Court Upholds FCC Tuner Mandate

Ruling is seen as implicitly endorsing other digital-TV regulations

FCC chief Michael Powell's drive to muscle through the digital-TV transition scored a big legal victory last week when federal judges upheld the requirement that TV manufacturers install DTV tuners in most sets.

In sustaining the 2002 FCC decision, the judges ruled that potential gains from speeding the DTV transition outweighed the burden imposed on manufacturers and consumers. "We will not second-guess the commission's weighing of costs and benefits," the court said.

The ruling's impact carries beyond the legality of the tuner requirement. Several FCC and Washington lawyers see the decision as implicit endorsement for other DTV regulations the FCC has approved or is moving to wrap up soon. Most notable among them are the restrictions on digital copying and retransmission. To a lesser degree, the court's tuner endorsement also firms up grounds for granting broadcasters new cable-carriage rights for their DTV channels.

"The commission reasonably determined to take action to bring digital tuners to the market in quantity and at reasonable prices so that the DTV transition may move at the pace required by Congress," wrote Judge John Roberts.

The ruling seems to bolster an FCC plan to require DTV sets and digital storage devices to be equipped to honor the broadcast flag, a code that bars retransmission of TV stations' signals over the Internet or other networks outside the original viewer's control. The commissioner was scrambling last week to wrap up and approve broadcast-flag rules by Friday afternoon.

"The tuner decision bodes well for the flag," said Precursor Group analyst Rudy Baca.

"The court has recognized that the DTV transition is not a market-driven activity but a government-directed policy," said National Association of Broadcasters regulatory attorney Jack Goodman.

The Consumer Electronics Association (CEA) challenged the FCC's rule on grounds that the commission had no authority to impose the tuner requirement and failed to adequately measure the hike in set prices.

But the judges deemed the tuner mandate a reasonable exercise under the 1962 All Channel Receiver Act, which required all sets to accommodate UHF signals.

As for the cost/benefit analysis, FCC estimates showing tuner prices falling below $15 once production ramps up were "hardly a model of thorough consideration," the judges said. But, given the lack of reliable data, they found the FCC numbers meet the "minimum standard for reasoned decision making."

The FCC ruled last year that 50% of 36-inch sets capable of receiving analog signals must include DTV receivers by July 1, 2004, and 100% a year later. Sets 13 inches and larger must have DTV tuners by July 1, 2007.

The mandate was imposed to staunch the proliferation of analog-only sets—25 million are sold yearly—and to bring closer the day when 85% of TV households are equipped to receive digital channels from their local broadcasters, the trigger for reclaiming analog TV spectrum in a market.

CEA officials say it's too early to predict whether the group will seek a Supreme Court review.

Broadcasters also were fighting a rear-guard action to kill talk of exempting news and public-affairs shows from the broadcast flag's protections. "It is incomprehensible to me that some people think that which we spend most of our money on isn't entitled to protection," Cox Television chief Andrew Fisher told MSTV's fall conference two weeks earlier.

Rumors of an exemption were generated after FCC asked for industry input on an exemption because individuals might want to e-mail news clips about family members or important public-affairs events.