**Before the**

**Federal Communications Commission**

**Washington, D.C. 20554**

+----------------------------------+---+---------------------------------+
| In the Matter of                 | ) | File Number EB-07-SE-352        |
|                                  |   |                                 |
| Oceanic Time Warner Cable,       | ) | NAL/Acct. No. 200932100002      |
|                                  |   |                                 |
| a division of Time Warner Cable, | ) | FRN 0018049841                  |
| Inc.                             |   |                                 |
|                                  | ) |                                 |
| Oceanic Kauai Cable System       |   |                                 |
|                                  | ) |                                 |
|                                  |   |                                 |
|                                  | ) |                                 |
+----------------------------------+---+---------------------------------+

##  {#section .unnumbered}

## NOTICE OF APPARENT LIABILITY FOR FORFEITURE AND ORDER {#notice-of-apparent-liability-for-forfeiture-and-order .unnumbered}

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

By the Chief, Enforcement Bureau:

# INTRODUCTION

1.  In this *Notice of Apparent Liability for Forfeiture and Order*
    ("*NAL and Order*"), we find that Oceanic Time Warner Cable
    ("Oceanic Kauai"), a division of Time Warner Cable, Inc. (together
    with Oceanic Kauai, "TWC") apparently willfully violated Sections
    76.1201 and 76.640(b)(1) of the Commission\'s Rules ("Rules") in its
    Oceanic Kauai cable system.[^1] Specifically, Oceanic Kauai
    apparently violated Section 76.1201 by moving certain channels to a
    Switched Digital Video ("SDV") platform on November 6, 2007, thereby
    preventing subscribers with CableCARD-equipped unidirectional
    digital cable products ("UDCPs") from using their navigation devices
    to access these channels.[^2] Further, in its deployment of SDV on
    November 6, 2007, TWC apparently violated Section 76.640(b)(1) by
    failing to provide a virtual channel table which conforms to the
    standards required under Sections 76.640(b)(1)(i) and
    76.640(b)(1)(v). We conclude, pursuant to Section 503(b) of the
    Communications Act of 1934, as amended ("Act"),[^3] that TWC is
    apparently liable for a forfeiture in the amount of twenty thousand
    dollars (\$20,000). We also require TWC to make appropriate refund
    of fees charged to customers affected by TWC's movement of linear
    channels to the SDV platform on November 6, 2007.[^4]

# BACKGROUND

2.  Congress and the Commission have long recognized the importance of
    allowing consumers the freedom to purchase their own navigation
    devices from sources other than their cable operator, satellite
    provider, or other multichannel video programming distributor
    ("MVPD"). Thus, Congress adopted Section 629 of the Act,[^5] which
    requires the Commission to ensure the commercial availability of
    navigation devices. By separating the security and navigation
    functions of equipment used to receive MVPD programming, Congress
    hoped to spur competition and expand consumer choice. As the House
    Report accompanying Section 629 noted, "competition in the
    manufacturing and distribution of consumer devices has always led to
    innovation, lower prices and higher quality. Clearly, consumers will
    benefit from having more choices among telecommunications
    subscription services available through various distribution
    sources."[^6] At the same time, Congress recognized that MVPDs have
    "a valid interest, which the Commission should continue to protect,
    in system or signal security and in preventing theft of
    service."[^7]

3.  In its order proposing rules implementing Section 629, the
    Commission stated that its overarching goal was to assure
    competition in the availability of set-top boxes and other customer
    premises equipment.[^8] 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." [^9]

4.  Thus, in adopting Section 76.1201 of the Commission's Rules,[^10]
    which allows subscribers to acquire, attach, and use any compatible
    navigation device with an MVPD's system, 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.[^11] 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."[^12] The Commission emphasized
    that "\[f\]ollowing the *Carterfone* principle adopted in the
    telephone context would allow subscribers the option of owning their
    own navigation devices and would facilitate the commercial
    availability of equipment."[^13] The Commission stated that "\[t\]he
    steps taken in this Report and Order, if implemented promptly and in
    good faith, should result in an evolution of the market for
    navigation devices so that they become generally and competitively
    available."[^14] 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.[^15]

5.  Five years later, in the *Plug and Play Order*,[^16] the Commission
    took further steps to facilitate the direct connection of digital
    navigation devices (including commercially available UDCPs) to MVPD
    systems. Specifically, the Commission considered standards agreed
    upon by the cable and consumer electronics ("CE") industries[^17]
    and adopted a cable compatibility standard for integrated,
    unidirectional digital cable television receivers, as well as other
    UDCPs, to ensure the compatibility and commercial availability of
    UDCPs with cable television systems. 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.[^18] 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[^19] without
    the need of a separate set-top box leased from their cable operator,
    while protecting the cable operator from theft of its programming
    services.[^20]

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.[^21] In an SDV system, a subset of programming
    is delivered in the traditional way to all subscribers regardless of
    whether they are viewing the programs. For those channels, the
    CableCARD-equipped UDCP works as described above, allowing the
    subscriber to view the channels delivered in the traditional
    broadcast manner. The remaining channels are switched through the
    use of SDV network equipment located at a "hub" (where signals are
    converted and placed onto the "last mile" coaxial portion of the
    network). These switched channels do not occupy bandwidth, and are
    not available to subscribers until a subscriber tunes to that
    channel by sending a request, using a remote control or program
    guide, upstream through the use of a set-top box to the hub. At the
    hub, the SDV equipment directly receives and processes set-top
    channel change requests for switched content and responds to that
    set-top with the frequency and program number where that content can
    be found. Once the hub receives the request, it immediately begins
    to transmit the channel.

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

9.  As noted above, the *Plug and Play Order* not only adopted standards
    to allow commercially available navigation devices to work with MVPD
    systems*,* but also adopted technical rules to ensure that cable
    subscribers would be able to view digital cable services while still
    enjoying full functionality of their UDCPs.[^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 TWC based on complaints that the company had moved
    certain cable channels that previously had been accessible to
    subscribers using CableCARD-equipped UDCPs, such as digital cable
    ready television sets and digital video recorders, to an SDV
    platform. Specifically, one complainant alleged that TWC had
    deployed SDV and moved a large number of channels to an SDV
    platform, including popular high definition ("HD") sports and
    entertainment channels.[^27] According to the complaints, TWC's
    implementation of SDV necessarily required customers using a
    CableCARD to obtain additional equipment, *i.e.*, a set-top box,
    from the cable company to continue to receive all cable channels
    available to them prior to the change to the SDV platform.[^28] 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,[^29] the
    2002 MOU,[^30] and in particular, the policies and rules established
    by the Commission in the *Plug and Play Order.*[^31] The Bureau
    issued its first supplemental LOI on August 25, 2008[^32] and a
    second supplemental LOI on October 3, 2008[^33] to TWC to obtain
    additional information concerning the company's deployment of SDV.

