. 20554**

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| In the Matter of                 | * | CSR-7012-Z                   |
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| Comcast Corporation              | ) | CS Docket No. 97-80          |
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| Request for Waiver of Section    | * |                              |
| 76.1204(a)(1) of                 |   |                              |
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| the Commission's Rules           | * |                              |
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| Implementation of Section 304 of | * |                              |
| the Telecommunications Act of    | * |                              |
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| Commercial Availability of       | * |                              |
| Navigation Devices               | ) |                              |
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+----------------------------------+---+------------------------------+

MEMORANDUM OPINION AND ORDER

**Adopted: July 20, 2007** **Released: September 4, 2007**

By the Commission: Commissioner Copps issuing a statement; Commissioners
Adelstein and McDowell concurring and issuing a joint statement.

# INTRODUCTION

1.  Comcast Corporation ("Comcast") seeks review[^1] of the Media
    Bureau's decision in the above-captioned proceeding.[^2] The Bureau
    denied Comcast's request[^3] for waiver of the ban on integrated
    set-top boxes,[^4] finding that the boxes for which Comcast sought
    waiver (the "Subject Boxes") are not eligible for relief under
    (1) Section 629(c) of the Communications Act of 1934, as amended
    (the "Act");[^5] (2) the waiver policy established by the Commission
    for low-cost, limited-capability devices;[^6] and/or (3) Sections
    1.3 and 76.7 of the Commission's rules.[^7] As set forth below, we
    deny Comcast's Application for Review and affirm the Bureau's
    *Order*.

# BACKGROUND

2.  Congress directed the Commission to adopt regulations to assure the
    commercial availability of navigation devices more than ten years
    ago as part of the Telecommunications Act of 1996.[^8] The
    Commission implemented this directive in 1998 through the adoption
    of the "integration ban," which established a date after which cable
    operators no longer may place into service new navigation devices
    (*e.g.*, set-top boxes) that perform both conditional access and
    other functions in a single integrated device.[^9] Originally, the
    Commission established January 1, 2005 as the deadline for
    compliance with the integration ban.[^10] On two occasions, the
    National Cable and Telecommunications Association ("NCTA"), on
    behalf of all cable operators, sought -- and obtained -- extensions
    of that deadline.[^11] The Commission ultimately fixed July 1, 2007
    as the deadline in order to afford cable operators additional time
    to determine the feasibility of developing a downloadable security
    function that would permit compliance with the Commission's rules
    without incurring the cable operator and consumer costs associated
    with the separation of hardware.[^12] NCTA filed another request to
    extend the July 1, 2007 deadline,[^13] which the Media Bureau denied
    on June 29, 2007.[^14]

3.  The purpose of the integration ban is to assure reliance by both
    cable operators and consumer electronics manufacturers on a common
    separated security solution.[^15] This "common reliance" is
    necessary to achieve the broader goal of Section 629 -- *i.e.*, to
    allow consumers the option of purchasing navigation devices from
    sources other than their MVPD.[^16] Although the cable industry has
    twice challenged the lawfulness of the integration ban, in both
    cases the D.C. Circuit denied those petitions.[^17] In limited
    circumstances, however, operators may be eligible for waiver of the
    integration ban.[^18]

4.  Until and unless MVPDs subject to the integration ban[^19] actually
    begin relying upon the same separated security solution made
    available to consumer electronics manufacturers -- whether that is a
    hardware-based solution (*i.e.*, CableCARDs) or a software-based
    solution[^20] -- the objective of Section 629 will not be achieved.
    Given the extensions of the integration ban deadline that already
    have been granted, we believe that any additional requests for
    waivers of that deadline, including the one before us, appropriately
    have a heavy burden to overcome.[^21]

# COMMENTS

5.  Several parties filed comments regarding Comcast\'s Application for
    Review.[^22] Two manufacturers of the Subject Boxes argue that
    incorporating CableCARD functionality into the Subject Boxes will
    increase their cost and effectively deprive consumers of a low-cost
    option for accessing digital services.[^23] They assert that the
    higher cost will lower consumer demand, thereby slowing the cable
    industry's transition to all-digital systems and delaying the
    benefits associated with that transition.[^24] According to certain
    manufacturers, there is no market interest for
    cable-operator-provided, one-way (*i.e*., non-interactive) set-top
    boxes, and therefore the Commission could not have intended to limit
    the waivers contemplated in the *2005 Deferral Order* to such
    devices.[^25] Other commenters suggest that denial of Comcast's
    Application for Review will impose additional costs on subscribers
    and present a hurdle as subscribers transition from analog to
    digital television.[^26] Panasonic argues that grant of a waiver
    would ease the transition to all-digital terrestrial
    broadcasting[^27] because devices that perform digital-to-analog
    conversion would allow current analog-only cable subscribers to
    continue to receive digital signals from broadcasters after the
    transition.[^28] Panasonic also urges us to consider "Comcast's
    expectation and support for the resources and actions necessary to
    assure its network is rapidly \[OpenCable Applications Platform
    ("OCAP")\] capable," arguing that OCAP is necessary to achieve a
    competitive navigation device market.[^29]

6.  Parties urging the Commission to deny Comcast's Waiver Request
    emphasize that the Bureau properly denied the Waiver Request as
    overly broad and acted consistent with Commission precedent and case
    law.[^30] They counter that the Commission repeatedly has considered
    the issue of short-term costs and note that the Commission in 2005
    specifically developed a narrow exception to the integration ban to
    make certain that subscribers do not face hurdles in the transition
    to all-digital systems.[^31] CEA, which represents 2,100 companies
    within the U.S. consumer technology industry,[^32] adds that
    enforcement of the integration ban for all of the set-top boxes
    deployed by Comcast and other multiple system operators is the only
    way to ensure that economies of scale are achieved with respect to
    the production costs of CableCARDs.[^33] Sony disputes Comcast's
    claim that it should not have to divert resources from OCAP and a
    downloadable security solution, noting that the Commission has
    previously considered and rejected that argument.[^34] Sony also
    emphasizes that "cable operators have been on notice with respect to
    the common reliance requirement for nearly nine years."[^35]

# DISCUSSION

7.  Comcast argues that the Bureau ignored the Commission's policy with
    regard to waivers for low-cost, limited-capability set-top boxes,
    misapplied the waiver standards in Section 629(c) of the
    Communications Act and Sections 1.3 and 76.7 of the Commission's
    rules, and attempted to establish new policy as part of the waiver
    process.[^36] As discussed below, we conclude that the Bureau
    correctly applied the statute and the Commission's rules. A waiver
    under Section 629(c) is not warranted here because Comcast has
    failed to show that a waiver is necessary to assist the development
    or introduction of new technologies or services.[^37] In addition,
    we find that Comcast's request does not meet the requirements for
    waiver under the policy announced in the *2005 Deferral Order*
    because the subject set-top boxes contain an advanced capability,
    *i.e.,* two-way functionality, and thus are not the "low-cost,
    limited capability" set-top boxes covered under the policy .[^38]
    Further, Comcast has failed to demonstrate that any public interest
    benefits of a waiver would outweigh the associated harms, and thus a
    waiver is not warranted under either Sections 1.3 or 76.7 of the
    Commission's rules. Accordingly, we deny Comcast's Application for
    Review.

## Section 629(c)

8.  Pursuant to Section 629(c), the Commission shall grant a waiver of
    its navigation device rules when "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."[^39] Comcast asserts
    that Section 629 requires the Bureau to consider "Comcast's ability
    to expand and enhance digital services" when evaluating Comcast's
    request for waiver.[^40] While Comcast admits that it has had
    success in its digital deployment, it nevertheless claims that
    waiver is necessary for continued development and consumer adoption
    of that service,[^41] and argues that the Bureau ignored the need to
    transition analog subscribers to entry-level digital service.[^42]
    Comcast also contends that the Bureau erred in four other respects
    in its application of Section 629(c): (1) ignoring Comcast's offer
    to make its waiver request for a limited time; (2) barring operators
    from filing requests for low-cost, limited-capability devices under
    Section 629(c); (3) suggesting that waivers granted pursuant to
    Section 629(c) are solely for new entrants; and (4) failing to
    comply with the 90-day timeframe set forth in Section 629(c).[^43]

9.  We reject Comcast's interpretation of Section 629(c). Section 629(c)
    directs the Commission to grant waiver of its rules upon an
    appropriate showing that such waiver is "necessary to assist the
    development or introduction of a new or improved . . .
    service."[^44] We find that the Bureau properly interpreted this
    language. To interpret Section 629(c) as requiring a waiver based on
    "Comcast's ability to expand and enhance digital services," as
    Comcast argues, not only would improperly expand the scope of the
    statutory waiver standard, but effectively would eviscerate the very
    purpose of the integration ban: implementation of Congress'
    directive that the Commission adopt rules to assure a competitive
    navigation device market develops.[^45] As the Bureau indicated,
    "while it could be argued that a waiver under Section 629(c) would
    assist the development or introduction of virtually any service
    offered by an MVPD, we do not believe that Congress intended for us
    to interpret this narrowly tailored exception in such a lenient
    manner. Indeed, such an interpretation would effectively negate any
    rules adopted pursuant to Section 629(a)."[^46] We agree with the
    Bureau's analysis. Grant of broad waiver requests (like the instant
    waiver request for the Subject Boxes) would lead to deployment of a
    substantial number of integrated devices.[^47] This, in turn, would
    decrease operators' incentives to support fully CableCARD devices
    that are connected to their cable systems -- and as CEA asserts, the
    success of third-party devices depends on adequate operator
    support.[^48] Further, we conclude that the failure to date of the
    parties to negotiate successfully an agreement that would enable the
    development and sale of two-way, interactive navigation devices at
    retail compels us to strictly enforce the Commission's rules,
    including the integration ban, that are designed to implement
    Section 629(a).

