**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. 200932100003      |
|                                  |   |                                 |
| a division of Time Warner Cable, | ) | FRN 0018049841                  |
| Inc.                             |   |                                 |
|                                  | ) |                                 |
| Oceanic Oahu Central Cable       |   |                                 |
| System                           | ) |                                 |
+----------------------------------+---+---------------------------------+

##  {#section .unnumbered}

## FORFEITURE ORDER {#forfeiture-order .unnumbered}

**Adopted: January 19, 2009 Released: January 19, 2009**

By the Chief, Enforcement Bureau:

# INTRODUCTION

1.  In this *Forfeiture Order*, we find that Oceanic Time Warner Cable,
    a division of Time Warner Cable, Inc., Oceanic Oaha Central Cable
    System (collectively, "TWC"), willfully and repeatedly violated
    Section 76.1201 of the Commission\'s Rules ("Rules") in its Oceanic
    Oahu Central Cable System.[^1] Specifically, TWC 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.[^2] Further, in its deployment of SDV on November 6, 2007,
    TWC 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"),[^3] that TWC is liable for a forfeiture in the amount of
    twenty thousand dollars (\$20,000). As discussed below, we further
    direct TWC to comply with the Bureau's Order 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.[^4]

# 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,[^5] 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."[^6] 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."[^7]

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.[^8] "As 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." [^9]

4.  Thus, in adopting Section 76.1201 of the Commission's Rules,[^10]
    which allows subscribers to acquire, attach, and use any compatible
    navigation device with an MVPD's system, subject to the proviso that
    such equipment not cause harmful interference or facilitate theft of
    service, the Commission likened its actions to the *Carterfone*
    principle it previously adopted in the telephone environment.[^11]
    In *Carterfone,* the Commission allowed consumers to attach legal
    devices to the telephone network unless that equipment would damage
    the network. "As 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."[^12] 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."[^13] 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."[^14]

5.  The Commission recognized that its work on these issues was not
    complete and reiterated its commitment to monitoring developments
    regarding the compatibility of set-top boxes and digital
    televisions.[^15] Five years later, in the *Plug and Play
    Order*,[^16] 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[^17] 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.

6.  Generally, the *Plug and Play Order* required MVPDs to support
    operation of UDCPs and 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 retail control over their system security.

7.  Consumers with UDCPs access MVPD programming by using a CableCARD
    leased from the cable operator.[^18] UDCPs, and certain related CE
    equipment, 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[^19] 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.[^20]

8.  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). Many cable operators, however, 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 whether they are viewing the programs or not. For those
    channels, the CableCARD-equipped UDCP will work 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 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. A customer who uses a
    CableCARD-equipped UDCP to receive programming 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 that a
    channel be delivered 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.  On November 8, 2007, the Spectrum Enforcement Division of the
    Enforcement Bureau ("Bureau") issued a Letter of Inquiry
    ("LOI")[^21] 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 Oceanic had
    deployed SDV and moved a large number of channels to an SDV
    platform, including popular high definition ("HD") sports and
    entertainment channels.[^22] According to the complaints, Oceanic'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.[^23] 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,[^24] the
    2002 MOU,[^25] and in particular, the policies and rules established
    by Commission in the *Plug and Play Order*[^26] The Bureau issued a
    Supplemental LOI to TWC on August 25, 2008 to obtain additional
    information concerning the company's deployment of SDV.[^27]

10. TWC responded to the LOI on November 30, 2007,[^28] and responded in
    part to the Supplemental LOI on September 12, 2008[^29] and in full
    on September 23, 2008.[^30] In its response, TWC admits that its
    Oceanic and Oahu Central cable systems deployed SDV for customers on
    the islands of Oahu and Oahu Central on November 6, 2007, moving 62
    linear channels to an SDV platform.[^31] TWC reports that its Hawaii
    Division, which includes the cable systems at issue here, had
    415,534 subscribers at the time of SDV deployment.[^32] 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.[^33] 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.[^34] 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").[^35]

11. On October 14, 2008, after reviewing the evidence and TWC's
    arguments, the Bureau issued a *Notice of Apparent Liability for
    Forfeiture and Order,*[^36] finding that TWC apparently had
    willfully violated Sections 76.1201 and 76.640(b)(1) of the Rules by
    moving certain channels to a SDV platform on November 6, 2007,
    thereby preventing subscribers with CableCARD-equipped UDCPs from
    using their navigation devices to access these channels and 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).