16. TWC responded to the LOI on November 30, 2007,[^34] and responded in
    part to the first supplemental LOI on September 12, 2008[^35] and in
    full on September 23, 2008.[^36] TWC responded to the second
    supplemental LOI on October 14, 2008.[^37] In its response, TWC
    admits that its Oceanic Kauai cable system deployed SDV for its
    Kauai customers on November 6, 2007, moving 62 linear channels to an
    SDV platform.[^38] For CableCARD customers affected by its SDV
    deployment,[^39] TWC offered set-top boxes at the same price as the
    customers' CableCARDs for two years from the date of SDV
    deployment.[^40] TWC states that it had planned to deploy SDV on
    several other Hawaiian islands, but has deferred that action until
    it has provided 30 days notice to the relevant Local Franchising
    Authority ("LFA").[^41]

17. With respect to the technical requirements described above, TWC
    admits that it does not provide its subscribers using
    CableCARD-equipped UDCPs with a virtual channel table that includes
    programming on its SDV platform.[^42] Rather, it enables its
    CableCARD subscribers to navigate only to "all one-way services
    *provided* to the UDCP."[^43] TWC asserts that its actions are
    consistent with Section 76.640 of the Commission's Rules because --
    according to TWC -- Section 76.640(b)(1)(v) does not require that
    UDCPs be able to navigate "*two-way* programming streams delivered
    using SDV technology."[^44]

# DISCUSSION

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

18. Section 76.1201 of the Rules prohibits an MVPD from "prevent\[ing\]
    the connection or use of navigation devices to or with its system"
    unless such devices would cause electronic or physical harm or allow
    the unauthorized receipt of service.[^45] Based on the record before
    us, we find that TWC apparently willfully[^46] violated Section
    76.1201 by moving certain linear channels to an SDV platform in its
    Oceanic Kauai cable system[^47] on November 6, 2007.[^48] In so
    doing, TWC prevented subscribers with UDCPs, such as "digital cable
    ready" televisions and TiVo recorders, from viewing the switched
    linear channels that were already part of their subscription package
    without the use of a TWC-supplied set-top box, thus impairing the
    use of those UDCPs within the affected cable system. Additionally,
    because customers now must have a TWC-leased set-top box to view
    many of their channels, even on UDCP devices, TWC's migration of
    channels to an SDV platform has prevented the use of some functions
    available on those UDCPs, such as the abilities to view
    picture-in-picture and to record one channel while viewing another
    channel.[^49]

19. Notwithstanding its effect on CableCARD-using UDCP owners, TWC
    contends that its movement of existing linear channels to an SDV
    platform is fully consistent with the Act and the Commission's rules
    and policies, including the *Plug and Play Order* and the 2002 MOU
    between the cable operators and the CE industry.[^50] TWC states
    that the *Plug and Play Order,* which adopted specific provisions of
    the 2002 MOU with certain modifications, established a regulatory
    framework for the commercial introduction of unidirectional
    navigation devices, and explicitly recognized that *all* two-way
    services, including SDV service, would require a set-top box.[^51]
    TWC submits that the Commission fully anticipated and accounted for
    the deployment of new interactive services like SDV, and sought to
    ensure that the standards adopted in the *Plug and Play Order* would
    not freeze technology or stifle the innovation of new
    technology.[^52] According to TWC, neither the 2002 MOU nor the
    *Plug and Play Order* prohibit cable operators from deploying new
    services or restrict the development or deployment of SDV or other
    bi-directional technologies and services.[^53] TWC argues that
    rather than prohibiting the deployment of new technology and
    services by cable operators, the Commission sought to safeguard
    consumers' interest by promoting outreach and consumer
    education.[^54] TWC claims that it has fulfilled its
    responsibilities to subscribers with UDCPs by informing them of the
    need for a set-top box to receive two-way services, and, for the SDV
    deployment at issue here, has accommodated consumers using a
    CableCARD-equipped UDCP by offering to lease a set-top box at no
    additional charge for two years.[^55] In short, TWC argues that the
    Commission's rules leave cable operators "free to innovate and
    introduce new products and services without regard to whether
    consumer electronics manufacturers are positioned to deploy
    substantially similar products and services."[^56]

20. We reject TWC's arguments as inconsistent with the language and the
    intent of the Commission's rules and orders.[^57] Taken to its
    logical conclusion, TWC's reasoning would permit an MVPD to move
    *all* of its programming to an SDV platform without regard for the
    impact its actions would have on customers using or wishing to use
    CableCARD-equipped UDCPs. Such an outcome would be fundamentally at
    odds with the Commission's goal of protecting cable subscribers'
    ability to view signals through the use of commercially available
    navigation devices offered in a competitive market. TWC's movement
    of linear channels that were previously accessible with a
    CableCARD-equipped UDCP to a switched digital platform that can only
    be accessed with a TWC-provided set-top box conflicts with the
    Commission's rules and policies designed to promote competition and
    consumer choice of navigation devices.

21. While we recognize that the *Plug and Play Order* does not prohibit
    cable operators from developing and deploying new technology and
    services, it does not permit TWC's actions here. In recognizing that
    cable operators are free to innovate and introduce new products and
    services, the Commission cautioned that such development and
    deployment of new products and services should not interfere with
    the functioning of consumer electronics equipment or the
    introduction of such equipment into the commercial market for
    navigation devices.[^58] Indeed, the Commission has continually
    emphasized that its navigation device rules are an important tool
    for promoting competition and bringing more choices to
    consumers.[^59] Yet the manner in which TWC has opted to administer
    its SDV programming effectively negates the concerted efforts and
    advances made thus far to achieve a competitive pro-consumer
    environment for such equipment.

22. Specifically, by moving linear programming to an SDV platform, TWC
    has prevented CableCARD-equipped UDCPs from receiving previously
    available channels and impaired the usefulness of competitive
    commercially available navigation devices, in violation of the
    Commission's Rules and the intent of Section 629. The Commission
    recognized that devices made pursuant to the standard adopted in the
    *Plug and Play Order* lacked upstream or bi-directional capabilities
    and therefore could not receive certain programming or services, but
    that recognition did not extend to services that consumers
    traditionally experienced as one-way services or programming that
    was part of the package for which they were already paying.[^60] 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.[^61] TWC
    states that its activation of SDV technology did not prevent its
    customers with UDCPs from receiving switched channels; but rather,
    these customers simply needed to obtain a set-top box to view such
    programming.[^62] Such a situation is fundamentally at odds with the
    policy and regulatory objectives of the *Plug and Play* *Order*.

