Broadband Cable Association of Pennsylvania

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May 21, 2013

The Federal Communications Commission's attempt to defend its net neutrality rules against a court challenge got major support on Monday from the Supreme Court, which ruled in a separate case that regulatory agencies should usually be granted deference in interpreting their own jurisdictions.

In a 6-to-3 decision, Justice Antonin Scalia wrote that in cases where Congress has left ambiguous the outlines of a regulatory agency's jurisdiction, "the court must defer to the administering agency's construction of the statute so long as it is permissible." That has big implications for Verizon v. F.C.C., in which Verizon challenged the F.C.C.'s Open Internet Order, its rules on net neutrality. Those rules said that an Internet service provider must treat all traffic on its system roughly equally, not giving priority to any one type of data or application as it moves through the provider's Internet pipes.

The net neutrality case is pending before the United States Court of Appeals for the District of Columbia Circuit. The appeals court was expected to hear arguments in that case this spring, but deferred the case until next fall. Court watchers have speculated that the delay may have been spurred by anticipation of Monday's decision in Arlington v. F.C.C., No. 11-1545. "This case just gave the F.C.C.'s argument a lot more weight," said David Kaut, a telecommunications regulatory analyst at Stifel, Nicolaus & Company in Washington. Mr. Kaut cautioned, however, that the differing facts of the two cases made it uncertain whether the precedent in the Arlington case was sufficient to validate the F.C.C.'s argument that it has authority to regulate Internet service providers.

Edward S. McFadden, a Verizon spokesman, said the company did not "anticipate that today's decision in Arlington v. F.C.C. will have any effect on our appeal" in the net neutrality case. The precedent applied by Justice Scalia in the Arlington case was Chevron U.S.A. v. Natural Resources Defense Council, in which the court held that courts must defer to an agency's interpretation of its statutory jurisdiction unless it exceeds the specific bounds set by Congress. How that applies to the Verizon case remains uncertain, however, because of a previous decision by the District of Columbia Circuit itself, in Comcast v. F.C.C. In that case, which involved a net neutrality enforcement proceeding, the circuit court said in 2010 that the F.C.C. did not have authority over Comcast's Internet service. New York Times

TiVo Inc.'s fiscal first-quarter loss narrowed as the TV set-top box maker continued to increase its subscriber rolls and reported stronger revenue. TiVo, which has mostly posted losses since the second half of 2009, has seen intellectual-property battles and heavy litigation costs impact its bottom-line results in recent periods. However, the company has also seen good returns for its legal spending, reaching settlements with companies like AT&T Inc, EchoStar Corp., Dish Network Corp. and Verizon Communications Inc. The latest quarter included $10.9 million of litigation expense, compared with $5.4 million in the year-ago quarter.

Meanwhile, TiVo has been placing less emphasis on the set-top boxes it sells at retail and more on distributing its offerings through operators' set-top boxes or through TVs alone. The company has also continued to build technology that allows its software to run in other devices. TiVo has now posted subscriber increases for seven straight quarters, following a four-year streak of declining subscriber numbers. In the latest period, TiVo added a net 255,000 subscribers, compared with the 206,000 subscribers it gained a year earlier. "We saw one of the best quarters ever in terms of subscription growth, driven by a number of our existing operator deals in the U.S. and abroad that are fully up and running," said Chief Executive Tom Rogers.

For the period ended April 30, TiVo reported a loss of $10.3 million, or nine cents a share, compared with a year-earlier loss of $20.8 million, or 17 cents a share. Net revenue rose 22%, to $82.6 million, while service-and-technology revenue increased 13%, to $61.8 million. In February, TiVo forecast a net loss between $16 million to $19 million and service-and-technology revenue of $60 million to $62 million. Gross margin widened to 60% from 51.1%. Operating expenses were up 8.1%. TiVo-owned subscription acquisition costs were down 19%. Monthly churn, or the customer cancellation rate, was 1.5% for TiVo-owned subscriptions, compared with 1.6% a year earlier.

For the second-quarter, TiVo projected a net loss of $13 million to $16 million and service-and-technology revenue of $68 million to $70 million. Analysts polled by Thomson Reuters most recently forecast a net loss of $12.6 million and $68 million in comparable revenue. Shares were up 1%, to $12.79 after hours. Through the close, the stock has climbed 36% over the past 12 months. Wall Street Journal

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