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Cablevision Systems Corporation v. FCC & USA, No. 10-1062 (D.C. Cir.)

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Released: June 10, 2011
USCA Case #10-1062 Document #1312593 Filed: 06/10/2011 Page 1 of 48

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT




Argued February 14, 2011
Decided June 10, 2011

No. 10-1062

CABLEVISION SYSTEMS CORPORATION,
PETITIONER
v.

FEDERAL COMMUNICATIONS COMMISSION AND UNITED
STATES OF AMERICA,
RESPONDENTS

NATIONAL CABLE & TELECOMMUNICATIONS ASSOCIATION, ET
AL.,
INTERVENORS


Consolidated with 10-1088


On Petitions for Review of an Order
of the Federal Communications Commission



Henk J. Brands argued the cause for petitioners. With
him on the briefs were Howard J. Symons and Jeffrey A.
Lamken.

Neal M. Goldberg, Michael S. Schooler, Diane B.
Burstein, Samuel L. Feder, and Matthew E. Price were on the


USCA Case #10-1062 Document #1312593 Filed: 06/10/2011 Page 2 of 48
2
brief for intervenor National Cable & Telecommunications
Association in support of petitioner. Robert G. Kidwell
entered an appearance.

C. Grey Pash Jr., Counsel, Federal Communications
Commission, argued the cause for respondents. With him on
the brief were Catherine G. O'Sullivan and Nancy C.
Garrison, Attorneys, U.S. Department of Justice, Austin C.
Schlick, General Counsel, Federal Communications
Commission, Peter Karanjia, Deputy General Counsel, and
Daniel M. Armstrong III, Associate General Counsel. Richard
K. Welch, Deputy Associate General Counsel, and Nandan M.
Joshi, Counsel, entered appearances.

Jonathan E. Nuechterlein argued the cause for
intervenors AT&T, Inc., et al. in support of respondents. With
him on the brief were Heather M. Zachary, Christopher M.
Heimann, Gary L. Phillips, Scott H. Angstreich, Jeffrey M.
Harris, Michael E. Glover, Edward Shakin, William H.
Johnson, and Christopher J. Wright.

Before: ROGERS, TATEL, and GRIFFITH, Circuit Judges.


Opinion for the Court filed by Circuit Judge TATEL.

TATEL, Circuit Judge: Under section 628 of the
Communications Act, the Federal Communications
Commission has long imposed program access requirements
on vertically integrated cable companies in order to limit their
ability to withhold satellite programming from competitors in
the video distribution market. Recognizing that existing
regulations governing satellite video distribution allowed
vertically integrated cable companies to withhold terrestrially
delivered programming, a small but competitively significant
niche whose importance has increased with improved


USCA Case #10-1062 Document #1312593 Filed: 06/10/2011 Page 3 of 48
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technology, the Commission issued an order adopting rules to
close the so-called terrestrial loophole. Challenging that order,
petitioners contend (among other things) that the Commission
lacks statutory authority to regulate the withholding of
terrestrial programming. But given section 628's broad
language and purpose--promoting competition by restricting
vertically integrated cable companies from denying their
competitors access to popular programming networks--we
see nothing in the statute that unambiguously precludes the
Commission from extending its program access rules to
terrestrially delivered programming. Nor do we see any merit
in petitioners' contention that the Commission's rules violate
the First Amendment or in their various Administrative
Procedure Act challenges, save one: that the Commission
acted arbitrarily and capriciously by deciding to treat certain
conduct involving terrestrial programming withholding as
categorically "unfair" for purposes of section 628.
I.
To provide context for the challenged order, we begin
with a brief overview of the video programming industry and
the relevant terminology. The industry includes two essential
players: video programmers and video programming
distributors. Distributors, who provide video programming
directly to consumers, are called "multichannel video
programming distributors" (MVPDs). See 47 U.S.C.
522(13). This general category includes "cable operators"
like Cablevision, Comcast, and TimeWarner who deliver
video programming by cable, id. 522(5)(7), direct
broadcast satellite (DBS) companies like DirecTV and Dish
Network who transmit programming via direct-to-home
satellites, and wireline companies like AT&T and Verizon
who transmit programming through fiber optics. See In re
Annual Assessment of the Status of Competition in the Market
for the Delivery of Video Programming: Thirteenth Annual


USCA Case #10-1062 Document #1312593 Filed: 06/10/2011 Page 4 of 48
4
Report, 24 FCC Rcd. 542, 54448 413 (2009) (providing
an overview of the MVPD market). Video programmers, also
referred to as video programming vendors, are television
networks like ESPN, TNT, and CNN who sell or license
programming to MVPDs. Particularly relevant to this case,
video programming, and by extension the programmers who
sell it, is classified based on the technology used to transmit it
to MVPDs, not on the technology MVPDs then use to
retransmit it to customers. Satellite programming refers to
programming transmitted to MVPDs via satellite for
retransmission to customers. See 47 U.S.C. 548(i)(1), (3)
(providing definitions for both "satellite cable programming"
and "satellite broadcast programming"). By contrast,
terrestrial programming refers to programming delivered to
MVPDs over land-based networks, such as fiber optics. See
47 C.F.R. 76.1000(l).