23. Section 76.1201 was adopted to achieve the statutory requirement of
    alternative sources of navigation devices and to ensure the
    commercial availability of navigation devices.[^63] The *Plug and
    Play Order* sought to provide further assurance of the commercial
    availability of navigation devices by requiring that cable operators
    support the operation of UDCPs in connection with their cable
    systems. TWC's movement of linear programming to an SDV platform
    clearly impairs the use of CableCARD-equipped UDCPs and
    fundamentally limits the commercial and competitive viability of
    those devices. After TWC's movement of linear programming to an SDV
    platform, customers who use CableCARD-equipped UDCPs can no longer
    receive that programming without leasing a set-top box from the
    company.[^64] Those customers who choose to lease a set-top box not
    only must bear the additional cost, but also lose many features of
    their UDCPs, such as picture-in-picture viewing and the ability to
    record one channel while watching another. Accordingly, TWC is
    preventing its customers from using their UDCPs and undermining the
    policy goals of Congress and the Commission to ensure the commercial
    availability and use of navigation devices. Thus, we find TWC's
    November 6, 2007 migration of linear channels to an SDV platform in
    its Oceanic Kauai cable system apparently constitutes a willful
    violation of Section 76.1201 of the Rules.

24. TWC also stresses the importance of the development and deployment
    of SDV. TWC claims it is pro-competitive, pro-consumer, vital to the
    digital television transition (especially for carriage of broadcast
    signals in both analog and digital format as required by the
    Commission), and critical for expanding the number of HD programming
    and increasing broadband transmission speeds.[^65] Finally, TWC
    claims that halting or reversing the migration of channels to SDV
    would harm not only TWC's legitimate business interests, but the
    public interest more broadly.[^66]

25. The deployment of SDV technology may provide public benefits. It is
    not TWC's deployment of SDV technology that violates Section
    76.1201, but TWC's migration of existing linear programming to an
    SDV tier that we find inconsistent with the Commission's Rules.[^67]
    For example, charging for channels not presently accessible to
    subscribers with CableCARD-equipped UDCPs undermines the policy and
    regulatory objectives of the *Plug and Play Order.* TWC's movement
    of linear programming to an SDV platform is particularly troubling
    because no bi-directional navigation devices are commercially
    available at this time. We understand that a major impediment to the
    availability of such devices is the cable industry's insistence on
    licensing conditions that go beyond the protection of the network
    from physical or electronic harm or theft or service. For example,
    limitations on the ability to integrate broadband capability into
    competitive navigation devices and the ability to integrate
    web-based or IP content with cable-provided programming are not
    related to Congress' recognition that MVPDs have "a valid interest,
    which the Commission should continue to protect, in system or signal
    security and in preventing theft of service."[^68] We consider such
    restrictions to be contrary to Congress and the Commission's shared
    policy goal of expeditious commercial availability of bi-directional
    navigation devices.

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

26. TWC readily admits that it does not populate the virtual channel
    table with its two-way services.[^69] In its defense, TWC claims
    that Section 76.640 only applies to unidirectional digital cable
    services; on its face, however, Section 76.640 applies only to
    unidirectional *products*.[^70] 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.[^71] Therefore, TWC is
    required to describe programming on an SDV platform in the
    out-of-band forward data channel and populate the virtual channel
    table with all of its programming services. As TWC did not provide a
    complete virtual channel table, TWC violated Sections
    76.640(b)(1)(i) and 76.640(b)(1)(v) of the Commission's Rules.

27. Pointing to the inability of UDCPs to view two-way services, TWC
    claims that Section 76.640, by its "text and history," does not
    apply to SDV, which is a bi-directional service.[^72] But TWC fails
    to cite any language in the rule, the adopting order, or Commission
    precedent in which the Commission stated that 76.640 did not apply
    to such services, including SDV. Including the SDV programming in
    the virtual channel table would make it clear to TWC subscribers
    using CableCARD-equipped UDCPs that their cable operator is charging
    them for programming that they cannot see.

28. In any event, Commission regulatees may not pick and choose with
    which of the Commission's Rules they wish to comply. If TWC believed
    it had a legitimate reason to exclude two-way programming from the
    virtual channel table provided to customers with CableCARD-equipped
    UDCPs, the company should have sought a waiver of the relevant
    rules.[^73] Accordingly, based on the record before us, we find that
    TWC apparently willfully violated Section 76.640(b) by failing to
    provide a virtual channel table as required by Section
    76.640(1)(b)(i) and 76.640(b)(1)(v) in its Oceanic Kauai cable
    system.

> **C. Forfeiture Calculation**

29. Under Section 503(b)(1)(B) of the Act, any person who is determined
    by the Commission to have willfully or repeatedly failed to comply
    with any provision of the Act or any rule, regulation, or order
    issued by the Commission shall be liable to the United States for a
    forfeiture penalty.[^74] 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.[^75] 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.[^76] We conclude that TWC is
    apparently liable for a forfeiture in the amount of twenty thousand
    dollars (\$20,000) for its willful violation of Sections 76.1201,
    76.640(b)(1)(i), and 76.640(b)(1)(v) of the Rules.

30. Under Section 503(b)(2)(A) and Section 1.80(b)(1) of the
    Commission's Rules,[^77] 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."[^78]

31. The Commission's *Forfeiture Policy Statement*[^79] and Section 1.80
    of the Rules do not establish a specific base forfeiture for
    violation of Section 76.1201.[^80] In a similar case, the Commission
    proposed forfeitures for each cable system involved in the
    violation.[^81] Thus, we propose to establish a base forfeiture
    amount for each cable system in which linear programming has been
    moved to an SDV platform, thereby impairing customers' use of
    navigation devices such as UDCPs to view such programming. As noted
    above, this case involves one of TWC's Hawaii Division cable systems
    -- Oceanic Kauai.

32. TWC contends that enforcement action is inappropriate here because
    the number of subscribers that rely on CableCARD-equipped UDCPs is
    small. According to TWC, less than 0.3 percent of its subscriber
    base relies on UDCPs and more than 63 percent of those subscribers
    also utilize one or more set-top boxes.[^82] TWC contends that
    because a large percent of its subscribers benefit from the
    deployment of SDV, the Commission should encourage the deployment of
    SDV rather than conduct enforcement proceedings against operators
    for such deployment.

