FCC fines Time Warner Cable for leaving CableCARD customers in the dark

Two related things happened on Monday. Time Warner Cable cut off moved both of my high-definition ESPN channels to a new HD tier -- a tier where many of the channels were off-limits to me because I had dared to exercise some consumer choice. And, I got a chance to look at that FCC ruling last week that slapped Time Warner with a $20,000 fine for doing to its customers in Hawaii what they've been doing to me.

UPDATE: Time Warner did a whole channel shuffle this week. Read my update.

As I've written about before, I am one of a tiny minority of people who decided to buy a TV recording device that uses the new CableCARD technology. The CableCARD was designed to cut down on the number of ugly black boxes that are plopped on top of (or below) your TV set. Instead, you insert a little credit-card-sized receiver into a CableCARD-equipped TV or other device, and off you go.

That was the idea, at least. From the get-go the cable industry was not enthusiastic about being told to support the CableCARD. Cable operators have their reasons, as I've recounted before, and they may be valid ones. It took years to get CableCARDs here in Kansas City, and even then, customers must rent them (albeit for 80 percent less than what they pay to rent a cable box).

Beginning in late 2007, however, Time Warner and other cable operators began to implement something called switched digital video or SDV. All you need to know is this: SDV is two-way. But the CableCARD that Time Warner rents me, when inserted into my TiVo, only communicates one-way, as a receiver. I can't send anything back to the cable plant, which means I -- and anyone else relying on a CableCARD -- can't use SDV.

Why is this a big deal? Because Time Warner started moving dozens of what it calls "lesser-watched channels" onto its SDV platform to save bandwidth. Channels like BBC America, Sundance Channel ... and now, bunches of HD channels as well.

Can they do this?

Before I get to that question, let me just say that I am aware of my own motives here. And as a journalist, I'm instructed to put my readers' interests first and foremost -- and especially not to put my interests above my readers'.

The reality is that (according to Time Warner) only 1,200 customers in the Kansas City area rent CableCARDs from them. That's less than one percent of its subscriber base. So the argument here is that Time Warner is being squeezed by an ever-growing list of bandwidth needs: more space for HDTV. More space for pay-per-view and free on-demand channels. And so on.

So in theory, if Time Warner is forced to cater to people like me, it could mean limiting services to the other 99.7 percent of customers. That's not very fair, now is it?

So what are the counter-arguments?

1. Well, for starters, the law is the law, and Time Warner agreed to support CableCARDs and now it's not. Here's the FCC order spelling it out. I asked Time Warner Cable for a response and here it is: "Time Warner Cable does not agree with the Notice of Apparent Liability for Forfeiture Order and will be responding accordingly to the Federal Communication Commission's Enforcement Bureau."

2. A persuasive case has been made that Time Warner isn't fully to blame for glitches in the CableCARD rollout. Yet it's hard to sympathize with the cable operator when we now know that a workaround exists that will allow CableCARDs to use SDV. Any TiVo customer with CableCARDs knows this, because TiVo has a setup screen that tells you about it! They're called tuning adapters and they've been tested and are ready to go. But a reader recently wrote to tell me he had spoken with a customer rep and TWCKC has no intention of supporting the tuning adapters. (Time Warner wouldn't confirm or deny this.)

3. But here's the clincher: Time Warner is charging its CableCARD users the same price for digital cable as all of its other customers -- but is only giving them a fraction of the channels. That fraction is pretty large right now, but with each new HD channel addition to the SDV band, the gap between us and them grows. with the removal of ESPN HD it really feels to me like a gauntlet has been laid down. I mean, that's hardly a "lesser-watched channel" in my or any other household where there's a guy who likes sports.

A $20K fine doesn't sound like much ... until you multiply it by dozens of systems that Time Warner owns across the country. And it's not just a fine; the FCC is ordering Time Warner to refund customers who were charged money for channels they couldn't get (which was point no. 3 above).

I've sent the FCC order to my pal Nick Johnson, the onetime gadfly FCC commissioner. He once wrote an article in which he reviewed every item on a typical FCC day's docket and showed how the commission had taken the wrong side on every single matter -- aligning with corporate interests against the public interest. I want his reaction because frankly, it's so rare that the FCC actually gets it right, I want to make sure I'm not deluding myself. I'll let you know what he says.

Previously on TV Barn: I interviewed Johnson about the Time Warner cable-box lawsuit, which touches on some of the same issues as this story.

Comments

[Corey O]

I would gather that part of the reason that only 1,200 people have CableCards is because every time I've tried to have them install one the installers cannot get it to work. I've given up and went with the stupid box.

[MrJeff]

I laughed 'til I cried.

When I remembered that Time Warner NYC won't even let me install a CableCard unless I plunk down $300 for a TiVo (series 3).

[the Kansas Citian]

Happend on Monday? I blogged on the fines last Friday:
http://thekansascitian.blogspot.com/2008/10/time-warner-cable-fined-for-kc.html

[Yes you did! But perhaps you stopped reading after the first sentence and didn't catch the part where I wrote that "I got a chance to look at that FCC ruling last week ..." Anyway, a reader in California was kind enough to email me the link to the order. Which reminds me: Greg, thanks! --AB]

[Chris Kamler]

I gave up on mine 6 months ago or I'd have gladly been one of the 1%. The TV I bought (an LG something or other) came with its own DVR built in, just insert said Cable Card and away you go. Oh, except the crippled service the card gets connecting up to Time Warner.