As we recently explained, "[f]rom the 1940s when the
first cable television systems were built until the 1990s, the
cable industry dominated [the MVPD retail] market," with
cable operators often enjoying local monopolies. Cablevision
Sys. Corp. v. FCC, 597 F.3d 1306, 1308 (D.C. Cir. 2010).
While the market for cable operators flourished, the demand
for new cable programming to supplement traditional
broadcast programming also increased. "These two halves of
the cable industry often had--and still have--overlapping
ownership, with cable operators having ownership interests in
cable programmers, and vice versa." Id. Recognizing that the
combination of horizontal concentration and vertical
integration in the video market created the "potential for
certain anticompetitive conduct" because "[v]ertically
integrated cable operators" could "deny alternative [MVPDs]
access to cable programming services" they needed to
compete for customers, the Commission presented a report to
Congress in 1990 recommending (among other things) that it


USCA Case #10-1062 Document #1312593 Filed: 06/10/2011 Page 5 of 48
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restrict vertically integrated cable programmers from refusing
to share their programming with other MVPDs. See In re
Competition, Rate Deregulation & the Comm'n's Policies
Relating to the Provision of Cable Television Serv., 5 FCC
Rcd. 4962, 497177 1314 (1990).

Two years later, Congress enacted the Cable Television
Consumer Protection and Competition Act of 1992 ("Cable
Act"), Pub. L. No. 102-385, 106 Stat. 1460, which amended
the Communications Act of 1934. Finding that "[t]he cable
industry had become vertically integrated" and that cable-
affiliated programmers had "the incentive and ability to favor
their affiliated cable operators over nonaffiliated cable
operators and programming distributors using other
technologies," id. 2(a)(5), Congress adopted section 628 to
"increas[e] competition and diversity in the multichannel
video programming market," 47 U.S.C. 548(a). Section
628(b) makes it
unlawful for a cable operator, a satellite cable
programming vendor in which a cable operator has
an attributable interest, or a satellite broadcast
programming vendor to engage in unfair methods of
competition or unfair or deceptive acts or practices,
the purpose or effect of which is to hinder
significantly or to prevent any multichannel video
programming distributor from providing satellite
cable programming or satellite broadcast
programming to subscribers or consumers.
Id. 548(b). To implement that prohibition, section 628(c)(1)
directs the Commission to issue regulations specifying
particular unlawful conduct, id. 548(c)(1), and subsection
(c)(2) establishes "[m]inimum contents" for those regulations.
Specifically, subsection (c)(2) directs the Commission to


USCA Case #10-1062 Document #1312593 Filed: 06/10/2011 Page 6 of 48
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prohibit three different kinds of practices. First, it must
prevent cable operators from "improperly influencing" actions
by affiliated satellite cable programming vendors and satellite
broadcasting vendors concerning the sale of satellite
programming to unaffiliated MVPDs. Id. 548(c)(2)(A).
Second, the Commission must prohibit vertically integrated
satellite cable programming vendors and satellite broadcasting
vendors from discriminating between MVPDs in the sale of
their satellite programming (subject to limited exceptions). Id.
548(c)(2)(B). Third, the Commission must bar exclusive
contracts for satellite programming between cable operators
and vertically integrated satellite programmers. Id.
548(c)(2)(C)(D). With respect to areas unserved by cable
at the time the Act was passed in October 1992, that
prohibition is absolute. Id. 548(c)(2)(C). But in areas served
by cable prior to that date, the statute allows the Commission
to exempt exclusive contracts that it determines, based on
statutory criteria, are "in the public interest." Id.
548(c)(2)(D), (c)(4). The prohibition on exclusive contracts
in these areas was to sunset after ten years unless the
Commission determined that the prohibition remained
necessary to protect competition and diversity in video
programming distribution. Id. 548(c)(5).


In order to implement section 628(c)(2)'s program access
provisions, the Commission issued regulations containing
(among other things) a complaint procedure to address alleged
violations. See In re Implementation of Sections 12 & 19 of
the Cable Television Consumer Prot. & Competition Act of
1992, 8 FCC Rcd. 3359 (1993). In doing so, the Commission
declined to identify additional specific "unfair" acts or
practices beyond those listed in subsection (c)(2) that could
violate subsection (b). It recognized, however, that subsection
(b) remained "a clear repository of Commission jurisdiction to
adopt additional rules or take additional actions" to "address[]


USCA Case #10-1062 Document #1312593 Filed: 06/10/2011 Page 7 of 48
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those types of conduct, primarily associated with horizontal
and vertical concentration within the cable and satellite cable
programming field, that inhibit the development of
multichannel video distribution competition." Id. at 337374
4041. Since adopting these initial rules, the Commission
has twice extended subsection (c)(2)(D)'s prohibition on
exclusive contracts for satellite programming in previously
served areas. See Cablevision, 597 F.3d at 131215 (denying
petitions for review challenging the Commission's most
recent extension in 2007).

Accordingly, since 1992, vertically integrated cable
companies have been subject to regulations that prohibit
exclusive dealing arrangements and other related
anticompetitive practices for satellite programming. But
because none of these restrictions applied to the withholding
of terrestrial programming, vertically integrated cable
operators have been free to enter into exclusivity deals with
cable-affiliated programmers for terrestrial programming and
thus to withhold such programming from competitor MVPDs.
See In re Review of the Comm'n's Program Access Rules &
Examination of Program Tying Arrangements, 25 FCC Rcd.
746, 76667 30 (2010) [hereinafter 2010 Order] (citing
examples of terrestrial programming withholding).