12. TWC responded to the NAL on November 14, 2008.[^37] With respect to
    the NAL's finding of apparent liability under Section 76.1201, TWC
    makes three principal arguments. First, TWC asserts that the NAL's
    finding of apparent liability violates the plain meaning of the
    rule. According to TWC, the language "prevent the connection or use"
    of a navigation device means that a cable operator can be held
    liable only where it has made it impossible for a customer to
    connect or use the device.[^38] Second, TWC asserts that the NAL's
    "overly expansive reading" of the rule violates important public
    policy objectives.[^39] Third, TWC argues that the NAL intrudes upon
    its First Amendment rights.[^40] TWC similarly asserts that the
    Bureau's finding that TWC apparently violated Section 76.640 is
    flawed.[^41] Finally, TWC asserts that the NAL findings present
    novel interpretations of the rules at issue and thereby exceed the
    bounds of the Bureau's delegated authority.[^42]

# DISCUSSION

> **A. TWC Willfully and Repeatedly Violated Section 76.1201 By
> Requiring Subscribers To Obtain A Set-Top Box To View Previously
> Accessible Linear Programming**

13. 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.[^43] Based on the record before
    us, we find that TWC willfully and repeatedly[^44] violated Section
    76.1201 by moving certain linear channels to an SDV platform in its
    Oahu Central and Oceanic cable systems[^45] on November 6,
    2007.[^46] 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 effectively impairing the use of those UDCPs within each
    affected cable system. Additionally, because a TWC-leased set-top
    box now is required to view many TWC 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 capacity to
    view picture-in-picture and record content.[^47]

> **1. The NAL's Findings Are Not Foreclosed by the Plain Language of
> Section76.1201**

14. Notwithstanding its effect on CableCARD users, TWC contends that the
    language "prevent the connection or use of navigation devices," as
    used in Section 76.1201, makes clear that a cable operator can be
    held liable only where it has stopped or made it impossible for a
    customer to connect or use the device.[^48] According to TWC, its
    implementation of SDV does not *stop* a subscriber from doing so or
    "make\[it\] impossible" for a customer to do so.[^49] TWC asserts
    that the Bureau found only that the company's implementation of SDV
    "impairs," rather than prevents, the use of such devices and thus
    the Bureau's finding is insufficient for purposes of finding a
    violation of the standard set forth in the rule.[^50]

15. We do not agree that a violation of Section 76.1201 occurs only
    where a cable operator "stops" or "makes it impossible" for a
    customer to connect or use a navigation device. At its core, TWC
    would have us find that unless a cable operator prevents access to
    each and every program and service that constitutes the customer's
    subscribed programming tier, no violation of Section 76.1201 has
    occurred. Under TWC's interpretation of Section 76.1201, a cable
    operator may prevent (non-cable operator-supplied) UDCPs from
    accessing any portion of a programming service (or transport stream)
    --- such as closed captioning or content advisory information --- or
    may prevent these devices from accessing any linear video
    programming---such as select channels within a subscriber's
    purchased programming tier --- and nonetheless act consistently with
    the Commission's mandate to support CableCARD-equipped devices. As
    we stated in the *TWC NAL and Order,* 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. TWC's interpretation would eviscerate the
    rule, is inconsistent with the operative text of Section 76.1201--
    "use of navigation devices," and the Commission's goal to ensure
    commercial compatibility of such devices. Considering that the
    primary objective of Section 629 of the Act and Sections
    76.1200-76.1210 of the Rules is to maximize the commercial
    availability of navigation devices, we decline to adopt a view of
    our Rule that ignores the plain text and the purpose of these
    sections.[^51]

16. Moreover, TWC's strained interpretation of the Rule 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. Our conclusion is not
    affected by the fact that customers can still attach and use
    navigation devices to receive cable services, and that customers may
    access switched digital programming by obtaining a set top box from
    TWC. In the *Plug and Play Order,* the Commission sought to enable
    *unaffiliated* manufacturers, retailers, and other vendors to
    compete with MVPD-provided equipment by facilitating the direct
    connection of digital navigation devices to MVPD systems.

