**Before the**

**Federal Communications Commission**

**Washington, D.C. 20554**

+----------------------------------+---+---------------------------------+
| In the Matter of                 | ) | File Number EB-07-SE-351        |
|                                  |   |                                 |
| Cox Communications, Inc.         | ) | NAL/Acct. No. 200932100001      |
|                                  |   |                                 |
| Fairfax County, Virginia Cable   | ) | FRN 0016034050                  |
| System                           |   |                                 |
|                                  | ) |                                 |
|                                  |   |                                 |
|                                  | ) |                                 |
|                                  |   |                                 |
|                                  | ) |                                 |
+----------------------------------+---+---------------------------------+

## 

## NOTICE OF APPARENT LIABILITY FOR FORFEITURE AND ORDER

**Adopted: October 15, 2008 Released: October 15, 2008**

By the Chief, Enforcement Bureau:

# I. INTRODUCTION

1.  In this *Notice of Apparent Liability for Forfeiture and Order*
    ("*NAL and Order*"), we find that Cox Communications, Inc. ("Cox")
    apparently willfully violated Sections 76.1201 and 76.640(b)(1) of
    the Commission\'s Rules ("Rules").[^1] Specifically, Cox apparently
    violated Section 76.1201 by moving certain channels to a Switched
    Digital Video ("SDV") platform on October 16, 2007, in its Fairfax
    County, Virginia cable system, 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 October 16, 2007, Cox
    apparently violated Section 76.640(b)(1) by failing to provide a
    virtual channel table conforming to the standards required under
    Section 76.640(b)(1)(i) and (v). We conclude, pursuant to Section
    503(b) of the Communications Act of 1934, as amended ("Act"),[^3]
    that Cox is apparently liable for a forfeiture in the amount of
    twenty thousand dollars (\$20,000). We also require Cox to make
    appropriate refund of fees charged to customers affected by Cox's
    movement of linear channels to the SDV platform on October 16, 2007.

# II. BACKGROUND

2.  Congress and the Commission have long recognized the importance of
    allowing consumers the freedom to purchase their own navigation
    devices from sources other than their cable operator, satellite
    provider, or other multichannel video programming distributor
    ("MVPD"). Thus, Congress adopted Section 629 of the Act,[^4] 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."[^5] 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."[^6]

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.[^7] The Commission explained that "\[a\]s
    navigation devices are the means to deliver analog and digital
    communications, competition in the navigation equipment market is
    central toward encouraging innovation in equipment and services, and
    toward bringing more choice to a broader range of consumers at
    better prices." [^8]

4.  Thus, in adopting Section 76.1201 of the Commission's Rules,[^9]
    which allows subscribers to acquire, attach, and use any compatible
    navigation device with an MVPD's system, as long as that equipment
    does not cause harmful interference or facilitate theft of service,
    the Commission likened its actions to its *Carterfone* decision in
    the telephone environment.[^10] In *Carterfone,* the Commission
    allowed consumers to attach legal devices to the telephone network
    unless that equipment would harm the network. The Commission stated
    that "\[a\]s a result of *Carterfone* and other Commission actions,
    ownership of telephones moved from the network operator to the
    consumer. As a result, the choice of features and functions
    incorporated into a telephone has increased substantially, while the
    cost of equipment has decreased."[^11] 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."[^12] 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."[^13] The Commission recognized that its work on these
    issues was not complete, however, and reiterated its commitment to
    monitoring developments regarding the compatibility of set-top boxes
    and digital televisions.[^14]

5.  Five years later, in the *Plug and Play Order*,[^15] 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[^16]
    and adopted a cable compatibility standard for integrated,
    unidirectional digital cable television receivers, as well as other
    UDCPs, to ensure the compatibility and commercial availability of
    UDCPs with cable television systems. Generally, the *Plug and Play
    Order* required MVPDs to support operation of UDCPs and to ensure
    the utilization of such navigation devices in connection with their
    cable systems. In addition, the Commission required MVPDs to make
    available a security element separate from the basic navigation
    device. Under this framework, the Commission sought to enable
    unaffiliated manufacturers, retailers, and other vendors to
    commercially market UDCPs while allowing MVPDs to retain control
    over their system security.

6.  Consumers with UDCPs access MVPD programming by using a CableCARD
    leased from the cable operator.[^17] UDCPs employ a standard
    interface that permits them to negotiate with the CableCARD. The
    CableCARD descrambles the MVPD's encoded digital signal and allows
    the subscriber to view the programming. Thus, commercially available
    UDCPs can be compatible with cable systems nationwide, while cable
    operators maintain their ability to secure programming content from
    unauthorized viewing. In theory, this arrangement allows consumers
    access to all of a cable operator's linear programming[^18] 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.[^19]

7.  But recent events have demonstrated the limits of this theory.
    Traditionally, cable systems have used broadcast-type technologies
    that deliver all programs to all subscribers whether the subscribers
    view the programs or not. The programs not viewed nonetheless occupy
    system bandwidth, which prevents the use of that bandwidth for any
    other purpose. Because of ever-increasing constraints on bandwidth,
    many cable operators have begun to test and deploy SDV technology in
    their cable systems.[^20] In an SDV system, a subset of programming
    is delivered in the traditional way to all subscribers regardless of
    whether they are viewing the programs. For those channels, the
    CableCARD-equipped UDCP works as described above, allowing the
    subscriber to view the channels delivered in the traditional
    broadcast manner. The remaining channels are switched through the
    use of SDV network equipment located at a "hub" (where signals are
    converted and placed onto the "last mile" coaxial portion of the
    network). These switched channels do not occupy bandwidth, and are
    not available to subscribers until a subscriber tunes to that
    channel by sending a request, using a remote control or program
    guide, upstream through the use of a set-top box to the hub. At the
    hub, the SDV equipment directly receives and processes set-top
    channel change requests for switched content and responds to that
    set-top with the frequency and program number where that content can
    be found. Once the hub receives the request, it immediately begins
    to transmit the channel.

8.  A customer who uses a CableCARD-equipped UDCP to receive
    programming, however, must have additional equipment with the
    necessary upstream signaling capability to obtain the switched
    (*i.e*., bi-directional) channels. The UDCP cannot perform the
    bi-directional functions necessary to request delivery of a channel
    via SDV. Nor can the CableCARD, which is designed only to provide
    the separate security element, provide the necessary interface
    needed to send the signal to the SDV server. Thus, in essence, in an
    SDV system, all subscribers must have a cable-operator supplied
    set-top box to view channels placed on the SDV platform.[^21]

9.  As noted above, the *Plug and Play Order* not only adopted standards
    to allow commercially available navigation devices to work with MVPD
    systems*,* but also adopted technical rules to ensure that cable
    subscribers would be able to view digital cable services while still
    enjoying full functionality of their UDCPs.[^22] The Commission did
    so pursuant to Section 624A of the Act,[^23] which requires the
    agency to ensure that cable subscribers enjoy the full benefit of
    available cable programming as well as the features and functions of
    their televisions. To that end, the Commission adopted Section
    76.640(b) of the Rules, which obligates cable operators to support
    UDCPs through compliance with certain Program System Information
    Protocol ("PSIP") standards put forth by the Advanced Television
    Systems Committee ("ATSC"). The standards referenced in Section
    76.640 were proposed as part of the *2002 MOU* reached between cable
    operators and consumer electronics manufacturers to ensure
    compatibility between consumer electronics devices and cable
    systems.

