Appeals Court Backs FCC Set-Top Rules

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Washington-A federal court here ruled last week that the Federal Communications Commission acted lawfully by banning cable operators from deploying integrated set-top boxes beginning in 2005.

The court also unanimously agreed that the FCC was justified in ordering cable operators to provide a channel-unscrambling module for "hybrid" set-tops that serve as gateways to both analog and digital programming.

The 3-0 decision came from a panel of the U.S. Court of Appeals for the District of Columbia Circuit.

A lawyer for the National Cable Television Association-which joined General Instrument Corp. (now Motorola Broadband Communications Sector) in challenging the FCC's mandates-said it was doubtful that the an appeal would be filed.

Under FCC rules adopted in 1997, cable operators may not offer integrated boxes after Jan. 1, 2005. Integrated boxes include signal-security and channel-surfing functions as inseparable features.

Cable operators are also required to furnish requesting subscribers with modules that are inserted into hybrid boxes and that can unscramble digital programming.

The FCC adopted both requirements under a provision of the Telecommunications Act of 1996 that ordered the commission to promote the retail sale of set-tops.

The FCC said the best way to accomplish this was to phase out integrated boxes and to separate signal-security from channel-surfing features with a module that slips into a slot in the box.

The agency did not apply its separation requirement to analog-only boxes because cable is deep into its transition to digital, rapidly making analog-only boxes obsolete.

The cable industry is unlikely to appeal because the FCC has said that it would review the appropriateness of the 2005 phase-out sometime this year, the NCTA lawyer said.

Analog modules for hybrid boxes do not exist. Many cable operators are complying with the FCC 's hybrid-box-separation requirement by duplicating scrambled analog signals in digital, which allows subscribers to use digital modules to see their analog premium and pay-per-view programming.

That method of complying with the FCC's separation requirement, despite the drain on bandwidth, is another reason why cable is unlikely to appeal, the NCTA lawyer said.

The NCTA and GI argued in a losing cause that the integrated-box phase-out violated the express terms of law, claiming that in promoting the commercial availability of set-tops, Congress did not intend to deny cable the right to lease its own integrated boxes.

The cable industry also lost in claiming that providing a module for hybrid boxes would, among other things, jeopardize signal security.

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