17. TWC further argues that the rule was historically intended to do no
    more than provide a right to attach commercially available equipment
    and does not include an obligation that an operator carry any
    service used by such equipment.[^52] We concur that in adopting this
    rule, the Commission agreed that the 'right to attach' must be
    subject to the limitation that the equipment does not harm the MVPD
    network.[^53] Thus, the Commission adopted rules that would permit
    MVPDs to restrict the attachment or use of equipment to their
    systems where electronic or physical harm would be caused by the
    attachment or operation of such equipment.[^54] The Commission was
    clear however, that "\[t\]hese standards \[set forth in Section
    76.1203\] shall be used only to prevent attachment of navigation
    devices that raise reasonable and legitimate concerns of electronic
    or physical harm or theft of service, and *not as a means to
    unreasonably restrict the use of navigation devices obtained from a
    source other than the MVPD*."[^55] The Commission was equally clear
    that it expected the cable industry to dedicate the resources
    necessary to ensure that commercially available CableCARD-enabled
    devices continue to interoperate properly with cable systems.[^56]
    The equipment at issue does not raise concerns of electronic or
    physical harm or theft of service.

18. Finally, we disagree with TWC's claims that there is no record
    support for the allegation that as a result of the deployment of
    SDV, UDCPs lose certain functions, such as picture-in-picture, and
    that the NAL does not take the balanced approach to equipment
    compatibility that is required by Section 624A.[^57] 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,"
    [^58] and thus ensures the full compatibility of these devices with
    the cable system. The deployment of SDV and the requirement that a
    customer use a company-supplied set top box to view the now switched
    channels, negates whatever functionalities were available in the
    UDCP for those of the company-supplied set-top box. The Commission
    received numerous complaints from affected consumers. For instance,
    some cable operators have migrated linear HD programming to an SDV
    format, thus rendering useless the high definition capability of the
    navigation device. In addition, many complaints from consumers
    indicate that SDV deployment has affected their use of TiVo. One of
    TiVo\'s main features is the ability to watch one program while
    recording another (*i.e*., TiVo Series 3 was designed with two
    CableCARD slots -- one single-stream CableCARD (\"S-Card\") to
    decrypt the programming that the TiVo is recording, and another
    S-card to decrypt the programming that the TiVo is displaying). The
    functionality of TiVo is lost with the use of the company-supplied
    set-top box, which has its own built-in functionality.

> **2. The NAL's Findings Are Fully Consistent with the Public Policy
> Underlying the Commission's Rules and Orders on "*Plug and Play"***

19. TWC next argues that its manner of implementing SDV is not
    inconsistent with the *Plug and Play* *Order*.[^59] Specifically, it
    contends that the interactive or advanced two-way capabilities
    envisioned by that order are not limited to video on demand (VOD),
    electronic programming guides (EPG), and impulse pay per view
    (IPPV); are essentially without limit; and thus include SDV within
    its auspices.[^60] TWC impliedly states that it may move all of its
    programming to an SDV format because *Plug and Play* provided for
    this eventuality by mandating DVI/HDMI connections, which allow for
    connection of UDCPs with two-way navigation devices. According to
    TWC, such an action is also supported by Rules that permit cable
    operators to move any programming for any reason \-- no law provides
    subscribers with an entitlement to receive any particular
    service.[^61]

20. The Bureau previously considered, and rejected, the arguments raised
    by TWC. As we have previously found, TWC's arguments are
    inconsistent with the language and the intent of the Commission's
    Rules and orders.[^62] We do not believe that, in adopting the *Plug
    and Play Order*, the Commission intended to permit an MVPD move
    *all* of its programming to an SDV platform "without regard" for the
    impact such a move would have on its UDCP-owning customers. Such an
    outcome would be fundamentally inconsistent 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 is clearly at odds 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, we conclude that it does not permit TWC's actions here. By
    moving linear programming to an SDV platform, TWC prevents
    CableCARD-equipped UDCPs from receiving previously available
    channels and negates the usefulness of competitive commercially
    available navigation devices, in violation of the intent of Section
    629 and the Commission's Rules.[^63] 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.[^64] 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 cable operator-provided set-top box.[^65] Such an outcome
    is fundamentally at odds with the policy and regulatory objectives
    of the *Plug and Play* *Order*.

22. 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.[^66] 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 UDCP in connection with their cable
    systems. TWC's implementation of SDV in this case clearly negates
    the use of CableCARD-equipped UDCPs and fundamentally limits the
    commercial and competitive viability of those devices in cable
    systems where SDV has been deployed. In the instant case, customers
    who used CableCARD-equipped UDCPs are unable to receive dozens of
    linear channels after the deployment of SDV.[^67] As such, TWC is
    effectively preventing CableCARD-equipped UDCPs from receiving
    channels previously available and undermining the underlying policy
    goals of the Act and the Commission's Rules 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 Oahu Central Cable System constitutes a willful and
    repeated violation of Section 76.1201 of the Rules.