10. While Comcast may be correct in its assertion that the existence of
    some digital services does not preclude the Commission from
    considering a waiver application under Section 629(c),[^49] we find
    compelling that as of February 2006, all Comcast subscribers live in
    markets where Comcast has launched digital service.[^50] Therefore,
    Comcast has significantly more than "some" existing digital
    services, and based on these facts has failed to show that a waiver
    is "necessary" here to assist in the "development or introduction"
    of new or improved services. Moreover, we fully expect Comcast to
    continue to develop and introduce digital services in a rapid manner
    in the absence of a waiver and thus do not believe that a waiver is
    "necessary" to assist in the development or introduction of such
    services.[^51] Moreover, we reject Comcast's assertion that waiver
    is warranted in this case because the cost of its entry-level
    digital service will increase without waiver, thereby discouraging
    adoption of digital service.[^52] As the Commission has explained
    previously, the integration ban strikes a proper balance between
    that potential harm and achievement of Section 629's goal of a
    competitive navigation device marketplace,[^53] and that ban has
    been upheld by the D.C. Circuit. [^54] Therefore, we conclude that
    the Bureau was correct in finding that Comcast failed to make the
    appropriate showing that a waiver was necessary, as required by
    Section 629(c).

11. As the Bureau correctly found that Comcast has not justified a
    waiver under Section 629(c), it is not necessary for us to address
    Comcast's other assertions with respect to Section 629(c). In order
    to provide further guidance to interested parties, however, we will
    address these concerns. First, we agree with the Bureau that
    Comcast's original Waiver Request, which was unlimited in duration,
    was overly broad, and that waivers under Section 629(c) must be
    requested for a limited time.[^55] Second, we clarify the Bureau's
    statement that "future requests for waiver for low-cost, limited
    capability set top boxes will not be considered under Section
    629(c), but rather under the standard developed in the *2005
    Deferral Order.*"[^56] While cable operators are not barred from
    filing waiver requests for low-cost, limited-capability set top
    boxes pursuant to Section 629(c), we believe generally that waivers
    sought for such devices are more appropriately requested under the
    waiver policy articulated in the *2005 Deferral Order*.
    Specifically, the purpose of Section 629(c) is to provide waivers
    where "necessary to assist the development or introduction of a new
    or improved ... service," whereas the waiver policy established in
    the *2005 Deferral Order* is directed at devices that provide solely
    the ability to view digital cable signals on analog television
    displays. Thus, we cannot envision a device that would satisfy our
    *2005 Deferral Order's* waiver policy and at the same time meet the
    waiver standards of Section 629(c).[^57] Third, Comcast incorrectly
    claims that the Bureau suggested that waivers granted pursuant to
    Section 629(c) are solely for new competitors. The Bureau offered
    this as an example, not as a prerequisite for waiver under Section
    629(c).[^58] Finally, we clarify the Bureau's statement that
    "requests for waiver made pursuant to the *2005 Deferral Order* are
    not subject to the 90-day time limit set forth in Section
    629(c)."[^59] As discussed above, we believe that waivers for
    low-cost, limited-capability set top boxes are more appropriately
    evaluated under the waiver policy articulated in the *2005 Deferral
    Order* rather than under Section 629(c). Thus, to the extent a
    waiver request for a low-cost, limited-capability set-top box does
    not meet the standard of Section 629(c), it will be evaluated under
    the Commission's general waiver standard, to which the 90-day time
    limit in Section 629(c) does not apply.[^60]

## *2005 Deferral Order*

12. Comcast asserts that the Bureau misinterpreted and ignored the
    Commission's policy with respect to "low-cost, limited capability"
    set-top boxes,[^61] contending that such devices were exempted "to
    *expand* consumer access to digital services via existing analog
    television sets."[^62] Comcast also argues that the Commission
    relied on the availability of the low-cost, limited-capability
    waiver to support the integration ban in its brief and in oral
    arguments before the D.C. Circuit in *Charter Communications v.
    FCC*.[^63] Comcast contends further that the Bureau misinterpreted
    the Commission's intent by finding that two-way functionality
    exceeds the "limited capability" standard.[^64] Comcast claims that
    it has never deployed one-way digital set-top boxes, and the
    Commission could not have intended in the *2005 Deferral Order* to
    exempt devices that do not exist.[^65]

13. We conclude that the Bureau correctly applied Commission policy --
    specifically, the waiver standard for low-cost, limited-capability
    devices the Commission established in 2005 -- to Comcast's request
    for relief.[^66] The Commission stated in the *2005 Deferral Order*
    that it would consider waiver requests for "low-cost, limited
    capability" set-top boxes to ensure that no consumer loses the
    ability to receive digital programming as broadcasters and cable
    providers transition to digital.[^67] The Commission did not commit
    to automatically grant every waiver requested that purports to
    satisfy that objective. Rather, the Commission said that it would
    entertain such requests for waiver where the subject device met
    specific criteria and in the context of facilitating the digital
    transition.[^68] Accordingly, we believe that the Commission's
    stated intention to "not displace a low-cost set-top box option for
    MVPD subscribers"[^69] appropriately must be considered within that
    narrowly defined context, while keeping in mind the overarching goal
    of establishing a competitive market for navigation devices.

14. Further, as noted above, in preserving a low-cost option in 2005,
    the Commission intended to protect consumers by narrowly tailoring
    the waiver standard to address a specific governmental interest --
    enabling analog cable subscribers to continue to view programming as
    cable operators and broadcasters transition to all-digital
    transmissions.[^70] Indeed, filings from the cable industry in late
    2004 indicate that the industry's main concern was that existing
    analog devices would require simple "digital-to-analog converters"
    as cable providers transitioned to all-digital systems, and that
    requiring those devices to include a CableCARD interface would
    "present a serious impediment to the discontinuance of analog
    transmission."[^71] Comcast, however, misconstrues the term "limited
    capability boxes" to mean boxes providing the capabilities that the
    vast majority of its subscribers may want (as opposed to boxes with
    capabilities that are requested by only its "best customers," such
    as DVR capabilities, dual tuners, HD outputs, and broadband support,
    which Comcast does not consider to be "limited capability"
    boxes).[^72] But while the Subject Boxes appear to be low-cost,[^73]
    they include electronic programming guide ("EPG"), pay-per-view,
    video-on-demand ("VOD"), and switched-digital capabilities, all of
    which involve two-way communications between the set-top box and the
    cable headend and are not necessary to achieve the goal of enabling
    analog customers to continue to view programming as cable operators
    and broadcasters transition to digital.[^74] Indeed, the Commission
    expressly warned in the *2005 Deferral Order* that we did not
    "believe that waiver \[would\] be warranted for devices containing
    personal video recording ("PVR"), high-definition, broadband
    Internet access, multiple tuner, or *other similar advanced
    capabilities*."[^75] Thus, we do not believe that the Subject Boxes
    are appropriately characterized as "limited-capability" boxes.
    Accordingly, we affirm the Bureau's determination that set-top boxes
    containing such an advanced capability, *i.e.,* two-way
    functionality, should not be granted a waiver under the standard
    established in the *2005 Deferral Order*.[^76]

15. We also find that the Bureau did not err in basing its
    interpretation of "advanced" capabilities on that term's meaning in
    the plug-and-play context.[^77] The Commission's plug-and-play rules
    are inherently related to the navigation device rules; both sets of
    rules were adopted pursuant to the Commission's authority under
    Section 629, and the plug-and-play rules were adopted to allow
    third-party manufacturers to offer one-way (*i.e.*, non-interactive)
    digital-cable-ready navigation devices for sale at retail.
    Therefore, the filings in the plug-and-play docket serve as an
    appropriate source for guidance in this case. Furthermore, the
    Bureau took its references from cable industry filings.[^78] In
    particular, we find it noteworthy that the cable industry
    specifically advocated before the Commission that the two-way
    interactive features contained in the Subject Boxes be classified as
    "advanced" capabilities. Specifically, the cable industry
    recommended that the Commission include in its regulations a
    requirement that non-interactive consumer electronics equipment
    contain a warning that "Certain *advanced* and interactive digital
    cable services such as video-on-demand, a cable operator's enhanced
    program guide and data-enhanced television services may require the
    use of a set-top box."[^79] While cable operators are, of course,
    free to change their positions on issues to suit their evolving
    private economic interests, the Commission is not obliged to ignore
    such an evolution or to follow suit. Therefore, we disagree with
    Comcast's assertion that the definition of "advanced" used in the
    plug-and-play context is not relevant to this proceeding. Rather, we
    agree with the Bureau that it provides support for the conclusion
    that the Subject Boxes contain "advanced capabilities" and thus are
    not eligible for a waiver under the standard established in the
    *2005 Deferral Order*.[^80]