10. The deployment of SDV technology has implications for cable
    operators' compliance with certain subparts of Section 76.640(b).
    First, Section 76.640(b)(1)(i) provides, in relevant part:

> \(b\) No later than July 1, 2004 cable operators shall support
> unidirectional digital cable products, as defined in §15.123 of this
> chapter, through the provision of Point of Deployment modules (PODs)
> and services, as follows:
>
> \(1\) Digital cable systems with an activated channel capacity of 750
> MHz or greater shall comply with the following technical standards and
> requirements:
>
> \(i\) SCTE 40 2003 (formerly DVS 313): "Digital Cable Network
> Interface Standard" ...,provided however that with respect to Table
> B.11, the Phase Noise requirement shall be -86 dB/Hz, and also
> provided that the "transit delay for most distant customer"
> requirement in Table B.3 is not mandatory.

SCTE 40 2003, Section 5.5 states that "\[w\]hen one or more scrambled
services are offered on the cable system, System and Service Information
for all services (both scrambled and in-the-clear) shall be carried in
an out-of-band Forward Data Channel, as defined in section 3.3.3 above,
using the formats described in SCTE DVS/234 (rev.2)." [^24]

11. In essence, Section 76.640(b)(1)(i) requires cable operators to send
    UDCPs a one-way stream of data that is separate from the video
    programming (the "out of band Forward Data Channel"). That data
    stream includes channel lineups and other programming information
    otherwise known as "service information tables." This requirement
    applies to *all* services, both scrambled and in the clear.

12. Second, Section 76.640(b)(1)(v) further provides, in relevant part:

> \(v\) When service information tables are transmitted out-of-band for
> scrambled services:
>
> \(A\) The data shall, at minimum, describe services carried within the
> transport stream carrying the PSIP data itself;
>
> \(B\) A virtual channel table shall be provided via the extended
> channel interface from the POD module. Tables to be included shall
> conform to ANSI/SCTE 65 2002 ... "Service Information Delivered
> Out-of-Band for Digital Cable Television".... [^25]

13. Together, Section 76.640(b)(1)(i) and Section 76.640(b)(1)(v)
    require a cable operator to provide information to UDCPs allowing
    them to find and display a scrambled programming service on a
    particular channel. Section 76.640(b)(1)(i) is the basic requirement
    regarding service information tables, and Section 76.640(b)(1)(v)
    provides the more detailed specifications for how cable operators
    should format and transmit a particular service information table
    \-- the "virtual channel table." That table acts as a legend for the
    UDCP. When a cable operator transmits its digital cable services,
    those services are not necessarily transmitted on the channels
    listed on a subscriber's programming guide. The virtual channel
    table enables a UDCP to display the programming services on the
    channels on which the subscriber expects to see them. As noted
    above, virtual channel table information is sent on a data channel
    separate from the video programming (\""out-of-band") via a
    communication path agreed upon by cable operators and CE
    manufacturers (the "extended channel interface").

14. Because of the bi-directional nature of SDV technology, however,
    UDCPs cannot view programming provided on such a platform. If a
    cable operator transmits a virtual channel table that includes SDV
    programming to a UDCP, the UDCP will indicate that SDV programming
    should appear on certain channels but will be unable to display it.
    To avoid such a scenario, some cable operators may have unilaterally
    excluded SDV programming from the virtual channel tables transmitted
    to customers with CableCARD-equipped UDCPs.

15. On November 8, 2007, the Spectrum Enforcement Division of the
    Enforcement Bureau ("Bureau") issued a Letter of Inquiry
    ("LOI")[^26] to Cox based on complaints that the company had moved
    certain cable channels that previously were accessible to
    subscribers using CableCARD-equipped UDCPs, such as digital cable
    ready television sets and digital video recorders, to an SDV
    platform. Specifically, the Enforcement Bureau received a notice
    that Cox had sent to its Fairfax County, Virginia CableCARD
    subscribers informing them that effective October 16, 2007, Cox
    would implement new technology that was not compatible with one-way
    digital cable ready devices requiring a CableCARD.[^27] According to
    the notice, customers that used CableCARD-equipped UDCPs to receive
    programming now would need a Cox digital set-top box to continue to
    receive all cable channels available to them prior to the change to
    the SDV platform. The LOI sought information on a number of issues,
    and asked the company to explain how its implementation of SDV was
    consistent with Section 629 of the Act, Commission Rules
    implementing that statute,[^28] the 2002 MOU,[^29] and in
    particular, the policies and Rules established by the Commission in
    the *Plug and Play Order.*[^30] The Bureau issued a Supplemental LOI
    to Cox on September 5, 2008[^31] and a Second Supplemental LOI on
    October 3, 2008[^32] to obtain additional information concerning the
    company's deployment of SDV.

16. Cox responded to the LOI on December 17, 2007,[^33] and responded to
    the Supplemental LOI on September 19, 2008[^34] and the Second
    Supplemental LOI on October 10, 2008.[^35] In its LOI Response, Cox
    admits that its Fairfax County, Virginia cable system deployed SDV
    on October 16, 2007, which resulted in the movement of the Latino
    tier and 14 linear channels to an SDV platform.[^36] Cox states that
    the deployment of SDV to its Fairfax County customers affected a
    small number of its customers using CableCARDs in one-way
    devices[^37] and that to mitigate the potential impact on these
    customers, Cox offered to transition them at little or no
    incremental cost to bi-directional equipment to ensure that they
    could continue accessing the switched channels, even though they had
    purchased a one-way CableCARD device.[^38] Specifically, at the time
    of its SDV deployment, Cox offered CableCARD-equipped UDCP
    subscribers a standard digital receiver for the same price as a
    CableCARD for the first year or a free Digital Video Recorder
    ("DVR") for three months.[^39] Both those offers have since expired.

17. With respect to the technical requirements described above, Cox
    admits that it does not provide its subscribers using
    CableCARD-equipped UDCPs with a virtual channel table that includes
    programming on its SDV platform.[^40] Rather, "Cox's Fairfax,
    Virginia subscribers who utilize a Cox provided CableCARD with their
    UDCPs receive a 'virtual channel table' covering all of the
    scrambled programming services viewable on their one-way
    devices."[^41] Cox explains that it "does not populate that channel
    table for two-way services that are not viewable with UDCP
    devices."[^42] Cox asserts that its actions are consistent with
    Section 76.640 of the Commission's Rules because \-- according to
    Cox \-- those provisions only apply to unidirectional digital cable
    services.[^43] Cox further argues that populating the virtual
    channel table for two-way services would confuse consumers with
    UDCPs, as those devices are incapable of viewing two-way
    services.[^44]

# III. DISCUSSION

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

18. Section 76.1201 of the Rules prohibits an MVPD from "prevent\[ing\]
    the connection or use of navigation devices to or with its system"
    unless such devices would cause electronic or physical harm or allow
    the unauthorized receipt of service.[^45] Based on the record before
    us, we find that Cox apparently willfully[^46] violated Section
    76.1201 by moving certain linear channels to an SDV platform in its
    Fairfax County, Virginia cable system on October 16, 2007.[^47] In
    so doing, Cox 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 Cox-supplied set-top box,
    thus impairing the use of those UDCPs within the affected cable
    system. Additionally, because customers now must have a Cox-leased
    set-top box to view many of their channels, even on UDCP devices,
    Cox's migration of channels to an SDV platform has prevented the use
    of some functions available on those UDCPs, such as the abilities to
    view picture-in-picture and to record one channel while viewing
    another channel.[^48]

