Currently, ExpressVu and StarChoice, which is owned by Shaw Communications, are the only licenced direct-to-home providers in Canada.

In Friday's decision, the Supreme Court voted unanimously that businesses selling equipment to receive satellite signals from outside Canada are violating the Radiocommunication Act, which outlaws the unauthorized decoding of an encrypted signal.

However, the high court also left it up to the so-called grey-market satellite providers to make a strong case in court that the federal law violates freedom of communication guaranteed under the Charter of Rights and Freedoms by not answering Constitutional questions raised in the case.

Can-Am's lawyers had argued that prohibiting decoding of broadcast signals from other countries violates Canadians' guaranteed right under the Charter to freedom of expression and communication.

"Although there has been much debate — indeed rhetoric — about the term [grey-market], it is not necessary to enter that discussion in these reasons," Mr. Justice Frank Iacobucci said in Friday's ruling.

Instead, he said, the issue falls on the much narrower questions of whether the federal act prohibit the decryption of encrypted signals emanating form U.S. broadcasters.

"My conclusion is that it does," Mr. Justice Iacobucci said.

The issue has been closely watched within the industry because of the potential size of the so-called grey market and its ability to cut into the business of Canadian satellite firms.

A study released earlier this year by the Canadian Cable Television Association suggested that grey-market, U.S.-based satellite dishes have become so pervasive in Canada that they suck $400-million a year out of the Canadian system and now number more than 600,000 across the country.

While federal government policy opposes the dishes, dealers have continuously challenged any charges laid against them, leading to the Supreme Court challenge.

In September, 2000, the B.C. Court of Appeal had ruled that the Radiocommunication Act did not prevent Can-Am — which sells U.S. DTH decoding systems to Canadian customers and helps them set up U.S. addresses so they can receive the signals — from helping Canadian viewers get signals from outside the country.

A similar ruling was issued in Ontario last year, when the Ontario Court of Appeal overturned an RCMP search warrant for satellite dealer Tech Electronics, ruling that no criminal offense had occurred at the business that sold grey-market systems.

In the past, lower courts have ruled that federal broadcast regulation applies only to signals originating in this country.