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If you need the complete document, download the WordPerfect version or Adobe Acrobat version, if available. ***************************************************************** Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 In the Matter of ) ) MOTOROLA'S HOMECLEARTM SYSTEM ) ) ) Request for Declaratory Ruling) ) ORDER Adopted: December 10, 1997 Released: December 11, 1997 By the Deputy Chief, Cable Services Bureau: 1. In this Order we address Motorola's request, by its letter dated May 20, 1997, for a declaratory ruling asking the Commission to treat Motorola's broadband descrambler equipment, included in its HomeClearTM product offering, as customer equipment for cost recovery purposes. We issued a public notice on June 11, 1997, seeking comment on Motorola's request. No comments were filed in this matter. 2. As described below, we grant Motorola's request for cost recovery treatment of the broadband descrambler portion of its HomeClear system. Under Section 76.923 of the Commission's rules, cable operators can recover from subscribers the cost of customer equipment such as converter boxes and remote control units. Based on our review of Motorola's filing in this proceeding, we believe that where Motorola's broadband descrambler equipment is located on the customer's residence at or near the demarcation point or in the customer's residence it can be accorded treatment as customer premises equipment for cost recovery purposes, and therefore, Motorola's request should be permitted. 3. HomeClear is a system designed to scramble channels at the headend while at the same time passing through a number of "in the clear" channels to video equipment used in the subscriber's premises. Motorola states that the descrambler equipment portion of the HomeClear system: (1) would be located on the customer's residence at or near the wiring demarcation point or in the customer's residence, (2) serves the same function, i.e., conditional access to programming in analog cable television systems, as a set top converter, and (3) will often replace the consumer's set top boxes for viewing multi-channel video programming on television sets. Motorola asks that the descrambler equipment portion of the system be classified as customer equipment consistent with the Commission's policy goal that similar equipment be regulated in a nondiscriminatory manner and not based on the level of service received by the subscriber. 4. Our rate regulation rules for equipment that is used to receive the basic service tier are set forth in Section 76.923. The equipment regulated under this section consists of "all equipment in a subscriber's home, provided and maintained by the operator, that is used to receive the basic service tier, regardless of whether such equipment is additionally used to receive other tiers of regulated programming service and/or unregulated service." Our rules permit categorization of customer equipment costs into broad categories, limited only by the requirement that equipment so aggregated be of the same type. Generally, our rules set out three types of customer equipment: (1) converter boxes, (2) remote controls and (3) inside wiring. Customer equipment costs should be aggregated into one of these broad categories. The converter box category can include advanced boxes. We found that flexibility was consistent with the express language of Section 623(a)(7) of the Communications Act, and stated our belief that our amended rules would reduce the cost of advanced technology for consumers and permit manufacturers to more easily implement future technical innovation in the broadband industry. Operators are allowed, but are not required, to classify any of their equipment into these categories; but must charge rates for equipment and installations based on actual costs. 5. A subscriber requires the use of customer premises equipment such as a set top converter box/descrambler to receive cable signals that are delivered scrambled to the subscriber's home from the cable operator's headend. When signals are sent from the headend and delivered scrambled to the subscriber, a set top converter box/descrambler would be required to be located at each television set at the subscriber's premises to descramble and allow the subscriber to receive the authorized signals. The subscriber is charged separately for the use of each set top converter box/descrambler as customer premises equipment under Section 76.923 of our rules. Signals may also be sent unscrambled or "in the clear" with the use of clear channel delivery systems such as traps, interdiction, and addressable filters. When signals are sent using clear channel delivery systems, the equipment necessary to descramble signals, and allow the subscriber to receive the authorized signal, is located in the cable distribution network between the headend and the subscriber's premises. The equipment used to descramble signals is not required at the subscribers premises, and the subscriber is not subject to a separate equipment charge. 