33. While the number of subscribers that were prevented from using their
    CableCARD-equipped UDCPs to access certain programming may be a
    relatively small percentage of all cable subscribers, we consider
    the consumer harm resulting from actions here, which frustrate the
    Commission's broader goal of achieving a competitive navigation
    device market, to be significant.[^83] 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.[^84] 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.[^85]
    Given the number of channels involved and the effect of actions like
    those here on the Commission's policy objectives, however, we find
    that a more significant penalty is appropriate. We conclude that
    \$10,000 per cable system in which linear programming is moved to an
    SDV platform is an appropriate base forfeiture for violation of
    Section 76.1201. In this case, TWC moved linear programming to an
    SDV platform in one cable system, Oceanic Kauai. Accordingly, we
    conclude that TWC is apparently liable for a \$10,000 forfeiture for
    its willful violation of Section 76.1201 of the Rules.

35. Additionally, we conclude that TWC is apparently liable for a
    forfeiture in the amount of \$5,000 for its willful violation of
    Section 76.640(b)(1)(i) of the Rules and \$5,000 for its willful
    violation of Section 76.640(b)(1)(v) of the Rules. The Commission's
    *Forfeiture Policy Statement* and Section 1.80 of the Rules do not
    establish a specific base forfeiture for violation of Section
    76.640(b). However, we note that Section 1.80(b) establishes a base
    forfeiture of \$5,000 for unauthorized discontinuance of
    service.[^86] We find that the actions of TWC effectively
    discontinue a portion of the services for each of its CableCARD
    subscribers who choose to view content via a UDCP. We also conclude
    that the amount of the proposed forfeiture for each violation is
    commensurate with the harm imposed upon cable subscribers. Because
    the violation of Section 76.640(b)(1) coincides with the migration
    of linear channels to an SDV platform, we will also apply this base
    forfeiture amount of \$5,000 for each technical violation of Section
    76.640(b)(1) on a per cable system basis. Accordingly, we conclude
    that TWC is apparently liable for a forfeiture in the amount of
    \$10,000 for its willful violation of Sections 76.640(b)(1)(i) and
    76.640(b)(1)(v) in its Oceanic Kauai cable system.

36. TWC's implementation of SDV in its Oceanic Kauai cable system, in
    which previously available linear programming was moved to an SDV
    platform, resulted in the removal of channel information and the
    loss of access to those switched channels for its subscribers using
    CableCARD-equipped UDCPs. Moreover, such implementation of SDV,
    without having in place standards to ensure bi-directional
    compatibility of cable television systems and CE equipment,
    effectively harms the Commission's policies to move navigation
    devices toward a fully competitive market. We note that TWC could
    have sought a waiver of these rules under Section 76.1207, but
    failed to do so.[^87] Accordingly, we conclude that TWC is
    apparently liable for a total forfeiture amount of twenty thousand
    (\$20,000) for its willful violation of Sections 76.1201 (\$10,000),
    76.640(b)(1)(i) (\$5,000), and 76.640(b)(1)(v) (\$5,000) of the
    Commission's Rules.

> **D. TWC Must Issue Refunds To Customers Harmed by its SDV
> Implementation**

37. TWC's implementation of SDV has harmed its customers who opted to
    purchase and use television receiving equipment that does not
    require a cable operator-supplied set-top device to receive cable
    service. Many consumers purchased expensive UDCPs, such as "cable
    ready" televisions and digital video recorders like TiVos, based on
    the reasonable assumption that no set-top box would be necessary to
    receive linear programming.[^88] In effect, TWC's movement of linear
    programming to an SDV platform has substantially diminished the
    value of its customers' UDCP devices. Moreover, CableCARD customers
    affected by TWC's SDV deployment now must pay higher prices to lease
    set-top boxes than they would have paid for CableCARDs. Those
    CableCARD customers who chose not to obtain the TWC-supplied set-top
    boxes after the implementation of SDV nevertheless have paid the
    same monthly rate for their cable service even though they can view
    significantly fewer channels. Most importantly, however, TWC's
    movement of linear programming to an SDV platform set back the
    shared goal of Congress and the Commission of a competitive market
    for commercially available navigation devices, as required by
    Section 629 and the Commission's rules.

38. In calculating the harm to TWC's customers who use UDCP equipment,
    we recognize that TWC has made offers to its CableCARD customers to
    offset the costs of obtaining a set-top box. TWC states that to
    mitigate the impact of its SDV deployment, it offered subscribers
    with UDCPs in its Hawaii Division the opportunity to lease an
    interactive set-top box for two years for the same monthly charge as
    a CableCARD.[^89] Specifically, TWC's notice to its customers states
    that the customer can exchange each CableCARD for a digital cable
    box at no extra charge and encourages customers to call to schedule
    a free visit. The notice also states that "\[d\]iscounting the
    digital box(es) in exchange for the cable card(s) will continue for
    a minimum of two years."[^90] While TWC's offer to provide a free
    set-top box to its CableCARD customers may provide temporary relief
    to its customers, it is not a permanent solution -- the benefits
    promised by TWC are, at best, limited in duration. TWC's offer does
    not address the critical problem concerning the company's
    interference with its customers' use of independently obtained
    UDCPs, *i.e.*, the loss of service to the extent customers can view
    fewer channels than they did before the movement of linear
    programming to an SDV platform, nor does it address the loss of
    functionality of the device in question.

39. Thus, we order TWC, within ninety (90) days of this *NAL and Order,*
    to issue refunds to CableCARD customers affected by the November 6,
    2007 implementation of SDV in its Oceanic Kauai cable system.
    Specifically, TWC must provide refunds as follows:

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

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

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

# ordering clauses

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

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

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

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

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

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

47. **IT IS FURTHER ORDERED** that a copy of this Notice of Apparent
    Liability for Forfeiture and Order shall be sent by first class mail
    and certified mail return receipt requested to counsel for Time
    Warner, Inc.: Arthur H. Harding, Esq., Fleischman and Harding LLP,
    1255 23rd Street, N.W., Eighth Floor, Washington, D.C. 20037 and
    Matthew A. Brill, Esq., Latham & Watkins LLP, 555 Eleventh Street,
    N.W., Suite 1000, Washington, D.C. 20004-1304.

