United States Court of Appeals

^FOR\ THE\ DISTRICT\ OF\ COLUMBIA\ CIRCUIT^

^Argued\ April\ 6,\ 2000\ Decided\ June\ 6,\ 2000\ ^

^No.\ 98-1420^

^[General\ Instrument\ Corporation,\ ]{.smallcaps}^

^[Petitioner]{.smallcaps}^

^v.^

^[Federal\ Communications\ Commission\ and\ ]{.smallcaps}^

^[United\ States\ of\ America,\ ]{.smallcaps}^

^[Respondents]{.smallcaps}^

^[National\ Cable\ Television\ Association,\ Inc.,\ et\ al.,\ ]{.smallcaps}^

^[Intervenors]{.smallcaps}^

^Consolidated\ with\ ^

^98-1423,\ 98-1576,\ 99-1204,\ 99-1312,\ 99-1313^

^On\ Petitions\ for\ Review\ of\ Orders\ of\ the\ ^

^Federal\ Communications\ Commission^

^\ ^*^Theodore\ Whitehouse^*^\ argued\ the\ cause\ for\ petitioners\ and\ supporting\ intervenor.\ With\ him\ on\ the\ briefs\ were\ ^*^John\ L.\ ^*

*^McGrew^*^,\ ^*^Glenn\ B.\ Manishin,\ Christy\ C.\ Kunin^*^,\ ^*^Daniel\ L.\ Brenner^*^,\ ^*^Neal\ M.\ Goldberg^*^,\ ^*^Loretta\ P.\ Polk^*^,\ ^*^Bruce\ D.\ Ryan^*^,\ and\ ^*^Michelle\ W.\ Cohen^*^.^

^\ ^*^Roberta\ L.\ Cook^*^,\ Counsel,\ Federal\ Communications\ Commission,\ argued\ the\ cause\ for\ respondents.\ ^*^Christopher\ J.\ Wright^*^,\ General\ Counsel,\ ^*^Daniel\ M.\ Armstrong^*^,\ Associate\ General\ Counsel,\ ^*^Lisa\ A.\ Burns^*^,\ Counsel,\ ^*^Joel\ I.\ Klein^*^,\ Assistant\ Attorney\ General,\ U.S.\ Department\ of\ Justice,\ ^*^Robert\ B.\ Nicholson^*^\ and\ ^*^Robert\ J.\ Wiggers^*^,\ Attorneys,\ were\ on\ the\ brief.\ ^*^James\ M.\ Carr^*^\ and\ ^*^Nancy\ L.\ Kiefer^*^,\ Counsel,\ Federal\ Communications\ Commission,\ entered\ appearances.^

^\ ^*^David\ Alan\ Nall^*^\ argued\ the\ cause\ for\ intervenors.\ With\ him\ on\ the\ brief\ were\ ^*^Jonathan\ Jacob\ Nadler^*^,\ ^*^Jonathan\ D.\ Blake^*^,\ ^*^Joe\ D.\ Edge,\ Mark\ F.\ Dever^*^,\ ^*^Catherine\ M.\ Krupka^*^,\ and\ ^*^Kevin\ S.\ DiLallo^*^.\ ^*^Benigno\ E.\ Bartolome,\ Jr.^*^\ and\ ^*^John\ W.\ Pettit^*^\ entered\ appearances.^

^\ Before:\ [Silberman]{.smallcaps},\ [Williams]{.smallcaps},\ and\ [Sentelle]{.smallcaps},\ ^*^Circuit\ Judges^*^.^

^Opinion\ for\ the\ Court\ filed\ by\ ^*^Circuit\ Judge^*^\ [Silberman]{.smallcaps}.^

^\ [Silberman]{.smallcaps},\ ^*^Circuit\ Judge^*^:\ Petitioners\ challenge\ an\ order\ of\ the\ Federal\ Communications\ Commission\ precluding\ cable\ television\ operators\ from\ offering\ \"integrated\"\ converter\ boxes\ that\ perform\ both\ security\ and\ ancillary\ functions.\ We\ think\ the\ Commission\'s\ ban\ on\ integrated\ devices\ is\ premised\ on\ a\ reasonable\ interpretation\ of\ section\ 629\ of\ the\ Communications\ Act,\ and\ we\ deny\ the\ petitions.^

**^I^**^.^

^\ This\ case\ concerns\ a\ piece\ of\ electronic\ equipment\ familiar\ to\ most\ American\ consumers:\ the\ set‑top\ cable\ or\ \"converter\"\ box.\ Converter\ boxes\ are\ the\ most\ common\ instrument\ (\"navigation\ device\")\ that\ provides\ access\ to\ cable\ programming\ or\ other\ multichannel\ video\ programming\ services.^[^1]^\ The\ typical\ converter\ box\ performs\ an\ important\ security\ or\ \"conditional\ access\"\ function,\ containing\ embedded\ technology\ that\ decodes\ or\ descrambles\ a\ digital\ or\ analog\ cable\ signal.^[^2]^\ It\ is\ this\ function\ that\ precludes\ a\ consumer\ from\ accessing\ tiers\ of\ cable\ programming\ not\ part\ of\ his\ subscription\ package.\ At\ the\ same\ time,\ converter\ boxes\ often\ perform\ other\ tasks---which\ we\ refer\ to\ for\ simplicity\'s\ sake\ as\ ancillary\ functions---unrelated\ to\ security.\ For\ instance,\ converter\ boxes\ commonly\ include\ channel\ tuners\ and\ provide\ access\ to\ video\ programming\ guides.^

^\ Converter\ boxes\ traditionally\ have\ been\ available\ to\ consumers\ only\ by\ lease\ from\ cable\ operators,\ as\ part\ of\ a\ cable\ service\ package.\ Section\ 629\ of\ the\ Communications\ Act,\ passed\ by\ Congress\ as\ part\ of\ the\ Telecommunications\ Act\ of\ 1996,\ sought\ to\ change\ this\ state\ of\ affairs.\ The\ FCC\ was\ directed\ to\ take\ steps\ to\ make\ converter\ boxes\ (and\ other\ navigation\ devices)\ commercially\ available\ from\ sources\ other\ than\ cable\ operators.\ Entitled\ \"Competitive\ Availability\ of\ Navigation\ Devices,\"\ section\ 629\ provides\ as\ follows:^

