Charter Communications, Inc. v. F.C.C., 05-1237.
| Decision Date | 18 August 2006 |
| Docket Number | No. 05-1237.,05-1237. |
| Parties | CHARTER COMMUNICATIONS, INC. and Advance/Newhouse Communications, Petitioners v. FEDERAL COMMUNICATIONS COMMISSION and United States of America, Respondents Consumer Electronics Association and National Cable & Telecommunications Association, Intervenors. |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
John D. Seiver argued the cause for petitioners and intervenor National Cable and Telecommunications Association. With him on the briefs were Paul Glist, Paul B. Hudson, Christopher A. Fedeli, Daniel L. Brenner, and Neal M. Goldberg.
Joseph R. Palmore, Counsel, Federal Communications Commission, argued the cause for respondent. With him on the brief were Thomas O. Barnett, Assistant Attorney General, U.S. Department of Justice, Catherine G. O'Sullivan and Andrea Limmer, Attorneys, Samuel L. Feder, General Counsel, Federal Communications Commission, Richard K. Welch, Associate General Counsel, John E. Ingle, Deputy Associate General Counsel, and Laurence N. Bourne, Counsel.
Robert S. Schwartz and Julie M. Kearney were on the brief for intervenor Consumer Electronics Association.
Before: GINSBURG, Chief Judge, and TATEL and GARLAND, Circuit Judges.
Opinion for the Court filed by Circuit Judge GARLAND.
Cable television operators petition for review of an order of the Federal Communications Commission (FCC). In that order, the FCC declined to rescind a rule that will preclude cable operators from offering set-top converter boxes that bundle both security (descrambling) and non-security (e.g., channel selection) functions in a single device. For the reasons explained below, we deny the petition for review.
In the communications context, "navigation devices" are "equipment used by consumers ... to access multichannel video programming and other services" from multichannel video programming distributors (MVPDs), such as cable operators and direct broadcast satellite services. 47 C.F.R. § 76.1200(c); see id. § 76.1200(b) (defining MVPDs). The most common such device is the set-top converter box. Cable television subscribers typically lease converter boxes from their cable operators as part of their overall service packages. As currently configured, these devices integrate security and non-security functions. The security function "contain[s] embedded technology that decodes or descrambles" a cable signal, and it is "this function that precludes a consumer from accessing tiers of cable programming not part of his subscription package." General Instrument Corp. v. FCC, 213 F.3d 724, 726 (D.C.Cir.2000) (footnote omitted). Converter boxes also perform other tasks "unrelated to security." Id. For example, "converter boxes commonly include channel tuners and provide access to video programming guides." Id. Historically, because only the cable system operator could provide the conditional access (security) technology, suppliers unaffiliated with the cable operator were not able to offer consumers comparable navigation devices. Hence, such devices were not available at retail.
In 1996, Congress amended the Communications Act to add a new section 629, entitled "Competitive Availability of Navigation Devices." 47 U.S.C. § 549. The first sentence of section 629(a) directs the FCC to "adopt regulations to assure the commercial availability, to consumers of multichannel video programming[,] ... of converter boxes, interactive communications equipment, and other equipment used by consumers to access multichannel video programming[,] . . . from manufacturers, retailers, and other vendors not affiliated with any [MVPD]." Id. § 549(a). Section 629(a)'s second sentence further provides that "[s]uch regulations shall not prohibit any [MVPD] from also offering converter boxes, interactive communications equipment, and other equipment used by consumers to access multichannel video programming. . . ." Id.
In 1998, pursuant to section 629(a)'s directive to assure the commercial availability of navigation devices, the FCC adopted regulations that required MVPDs, by July 1, 2000, to make the security element available separately from the basic navigation device. See Implementation of Section 304 of the Telecommunications Act of 1996: Commercial Availability of Navigation Devices, 13 FCC Rcd 14775, 14806, ¶ 76, 1998 WL 333448 (1998) ("1998 Order").1 The FCC's 1998 Order concluded that requiring MVPDs to make the security element separately available would permit independent manufacturers and retailers to market navigation devices while allowing MVPDs to retain control over their system security. See 13 FCC Rcd at 14793-94, ¶ 49. Thereafter, MVPDs began developing a separate security module—now commonly referred to as a CableCARD— that plugs into a slot in a host navigation device, permitting the device to perform both the security and non-security functions.