    FEDERAL COMMUNICATIONS COMMISSION

Kris Anne Monteith

Chief, Enforcement Bureau

**ATTACHMENT A**

Representative Customer Complaints Received by FCC

Concerning Time Warner Cable's Implementation of SDV

in its Hawaii Division

  --------------------------------------------------------------------------------
  **Date       **Complaint      **Consumer Complaint**
  Received**   Number**         
  ------------ ---------------- --------------------------------------------------
  08/13/2008   08-C00045550-1   Oceanic Time Warner is not providing equal access
                                to \"cable card\" customers, as stated in the FCC
                                act of 1996. Customers with cable cards can not
                                access \"switched video signals\" which is the
                                preferred method of broadcast for most digital
                                channels by Oceanic. Other cable companies now
                                provide \"Tuning Adapters,\" \"Tuning Resolvers,\"
                                or \"Dongles,\" to resolve this problem. However,
                                Oceanic seems to continue to be above the law, and
                                does not provide anything for it.

  07/31/2008   08-C00042096-1   I signed up for service with Oceanic Time Warner
                                Cable today, and told them I wanted a Cable Card
                                so that I could use my Tivo to record programming.
                                While they will provide a Cable Card, they limit
                                the cable card in so many ways in order to limit
                                it as a viable choice. There are many many
                                channels that the Cable Card does not receive,
                                including all high definition channels. Even basic
                                channels such as the Weather channel are not
                                available to Cable Card users. While they may be
                                operating within the law by offering a Cable Card
                                alternative, it\'s clear that they have limited
                                the Cable Card in such a dramatic way such that it
                                is unusable. This type of action should certainly
                                be addressed by the FCC in order to protect
                                consumer choice.

  04/24/2008   08-C00016147-1   Oceanic Time Warner (OTW) cable is in violation of
                                the spirit of the Telecommunications act of 1996.
                                They are supposed to provide equal access to Cable
                                Card users who do not wish to use OTW\'s cable
                                boxes or DVR\'s. Currently, OTW provides something
                                called \"switched video\" access to all users who
                                wish to receive High Definition signals on their
                                tv\'s. Unfortunately for Tivo users, this
                                \"switched video\" signal does not allow for Tivo
                                boxes to receive these signals and the Tivo is
                                \"locked out\" of the High Definition service (30
                                Channels). I called OTW and their claim is that
                                the \"switched video\" service is a benefit to its
                                customers because it provides access to more
                                channels at a lesser band width. I understand how
                                this can be considered beneficial, however in
                                doing this, they violate the Act being that the
                                only customers who can receive these signals are
                                customers WITHOUT Cable Cards only giving access
                                to Customers using their boxes. This is a break
                                down of what a non-Tivo use

  12/26/2007   07-W13616500     Anticompetitive behaviour including, but not
                                necessarily limited to, disabling of HDTV
                                broadcast for CableCard customers, instead making
                                these available only via Cable tuner boxes or
                                Digital Video Recorders supplied by Oceanic Cable.
                                Competing products such as TiVo Series3 are
                                \[sic\] no longer able to receive the majority of
                                HDTV broadcasts. I am concerned that this
                                monopolistic behavior that may violate sections of
                                the Telecommunications Act of 1996.

  11/02/2007   07-W13507006     On November 6, 2007, Oceanic Time Warner Cable
                                will change to Switched Digital Video (SDV),
                                effectively making useless cable cards and my Tivo
                                series 3 DVR in which the cards are installed.
                                This change will shut off at least 15 channels of
                                HD programming and at least 60 channels of digital
                                programming that I currently receive. All new
                                channels after the change, according to Oceanic
                                TW, will only be available via SDV. About 6 months
                                ago I decided to purchase a Tivo Series 3 after
                                speaking with at least 3 different Oceanic
                                customer service representatives about Tivo's
                                compatibility. They all assured me that the Tivo
                                with Cable Cards would work, and that I'd receive
                                all programming except pay per view and other
                                limited content. Never did anyone mention that
                                most programming received now would be blocked
                                from cable cards when switching to SDV. I am aware
                                that technology is in development to fix this
                                situation, however, SDV should not be implemented
                                until the technology catches up. If the FCC
                                mandated that cable companies use cable cards,
                                then how can the FCC allow these cable companies
                                to indiscriminately shut off programming to cable
                                card users -- especially programming that we've
                                been receiving up to this point? Could the FCC ask
                                Oceanic Time Warner Cable to reconsider delaying
                                this change until technology allows cable cards to
                                function with SDV? I look forward to your response
                                in this matter.

  9/21/2007    07-W13394299     Oceanic Time Warner is ceasing to support
                                CableCARD HD programming as of 9/24/07. This is
                                clearly an antitrust issue, to force customers to
                                rent their cable boxes if they want to receive HD
                                programming. Is this not in clear violation of the
                                FCC rulings over the past few years, which have
                                been meant to uncouple decoding issues from access
                                issues? Furthermore, this essentially eliminated
                                TIVO as an alternative to the cable company's
                                boxes, since TIVO works with cableCARDS. Help!

  8/27/2007    07-R522759       At the beginning of August 2007, I called Oceanic
                                Time Warner (located in Hawaii) to request cable
                                cards that carried High Definition package to go
                                along with a HD-Tivo DVR that I wanted to
                                purchase. The customer service representative
                                stated that the cable cards would allow me to
                                watch and record HD programs on the HD-Tivo. I
                                made an agreement with the customer service
                                representative and I ordered the cards. Then I
                                spent \$300 for the HD-Tivo DVR and \$300 for a
                                Tivo Service subscription package and I made an
                                appointment for an Oceanic cable technician to
                                come out and install the cards. After three weeks,
                                on August 24, 2007, the technician came out and
                                tried to install the cards. Everything worked on
                                the TV except the HD package. After two hours of
                                making calls, the technician learned that over the
                                last few weeks, Oceanic Cable (without telling
                                their workers) decided to stop allowing the HD
                                package available on the cable cards (it is
                                available on their cable boxes). On the same day,
                                I then made a call to the technician's supervisor
                                who told me that there was nothing that he could
                                do because it wasn't his decision. He said that he
                                would try and work out an alternative solution,
                                but there was no way that they were going to offer
                                the cable cards with HD. My complaint is this: I
                                entered into an agreement with Oceanic Cable to
                                purchase cable cards with an HD package, and I
                                ended up spending a great deal of money and time
                                towards a product they never intended to honor. I
                                need to know whether the standard cable packages
                                (specifically HD programming) that cable companies
                                offer on their cable boxes MUST also be offered on
                                their cable cards (with the exception of
                                interactive programming).

