‘EchoStar’ Said to Show Limits on FCC Ancillary Jurisdiction, Acting Without Full Engagement

January’s court reversal of FCC content encoding rules shows limits on the agency acting on ancillary jurisdiction and on the commission making into rules industry deals where all affected sectors didn’t participate, said multichannel video programming distributor lawyers. Those MVPD representatives said the U.S. Court of Appeals for the D.C. Circuit’s ruling against the agency and in favor of the company, now called Dish Network but that went by EchoStar at the time the encoding rules were adopted about 10 years ago, shows that the rules are now outdated. Also at an FCBA brown-bag lunch, a lawyer for makers of consumer electronics and other high-technology interests said the industry deal on which the now-reversed encoding order was based wasn’t objected to before the commission adopted it. Rules cable now said were imposed on it were agreed to by that industry a decade ago, said the attorney, Robert Schwartz of Constantine Cannon.

He and others we interviewed after Monday’s panel expressed mixed views about whether the agency now will tackle MVPD-wide encoding rules after the D.C. Circuit’s ruling. In what some said was the only guidance the Media Bureau gave to industry after the ruling, it noted that the court decision to vacate the rules junked the encoding rules and some technical standards for CableCARDs and labeling on compatibility of those cards that separate security from navigation in CE devices such as set-top boxes. “The integration ban” requiring such separation “is unaffected by the EchoStar decision,” said an April bureau order (http://bit.ly/1an24YO) giving Charter Communications a two-year CableCARD waiver (CD April 22 p3). A bureau spokeswoman declined to comment for this story.

That Schwartz and cable lawyer Paul Glist of Davis Wright were talking at the FCBA event about the cable/CE deal to which DBS wasn’t a party shows “why as a satellite provider we weren’t there,” said Stephanie Roy of Steptoe & Johnson, which represented Dish in its D.C. Circuit win against the FCC. “The satellite industry tried to participate when it got wind” of the possible agreement on encoding, which ended up being a “weakness in this case,” she said. There’s no need for encoding rules now, agreed Roy and Glist. Consumer demand takes the place of the rules, she said, citing high levels of VOD and other non-real time viewing that companies don’t want to cut off. “The public in how they watch ... has kind of overtaken the role of the regulators,” said Roy.

Innovation occurs “around” the FCC encoding rule, said Glist, who has represented Charter, NCTA and others on cable/CE matters. “I can give you the laundry list” of such technologies that include smartphone operating systems “but all of those are operating without an FCC-defined interface,” unlike cable, he said. “The rules are not as agile as the market.” EchoStar was a “reset” for encoding rules, Glist said several times. “You can’t actually have the government come in and define a standard interface and expect all innovation to flow through that interface.” No one has “shown there to be any harm in the marketplace since the EchoStar decision,” as cable operators continue supporting CableCARDs and devices made by TiVo and other CE companies, Glist said: “We may say we feel a little naked without the rules in place” but “no one has come in and said there’s a problem that needs to be fixed.” TiVo petitioned the FCC to reinstate some of what the D.C. Circuit undid, a request MVPDs opposed and CEA, Public Knowledge and the All-Vid Tech Company Alliance supported (CD Sept 19 p8).

EchoStar shows that an FCC-codified deal should include a wider array of stakeholders in the future, and also the limits of ancillary authority, said Glist. “The court is going to be more favorably disposed to a rulemaking that includes more stakeholders,” he said. “We've seen an evolution and a constriction of ancillary authority” that “should be sobering in any rulemaking at the commission, even more than how many stakeholders you have involved and at what time,” continued Glist. “To the extent the FCC has an interest in moving forward on some of these rules, I think the lesson of the order is the process has to be inclusive,” said Roy in an interview, of whether the agency will address the EchoStar decision. “But we certainly have no indication that this has been something that is in the works” now at the agency, she added.

Schwartz hopes the FCC under a full complement of commissioners and led by Chairman Tom Wheeler “will address this and other pending Section 629 issues as expeditiously as they can and will act favorably,” he told us. That’s the section of the Telecom Act dealing with CableCARD rules. “My clients have fully supported TiVo’s petition.” Schwartz represents CEA and the All-Vid Tech Company Alliance, which has included Google, Intel and other high-tech companies. “Innovation with competition is happening every place, with the big exception of the cable space,” said Schwartz at the event. No one “who commented on the technical rules had a single blessed problem with them in any way,” he said about the cable/CEA deal enshrined in the now-vacated FCC order. “They were one of the few things with plug-and-play rules” that lacked problems, said Schwartz.

Cable consultant Steve Effros told us he doubts the FCC “will do anything” on addressing encoding rules across MVPDs now that Wheeler has arrived. Such rules are “way too complicated at this point to deal with all the various ways people get TV, and the new technologies coming,” Effros said. Roy also doesn’t “think there is a need for the rules,” she said in an interview. The video market “is significantly different today than it was back when these rules were promulgated, and I think the consumer expectations” and those of her clients stand “in the stead of the rules,” she said. -- Jonathan Make (jmake@warren-news.com)