The U.S. Court of Appeals for the D.C. Circuit vacated the Federal Communications Commission’s (FCC) rules requiring digital television (DTV) broadcast receiving and associated equipment to include technology intended to prevent further distribution of digital broadcast programming, such as via the internet. American Library Association, et al., v. FCC, Case No. 04-1037 (May 6, 2005) (Edwards, J.). Motion picture interests said that lack of such protection could limit the HDTV content made available for broadcast, whereas some technology and consumer interests challenged the necessity, effectiveness and collateral consequences of the rule. The Court ruled, however, on the grounds of the FCC’s jurisdiction.
The "broadcast flag" technology regime emerged largely from a private sector technical working group that included representatives of entertainment and technology companies and public interest groups; however, the technology was controversial. Nonetheless, the FCC adopted rules based on this technical regime in 2003. The rules require DTV receivers and associated devices manufactured on or after July 1, 2005 to include technology pertaining to the "screening" of broadcast content for a digital code—a "broadcast flag"—embedded in the data stream. If a "flag" is identified in a program (or if "screening" for the flag is not performed), the program may only be routed to a digital output or a recording device that protects against mass, indiscriminate redistribution of content over the internet. There is no limitation on the transmission of content over "analog" (including analog high definition) outputs and no limitation on consumer home recording—provided that digital recorders have a means to protect against internet redistribution of the recordings they make. The FCC has certified technologies as to both interface and digital recording protection against such redistribution.
Libraries and consumer groups challenged the regulations on the basis that the FCC lacked jurisdiction over TV broadcasting sufficient to govern device design after a signal has left the broadcast reception circuitry as the "flag" rules do. The Court first determined that at least the library petitioners had standing, as the "flag" rules potentially interfere with internet retransmission of broadcast programming for lawful "distance education" purposes. In granting the petitions for review and vacating the FCC regulations, the Court agreed that the FCC’s statutory authority over TV broadcasts does not extend to regulation of consumers’ use of television receiver apparatus after the broadcast has been received.
The Court emphatically rejected the FCC’s argument that it has "ancillary jurisdiction" under Title I of the Communications Act to adopt such regulations in furtherance of its statutory authority to foster broadcasting and promote the transition to DTV. The FCC and the Motion Picture Association of America, which intervened in the appeal, argued that the FCC’s interest and responsibilities in the congressionally mandated transition to digital broadcasting and High Definition Television (HDTV) provided the commission with "ancillary" jurisdiction to impose such regulations on devices. The Court, however, was unwilling to afford Chevron deference to the FCC’s interpretation of its own statutory authority because the Court could not find that the agency was acting pursuant to any authority delegated by Congress. Although the FCC has authority over apparatus used in the transmission and reception of wire or radio communications, this authority does not extend to regulation of consumer electronics products when those devices are not engaged in the process of wire or radio transmission. A DTV receiver is no longer engaged in "communications by wire or radio" once the broadcast has been received.
Thus, to the extent the new rules require DTV equipment to give effect to the broadcast flag after the DTV broadcast has been received, the rules exceed any ancillary jurisdiction, based on its powers over broadcast signals and their reception, that the FCC might have over the design of consumer electronics and information technology products. When it adopted these regulations, the FCC noted that this was the first time it had exercised ancillary jurisdiction over equipment manufacturers in this manner. The Congress, which is slated to consider "DTV transition" legislation that would set a "hard" date for a cutoff of analog broadcasting, is expected also to receive proposals to "ratify" the FCC regulations. Proponents cite Congress’s ratification of the Federal Trade Commission’s "Do Not Call List" regulations after they were vacated by an appeals court on jurisdictional grounds as a direct precedent. Some opponents say that such legislation would turn the FCC into the "Federal Computer Commission."
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