19. Notwithstanding its effect on CableCARD-using UDCP owners, Cox
    contends that its movement of existing linear channels to an SDV
    platform is fully consistent with the Act and the Commission's rules
    and policies, including the *Plug and Play Order* and the 2002 MOU
    between the cable operators and the CE industry.[^49] Cox states
    that in the *Plug and Play Order,* the Commission "explicitly
    acknowledged that the 'MOU reflects a compromise agreement among the
    parties on a specification that will permit the manufacturer of
    unidirectional digital cable television receivers,' and that
    '\[d\]ue 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").'"[^50] According to Cox, its
    deployment of SDV is precisely the kind of advanced bi-directional
    technology that the Commission's rules permit.[^51] Moreover, Cox
    argues that the Commission has stated that Section 629 and its
    associated rules include no obligation for cable operators to carry
    any service that is used by unidirectional equipment[^52] and that
    the Commission did not intend "to force cable operators to develop
    and deploy products and services in tandem with consumer electronics
    manufacturers. Cable operators are free to innovate and introduce
    new products and services without regard to whether consumer
    electronics manufacturers are positioned to deploy substantially
    similar products and services."[^53] As such, Cox contends that its
    development and deployment is consistent with the Commission's
    policies and rules and with Congressional intent that in
    implementing Section 629, the Commission should "avoid actions which
    could have the effect of freezing or chilling the development of new
    technologies and services."[^54]

20. We reject Cox's arguments as inconsistent with the language and the
    intent of the Commission's rules and orders. Taken to its logical
    conclusion, Cox's reasoning would permit an MVPD to move *all* of
    its programming to an SDV platform without regard for the impact its
    actions would have on customers using or wishing to use
    CableCARD-equipped UDCPs. Such an outcome would be fundamentally at
    odds with the Commission's goal of protecting cable subscribers'
    ability to view signals through the use of commercially available
    navigation devices offered in a competitive market. Cox'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 Cox-provided set-top box conflicts with the
    Commission's rules and policies designed to promote competition and
    consumer choice of navigation devices.

21. While we recognize that the *Plug and Play Order* does not prohibit
    cable operators from developing and deploying new technology and
    services, it does not permit Cox's actions here. In recognizing that
    cable operators are free to innovate and introduce new products and
    services, the Commission cautioned that such development and
    deployment of new products and services should not interfere with
    the functioning of consumer electronics equipment or the
    introduction of such equipment into the commercial market for
    navigation devices.[^55] Indeed, the Commission has continually
    emphasized that its navigation device rules are an important tool
    for promoting competition and bringing more choices to
    consumers.[^56] Yet the manner in which Cox has opted to administer
    its SDV programming effectively negates the concerted efforts and
    advances made thus far to achieve a competitive pro-consumer
    environment for such equipment.

22. Specifically, by moving linear programming to an SDV platform, Cox
    has prevented CableCARD-equipped UDCPs from receiving previously
    available channels and impaired the usefulness of competitive
    commercially available navigation devices, in violation of the
    Commission's Rules and the intent of Section 629. The Commission
    recognized that devices made pursuant to the standard adopted in the
    *Plug and Play Order* lacked upstream or bi-directional capabilities
    and therefore could not receive certain programming or services, but
    that recognition did not extend to services that consumers
    traditionally experienced as one-way services or programming that
    was part of the package for which they were already paying.[^57] At
    no point did the Commission authorize MVPDs to modify their
    transmission of linear programming such that UDCP devices could no
    longer receive such programming without a set-top box. Cox states
    that "to the extent any Cox customer is unable to view any
    programming carried on the SDV platform, it only will be by the
    customer's choice."[^58] But it is Cox that has chosen to place its
    customers in a dilemma \-- either continue to receive the now-SDV
    programming by leasing a set-top box at additional cost and the
    expense of many of their UDCP's features, or keep using the
    CableCARD but lose the ability to view certain programming for which
    Cox continues to bill them. Such an outcome is fundamentally at odds
    with the policy and regulatory objectives of the *Plug and Play*
    *Order*.

23. Section 76.1201 was adopted to achieve the statutory requirement of
    alternative sources of navigation devices and to ensure the
    commercial availability of navigation devices.[^59] The *Plug and
    Play Order* sought to provide further assurance of the commercial
    availability of navigation devices by requiring that cable operators
    support the operation of UDCPs in connection with their cable
    systems. Cox's movement of linear programming to an SDV platform
    clearly impairs the use of CableCARD-equipped UDCPs and
    fundamentally limits the commercial and competitive viability of
    those devices. After Cox's movement of linear programming to an SDV
    platform, customers who use CableCARD-equipped UDCPs can no longer
    receive that programming without leasing a set-top box from the
    company.[^60] Those customers who choose to lease a set-top box not
    only must bear the additional cost, but also lose many features of
    their UDCPs, such as picture-in-picture viewing and the ability to
    record one channel while watching another. Accordingly, Cox is
    preventing its customers from using their UDCPs and undermining the
    policy goal of Congress and the Commission to ensure the commercial
    availability and use of navigation devices. Thus, we find Cox's
    October 16, 2007 migration of linear channels to an SDV platform in
    its Fairfax County, Virginia cable system apparently constitutes a
    willful violation of Section 76.1201 of the Rules.[^61]

24. Cox also stresses the importance of the development and deployment
    of SDV. Cox claims it is pro-competitive, pro-consumer, vital to the
    digital television transition (especially for carriage of broadcast
    signals in both analog and digital format as required by the
    Commission), and critical for expanding the number of HD programming
    and increasing broadband transmission speeds.[^62] Finally, Cox
    claims that only a *de minimus* number of its customers were
    potentially affected by the implementation of SDV and that the
    company took steps to minimize any potential inconvenience for these
    few customers in its promotional offer to provide bi-directional
    receivers at little or no cost.[^63]

25. The deployment of SDV technology may provide public benefits. It is
    not Cox's deployment of SDV technology that violates Section
    76.1201, but Cox's migration of existing linear programming to an
    SDV tier that we find inconsistent with the Commission's Rules. For
    example, charging for channels not presently accessible to
    subscribers with CableCARD-equipped UDCPs undermines the policy and
    regulatory objectives of the *Plug and Play Order.* Cox's movement
    of linear programming to an SDV platform is particularly troubling
    because no bi-directional navigation devices are commercially
    available at this time. We understand that a major impediment to the
    availability of such devices is the cable industry's insistence on
    licensing conditions that go beyond the protection of the network
    from physical or electronic harm or theft of service. For example,
    limitations on the ability to integrate broadband capability into
    competitive navigation devices and the ability to integrate
    web-based or IP content with cable-provided programming are not
    related to Congress' recognition that MVPDs have "a valid interest,
    which the Commission should continue to protect, in system or signal
    security and in preventing theft of service."[^64] We consider such
    restrictions to be contrary to Congress and the Commission's shared
    policy goal of expeditious commercial availability of bi-directional
    navigation devices.

## B. Cox Apparently Willfully Violated Section 76.640(b) by Failing to Comply with the Commission's Technical Rules Regarding the Provision of a Virtual Channel Table for SDV Programming

26. Cox readily admits that it does not populate the virtual channel
    table with its two-way services.[^65] In its defense, Cox claims
    that Section 76.640 only applies to unidirectional digital cable
    services; on its face, however, Section 76.640 applies only to
    unidirectional *products*.[^66] 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.[^67] Therefore, Cox is
    required to describe programming on an SDV platform in the
    out-of-band forward data channel and populate the virtual channel
    table with all of its programming services. As Cox did not provide a
    complete virtual channel table, Cox violated Section 76.640(b)(1)(i)
    and 76.640(b)(1)(v) of the Commission's Rules.

