In an effort to bolster ease-of-use for pay-TV subscribers and encourage choice within the device landscape of the home, the FCC (News - Alert) has been championing a “plug and play” option where CableCARD devices can be bought at retail (including TV sets themselves) and used to decrypt cable and satellite feeds directly—a move that would make the set-top box (STB) obsolete. The dream has been handed a set-back however: this week an appeals court struck down the rule, for now.

The court sided with satellite operator DISH Network Corp in the case, which argued that the FCC’s encryption rules around the CableCARD initiative would make it more difficult to strike deals with content companies for pay-per-view (PPV) and some video on demand (VOD) content. DISH also argued that the FCC’s ruling in the matter was made to satisfy a need in the cable market, but is not applicable to satellite in the same way. DISH argued that off-the-shelf retail STBs are already available for satellite offerings (Sling Media’s (News - Alert) boxes, for instance, or TiVo).

CableCARD devices were conceived by the removal of an obstacle in the market to the all-digital TV transition by eliminating the requirement for consumers to purchase or lease a new STB from the cable company in order to receive digital feeds. Instead, new TVs and peripherals would already be digital-ready, and consumers need only to plug their cable directly into the embedded CableCARD. The other benefit in the FCC’s view is the ability to engender a retail marketplace for pay-TV gear, where consumers can buy a device off the shelf with the bells and whistles that they choose, at the Best Buys of the world.

“Applying the encoding rules to cable providers may meet consumer expectations with respect to the market for cable devices, but that is no reason to impose these rules on all MVPDs,” Judge Janice Rogers Brown wrote in the court's opinion.

“Though section 629's directive to 'adopt regulations to assure the commercial availability' of navigation devices may afford the FCC some wiggle room in crafting its regulatory regime, the statute's language is not as capacious as the agency suggests,” Brown added. “Certainly, section 629 provides no explicit textual basis for the encoding rules, instead authorizing 'regulations to assure the commercial availability' of navigation devices. But the FCC points out the encoding rules fulfill 'consumers' expectations that their digital televisions and other equipment will work to their full capabilities.' Consumer satisfaction enhances consumer demand, ensuring a viable commercial market. However, as the FCC acknowledges, the encoding rules are not necessary to sustain a commercial market for direct broadcast satellite devices.”

The U.S. Court of Appeals for the District of Columbia Circuit struck down the rule, but the FCC said it was reviewing the ruling.

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