Although terrestrial programming accounts for only a
minority of video programming and is generally limited to
regional and local networks, improved technology has made
"terrestrial distribution . . . more cost effective." Id. at 766
30. As a result, its use is "likely to continue and possibly
increase in the future." Id. Moreover, the importance of
terrestrial programming to the video programming market
exceeds its share of that market. A significant number of
Regional Sports Networks (RSNs) are terrestrially delivered,
and the Commission has long recognized that such


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programming, given its "must have" and nonreplicable nature,
could drive the MVPD market. See In re Annual Assessment
of the Status of Competition in Markets for the Delivery of
Video Programming: Sixth Annual Report, 15 FCC Rcd. 978,
986 16 (2000) ("We recognize that the terrestrial
distribution of programming, including in particular regional
sports programming, could eventually have a substantial
impact on the ability of alternative MVPDs to compete in the
video marketplace.").

In 2010, following notice and comment, the Commission
decided to close the "terrestrial loophole." 2010 Order, 25
FCC Rcd. at 747 1. Recognizing that section 628(c)(2)
imposes specific prohibitions on satellite programming only
and that the "focus of the statute is not on the ability of an
MVPD to provide a particular terrestrially delivered
programming network," id. at 758, 774 20, 39, the
Commission located its authority to close the terrestrial
loophole in two places: subsection (b)'s broad prohibition and
subsection (c)(1)'s delegation of authority to promulgate
regulations implementing subsection (b). Although
acknowledging that subsection (b) contains no express
mandate to share terrestrial programming, the Commission
explained that the provision does prohibit unfair acts "that
have the purpose or effect of preventing or hindering
significantly an MVPD from providing satellite . . .
programming" to its customers. Id. at 751 11 (citing 47
U.S.C. 548(b)). And in some instances, according to the
Commission, record evidence demonstrated that withholding
terrestrial programming has just such an effect. Cable
operators continue to "own programming for which there may
be no good substitutes, and this `must-have' programming is
necessary for viable competition in the video distribution
market." Id. at 770 34. In support, the Commission pointed
to a 2006 regression analysis finding that the withholding of


USCA Case #10-1062 Document #1312593 Filed: 06/10/2011 Page 9 of 48
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terrestrial RSNs substantially lowered the percentage of
television households subscribing to DBS in two of three
studied markets from what would have been expected without
such withholding. See id. at 768 32. Specifically, the study
concluded that terrestrial programming withholding decreased
a competitor MVPD's market share from 14.5% to 8.6% in
Philadelphia and from 11.1% to 7.4% in San Diego, although
it found no statistically significant effect in Charlotte. See In
re Applications for Consent to the Assignment and/or
Transfer of Control of Licenses Adelphia Commc'ns, 21 FCC
Rcd. 8203, 834546 app. D 1718 (2006).

The Commission acknowledged that when a cable-
affiliated company withholds terrestrial programming,
competitor MVPDs ordinarily remain able to deliver satellite
programming to customers. But in some cases, the
Commission determined, denying access to must-have
terrestrial programming, like RSNs, could discourage
alternative MVPDs "from entering new [geographic] markets
or . . . limit [their] ability . . . to provide a competitive
alternative to the incumbent cable operator." 2010 Order, 25
FCC Rcd. at 774 39. In other words, "the effect of denying
an MVPD the ability to provide certain terrestrially delivered,
cable-affiliated programming may be to significantly hinder
the MVPD from providing video programming in general,
including satellite . . . programming . . . , as well as
terrestrially delivered programming." Id. (emphasis added).
This significant hindrance could, in turn, adversely affect
consumers by reducing competition, "allow[ing] cable
operators to raise rates and to refrain from innovating." Id.

Having determined that it had statutory authority to close
the terrestrial loophole, the Commission, through the
challenged order, issued regulations authorizing the filing of
complaints alleging that an MVPD or satellite programming


USCA Case #10-1062 Document #1312593 Filed: 06/10/2011 Page 10 of 48
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vendor violated section 628(b) by (1) engaging in unfair
terrestrial programming withholding that (2) prevented or
significantly impaired an MVPD from providing satellite
programming to customers. In those regulations, the
Commission identified the conduct it would consider "unfair"
under section 628(b). Specifically, MVPDs could file
complaints against cable operators and covered satellite
programming vendors for actions that would violate section
628(c)(2) "but for the terrestrial loophole," i.e., conduct
involving undue influence, discrimination, or exclusive
agreements. Id. at 77880 4849. Although the
Commission found subsection (c)(2)-like conduct involving
terrestrial programming to be categorically "unfair," it
declined to ban such conduct outright. Instead, it required
complainants to show that the unfair act in fact had "the
purpose or effect of hindering significantly or preventing
[them] from providing satellite . . . programming to
subscribers or consumers." Id. at 78081 50. "For most
terrestrially delivered, cable-affiliated programming" that is
"readily replicable" such as local news or local community
programming, the Commission indicated that "the record
contain[ed] no evidence" that subsection (c)(2)-like conduct
would generally have such a purpose or effect. Id. at 781 &
n.200 51. But "especially given predictions that
programming will increasingly shift to terrestrial delivery,"
the Commission left open the possibility that complainants
could satisfy their burden of proof in individual cases. Id. at
781 51. As to RSN programming, however, the Commission
found that its precedent and record evidence, such as the 2006
regression analysis discussed above, demonstrated that such
programming is "very likely to be both non-replicable and
highly valued by consumers." Id. at 78283 52. As a result,
complainants could "invoke a rebuttable presumption that an
unfair act involving a terrestrially delivered, cable-affiliated
RSN has the purpose or effect set forth in [s]ection 628(b)."