6. The HomeClear system is designed to permit cable operators to scramble channels at the headend while at the same time passing through other channels "in the clear" to video equipment used in the subscriber's premises. The cable operator can remotely address the broadband descrambler portion of the HomeClear unit that is at the subscriber's premises. To selectively descramble channels, a single descrambler unit could be located at or near the cable home wiring demarcation point, on the wall outside a customer's residence, and in some cases inside the customer's premises. The HomeClear unit will not interfere with a customer's ability to use any feature of a television set such as, picture-in-picture, parental control, stereo and remote control. It will also permit a customer's television sets and video recording devices to simultaneously tune different programming channels. 7. Our rate regulations for customer equipment apply to all equipment "in a subscriber's home provided and maintained by the operator, that is used to receive the basic service tier." In the case of Motorola's HomeClear system, the descrambling occurs on the subscriber's premises using a single descrambler unit that will be located at or near the cable home wiring demarcation point, or in some cases inside the customer's premises. Once installed, the single HomeClear unit descrambles authorized signals for receipt at each television and video cassette recorder in the home, eliminating the need for individual set top converter box/descrambler units for each piece of video equipment on the customer's premises. 8. We believe that, consistent with the flexibility of our rules allowing broad categorization of equipment in order to advance technical innovations, there is good cause to permit Motorola's broadband descrambler unit to be accorded treatment as customer equipment for cost recovery purposes, and we will not strictly apply the requirement under Section 76.923 that the equipment be located "in a subscriber's home." Our cost recovery treatment is premised on the HomeClear unit being located on the subscribers' premises at or near the cable wiring demarcation point, i.e., near the outside wall of the subscriber's residence, or in the subscriber's premises. Additionally, our treatment is subject to the condition that where the HomeClear unit is installed on the outside wall of the subscriber's residence, the subscriber will not be responsible for losses in cases of theft or tampering of the unit. We accord this treatment because, as with set top converter box/descrambler units, customers will be aware that the HomeClear unit is installed on the subscriber's premises, unlike equipment installed on a pole or pedestal. In addition, the HomeClear unit will be powered from the subscriber's home, as with set top converter box/descrambler units located in a subscriber's home. 9. In treating HomeClear units as customer equipment for cost recovery purposes, we note that it is our understanding that the cable operator will follow similar procedures regarding installation of HomeClear units as it does for customer equipment installed in a subscriber's home and our ruling is premised on that understanding. Subscribers who have converter boxes/descramblers at the time the HomeClear unit is introduced may not be charged for the installation of the HomeClear unit. Cable operators may not impose a monthly charge until the HomeClear unit is activated to receive service. Existing customer equipment no longer needed to receive cable services may not be subject to a monthly charge. In instances where the subscriber wants only the basic service tier, the cable operator will not charge for the HomeClear unit because it will not be necessary for the delivery of such basic service. For operators that choose to aggregate equipment costs under Section 76.923 of our rules, the cost of the HomeClear descrambler units should be aggregated as a converter box. 10. We believe that providing cost recovery treatment to the descrambler equipment portion of Motorola's HomeClear system will encourage the implementation of an advanced broadband descrambling technology that will provide benefits to consumers and cable operators. As indicated above, a single HomeClear unit will eliminate the need for customers to install a set top converter box/descrambler unit at each television set and video cassette recorders and will enable customers to use all the features of a television set. Further, the HomeClear system will permit cable operators to scramble and descramble channels remotely from the headend, encouraging efficiencies in scheduling customer services and reducing overall service costs. 11. Accordingly, IT IS ORDERED that Motorola's request for a declaratory ruling asking the Commission to treat Motorola's broadband descrambler equipment, included in its HomeClear product offering, as customer equipment for cost recovery purposes IS GRANTED. 12. This action is taken pursuant to delegated authority under section 0.321 of the Commission's rules. FEDERAL COMMUNICATIONS COMMISSION John E. Logan Deputy Chief, Cable Services Bureau