27. Pointing to the inability of UDCPs to view two-way services, Cox
    claims that populating the virtual channel table for two-way
    services would confuse consumers with UDCPs.[^68] We disagree. It is
    the *absence* of SDV programming from the virtual channel table that
    is confusing because it creates the false impression that the
    subscriber is receiving all of the programming to which he or she is
    entitled. Including the SDV programming in the virtual channel table
    would make it clear to Cox subscribers using CableCARD-equipped
    UDCPs that their cable operator is charging them for programming
    that they cannot see.

28. In any event, Commission regulatees may not pick and choose with
    which of the Commission's Rules they wish to comply. If Cox 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.[^69] Accordingly, based on the record before us, we find that
    Cox apparently willfully violated Section 76.640(b) by failing to
    provide a virtual channel table as required by Section
    76.640(1)(b)(i) and 76.640(b)(1)(v) in its Fairfax, Virginia cable
    system.

## C. Forfeiture Calculation

29. Under Section 503(b)(1)(B) of the Act, any person who is determined
    by the Commission to have willfully or repeatedly failed to comply
    with any provision of the Act or any rule, regulation, or order
    issued by the Commission shall be liable to the United States for a
    forfeiture penalty.[^70] 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.[^71] 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.[^72] We conclude that Cox is
    apparently liable for a forfeiture in the amount of \$20,000 for its
    willful violation of Sections 76.1201, 76.640(b)(1)(i), and
    76.640(b)(1)(v) of the Rules.

30. Under Section 503(b)(2)(A) and Section 1.80(b)(1) of the
    Commission's Rules,[^73] 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."[^74]

31. The Commission's *Forfeiture Policy Statement*[^75] and Section 1.80
    of the Rules do not establish a specific base forfeiture for
    violation of Section 76.1201.[^76] In a similar case, the Commission
    proposed forfeitures for each cable system involved in the
    violation.[^77] Thus, we propose to establish a base forfeiture
    amount for each cable system in which linear programming has been
    moved to an SDV platform, thereby impairing customers' use of
    navigation devices such as UDCPs to view such programming. As noted
    above, this case involves one Cox cable system -- Fairfax County,
    Virginia.

32. Cox argues that Section 629 of the Act cannot be interpreted as
    precluding cable operators from deploying a two-way video platform
    as long as some customers own devices that are, by definition,
    one-way.[^78] If such were the case, Cox contends, a small
    percentage of consumers could effectively prevent the implementation
    of technical upgrades that would benefit the vast majority of
    consumers.[^79] Cox contends that the number of subscribers that
    rely on CableCARD-equipped UDCPs in its Fairfax County cable system
    is small (*i.e*., less than 0.4% of its customers had purchased
    one-way devices),[^80] and that on balance, the implementation of
    SDV provides an overall benefit to the entire customer base.[^81]

33. While the number of subscribers that were prevented from using their
    CableCARD-equipped UDCPs to access certain programming may be a
    relatively small percentage of all cable subscribers, we consider
    the consumer harm resulting from actions here, which frustrate the
    Commission's broader goal of achieving a competitive navigation
    device market, to be significant.[^82] Moreover, it is impossible to
    determine the injury actions like those at issue here may have
    inflicted on the market for one-way devices such as UDCPs. The
    movement of linear programming to an SDV platform, without having in
    place standards to ensure bi-directional compatibility of cable
    television systems and consumer electronics equipment without
    unnecessary licensing conditions, significantly harms the
    Commission's policies to move navigation devices toward a fully
    competitive market.[^83] Consumers have little incentive to purchase
    a UDCP and lease a CableCARD when their cable provider already has
    moved more than a dozen channels to a platform inaccessible to such
    equipment.

34. One analogous violation for which the Commission has already
    established a base forfeiture is violation of the cable broadcast
    signal carriage rule, which has a base forfeiture of \$7,500.[^84]
    Given the number of channels involved and the effect of actions like
    those here on the Commission's policy objectives, however, we find
    that a more significant penalty is appropriate. We conclude that
    \$10,000 per cable system in which linear programming is moved to an
    SDV platform is an appropriate base forfeiture for violation of
    Section 76.1201. In this case, Cox moved linear programming to an
    SDV platform in one cable system, Fairfax County, Virginia.
    Accordingly, we conclude that Cox is apparently liable for a
    \$10,000 forfeiture for its willful violation of Section 76.1201 of
    the Rules.

35. Additionally, we conclude that Cox is apparently liable for a
    forfeiture in the amount of \$5,000 for its willful violation of
    Section 76.640(b)(1)(i) of the Rules and \$5,000 for its willful
    violation of Section 76.640(b)(1)(v) of the Rules. The Commission's
    *Forfeiture Policy Statement* and Section 1.80 of the Rules do not
    establish a specific base forfeiture for violation of Section
    76.640(b). We note, however, that Section 1.80(b) establishes a base
    forfeiture of \$5,000 for unauthorized discontinuance of
    service.[^85] We find that the actions of Cox effectively
    discontinue a portion of the services for each of its CableCARD
    subscribers who choose to view content via a UDCP. We also conclude
    that the amount of the proposed forfeiture for each violation is
    commensurate with the harm imposed upon cable subscribers. Because
    the violation of Section 76.640(b)(1) coincides with the migration
    of linear channels to an SDV platform, we will also apply this base
    forfeiture amount of \$5,000 for each technical violation of Section
    76.640(b)(1) on a per cable system basis. Accordingly, we conclude
    that Cox is apparently liable for a forfeiture in the amount of
    \$10,000 for its willful violation of Sections 76.640(b)(1)(i) and
    76.640(b)(1)(v) in its Fairfax County, Virginia cable system.

36. Cox's implementation of SDV in its Fairfax County, Virginia 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 significantly harms the Commission's policies
    to move navigation devices toward a fully competitive market. We
    note that Cox could have sought a waiver of these rules under
    Section 76.1207, but failed to do so.[^86] Accordingly, we conclude
    that Cox is apparently liable for a total forfeiture amount of
    twenty thousand (\$20,000) for its willful violation of Sections
    76.1201 (\$10,000), 76.640(b)(1)(i) (\$5,000), and 76.640(b)(1)(v)
    (\$5,000) of the Commission's Rules.

## D. Cox Must Issue Refunds To Customers Harmed by Its SDV Implementation

37. Cox'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.[^87] In effect, Cox's movement of linear
    programming to an SDV platform has substantially diminished the
    value of its customers' UDCP devices. Moreover, CableCARD customers
    affected by Cox'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 Cox-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, Cox's
    movement of linear programming to an SDV platform set back the
    shared goal of Congress and the Commission of a competitive market
    for commercially available navigation devices, as required by
    Section 629 and the Commission's rules.