^(a)\ Commercial\ consumer\ availability\ of\ equipment\ used\ to\ access\ multichannel\ video\ programming\ distributors.\ The\ Commission\ shall,\ in\ consultation\ with\ appropriate\ industry\ standard‑setting\ organizations,\ adopt\ regulaions\ to\ assure\ the\ commercial\ availability,\ to\ consumers\ of\ multichannel\ video\ programming\ \...\ of\ converter\ boxes,\ interactive\ communications\ equipment,\ and\ other\ equipment\ used\ by\ consumers\ to\ access\ multichannel\ video\ programming\ \...\ from\ manufacturers,\ retailers,\ and\ other\ vendors\ not\ affiliated\ with\ any\ multichannel\ video\ programming\ distributor.\ Such\ regulations\ shall\ not\ prohibit\ any\ multichannel\ video\ programming\ distributor\ from\ also\ offering\ converter\ boxes,\ interactive\ communications\ equipment,\ and\ other\ equipment\ used\ by\ consumers\ to\ access\ multichannel\ video\ programming\ \...\ if\ the\ system\ operator\'s\ charges\ to\ consumers\ for\ such\ devices\ and\ equipment\ are\ separately\ stated\ and\ not\ subsidized\ by\ charges\ for\ any\ such\ services.^

^(b)\ Protection\ of\ system\ security.\ The\ Commission\ shall\ not\ prescribe\ regulations\ under\ subsection\ (a)\ of\ this\ section\ which\ would\ jeopardize\ security\ of\ multichannel\ video\ programming\ \...,\ or\ impede\ the\ legal\ rights\ of\ a\ provider\ of\ such\ services\ to\ prevent\ theft\ of\ service.^

^47\ U.S.C.\ §\ 549(a)‑(b).^

^\ The\ Commission\ issued\ a\ Notice\ of\ Proposed\ Rulemaking\ seeking\ comment\ on\ how\ best\ to\ implement\ section\ 629\'s\ requirements.^[^3]^\ It\ explicitly\ recognized\ that\ it\ was\ required\ to\ balance\ section\ 629(a)\'s\ mandate\ for\ \"commercial\ availability\"\ with\ section\ 629(b)\'s\ prohibition\ against\ any\ Commission\ action\ that\ would\ \"jeopardize\"\ the\ security\ of\ cable\ programming.\ Any\ solution\ requiring\ devices\ containing\ conditional\ access\ functionality\ to\ be\ made\ widely\ available\ at\ retail\ certainly\ would\ exacerbate\ the\ problem\ of\ cable\ theft,\ already\ a\ \$5\ billion\ dollar\ drain\ on\ cable\ operators\ and\ their\ customers.\ But\ the\ Commission\ offered\ a\ possible\ alternative\ that\ it\ thought\ might\ \"assure\ commercial\ availability\"\ of\ navigation\ devices\ without\ posing\ a\ major\ risk\ to\ cable\ security.\ It\ noted\ that\ ^

^\[i\]n\ theory,\ it\ would\ be\ possible\ to\ take\ a\ typical\ decoder\ box\ and\ divide\ it\ into\ two\ separate\ parts.\ One\ part\ would\ contain\ the\ operational\ and\ functional\ components\ such\ as\ the\ tuner,\ the\ remote\ control\ circuitry,\ the\ power\ supply,\ and\ any\ other\ non‑access\ control\ features.\ A\ second\ part\ would\ contain\ the\ access\ control\ features.\ With\ an\ interface,\ it\ would\ be\ possible\ to\ have\ the\ first\ part\ of\ the\ device\ available\ through\ retail\ outlets,\ and\ the\ second\ part,\ containing\ the\ more\ sensitive\ access\ control\ apparatus,\ available\ only\ from\ the\ service\ supplier.^

^In\ other\ words,\ the\ Commission\ suggested\ a\ separation\ of\ the\ traditional\ converter\ box\ into\ two\ parts\ (unbundling),\ permitting\ a\ device\ providing\ ancillary\ functions\ to\ be\ available\ at\ retail\ while\ allowing\ cable\ operators\ to\ maintain\ exclusive\ control\ over\ conditional\ access\ functionality.^

^\ After\ receiving\ comments,\ the\ FCC\ issued\ an\ order\ adopting\ this\ proposal.\ ^*^See\ In\ re\ Section\ 304\ of\ the\ Telecommunications\ Act\ of\ 1996,\ Commercial\ Availability\ of\ Navigation\ Devices^*^,\ 13\ F.C.C.R.\ 14775\ (1998)\ (\"^*^Navigation\ Devices\ Order^*^\").\ Cable\ operators\ were\ directed\ to\ make\ available\ separate\ security\ components\ or\ \"modules\"\ by\ July\ 1,\ 2000.\ ^*^See^*^\ 47\ C.F.R.\ §\ 76.1204(a)(1)\ &\ (e).\ The\ Commission\'s\ notion\ was\ that\ these\ modules\ could\ then\ be\ \"plugged\ in\"\ to\ commercially\ available\ equipment\ performing\ ancillary\ functions.\ It\ recognized\ that\ standardized\ digital\ and\ analog\ interfaces\ would\ be\ necessary\ to\ make\ the\ security\ modules\ uniformly\ compatible\ with\ retail\ equipment\ performing\ ancillary\ functions.\ After\ a\ lengthy\ discussion\ of\ technological\ alternatives,\ the\ Commission,\ noting\ the\ \"dangers\ of\ detailed\ government\ standard\ setting,\"\ left\ it\ to\ the\ cable\ industry\ and\ its\ national\ standard‑setting\ organizations\ to\ develop\ the\ appropriate\ interfaces.^

^\ The\ FCC\ did\ more\ than\ impose\ this\ separation\ requirement\ on\ cable\ operators.\ The\ question\ remained\ concerning\ precisely\ what\ equipment\ cable\ operators\ would\ be\ allowed\ to\ provide.\ In\ addition\ to\ mandating\ the\ \"commercial\ availability\"\ of\ converter\ boxes,\ section\ 629(a)\ states\ that\ the\ Commission\ \"shall\ not\ prohibit\"\ ^*^cable\ operators^*^\ from\ providing\ those\ devices.\ Cable\ industry\ commenters\ asserted\ that\ operators\ should\ be\ able\ to\ offer\ the\ traditional\ \"integrated\"\ converter\ boxes\ that\ perform\ both\ conditional\ access\ and\ ancillary\ functions,\ so\ long\ as\ they\ make\ available\ a\ separate\ security\ module\ for\ use\ in\ combination\ with\ retail\ navigation\ devices.\ The\ Commission\ disagreed:^