23. TWC again reasserts that it cannot achieve the efficiencies enabled
    by SDV without moving linear channels.[^68] According to TWC, a
    finding of liability as a consequence for such migration would
    undermine "vital public policy interests," such as additional HD
    programming and other digital content for all customers.[^69] TWC
    also asserts that a restriction on SDV would harm the Commission's
    own policy objectives, such as the digital transition, increased
    programming diversity, MVPD competition, and enhanced broadband
    capabilities.[^70]

24. As we stated in the *TWC NAL and Order*, we do not dispute that the
    deployment of SDV technology may provide significant 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 Commission Rules. As
    we noted in the *TWC NAL and Order*, charging for channels not
    presently accessible to subscribers with CableCARD-equipped UDCPs
    undermines the policy and regulatory objectives of the *Plug and
    Play Order.* Moreover, we are not convinced that the only way TWC
    can create additional capacity using SDV is to move existing linear
    programming to an SDV platform. Regardless of the benefits touted,
    the manner in which TWC has migrated linear channels prevents
    certain UDCP customers the use and functionality of their navigation
    devices.[^71]

> **3. The NAL's Reading of Section 76.1201 Does Not Conflict with the
> First Amendment**

25. TWC's arguments that the NAL runs afoul of the First Amendment are
    insubstantial. As an initial matter, TWC's contention that the NAL
    renders the Commission's *Viewability Order* unconstitutional lacks
    any merit.[^72] In the *Viewability Order*, the Commission set forth
    a comprehensive analysis of why the requirement that all cable
    subscribers be able to view the signals of all must-carry stations
    after the digital transition was consistent with the First
    Amendment,[^73] and the U.S. Court of Appeals for the District of
    Columbia Circuit recently dismissed a constitutional challenge to
    the *Viewability Order*.[^74] The analysis contained in the
    *Viewability Order* in no way depended on the use of SDV under the
    circumstances present here, and the interpretation of our Rules set
    forth in the NAL neither alters the Commission's expectation that
    "cable capacity will continue to expand in future years, thus
    further decreasing the relative burden on cable operators" nor its
    observation that "because digital cable systems offer so much more
    capacity, the proportion of overall bandwidth devoted to must-carry
    signals is that much smaller than was the case at the time of the
    \[U.S. Supreme Court decisions upholding the constitutionality of
    must-carry regulation\]."[^75]

26. Neither is there any merit to TWC's contention that the NAL violates
    the First Amendment by "impermissibly curtail\[ing\] TWC's editorial
    discretion to deliver programming of its choice using the most
    efficient technology available to it."[^76] Simply put, TWC has no
    First Amendment right to undermine the development of a competitive
    market for navigation devices by preventing consumers from accessing
    linear programming in their existing programming packages with a
    CableCARD-equipped UDCP and instead requiring the consumer to obtain
    a TWC-provided set-top box. To the extent that the rules at issue
    here implicate the First Amendment at all, the requirements are
    content neutral and narrowly tailored to further the substantial
    federal interest in developing and maintaining a competitive market
    for navigation devices, an interest whose importance has been
    recognized by both Congress and the courts.[^77] Finally, while TWC
    complains that the First Amendment is implicated by the treatment of
    other MVPDs under the integration ban, the D.C. Circuit previously
    rejected the cable industry's attempt to raise the differential
    treatment of cable and DBS in another proceeding, noting the
    evidence set forth by the Commission of the distinctions in the
    navigation-device market for cable and DBS and observing that "the
    cable industry is 'perfectly capable of filing a petition tomorrow
    with the Commission' that will generate a record appropriate for
    consideration of those issues."[^78] The same holds true here.

> **B. TWC 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**

27. TWC contends that the *TWC NAL and Order*'s finding that the
    standard incorporated by reference in Section 76.640(b)(1)(i)
    applies to all services, including two-way services like SDV is
    wrong.[^79] According to TWC, Section 76.640(b)(1)(i), through the
    incorporated standard SCTE 40 (2003), stands for the proposition
    that SCTE 65 tables must be presented only for services that are
    *offered* to the UDCP host device. Since two-way services are not
    offered, they need not be included.[^80] TWC further asserts that
    because the text of the rule is limited to one-way products, it
    cannot reasonably be applied to two-way *services*.[^81] Issues
    relating to two-way services, TWC states, were not yet ripe for
    consideration during the Commission's consideration of its *Plug and
    Play Order*, and so were never intended to be encompassed by this
    rule. TWC also cites to the technical standard SCTE 65 to suggest
    that the standard was not intended to apply to two-way services,
    partly because hidden channels are skipped when the subscriber is
    channel surfing, and partly because the standards state that UDCPs
    may disregard virtual channel data associated with an
    application-type virtual channel. TWC argues that the virtual
    channel table is designed to present only channels that are
    accessible.[^82]

28. TWC's arguments are without merit. On its face, Section 76.640
    applies only to unidirectional *products*.[^83] 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.[^84] 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.