## The Bureau's Application of the Public Interest Waiver Standard

16. Comcast asserts that the Bureau misapplied the public interest
    waiver standard found in Sections 1.3 and 76.7 of the Commission's
    rules.[^81] Comcast argues that the Bureau ignored the public
    interest benefits that it speculates would result if waiver were
    granted, namely increased consumer adoption of digital service, a
    smoother digital transition for Comcast and broadcasters, and
    accelerated development of a downloadable security solution.[^82]
    Comcast also contends that the Bureau afforded too much weight to
    the potential harms that consumer electronics manufacturers
    face.[^83]

17. The Bureau properly weighed the potential public interest benefits
    of waiver against the potential harms in its review of the Waiver
    Request. As mentioned above, the Commission has already addressed
    this issue by analyzing the harms and benefits associated with the
    integration ban, and concluded that the benefits justified any
    potential harms, including the potential increased cost of set-top
    boxes:

> \[T\]he costs that this requirement will impose should be
> counterbalanced to a significant extent by the benefits likely to flow
> from a more competitive and open supply market. In particular, it
> seems likely that the potential savings to consumers from greater
> choice among navigation devices will offset some of the costs from
> separating the security and non-security functions of either
> MVPD-supplied devices or those that might otherwise be made available
> through retail outlets. In addition, except as discussed below, we
> generally do not believe that maintenance of the prohibition on
> integrated navigation devices will delay the DTV transition. We
> believe that the incentive provided by the separate security
> requirement will spur cable operators to meet their obligations and
> promote the timely development of a competitive market in host
> devices. Accordingly, we find that there are sufficient competitive
> and consumer benefits to justify the costs of the ban.[^84]

As noted above, the paramount goal of the integration ban is a
competitive navigation device market, and we conclude that the Bureau
correctly weighed this objective heavily when evaluating the relative
public interest benefits and harms associated with Comcast's
request.[^85] Likewise, the Bureau recognized the Commission's decision
that common reliance on a separated security function was the best means
to meet that goal.[^86] If the Bureau had granted the Waiver Request, it
would have created an exception to the integration ban rule that would
have substantially undermined the goals of common reliance, *e.g.,*
developing a commercial market for navigation devices.[^87] While we
recognize concerns raised by some commenters that imposition of the
integration ban may lead to higher cable bills in the short term,[^88]
we reaffirm the conclusion that the Commission reached in the *2005
Deferral Order* that "the costs that this requirement will impose should
be counterbalanced to a significant extent by the benefits likely to
flow from a more competitive and open supply market."[^89] Therefore, we
conclude that the Bureau correctly found that the possible public
interest benefits suggested by Comcast in support of its Waiver Request
do not outweigh the substantial public interest benefits associated with
the integration ban and the possible harm that could result from
granting Comcast's waiver request .

18. Comcast also contends that the Bureau improperly modified the
    standard for waiver established in the *2005 Deferral Order* for
    low-cost, limited-capability set-top boxes.[^90] Specifically,
    Comcast alleges that "\[t\]he Bureau has now conjured up an entirely
    different waiver regime which is completely disconnected from the
    simple process established by the full Commission in 2005" and that
    "\[u\]nder the Bureau's newly-concocted test, if Comcast wants to
    deploy the DCT-700 and similar low-cost boxes after the ban, it must
    commit to going all-digital before February 2009 or to using the
    boxes solely for specialty tier customers."[^91] Comcast contends
    that this constitutes the impermissible establishment of a new
    waiver standard by the Bureau that "conflict\[s\] with law and
    policy established by Congress and the Commission."[^92]

19. Although the Bureau denied Comcast's request for waiver, it granted
    Comcast leave to file an amended waiver request and suggested
    potential ways that Comcast might be able to demonstrate that a
    waiver is in the public interest. In particular, it stated that a
    waiver request demonstrating a commitment to go all-digital by a
    date certain or to provide specialty tiers without a
    tier-buy-through requirement might lead to a different result.[^93]
    Comcast alleges that when the Bureau made these suggestions, the
    Bureau actually was revising the waiver standard the Commission
    established in 2005.[^94] We disagree. This discussion took place in
    the context of the Bureau's consideration of Comcast's request for
    relief under the general waiver provisions of Sections 1.3 and 76.7
    of the Commission's rules -- *not* in the context of its evaluation
    of that request pursuant to the waiver policy the Commission
    established in 2005 for low-cost, limited-capability devices.[^95]

20. Moreover, the Bureau merely provided examples of how certain public
    interest benefits already alleged by Comcast in its original waiver
    request,[^96] if expressed in more definitive terms, might cause the
    Bureau to reassess the relative public interest harms and benefits
    that would result from a waiver of the integration ban for the
    Subject Boxes. For this reason, we conclude that the Bureau did not
    establish new policy or amend any policies that were established by
    the full Commission.[^97] It was merely trying to provide helpful
    guidance. Further, we note that, going forward, Comcast may amend
    its request for waiver under Sections 1.3 and 76.7 on any basis it
    chooses. Comcast is not in any way limited to, or constrained by,
    the examples provided by the Bureau in the *Order*. Rather, the only
    burden that Comcast must overcome with any future request for waiver
    of the integration ban for the Subject Boxes under Sections 1.3 and
    76.7 is the requirement that it demonstrate that grant of such a
    request, on balance, would further the public interest.[^98]
    Accordingly, it is not necessary for the Commission to decide
    whether the examples offered by the Bureau would be sufficient to
    tip the balance of the public interest analysis in favor of the
    applicant. Rather, because we agree with the Bureau\'s conclusion
    that the particular benefits actually asserted in Comcast\'s Waiver
    Request were insufficient, we hereby affirm the Bureau\'s decision
    not to grant the waiver.[^99]

# CONCLUSION

21. We affirm the Bureau's *Order* in this matter. Comcast's Waiver
    Request did not justify a waiver under Section 629(c), the waiver
    policy established in the *2005 Deferral Order*, or more generally
    under Sections 1.3 or 76.7 of the Commission's rules. The Bureau
    correctly found that waiver of the navigation device rules should be
    granted, for example, when necessary to assist in the development or
    introduction of new or improved services, when requested for a
    "low-cost, limited capability" device, or when it has been
    demonstrated that the public interest benefits of a waiver outweigh
    the substantial benefits that the establishment of a competitive
    navigation device market, facilitated by common reliance, would
    bring. As such, we deny Comcast's Application for Review.

# ORDERING CLAUSE

22. Accordingly, **IT IS ORDERED**, pursuant to Sections 1, 4(i), 5(c),
    and 629(c) of the Communications Act of 1934, as amended,[^100] and
    1.3, 1.115 and 76.7 of the Commission's rules,[^101] that Comcast
    Corporation's Application for Review **IS** **DENIED**.

FEDERAL COMMUNICATIONS COMMISSION

Marlene H. Dortch

Secretary

**STATEMENT OF**

**COMMISSIONER MICHAEL J. COPPS**

** **

*Re:       Comcast Corporation Request for Waiver of Section
76.1204(a)(1) of the Commission's Rules; Implementation of Section 304
of the Telecommunications Act of 1996; Commercial Availability of
Navigation Devices*

Eleven years ago, Congress instructed the Commission to assure the
commercial availability of set top boxes. The message was clear:
American consumers should be able to purchase a device at Best Buy or
Wal-Mart that works just as well with their television as the cable
company's own device. This openness is clearly good news for cable
subscribers. Vigorous competition will drive prices down and increase
the pace of technological innovation.

Anyone who doubts the importance of replacing vertical integration with
device openness need only look at the effects of the FCC's 1968
*Carterfone* decision, which freed consumers from the obligation to
lease AT&T's black rotary phone. This reform unleashed a flood of less
expensive phones and paved the way for innovations like the fax and
answering machine. Indeed, it is no exaggeration to say that
*Carterfone­---*by enabling third-party manufacturers to develop and sell
dial-up modems---played a critical role in bringing the Internet to
American homes.

In a series of orders over the past decade, the FCC has affirmed that an
integration ban is the right way to foster a robust market for
third-party set top boxes. Yet for a variety of reasons, we have
repeatedly postponed the effective date of the ban. The time for delay
is over. I am delighted that Comcast consumers will soon be able to
enjoy the benefits of a retail market for set top boxes. I am confident
this will translate into lower prices and a better viewing experience
for consumers.