38. In calculating the harm to Cox's customers who use UDCP equipment,
    we recognize that Cox has made offers to its CableCARD customers to
    offset the costs of obtaining a set-top box. Cox states that to
    mitigate the impact of its SDV deployment, it offered to transition
    subscribers with UDCPs to bi-directional equipment at no initial
    cost. Specifically, Cox's notice to its customers states:

> If you're interested in a DVR receiver from Cox, for a limited time
> we're offering \[a\] DVR free for the first three months. A DVR will
> allow you to record your favorite shows and watch them on your
> schedule and also give you access to Cox On DEMAND and all the other
> great services offered with digital cable. Or, if you would prefer a
> standard digital receiver we are pleased to offer you one for the same
> price as a CableCARD for the first year (\$1.99 a month).[^88]

While Cox's offer to provide a free set-top box to its CableCARD
customers may have provided temporary relief to some its customers; it
was not a permanent solution \-- the benefits promised by Cox expired
months ago. Cox's offer did not address the critical problem concerning
the company's interference with its customers' use of independently
obtained UDCPs, *i.e.*, the of service to the extent customers can view
fewer channels than they did before the movement of linear programming
to an SDV platform, nor does it address the loss of functionality of the
device in question.

39. Thus, we order Cox, within ninety (90) days of this *NAL and Order,*
    to issue refunds to CableCARD customers affected by the October 16,
    2007 implementation of SDV in its Fairfax County, Virginia cable
    system. Specifically, Cox must provide refunds as follows:

```{=html}
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(a) For former CableCARD customers that began to lease any set-top boxes
    from Cox following notice of a possible SDV deployment, Cox must
    refund the difference in cost (if any) between the charges for the
    Cox set-top boxes and the CableCARDs previously leased by such
    customers; and

(b) For CableCARD customers that kept their CableCARDs even after notice
    of the SDV deployment, Cox must refund the customers' subscriber
    fees based on the diminished value of their service following the
    movement of linear programming to an SDV platform and reduce their
    rates on a going-forward basis accordingly.