^We\ conclude\ that\ the\ continued\ ability\ \[of\ cable\ providers\]\ to\ provide\ integrated\ equipment\ is\ likely\ to\ interfere\ with\ the\ statutory\ mandate\ of\ commercial\ ability\ and\ that\ the\ offering\ of\ integrated\ boxes\ should\ be\ phased\ out.\ We\ agree\ with\ those\ commenters\ who\ note\ that\ integration\ is\ an\ obstacle\ to\ the\ functioning\ of\ a\ fully\ competitive\ market\ for\ navigation\ devices\ by\ impeding\ consumers\ from\ switching\ to\ devices\ that\ become\ available\ through\ retail\ outlets.^

^It\ accordingly\ required\ cable\ operators\ to\ cease\ providing\ new\ integrated\ cable\ boxes\ by\ January\ 1,\ 2005.\ ^*^See^*^\ 47\ C.F.R.\ §\ 76.1204(a)(1).\ Cable\ operators\ could,\ however---like\ any\ retailer---provide\ a\ device\ performing\ only\ ancillary\ functions,\ which\ could\ in\ turn\ be\ combined\ with\ the\ security\ module\ by\ the\ consumer.^

^\ Commissioner\ Powell\ wrote\ a\ separate\ statement\ dissenting\ in\ part.\ While\ he\ agreed\ with\ the\ Commission\'s\ requirement\ that\ cable\ operators\ make\ available\ separate\ security\ modules\ with\ standard\ interfaces,\ he\ argued\ that\ the\ agency\'s\ decision\ barring\ them\ from\ producing\ integrated\ devices\ was\ unsound.\ He\ thought\ that\ efficiencies\ might\ well\ accompany\ the\ integration\ of\ security\ and\ ancillary\ functions\ in\ a\ single\ device,\ and\ that\ the\ Commission\'s\ ban\ might\ \"den\[y\]\ a\ cost\ effective\ choice\ for\ consumers.\"\ \"It\ is\ quite\ plausible\ to\ me,\"\ he\ explained,\ \"that\ the\ \'impediment\'\ to\ switching\ to\ retail\ may\ in\ fact\ be\ a\ consumer\ preference\ for\ distributor‑supplied\ integrated\ boxes!\ I\ see\ no\ reason\ to\ attempt\ to\ control\ consumer\ preferences.\"^

^\ In\ response\ to\ requests\ for\ reconsideration\ from\ several\ commenters,\ the\ Commission\ modified\ some\ of\ the\ conclusions\ it\ reached\ in\ the\ ^*^Navigation\ Devices\ Order^*^.^[^4]^\ It\ deferred\ indefinitely\ the\ July\ 2000\ separation\ deadline\ for\ navigation\ devices\ providing\ access\ to\ analog\ video\ programming.\ Finding\ a\ consensus\ among\ commenters\ that\ the\ cable\ industry\ was\ rapidly\ moving\ from\ analog\ to\ digital\ programming,\ the\ FCC\ concluded\ that\ \"the\ application\ of\ Section\ 629\ to\ analog\ devices\ would\ result\ in\ unnecessary\ expenditures\ by\ \[the\ cable\ industry\]\ for\ a\ module\ that\ will\ soon\ be\ obsolete.\"\ However,\ it\ reaffirmed\ the\ separation\ deadline\ for\ digital\ devices\ and,\ importantly\ for\ the\ purposes\ of\ this\ case,\ it\ also\ applied\ the\ separation\ requirement\ to\ so‑called\ \"hybrid\"\ converter\ boxes\ capable\ of\ processing\ both\ analog\ and\ digital\ signals.\ The\ agency,\ over\ the\ protestations\ of\ commenters\ in\ the\ cable\ industry,\ maintained\ its\ prohibition\ against\ integrated\ navigation\ devices.\ Commissioner\ Powell\ again\ voiced\ his\ objection\ to\ the\ integration\ ban\ in\ a\ brief\ dissenting\ statement.^

^\ Several\ members\ of\ the\ cable\ industry\ now\ petition\ for\ review\ of\ the\ ^*^Navigation\ Devices\ Order^*^\ and\ the\ ^*^Reconsideration\ Order^*^.\ Petitioners\'\ primary\ argument\ is\ that\ the\ FCC\ exceeded\ its\ authority\ under\ section\ 629\ by\ precluding\ cable\ operators\ from\ offering\ integrated\ converter\ boxes\ to\ their\ customers.\ They\ do\ not\ challenge\ the\ Commission\'s\ separation\ requirement\ insofar\ as\ it\ applies\ to\ digital\ equipment.\ They\ do,\ however,\ object\ to\ the\ Commission\'s\ requirement\ that\ cable\ operators\ make\ available\ separate\ hybrid\ security\ modules.^

**^II^**^.^

^\ Petitioners\ assert\ that\ the\ integration\ ban\ is\ squarely\ foreclosed\ by\ the\ second\ sentence\ of\ section\ 629(a),\ which\ states\ that\ the\ Commission\'s\ regulations\ \"^*^shall\ not\ prohibit^*^\ any\ multichannel\ video\ programming\ distributor\ from\ also\ offering\ ^*^converter\ boxes^*^,\ interactive\ communications\ equipment,\ and\ other\ equipment\ used\ by\ consumers\ to\ access\ multichannel\ video\ programming.\"\ (emphasis\ added).\ While\ the\ term\ \"converter\ box\"\ is\ not\ defined\ in\ the\ 1996\ Act,\ petitioners\ claim\ that\ the\ term\ at\ the\ very\ least\ includes\ those\ integrated\ devices\ that\ the\ Commission\ banned\ in\ the\ ^*^Navigation\ Devices\ Order^*^.\ They\ point\ out\ that\ the\ most\ common\ type\ of\ navigation\ device\ in\ existence\ at\ the\ time\ of\ the\ passage\ of\ the\ 1996\ Act\ was\ the\ integrated\ converter\ box.\ The\ Commission\ stumbles\ over\ the\ first\ step\ of\ ^*^Chevron\ U.S.A.\ Inc.\ v.\ Natural\ Resources\ Defense\ Council,\ Inc.^*^,\ 467\ U.S.\ 837\ (1984),\ in\ petitioners\'\ view,\ because\ the\ second\ sentence\ of\ section\ 629(a)\ clearly\ prohibits\ the\ Commission\ from\ enacting\ the\ integrated\ device\ ban.^

