UNITED STATES COURT OF APPEALS FOR THE D.C. CIRCUIT


GEN INSTRUMENT CORP

v.

FCC


98-1420a

D.C. Cir. 2000


*	*	*


Silberman, Circuit Judge: Petitioners challenge an order  of the
Federal Communications Commission precluding cable  television
operators from offering "integrated" converter box- es 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 Communi- cations 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 "convert- er" box. Converter
boxes are the most common instrument  ("navigation device") that
provides access to cable program- ming or other multichannel video
programming services.1 




__________

n 1 "Multichannel video programming services" include not only  cable
programming but also other services that provide multiple 


The typical converter box performs an important security or 
"conditional access" function, containing embedded technolo- gy 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 subscrip- tion 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 con- sumers 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 regula-




__________

n channels of video programming, such as direct broadcast satellite 
service. See In re Implementation of Section 304 of the Telecom-
munications 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 re-
quirement), we use the generic term "cable programming" to refer  to
all multichannel video programming services covered by the  contested


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 com- plexity involved in
digital signal delivery methods, digital program- ming is far less
susceptible to theft than analog programming.


tions 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 distrib- utor from also offering
converter boxes, interactive com- munications 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


(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


47 U.S.C. s 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 availabili- ty" with section 629(b)'s prohibition
against any Commission  action that would "jeopardize" the security of
cable program- ming. 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 custom- ers.
But the Commission offered a possible alternative that  it thought
might "assure commercial availability" of naviga- tion devices without
posing a major risk to cable security. It  noted that




__________

n 3 See In re Implementation of Section 304 of the Telecommuni- cations
Act of 1996, Commercial Availability of Navigation De- vices, 12
F.C.C.R. 5639 (1997) ("Notice of Proposed Rulemaking").


[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), permit- ting 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 adopt- ing this
proposal. See In re Section 304 of the Telecommuni- cations Act of
1996, Commercial Availability of Navigation  Devices, 13 F.C.C.R.
14775 (1998) ("Navigation Devices Or- der"). Cable operators were
directed to make available sepa- rate security components or "modules"
by July 1, 2000. See  47 C.F.R. s 76.1204(a)(1) & (e). The
Commission's notion  was that these modules could then be "plugged in"
to com- mercially 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 func- tions. After a lengthy
discussion of technological alterna- tives, the Commission, noting the
"dangers of detailed gov- ernment standard setting," left it to the
cable industry and its  national standard-setting organizations to
develop the appro- priate interfaces.


The FCC did more than impose this separation require- ment on cable
operators. The question remained concerning  precisely what equipment
cable operators would be allowed to  provide. In addition to mandating
the "commercial availabili- ty" of converter boxes, section 629(a)
states that the Commis- sion "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 provid- ers] 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 avail- able through


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


Commissioner Powell wrote a separate statement dissent- ing in part.
While he agreed with the Commission's require- ment 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


In response to requests for reconsideration from several  commenters,
the Commission modified some of the conclu-


sions it reached in the Navigation Devices Order.4 It de- ferred
indefinitely the July 2000 separation deadline for navi- gation
devices providing access to analog video programming.  Finding a
consensus among commenters that the cable indus- try 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" con- verter boxes capable of processing both analog and
digital  signals. The agency, over the protestations of commenters in 
the cable industry, maintained its prohibition against inte- grated
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 Reconsidera- tion 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
separa- tion 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 equip- ment, and other equipment used by
consumers to access 




__________

n 4 See In re Implementation of Section 304 of the Telecommuni- cations
Act of 1996, Commercial Availability of Navigation De- vices, 14
F.C.C.R. 7596 (1999) ("Reconsideration Order").


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


The attractive simplicity of petitioners' construction, as the 
Commission persuasively responds, dissolves upon close scru- tiny. 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


rity, 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 some- what
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 consis-
tency 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 Commis- sion's interpretation which is


We move on to petitioners' alternative (but related) statuto- ry
theory: that section 629(b)'s prohibition of regulations  "which would
jeopardize security of multichannel video pro- gramming" precludes the
Commission's integration ban (em- phasis added). It is argued that
evidence in the record  indicates that "embedded security currently
contained in inte- grated 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) (defin- ing "jeopardize" as "to expose to danger (as
of imminent loss,  defeat, or serious harm): Imperil"). In any event,
we do not  see how the Commission's decision to ban integrated


er 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 navi- gation devices.5
Regardless of our disposition of the Commis- sion'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
insuf- ficient 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 eco- nomic policy decision
to ban the sale of integrated devices was  unsound--essentially to
echo Commissioner Powell's thought- ful position. The Commission
concluded that integration 




__________

n 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 re-
quirements 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 avail- ability
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 Implemen- tation 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) ("Compata- bility Order").


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 state- ment 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 petition- ers did not
assert in their briefs that the Commission's  integration ban was
arbitrary and capricious. At oral argu- ment, counsel responded to
this omission by noting that they 




__________

n 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.


did make a Chevron argument in their opening brief, and  although it
was phrased in Chevron step one terms, it neces- sarily implied a step
two argument as well, and a step two  Chevron argument is close enough
to an arbitrary and capri- cious claim. Even granting petitioners'
point that its statuto- ry 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 arbi- trary 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
mischaracteriza- tion of an argument, but rather of a party raising an
entirely  new argument--the reasonableness of the Commission's eco-
nomic 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


III.


There remain petitioners' arguments directed to the Com- mission's
requirement that cable operators provide separate  security modules.
As mentioned above, the Commission ex-


empted 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


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. s 544a.  Section 624a, passed by Congress in 1992,
directed the Com- mission 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. s 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 Deco- der 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


Even granting the dubious proposition that the Commission  has mandated
the cable industry's use of the Decoder Inter- face in the proceeding
under review,8 petitioners' argument is 




__________

n 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 


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 limita- tions 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. 204, 104th Cong., 1st Sess. at  215 (1995) (Additional
Views of Rep. Eshoo) ("[M]y amend- ment 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 commer- cial provision of integrated boxes in fact
creates excessive  security risks, then the very mandate of commercial
availabil- ity 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 




__________

n 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. s 76.1204(b).


passage. We certainly understand the Commission's reluc- tance to
conclude that section 629(b) requires this result.


Moreover, while petitioners proffer ample evidence--evi- dence
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 pack- aging that security hardware in a
separate module, as op- posed 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 pro-
prietary 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] infor- mation 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 opera- tors
providing hybrid service--a standard which, as we dis- cussed above,
requires a showing of a substantial, as opposed  to slight, risk of


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. Con- vinced by comments that analog programming was rapidly 
becoming obsolete, the Commission reversed itself on rehear- ing, and
indefinitely deferred the separation requirement with  respect to
analog-only navigation devices. It did not, howev- er, extend this
exemption to hybrid devices, which are capable  of processing both
analog and digital signals. See Reconsid- eration Order, 14 F.C.C.R.
at 7603; 47 C.F.R. s 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 naviga- tion device if their equipment
choice to receive all ser- vices 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 ana- log-only and hybrid
devices. Petitioners respond that the  Commission offers inadequate
evidence to support this as- sumption about the hybrid navigation
devices market. While 


the Commission's order is hardly a model of comprehensive- ness on this
point, we disagree that its conclusion is unsup- ported 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 "hy- brid" 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
peti- tioners' final challenge to the Commission's separation re-
quirement for hybrid navigation devices.


* * * *


For the foregoing reasons, the petitions for review are


Denied.