29. TWC next argues that, because Section 15.123 provides that a UDCP
    cannot be labeled as digital-ready unless it can navigate channels
    through the virtual channel table, the provision of SDV data to
    UDCPs would render them non-compliant since the devices would be
    unable to navigate to SDV programming.[^85] According to TWC, as a
    result, the UDCP would be rendered noncompliant with the Part 15
    rules, could not be marketed as digital cable ready, and cable
    operators would be relieved of any obligation to support these
    devices since they are required only to "support unidirectional
    digital cable products . . ."[^86] TWC argues that rules are not to
    be interpreted in manner that would nullify corresponding rules.
    Lastly, TWC argues that there is no practical benefit to
    transmitting information for channels that cannot be viewed without
    a set-top box.[^87]

30. We disagree. Requiring compliance with Section 76.640(b) does not
    conflict with Section 15.123 and provides a significant practical
    benefit. As we stated in the *TWC NAL and Order*, 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.[^88] We
    reiterate that 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.[^89] Accordingly, based on
    the record before us, we find that TWC 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 Oahu
    Central Cable System.

**C. The Bureau Did Not Exceed Its Delegated Authority in Issuing the
NAL**

31. TWC argues that the Bureau's expansive interpretations of the Rules
    and its decision to penalize the company present novel questions of
    policy and law; the issues, therefore, fall outside the scope of the
    Bureau's delegated authority and must be submitted to the Commission
    for en banc disposition under Section 0.311(a)(1).[^90]

32. The Enforcement Bureau serves as the primary Commission entity
    responsible for enforcement of the Act, the Commission's rules, and
    Commission orders.[^91] The Bureau has delegated authority to issue
    orders taking appropriate action in response to complaints or
    investigations, including issues notices of apparent liability and
    related orders.[^92] The Bureau has delegated authority to decide
    matters unless they "present novel questions of law, fact or policy
    that cannot be resolved under existing precedents and
    guidelines."[^93] The questions presented here are consistent with
    the Commission's *Plug and Play Order*, the rules found in Section
    76.1201 implementing that order, and the technical rules of Section
    76.640(b). As such, the Bureau acted within its delegated authority
    in issuing the *TWC NAL and Order.* The Bureau is merely applying
    existing rules and case law to the instant facts.

> **D. Forfeiture Calculation**

33. 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.[^94] 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.[^95] 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.[^96] We conclude that TWC is
    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.

34. Under Section 503(b)(2)(A) and Section 1.80(b)(1) of the
    Commission's Rules,[^97] 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."[^98]

35. The Commission's *Forfeiture Policy Statement*[^99] and Section 1.80
    of the Rules do not establish a specific base forfeiture for
    violation of Section 76.1201.[^100] In a similar case, the
    Commission proposed forfeitures for each cable system involved in
    the violation.[^101] Thus, we 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 Oahu
    Central Cable System.

36. As we stated in the *TWC NAL and Order,* 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.[^102] Given the number of channels
    involved and the effect of actions like those here on the
    Commission's policy objectives, however, we conclude 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 Oahu Central Cable System. Accordingly, we
    conclude that TWC is liable for a \$10,000 forfeiture for its
    willful violation of Section 76.1201 of the Rules.

37. Additionally, we conclude that TWC is 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.[^103] 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 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 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 Oahu Central Cable System.

38. TWC's implementation of SDV in its Oceanic Oahu Central 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.[^104] Accordingly, we conclude that TWC is
    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.

> **E. TWC Must Issue Refunds to Customers Harmed by its SDV
> Implementation**

39. As we noted in the *TWC NAL and Order,* 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.[^105]
    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.

40. 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. 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.

41. In the *TWC NAL and Order*, we ordered TWC, within ninety (90) days
    of the *NAL and Order,* to issue refunds to CableCARD customers
    affected by the November 6, 2007 implementation of SDV in its
    Oceanic Oahu Central Cable System.[^106] In addition, within
    thirty (30) days of the release of the *TWC NAL and Order,* we
    required TWC to submit to the Enforcement Bureau an explanation of
    the method the company planned 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 failed to comply with the Bureau's Order and the Bureau is
    separately addressing that violation of the Commission's Rules.