^\ The\ attractive\ simplicity\ of\ petitioners\'\ construction,\ as\ the\ Commission\ persuasively\ responds,\ dissolves\ upon\ close\ scrutiny.\ For\ the\ term\ \"converter\ box\"\ also\ appears\ in\ the\ ^*^first^*^\ sentence\ of\ section\ 629(a):\ \"The\ Commission\ shall\ enact\ regulations\ to\ assure\ the\ commercial\ availability\ of\ ^*^converter\ boxes^*^\....\"\ (emphasis\ added).\ If\ petitioners\'\ interpretation\ is\ correct,\ the\ Commission\ is\ therefore\ equally\ compelled\ by\ the\ plain\ language\ of\ the\ statute\ to\ permit\ ^*^retailers^*^\ to\ provide\ integrated\ navigation\ devices,\ ^*^see,\ e.g.,\ Sullivan\ v.\ Stroop^*^,\ 496\ U.S.\ 478,\ 484\ (1990)\ (noting\ presumption\ that\ \"identical\ words\ used\ in\ different\ parts\ of\ the\ same\ act\ are\ intended\ to\ have\ the\ same\ meaning\")---certainly\ an\ unacceptable\ result\ from\ petitioners\'\ point\ of\ view.^

^\ Petitioners\ gamely\ insist\ that\ the\ parallel\ language\ in\ the\ first\ and\ second\ sentences\ of\ 629(a)\ is\ not\ fatal\ to\ their\ argument.\ They\ do\ not\ dispute\ that\ Congress\ meant\ to\ use\ the\ term\ \"converter\ box\"\ consistently\ in\ the\ statute.\ They\ acknowledge\ that,\ if\ section\ 629(a)\ were\ to\ be\ applied\ in\ isolation,\ the\ Commission\ would\ be\ obliged\ to\ permit\ both\ cable\ providers\ and\ retailers\ to\ provide\ integrated\ navigation\ devices.\ Their\ construction\ is\ saved\ from\ that\ concededly\ unacceptable\ outcome\ according\ to\ them,\ because\ ^*^another\ section^*^,\ section\ 629(b),\ limits\ section\ 629(a),\ precluding\ the\ Commission\ from\ implementing\ the\ statute\'s\ commercial\ availability\ requirement\ in\ a\ manner\ that\ \"jeopardizes\"\ the\ security\ of\ cable\ programming.\ Since\ permitting\ retailers\ to\ offer\ integrated\ devices\ would\ undoubtedly\ \"jeopardize\"\ security,\ petitioners\ reason,\ the\ Commission\ must\ prohibit\ them\ from\ doing\ so---but\ this\ limitation\ does\ not\ alter\ the\ clear\ command\ in\ the\ second\ section\ of\ section\ 629(a).^

^\ Petitioners\ offer\ a\ plausible\ construction,\ but\ it\ is\ somewhat\ strained.\ They\ reach\ their\ result\ only\ by\ reading\ section\ 629(b)\ not\ merely\ to\ \"limit\"\ section\ 629(a),\ but\ to\ disrupt\ the\ textual\ symmetry\ of\ its\ language.\ We\ have\ before\ us\ two\ constructions\ then,\ both\ of\ which\ interpret\ section\ 629(b)\'s\ mandate\ as\ \"limiting\"\ section\ 629(a)\ in\ a\ not\ obvious\ manner.\ The\ FCC\'s\ interpretation\ maintains\ consistency\ between\ the\ provision\'s\ two\ sentences\ by\ adopting\ a\ narrow\ definition\ of\ \"converter\ box.\"\ Petitioners\ take\ the\ opposite\ approach,\ holding\ to\ the\ more\ typical\ definition\ of\ \"converter\ box\"\ in\ one\ sentence\ of\ section\ 629(a)\ at\ the\ price\ of\ the\ same\ term\ meaning\ something\ entirely\ different\ in\ the\ other.\ Under\ ^*^Chevron^*^,\ we\ are\ obliged\ to\ accept\ the\ Commission\'s\ interpretation\ which\ is\ easily\ a\ permissible\ one.^

^\ We\ move\ on\ to\ petitioners\'\ alternative\ (but\ related)\ statutory\ theory:\ that\ section\ 629(b)\'s\ prohibition\ of\ regulations\ \"which\ would\ ^*^jeopardize^*^\ security\ of\ multichannel\ video\ programming\"\ precludes\ the\ Commission\'s\ integration\ ban\ (emphasis\ added).\ It\ is\ argued\ that\ evidence\ in\ the\ record\ indicates\ that\ \"embedded\ security\ currently\ contained\ in\ integrated\ equipment\ is\ a\ more\ secure\ method\ of\ protecting\ intellectual\ property\ than\ is\ separated\ security.\"\ Petitioners\ contend\ that\ this\ evidence,\ combined\ with\ a\ rather\ liberal\ definition\ of\ the\ word\ \"jeopardize\"\ as\ meaning\ ^*^any^*^\ increase\ in\ security\ risk,\ should\ lead\ us\ ineluctably\ to\ the\ conclusion\ that\ the\ Commission\'s\ prohibition\ of\ integrated\ devices\ is\ unlawful.^

