Way back in the 1990s, Congress decided that they wanted to increase the availability and separate market of third party television navigation devices. Traditionally, these set-top converter boxes were leased or loaned from the cable company. This obviously restricted the market for other participants, presumably including TiVo and other DVR providers.
On the other hand, cable companies had adopted the ubiquitous cable box in order to allow them to encode their channels and prevent theft. The proposed law, § 629 of the Communications Act, directs the FCC to strike a balance between opening up the third party market, while still allowing cable companies the ability to encode video to prevent theft.
The cable companies and the FCC sat down, hammered out some encoding standards, and agreed to abide by them in a Memorandum of Understanding, which would only be effective if it applied to all video providers, including satellite companies.
Unfortunately, they forgot to invite those satellite companies.
The FCC submitted the MOU as a rule via notice and comment procedures. The satellite companies complained. The FCC adopted the rules anyway, citing the competitive imbalance that would happen absent universal applicability.
That was their second mistake. According to the D.C. Circuit, the statute doesn’t enable them to make rules that apply to satellite companies.
Section 629 authorizes regulations to assure “commercial availability” of third-party devices. While universal encoding standards may be a laudable goal that will improve user experience, it is not necessary to sustain the market for satellite devices. Satellite devices are available at retail, portable nationwide, and aren’t subject to the same closed market as cable installations.
The FCC tried to argue that the cable companies wouldn’t play along with their solution to § 629’s mandate unless they regulated the satellite companies as well. Of course, the connection there is pretty tenuous. Such a theory would allow the FCC to regulate anyone and anything as long as it helped to sweeten the deal with the cable companies.
But what about the ancillary catch-all clause of §§ 629 and 624A that authorize the FCC to “make such rules and regulations, and issue such orders … as may be necessary…?” This is really the same argument as before, isn’t it?
In order to fall under the catch-all, the matter regulated must be “reasonably ancillary” to the statute’s mandate. The FCC argues that a universally applied encoding regulation would lead to compatible equipment, happy consumers, and a thriving market. Again, where does it stop? They could regulate anything that could lead to a happy, thriving, market. The court cited such examples as regulating the lineup of channels a satellite carrier could carry or number of high definition channels.
Furthermore, under § 624, the act specifically authorizes regulating cable encoding. Expressio unius est exclusio alterius, right? The same law also declares one of its goals was “to increase the availability of satellite cable programming and satellite broadcast programming.” That certainly doesn’t seem to vibe with the FCC’s actions.
- Echostar Satellite LLC v. Federal Communications Commission (D.C. Circuit Court of Appeals)
- DC Circuit Demands Explanation for Discriminatory Mailing Rates (FindLaw’s D.C. Circuit Blog)
- Court sides with Dish in striking down FCC TV rule (Reuters)