Though I approve today's *Order*, I do want to address one procedural
issue raised by our decision. The statute expressly requires the
Commission to ***grant*** any waiver request made under Section 629(c)
within 90 days. Because our decision ***denies*** such a request---and
for good reason---the plain text of the statute does not require us to
issue our decision within the 90-day statutory period. But even though
our decision complies with the letter of the law, I do not think it is
consistent with its spirit. I therefore note my view that a better
practice would be to issue a grant ***or denial*** of a Section 629(c)
waiver request within 90 days.

I thank the Bureau for their hard work on this item.

**JOINT STATEMENT OF**

**COMMISSIONERS ROBERT M. MCDOWELL**

**AND JONATHAN S. ADELSTEIN**

**CONCURRING**

*Re: Comcast Corporation Application for Review*, CS Docket No. 97-80

In this Order, the Commission upholds the Media Bureau's denial of
Comcast's request for waiver of the integration ban. The primary reason
for the denial is that the subject set-top boxes contain an advanced
capability *i.e.*, two-way functionality, and thus are not the
"low-cost, limited-capability" boxes that would qualify for a waiver
under the Commission's *2005 Deferral Order*.

Before discussing the specifics of the application for review, it is
important to survey how we arrived at this juncture. As part of the
Telecommunications Act of 1996, Congress passed Section 629, directing
the Commission to adopt regulations to "assure the commercial
availability" to MVPD consumers of navigation devices, specifically
"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, from
manufacturers, retailers, and other vendors not affiliated with any
multichannel video programming distributor."[^102] Congress intended to
create a competitive market for navigation devices by ensuring that
consumers have the opportunity to buy navigation devices from sources
other than their MVPD. In other words, Congress wanted to create a
national, competitive market for navigation devices to give consumers
the option of going to their electronics retailer to choose a set-top
box with the features they want, rather than having only the boxes
supplied from their MVPD.

To carry out the goals of Section 629, in 1998 the Commission adopted
the "integration ban," which established a date after which cable
operators no longer may place into service new set-top boxes that
perform both conditional access and other functions in a single,
integrated device. Specifically, the FCC required cable operators, not
all MVPDs, to make available by July 1, 2000 a security element separate
from the basic navigation device. Separating the security element from
the host device (known as the "integration ban") would enable
unaffiliated manufacturers, retailers and vendors to commercially market
devices while allowing cable operators to retain control over their
system security. Separated security allows individual cable operators to
design and operate equipment reflecting their particular security needs,
while still facilitating the development of a market for consumer
equipment that is geographically portable. Technologically, this
separation of security from other features could be achieved by
equipping set-top boxes with "CableCARDs" supplied by the cable
operator, which would access security functions. The Commission order
allowed cable operators to use devices with integrated security until
January 1, 2005.

The purpose of the ban was to assure reliance by both cable operators
and consumer electronics manufacturers on a common separated security
solution. This "common reliance" was intended to spur a competitive
market in set-top boxes and thus provide consumers more choices and more
innovative features offered by several vendors. The ban would thus help
achieve the broader goal of Section 629 -- allowing consumers to buy
set-top boxes at retail, rather than only from their MVPD.

Both Congress and the Commission provided grounds for waiver of the
regulations. Section 629(c) mandated that the Commission shall waive its
regulations "for a limited time" upon a showing by an MVPD provider or
equipment provider that a waiver is "necessary to assist the development
or introduction of a new or improved multichannel video programming or
other service" offered over their systems. In its *2005 Deferral Order*,
the Commission decided to consider requests for waiver of the
integration ban for limited-capability integrated digital cable boxes to
ensure that establishing a competitive market would not displace a
low-cost set-top box option for MVPD subscribers.

The Commission originally fixed January 1, 2005 as the deadline for
compliance with the integration ban. The cable industry sought and was
granted two extensions of that deadline. In April 2003, the Commission
extended the effective date until July 1, 2006 and then in 2005, further
extended the date until July 1 of this year. The Commission granted the
extensions on the basis that a downloadable security solution was
feasible in the near term. All the relevant parties now agree that the
industry is still years away from implementing downloadable security
nationwide.

The cable industry has been on notice of this rule since 1998 and has
already been granted extensions for two and a half years. The statute,
in Section 629(c), contemplates waivers only for a limited period of
time. In addition, Section 629(e) states that the Commission should
sunset its rules only if a competitive market for navigation devices is
established. Although the waiver standard in Section 629(c) may not
apply because of the type of set-top boxes at issue, it is clear that
Congress intended waivers to be temporary. Granting multiple extensions
of the effective date essentially sunsets the rules before they take
effect and before a competitive market emerges, contrary to Congress'
explicit intent.

The statutory basis for waiver focused on the capabilities of the
subject box to provide for new or improved services. Similarly, when the
Commission established grounds for waiver of the integration ban in
2005, it made clear that we would look at the capabilities of the box.
As we stated in the *2005 Deferral Order*:

> \[W\]e will entertain requests for waiver of the prohibition on
> integrated devices for limited capability integrated digital cable
> boxes. We do not believe that waiver will be warranted for devices
> that contain personal video recording ("PVR"), high-definition,
> broadband Internet access, multiple tuner, or other similar advanced
> capabilities.

What we have done instead, through a series of Bureau-issued orders, is
focus on ***the operator*** who requested the waiver, rather than ***the
box***. Comcast filed a petition for waiver for three set-top box
models: Motorola's DCT-700; Scientific-Atlanta's Explorer-940; and Pace
Micro's Chicago set-top boxes. Many other waiver applicants sought and
were granted relief for exactly the same boxes covered by the Comcast
request. The basis for granting the waivers had nothing to do with the
boxes -- in each instance, the Bureau found the two-way functionality of
these boxes to be too advanced to qualify as limited-capability devices.
Instead, the Bureau orders used generic regulations in Sections 1.3 and
76.7 of the CFR to grant waivers based on certain characteristics of the
operator -- for instance, the operator's "demonstrated financial
hardship," the operator's delivery of service to an area prone to
natural disasters, or most often, the operator's commitment to migrate
to an all-digital network before the digital transition date for
broadcast television. We concur in this Order because of the
inconsistent and arbitrary application of the waiver standard to
applicants.

The policy objective of the 2005 Commission was to preserve a low-cost
set-top box option for consumers, both for those who have analog TVs
after the broadcast transition and for those who choose to try an
economical digital cable service. The Commission intended these low-cost
boxes to help cable's own digital transition, but did not intend to
force cable companies to complete their digital transitions by the
deadline set for the broadcast DTV transition. In the *2005 Deferral
Order*, the Commission stated:

> \[A\]chieving consumer choice by establishing a competitive market
> should not displace a low-cost set-top box option for MVPD
> subscribers. It is critical to the DTV transition that consumers have
> access to inexpensive digital set-top boxes that will permit the
> viewing of digital programming on analog television sets both during
> and after the transition. The availability of low-cost boxes will
> further the cable industry's migration to all-digital networks,
> thereby freeing up spectrum and increasing service offering such as
> high-definition television. Accordingly, as cable systems migrate to
> all-digital networks, we will also consider whether low-cost, limited
> capability boxes should be subject to the integration ban or whether
> cable operators should be permitted to offer such low-cost, limited
> capability boxes on an integrated basis.

This reasoning provides a sound basis for waivers, but does not offer a
basis for treating the same boxes differently. Each box should either be
exempted from the integration ban or not, based on its characteristics,
not on how a particular operator is situated. Also, in our opinion, the
reasoning fails to justify granting waivers on the basis of a commitment
to complete the transition to ***digital cable*** by February 17, 2009,
the deadline Congress set for ***broadcasters*** to transition to DTV.

We think the Bureau reached the correct result when it determined that
the subject boxes, although low-cost, are not "limited-capability"
boxes. Unfortunately, the Bureau orders did not stop at this analysis,
but rather continued on to grant waivers for these boxes for certain
applicants and not others. The result of these inconsistent decisions is
that consumers will be treated differently, based on where they live and
which MVPD they choose. This inconsistent application of the waiver
policy does not further Congress' goal of promoting a national retail
market for these devices.

Because Comcast's waiver request was not granted, the company will have
to deploy more expensive boxes that contain separated security and
likely will pass on this cost to its subscribers. Those who subscribe to
a company whose waiver was granted will pay less for an integrated box,
even though that box comes with the same functions and features as
Comcast's. That result doesn't make sense \-- for consumers, for MVPDs
for the consumer electronics industry, or for the creation of the
national retail market Congress intended.

[^1]: Application for Review of Comcast Corporation (filed January 30,
    2007) ("Application for Review"); *see also* 47 C.F.R. § 1.115.

[^2]: *Comcast Corporation Request for Waiver of Section 76.1204(a)(1)
    of the Commission's Rules*, Memorandum Opinion and Order, DA 07-49
    (MB rel. Jan. 10, 2007) ("*Order*").

