D.C. Circuit Affirms Integration Ban
On August 18, 2006, the U.S. Court of Appeals for the District of Columbia Circuit denied the cable industry’s appeal of the FCC’s integration ban. Charter Commc’ns, Inc. and Advance/Newhouse Commcn’s v. FCC, No. 05-1237. The integration ban provides that, as of July 1, 2007, MVPDs subject to the ban may no longer place into service new navigation devices with integrated security.
The Court deferred to the FCC’s theory that “common reliance by cable operators on the same security technology and conditional access interface that consumer electronics manufacturers must employ in developing competitive navigation devices was necessary to assure development of the statutorily required competitive market for navigation devices.” The Court did not find unreasonable the Commission’s attempt to secure competitive success, not just competitive availability, and therefore found that the low adoption rate of CableCARDs could justify FCC action to force consumers away from relying on integrated leased set-top boxes. Unlike an earlier appeal of the integration ban, this panel of the D.C. Circuit expressed no skepticism about a Commission rule that raises set-top costs and limits consumer choices, deferring instead to “the FCC’s predictive judgment.”
The cable industry had also objected that the FCC ignored the impact of intermodal competition from DBS and the telcos, as well as the disparate treatment of the cable industry and DBS, which was exempted from the ban in 1998. The Court observed that the cable industry could file a petition “tomorrow” for “amendment or rescission” of the integration ban based on adverse impact on competition or other arguments. But the Court deferred to the Commission’s judgment that it need not deal with such arguments on the record assembled prior to the appeal.
The court explicitly left the door open for future relief as the market and technologies, such as downloadable security, develop. (NCTA recently filed a waiver request asking that the ban be deferred until after the 2009 digital transition “hard date” or the deployment of downloadable security, whichever comes first. That waiver has yet to be considered.)
The Court’s decision is available here. Please contact us if you would like further information regarding the Court’s decision or future strategies regarding the integration ban.