**Before the**

**Federal Communications Commission**

**Washington, D.C. 20554**

+----------------------------------+----+------------------------------+
| In the Matter of                 | *  | CSR-7819-Z                   |
|                                  | *) |                              |
| Alabama Broadband, LLC           | ** | CSR-7212-Z                   |
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| Great Plains Cable Television,   | *  | CSR-7625-Z                   |
| Inc.                             | *) |                              |
|                                  | ** |                              |
| Millennium Digital Media         |    |                              |
| Systems, L.L.C., d/b/a           | *  |                              |
| Broadstripe                      | *) |                              |
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| Requests for Waiver of Section   |    |                              |
| 76.1204(a)(1) of the             | *  |                              |
| Commission's Rules               | *) |                              |
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+----------------------------------+----+------------------------------+

**MEMORANDUM OPINION AND ORDER**

**Adopted: November 14, 2008 Released: November 14, 2008**

By the Chief, Media Bureau:

# INTRODUCTION

1.  The above-captioned multichannel video programming distributors
    ("Petitioners") have filed with the Chief of the Media Bureau
    requests for waiver (the "Waiver Requests") of the ban on integrated
    set-top boxes set forth in Section 76.1204(a)(1) of the Commission's
    rules.[^1] For the reasons stated below, we grant the waivers
    requested by Alabama Broadband, LLC ("Alabama Broadband"), Great
    Plains Cable Television, Inc. ("Great Plains"), and Millennium
    Digital Media Systems, L.L.C. ("Broadstripe"), until January 31,
    2009, conditioned as set forth below.

# BACKGROUND

## Section 629 of the Act

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.[^2] 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.[^3] Originally, the
    Commission established January 1, 2005 as the deadline for
    compliance with the integration ban.[^4] On two occasions, the
    National Cable and Telecommunications Association ("NCTA"), on
    behalf of all cable operators, sought -- and obtained -- extensions
    of that deadline.[^5] 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.[^6]

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.[^7] 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.[^8] Although the cable industry has
    challenged the lawfulness of the integration ban on three separate
    occasions, in each of those cases the D.C. Circuit denied those
    petitions.[^9] In limited circumstances, however, operators may be
    eligible for waiver of the integration ban.[^10]

# discussion

4.  Petitioners make their requests for waiver pursuant to the
    *Financial Hardship Order*[^11] and Sections 1.3 and 76.7 of the
    Commission's rules.[^12] In light of Petitioners' demonstrated
    financial hardships and consistent with the *Financial Hardship
    Order*, we conclude that a limited grant of their Waiver Requests
    until January 31, 2009 is justified under Sections 1.3 and 76.7 of
    the Commission's rules. We therefore grant Petitioners limited
    waivers of the integration ban for the Subject Boxes.[^13]

5.  On October 10, 2007, Broadstripe filed a petition requesting a
    waiver of the integration ban until July 1, 2008.[^14] On June 25,
    2008, Broadstripe updated its financial record, and sought an
    extension of the waiver until July 1, 2009.[^15] Broadstripe has
    demonstrated that good cause exists to grant its request and that
    such a waiver would serve the public interest in this specific
    instance. The company has demonstrated that its financial condition
    deteriorated materially in 2007 as compared to the previous
    year.[^16] Broadstripe's cash on hand decreased by almost half, its
    asset holdings declined, its members' equity became nonexistent, it
    fell into greater debt, it suffered an operating loss in 2007 and
    the company increased its net loss by a 40-fold amount.[^17]
    Broadstripe does not have enough current assets to cover its current
    debt.[^18] As Broadstripe is in increasingly poor financial
    condition, good cause exists to grant its waiver request.

