Microsoft Backs Set-Top Deadline Delay

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Microsoft Corp. may have rescued cable’s fight to postpone a Federal Communications Commission rule that would hamper their deployment of low-cost digital set-top boxes.

Thursday, Feb. 24, Microsoft sent a letter to the FCC supporting the cable industry’s request to delay until at least 2007 a deadline for eliminating cable-provided set tops that combined CableCARD security functions with channel surfing and interactive functions.

The requirement would have complicated cable’s plans to go all-digital through widespread deployment of low-cost digital set tops, says Paul Gallant, Washington analyst for Stanford Research Group.

A delay would be especially positive for Comcast, Time Warner, Insight and Mediacom, he says, because deploying low-cost set tops will expand their base of video-on-demand customers and permit simulcasting of cable channels in analog and digital.

Currently the ban is scheduled to go into effect July 2006. Cable operators complain that the current deadline will force them to raise monthly lease rates for new set tops by roughly $2.50 per month.  That cost increase, Gallant says, could lead to customer defections or lower margins.

The deadline was originally imposed to encourage a retail market for interactive digital boxes. The FCC judged that the market would be hindered if cable operators continued to supply all-in-one boxes, leaving customers less incentive to seek a retail version.

The FCC appeared to be leaning toward delaying the deadline until a lobbying blitz by Intel Corp. Cable lobbyists say Intel stands to benefit if non-cable equipment makers lead the retail box market because it is a the major supplier of their chips.

Microsoft first informed FCC Chairman Michael Powell of its decision to support a delay in the deadline via phone call Thursday.

Microsoft joined cable because company executives believe cable is moving toward developing retail products of its own. Maintaining the 2006 deadline will “further impede the kinds of collaborative efforts between the consumer electronics, information technology and cable industries that are need to devise more forward-looking and effective” routed to developing a retail market, wrote Microsoft regulatory counsel Paula Boyd in the company's letter to the FCC.

Also signing the letter were James Coltharp, Comcast chief policy advisor, and Stephen Teplitz, Time Warner associate general counsel.

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