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Id. The Commission extended this rebuttable presumption to
an RSN's high definition (HD) programming feed, relying on
"substantial evidence regarding consumers' preference for
HD programming." Id. at 78485 5455.

In designating the entities it could hold liable, the
Commission explained that section 628(b) required it to
address the unfair acts of cable operators and covered satellite
programming vendors "but not the unfair acts of other
programmers delivering programming only by terrestrial
means." Id. at 786 57. Applying section 628(b), the
Commission rejected the argument, made by several
commenters, that satellite programming vendors could not
possibly violate this provision because the distribution of
terrestrial programming falls outside such vendors' statutorily
defined activities. According to the Commission, this
argument "read[] into the statute an additional condition that
is not there" because "[n]othing in the statute excludes an
otherwise covered entity from the reach of [s]ection 628(b)"
when such an entity engages in unlawful activities. Id. at 779
n.192 49. To address unfair conduct by cable-affiliated
programmers who provide only terrestrially delivered
programming, the Commission imposed vicarious liability on
the cable operator or covered satellite programmer where the
complainant "establish[ed] that the [terrestrial] programmer is
wholly owned by, controlled by, or under common control
with one or more of these entities." Id. at 786 57. The
Commission explained that vicarious liability was "necessary
to give [s]ection 628(b) practical effect." Id. Otherwise, a
cable-controlled terrestrial program supplier could circumvent
the regulations by "insist[ing] that a competitive MVPD pay
an exorbitant rate," thereby "achieving the same result as an
exclusive contract." Id.



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Cablevision Systems Corporation and Madison Square
Garden L.P., respectively a cable operator and video
programmer, own satellite and terrestrially delivered video
programming services and have a common controlling
shareholder. The two companies petition for review of the
Commission's terrestrial programming order. Along with
their supporting intervenor, the National Cable
& Telecommunications Association (NCTA), petitioners raise
three principal objections. First, they contend that the
Commission exceeded its section 628 authority by extending
its program access rules to terrestrially delivered
programming. Second, they argue that the Commission's
rules, which regulate speech activities of cable operators and
video programmers, violate the First Amendment. Third, they
argue that certain specific features of the rules run afoul of
section 628, the Administrative Procedure Act (APA), and/or
the First Amendment. We consider each argument in turn.

II.


Starting with petitioners' statutory argument, we apply
the familiar Chevron framework to the Commission's
interpretation of its governing statute. Chevron U.S.A. Inc. v.
Natural Res. Def. Council, 467 U.S. 837, 84243 (1984). We
begin by asking "whether Congress has directly spoken to the
precise question at issue." Id. at 842. If it has, we "give effect
to the unambiguously expressed intent of Congress." Id. at
84243. But if Congress has not unambiguously foreclosed
the agency's construction of the statute, we defer to the
agency provided its construction is reasonable. See Nat'l
Cable & Telecomms. Ass'n v. Brand X Internet Servs., 545
U.S. 967, 980 (2005).


Petitioners face an uphill climb in arguing that the
Commission's interpretation of section 628(b) fails under
Chevron step one. In National Cable & Telecommunications


USCA Case #10-1062 Document #1312593 Filed: 06/10/2011 Page 13 of 48
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Ass'n v. FCC ("NCTA"), we described section 628(b)'s
prohibition as "broad and sweeping," observing that its
language bars unfair "practices `the purpose or effect of which
is to hinder significantly or to prevent any multichannel video
programming distributor from providing satellite . . .
programming . . . to subscribers or consumers.' " 567 F.3d
659, 664 (D.C. Cir. 2009) (quoting 47 U.S.C. 548(b)). This
broad language, we pointed out, "comports" with section
628's similarly expansive "express purpose of `promot[ing]
the public interest, convenience, and necessity by increasing
competition and diversity in the multichannel video
programming market.' " Id. (quoting 47 U.S.C. 548(a)).
"Mindful that statutes written in broad, sweeping language
should be given broad, sweeping application," id. (internal
quotation marks omitted), we rejected a challenge to a
Commission order banning exclusivity agreements between
cable operators and the owners of apartment buildings and
other multiple dwelling units (the "MDU order"). We
concluded that the Commission acted "well within the bounds
of . . . section 628" because such exclusivity agreements have
both the purpose and effect of preventing rival MVPDs from
providing satellite programming to customers. Id. at 661,
66364.

Notwithstanding NCTA and section 628's broad
language, petitioners insist that the statute unambiguously
precludes the Commission's terrestrial program access rules.
First, highlighting section 628(c)(2)'s repeated references to
satellite programming, they claim that Congress deliberately
exempted terrestrial programming from the Commission's
program access regime and that the Commission may not use
its subsection (b) and (c)(1) general authority to disturb that
choice. Second, petitioners maintain that the order conflicts
with section 628(b)'s designation of the entities that can be
held liable for violating the prohibition. As the Commission


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acknowledged, section 628(b) applies to cable operators and
to two types of satellite programming vendors, but not to
purely terrestrial programmers. 2010 Order, 25 FCC Rcd. at
78687 57. According to petitioners, "it is inconceivable
that, if Congress intended to authorize the FCC to prohibit the
withholding of terrestrial programming, it would have
drafted" the statute in this way. Pet'rs' Br. 38. Finally,
petitioners contend that the Commission's order violates
section 628(b)'s requirement that prohibited unfair acts
prevent or significantly hinder an MVPD "from providing
satellite . . . programming to subscribers and consumers." 47
U.S.C. 548(b) (emphasis added). Interpreting "to provide"
to mean "to furnish" or "to make available," petitioners argue
that when a vertically integrated cable company withholds
terrestrial programming, it places no restrictions whatever on
a rival MVPD's ability to make satellite programming
available to willing customers.