  8/20/2007    07-W13296545     According to Oceanic Time Warner Cable's CSR I
                                spoke to yesterday (after an installer was unable
                                to provide access to HD programming via Cable
                                Card) Oceanic is now going to a SDV (Switched
                                Digital Video) system and requires the Cable Card
                                to have two way communication. This type of Cable
                                Card technology has not been created yet and is
                                not available for any Cable Card device on the
                                market today. Also that as of August 13, 2007, all
                                of Oceanic's HD programming was moving to this SDV
                                and I could no longer purchase it from them for
                                use on my cable card device. They explained to me
                                that cable card is less than 2% of the market.
                                They needed the SDV upgrade to supply more
                                channels and that cable card was in the way of
                                that progress. Over the last 24 hours I have
                                familiarized myself with only a small portion of
                                the Telecom Act of 1996. But I feel that Oceanic
                                Cable/Time Warner is clearly disregarding the
                                Federal Mandates by not including all programming
                                via Cable Card especially HD programming.

  7/20/2007    07-W13208259     Despite the July 1, 2007 effective date of the
                                FCC's Order regarding cable card enabled (non
                                integrated) digital set top TV cable boxes, Time
                                Warner in Hawaii will only issue a cable card
                                enabled box (1) as part of its PVR box and (2) if
                                you agree to upgrade to HD. Despite the Order,
                                Time Warner Hawaii will not issue any other cable
                                card enabled (non integrated) set top box and will
                                not allow cable cards to be used with non-HD
                                service. Please investigate as I would like to use
                                cable cards as soon as possible and Time Warner is
                                clearly making up "rules" for its consumers in
                                Hawaii that are at odds with both the letter and
                                intent of the FCC's Order.
  --------------------------------------------------------------------------------

[^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]: TWC's notice to its customers, as well as technical papers
    submitted by the company to the Bureau, support our characterization
    of TWC's actions as "moving" or "migrating" linear programming to a
    SDV platform.

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

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

[^7]: *Id*.

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

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

[^10]: 47 C.F.R. § 76.1201.

[^11]: *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)).

[^12]: *Navigation Devices Order*, 13 FCC Rcd at 14780, ¶ 11.

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

[^14]: *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.

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

[^16]: *Implementation of Section 304 of the Telecommunications Act of
    1996, Commercial Availability of Navigation Devices, Compatibility
    Between Cable Systems and Consumer Electronics Equipment*, Second
    Report and Order and Second Further Notice of Proposed Rulemaking,
    18 FCC Rcd 20885 (2003) ("*Plug and Play Order*"). "The term 'plug
    and play' refers to a device's ability to plug into a cable system
    and receive digital cable programming without a cable-operator
    provided set-top box." *Third Further Notice of Proposed
    Rulemaking*, 22 FCC Rcd at 12025, n.9.

[^17]: *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.

[^18]: In most cases, the MVPDs have employed CableCARDs as their
    separate-security solution to enable non-integrated conditional
    access. *But see Cablevision Systems Corporation's Request for
    Waiver of Section 76.1204(a)(1) of the Commission's Rules*,
    Memorandum Opinion and Order, 22 FCC Rcd 220, 221-222 (2007). The
    Commission granted Cablevision a waiver of the ban on cable operator
    deployment of set-top boxes with integrated security to allow
    Cablevision to use a Smart-Card-based separate-security solution,
    which is CableCARD-compatible with the use of an adaptor.

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

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

[^21]: *See 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.").

[^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
    Mark Lawrence-Apfelbaum, Esq., Executive Vice President and General
    Counsel, Time Warner Cable, Inc. (Nov. 8, 2007) ("Nov. 8 LOI").

[^27]: *See* Letter from Robert A. Flatt to Kevin J. Martin, Chairman,
    Federal Communications Commission dated Nov. 7, 2007 (available as a
    comment in CS Docket No. 97-08) ("*Flatt Complaint*"). According to
    the August 21, 2007 notice that TWC sent to its Hawaii subscribers,
    Oceanic planned to move certain channels to a two-way switched
    digital platform on September 24, 2007. TWC ultimately delayed its
    deployment of SDV until November 6, 2007. *See* Letter from Arthur
    H. Harding, Fleischman and Harding LLP and Matthew A. Brill, Latham
    & Watkins LLP, counsel for TWC, dated September 12, 2008 ("Sept. 12
    Supplemental LOI Response") at Exhibit A.

[^28]: *Id*. at 1. In addition to the *Flatt Complaint*, the Commission
    has received several other complaints from TWC customers about
    Oceanic's SDV deployment. We have provided relevant excerpts and
    identifying information for those complaints in Attachment A. Unlike
    the *Flatt Complaint*, these complaints were not filed in a public
    Commission docket, so we will treat the complainants' names as
    confidential for privacy reasons.

[^29]: The Nov. 8 LOI stated we were investigating possible violations
    of Section 629 of the Act, 47 U.S.C. § 549, and Sections 76.640,
    76.980(f), 76.984, 76.1204, 76.1206, and 76.1603 of the Commission's
    rules, 47 C.F.R. §§ 76.640, 76.980(f), 76.984, 76.1204, 76.1206, and
    76.1603.

[^30]: *See Plug and Play Order*, 18 FCC Rcd at 20885 n.3.

[^31]: *Id.* at 20885.

[^32]: *See* Letter from JoAnn Lucanik, Deputy Chief, Spectrum
    Enforcement Division, Enforcement Bureau, Federal Communications
    Commission to Arthur H. Harding, Fleischman and Harding LLP and
    Matthew A. Brill, Latham & Watkins LLP, counsel for TWC, (Aug. 25,
    2008) ("Aug. 25 Supplemental LOI"). The Aug. 25 Supplemental LOI
    noted that the investigation now included possible violations by TWC
    of Sections 76.1201 and 76.1202 of the Rules. 47 C.F.R. §§ 76.1201,
    76.1202. *Id*., at note 3.

[^33]: *See* Letter from JoAnn Lucanik, Deputy Chief, Spectrum
    Enforcement Divison, Enforcment Bureau, Federal Communications
    Commission, to Arthur H. Harding, Fleischman and Harding LLP and
    Matthew A. Brill, Latham & Watkins LLP, counsel for TWC, (Oct. 3,
    2008) ("Oct. 3 Supplemental LOI").