```{=html}
<!-- -->
```
40. In addition, we require Cox to submit to the Enforcement Bureau an
    explanation of the method the company plans to use to determine the
    appropriate amount of refunds, the number of customers receiving
    refunds, the total value of such refunds, and the planned timing of
    such refunds. Cox must submit this information to the Enforcement
    Bureau for review and approval within thirty (30) days of the
    release of this decision and must proceed with its proposed refund
    plan within sixty (60) days of such submission, provided the
    Enforcement Bureau approves Cox's proposed refund plan within
    thirty (30) days of Cox's submission.

# IV. ordering clauses

41. Accordingly, **IT IS ORDERED** that, pursuant to Section 503(b) of
    the Act, and Section 1.80 of the Rules, and the authority delegated
    by Sections 0.111 and 0.311 of the Commissions Rules, Cox
    Communications, Inc. is **NOTIFIED** of its **APPARENT LIABILITY FOR
    A FORFEITURE** in the amount of twenty thousand dollars (\$20,000)
    for willful violation of Sections 76.1201, 76.640(b)(1)(i) and
    76.640(b)(1)(v) of the Rules.

42. **IT IS FURTHER ORDERED** that, pursuant to Section 1.80 of the
    Rules, within thirty days of the release date of this Notice of
    Apparent Liability for Forfeiture and Order, Cox **SHALL PAY** the
    full amount of the proposed forfeiture or **SHALL FILE** a written
    statement seeking reduction or cancellation of the proposed
    forfeiture.

43. **IT IS FURTHER ORDERED** that, pursuant to sections 1, 4(i), 4(j),
    601, and 629 of the Communications Act of 1934, as amended 47 U.S.C.
    §151, 154(i), 154(j), 521, 549, Cox must take the steps set forth in
    paragraphs 39 and 40 of this *NAL and Order*.

44. Payment of the forfeiture must be made by check or similar
    instrument, payable to the order of the Federal Communications
    Commission. The payment must include the NAL/Account Number and FRN
    Number referenced above. Payment by check or money order may be
    mailed to Federal Communications Commission, P.O. Box 979088, St.
    Louis, MO 63197-9000. Payment by overnight mail may be sent to U.S.
    Bank -- Government Lockbox #979088, SL-MO-C2-GL, 1005 Convention
    Plaza, St. Louis, MO 63101. Payment by wire transfer may be made to
    ABA Number 021030004, receiving bank TREAS/NYC, and account
    number 27000001. For payment by credit card, an FCC Form 159
    (Remittance Advice) must be submitted. When completing the FCC Form
    159, enter the NAL/Account number in block number 23A (call
    sign/other ID), and enter the letters "FORF" in block number 24A
    (payment type code). Requests for full payment under an installment
    plan should be sent to: Chief Financial Officer \-- Financial
    Operations, 445 12th Street, S.W., Room 1-A625, Washington,
    D.C. 20554. Please contact the Financial Operations Group Help Desk
    at 1-877-480-3201 or Email: ARINQUIRIES@fcc.gov with any questions
    regarding payment procedures. Cox will also send electronic
    notification on the date said payment is made to
    JoAnn.Lucanik@fcc.gov and Kevin.Pittman@fcc.gov.

45. The response, if any, must be mailed to the Office of the Secretary,
    Federal Communications Commission, 445 12th Street, S.W.,
    Washington, D.C. 20554, ATTN: Enforcement Bureau -- Spectrum
    Enforcement Division, and must include the NAL/Acct. No. referenced
    in the caption. The response should also be e-mailed to JoAnn
    Lucanik, Deputy Chief, Spectrum Enforcement Division, Enforcement
    Bureau, FCC, at JoAnn.Lucanik@fcc.gov and Kevin Pittman, Esq.,
    Spectrum Enforcement Division, FCC, at Kevin.Pittman@fcc.gov.

46. The Commission will not consider reducing or canceling a forfeiture
    in response to a claim of inability to pay unless the petitioner
    submits: (1) federal tax returns for the most recent three-year
    period; (2) financial statements prepared according to generally
    accepted accounting practices; or (3) some other reliable and
    objective documentation that accurately reflects the petitioner's
    current financial status. Any claim of inability to pay must
    specifically identify the basis for the claim by reference to the
    financial documentation submitted.

47. **IT IS FURTHER ORDERED** that a copy of this Notice of Apparent
    Liability for Forfeiture and Order shall be sent by first class mail
    and certified mail return receipt requested to counsel for Cox
    Communications, Inc., Gary Lutzker, Esquire, Dow Lohnes PLLC, 1200
    New Hampshire Avenue, NW, Suite 800, Washington, DC 20036-6802.

FEDERAL COMMUNICATIONS COMMISSION

Kris Anne Monteith

Chief, Enforcement Bureau

**ATTACHMENT A**

Representative Customer Complaints Received by FCC

Concerning Cox Communications, Inc.'s Implementation of SDV

in its Fairfax County, Virginia Cable System

  --------------------------------------------------------------------------------
  **Date       **Complaint      **Consumer Complaint**
  Received**   Number**         
  ------------ ---------------- --------------------------------------------------
  03/22/2008   08-C00009190-1   On October 16, 2007, Cox Communications in Fairfax
                                Virginia began using Switched Digital Video to
                                encode all new channels that they have added to
                                their service. As a CableCARD customer, I am
                                paying for channels that I cannot view. Starting
                                next month the MLB Extra Innings package will
                                begin for a new season and will be moved to
                                Switched Digital Video, thus also being
                                unavailable to me. When I signed up for Cox's High
                                Definition service, I purchased a \$700 TiVo
                                Series 3 and prepaid \$300 for three years of TiVo
                                service. I did this with the understanding that
                                Cox would provide CableCARDs that would give me
                                access to all of their channels, with the
                                exception of pay-per-view events. Their switch to
                                Switched Digital Video leaves CableCARD customers
                                like myself out in the cold, with no means of
                                getting access to these channels. It was my
                                understanding that the Integration Ban forbade
                                this behavior.

  02/16/2008   08-C00002771-1   I recently purchased a TiVo HD and had Cox install
                                a Multi-stream CableCARD in it. Currently, there
                                are over 15 channels that do not come in due to
                                decisions made by Cox to not support CableCARDs
                                and third party products such as my TiVo HD. When
                                Cox recently added several new channels in my area
                                (northern Virginia) they did so using SDV
                                technology. This is like a two-way service which
                                Cox doesn't support with CableCARDs. Cox doesn't
                                say or admit anywhere that you can't get a bunch
                                of channels because they use SDV, only PPV and
                                VOD. By not being able to receive these channels
                                with a TiVo and CableCARD, Cox is violating an FCC
                                mandate for cable companies to support such
                                devices. They render competing device useless and
                                the more channels added in this manner, the more
                                Cox is guaranteeing reliance on their own
                                equipment.

  12/07/2007   07-W13582835     Currently because of high definition SDV Cox is
                                providing in my area, my TiVo HD unit will not
                                receive various HD channels with the Cox
                                CableCARDs I am paying for, they will only work if
                                I lease a Cox HD receiver. This seems highly
                                unfair to those who like the alternatives of
                                having to lease only Cox HD hardware solutions.

  10/31/2007   Letter           I am filing this complaint against Cox
                                Communications on the grounds that the company is
                                in violation of the Telecommunications Act of
                                1996. Specifically, Cox is limiting the number of
                                digital channels I receive because I use a
                                CableCARD. The spirit of this Act was to give
                                consumers a choice when deciding which type of
                                device to use to view cable channels. Now, Cox
                                Communications is advising consumers that the only
                                way one can get the full digital cable lineup is
                                to use a Cox cable box. If one chose to use a
                                CableCARD, one would still pay for the digital
                                lineup but not receive 75 of those channels in
                                digital format. To be clear, for over two years I
                                have subscribed to digital cable, with a Cox
                                CableCARD, and have analog. I contacted a Cox
                                technician about the issue and was informed I
                                would be required to use a cable box in order to
                                regain the digital channels I had lost. I then
                                contacted a manager in the Herndon, Virginia
                                office, who informed me of the same. As a
                                resolution, I would like to see Cox provide the
                                full digital lineup to consumers who have made the
                                choice to use CableCARDs. This request would
                                exclude any channels that require two-way
                                communications such as On Demand, Digital PPV,
                                interactive, etc., that CableCARDs currently do
                                not support. Second, if Cox is allowed to exclude
