Comcast Loses Appeal of FCC CableCARD Waiver Denial
Comcast lost an appeal Friday of a 2007 FCC refusal to waive CableCARD rules on its low-cost boxes that the company said stood to cost industry hundreds of millions. The decision at the U.S. Appeals Court for the District of Columbia Circuit said the cable operator can’t use as the basis of its appeal the argument that Media Bureau handling of its waiver requests was discriminatory or inconsistent with past FCC policies.
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To challenge the policy in court, Comcast would have had to have asked commissioners to review bureau waivers of a rule requiring pay-TV companies to separate security and navigation functions in set-top boxes, Judge Laurence Silberman said in his decision. The ruling reflected oral argument in the case, in which Silberman asked an attorney for Comcast why it didn’t challenge the other waivers (CD April 9 p6). Though Comcast said it didn’t challenge them because it supported the waivers, “this is irrelevant,” wrote Silberman. “Without an appeal from the Media Bureau’s decisions, we simply do not know how the commission would have ruled on the earlier waiver requests.” The company is correct that bureau decisions “have the force of law” without commission action, he wrote, but “unchallenged staff decisions are not commission precedent.”
The judge cited a “long line of cases in this circuit” in which it “unambiguously” ruled that agencies aren’t bound by unchallenged staff decisions. That’s despite Comcast invoking a 1991 ruling by the D.C. Circuit finding agency policy may be set by a “subordinate unit,” Silberman wrote. Comcast “would have had a plausible argument” if the waivers it said were mishandled were by the full FCC, he wrote. Comcast claimed the bureau unfairly denied it a waiver because it wouldn’t agree to transition its 10 million analog customers to digital cable by Feb. 17, 2009.
The company sells digital cable in all its markets and has a business incentive to roll out new services, waiver or no waiver, the jurist wrote. The FCC explanation for denying Comcast a waiver “was quite reasonable,” he wrote. “The FCC relied in part upon Comcast’s own press releases, which showed significant growth in revenue from digital services such as pay-per-view and video-on-demand. Cable companies do not give away their services for free.”
A 2005 FCC order setting CableCARD rules was “ambiguous” in deciding that set-tops with “advanced services” don’t qualify for waivers, but the FCC is entitled to “’substantial deference,'” wrote Silberman. Comcast claimed low-cost boxes with VoD, pay-per-view and electronic program guide features weren’t advanced, but Silberman said he found nothing to dispute the commission conclusion to the contrary. He cited “advanced” as defined in Webster’s Third New International Dictionary, writing that “these services are certainly close relations of the functionalities that are specifically listed in the 2005 order.”
Comcast is “disappointed” by the ruling and will continue to deploy digital services, said a spokeswoman, who wouldn’t say if the company will appeal. NCTA, an intervenor in the case along with CEA, declined to comment. The FCC believes the ruling means a “competitive” market for set-top boxes is nearer, said a spokesman. “Congress and the FCC have envisioned consumers being able to walk into their local retail store and buy televisions and set-top boxes from any manufacturer that would work on any cable system.”
Comcast needs no CableCARD waiver for a no-frills digital-to-analog converter that Chief Operating Officer Steve Burke told investors it will begin deploying this year in some markets to reclaim analog bandwidth (CD May 2 p5), said an industry source. The boxes won’t work with encrypted programming or advanced services like VoD, but Comcast hasn’t said if it will need waivers. It won’t because “the boxes don’t have embedded security,” the source said.
CEA, which intervened on the FCC’s behalf, hailed the decision. “We are pleased that the D.C. Circuit has upheld the FCC’s determination that a competitive multichannel video equipment marketplace is in the interest of consumers and is required by the law,” said Michael Petricone, senior vice president of government affairs. “We hope that following this decision, our partners in the cable industry will end this nearly decade-old litigation. Manufacturers and cable providers share a common interest in providing our customers the most innovative broadband and video services, and we should be working together to bring consumers the next generation of technology.”