6.  On March 14, 2008, Alabama Broadband petitioned the Commission for a
    limited waiver of the integration ban.[^19] Alabama Broadband has
    demonstrated that good cause exists to grant its request and that
    such a waiver would serve the public interest in this specific
    instance. The company provided financial information that
    demonstrates that it does not have enough liquid assets to pay its
    current bills.[^20] Alabama Broadband has a large deficit and its
    cash flow predictions, although showing some progress, do not bode
    well for a near term increase in equity.[^21] Based on Alabama
    Broadband's extraordinary financial hardship, good cause exists to
    grant its waiver request.

7.  In the *Financial Hardship Order,* the Bureau granted Great Plains a
    waiver of the integration ban until July 1, 2008.[^22] On July 1,
    2008, Great Plains submitted a request that the Commission extend
    its waiver of the integration ban to July 1, 2009.[^23] Great Plains
    has suffered net losses for the past four consecutive years.[^24]
    Although Great Plains' operating cash flow is positive for each of
    these years, its cash flow from investing has been negative for four
    straight years.[^25] Great Plains' cash reserves are decreasing, and
    the company does not have enough current assets to cover its current
    liabilities, and its total debt is more than five times its
    equity.[^26] Based on Great Plains' continuing financial hardship,
    good cause for a limited grant of its Extension Request exists.

8.  While we have not been persuaded by others who have made speculative
    claims that the integration ban may impose a financial burden on
    their companies,[^27] we find that Petitioners' situations are still
    extraordinary, and we are persuaded by Petitioners' specific
    demonstrations of their continued financial hardships. While common
    reliance is integral to the development of the competitive
    navigation device market that Congress mandated through Section 629,
    we believe that in these specific cases the Petitioners have shown
    good cause for waiver of the integration ban rule based on the costs
    associated with its imposition. Accordingly, we conclude that
    limited waivers of the integration ban until January 31, 2009 would
    be in the public interest, and that Petitioners have met the
    standard for waivers under Sections 1.3 and 76.7 of the Commission's
    rules.

9.  We also conclude that Petitioners need to establish a plan to come
    into compliance with the integration ban. Increased demand due to
    common reliance should reduce the cost of compliant set-top boxes,
    and the financial burdens Petitioners face should dissipate.
    Therefore, as a condition of waiver, within 30 days of the release
    of this order Petitioners must file with the Media Bureau specific
    plans that will allow them to come into compliance, including
    relevant supporting data (for example, data that demonstrates
    historical set-top box price trends and projected prices for those
    boxes). We will review those plans to make sure that each Petitioner
    has a reasonable strategy to come into compliance. We do not expect
    to grant further waivers unless a Petitioner presents an exceptional
    reason that it will be unable to comply with the integration ban
    after January 31, 2009.

# ordering clauses

10. Accordingly, **IT IS ORDERED** that, pursuant to Sections 1.3 and
    76.7 of the Commission's rules, 47 C.F.R. §§ 1.3 & 76.7, the
    requests for waiver of Section 76.1204(a)(1) of the Commission's
    rules, 47 C.F.R. § 76.1204(a)(1), filed by Alabama Broadband, LLC,
    Great Plains Cable Television, Inc., and Millennium Digital Media
    Systems, L.L.C., d/b/a Broadstripe **ARE GRANTED** until January 31,
    2009 for the Motorola DCT-1000, Motorola DCT-2000, Motorola
    DCT-2244, Motorola DCT-2500, Motorola DSR-410, Motorola DSR-470,
    Motorola DCR-4416, Motorola DCT-6200, Motorola DCT-6412, Evolution
    Broadband DMS-1002, and Evolution Broadband DMS-1002-CA, as
    conditioned above.

11. **IT IS FURTHER ORDERED** that Alabama Broadband, LLC, Great Plains
    Cable Television, Inc., and Millennium Digital Media Systems,
    L.L.C., d/b/a Broadstripe **SHALL FILE** with the Media Bureau
    specific plans that will allow them to come into compliance with
    Section 76.1204(a)(1) of the Commission's Rules, 47 C.F.R. §
    76.1204(a)(1), including relevant supporting data, within 30 days of
    the release of this order.