                                digital channels to consumers, then the consumer
                                should have a prorated billing statement that
                                directly correlates as a percent of the digital
                                video channels the consumer is losing. For
                                example, if 100 digital video channels cost \$100
                                dollars and 75 of those channels are not
                                obtainable in digital format for consumers who
                                choose to use CableCARDs, then Cox should only
                                charge \$25 dollars a month not \$100. I will
                                caveat this resolution because it may give Cox the
                                ability to discriminate \[against\] popular
                                digital channels such as CNN and CSPAN for use
                                with the Cox cable box-only approach and leave the
                                Cox CableCARD user with the less popular channels.
                                Lastly, the same percentage based billing logic,
                                as stated above, should be retroactively applied
                                and cost reimbursed, to all current Cox cable card
                                subscribers who have had their service switched
                                from digital to analog. This retroactive refund
                                should be automatically applied.

  08/23/2007   07-W13311936     On September 10, 2007 my cable company, Cox
                                Communications, begins rolling out its switched
                                digital service. Because I'm a CableCARD user, I
                                will no longer be able to access 54 previously
                                accessible channels. This will surely increase
                                over time to include every channel. If I want to
                                access these channels, Cox says I'll have to lease
                                one of their digital receivers. Which, of course,
                                is more expensive. And I don't have a choice.
                                Competitor's set-top boxes and DVRs (TiVo's for
                                example) are incompatible with switched digital. I
                                thought the FCC required cable providers to
                                support the CableCARD standard and to correct
                                incompatibilities between their networks and
                                certified CableCARD devices. By making their
                                network less compatible with CableCARD, Cox is
                                forcing me to give up my CableCARD for one of
                                their set-top boxes. The FCC should not allow
                                cable companies to hobble or render competitive
                                set-top boxes unusable by deploying new switching
                                technology that won't work with other boxes. I
                                want the FCC to stop Cox from deploying its
                                switched digital technology until such time as (1)
                                they can provide me with a CableCARD that is
                                compatible with switched digital, or (2)
                                competitive set-top boxes and DVRs compatible with
                                switched digital are brought to market by the
                                Consumer Electronics industry. I demand a choice
                                in the marketplace. In the event the FCC allows
                                Cox to reduce my current cable service, I want my
                                cable bill prorated. I shouldn't have to pay the
                                same money for fewer channels.
  --------------------------------------------------------------------------------

[^1]: 47 C.F.R. §§ 76.1201, 76.640(b)(1).

[^2]: The term "navigation devices" refers to "converter boxes,
    interactive communications equipment, and other equipment used by
    consumers to access multichannel video programming and other
    services offered over multichannel video programming systems." 47
    C.F.R. § 76.1200(c). The UDCPs at issue in this proceeding include
    certain "digital cable ready" televisions and TiVo digital video
    recorders.

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

[^4]: 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).

[^5]: [H.R. Rep. No]{.smallcaps}. 104-204, at 112 (1995).

[^6]: *Id*.

[^7]: *Implementation of Section 304 of the Telecommunications Act of
    1996, Commercial Availability of Devices,* Notice of Proposed
    Rulemaking, 12 FCC Rcd 5639, 5641 (1997).

[^8]: *See Implementation of Section 304 of the Telecommunications Act
    of 1996, Commercial Availability of Navigation Devices,* Report and
    Order, 13 FCC Rcd 14775, 14776, ¶ 2 (1998) ("*Navigation Devices
    Order*").

[^9]: 47 C.F.R. § 76.1201.

[^10]: *See* *Navigation Devices Order*, 13 FCC Rcd at 14778 (citing
    *Use of the Carterfone Device in Message Toll Service,* Decision, 13
    FCC 2d 420, 424-25 (1968), *recon. denied*, 14 FCC 2d 571(1968)).

[^11]: *Navigation Devices Order*, 13 FCC Rcd at 14780, ¶ 11.

[^12]: *Id.* at 14786.

[^13]: *Id*. at 14780, ¶ 11. The Commission acknowledged that "the
    parallel to the telephone has limitations" and specifically stated
    that the rules it adopted in implementing Section 629 of the Act
    sought to accommodate the differences from the telephone model.
    *Id.* at 14780, ¶ 12.

[^14]: *Id*. at 14781.

[^15]: *Implementation of Section 304 of the Telecommunications Act of
    1996, Commercial Availability of Navigation Devices, Compatibility
    Between Cable Systems and Consumer Electronics Equipment*, Second
    Report and Order and Second Further Notice of Proposed Rulemaking,
    18 FCC Rcd 20885 (2003) ("*Plug and Play Order*"). "The term 'plug
    and play' refers to a device's ability to plug into a cable system
    and receive digital cable programming without a cable-operator
    provided set-top box." *Third Further Notice of Proposed
    Rulemaking*, 22 FCC Rcd at 12025, n.9.

[^16]: *See December 2002 Memorandum of Understanding Among Cable MSOs
    and Consumer Electronics Manufacturers. Plug and Play Order,* 18 FCC
    Rcd at 20887, n.3 (citing Letter from Carl E. Vogel, President and
    CEO, Charter Communications, *et al*., to Michael K. Powell,
    Chairman, FCC (Dec. 19, 2002) ("2002 MOU")). The MOU "reflects a
    compromise agreement among the parties \[cable and consumer
    electronics industries\] on a specification that will permit the
    manufacture of unidirectional cable television receivers that
    include \[the same\] ... navigation functionality \[that currently
    exists for set-top boxes\]." *Plug and Play Order*, 18 FCC Rcd at
    20890, ¶ 7.

[^17]: 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.

[^18]: 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").

[^19]: *Third Further Notice of Proposed Rulemaking,* 22 FCC Rcd at
    12025 ¶¶ 3-4.

[^20]: *See Carriage of Digital Television Broadcast Signals: Amendment
    to Part 76 of the Commission's Rules*, Third Report and Order and
    Third Further Notice of Proposed Rulemaking, 22 FCC Rcd 21064,
    21095, ¶ 60 (2007) ("*Viewability Order*") ("Cable operators
    continue to develop ways to use their available capacity more
    efficiently. For example, cable operators, in order to keep pace
    with their competitors, are beginning to deploy 'switched
    digital'-capability in their networks. In a switched digital
    environment, a channel is transmitted via coaxial cable to a
    subscriber\'s premises only when the subscriber tunes to that
    channel.").

[^21]: In November 2007, "... CableLabs, NCTA, TiVo, Motorola,
    Scientific-Atlanta, Big Band Networks, and C-COR announced the
    availability of a technical solution for UDCPs, being adopted by
    TiVo, that can enable certain devices using unidirectional
    CableCARDs to access switched digital services previously
    unavailable to them." *See* Letter from Gary S. Lutzker, Esq., Dow
    Lohnes PLLC, Counsel for Cox Communications, Inc. to Marlene H.
    Dortch, Secretary, Federal Communications Commission (Dec. 17, 2007)
    ("LOI Response") at Exhibit 4, n.11 (internal citations omitted).
    According to the November 26, 2007 press releases provided by Cox,
    the external adapter was to have been available in "the second
    quarter of 2008." Cox has not informed the Bureau whether the device
    is now available, whether the company has offered it to its
    customers, how the device would be priced, or how it would differ in
    appearance from a traditional set-top box.

[^22]: *See Plug and Play Order*, 18 FCC Rcd at 20892.

[^23]: 47 U.S.C. § 544a.

[^24]: *See* SCTE 40 2003, Section 5.5, page 16.

[^25]: 47 C.F.R. § 76.640(b).

[^26]: *See* Letter from Kathryn S. Berthot, Chief, Spectrum Enforcement
    Division, Enforcement Bureau, Federal Communications Commission to
    James A. Hatcher, Esq., Senior Vice President, Legal and Regulatory
    Affairs, Cox Communications, Inc. (Nov. 8, 2007) ("LOI").

[^27]: *Id*. at Exhibit A. The Commission has received several
    complaints from Cox customers about SDV deployment in Cox's Fairfax
    County cable system. We have provided relevant excerpts and
    identifying information for those complaints in Attachment A.
    Because these complaints were not filed in a public Commission
    docket, we will treat the complainants' names as confidential for
    privacy reasons.

[^28]: The LOI described an investigation into 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.

[^29]: *See Plug and Play Order*, 18 FCC Rcd at 20885 n.3.

[^30]: *Id.* at 20885.

[^31]: *See* Letter from JoAnn Lucanik, Deputy Chief, Spectrum
    Enforcement Division, Enforcement Bureau, Federal Communications
    Commission to Gary S. Lutzker, Esq., Dow Lohnes PLLC, Counsel for
    Cox Communications, Inc., (Sept. 5, 2008) ("Supplemental LOI"). The
    Supplemental LOI noted that the investigation now included possible
    violations by Cox of Sections 76.1201 and 76.1202 of the Rules. 47
    C.F.R. §§ 76.1201, 76.1202. Supplemental LOI at n. 3.

[^32]: *See* Letter from JoAnn Lucanik, Deputy Chief, Spectrum
    Enforcement Division, Enforcement Bureau, Federal Communications
    Commission to Gary S. Lutzker, Esq., Dow Lohnes PLLC, Counsel for
    Cox Communications, Inc., (Oct. 3, 2008) ("Second Supplemental