[^3]: Comcast Corporation's Request for Waiver of 47 C.F.R. §
    76.1204(a)(1), CSR-7012-Z, CS Docket No. 97-80 (April 19, 2006)
    ("Waiver Request").

[^4]: 47 C.F.R. § 76.1204(a)(1).

[^5]: 47 U.S.C. § 549(c).

[^6]: *See* *Implementation of Section 304 of the Telecommunications Act
    of 1996: Commercial Availability of Navigation Devices*, 20 FCC Rcd
    6794, 6813-14, ¶ 37 (2005) ("*2005 Deferral Order*"), *pet. for
    review denied*, *Charter Communications, Inc. v. FCC*, 460 F.3d 31
    (D.C. Cir. 2006).

[^7]: See 47 C.F.R. §§ 1.3, 76.7; *Order* at ¶¶ 15-33. The Bureau also
    "grant\[ed\] Comcast leave to amend its request" for waiver. *Id*.
    at ¶ 1. *See also id*. at ¶¶ 32-34.

[^8]: *See* Section 629(a) of the Communications Act of 1934, as
    amended, 47 U.S.C. § 549(a) (requiring the FCC "to adopt regulations
    to assure the commercial availability, to consumers of multichannel
    video programming and other services offered over multichannel video
    programming systems, of 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, from manufacturers,
    retailers, and other vendors not affiliated with any multichannel
    video programming distributor") *See also* Telecommunications Act of
    1996, Pub. L. No. 104-104, § 304, 110 Stat. 56, 125-126 (1996).

[^9]: *See Implementation of Section 304 of the Telecommunications Act
    of 1996: Commercial Availability of Navigation Devices*, 13 FCC Rcd
    14775, 14803, ¶ 69 (1998) ("*First Report and Order*") (adopting
    Section 76.1204 of the Commission's rules, subsection (a)(1) of
    which (1) required multichannel video programming distributors
    ("MVPDs") to make available by July 1, 2000 a security element
    separate from the basic navigation device (*i.e.*, the CableCARD),
    and, in its original form, (2) prohibited MVPDs covered by this
    subsection from "plac\[ing\] in service new navigation devices ...
    that perform both conditional access and other functions in a single
    integrated device" after January 1, 2005). *See also* 47 C.F.R. §
    76.1204(a)(1) (1998).

[^10]: *First Report and Order,* 13 FCC Rcd at 14803, ¶ 69.

[^11]: In April 2003, the Commission extended the effective date of the
    integration ban until July 1, 2006. *See Implementation of Section
    304 of the Telecommunications Act of 1996: Commercial Availability
    of Navigation Devices*, 18 FCC Rcd 7924, 7926, ¶ 4 (2003)
    ("*Extension Order*"). Then, in 2005, the Commission further
    extended that date until July 1, 2007.^?^ *See 2005 Deferral Order*,
    20 FCC Rcd at 6810, ¶ 31.

[^12]: *2005 Deferral Order*, 20 FCC Rcd at 6810, ¶ 31.

[^13]: *See* National Cable & Telecommunications Association's Request
    for Waiver of 47 C.F.R. § 76.1204(a)(1) at 1 (filed Aug. 16, 2006)
    ("*NCTA Request for Waiver*") (seeking a third extension of the
    deadline for compliance with the integration ban "for all cable
    operators until their deployment of downloadable security or
    December 31, 2009, whichever is earlier"); *National Cable &
    Telecommunications Association Request for Waiver of Section
    76.1204(a)(1) of the Commission's Rules*, DA 07-2920 (MB rel. June
    29, 2007).

[^14]: *National Cable & Telecommunications Association Request for
    Waiver of Section 76.1204(a)(1) of the Commission's Rules*, DA
    07-2920 (MB rel. June 29, 2007).

[^15]: *See Order* at ¶ 30, n.105. *See also Cablevision Systems
    Corporation's Request for Waiver of Section 76.1204(a)(1) of the
    Commission's Rules*, DA 07-48, at ¶ 19 (MB rel. Jan 10, 2007)
    (citing the *2005 Deferral Order*, 20 FCC Rcd at 6809, ¶ 30)
    (explaining why the Commission "require\[d\] MVPDs and consumer
    electronics manufacturers to rely upon identical separated security
    with regard to hardware-based conditional access solutions").

[^16]: *See* [S. Rep]{.smallcaps}. 104-230, at 181 (1996) (Conf. Rep.).
    *See also* *Bellsouth Interactive Media Services, LLC*, 19 FCC Rcd
    15607, 15608, ¶ 2 (2004). As the Bureau noted, Congress
    characterized the transition to competition in navigation devices as
    an important goal, stating that "\[c\]ompetition in the
    manufacturing and distribution of consumer devices has always led to
    innovation, lower prices and higher quality." *Order* at ¶ 2 (citing
    H.R. [Rep. No.]{.smallcaps} 104-204, at 112 (1995)).

[^17]: *Charter Comm., Inc. v. FCC*, 460 F.3d 31 (D.C. Cir. 2006);
    *General Instrument Corp. v. FCC*, 213 F.3d 724 (D.C. Cir. 2000).
    The Commission argued, and the D.C. Circuit agreed, that the
    integration ban was a reasonable means to meet Section 629's
    directive. *Charter* *Comm., Inc. v. FCC*, 460 F.3d 31, 41 (D.C.
    Cir. 2006) ("this court is bound to defer to the FCC\'s predictive
    judgment that, '\[a\]bsent common reliance on an identical security
    function, we do not foresee the market developing in a manner
    consistent with our statutory obligation.'").

[^18]: For example, Section 629(c) provides that the Commission shall
    grant a waiver of its regulations implementing Section 629(a) upon
    an appropriate showing that such waiver is necessary to assist the
    development or introduction of new or improved services. 47 U.S.C §
    549(c). In the *2005 Deferral Order*, the Commission announced that
    it would entertain requests for waiver for low-cost,
    limited-capability devices. *See* *2005 Deferral Order*, 20 FCC Rcd
    6794, 6813-14, ¶ 37. More recently, petitioners who have shown good
    cause have received waivers of the integration ban pursuant to
    Sections 1.3 and 76.7 of the Commission's rules. *See* *Bend Cable
    Communications, LLC d/b/a BendBroadband Request for Waiver of
    Section 76.1204(a)(1) of the Commission's Rules*, DA 07-47 (MB rel.
    Jan 10, 2007); *Cablevision Systems Corporation's Request for Waiver
    of Section 76.1204(a)(1) of the Commission's Rules*, DA 07-48, at ¶
    19 (MB rel. Jan 10, 2007).

[^19]: *See* 47 C.F.R. § 76.1204(a)(2) (stating that the requirements
    set forth in subsection (a)(1) "shall not apply to a multichannel
    video programming distributor that supports the active use by
    subscribers of navigation devices that: (i) operate throughout the
    continental United States, and (ii) are available from retail
    outlets and other vendors throughout the United States that are not
    affiliated with the owner or operator of the multichannel video
    programming system"). *See also* *First Report and Order*, 13 FCC
    Rcd at 14801, ¶ 65-66 (concluding that DBS providers and "direct to
    home (DTH or larger satellite service dish providers)" satisfy the
    exemption, set forth in Section 76.1204(a)(2) of the Commission's
    rules, from the separated security requirements set forth in Section
    76.1204(a)(1)).

[^20]: *See 2005 Deferral Order*, 20 FCC Rcd at 6810, ¶ 31 (recognizing
    "that development of set-top boxes and other devices utilizing
    downloadable security is likely to facilitate the development of a
    competitive navigation device market . . . \[and\] aid in the
    interoperability of a variety of digital devices"). *See also
    Commission Reiterates that Downloadable Security Technology
    Satisfies the Commission\'s Rules on Set-Top Boxes and Notes Beyond
    Broadband Technology\'s Development of Downloadable Security
    Solution*, DA 07-51, at ¶ 1 (MB rel. Jan 10, 2007) (Public Notice)
    (noting that "Beyond Broadband Technology, LLC (BBT) has already
    developed a downloadable security solution which provides for common
    reliance").

[^21]: *See Indus. Broad. Co. v. FCC*, 437 F.2d 680, 683 (D.C. Cir.
    1970) (applicant bears heavy burden to demonstrate that his
    arguments for waiver are substantially different from those that
    have been carefully considered in rulemaking proceeding). *See also*
    Sony Comments at 2 ("Only a narrowly tailored, well-justified waiver
    request that fits in the context of the Act and Commission precedent
    could reasonably have been granted.").

[^22]: *See, e.g.,* comments filed by Americans for Prosperity, Cisco
    Systems, Inc. ("Cisco"), the Consumer Electronics Association
    ("CEA"), the Hispanic Federation, the League of Rural Voters,
    Motorola, Inc. ("Motorola"), the National Black Chamber of Commerce,
    Pace Micro Technology, PLC ("Pace Micro"), Panasonic Corporation of
    North America ("Panasonic"), Pioneer North America, Inc., Sony
    Electronics, Inc. ("Sony"), and the U.S. Hispanic Chamber of
    Commerce. Comcast, NCTA, and Thomson filed reply comments.