^\ We\ think\ petitioners\'\ premise\ that\ any\ Commission\ action\ that\ (even\ slightly)\ increases\ security\ risk\ \"jeopardizes\"\ cable\ programming\ is\ wrong.\ To\ place\ something\ in\ \"jeopardy\"\ means\ to\ subject\ it\ to\ ^*^serious^*^\ or\ ^*^significant^*^\ danger.\ ^*^See^*^\ [Webster\'s\ Third\ New\ International\ Dictionary\ (1981)]{.smallcaps}\ (defining\ \"jeopardize\"\ as\ \"to\ expose\ to\ danger\ (as\ of\ imminent\ loss,\ defeat,\ or\ serious\ harm):\ [Imperil]{.smallcaps}\").\ In\ any\ event,\ we\ do\ not\ see\ how\ the\ Commission\'s\ decision\ to\ ban\ integrated\ converter\ boxes\ in\ and\ of\ itself\ poses\ ^*^any^*^\ threat\ to\ system\ security.\ Petitioners\ point\ to\ evidence\ purportedly\ showing\ that\ the\ separation\ of\ security\ functions\ increases\ the\ risk\ of\ cable\ theft.\ But\ petitioners\ do\ not\ challenge\ the\ Commission\'s\ separation\ requirement---at\ least\ with\ respect\ to\ digital\ navigation\ devices.^[^5]^\ Regardless\ of\ our\ disposition\ of\ the\ Commission\'s\ integration\ ban,\ would‑be\ cable\ thieves\ will\ be\ able\ to\ request\ separate\ security\ modules\ from\ their\ cable\ operators.\ Petitioners\'\ failure\ to\ explain\ how\ the\ Commission\'s\ bar\ on\ integration\ would\ in\ and\ of\ itself\ threaten\ the\ security\ of\ digital\ cable\ systems\ is\ fatal\ to\ their\ section\ 629(b)\ statutory\ argument.\ In\ sum,\ we\ think\ petitioners\'\ statutory\ objections\ to\ the\ Commission\'s\ ban\ on\ integrated\ digital\ and\ hybrid\ navigation\ devices,\ while\ well‑presented\ by\ counsel,\ are\ insufficient\ to\ clear\ the\ formidable\ hurdle\ of\ ^*^Chevron^*^\ deference.^[^6]

^\ Petitioners\ at\ oral\ argument\ sought\ to\ slide\ from\ their\ statutory\ claim\ to\ an\ argument\ that\ the\ Commission\'s\ economic\ policy\ decision\ to\ ban\ the\ sale\ of\ integrated\ devices\ was\ unsound---essentially\ to\ echo\ Commissioner\ Powell\'s\ thoughtful\ position.\ The\ Commission\ concluded\ that\ integration\ would\ \"impede\[\ \]\ consumers\ from\ switching\ to\ devices\ that\ become\ available\ through\ retail\ outlets,\"\ ^*^Navigation\ Devices\ Order^*^,\ 13\ F.C.C.R.\ at\ 14803.\ This\ statement\ does\ not\ in\ and\ of\ itself\ tell\ us\ very\ much,\ without\ further\ explanation\ as\ to\ why\ consumers\ would\ be\ \"impeded.\"\ Consumers\ might\ have\ chosen\ not\ to\ purchase\ retail\ devices\ for\ perfectly\ sensible\ economic\ reasons---because,\ for\ instance,\ there\ are\ efficiency\ gains\ captured\ in\ the\ manufacture\ of\ an\ integrated\ box\ that\ lead\ it\ to\ cost\ less\ than\ the\ combined\ cost\ of\ a\ separate\ security\ module\ and\ a\ retail\ device,\ or\ because\ consumers\ view\ as\ too\ high\ the\ transaction\ costs\ of\ seeking\ a\ separate\ ancillary\ device\ at\ retail.\ If\ this\ is\ the\ case,\ the\ integration\ ban\ does\ nothing\ more\ than\ deny\ the\ most\ cost‑effective\ product\ choice\ to\ consumers---an\ ironic\ outcome\ for\ an\ order\ implementing\ \"one\ of\ the\ most\ pro‑consumer,\ pro‑competitive\ provisions\ of\ the\ Telecom\ Act.\"\ ^*^Id^*^.\ at\ 14844\ (separate\ statement\ of\ Commissioner\ Ness).\ Perhaps\ there\ are\ benefits\ that\ will\ flow\ to\ consumers\ from\ the\ integration\ ban,^[^7]^\ but\ the\ Commission\ did\ not\ clearly\ spell\ them\ out.\ If\ it\ had,\ and\ if\ we\ nevertheless\ thought\ Commissioner\ Powell\ had\ the\ better\ argument,\ we\ would\ not\ on\ that\ basis\ alone\ be\ justified\ in\ reversing\ the\ Commission\'s\ economic\ judgment.\ ^*^See\ City\ of\ Los\ Angeles\ v.\ United\ States\ Dep\'t\ of\ Transp.^*^,\ 165\ F.3d\ 972,\ 977\ (D.C.\ Cir.\ 1999)\ (\"In\ reviewing\ the\ Department\'s\ order,\ we\ do\ not\ sit\ as\ a\ panel\ of\ referees\ on\ a\ professional\ economics\ journal,\ but\ as\ a\ panel\ of\ generalist\ judges\ obliged\ to\ defer\ to\ a\ reasonable\ judgment\ by\ an\ agency\ acting\ pursuant\ to\ congressionally\ delegated\ authority.\").^

We need not decide this question, however, since petitioners did not
assert in their briefs that the Commission\'s integration ban was
arbitrary and capricious. At oral argument, counsel responded to this
omission by noting that they did make a *Chevron* argument in their
opening brief, and although it was phrased in *Chevron* step one terms,
it necessarily implied a step two argument as well, and a step two
*Chevron* argument is close enough to an arbitrary and capricious claim.
Even granting petitioners\' point that its statutory argument allows us
to consider whether the statute, if ambiguous, was reasonably
interpreted (*Chevron* step two), their problem is that that argument
was put entirely in terms of statutory interpretation. At no point in
their opening brief did petitioners contend that, even assuming the
statute did not foreclose the Commission\'s policy, it was nevertheless
unreasonable. To be sure, we have recognized that an arbitrary and
capricious claim and a *Chevron* step two argument overlap, and because
of that we have not been sticky as to whether an argument in the area of
overlap is characterized as a *Chevron* step two claim or as an
arbitrary and capricious challenge. Whether a statute is unreasonably
interpreted is close analytically to the issue whether an agency\'s
actions under a statute are unreasonable. *See National Ass\'n. of
Regulatory Util. Comm\'rs v. ICC*, 41 F.3d 721, 726 (D.C. Cir. 1994).
But here the contention petitioners pressed at oral argument is outside
the area of overlap: they challenge the Commission\'s assumptions about
market behavior for reasons wholly independent of the statutory
arguments made in their opening brief. This is not a case of a mere
mischaracterization of an argument, but rather of a party raising an
entirely new argument---the reasonableness of the Commission\'s economic
judgment---in its reply brief. Since petitioners\' initial brief did not
in our view properly put the Commission on notice that its economic
reasoning was being challenged, we do not think it appropriate to
consider the arbitrary and capricious challenge. *See, e.g., McBride v.
Merrell Dow and Pharmaceuticals, Inc.*, 800 F.2d 1208, 1210-11 (D.C.
Cir. 1986).