42. Thus, we order TWC, within ninety (90) days of this *Forfeiture
    Order,* to issue refunds to CableCARD customers affected by the
    November 6, 2007 implementation of SDV in its Oceanic Oahu Central
    Cable System. Specifically, TWC must provide refunds as follows:

```{=html}
<!-- -->
```
(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 CableCARD 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 by \$0.10 per
    month, per channel moved and reduce their rates on a going-forward
    basis accordingly.[^107]

# ordering clauses

43. 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., Oceanic Oahu
    Central Cable System **IS LIABLE 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.

44. **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.
    §151, 154(i), 154(j), 521, 549, Time Warner Cable, Inc. must take
    the steps set forth in paragraph 42 of this *Forfeiture Order*.

45. Payment of the forfeiture must be made by check or similar
    instrument, payable to the order of the Federal Communications
    Commission within thirty (30) days of the release of this Order. 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.

46. **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

[^1]: 47 C.F.R. § 76.1201.

[^2]: Navigation devices refer 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. §
    76.1200(c). UDCPs refer to devices that have the ability to receive
    encrypted digital cable programming, but do not have any upstream,
    or bidirectional, capabilities. For example, such devices cannot
    support two-way services such as Electronic Programming Guides
    (EPGs), Voice on Demand (VOD), Pay Per View (PPV), and other
    interactive capabilities. *See Implementation of Section 304 of the
    Telecommunications Act of 1996, Commercial Availability of
    Navigation Devices, Compatibility Between Cable Systems and Consumer
    Electronics Equipment*, Third Further Notice of Proposed Rulemaking,
    22 FCC Rcd 12024, 12025-26 (2007) ("*Third Further Notice of
    Proposed Rulemaking*"). *See also* 47 C.F.R. § 15.123(a).

[^3]: 47 U.S.C. § 503(b). This *Forfeiture Order* is issued through the
    coordinated effort of the Commission's Enforcement Bureau and Media
    Bureau. *See* 47 C.F.R. §§ 0.61(f)(5), 0.111(15).

[^4]: 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.

[^5]: 47 U.S.C. § 549. Section 629 was adopted as part of the
    Telecommunications Act of 1996. Pub. L. No. 104-104, 110 Stat. 56
    (1996).

[^6]: [H.R. Rep. No]{.smallcaps}. 104-204, at 112 (1995).

[^7]: *Id*.

[^8]: *Implementation of Section 304 of the Telecommunications Act of
    1996, Commercial Availability of Devices,* Notice of Proposed
    Rulemaking, 12 FCC Rcd 5639, 5641 (1997).

[^9]: *See Implementation of Section 304 of the Telecommunications Act
    of 1996, Commercial Availability of Navigation Devices,* Report and
    Order, 13 FCC Rcd 14775, 14776, para. 2 (1998) ("*Navigation Devices
    Order*").

[^10]: 47 C.F.R. § 76.1201.

[^11]: *See* *Navigation Devices Order*, 13 FCC Rcd at 14478 (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)).

[^12]: *Navigation Devices Order Id.* at 14780, para. 11.

[^13]: *Id.* at 14786.

[^14]: *Id*. The Commission recognized 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.

[^15]: *Id*. at 14781.

[^16]: *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 n.9.

[^17]: *See December 2002 Memorandum of Understanding Among Cable MSOs
    and Consumer Electronics Manufacturers. Id*. at note 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 \[that currently exists for set-top boxes\]."

[^18]: 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.

[^19]: The term "linear programming" is generally understood to refer to
    video programming that is prescheduled by the programming provider.
    *Cf*. 47 U.S.C. § 522(12) (defining "interactive on-demand services"
    to exclude "services providing video programming prescheduled by the
    programming provider").

[^20]: *Third Further Notice of Proposed Rulemaking,* 22 FCC Rcd at
    12025 ¶¶3-4.

[^21]: *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) ("LOI").

[^22]: *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 ("Initial
    Supplemental LOI Response") at Exhibit A.

[^23]: *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 provided relevant excerpts and
    identifying information for those complaints in Attachment A to the
    *Oceanic Time Warner Cable, a subsidiary of Time Warner Cable,
    Inc.,* Notice of Apparent Liability for Forfeiture and Order, 23 FCC
    Rcd 14981 (Enf. Bur. 2008) (*"TWC NAL and Order").* 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.

[^24]: The LOI stated we were investigating possible violations of
    Section 629 of the Act, 47 U.S.C. § 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. §§ 76.640, 76.980(f), 76.984, 76.1204, 76.1206, and
    76.1603.