[^23]: Cisco Comments at 1-2, Motorola Comments at 3. Cisco is the
    parent company of Scientific Atlanta, manufacturer the Explorer-940,
    one of the Subject Boxes. Motorola manufactures the DCT-700, another
    one of the Subject Boxes. Pace Micro manufactures the third Subject
    Box, the Pace Chicago.

[^24]: Cisco Comments at 2, Motorola Comments at 3.

[^25]: Motorola Comments at 4, Pace Micro Comments at 3-4. In a similar
    vein, NCTA argues that the Commission's reference to Comcast's
    Waiver Request in arguments before the D.C. Circuit implied that the
    Commission would grant waiver for two-way devices. *See* NCTA Reply
    at 3-4.

[^26]: *See, e.g.*, Letter from Niel Ritchie, Executive Director, League
    of Rural Voters, to Kevin Martin, Chairman, Federal Communications
    Commission (Feb. 13, 2007), Letter from Lillian Rodriguez-Lopez,
    President, Hispanic Federation, to Kevin Martin, Chairman, Federal
    Communications Commission at 1 (Feb. 14, 2007); Letter from Tim
    Phillips, President, Americans for Prosperity, to Kevin Martin,
    Chairman, Federal Communications Commission, et al. at 1 (Feb. 13,
    2007), Letter from Michael L. Barrera, President and CEO, U.S.
    Hispanic Chamber of Commerce, to Kevin J. Martin, Chairman, Federal
    Communications Commission (Feb. 14, 2007); Letter from Harry C.
    Alford, President/CEO, National Black Chamber of Commerce, to the
    Chairman and Commissioners of the Federal Communications Commission
    at 1-2 (Feb. 22, 2007); NCTA Reply at 2; Comcast Reply at 1-2.

[^27]: In 2006, Congress set February 17, 2009 as the statutory deadline
    by which all terrestrial television broadcasters must cease
    broadcasting analog signals. *See* Deficit Reduction Act of 2005,
    Pub. L. No. 109-171, 120 Stat. 4 (2006) (amending Section 309(j)
    (14) and Section 337(e) of the Communications Act, as amended).

[^28]: Panasonic Comments at 3-5 (noting that "to the extent that
    limited-capability digital cable set-top boxes which convert digital
    cable signals to analog signals for display on existing,
    conventional NTSC televisions, can contribute to expanding quickly
    and readily the number of America's 'digital TV' households, the
    sooner the benefits of the digital broadcast transition can accrue
    to both consumers and local broadcast stations").

[^29]: Panasonic Comments at 7. *See also* Thomson Reply at 3 (referring
    to the cable industry's successful implementation of DOCSIS, and
    arguing that imposition of the integration ban will divert resources
    from a similarly successful adoption of OCAP).

[^30]: *See, e.g.,* Sony Comments at 3-13; CEA Comments at 10-11.
    Furthermore, Sony contends that Comcast did not meet any standard
    for waiver. *See* Sony Comments at 13-19.

[^31]: Sony Comments at 9-10.

[^32]: About CEA, http://www.ce.org/AboutCEA/default.asp (last visited
    March 6, 2007).

[^33]: CEA Comments at 4-5 (arguing that "mass production and use
    throughout the converter box lineup by Comcast and other MSOs is the
    *only* way finally to make Moore's law effective for CableCARDs,"
    upon which "competitive future two-way devices" will depend).

[^34]: Sony Comments at 8.

[^35]: Sony Comments at 8, n.27.

[^36]: *See* *generally* Application for Review at i-ii.

[^37]: *Order* at ¶¶ 17-19.

[^38]: *See Order* at ¶ 26, 29-30.

[^39]: Application for Review at 10-13.

[^40]: Application for Review at 12 (emphasis omitted).

[^41]: Application for Review at 11-13.

[^42]: Application for Review at 12-13.

[^43]: Application for Review at 13-15.

[^44]: 47 U.S.C. § 549(c).

[^45]: 47 U.S.C. § 549(a).

[^46]: *See Order* at ¶ 19.

[^47]: Indeed, in its initial Waiver Request, Comcast stated that it
    "aims to purchase between 1 million and 1.5 million DCT-700s" in
    2006 and "expects to purchase comparable numbers of these devices
    (whether the DCT-700, Explorer-940, or Pace Chicago set-top boxes)
    in subsequent years if the instant waiver is granted." Waiver
    Request at 10. *See also* Microsoft Comments at 5 (filed June 15,
    2006) (stating that Comcast will deploy the limited-capability
    set-top boxes in 20 percent of its customers' homes by the end of
    2006).

[^48]: *See* CEA Comments at 4-5.

[^49]: Application for Review at 11.

[^50]: *Order* at ¶ 17.

[^51]: *See*, *e.g.*, *Order* at ¶ 18 (noting that Comcast's revenues
    from VOD and PPV increased 30 percent between the second quarter of
    2005 and the second quarter of 2006) (citation omitted); Press
    Release, Comcast Corporation, Comcast Holds 2007 Annual Meeting of
    Shareholders (May 23, 2007) *available at*
    http://www.cmcsk.com/phoenix.zhtml?c=147565&p=irol-newsArticle&ID=1006266&highlight=
    (recounting Comcast Chairman and CEO Brian Roberts' comments "about
    Comcast\'s superior cable, Internet, and phone products" and his
    expectation that those products will "continue to drive significant
    growth for the Company during the remainder of 2007 and beyond. In
    particular, he said he expects Comcast Digital Voice penetration to
    be 20-25% by the end of 2009.").

[^52]: Application for Review at 12-13.

[^53]: *See 2005 Deferral Order*, 20 FCC Rcd at 6807, ¶ 27
    ("\[A\]lthough we wish to place as little of the cost burden
    resulting from the ban on the public, the mere fact that consumers
    will bear some of the costs resulting from the imposition of the
    integration ban is not sufficient justification to eliminate the
    ban.").

[^54]: *See* *Charter Comm., Inc. v. FCC,* 460 F.3d 31 (D.C. Cir. 2006);
    *General Instrument Corp. v. FCC,* 213 F.3d 724 (D.C.Cir. 2000)*.
    See also* CEA Comments at 8 ("The requirement of 'necessity' means
    that Comcast must show more than simply that compliance with the
    rule will impose a nonzero cost on Comcast.").

[^55]: *See* 47 U.S.C. § 549(c) (directing the Commission to waive
    regulations adopted under subsection (a) "for a limited time").
    Although, as Comcast notes, it did later propose that the Commission
    could make a more limited five year grant, *see* Letter from Brian
    L. Roberts, Chairman and Chief Executive Officer, Comcast
    Corporation, to Kevin J. Martin, Chairman, Federal Communications
    Commission at 2 (Aug. 21, 2006), the Bureau correctly determined
    that Comcast's waiver request failed to meet the standard under
    Section 629(c) regardless of the timeframe for which waiver was
    sought because Comcast did not show that waiver was "necessary" to
    assist in the development or introduction of new or improved
    services. *See Order* at ¶¶ 17-19. Accordingly, we conclude that the
    Bureau's failure to note that subsequent amendment of the waiver
    request constitutes harmless error. *See Order* ¶ 20.

[^56]: *See Order* at ¶ 24, n.92. *See also* Application for Review at
    13-14.

[^57]: *See Order* at ¶ 24, n.92.

[^58]: *See Order* at ¶ 15 ("\[W\]aivers of those regulations are
    granted when doing so 'is necessary to assist the development or
    introduction of a new or improved' service, such as, *for example*,
    a nascent MVPD offering from a new competitor.") (emphasis added).

[^59]: *See Order* at ¶ 24, n.92.

[^60]: Comcast argues that the legislative history directs the
    Commission to "act on" waiver requests within 90 days. *See* Comcast
    Reply at 4, n. 16 (citing S. [Rep]{.smallcaps}. 104-230, at 181
    (1996) (Conf. Rep.)). Yet Section 629(c) expressly limits the 90-day
    requirement to waiver requests making \"an appropriate showing\"
    that such waiver is necessary. Our determination that Comcast's
    request did not satisfy the substantive requirements of Section
    629(c) therefore means that the 90-day procedural requirement does
    not apply.

[^61]: Application for Review at 2-10.

[^62]: Application for Review at 4 (emphasis in original).

[^63]: Application for Review at 2 (citing Brief of Respondents at 14,
    30, *Charter Comm. Inc. and Advance/Newhouse Comm. v. FCC*, 460 F.3d
    31 (D.C. Cir. 2006) (No. 05-1237); Transcript of Oral Argument at
    21, *Charter Comm. Inc. and Advance/Newhouse Comm. v. FCC* (D.C.
    Cir. 2006) (No. 05-1237); *2005 Deferral Order*, 20 FCC Rcd at
    6807-6809, 6813-6814, ¶¶ 27, 29, 37). *See also* Comcast Reply at 2,
    NCTA Reply at 3-5.

