Comcast Corp. (Nasdaq: CMCSA, CMCSK)'s battle to obtain a waiver on some low-end digital set-tops with integrated security has hit the skids. On Friday, a U.S. appeals court upheld the Federal Communications Commission (FCC) 's stance that Comcast's set-tops should have removable security, a move that's meant to encourage competition among set-top makers.

Short of a waiver, Comcast and other operators are subject to an FCC-mandated integrated security ban that went into effect last July. Most MSOs are required to buy and deploy set-tops with separable security, typically handled by slots that house removable CableCARD modules. (See Show Me the M-Card!) At last check, the top 10 U.S. cable operators had deployed more than 4.18 million "operator-supplied" CableCARDs, the majority coming pre-inserted in digital set-tops. (See CableCARD Update III .)

Comcast originally sought a waiver on three low-end box models: the Motorola Inc. (NYSE: MOT) DCT700, Scientific Atlanta (now Cisco Systems Inc. (Nasdaq: CSCO)) Explorer 940, and the Pace Micro Technology "Chicago" DC501p.

Citing high costs for entry-level CableCARD-based set-tops, the MSO had, in part, argued that the integrated boxes were key to the MSO's digital transition. Comcast also complained that it was being singled out while the FCC awarded waivers to scores of other operators, including Verizon Communications Inc. (NYSE: VZ), that pledged to go all-digital by the February 2009 digital TV transition. (See Verizon & Others Get Their Waivers.)

Verizon, though, is getting ready to deploy a new family of Motorola-made boxes with on-board high-def and digital video recording capabilities with CableCARDs, according to Multichannel News. However, the telco can continue to use entry-level integrated security boxes (the Motorola DCT700) through the end of 2009. (See Verizon to Change Its Analog Channels.)

The FCC had twice denied Comcast's request for a waiver, and the MSO responded by filing a lawsuit last November. (See Comcast Takes CableCARD Battle to Court and FCC Denies Comcast Again .)

Comcast's appeals case appeared to be in trouble from the start, as the court, in April, questioned whether it was required to defer to the FCC's judgment. (See The CableCARD Follies .)

In a statement, Comcast said it was "disappointed" in the court's decision. "Our only interest has been to facilitate and accelerate the digital transition for our customers in the most cost-effective fashion," it added.

Comcast also noted a plan "to help even more consumers to go digital faster and economically," a likely reference to the emerging Digital Terminal Adapter (DTA), a simple, one-way digital-to-analog box the MSO plans to deploy in tandem with a strategy to reclaim valuable analog spectrum. (See Comcast Confirms Digital Dongle Project, Comcast Pursuing $35 Digital Dongle, and Comcast's 30-to-1 Odds.)

Comcast has not announced much in the way of DTA product details, but some of the bigger questions are whether the device will be able to steer clear of the FCC separable security mandate and if most customers will be able to install them without requiring expensive truck rolls.

— Jeff Baumgartner, Site Editor, Cable Digital News