Petitioners' first argument--that section 628(c)(2)'s
limitations implicitly restrict the scope of section 628(b)'s
general prohibition--fails for the same reason we rejected a
similar argument in NCTA. "By its terms, section 628(c)[(2)]
describes only the `[m]inimum contents of regulations. . . .' "
NCTA, 567 F.3d at 66465 (quoting 47 U.S.C. 548(c)(2)).
Indeed, "Congress's enumeration of specific, required
regulations in subsection (c) actually suggests that Congress
intended subsection (b)'s generic language to cover a broader
field." Id. at 665. Petitioners' reliance on cases holding that
agencies may not use their general rulemaking authority to
override a more specific statutory directive is thus misplaced.
See, e.g., Nat'l Mining Ass'n v. Dep't of Interior, 105 F.3d
691, 69394 (D.C. Cir. 1997) (holding that a general grant of
rulemaking authority did not authorize the agency to
supplement statutory conditions for when mining permits
would be withheld); Natural Res. Def. Council, Inc. v. Reilly,


USCA Case #10-1062 Document #1312593 Filed: 06/10/2011 Page 15 of 48
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976 F.2d 36, 41 (D.C. Cir. 1992) (holding that the EPA could
not use its general grant of rulemaking authority to stay
regulations subject to statutory deadlines). Because section
628(c)(2) establishes a floor rather than a ceiling, the
Commission's reliance on subsections (b) and (c)(1) to
regulate conduct that subsection (c)(2) leaves unrestricted in
no way contravenes congressional intent.

Petitioners acknowledge that given subsection (c)(2)'s
"minimum contents" caption, the Commission necessarily has
authority to issue rules that go beyond that subsection. This,
they nonetheless insist, is "no answer" to their argument that
subsection (c)(2) expresses a congressional decision to
exempt terrestrial programming withholding from regulation.
Pet'rs' Br. 37. Congress "carefully considered prohibiting
cable operators from withholding terrestrial programming but
conspicuously stopped short of doing so." Id. at 35. In
support, petitioners point out that Congress adopted the House
version of section 628(c)(2), which applied only to satellite
programming, instead of the Senate version, which would
have imposed fair dealing restrictions on cable-affiliated
programmers without distinguishing between methods of
programming transmission. See H.R. Rep. No. 102-862, at 91
(1992) (Conf. Rep.), reprinted in 1992 U.S.C.C.A.N. 1231,
1273. Therefore, petitioners claim, even though subsection
(c)(2) is not a ceiling, expanding the program access rules
beyond satellite programming is impermissible because "[b]y
starkly and specifically exempting a small category of
programming, Congress made clear that it did not wish that
category to be subject to the specified rules." Pet'rs' Br. 36
37. To illustrate the point, petitioners offer an analogy.
Suppose Congress passed a statute requiring EPA to regulate
emissions by "non-hybrid cars." Under such a statute, EPA
could invoke its general rulemaking authority to promulgate
additional emissions regulations, perhaps by regulating


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emissions from non-hybrid trucks, but it would have no
authority, according to petitioners, to regulate hybrid car
emissions.

It does not follow, however, that just because Congress
required mandatory minimum regulations for some
technologies, it intended to exclude other technologies from
regulation. Hardly clairvoyant, especially with respect to
rapidly evolving technologies, Congress may well have
targeted satellite programming in section 628(c)(2) simply
because it was at the time far and away the dominant form of
video programming and thus the focus of concerns about
anticompetitive withholding. See Intervenors in Support of the
Comm'n Br. 12 ("[T]errestrial delivery was rarely used when
the statute was passed."). The legislative history sheds no
light on Congress's intent, as there is neither any explanation
in the House committee reports concerning its decision to use
the term "satellite programming" rather than "video
programming" nor any indication in the conference report that
Congress adopted the House language to restrict the statute's
coverage. See Mead Corp. v. Tilley, 490 U.S. 714, 723 (1989)
("We do not attach decisive significance to the unexplained
disappearance of one word from an unenacted bill because
mute intermediate legislative maneuvers are not reliable
indicators of congressional intent." (internal quotation marks
omitted)). To the contrary, the conference report emphasizes
the statute's expansive goals, explaining that "the conferees
expect the Commission to address and resolve the problems
of unreasonable cable industry practices, including restricting
the availability of programming and charging discriminatory
prices to non-cable technologies." See H.R. Rep. No. 102-
862, at 93, reprinted in 1992 U.S.C.C.A.N. at 1275. We thus
see no justification for construing Congress's reference to
satellite programming withholding in subsection (c)(2) as an
effort to prevent the Commission from addressing similar


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unfair practices that--two decades later--have either the
purpose or effect that subsection (b) proscribes. See NCTA,
567 F.3d at 665 ("The Commission's remedial powers . . .
extend beyond the kinds of unfair-dealing interventions
Congress specifically foresaw.").