[^34]: *See* Letter from Arthur H. Harding, Fleischman and Harding LLP
    and Matthew A. Brill, Latham & Watkins LLP, Counsel for Time Warner
    Cable, to Kathryn S. Berthot, Chief, Spectrum Enforcement Division,
    Enforcement Bureau, Federal Communications Commission (Nov. 30,
    2007) ("Nov. 30 LOI Response").

[^35]: *See* Sept. 12 Supplemental LOI Response.

[^36]: *See* Letter from Arthur H. Harding, Fleischman and Harding LLP
    and Matthew A. Brill, Latham & Watkins LLP, Counsel for Time Warner
    Cable, to Marlene H. Dortch, Secretary, Federal Communications
    Commission (Sept. 23, 2008) ("Sept 23 Supplemental LOI Response").
    TWC provided clarification on the Hawaii cable systems affected by
    the November 6, 2007 SDV implementation on October 6, 2008. *See*
    e-mail from Matthew Brill to JoAnn Lucanik October 6, 2008 ("Oct. 6
    E-mail").

[^37]: *See* Letter from Arthur H. Harding, Fleischman and Harding LLP
    and Matthew A. Brill, Latham & Watkins LLP, Counsel for Time Warner
    Cable, to Marlene H. Dortch, Secretary, Federal Communications
    Commission (Oct. 14, 2008) ("Oct. 14 Supplemental LOI Response").

[^38]: Sept. 12 Supplemental LOI Response, Exhibit A.

[^39]: TWC reports that its Hawaii Division, which includes its Oceanic
    Kauai cable system, had 415,534 subscribers at the time of SDV
    deployment. The company does not have a precise estimate of the
    number of CableCARD-using UDCPs affected by its SDV deployment, but
    believes it to be less than 583. *Id.*

[^40]: In its most recent offer, TWC limited the period for affected
    CableCARD customers to receive a free set-top box to six months.
    *Id.*

[^41]: *Id.*

[^42]: Oct. 14 Supplemental LOI Response at 7 (emphasis added).

[^43]: *Id.* (emphasis in original).

[^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]: TWC states that in its Hawaii Division, TWC deployed SDV for the
    islands of Oahu and Kauai on November 6, 2007; and that the Maui,
    Kona and Hilo SDV deployment, scheduled for September 2, 2008, was
    being delayed. Sept. 12 Supplemental LOI Response, Exhibit A.

[^48]: We are aware that other TWC cable systems have implemented SDV
    and will address the legality of those actions in future
    proceedings.

[^49]: 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).

[^50]: Nov. 30 LOI Response at 1, 14-17.

[^51]: Specifically, TWC states that "\[j\]ust as the *Plug & Play
    Order* expressly recognized that a set-top box would be required to
    receive any interactive services, the MOU made clear that the
    unidirectional products it covered 'do not utilize the return path
    of the cable system.' As a result the MOU recognizes that UDCPs
    would require a set-top box to access services such as VOD or IPPV.
    Since SDV -- like VOD and IPPV -- does utilize the return path of
    the cable system, it falls outside of the MOU's description of
    covered products and services." *Id*. at 16 (internal citations
    omitted).

[^52]: *Id*. at 15. TWC cites to *Implementation of Section 304 of the
    Telecommunications Act of 1996: Commercial Availability of
    Navigation Devices; Compatibility Between Cable Systems and Consumer
    Electronics Equipment*, Second Report and Order, 20 FCC Rcd 6794
    (2005) ("*2005 Deferral Order*"). In the *2005 Deferral Order*, TWC
    states that the Commission explained its "objective \... has been
    'to ensure that the goals of Section 629 are met without fixing into
    law the current state of technology." Nov. 30 LOI Response at 4-5
    (citing to *2005 Deferral Order*, 20 FCC Rcd at 6812, ¶35).

[^53]: *Id*. at 14. Rather, TWC states, the Commission's *Plug and Play
    Order* explicitly recognized that all two-way services, including
    SDV, would require a set-top box.

[^54]: *Id*. at 5. According to TWC, the Commission "encouraged cable
    operators to 'ensure that subscribers and local retailers are both
    aware of the availability of digital cable service in their area and
    of the compatibility of unidirectional digital cable products with
    operators' systems,' and further called on the consumer electronics
    industry 'to collaborate with both their retail partners and the
    cable industry to develop consumer awareness campaigns about
    unidirectional digital cable televisions and their functionalities,
    particularly with regard to the need for set-top boxes in order to
    receive interactive services.'" *Id.* (citing *Plug and Play Order*,
    18 FCC Rcd at 20904, at ¶41). Once again, we note that the
    Commission clearly indicated its understanding that UDCPs' problems
    were limited to "interactive services" and not linear programming.

[^55]: *Id*. at 15. As noted earlier, however, TWC has offered only six
    months of discounted fees for its set-top boxes for its upcoming
    planned deployment of SDV in Hawaii. *See* Sept. 12 Supplemental LOI
    Response at Exhibit A. Many other TWC divisions have not offered any
    discounts.

[^56]: Nov. 30 LOI Response at 5 (citing *2005 Deferral Order,* 20 FCC
    Rcd at 6809, ¶ 30.)

[^57]: TWC also argues that "curtailing TWC's ability to deliver its
    programming of choice based on its selection of the most efficient
    technology available would likely run afoul of the First Amendment."
    *See Oct. 14 Supplemental LOI Response* at 5 (citation omitted). We
    reject this argument. The requirements at issue are content neutral
    and are narrowly tailored to further the substantial federal
    interest of maximizing commercial availability of navigation devices
    to the consumer. *See Turner Broadcasting System, Inc. v. FCC,* 512
    U.S. 622, 662 (1994).

[^58]: *2005 Deferral Order*, 20 FCC Rcd at 6809-10.

[^59]: *Id.*

[^60]: "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.").

[^61]: TWC's Nov. 30 LOI Response cites an *ex parte* letter it filed in
    the *Plug and Play* docket in 2006. In that letter, TWC states that
    it informed staff from the Commission's Media Bureau "that SDV would
    impact some subscribers using \[UDCPs\], but noted that *these
    subscribers would continue to receive nearly all the same channels
    as subscribers using digital set top boxes*. Contrary to the
    suggestions of the Consumer Electronics Association in its March 23,
    2006 *ex parte*, the use of SDV by TWC in no way contravenes our
    support of UDCPs." Letter from Steven N. Teplitz, Time Warner Cable,
    Inc. to Marlene Dortch, Secretary, Federal Communications Commission
    dated May 11, 2006 (filed in CS Docket 97-80) ("*TWC Ex Parte
    Letter"*) (emphasis added). As the facts of this case demonstrate,
    TWC's removal of more than 60 channels, including popular HD
    channels, is inconsistent with the company's *ex parte* letter more
    than a year beforehand.

