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In a somewhat cursory opinion, the DC Circuit struck down the FCC's "Plug and Play" order, which has been in place since 2003. The "encoding rules" this order enacted were designed to prevent subscription TV services from making it difficult for people to use home recording equipment, using copy-protection technologies like Macrovision.
To do this, the Court relied on out-of-context language from a different, 1998 FCC Order. This could have a number of repercussions for home video users--for instance, cable providers could start using "selectable output control" freely--disabling the analog outputs of devices remotely, for any reason at all. (For most users, these means any connections on their devices other than HDMI.) A lot of home theater equipment may just have become a lot less valuable. (There's uncertainty because the Court's opinion doesn't address later-enacted rules on the same subject--it strikes down an older version of the rules. Thus the situation is legally ambiguous.)
Some are positing that this spells trouble for FCC efforts to improve its set-top box rules--for example, by implementing AllVid, a proposal PK has endorsed for a while. But it probably doesn't--whether the FCC acts on AllVid depends only on whether it's willing to take on the interests that are opposed to it--the legal and technological path is as clear as ever.
The FCC is charged under Section 629 of the Communications act with promoting the commercial availability of "navigation devices"--a general term that applies to set-top boxes, TVs, and other electronics that you use to interact with subscription TV programming. This statute was designed to make it so users could just buy devices at retail, plug them into their cable or other subscription TV system, and have them work--preferably, without the need for a proprietary set-top box.
The encoding rules were enacted pursuant the that statute. The FCC found that they were necessary to promote a market in "navigation devices" and protect settled consumer expectations about what they can do with content. While the Court was somewhat skeptical of the FCC's reasoning here, it ended up striking the rules for another reason, and in a way that shows how things the FCC says can come back to haunt it.
The CableCARD rules were the primary way the FCC implemented Section 629, and never applied to satellite TV providers. Fundamentally this was because satellite TV, at the time the rules were being crafted, was relatively new, and policymakers wanted to give it more flexibility than cable. The formal legal reason stated at the time, though, was that you could go into retail stores and pick up satellite gear, from a number of providers.
This isn't really true anymore--satellite dishes and set-top boxes are just as locked-down and controlled as cable equipment. Nevertheless the Court cited the 1998 FCC to say, with respect to satellite TV at least, mission accomplished. Since retail equipment was already available for satellite TV, there's no further need for any rules to promote it, which means that the encoding rules (which unlike CableCARD, applied to satellite as well as cable) exceeded the Commission's authority.
This is kind of weird--even leaving aside that the market has totally changed since 1998. Section 629 is not just a "pick up your proprietary gear at the store" law. It was intended to promote standardization and nationwide markets for this gear, not just change the place you buy it. More recent pronouncements from the FCC than the 1998 language dredged up in this case confirm this.
Now, there are other elements to this decision. The most obvious is its dismissive treatment of "ancillary authority"--a Supreme Court doctrine that says that the FCC can enact rules that are necessary to carry out other policies, for which there might be more clear Congressional direction. Basically, it's a doctrine that allows the FCC to fill in the gaps, on the assumption that Congress couldn't have predicted everything an agency like that might have to do. It's troubling that the DC Circuit dismisses this doctrine with little more than a claim that the doctrine seems to give the FCC "plenary" powers. The Court fails to provide any guidance as to how the FCC could successfully make use of the ancillary authority the Supreme Court says it has, but which the DC Circuit keeps saying it doesn't.
But the most important legal issue, going forward, is whether the DC Circuit has foreclosed, to the extent its jurisdiction allows, any possibility of rules under Section 629 that apply equally to all MVPDs. I don't think it does. In fact, I think the FCC could re-pass the encoding rules and overcome the DC Circuit's objections.
Let's review the operative language of Section 629. It states,
The Commission shall, in consultation with appropriate industry standard-setting organizations, adopt regulations to assure the commercial availability, to consumers of multichannel video programming and other services offered over multichannel video programming systems, of converter boxes, interactive communications equipment, and other equipment used by consumers to access multichannel video programming and other services offered over multichannel video programming systems, from manufacturers, retailers, and other vendors not affiliated with any multichannel video programming distributor.
That's as clear a delegation of authority to an agency as you get--and it's settled law that when Congress delegates authority to an agency, courts don't get to second-guess it. (For instance, if a court says an ambiguous statute means one thing, and an agency says it means another thing, the agency's interpretation wins, not the court's.) The DC Circuit appears to believe that the FCC thinks that Section 629 is a "pick your gear up at the store" statute. The FCC simply needs to more forcefully state that this is not the case--that the law requires that it create a market for devices that work with any provider. This was not the case in 1998 and it is not the case today. If necessary it should clearly repudiate any previous language to the contrary --agencies are allowed to change course if they provide reasoned explanations.
To be clear, I don't just want the FCC to just reenact the rules that were just struck down--except maybe as a stopgap matter. I want it to enact AllVid, which is a much more comprehensive solution to the video device problem. If AllVid were in place, we wouldn't have to wait for Roku to strike a deal with Netflix, or follow the trade press to see how likely Amazon or Apple or Intel is to ink the content deals they need to offer a new video service. With AllVid, any device manufacturer would be able to sell products, with unique interfaces, that allow people to make the most of the subscription TV services they already pay for. Even after this decision, I still think the FCC can move forward with AllVid--if it wants to.
ps: It's fun to look at DC Circuit opinions to try to predict what will happen in the Open Internet case, but it's awfully hard to see a trend when contrasting this decision to the more thoroughly-reasoned data roaming opinion (which upheld the FCC) from a little while ago. I still think the FCC (and its supporters, like PK) have the better argument in that case, and the the Open Internet rules will be upheld. But this decision, and its somewhat surprising reasoning, show that you can never really predict what a court will do.