Moreover, even were there reason to believe that
Congress deliberately phrased subsection (c)(2) to exclude
terrestrial programming, as opposed to simply using a term
that captured the overwhelming majority of video
programming at the time, we still see nothing in the statute
that would unambiguously preclude the Commission from
extending its rules to terrestrial programming on a case-by-
case basis. Congress may well have wanted to avoid dictating
the rules the Commission must adopt for a nascent technology
while leaving it with authority to act should regulation prove
necessary. Petitioners' "non-hybrid car" analogy overlooks
this possibility.

For similar reasons, we reject petitioners' second
argument--that by leaving terrestrial programmers off the list
of entities covered by section 628(b), Congress
unambiguously placed terrestrially delivered programming
beyond Commission jurisdiction. Much like petitioners' first
argument, this contention fails because it establishes nothing
more than that when enacting the Cable Act, Congress was
not attuned to the possibility that vertically integrated cable
companies would engage in anticompetitive conduct
regarding terrestrial programming. When Congress delegates
broad authority to an agency to achieve a particular objective,
agency action pursuant to that delegated authority may extend
beyond the specific manifestations of the problem that
prompted Congress to legislate in the first place. See
Consumer Elecs. Ass'n v. FCC, 347 F.3d 291, 29799 (D.C.
Cir. 2003) (rejecting a Chevron step one challenge contending


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that the Commission's statutory authority was limited to only
the immediate concern Congress empowered the Commission
to address and indicating that the use of "broad language" to
solve a relatively specific problem "militates strongly in favor
of giving [the statute] broad application"). In this case,
although Congress may not have "foreseen the development
of [terrestrial delivery]," section 628's expansive language
suggests that it intended to give the Commission sufficient
flexibility "to maintain . . . a grip on the dynamic aspects of
[video programming]" so that it could pursue the statute's
objectives as industry technology evolves. United States v.
Sw. Cable Co., 392 U.S. 157, 172 (1968) (internal quotation
marks omitted); see also Massachusetts v. EPA, 549 U.S. 497,
532 (2007) ("While the Congresses that drafted [section]
202(a)(1) [of the Clean Air Act] might not have appreciated
the possibility that burning fossil fuels could lead to global
warming, they did understand that without regulatory
flexibility, changing circumstances and scientific
developments would soon render the . . . Act obsolete. The
broad language of [section] 202(a)(1) reflects an intentional
effort to confer the flexibility necessary to forestall such
obsolescence.").

Petitioners also claim that the supposedly poor fit
between section 628(b) and the regulation of terrestrial
programming withholding has led the Commission to adopt
liability rules that are arbitrary, capricious, or otherwise
unlawful. We address their specific objections in Part IV. For
present purposes, it suffices to note that even if the
Commission acted unlawfully by, for example, establishing
vicarious liability for cable operators based on the conduct of
affiliated terrestrial programmers, that would provide no
reason for barring the Commission from holding liable cable
operators and satellite programming vendors when they


USCA Case #10-1062 Document #1312593 Filed: 06/10/2011 Page 19 of 48
19
engage directly in unfair conduct that has the purpose or
effect the statute proscribes.

Finally, we are unpersuaded by petitioners' contention
that the Commission lacks authority to regulate terrestrial
programming withholding under section 628(b) because, in
their view, the effect of such withholding on the provision of
satellite programming is too attenuated. According to
petitioners and their supporting intervenor, section 628(b)
gives the Commission authority to regulate practices that
prevent or significantly impair an MVPD from either
obtaining satellite programming (which the subsection (c)(2)
program access rules address) or delivering satellite
programming to customers (which the MDU order in NCTA
dealt with). Terrestrial programming withholding, they insist,
has no effect on a rival MVPD's ability either to obtain
satellite programming or to deliver such programming
because even when cable-affiliated terrestrial programmers
refuse to share, the MVPD remains fully able to make satellite
programming available to
interested
customers.
Acknowledging that terrestrial programming withholding may
limit the number of customers an MVPD can attract, thus
reducing its market share, petitioners contend that commercial
attractiveness has nothing to do with whether the MVPD can
provide satellite programming.

The problem with petitioners' argument is that it wrongly
assumes an MVPD's lack of commercial attractiveness will
never prevent or significantly hinder it from providing
satellite programming. Indeed, as explained above, see supra
pp. 45, Congress enacted section 628 largely on the theory
that "exclusive arrangements" for programming "may tend to
establish a barrier to entry and inhibit the development of
competition in the market." S. Rep. No. 102-92, at 28 (1991),
reprinted in 1992 U.S.C.C.A.N. 1133, 1161; see also


USCA Case #10-1062 Document #1312593 Filed: 06/10/2011 Page 20 of 48
20
Cablevision, 597 F.3d at 1308 (discussing the Commission's
1990 report that led Congress to adopt section 628 and
summarizing the Commission's view that "the cable
operators' monopolies in the MVPD market persisted partly
because competitors were unable to secure programming
owned by vertically integrated cable companies"). When a
vertically integrated cable programmer limits access to
programming that customers want and that competitors are
unable to duplicate--like the games of a local team selling
broadcast rights to a single sports network--competitor
MVPDs will find themselves at a serious disadvantage when
trying to attract customers away from the incumbent cable
company. To use a concrete example, we doubt that
Philadelphia baseball fans would switch from cable to an
alternative MVPD if doing so would mean they could no
longer watch Roy Halladay, Cliff Lee, Roy Oswalt, and Cole
Hamels take the mound, even if they thought the alternative
MVPD was otherwise superior in terms of price and quality.
Facing such a structural disadvantage, a potential MVPD
competitor might realistically conclude that expanding its
presence in the Philadelphia market would be uneconomical,
thus limiting its ability to provide video programming--and
hence satellite video programming--to customers.