**^III^**^.^

^\ There\ remain\ petitioners\'\ arguments\ directed\ to\ the\ Commission\'s\ requirement\ that\ cable\ operators\ provide\ separate\ security\ modules.\ As\ mentioned\ above,\ the\ Commission\ exempted\ analog‑only\ devices\ from\ this\ requirement\ in\ its\ ^*^Reconsideration\ Order^*^,\ and\ petitioners\ do\ not\ contest\ the\ Commission\'s\ separation\ requirement\ with\ respect\ to\ digital\ navigation\ devices.\ Petitioners\'\ objections,\ then,\ concern\ only\ the\ application\ of\ the\ separation\ mandate\ to\ a\ rather\ narrow\ class\ of\ navigation\ devices:\ \"hybrid\"\ converter\ boxes\ capable\ of\ processing\ both\ analog\ and\ digital\ signals.^

^\ The\ first\ of\ these\ arguments,\ to\ which\ petitioners\ devote\ much\ effort,\ is\ that\ the\ separation\ requirement\ violates\ the\ \"Eshoo\ Amendment,\"\ Congress\'s\ 1996\ modification\ to\ section\ 624a\ of\ the\ Communications\ Act.\ ^*^See^*^\ 47\ U.S.C.\ §\ 544a.\ Section\ 624a,\ passed\ by\ Congress\ in\ 1992,\ directed\ the\ Commission\ to\ take\ steps\ to\ facilitate\ the\ compatibility\ of\ cable\ systems\ with\ consumer\ equipment,\ such\ as\ televisions\ and\ VCRs.\ The\ Eshoo\ Amendment,\ apparently\ animated\ by\ concerns\ that\ the\ FCC\ was\ using\ its\ power\ under\ section\ 624a\ to\ impose\ technology‑forcing\ technical\ standards\ on\ the\ cable\ industry,\ required\ the\ Commission\ to\ \"ensure\ that\ any\ standards\ or\ regulations\ developed\ under\ the\ authority\ of\ this\ section\ to\ ensure\ compatibility\ between\ televisions,\ video\ cassette\ recorders,\ and\ cable\ systems\ do\ not\ affect\ features,\ functions,\ protocols,\ and\ other\ product\ and\ service\ options.\"\ ^*^See^*^\ 47\ U.S.C.\ §\ 544a(c)(2)(D).\ Petitioners\ argue\ that\ the\ Commission\'s\ requirement\ that\ cable\ providers\ provide\ a\ hybrid\ security\ module\ constitutes\ a\ ^*^de\ facto^*^\ mandate\ that\ the\ industry\ adopt\ a\ particular\ protocol,\ the\ EIA-105\ Decoder\ Interface,\ that\ violates\ the\ \"letter\ and\ spirit\"\ of\ the\ Eshoo\ Amendment.\ Indeed,\ they\ inform\ us,\ it\ was\ a\ concern\ about\ the\ Commission\'s\ adoption\ of\ that\ very\ interface\ in\ an\ earlier\ proceeding\ that\ prompted\ Congress\ to\ pass\ the\ Eshoo\ Amendment\ in\ the\ first\ place.\ ^*^Cf.\ Compatability\ Order^*^\ at\ 4127.^

^\ Even\ granting\ the\ dubious\ proposition\ that\ the\ Commission\ has\ mandated\ the\ cable\ industry\'s\ use\ of\ the\ Decoder\ Interface\ in\ the\ proceeding\ under\ review,^[^8]^\ petitioners\'\ argument\ is\ foreclosed\ by\ the\ text\ of\ the\ provision\ on\ which\ it\ relies.\ For,\ as\ the\ quoted\ language\ above\ demonstrates,\ the\ Eshoo\ Amendment\ applies\ only\ to\ regulations\ promulgated\ under\ section\ 624a\'s\ equipment\ compatibility\ provisions;\ its\ limitations\ simply\ do\ not\ extend\ to\ the\ Commission\'s\ actions\ in\ this\ proceeding\ which\ were\ pursuant\ to\ section\ 629\'s\ independent\ grant\ of\ regulatory\ authority.\ Nor\ do\ we\ find\ the\ legislative\ history\ inconsistent\ with\ that\ precise\ textual\ analysis\ of\ the\ statute.\ Although\ Representative\ Eshoo\ by\ letter\ to\ the\ Commission\ sought\ to\ support\ petitioners\'\ interpretation,\ that\ \"legislative\ future\"\ is\ of\ almost\ no\ value,\ ^*^see\ United\ States\ ex\ rel.\ Long\ v.\ SCS\ Bus.\ &\ Technical\ Inst.^*^,\ 173\ F.3d\ 870,\ 878-79\ (D.C.\ Cir.\ 1999),\ ^*^modified^*^,\ 173\ F.3d\ 890\ (D.C.\ Cir.\ 1999),\ and,\ in\ any\ event,\ contradicts\ her\ statements\ at\ the\ time\ of\ the\ bill\'s\ passage,\ ^*^see^*^\ [H.R.\ Rep.\ No]{.smallcaps}.\ 204,\ 104th\ Cong.,\ 1st\ Sess.\ at\ 215\ (1995)\ (Additional\ Views\ of\ Rep.\ Eshoo)\ (\"\[M\]y\ amendment\ does\ not\ affect\ section\ 203\ \[of\]\ H.R.\ 1555,\ which\ assures\ that\ \'set‑top\'\ boxes\ will\ be\ made\ available\ to\ consumers\ through\ retail\ stores.\").^

