Judges Knock FCC Arguments for Cable Box Integration Ban
The FCC’s defense of the July 1, 2007, cable set-top integration ban took hits from judges Thurs. hearing oral arguments in cable’s petition at the U.S. Appeals Court, D.C., to have the order vacated.
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Judge Merrick Garland told FCC attorney Joseph Palmore he had failed to address cable’s argument that the rule gives DBS an unfair advantage over cable because, as a nationwide service, satellite isn’t governed by an integration ban order. After Garland spoke, Judge David Tatel asked rhetorically if the court should vacate the FCC rule, putting cable and DBS on par.
Judges stressed the inherent difference between local and regional cable service and national satellite service. Using Comcast as an example, Garland and colleagues, taking a page from the FCC playbook, said a cable operator’s service area is far more limited than satellite. “It isn’t everywhere in the country, that’s the whole point,” Tatel told cable attorney John Seiver: “That’s what the whole order is about.”
The court spent considerable time querying both sides on technical matters involving the difference between set-top software and hardware, details on downloadable security gear and CableCARDs. NCTA said over 150,000 CableCARDs have been installed (CD May 9 p8). Garland said: “What’s cable-ready TV?” Chief Judge Douglas Ginsburg, who asked the fewest questions, asked if DBS uses “proprietary software.” Struggling over a Palmore comments, Tatel said: “I'm just trying to understand.”
The court should dismiss the appeal because the market for cable navigation devices made by vendors unaffiliated with pay TV firms is “is nascent, it’s quite small,” Palmore said: “The purpose of this statute is to create a real, robust, sustainable” market instead of just “black boxes.” Garland’s response -- “Is the color important?” - drew chuckles. “DBS didn’t exercise the control that cable did,” said Palmore.
Seiver skewered FCC arguments against set-top integration. “Maybe there are some consumer benefits, but the Commission did not spell them out,” he said: “The benefits aren’t there.” Divorcing set-top functions will raise costs $70-$95 per device, he said. “DBS was given an exemption,” he said: “If cable cannot do the same thing… then we've got a competitive disadvantage.” The FCC had no basis for making the distinction it did, Seiver said.
Palmore conceded that the FCC solution could raise costs that customers could have to shoulder. Asked by Ginsburg if those would be “significant,” Palmore said: “The Commission is quite candid about that… perhaps an additional $2 a month.” He noted CEA, which sided with the FCC in the case, has said this would be too much.
“The FCC did not act in an arbitrary and capricious manner in March 2005 when it upheld its rules,” CEA Pres. Gary Shapiro said in a statement. CEA officials took issue with other Seiver remarks, saying the lawyer overstated progress being made in talks between cable and device makers. “We were concerned that the petitioner represented to the court that the two-way negotiations between cable and CE were complete. They are not,” Julie Kearney, CEA senior dir.& regulatory counsel, told us. That “distressed” lawyer Robert Schwartz, who represents CEA, he said, adding that he thought the FCC “argument went very well.” FCC Gen. Counsel Samuel Feder, who also observed the proceeding, declined to comment.
Neither side would predict the case’s outcome. Observers said the welter of technical questions made it hard to assess the judges’ leanings. “You can’t ever really predict the outcome,” Seiver told us as he left the courtroom: “It was a good argument.”