Court blocks dual boxes

No integration beyond 2005; cable told to unbundle digital set-top equipment
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The cable industry by 2005 must stop offering all-in-one decoder boxes that handle both channel surfing and security, a federal appeals court said last week.

A three-judge panel upheld FCC rules aimed at creating a competitive retail market for set-top boxes, which are expected to provide not only traditional channel surfing but also new digital-age services such as electronic program guides and interactive communication. The rules apply to digital boxes, not to analog-only boxes.

The cable industry and its equipment suppliers, who say subscribers should have the more convenient option of a single, integrated box, had challenged the rules in federal court.

They argued that the FCC unlawfully went beyond the intent of a 1996 law mandating that cable operators allow consumers to use channel-surfing equipment purchased from outside vendors. The law forbids the FCC from issuing regulations that prevent cable operators from offering converter boxes and other equipment.

But the court said the FCC was reasonable when it decided that continued sale of integrated security/channel-surfing boxes would dissuade consumers from buying equipment at independent retailers and would prevent the development of a competitive market.

Siding with the FCC were retailers such as Circuit City and consumer equipment makers. Cable industry officials said an appeal is unlikely.

Under the rules, cable systems by July 1 must make security "pods" that will work with retail converters and by January 2005 must halt integrated-box sales.

The court rejected cable industry arguments that the separation order would make it easier for thieves to steal cable signals.

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