^\ We\ also\ are\ unpersuaded\ by\ petitioners\'\ contention\ that\ the\ Commission\'s\ application\ of\ the\ separation\ requirement\ to\ the\ analog\ security\ components\ of\ hybrid\ devices\ impermissibly\ \"jeopardizes\"\ cable\ security\ in\ violation\ of\ section\ 629(b).\ As\ the\ Commission\ properly\ observed\ in\ its\ ^*^Reconsideration\ Order^*^,\ ^*^see^*^\ 14\ F.C.C.R.\ at\ 7605,\ if\ the\ analog\ separation\ requirement\ will\ violate\ section\ 629(b)\ in\ every\ case,\ without\ regard\ to\ specific\ evidence\ of\ security\ risks,\ and\ if\ commercial\ provision\ of\ integrated\ boxes\ in\ fact\ creates\ excessive\ security\ risks,\ then\ the\ very\ mandate\ of\ commercial\ availability\ itself\ violates\ section\ 629(b)---which\ is\ another\ way\ of\ saying\ that\ section\ 629\ violates\ section\ 629,\ at\ least\ with\ respect\ to\ those\ navigation\ devices\ accessing\ the\ dominant\ category\ of\ cable\ programming\ at\ the\ time\ of\ the\ 1996\ Act\'s\ passage.\ We\ certainly\ understand\ the\ Commission\'s\ reluctance\ to\ conclude\ that\ section\ 629(b)\ requires\ this\ result.^

^\ Moreover,\ while\ petitioners\ proffer\ ample\ evidence---evidence\ uncontested\ by\ the\ Commission,\ ^*^see\ Reconsideration\ Order^*^,\ 14\ F.C.C.R.\ at\ 7605-that\ analog\ navigation\ devices\ are\ more\ vulnerable\ to\ attacks\ by\ cable\ thieves\ than\ are\ their\ digital\ counterparts,\ it\ does\ not\ necessarily\ follow\ that\ packaging\ that\ security\ hardware\ in\ a\ separate\ module,\ as\ opposed\ to\ as\ an\ embedded\ part\ of\ an\ integrated\ converter\ box,\ \"jeopardizes\"\ analog\ security.\ After\ all,\ in\ both\ situations\ the\ security\ components\ themselves\ remain\ under\ the\ proprietary\ control\ of\ the\ cable\ operator.\ Petitioners\ do\ point\ to\ comments\ in\ the\ record\ explaining\ how\ the\ existence\ of\ a\ standardized\ industrywide\ common\ analog\ interface\ would\ increase\ the\ risk\ of\ theft\ by\ \"restrict\[ing\]\ the\ development\ of\ security\ improvements\"\ or\ by\ \"necessarily\ reveal\[ing\]\ information\ about\ the\ proprietary\ technology\ used\ to\ provide\ security.\"\ Telecommunications\ Industry\ Association\ Petition\ for\ Reconsideration\ at\ 4-5;\ Comments\ of\ Ameritech\ New\ Media\ at\ 4.\ Conclusory\ statements\ like\ these\ are,\ however,\ insufficient\ to\ establish\ that\ the\ Commission\'s\ separation\ requirement\ would\ \"jeopardize\"\ the\ cable\ security\ of\ operators\ providing\ hybrid\ service---a\ standard\ which,\ as\ we\ discussed\ above,\ requires\ a\ showing\ of\ a\ substantial,\ as\ opposed\ to\ slight,\ risk\ of\ harm.^

^\ Petitioners\ bring\ one\ final\ argument\ against\ the\ FCC\'s\ application\ of\ the\ separation\ requirement\ to\ hybrid\ navigation\ devices.\ As\ noted\ above,\ the\ Commission\ had\ originally\ required\ all\ cable\ operators,\ including\ those\ offering\ analog\ programming\ service,\ to\ offer\ a\ separate\ security\ module.\ ^*^See\ Navigation\ Devices\ Order^*^,\ 13\ F.C.C.R.\ at\ 14793.\ Convinced\ by\ comments\ that\ analog\ programming\ was\ rapidly\ becoming\ obsolete,\ the\ Commission\ reversed\ itself\ on\ rehearing,\ and\ indefinitely\ deferred\ the\ separation\ requirement\ with\ respect\ to\ analog‑only\ navigation\ devices.\ It\ did\ not,\ however,\ extend\ this\ exemption\ to\ hybrid\ devices,\ which\ are\ capable\ of\ processing\ both\ analog\ and\ digital\ signals.\ ^*^See\ Reconsideration\ Order^*^,\ 14\ F.C.C.R.\ at\ 7603;\ 47\ C.F.R.\ §\ 76.1204(f).\ Petitioners\ argue\ that\ it\ was\ arbitrary\ and\ capricious\ for\ the\ FCC\ to\ treat\ analog‑only\ and\ hybrid\ devices\ differently.^

^\ This\ claim\ is\ based\ on\ petitioners\'\ contention\ that\ \"the\ same\ factors\ that\ the\ Commission\ identified\ as\ supporting\ the\ exemption\ of\ analog‑only\ devices\ \...\ apply\ with\ equal\ force\ to\ the\ analog\ security\ component\ of\ \'hybrid\'\ devices.\"\ But\ this\ is\ an\ overstatement.\ The\ Commission\ did\ not\ abandon\ its\ separation\ mandate\ for\ analog‑only\ devices\ out\ of\ concerns\ over\ the\ security\ problems\ inhering\ in\ an\ analog\ security\ interface.\ ^*^See\ Reconsideration\ Order^*^\ at\ 7601-03.\ Nor\ did\ the\ Commission\ base\ its\ determination\ on\ the\ research\ and\ development\ costs\ of\ a\ common\ analog\ interface\ ^*^per\ se^*^.\ Instead,\ the\ agency\ did\ not\ think\ it\ worthwhile\ for\ the\ industry\ to\ construct\ a\ separate\ analog\ security\ ^*^module^*^\ (not\ merely\ an\ interface)\ that\ \"will\ soon\ be\ obsolete\"\ because\ of\ the\ industry\'s\ transition\ from\ analog\ to\ digital\ programming.\ ^*^Id.^*^\ at\ 7602.\ The\ competitive\ access\ mandate\ of\ section\ 629(a)\ would\ be\ more\ sensibly\ satisfied,\ the\ Commission\ reasoned,\ by\ focusing\ the\ industry\ (and\ the\ FCC)\ on\ the\ equipment\ capable\ of\ processing\ digital\ signals.\ ^*^See\ id.^*^\ at\ 7602-03.^

^\ Equipment,\ that\ is\ to\ say,\ like\ hybrid\ navigation\ devices.\ The\ Commission\ found\ that,\ unlike\ analog‑only\ equipment,^