The 1998 Order further required MVPDs, as of January 1, 2005, to stop selling or leasing new integrated navigation devices that perform both security and non-security functions.2 After the effective date, the rule would preclude cable operators from offering subscribers the integrated set-top converter boxes that had previously been standard. Should MVPDs wish to continue selling or leasing converter boxes to subscribers after the effective date, the FCC required that those boxes be non-integrated and rely on the same technology—the CableCARD—available to independent manufacturers and retailers. The Commission determined that, even with an unbundled security element available from MVPDs, the continued availability of integrated devices—devices that only MVPDs could provide—would impede competition. See id. at 14803, ¶ 69.
Finally, the 1998 Order provided that an MVPD could qualify for an exemption from the regulations if it "supports the active use by subscribers of navigation devices that: (i) operate throughout the continental United States, and (ii) are available from retail outlets . . . throughout the United States that are not affiliated with the [MVPD]." 47 C.F.R. § 76.1204(a)(2). In 1998, the only MVPDs that qualified for this exemption were direct broadcast satellite (DBS) systems. By contrast to the cable market, where navigation devices were unavailable except through cable operators, in the DBS market integrated navigation devices were already available at retail. In addition, although the DBS devices were not interchangeable among DBS providers, each DBS provider had a nationwide service footprint. Thus, unlike cable subscribers, DBS subscribers could continue using their equipment if they moved across the country, as long as they used the same DBS service provider. See 1998 Order, 13 FCC Rcd at 14800-02, ¶¶ 64-66.
The cable industry's trade association, the National Cable Television Association, Inc. (NCTA), challenged the 1998 Order as well as a 1999 Reconsideration Order3 in General Instrument Corp. v. FCC, 213 F.3d 724 (D.C.Cir.2000).4 NCTA argued that the plain language of section 629(a) precludes the FCC from adopting the ban on integrated equipment. As NCTA noted, although the section's first sentence directs the FCC to adopt regulations to assure the commercial availability of "converter boxes, interactive communications equipment, and other equipment" from unaffiliated manufacturers and retailers, its second sentence directs that the regulations "shall not prohibit any [MVPD] from also offering converter boxes, interactive communications equipment, and other equipment." 47 U.S.C. § 549(a). NCTA maintained that the FCC had contravened the plain text of the second sentence by prohibiting cable operators from offering integrated converter boxes.
The General Instrument court rejected NCTA's statutory challenge, noting that the term "converter boxes" must be read consistently in both sentences. See 213 F.3d at 730. If we accepted NCTA's reading, we said, the FCC would be "equally compelled by the plain language of the statute to permit retailers to provide integrated" converter boxes. That, we noted, would "certainly [be] an unacceptable result from [the cable industry's] point of view," because it would give unaffiliated companies access to cable operators' proprietary security technology. Id. Instead, we accepted as reasonable the FCC's interpretation, which construed the term "converter boxes" as not including integrated converter boxes. See id.
In September 2000, with its statutory authority confirmed, the FCC issued a Further Notice of Proposed Rulemaking "to review the effectiveness" of its navigation device rules. Implementation of Section 304 of the Telecommunications Act of 1996: Commercial Availability of Navigation Devices, 15 FCC Rcd 18199, 18199, ¶ 1, 2000 WL 1335826 (2000) ("Further Notice"). The Further Notice sought comment on the existence of "obstacles or barriers preventing or deterring the development of a retail market for navigation devices," on the "effect operator provision of integrated equipment has had on achieving a competitive market for commercially available navigation devices," and on "whether the 2005 date for the phase-out of integrated boxes remains appropriate." Id. at 18203, ¶ 11. Before the FCC could act on the Further Notice, however, the cable and consumer electronics industries adopted a memorandum of understanding to integrate the non-security navigation functionality of set-top boxes directly into digital television sets. This innovation made it possible for customers simply to "plug and play" by inserting a CableCARD directly into a digital cable-ready television with no need for an external navigation device.5 In April 2003, in part because of this development, the FCC extended the implementation date for the ban on new integrated boxes from January 1, 2005, to July 1, 2006. See Implementation of...
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