I'm waiting for my piles of cash from some intelligently drawn up Class Action suit. (Or like a free month of cable or something.)

So, like everyone else, I'm renting the $13.00 HD/DVR when I could've just been using the $4.00 Cable Card.

Pricks.

[Kevin K]

God, I hate TWKC. I will not (will not) get a box from them. So with my new HD set I still get ABC,CBS,NBC,PBS in HD, with only the cable plugged into the TV. It works, even thogh TW likes to moves the channels around some times. On my other TV (the main TV) I have a TiVo (series 2) on that for the past 8 years. TiVo is the best thing ever and I would love to move to TiVO HD with CableCards until I read stories like this one. Sometimes I want to move just to get a new cable company.

[Dennis]

Time Warner needs to get their act together. If they can't implement Tuning Adapters in KC like they have in a number of other cities by the time DirecTV releases their upcoming DirecTivo HD, I will happily leave Time Warner in the dust and return to DirecTV.

Did someone say class action lawsuit? I'm in. It's ridiculous that I'm paying $60+/month and I'm only getting a smattering of HD channels -- most of which are locals I can get over the air.

[Nick Johnson (Not the commissioner)]

Add Brighthouse in Florida to the list. I was told today my daughter can't get her NBA league pass which she paid almost $200 for last week on her new HD Tivo with Cablecard. And they won't refund either! I hope the FCC will take action since there is no intereactvity involved unless they have moved those channels to SDV and they could move all their channels to SDV totally undermining the FCC rules.

[Rich Dietrich]

I have an LG HDTV with a built in DVR and cable card through Comcast cable. It all works fine. I am looking forward to two-way cable card.

[Loralyn Cramer]

I cannot believe the song and dance TW has been giving the people of Hawaii who dared to purchase a TV with a Cablecard slot. I will speak just to TW's latest implacable position: The Cisco Tuning Adapter TW will "willingly" provide to their CableCard Customers does not work unless you don't need it. That is, the SDV Adapter will only work on the very latest TV's and TIVOs that already have a two-way cablecard system built-in!
It sickens me that the FCC takes such an impotent position in their alleged support of the consumer that TW feels free to make such ridiculous arguments. The $10,000 fines the FCC levies against TW are meaningless - which gives you an idea of the kind of money TW is fighting tooth and nail to protect.
Without proper regulation, TW will continue to raise one meaningless issue after another in hopes of wearing their customers into submission. They place absolutely no value at all on customer relations and will go the way of all such corporations.
Take a look at TW's stock. The writing is on the wall, but the cable companies completely lack the foresight to see it. Netflix offers true value and true choice. As Netflix continues their upgrades to HD, TW and Comcast will be the ones left in the cold - where they belong.

[Lyle Carter]

OMG. I can not believe the number of whiners posting comments here.

I too am a Tivo user, I have 3 of them. Two HD models which use cablecards, and one Series Two. And like all of you I am unable to receive many of the HD channels and any pay per view programming. But in my opinion the Tivo more than makes up for it. I would never rely on the cable company provided DVR. The Tivo has way too many added features that are not available through any DVR.

To Nick Johnson on Brighthouse in Florida, of course your daughter is not going to be able to get a Pay-Per-View package like NBA League Pass on her Tivo. Even Tivo's own website says that Tivo users will not have access to their cable providers PPV services. If she didn't have the common sense to research the Tivo capabilities before hand then that is her own fault. But I can bet you that she does have a cable company provided box in her home. They would not have let her order that package to begin with if she didn't!

Unlike you I do not blame the cable company for this. I bought new cutting edge technology (cablecard capable Tivo) before it was refined. That is always a dangerous and risky action. I paid over $700.00 for my first Tivo Series 3. It can not support the multi-stream cable cards, so now I am forced to pay for 2 cable cards. When if I had waited 6 more months I could have bought a newer model that would have functioned with a single cable card. Is that the cable company's fault??? Is it Tivo's fault??? No, it is my own fault for not waiting until the technology was fine tuned.

How many of you are old enough to remember Beta???

What about recently, how many of you went out and bought an HD DVD player???

But I am glad the cable companies are working both with Tivo and with CableLABS who created the CableCARD standard to develop the new Tuning Adapter.

So yeah, it is going to take a while for the cable companies to implement these Tuning Adapters. They will need to update their back end systems, update billing systems, and whatever else needs to be done to make these things work on their systems. Then they have to order enough of them from the manufacturer to supply their customers that use Tivo.

Oh, and the funniest comment award of all goes to Loralyn Cramer. You obviously have absolutely no idea how this technology works. I suggest you perform a little more research before making ill informed comments. First, the Tuning Adapter isn't going to require the use of "the very latest TV's and TIVOs that already have a two-way cablecard system built-in". That is the whole purpose of the Tuning Adapter, make none two-way devices capable of receiving SDV channels.

Oh, and that comment about stock prices... get a clue! Does the work RECESSION mean anythong to you???

Can you provide the name of one single company, any company, that hasn't seen a drop in their stock prices over the past few months???