^hybrid\ devices\ could\ interfere\ with\ competition\ in\ the\ digital\ marketplace.\ If\ hybrid\ devices\ were\ included\ in\ the\ deferral,\ it\ is\ more\ likely\ that\ subscribers\ would\ lack\ incentives\ to\ look\ to\ the\ marketplace\ for\ a\ digital\ navigation\ device\ if\ their\ equipment\ choice\ to\ receive\ all\ services\ was\ either\ to\ lease\ a\ box\ from\ the\ \[cable\ operator\],\ or\ to\ purchase\ a\ digital\ box\ at\ retail\ and\ obtain\ a\ separate\ analog\ box\ and\ a\ digital\ security\ module.^

*^Id.^*^\ at\ 7603.\ In\ other\ words,\ the\ Commission\ thought\ that,\ because\ of\ their\ ability\ to\ access\ digital\ programming,\ hybrid\ devices\ would\ likely\ find\ a\ market\ in\ the\ future---a\ distinction\ that\ explains\ the\ Commission\'s\ differential\ treatment\ of\ analog‑only\ and\ hybrid\ devices.\ Petitioners\ respond\ that\ the\ Commission\ offers\ inadequate\ evidence\ to\ support\ this\ assumption\ about\ the\ hybrid\ navigation\ devices\ market.\ While\ the\ Commission\'s\ order\ is\ hardly\ a\ model\ of\ comprehensiveness\ on\ this\ point,\ we\ disagree\ that\ its\ conclusion\ is\ unsupported\ by\ the\ record.\ A\ coalition\ of\ electronic\ retailers\ that\ supported\ the\ Commission\'s\ decision\ to\ exempt\ analog‑only\ devices\ argued\ that\ many\ cable\ systems\ will\ be\ hybrid\ \"for\ the\ foreseeable\ future,\"\ and\ thus\ should\ be\ not\ exempt\ from\ the\ separation\ requirement.\ Written\ ^*^Ex\ Parte^*^\ Presentation\ of\ Circuit\ City\ et\ al.\ Moreover,\ the\ Commission\'s\ concern\ about\ hybrid\ devices\ \"interfering\ with\ competition\ in\ the\ digital\ market\"\ appears\ well‑grounded\ in\ common\ sense.\ As\ intervenors\ observe,\ the\ ability\ to\ offer\ an\ integrated\ \"hybrid\"\ box\ capable\ of\ accessing\ digital\ programming\ might\ encourage\ cable\ operators\ to\ incorporate\ outdated\ analog\ functionality\ into\ their\ navigation\ devices\ in\ order\ to\ avoid\ the\ digital\ separation\ requirement.\ We\ therefore\ reject\ petitioners\'\ final\ challenge\ to\ the\ Commission\'s\ separation\ requirement\ for\ hybrid\ navigation\ devices.^

**^\*\ \*\ \*\ \*^**

^\ For\ the\ foregoing\ reasons,\ the\ petitions\ for\ review\ are^

^\ \ ^*^Denied^*^.^

[^1]: \"Multichannel video programming services\" include not only cable
    programming but also other services that provide multiple channels
    of video programming, such as direct broadcast satellite service.
    *See In re Implementation of Section 304 of the Telecommunications
    Act of 1996, Commercial Availability of Navigation Devices*, 13
    F.C.C.R. 14775, 14783 (1998). Since the regulations at issue in this
    case apply primarily to cable operators, *see id.* at 14800-801
    (exempting satellite programming from separation requirement), we
    use the generic term \"cable programming\" to refer to all
    multichannel video programming services covered by the contested
    regulations.

[^2]: Cable programming can be delivered by means of either analog or
    digital signals. An analog system transmits and receives microwave
    signals in their original form; a digital system, on the other hand,
    translates the original signal into a binary code, and decodes that
    signal upon receipt. Because of the increased complexity involved in
    digital signal delivery methods, digital programming is far less
    susceptible to theft than analog programming.

[^3]: See In re Implementation of Section 304 of the Telecommunications
    Act of 1996, Commercial Availability of Navigation Devices, 12
    F.C.C.R. 5639 (1997) (\"Notice of Proposed Rulemaking\").

[^4]: *See In re Implementation of Section 304 of the Telecommunications
    Act of 1996, Commercial Availability of Navigation De vices*, 14
    F.C.C.R. 7596 (1999) (\"*Reconsideration Order*\").

[^5]: ^\ Petitioners\ do\ challenge\ the\ separate\ security\ requirement\ insofar\ as\ it\ applies\ to\ the\ analog\ programming\ delivery\ function\ of\ \"hybrid\"\ navigation\ devices.\ We\ treat\ this\ argument\ ^*^infra.^*

[^6]: We reject petitioners\' rather labored contention that section
    629(d)(1), which states that \"\[d\]eterminations made or
    regulations prescribed with respect to commercial availability \...
    before the \[date of the Telecommunications Act of 1996\] shall
    fulfill the requirements of this section,\" prohibits the
    Commission\'s ban on integrated navigation devices. While we doubt
    that section 629(d)(1) proscribes the Commission from altering
    commercial availability determinations made prior to the 1996 Act,
    that provision is not even implicated in this case since the earlier
    Commission \"determination\" relied on by petitioners became final
    *after* the 1996 Act was enacted. *See Order on Reconsideration, In
    re Implementation of Section 17 of the Cable Television Consumer
    Protection and Competition Act of 1992, Compatibility Between Cable
    Systems and Consumer Electronics Equipment*, 11 F.C.C.R. 4121 (1996)

    ^(issued\ on\ April\ 10,\ 1996,\ after\ 1996\ Act\'s\ effective\ date)\ (\"^*^Compatability\ Order^*^\").^

[^7]: Or perhaps, somewhat paradoxically, it is the lack of these
    benefits that makes the ban necessary. The statute requires
    \"commercial availability,\" but does not condition that
    availability on an improvement in consumer welfare. So even if it
    were merely the transaction costs that \"impeded\" consumers from
    buying devices at retail, the Commission might be authorized to take
    affirmative steps to create a retail market.

[^8]: ^\ The\ Commission\ insists,\ quite\ plausibly,\ that\ it\ has\ done\ no\ such\ thing.\ Its\ regulations\ make\ no\ reference\ to\ the\ Decoder\ Interface\ nor\ to\ any\ other\ particular\ protocol;\ to\ the\ contrary,\ they\ require\ only\ the\ industry\'s\ development\ of\ a\ \"commonly\ used\ interface\ or\ an\ interface\ that\ conforms\ to\ appropriate\ technical\ standards\ promulgated\ by\ a\ national\ standards\ organization.\"\ 47\ C.F.R.\ §\ 76.1204(b).^