[^64]: Application for Review at 6-10.

[^65]: Application for Review at 6-7.

[^66]: The waiver policy articulated in the *2005 Deferral Order* is a
    narrow application of the Commission's general waiver authority.
    *See, e.g.,* 47 U.S.C. § 154(i); 47 C.F.R. §§ 1.3, 76.7; *WAIT Radio
    v. FCC*, 418 F.2d 1153, 1157 (D.C. Cir. 1969).

[^67]: *See* *2005 Deferral Order*, 20 FCC Rcd at 6813, ¶ 37.

[^68]: *2005 Deferral Order*, 20 FCC Rcd at 6813-14, ¶ 37.

[^69]: *2005 Deferral Order*, 20 FCC Rcd at 6813, ¶ 37.

[^70]: Previously, 47 U.S.C. § 309(j)(14) provided an exception to the
    original December 31, 2006 transition deadline if the Commission
    determined that less than 85 percent of the television households in
    a licensee's market were capable of receiving the signals of DTV
    broadcast stations through various means (*i.e.*, via
    over-the-reception, cable or satellite, or digital-to-analog
    conversion technology). 47 U.S.C. § 309(j)(14)(B)(iii) (2005). *See
    also* Sony Comments at 10, n.31 (arguing that because Congress
    replaced the "soft" deadline with a hard deadline, the policy basis
    for this waiver no longer exists).

[^71]: Letter from Neal M. Goldberg, General Counsel, National Cable and
    Telecommunications Association, to W. Kenneth Ferree, Chief, Media
    Bureau, Federal Communications Commission at 7-8 (Dec. 20, 2004).
    *See also* Letter from Neal M. Goldberg, General Counsel, National
    Cable and Telecommunications Association, to Marlene H. Dortch,
    Secretary, Federal Communications Commission, Attachment at 4 (Nov.
    23, 2004) (explaining the need for an inexpensive "\$35-\$50"
    digital set-top box that will "permit the viewing of digital
    programming on analog TV sets").

[^72]: Application for Review at 18. *See also* Microsoft Corporation
    Comments at 5 (filed June 15, 2006) (estimating that the Subject
    Boxes would be in 20 percent of Comcast's digital subscribers' homes
    by the end of 2006). Furthermore, we conclude that Comcast's
    argument that its boxes have always had two-way capabilities is a
    bit disingenuous. Cable operators (particularly large cable
    operators, such as Comcast) dictate the types of set-top boxes that
    are produced, as they constitute the vast majority of the market for
    such devices. Accordingly, it appears the reason that one-way boxes
    do not exist is that cable operators have never asked device
    manufacturers to build such devices. *See Order* at ¶ 26, n.97
    (noting that Pace Micro's "Digital Cable Adapter" was never produced
    due to a lack of interest from cable operators (citing Jeff
    Baumgartner, *New MSO-backed JV Proposes Sub-\$100 Set-Top with
    Downloadable Security*, [Ced Broadband Direct]{.smallcaps}, Dec. 22,
    2003, *available at*
    http://www.cedmagazine.com/toc-bbdirect/2006/20061222.html)).
    Therefore, it appears to us that Comcast's problem is not that
    "low-cost, limited capability" devices do not exist, but rather that
    Comcast and other cable providers have not asked their device
    manufacturers to build them. *See* Application for Review at 4
    (stating that "Comcast has *no interest* in ordering one-way set-top
    boxes") (emphasis added); Pace Micro Comments at 3 (noting that the
    cable operator market expressed no interest in a one-way set-top
    box); Cisco Comments at 2 (stating that the Subject Boxes "are the
    lowest cost, most limited capability digital cable boxes that are
    *currently* being commercially offered") (emphasis added); Motorola
    Comments at 4.

[^73]: *See* Application for Review at 3 (arguing that "\[t\]he boxes
    are low-cost (they cost between \$70 and \$100 at volume)"). *See*
    Sony Comments at 17 ("As \[Sony\] observed in its comments, and
    which \[Comcast\] does not rebut, grant of the Waiver Request would
    decrease today's CableCARD market base by an estimated thirty to
    forty percent, resulting in the concurrent loss of volume production
    benefits to consumers. Accordingly, the Bureau was correct to
    conclude that a grant would 'nullify the goal of Section 629(a).'")
    (citations omitted).

[^74]: We note that devices with the capabilities contained in the
    subject boxes are ineligible for the Coupon Program being
    administered by NTIA to assist Americans in receiving over-the-air
    broadcast television programming when full-power television stations
    cease analog broadcasting after February 17, 2009. To qualify for
    the Coupon Program, the Act requires that a box must be "a
    stand-alone device that does not contain features or functions
    except those necessary to enable a consumer to convert any channel
    broadcast in the digital television service into a format that the
    consumer can display on television receivers designed to receive and
    display signals only in the analog television service, but may also
    include a remote control device." *See* Title III of the Deficit
    Reduction Act of 2005, Pub. L. No. 109-171, 120 Stat. 4, 21 (Feb. 8,
    2006) (the Act), § 3005(d); *see also* 47 U.S.C. § 301.

[^75]: *See* *2005 Deferral Order*, 20 FCC Rcd at 6813, ¶ 37 (emphasis
    added).

[^76]: Because we agree with the Bureau that electronic program guides,
    pay-per-view, and video-on-demand are advanced capabilities, we do
    not find it necessary to address Comcast's argument that the Bureau
    improperly relied on certain boxes' "potential networking
    capability" in finding the Subject Boxes ineligible for a waiver
    under the standard established by the *2005 Deferral Order*. *See*
    Application for Review at 9-10. With respect to waivers for truly
    "limited capability integrated digital cable boxes," however, we
    note favorably that the Bureau emphasized that it would "entertain
    and grant future requests that satisfy the criteria set forth in the
    *2005 Deferral Order*." *Order* at ¶ 30 (citation omitted).

[^77]: *See Order* at ¶¶ 27-28.

[^78]: *See* *Order* at ¶¶ 27-28, nn.101-102.

[^79]: NCTA Reply Comments, CS Docket No. 97-80, PP Docket No. 00-67 at
    Appendix 1, page 7 (filed April 28, 2003) (emphasis added). *See
    also* NCTA Comments, CS Docket No. 97-80, PP Docket No. 00-67 at 5-6
    (filed March 28, 2003); *NCTA Request for Waiver* at 14 (describing
    VOD and EPGs as "advanced services").

[^80]: *See* *2005 Deferral Order*, 20 FCC Rcd at 6813, ¶ 37.

[^81]: Application for Review at 15-18. Section 1.3 of the Commission's
    rules states that "\[t\]he provisions of this chapter may be
    suspended, revoked, amended, or waived for good cause shown, in
    whole or in part, at any time by the Commission, subject to the
    provisions of the Administrative Procedure Act and the provisions of
    this chapter. Any provision of the rules may be waived by the
    Commission on its own motion or on petition if good cause therefor
    is shown." 47 C.F.R. § 1.3. Section 76.7(i) states that "\[t\]he
    Commission, after consideration of the pleadings, may determine
    whether the public interest would be served by the grant, in whole
    or in part, or denial of the request, or may issue a ruling on the
    complaint or dispute, issue an order to show cause, or initiate a
    forfeiture proceeding." 47 C.F.R. § 76.7(i).

[^82]: Application for Review at 15-16.

[^83]: Application for Review at 16-18.

[^84]: *2005 Deferral Order*, 20 FCC Rcd at 6809, ¶ 29. *See also
    Charter Communications, Inc. v. FCC*, 460 F.3d 31, 42 (D.C. Cir.
    2006) (quoting *2005 Deferral Order*, 20 FCC Rcd at 6809, ¶ 29
    (noting that "Congress regarded the commercial availability of
    navigation devices from independent sources as a benefit in and of
    itself"); Delta Radio, Inc. v. FCC, 387 F.3d 897, 901(D.C. Cir.
    2004) (holding that although an agency must give a waiver request a
    hard look to ensure that the agency is not rigidly applying a rule
    where it is not in the public interest, strict application of a rule
    may be justified by the gain in certainty and administrative ease,
    even if it results in some hardship). *See also* Sony Comments at 8
    ("Petitioner's argument that the Bureau Decision did not explicitly
    acknowledge the costs of compliance must fail, because the question
    of whether such costs could justify an exception to the rule had
    been asked and answered in the negative on multiple occasions.").

[^85]: *See Order* at ¶ 31, n.109.

[^86]: *See Order* at ¶ 31. In the *2005 Deferral Order*, the Commission
    explained the justification for common reliance:

    > We believe that common reliance by MVPDs and consumer electronic
    > manufacturers on an identical security function will align MVPDs'
    > incentives with those of other industry participants so that MVPDs
    > will plan the development of their services and technical
    > standards to incorporate devices that can be independently
    > manufactured, sold, and improved upon. Moreover, if MVPDs must
    > take steps to support their own compliant equipment, it seems far
    > more likely that they will continue to support and take into
    > account the need to support services that will work with
    > independently supplied and purchased equipment. We believe that
    > cable operator reliance on the same security technology and
    > conditional access interface that consumer electronics
    > manufacturers must rely on is necessary to facilitate innovation
    > in competitive navigation device products and should not
    > substantially impair innovation in cable operator-supplied
    > products . . . \[T\]he concept of common reliance is intended to
    > assure that cable operator development and deployment of new
    > products and services does not interfere with the functioning of
    > consumer electronics equipment or the introduction of such
    > equipment into the commercial market for navigation devices.