[^62]: *See* Nov. 30 LOI Response at 4, 9-10.

[^63]: *See Navigation Devices Order*, 13 FCC Rcd at 14786.

[^64]: According to the TWC notice announcing the deployment that
    ultimately took place on November 6, 2007, more than 40 channels
    would be moved to the SDV platform and no longer available without
    the use of a TWC-supplied set-top box: Digital Cable Service:
    (CSPAN-3, CSPAN-2, CNBC World, Bloomberg TV, The Weather Channel,
    AZN TV, Imaginasian, The Outdoor Channel, Country Music TV, VH1
    Classic, BET On Jazz, Ovation), Sports Pak: (Fuel, NBA TV, The
    Tennis Channel, Fox College Sports-Atlantic, Fox College
    Sports-Central, Fox College Sports-Pacific, College Sports TV),
    Encore Service: (Fuse), Spanish Pak: (Galavision, Fox Sports World
    Espanol, CNN Espanol, Discovery en Espanol, CNN Espanol, ESPN
    Deportes), Premium: (Chinese Channel), HD Entertainment Pak: (HD
    Golf/HD Versus, HD Versus & Golf, HD FSN, HD National Geographic, HD
    Net, HD Net Movies, INDemand HD, ESPN HD, ESPN2HD, HD Universal),
    Jewelry Channel, Pentagon Channel, KOAM, Ocean Network, and
    Inspirational TV. *See also* TWC Sept. 12 Supplemental LOI Response,
    Exhibit A (stating that 62 channels ultimately were moved to SDV
    platform).

[^65]: Nov. 30 LOI Response at 1-2, 12-13.

[^66]: *Id*. at 12 & n.25.

[^67]: TWC argues that the only way it can create additional capacity
    using SDV is to move existing programming to an SDV platform. *See*
    Letter from Arthur H. Harding, Fleischman and Harding LLP, and
    Matthew A. Brill, Latham & Watkins LLP, Counsel for Time Warner
    Cable to William Davenport, Assistant Chief, Enforcement Bureau,
    Federal Communications Commission (Oct. 6, 2008) ("Oct. 6
    Supplemental Response") at 1. Even if this point had some relevance
    to whether TWC has complied with Commission Rules, the company fails
    to provide any evidence to support its claim that it had no channel
    capacity available at the time of the SDV deployment in the Oceanic
    Oahu cable system such that it had no choice but to move existing
    linear programming to the SDV platform.

[^68]: *See supra* note 2.

[^69]: *Id.* at 7.

[^70]: *See* 47 C.F.R. § 76.640 ("Support for unidirectional digital
    cable products on digital cable systems.").

[^71]: *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\...").

[^72]: Oct. 14 Supplemental LOI Response at 2.

[^73]: 47 C.F.R. § 76.1207.

[^74]: 47 U.S.C. § 503(b)(1)(B); 47 C.F.R. § 1.80(a)(1).

[^75]: 47 U.S.C. § 503(b); 47 C.F.R. § 1.80(f).

[^76]: *See, e.g.,* *SBC Communications*, *Inc.,* Forfeiture Order, 17
    FCC Rcd 7589, 7591 (2002).

[^77]: 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.

[^78]: 47 U.S.C. § 503(b)(2)(E). *See also* 47 C.F.R. § 1.80(b)(4), Note
    to paragraph (b)(4): Section II. Adjustment Criteria for Section 503
    Forfeitures. We consider TWC's apparent violations of Section
    76.1201 to have begun on the date its cable system moved previously
    available linear programming to an SDV platform. TWC's apparent
    violations continue each day that such programming remains
    unavailable to customers using CableCARD-equipped UDCPs.

[^79]: *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).

[^80]: 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).

[^81]: *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).

[^82]: Nov. 30 LOI Response at 3.

[^83]: While the number of customers using CableCARD-equipped UDCPs may
    be a relatively small percentage of the overall number of MVPD
    customers nationwide, *see Third Further Notice of Proposed
    Rulemaking*, 22 FCC Rcd at 12025, the absolute number is significant
    -- more than 374,000 among the ten largest incumbent cable operator
    as of September 22, 2008. *See* Letter from Neal Goldberg, General
    Counsel, National Cable & Telecommunications Association, to Marlene
    Dortch, Secretary, FCC dated Sept. 22, 2008 (filed in CS Docket No.
    97-80) (compiling ten cable system reports on CableCARD usage).

[^84]: 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).

[^85]: 47 C.F.R. § 1.80(b)(4)(Note). *See also Cablevision Forfeiture
    Order,* 15 FCC Rcd at 24298.

[^86]: 47 C.F.R. § 1.80(b)(4)(Note). Violation of the broadcast signal
    carriage rule is also analogous to TWC's failure to provide the SDV
    programming information in its virtual channel table. In contrast
    with violations of Section 76.1201, however, violations of Section
    76.640(b)(1) do not affect the viewability of actual programming.
    Therefore, it is appropriate to impose a somewhat lesser penalty for
    such technical violations.

[^87]: Under Section 629(c) of the Act, 47 U.S.C. § 549(c) and Section
    76.1207 of the Commission's Rules, 47 C.F.R. § 76.1207, the
    Commission may waive rules adopted under Section 629(a) of the Act
    for a limited time "upon an appropriate showing by a provider of
    multichannel video programming and other services offered over
    multichannel video programming systems, or an equipment provider,
    that such waiver is necessary to assist the development or
    introduction of a new or improved multichannel video programming or
    other service offered over multichannel video programming systems,
    technology, or products. *See* 47 U.S.C. § 549(c), 47 C.F.R. §
    76.1207.

[^88]: For instance, one complainant stated that after talking to a
    customer service representative who stated that the CableCARDs would
    allow access to HD programming on a HD-Tivo DVR, the consumer spent
    \$300 for the HD-Tivo DVR and \$300 for a Tivo Service subscription
    package. Three weeks later, when the technician came to install the
    CableCARDs, the customer could not receive the HD package because
    TWC no longer "offered the cable cards with HD." *See* Complaint No.
    07-R522759 at Attachment A**.**

[^89]: *See* Nov. 30 LOI Response at 4.

[^90]: *Id.* at Attachment 1, Hawaii Division, Notice dated August 20,
    2007.