[^25]: *See Plug and Play Order*, 18 FCC Rcd at 20885 n.3.

[^26]: *Id.* at 20885.

[^27]: *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) ("Supplemental LOI"). The 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. §§ 76.1201, 76.1202.
    *Id*., at note 3.

[^28]: *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) ("LOI Response").

[^29]: *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. 12, 2008) ("Initial Supplemental LOI Response").

[^30]: *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) ("Final Supplemental LOI Response").

[^31]: Initial Supplemental LOI Response, Exhibit A.

[^32]: *Id.*

[^33]: TWC reported 583 UDCP CableCARD subscribers at the time of
    deployment for its entire Hawaii Division, which includes not only
    the Oceanic and Oahu Central cable system, but also several other
    systems. Although some subscribers may have more than one UDCP, this
    number probably overstates the number of affected devices. *Id.*

[^34]: *Id.*

[^35]: In its most recent offer, TWC limited the period for affected
    CableCARD customers to receive a free set-top box to six months.
    *Id.*

[^36]: *Oceanic Time Warner Cable, a subsidiary of Time Warner Cable,
    Inc.,* Notice of Apparent Liability for Forfeiture and Order, 23 FCC
    Rcd 14981 (Enf. Bur. Oct. 15, 2008) (*"TWC NAL and Order").*

[^37]: *Time Warner Cable Inc. Response to Notices of Apparent Liability
    and Request for Cancellation of Proposed Forfeitures*, File No.
    EB-07-SE-352 (filed Nov. 14, 2008) (TWC NAL Response). Together with
    its NAL Response, TWC also filed *Time Warner Cable Inc. Request for
    Stay Pending Resolution of Petition for Reconsideration and Request
    for Cancellation of Proposed Forfeitures,* EB-07-SE-352 (filed Nov.
    14, 2008) and *Petition for Reconsideration of Time Warner Cable
    Inc.*, EB-07-SE-352 (filed Nov. 14, 2008). TWC's *Request for Stay*
    and *Petition for Reconsideration* will be addressed in subsequent
    orders.

[^38]: *TWC NAL Response* at 15-20.

[^39]: *Id.* at 20-28.

[^40]: *Id.* at 32-37.

[^41]: *Id.* at 37-42.

[^42]: *Id.* at 43.

[^43]: 47 C.F.R. § 76.1201.

[^44]: *See* 47 U.S.C. § 312(f)(1) & (2) (defining a "willful" violation
    as the "conscious and deliberate commission or omission of such act,
    irrespective of any intent to violate any provision of this Act or
    any rule or regulation of the Commission," and defining "repeated"
    as "the commission or omission of such act more than once."). The
    definition of willful and the definition of repeated apply to
    violations for which forfeitures are assessed under Section 503(b)
    of the Act. *See Southern California Broadcasting Co*., Memorandum
    Opinion and Order, 6 FCC Rcd 4387 (1991), *recon. denied* 7 FCC Rcd
    3454 (1992).

[^45]: As noted earlier, TWC states that its Oceanic and Oahu Central
    cable systems deployed SDV for the islands of Oahu and Oahu Central.
    Initial Supplemental LOI Response, Exhibit A.

[^46]: We are aware that other TWC cable systems have implemented SDV
    and will address the legality of those actions in future
    proceedings.

[^47]: As enacted, 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. § 544a(c)(1)(B).

[^48]: *TWC NAL Response* at 15.

[^49]: *Id.*

[^50]: *Id.*

[^51]: *See* *Thomas Jefferson University v. Shalala*, 512 U.S. 504
    (1994) (agency's interpretation of its own rule must be given
    controlling weight unless clearly erroneous).

[^52]: *TWC Response at 15-16.*

[^53]: *See Navigation Devices Order*, 13 FCC Rcd at 14789.

[^54]: 47 § C.F.R. 76.1203.

[^55]: *Id.* (emphasis added).

[^56]: *But see 2005 Deferral Order,* 20 FCC Rcd at 6814.

[^57]: *TWC Response* at 17-20.

[^58]: 47 U.S.C. § 544a(c)(1)(B).

[^59]: *TWC Response* at 21.

[^60]: *Id.* at 22.

[^61]: *Id.* at 23-25.

[^62]: *See Oceanic Oahu Central NAL*, 23 FCC Rcd at 14987. 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).

[^63]: *See* 47 U.S.C. § 549; 47 C.F.R. § 76.1201.