    LOI"). This LOI sought information relating to possible violations
    of Section 76.640 of the Commission's Rules.

[^33]: *See* LOI Response. The response was timely filed based on the
    Bureau's approval of Cox's request for an extension of time to
    respond.

[^34]: *See* Letter from Gary S. Lutzker, Esq., Dow Lohnes PLLC, Counsel
    for Cox Communications, Inc. to Marlene H. Dortch, Secretary,
    Federal Communications Commission (Sept. 19, 2008) ("Supplemental
    LOI Response").

[^35]: *See* Letter from J. Christopher Redding, Esq., Dow Lohnes PLLC,
    Counsel for Cox Communications, Inc. to Marlene H. Dortch,
    Secretary, Federal Communications Commission at 3 (Oct. 10, 2008)
    ("Second Supplemental LOI Response").

[^36]: *See* LOI Response at 9, 11, and Exhibit 3. Cox states that it
    provided advanced notice of its switched digital implementation to
    its customers in the August 2007 billing inserts, which commenced on
    July 27, 2007 and continued through August 27, 2007, and also mailed
    a second notice to its CableCARD customers on September 14, 2007. In
    addition, Cox states that it provided advanced written notice to the
    Fairfax County local franchise authority ("LFA") on September 14,
    2007. According to these notices, in addition to pay-per-view
    channels, the Paquete Latino Tier and 14 networks would no longer be
    available to Cox's CableCARD-equipped UDCP customers without a Cox
    digital set-top box. Also, the notice stated that new channels added
    to the Cox Digital Cable and HD channel lineup will not be available
    to customers with CableCARD-equipped UDCPs without the use of a Cox
    set-top box.

[^37]: Cox reports that its Fairfax County, Virginia cable system served
    241,128 subscribers as of November 9, 2007; and that it had issued
    2002 CableCARDs in the Fairfax County system as of October 31, 2007.
    *See* Supplemental LOI Response at 2.

[^38]: LOI Response at 4.

[^39]: *Id.* at Exhibit 3.

[^40]: *Id*.

[^41]: Second Supplemental LOI Response at 3.

[^42]: *Id*.

[^43]: *Id*.

[^44]: *Id*.

[^45]: 47 C.F.R. § 76.1201.

[^46]: Section 312(f)(1) of the Act defines "willful" as "the conscious
    and deliberate commission or omission of \[any\] act, irrespective
    of any intent to violate" the law. 47 U.S.C. § 312(f)(1). The
    legislative history of Section 312(f)(1) clarifies that this
    definition of willful applies to both Sections 312 and 503(b) of the
    Act, H.R. Rep. No. 97-765, 97^th^ Cong. 2d Sess. 51 (1982), and the
    Commission has so interpreted the term in the context of Section
    503(b). *See Southern California Broadcasting Co.*, Memorandum
    Opinion and Order, 6 FCC Rcd 4387, 4388 (1991), *recon. denied*, 7
    FCC Rcd 3454 (1992).

[^47]: Cox confirms that it deployed SDV technology on October 16, 2007
    in its Fairfax County Virginia system. *See* Supplemental LOI
    Response at 1. Although Cox states that it has not deployed SDV
    technology in any of its other cable systems, it expects to deploy
    SDV technology in Orange County, California and Phoenix, Arizona
    within the coming months. *Id.* at n.1.

[^48]: 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).

[^49]: LOI Response at 2, 6-8.

[^50]: *Id.* at 7.

[^51]: LOI Response at 7, *quoting Plug and Play Order*, 18 FCC Rcd at
    20890.

[^52]: LOI Response at 8, *citing Gemstar International Group, Ltd.*,
    Memorandum Opinion and Order, 16 FCC Rcd 21531, 21542 (2001)
    ("*Gemstar*").

[^53]: LOI Response at 8, *citing Implementation of Section 304 of the
    Telecommunications Act of 1996, Commercial Availability of
    Navigation Devices,* Second Report and Order, 20 FCC Rcd 6794, 6809
    (2005) ("*2005 Deferral Order*").

[^54]: LOI Response at 15, *citing* H.R. Rep. No. 104-458, at 181
    (1995), *reprinted in* 1996 U.S.C.C.A.N. 10, 94.

[^55]: *2005 Deferral Order*, 20 FCC Rcd at 6809-10.

[^56]: *Id*.

[^57]: "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 bi-directional, capabilities (*i.e.*, consumer
    electronics manufacturers can only make unidirectional devices under
    the technical standard adopted in the *Plug and Play Order*). For
    example, such devices cannot support two-way services such as EPGs,
    VOD, PPV, and other ITV \[Interactive Television\] capabilities.").

[^58]: LOI Response at 4 n.11.

[^59]: *See Navigation Devices Order*, 13 FCC Rcd at 14786.

[^60]: According to the Cox notice announcing the deployment of SDV that
    took place on October 16, 2007, pay-per view channels, the Paquete
    Latino Tier and the following channels would be moved to the SDV
    platform and no longer available without the use of a Cox-supplied
    set-top box: CMT Pure Country, NASA, Jewelry TV, Cable Market Place
    II, American Life TV, Ovation, CSPAN 3, BET Jazz, SBTN, Bridges TV,
    ART, Zee TV, TV Asia and The Filipino Channel. In addition, new
    channels added to the Cox Digital Cable and HD channel lineup would
    no longer be available after October 16, 2007 to customers with
    CableCARD-equipped UDCP devices. LOI Response, Exhibit 3. *See also*
    Attachment A (quoting complaints received after Cox's SDV deployment
    that cite the addition of HD channels exclusively to the SDV
    platform).

[^61]: Our conclusion is consistent with the Commission's decision in
    *Gemstar* (*see supra* note 52), which involved Time Warner Cable's
    removal of Gemstar's Electronic Programming Guide from the vertical
    blanking interval of local broadcast television stations carried on
    Time Warner's cable systems. Among other arguments, Gemstar claimed
    that Time Warner had violated Section 629 of the Act and Section
    76.1202 of the Rules, 47 C.F.R. § 76.1202, which prohibits MVPDs
    from taking actions that prevent navigation devices that do not
    perform security functions from being made available to subscribers
    from sources unaffiliated with the MVPD. 16 FCC Rcd at 21541. The
    Commission rejected Gemstar's allegation, holding that Section 629
    and Section 76.1202 applied to equipment, rather than third-party
    services. *Id.* at 21542. As an initial matter, this case involves
    Cox's apparent violation of Section 76.1201, not 76.1202. This *NAL
    and Order* does not address whether Cox's actions may have violated
    the latter rule. Moreover, in this case, we do not find that the Act
    or Commission Rules require Cox to carry a third-party service that
    can be used by CableCARD-equipped UDCPs. Rather, we find that Cox
    apparently violated Section 76.1201 by altering its mode of
    transmission of its existing linear programming in a manner that
    reduced the value and utility of such devices.

[^62]: LOI Response at 2-3, 5, 8, 14-15.

[^63]: *Id*. at 4, 15

[^64]: *See supra* note 6.

[^65]: Second Supplemental LOI Response at 3.

[^66]: *See* 47 C.F.R. § 76.640 ("Support for unidirectional digital
    cable products on digital cable systems.").

[^67]: *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\...").

[^68]: Second Supplemental LOI Response at 3.

[^69]: 47 C.F.R. § 76.1207.

[^70]: 47 U.S.C. § 503(b)(1)(B); 47 C.F.R. § 1.80(a)(1).

[^71]: 47 U.S.C. § 503(b); 47 C.F.R. § 1.80(f).

[^72]: *See, e.g.,* *SBC Communications*, *Inc.,* Forfeiture Order, 17
    FCC Rcd 7589, 7591 (2002).

[^73]: 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.

[^74]: 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 Cox's apparent violation of Section 76.1201
    of the Commission's Rules to have begun on the date its cable system
    moved previously available linear programming to an SDV platform.
    Cox's apparent violation continues each day that such programming
    remains unavailable to customers using CableCARD-equipped UDCPs.

[^75]: *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).

[^76]: 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).

[^77]: *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).

[^78]: LOI Response at 4.

[^79]: *Id*.

[^80]: *Id*.

[^81]: *Id*. at 4-5. Cox states that its determination that the entire
    customer base would benefit from SDV led it to pursue the switched
    digital solution. Further, for the small number of customers using
    CableCARD-equipped UDCPs, Cox states it took steps to ensure these
    customers were not harmed by offering to transition this small group
    of customers at little or no incremental cost to bi-directional
    equipment.

[^82]: While the number of customers using CableCARD-equipped UDCPs may
    be a relatively small percentage of the overall number of MVPD
    customers nationwide, *see Third Further Notice of Proposed
    Rulemaking*, 22 FCC Rcd at 12025, the absolute number is significant
    -- more than 374,000 among the ten largest incumbent cable operator
    as of September 22, 2008. *See* Letter from Neal Goldberg, General
    Counsel, National Cable & Telecommunications Association, to Marlene
    Dortch, Secretary, FCC dated September 22, 2008 (filed in CS Docket
    No. 97-80) (compiling ten cable system reports on CableCARD usage).

[^83]: In addition, complaints received by the Commission and comments
    filed in CS Docket No. 97-80 suggest that consumers have been
    extremely frustrated by a multitude of cable operator-related
    problems with CableCARDs, including availability, pricing, and
    service quality issues. *See also* Letter from Julie M. Kearney,
    Senior Director and Regulatory Counsel, Consumer Electronics
    Association to Marlene Dortch, Secretary, Federal Communications
    Commission dated March 23, 2006 (filed in CS Docket 97-80) (listing
    difficulties of manufacturers in producing UDCPs due to alleged
    cable operator actions).

[^84]: 47 C.F.R. § 1.80(b)(4)(Note). *See also Cablevision Forfeiture
    Order*, 15 FCC Rcd at 24298 .

[^85]: 47 C.F.R. § 1.80(b)(4)(Note). Violation of the broadcast signal
    carriage rule is also analogous to Cox'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.

[^86]: 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 a rules adopted under Section subsection 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.

[^87]: For instance, according to one complainant, the consumer
    "purchased a \$700 TiVo Series 3 and prepaid \$300 for three years
    of TiVo service. I did this with the understanding that Cox would
    provide CableCARDs that would give me access to all of their
    channels, with the exception of pay-per-view events. Their switch to
    Switched Digital Video leaves CableCARD customers like myself out in
    the cold, with no means of getting access to these channels." *See*
    Complaint No. 08-C00009190-1 at Attachment A.

[^88]: LOI Response, Exhibit 3. By its own terms, this offer was both
    temporary and limited to existing residential CableCARD subscribers.