Another hypothetical proves the point. Suppose the
impact of withholding a particular cable-affiliated terrestrial
programming network in a particular market is so great that it
drives existing non-cable MVPDs completely out of the
market and keeps others from entering. In that case, no one
would doubt that terrestrial programming withholding
prevented MVPDs from providing satellite programming. Just
as "if you can't serve a building then you can't deliver
satellite . . . programming," NCTA, 567 F.3d at 664 (internal
quotation marks omitted), if you can't enter or survive in a
market, then you can't deliver satellite programming in that


USCA Case #10-1062 Document #1312593 Filed: 06/10/2011 Page 21 of 48
21
market. Petitioners conceded at oral argument that the
Commission would possess section 628(b) authority in such a
case, but they insisted there is no evidence that terrestrial
withholding has ever made it completely impossible for
potential competitors to enter or survive in a market. See Oral
Arg. Tr. at 6:198:10. Of course, petitioners are right about
this: the Commission has never suggested that there are
situations in which terrestrial withholding has completely
prevented an MVPD from serving a market. But given
petitioners' concession that the Commission can in principle
regulate terrestrial withholding when such withholding
completely prevents an MVPD from competing, thus
preventing that MVPD from providing satellite programming,
they have no basis for arguing that section 628
unambiguously precludes the Commission from regulating
where it has evidence that such withholding "hinder[s]
significantly," 47 U.S.C. 548(b), an MVPD from competing
with the incumbent cable operator to deliver satellite
programming to customers.

Before leaving Chevron step one, we pause to consider
petitioners' additional argument that we may not defer to the
Commission's interpretation of section 628(b) because
extending the program access rules to terrestrial programming
"raises grave constitutional questions." Petr's' Br. 41 (internal
quotation marks omitted). Although the canon of
constitutional avoidance does indeed "trump[] Chevron
deference," we "do not abandon Chevron deference at the
mere mention of a possible constitutional problem." Nat'l
Mining Ass'n v. Kempthorne, 512 F.3d 702, 711 (D.C. Cir.
2008). In any event, as we explain in Part III, there is nothing
to avoid.

Having rejected petitioners' arguments that section
628(b) unambiguously forecloses the Commission's


USCA Case #10-1062 Document #1312593 Filed: 06/10/2011 Page 22 of 48
22
interpretation, we are left to decide whether that interpretation
is reasonable under Chevron step two's "highly deferential
standard." Nat'l Rifle Ass'n of Am., Inc. v. Reno, 216 F.3d
122, 137 (D.C. Cir. 2000). It is. As the Commission
explained, through section 628 "Congress intended to
encourage entry and facilitate competition in the video
distribution market by existing or potential competitors to
traditional cable systems by, among other things, making
available to those entities the programming they need to
compete in the video distribution market." 2010 Order, 25
FCC Rcd. at 754 13. And according to the Commission,
terrestrially delivered programming, or at least some kinds of
terrestrial programming like RSNs that are both non-
replicable and highly coveted, have become necessary for
MVPDs to compete fully with vertically integrated cable
companies. Id. at 76871 3235. Petitioners have given us
no reason to disturb the Commission's effort to pursue
Congress's objectives as the video distribution industry
evolves.

Relying on language from NCTA, petitioners argue that
the Commission's interpretation of section 628(b) creates "the
specter of a statutory grant without bounds" because by
interpreting a statute focused on the provision of satellite
programming to authorize terrestrial withholding regulations,
the Commission has "stray[ed] so far from the paradigm case
as to render its interpretation unreasonable, arbitrary, or
capricious." 567 F.3d at 665. In our view, however, the
Commission has "barely reached beyond the paradigm case at
all." Id. at 666. Indeed, the order at issue here actually aligns
more closely with Congress's core purpose in enacting section
628 than did the MDU order. After all, preventing vertically
integrated cable companies from engaging in unfair dealing
over programming, precisely the conduct the challenged order
addresses, was the primary reason Congress enacted section


USCA Case #10-1062 Document #1312593 Filed: 06/10/2011 Page 23 of 48
23
628. See id. at 663 (acknowledging that "Congress's primary
purpose in enacting section 628 was . . . to expand
competition for programming, not service").

