It is war between the National Cable and Telecommunications Association and Boxee over a Federal Communications Commission proposal that would allow cable companies to encrypt or scramble their "basic tier" streams on all-digital systems. Time Warner Cable and Comcast say go for it. But Boxee is calling for a time-out on the idea.

Up until now, basic tier consumers have not needed de-scrambling set-top boxes to connect to basic tier (which usually just offer the over-the-air channels), the company's latest blog post warns. Big cable's real motivation in pushing this rule "is to prevent you from being able to connect the cable from the wall directly to your TV or Boxee Box. You will need to rent a set-top box from your cable provider, pay an extra $5-15 per month and it will no longer work with your Boxee Box or similar devices."

Boxee markets a gadget that allows consumers to watch both cable and Internet TV via that interface, and a hefty percentage of its customers depend on that nonencrypted stream to make the system work. In fact, Boxee has told the FCC that 40 percent of its device buyers connect to cable via a "clear QAM" [unencrypted quadrature amplitude modulation] signal.

"We estimate millions of consumers will see their TVs go dark," Boxee warns.

TP on board

Baloney, replies the NCTA, disputing Boxee's numbers and faulting the company for not integrating CableCARD access in its machines. "Boxee makes the astounding claim that basic tier encryption will have no consumer benefits, ignoring the substantial record evidence to the contrary—including the fact that encryption will free cable customers from having to wait at home for a service visit when connecting or disconnecting service."

The filing notes that straight-to-the-wall connections usually involve a technician visit to make sure the connection is secure. "Once the basic tier is encrypted, the opportunity for truckless installation and/or disconnection becomes available to all customers, not just basic tier customers."

To which Boxee has choice words: "Considering this ruling would also mean millions more set top boxes and cable cards are manufactured, distributed, and attached to electric outlets... their argument doesn't hold water. It's akin to a cable executive taking a private jet to an FCC meeting, but insisting on having recycled toilet paper on-board to help save the environment."

In the clear

Here's some background on how this little love fest began. In 1992, concerned about compatibility issues between various kinds of television sets and cable signals, Congress gave the FCC authority to require that cable companies offer basic tier on an unencrypted basis. But last October the Commission launched a proceeding suggesting that this provision be put to rest.

About 77 percent of cable subscribers have at least one digital cable set-top box or retail CableCARD device in their home, the agency noted. Various cable providers have received waivers from basic tier encryption over the years, most prominently Cablevision in New York City, and this has saved money via the decline in home visits.

The evidence thus shows, the FCC tentatively concluded, that:

where cable operators undertake appropriate consumer protection measures, the costs of retaining this rule (e.g., the need to schedule service appointments whenever a consumer subscribes to or cancels cable service as well as the expense and effect of cable operators' trucks on traffic and the environment) outweigh the benefits of retaining it (e.g., ensuring the continued utility of devices with clear-QAM tuners).

Concurrent action

The Boxee bottom line on this issue goes as so—total encryption of basic tier cable would deny consumers "innovative alternatives to traditional pay TV that rely on QAM compatibility, while increasing STB rental charges, energy costs, and dependency on MVPDs [multi-video program distributors]."

So the FCC shouldn't go the route "without taking concurrent action to increase compatibility of consumer devices with MVPD programming and ensure alternative means of access by non-MVPD devices to broadcast channel and public access programming."

The "concurrent action" that various advocacy groups want is AllVid, the FCC's proposal for a mandated industry-wide gadget that you could plug into your broadband router and connect to your cable TV provider, then watch online video and pay channels through a variety of AllVid-friendly devices. In a sense, Boxee is just that. What reform groups like Public Knowledge and the Media Access Project want the FCC to do is create an environment in which 1,000 Boxees could bloom. They're disappointed that after almost two years, the agency hasn't acted on the proposal.

Don't thwart the future

As for the de-encryption idea, both groups mostly support it, with some modifications. The FCC proposes that cable operators going this route (and almost all of them will) offer existing subscribers who have a basic-service non-set-top-box powered television the gear needed to descramble basic tier on one set without charge for a year. Subscribers who receive Medicaid would get the equipment needed to descramble basic tier on two sets without charge for five years from the date of encryption.

Both Public Knowledge and Media Access suggest the Lifeline/Linkup discount phone service program be added to the eligibility list. They also want the FCC's Final Order to make sure that consumers are given advance notice when their de-encryption period ends.

As for Boxee's protest, in a blog post, PK's John Bergmayer says he sympathizes with the company. "The Boxee Box is an early vision of the kind of next-generation video device that's needed to push the TV industry forward," he notes. "It's come from a private company, not one that has cut special deals with cable systems in every town," and provides features that set-top boxes don't offer.

"It would be perverse if the FCC actively thwarted this and similar devices," Bergmayer's commentary concludes.