FCC Encoding Rules Sent Back to Drawing Board

     (CN) – The D.C. Circuit reversed a telecommunication rule that imposes encoding restrictions on all cable and satellite providers, making them vulnerable to unauthorized broadcasts.
     In 2002, cable companies negotiated an agreement with the consumer electronics industry, seeking uniform standards that would allow compatibility across all cable systems. The parties discussed standards such as allowing customers to watch cable and satellite TV on “plug and play” televisions, replacing external navigation devices like set-top boxes.
     In joint recommendations to the Federal Communications Commission, the parties proposed encoding restrictions for cable providers and a ban on “selectable output control,” which allows content providers to shut off a connector or output on a program-by-program basis. The agreement was contingent on application of the encoding rules to all cable and satellite carriers.
     The Federal Communications Commission adopted the proposed rules in 2003, over the objections of Dish Network and other satellite carriers to the encoding restrictions. Regulators said the rules aimed to achieve the federal mandate of technical standardization among cable and satellite providers, while also preventing unauthorized access to service.
     Dish, formerly known as EchoStar Satellite, and other satellite carriers argued that they had been excluded from the negotiations, and that the prescriptions on encrypting programming prevented them from making deals with studios to play new movies on a pay-per-view basis, among other things.
     Dish asked the D.C. Circuit to strike down the rule, arguing that the FCC lacked authority to impose the standards on satellite providers.
     A three-judge panel agreed Tuesday that the FCC’s decision to apply the encoding rules to satellite providers exceeded the agency’s statutory authority.
     Applying the encoding rules to cable providers may be necessary to assure the commercial availability of navigation devices, but that is no reason to impose the rules on satellite providers, the opinion states.
     The court also slammed the FCC for trying to induce the cable operators’ acceptance of an agency-favored agreement by limiting competition from satellite providers.
     In claiming to have exercised ancillary authority, the FCC noted that the rules are related to its mission of assuring the commercial availability of navigation devices. But the judges found that ancillary jurisdiction is not “unrestrained authority.”
     “The FCC is powerless to wield its ancillary jurisdiction, however, where ‘there are strong indications that agency flexibility was to be sharply delimited,'” Judge Janice Brown wrote for the court.
     The Cable Act of 1992, which was directed at cable systems alone, imposes such limits, according to the ruling.
     Finding that the encoding rules are not severable, the court vacated the agency’s entire order.
     In a concurring opinion, Senior Circuit Judge Harry Edwards noted that, though the FCC may have authority to impose encoding rules on satellite carriers under certain circumstances, in this case, the FCC has failed to show the necessary link between the imposition of such rules and the federal mandate of technical standardization among cable and satellite providers to ensure the availability of navigation devices nationally.

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