12. This action is taken pursuant to authority delegated by Section
    0.283 of the Commission's rules, 47 C.F.R. § 0.283.

> FEDERAL COMMUNICATIONS COMMISSION
>
> Monica Shah Desai
>
> Chief, Media Bureau

[^1]: 47 C.F.R. § 76.1204(a)(1). The separation of the security element
    from the basic navigation device required by this rule is referred
    to as the "integration ban."

[^2]: *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).

[^3]: *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).

[^4]: *First Report and Order,* 13 FCC Rcd at 14803, ¶ 69.

[^5]: 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 Implementation of
    Section 304 of the Telecommunications Act of 1996: Commercial
    Availability of Navigation Devices*, 20 FCC Rcd 6794, 6810, ¶ 31
    ("*2005 Deferral Order*").

[^6]: *2005 Deferral Order*, 20 FCC Rcd at 6810, ¶ 31.

[^7]: *See Cablevision Systems Corporation's Request for Waiver of
    Section 76.1204(a)(1) of the Commission's Rules*, 22 FCC Rcd 220,
    226, ¶ 19 (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").

[^8]: *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."

[^9]: *Comcast Corp. v. FCC*, 526 F.3d 763 (D.C. Cir. 2008); *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.'").

[^10]: 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). Furthermore, 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 Great Plains Cable Television,
    Inc. et al Requests for Waiver of Section 76.1204(a)(1) of the
    Commission's Rules*, 22 FCC Rcd 13414, 13426-7, ¶¶ 39-40 (2007)
    ("*Financial Hardship Order*").

[^11]: *Financial Hardship Order*, 22 FCC Rcd 13426-7, ¶¶ 39-40.

[^12]: 47 C.F.R. §§ 1.3, 76.7.

[^13]: The Subject Boxes are the Motorola DCT-1000, Motorola DCT-2000,
    Motorola DCT-2244, Motorola DCT-2500, Motorola DSR-410, Motorola
    DSR-470, Motorola DCR-4416, Motorola DCT-6200, Motorola DCT-6412,
    Evolution Broadband DMS-1002, and Evolution Broadband DMS-1002-CA.

[^14]: Broadstripe Waiver Request at 1.

[^15]: Broadstripe Extension Request at 1.

[^16]: *See* Letter from Nicole Paolini-Subramanya, Counsel, Millennium
    Digital Media Systems, L.L.C., to Marlene H. Dortch, Secretary,
    Federal Communications Commission at Attachment (July 17, 2008).

[^17]: *Id*.

[^18]: *Id*.

[^19]: Alabama Broadband Waiver Request at 1.

[^20]: *See* Letter from Nicole Paolini-Subramanya, Counsel, Alabama
    Broadband, L.L.C., to Marlene H. Dortch, Secretary, Federal
    Communications Commission at Attachment (July 31, 2008).

[^21]: *Id*.

[^22]: *Financial Hardship Order*, 22 FCC Rcd at 13426-7, ¶¶ 39-40.

[^23]: *See* Letter from Nicole E. Paolini-Subramanya, Counsel, Great
    Plains Cable Television, Inc. to Marlene H. Dortch, Secretary,
    Federal Communications Commission at 1 (July 1, 2008).

[^24]: *Id*. at Attachment; Letter from Nicole E. Paolini-Subramanya,
    Counsel, Great Plains Cable Television, Inc. to Marlene H. Dortch,
    Secretary, Federal Communications Commission at Attachment (August
    8, 2008).

[^25]: *Id.*

[^26]: *Id.*

[^27]: *See, e.g.*, Comcast Corporation's Request for Waiver of 47
    C.F.R. § 76.1204(a)(1), CSR-7012-Z, CS Docket No. 97-80 at 17-19
    (April 19, 2006) (asserting that that the increased costs associated
    with the integration ban would slow Comcast's transitions to
    all-digital platforms).