[^64]: "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, ¶7.
    *See also Third Further Notice of Proposed Rulemaking,* 22 FCC Rcd
    at 12025-26, ¶ 4 ("Devices made pursuant to this standard have the
    ability to receive encrypted digital cable programming, but do not
    have any upstream, or bidirectional, 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.").

[^65]: TWC's 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.

[^66]: *See Navigation Devices Order*, 13 FCC Rcd at 14786.

[^67]: 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 Initial Supplemental LOI Response,
    Exhibit A (stating that 62 channels ultimately were moved to SDV
    platform).

[^68]: *TWC Response* at 28-32.

[^69]: *Id.* at 30.

[^70]: *Id.* at 31-32.

[^71]: We note TWC's claim that bi-directional navigation devices "are
    now becoming available at retail." *TWC Response* at 26. The
    development of bi-directional navigation devices without limitations
    on the ability to integrate broadband capability into competitive
    navigation devices and the ability to integrate web-based or IP
    content with cable-providing programming will further Congress and
    the Commission's shared policy goal of expeditious commercial
    availability of bi-directional navigation devices.

[^72]: See *Carriage of Digital Television Broadcast Signals*, Third
    Report and Order, 22 FCC Rcd 21064 (2007) ("*Viewability Order*").

[^73]: *See* *Viewability Order* at ¶¶ 41-63.

[^74]: *See C-SPAN, Inc. v. FCC*, 545 F.3d 1051 (D.C. Cir. 2008).

[^75]: *Viewability Order* at ¶ 60.

[^76]: *TWC Response* at 33.

[^77]: *See* 47 U.S.C. § 549; *Comcast Corp. v. FCC*, 536 F.3d 763 (D.C.
    Cir. 2008); *Charter Communications, Inc. v. FCC*, 460 F.3d 31 (D.C.
    Cir. 2006).

[^78]: *Charter*, 460 F.3d at 43 (quoting FCC counsel). Similarly,
    although TWC complains about a waiver given by the Media Bureau to
    Verizon, TWC never sought Commission review of that waiver, and this
    is not the appropriate proceeding for challenging its merits.

[^79]: *TWC Response* at 37.

[^80]: *Id.* at 37-38.

[^81]: *Id.*

[^82]: *TWC Response* at 38-40.

[^83]: *See* 47 C.F.R. §76.640 ("Support for unidirectional digital
    cable products on digital cable systems.").

[^84]: *Id.* at § 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\...").

[^85]: *TWC Response* at 41-42.

[^86]: *TWC Response* at 41.

[^87]: *Id.* at 42.

[^88]: *TWC NAL and Order*, XXX at para. 27.

[^89]: 47 C.F.R. § 76.1207.

[^90]: *TWC Response* at 43.

[^91]: 47 C.F.R. § 0.111.

[^92]: 47 C.F.R. § 0.111(17).

[^93]: 47 C.F.R. § 0.311(a)(3).

[^94]: 47 U.S.C. § 503(b)(1)(B); 47 C.F.R. § 1.80(a)(1).

[^95]: 47 U.S.C. § 503(b); 47 C.F.R. § 1.80(f).

[^96]: *See, e.g.,* *SBC Communications*, *Inc.,* Forfeiture Order, 17
    FCC Rcd 7589, 7591 (2002).

[^97]: 47 U.S.C. § 503(b)(2)(A); 47 C.F.R. § 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. § 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.

[^98]: 47 U.S.C. § 503(b)(2)(E). *See also* 47 C.F.R. § 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.

[^99]: *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).

[^100]: 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. § 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).

[^101]: *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). SDV is
    installed at separate hubs throughout the cable system, but
    generally the operator will implement the technology on a
    system-wide basis.

[^102]: 47 C.F.R. § 1.80(b)(4)(Note). *See also Cablevision Forfeiture
    Order,* 15 FCC Rcd at 24298.

[^103]: 47 C.F.R. § 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.

[^104]: Under Section 629(c) of the Act, 47 U.S.C. § 549(c) and Section
    76.1207 of the Commission's Rules, 47 C.F.R. § 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. § 549(c), 47 C.F.R. §
    76.1207.

[^105]: 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**.**

[^106]: *TWC NAL and Order* at 39.

[^107]: \$0.10 is our best estimate of the relevant license fee per
    channel. We note that TWC did not provide an explanation of the
    method the company planned to use to determine the appropriate
    amount of refunds as required by the *TWC NAL and Order*. The Bureau
    will reconsider the appropriate license fee per channel should TWC
    submit a petition for reconsideration that includes evidence that
    the license fees of the affected channels are lower than \$0.10 per
    month.