    *2005 Deferral Order*, 20 FCC Rcd at 6809-6810, ¶ 30. *See also*
    *Charter Communications, Inc. v. FCC*, 460 F.3d 31, 40-41 (D.C. Cir.
    2006).

[^87]: *See* Microsoft Corporation Comments at 5 (filed June 15, 2006)
    (estimating that the Subject Boxes would be in 20 percent of
    Comcast's digital subscribers' homes by the end of 2006).

[^88]: *See, e.g.*, Letter from Niel Ritchie, Executive Director, League
    of Rural Voters, to Kevin Martin, Chairman, Federal Communications
    Commission (Feb. 13, 2007), Letter from Lillian Rodriguez-Lopez,
    President, Hispanic Federation, to Kevin Martin, Chairman, Federal
    Communications Commission at 1 (Feb. 14, 2007); Letter from Tim
    Phillips, President, Americans for Prosperity, to Kevin Martin,
    Chairman, Federal Communications Commission, et al. at 1 (Feb. 13,
    2007), Letter from Michael L. Barrera, President and CEO, U.S.
    Hispanic Chamber of Commerce, to Kevin J. Martin, Chairman, Federal
    Communications Commission (Feb. 14, 2007).

[^89]: 2*005 Deferral Order*, 20 FCC Rcd at 6809, ¶ 29.

[^90]: *See* Application for Review at 18, 19-22.

[^91]: Application for Review at 18.

[^92]: Application for Review at 18. *See also* *id*. at 19 (arguing
    that, in granting Comcast leave to file an amended waiver request
    for the Subject Boxes "based on a commitment to go all-digital by a
    date certain," the Bureau has created "an entirely new policy that
    does not derive from any previous Commission order"); *id*. at 22
    (contending that the Bureau, by granting Comcast leave to file an
    amended waiver request for Subject Boxes deployed exclusively to
    family and ethnic tier customers, has established a new policy that
    "is unrelated to the waiver process established by the Commission in
    the \[*2005 Deferral Order*\] or the navigation device proceeding
    generally").

[^93]: *See Order* at ¶ 32.

[^94]: *See, e.g.*, Application for Review at 19 (arguing that
    "\[t\]here is no rational basis upon which the Bureau can conclude
    that this language in the 2005 *Order* imposed a requirement to go
    all-digital on waiver applicants"); *id*. at 22 ("This specialty
    tier requirement, like the all-digital requirement, is unrelated to
    the waiver process established by the Commission in the \[*2005
    Deferral Order*\] or the navigation device proceeding generally.").

[^95]: *See Order* at ¶ 32 (evaluating Comcast's request under the
    general waiver provisions of Sections 1.3 and 76.7 and noting that
    "specialty tiers such as family and ethnic tiers promote the public
    interest by allowing for more targeted programming, increasing the
    quality of available programming, and giving consumers greater
    control over the type of programming they see and the ability to
    limit the amount they spend on service") (citation omitted). *See
    also* *id*. at ¶ 34 (concluding that Comcast has failed to
    demonstrate that a waiver of the integration ban for the Subject
    Boxes is warranted under any relevant waiver standard but providing
    Comcast with the opportunity to file an amended request that either
    (1) "seeks waiver for a *truly low-cost, limited capability* set-top
    box" (*i.e.*, a set-top box that satisfies the waiver standard
    established in the *2005 Deferral Order*) (emphasis added);
    (2) "seeks a limited waiver for family and ethnic tier customers
    only" (*i.e.*, a waiver *for the Subject Boxes* -- which are *not*
    limited-capability boxes -- under Sections 1.3 and 76.7); or
    (3) "seeks waiver based on a commitment to go all-digital by a date
    certain such as February 2009 or sooner, when broadcasters will
    cease their analog operations" (again, a waiver for the Subject
    Boxes under Sections 1.3 and 76.7)); *Bend Cable Communications, LLC
    d/b/a BendBroadband Request for Waiver of Section 76.1204(a)(1) of
    the Commission's Rules*, DA 07-47, at ¶ 27 (MB rel. Jan 10, 2007)
    (concluding that the DCT-700 -- which is one of the Subject Boxes,
    and which, like the other Subject Boxes, includes two-way
    functionality -- is not eligible for a waiver under the *2005
    Deferral Order* "because it includes two-way functionality that
    places it outside of the scope of what the Commission intended when
    it was considering a waiver for 'limited capability integrated
    digital cable boxes,'" but conditionally granting BendBroadband a
    waiver for the DCT-700 under Sections 1.3 and 76.7 because the
    Bureau "recognize\[d\] that the ability to rapidly migrate to an
    all-digital network \[by 2008\] would produce clear, non-speculative
    public benefits").

[^96]: *See* Waiver Request at 10-11 (contending that "\[a\]pproval of
    the waiver will afford millions more Comcast customers access to a
    wide array of digital programming and services" including "special
    tiers of service"); *id*. at 13 (arguing that grant of the waiver
    request "will aid the migration of Comcast's cable systems to
    all-digital networks").

[^97]: *See* Sony Comments at 18-19.

[^98]: *See* 47 C.F.R. § 76.7(i). As such, we do not find it necessary
    to address the various concerns raised by Comcast regarding the
    Bureau's suggestions. *See, e.g.*, Application for Review at 19-21
    (arguing that Comcast cannot complete the migration to all-digital
    by February 2009); *id*. at 21-22 (arguing that Comcast -- and cable
    operators generally -- are not required by Congress to go
    all-digital by February 17, 2009, the deadline for the end of
    over-the-air analog broadcasts by full power television stations);
    *id*. at 22-25 (providing various reasons why Comcast does not
    intend to attempt to demonstrate voluntarily that a waiver of the
    integration ban under Sections 1.3 and 76.7 for Subject Boxes that
    are deployed exclusively to customers that subscribe to family and
    ethnic tiers would benefit the public interest).

[^99]: We note that Comcast recently submitted an *ex parte* letter in
    which it argued that denial of its waiver request would be
    inconsistent with previous staff decisions granting waivers to other
    companies. *See* Letter dated July 3, 2007 from Jonathan Friedman,
    Wilkie Farr & Gallagher, Counsel for Comcast Corp., to Marlene
    Dortch, Secretary, Federal Communications Commission (CS docket no.
    97-80). "\[I\]t \[is\] not necessary for the FCC to address these
    nonbinding \[staff\] decisions" in this Commission-level order.
    *Amor Family Broadcasting Group v. FCC*, 918 F.2d 960, 962 (D.C.
    Cir. 1990). They are not before us for review in this proceeding,
    and we accordingly express no opinion on the ultimate conclusions
    reached in those staff decisions. We do note, however, that each of
    the staff decisions about which Comcast complains involved a company
    that was not similarly situated to Comcast. For example, some
    companies receiving waivers from the staff committed to operate
    all-digital networks no later than February 17, 2009, other
    companies utilized technologies for which non-integrated HD or DVR
    devices have yet to be developed, and still others demonstrated
    unique financial hardship. *See, e.g., In the Matter of Consolidated
    Requests for Waiver of Section 76.1204(a)(1) of the Commission\'s
    Rules,* Memorandum Opinion and Order, DA 07-2921 (MB rel. June 29,
    2007); *In the Matter of Guam Cablevision, LLC,* Memorandum Opinion
    and Order, DA 07-2917 (MB rel. June 29, 2007); *In the Matter of
    Millenium Telecom, LLC D/B/A OneSource Communications,* Memorandum
    Opinion and Order, DA 07-2009 (MB rel May 4, 2007); *In the Matter
    of Charter Communications, Inc.,* Memorandum Opinion and Order, DA
    07-2008 (MB rel. May 4, 2007) (waiver granted due to MVPD\'s
    demonstrated financial hardship); *see also* Letter from Monica
    Desai, Chief of Media Bureau, to Jonathan Friedman, Wilkie Farr &
    Gallagher, Counsel for Comcast Corp. In any event, as indicated
    above, all we decide here is that Comcast has not established *its*
    entitlement to a waiver; we do not address the adequacy of those
    waiver requests that are not before us. To the extent, however, that
    Comcast believes that it would be entitled to a waiver under the
    reasoning of a subsequently-issued Commission-level waiver grant, it
    is free to file another request.

[^100]: 47 U.S.C. §§ 151, 154(i), 155(c), 405 and 549(c).

[^101]: 47 C.F.R. §§ 1.3, 1.115, 76.7.

[^102]: 47 U.S.C. 549(a).