Finally, in addition to challenging the substance of the
Commission's interpretation, petitioners argue that prior to
issuing the challenged order, the Commission had taken the
position that it lacked authority to regulate terrestrial
programming, and that it departed from that position without
acknowledgment. See FCC v. Fox Television Stations, Inc.,
__U.S.__, 129 S. Ct. 1800, 181011 (2009) (holding that
although the APA imposes no heightened standard of judicial
review when an agency changes its position, "the requirement
that an agency provide reasoned explanation for its action
[will] ordinarily demand that it display awareness that it is
changing position"). In its order, however, the Commission
pointed out that it had recognized that complaints concerning
terrestrial withholding might, under some circumstances, be
cognizable under subsection (b). See 2010 Order, 25 FCC
Rcd. at 75960 & n.80 22. True, the Commission also
acknowledged that some decisions by its former Cable
Services Bureau could be read to suggest that subsection
(c)(2) affirmatively limits the Commission's ability to
regulate terrestrial withholding. See id. at 75960 & n.77 22
(collecting Bureau decisions indicating "that [s]ection 628(b)
may not be used categorically to preclude programming
practices that are related to practices" that subsection (c)(2)
addresses but does not reach). But the Commission explained
that not only are the Bureau's statements distinguishable from
the present order--they addressed only the permissibility of
an across-the-board ban on terrestrial withholding--but also
"staff-level" Bureau decisions "are not binding on the
Commission." Id. at 760 22. The Commission added that
even if prior decisions could be read to preclude
"consideration of program access complaints involving


USCA Case #10-1062 Document #1312593 Filed: 06/10/2011 Page 24 of 48
24
terrestrially delivered, cable-affiliated programming," it was
now "reject[ing] that view." Id. Given the care the
Commission took to explain its prior actions, we see no basis
for concluding that it "casually ignored" prior policies and
interpretations or otherwise failed to provide a reasoned
explanation for its order. Dillmon v. Nat'l Transp. Safety Bd.,
588 F.3d 1085, 1089 (D.C. Cir. 2009) (internal quotation
marks omitted).

III.


Petitioners next contend that the Commission's order
violates the First Amendment, both on its face and as applied,
because the program access rules for terrestrial programming
burden the speech and association rights of cable operators
and video programmers. As to that claim, this court has
already done much of the heavy lifting. In Time Warner
Entertainment Co. v. FCC, 93 F.3d 957, 97778 (D.C. Cir.
1996) (per curiam), we held that intermediate scrutiny applied
to a facial challenge to the Commission's satellite
programming access rules established pursuant to section
628(c)(2). Under that standard, we will sustain a regulation if
" `it furthers an important or substantial governmental
interest; if the governmental interest is unrelated to the
suppression of free expression; and if the incidental restriction
on alleged First Amendment freedoms is no greater than is
essential to the furtherance of that interest.' " Turner Broad.
Sys., Inc. v. FCC, 512 U.S. 622, 662 (1994) (quoting United
States v. O'Brien, 391 U.S. 367, 377 (1968)). Concluding that
regulating vertically integrated programmers and operators to
promote competition in the video marketplace "furthers an
important government interest [that] is unrelated to the
suppression of free expression" and that subsection (c)(2)'s
restrictions did not "burden substantially more speech than is
necessary to further" that interest, we upheld the
Commission's program access rules against a facial challenge.


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25
Time Warner, 93 F.3d at 97879 (internal quotation marks
omitted).


In this case, therefore, we apply intermediate scrutiny to
the Commission's order, recognizing that we have already
concluded that its asserted justification--promoting
competition in the MVPD market--represents an important
governmental interest. Of course, just because the
government's "asserted interests are important in the abstract
does not mean" that the Commission's terrestrial
programming withholding rules "will in fact advance those
interests." Turner Broad. Sys., 512 U.S. at 664. "When the
[g]overnment defends a regulation on speech as a means to
redress past harms or prevent anticipated harms, it must . . .
demonstrate that the recited harms are real, not merely
conjectural, and that the regulation will in fact alleviate these
harms in a direct and material way." Id. Pointing to dramatic
changes in the video programming industry since Congress
passed the Cable Act in 1992, and in particular to significant
gains in market share enjoyed by MVPD competitors to cable,
petitioners contend that the Commission's imposition of any
program access obligations no longer serves an important
governmental interest and therefore violates the First
Amendment. "At a minimum," they assert, the extension of
program access rules to terrestrially delivered programming
fails intermediate scrutiny because "competition in the MVPD
industry has flourished even though terrestrial programming
was never required to be shared." Pet'rs' Br. 32.


The video programming industry does indeed look very
different today than it did when Congress passed the Cable
Act in 1992. See Cablevision, 597 F.3d at 131314 ("It is true
that the MVPD market has transformed substantially since the
Cable Act was enacted in 1992."); Comcast Corp. v. FCC,
579 F.3d 1, 8 (D.C. Cir. 2009) (describing the "overwhelming


USCA Case #10-1062 Document #1312593 Filed: 06/10/2011 Page 26 of 48
26
evidence concerning the dynamic nature of the
communications marketplace, and the entry of new
competitors at both the programming and the distribution
levels" (internal quotation marks and citation omitted)).
Although cable operators then controlled approximately 95%
of the national market for video programming, see
Cablevision, 597 F.3d at 1309, by 2007 their share had
decreased to 67%, and it has apparently continued dropping in
the face of competition from DBS providers and, more
recently, from telephone companies offering fiber optic
services, see 2010 Order, 25 FCC Rcd. at 763 27. In
addition, the number of programming networks has increased
dramatically while the percentage of networks vertically
integrated with cable operators has declined. See Cablevision,
597 F.3d at 1309, 1314.

Contrary to petitioners' argument, however, these market
changes do not mean that the Commission's order fails
intermediate scrutiny. By imposing liability only when
complainants demonstrate that a company's unfair act has
"the purpose or effect" of "hinder[ing] significantly or . . .
prevent[ing]" the provision of satellite programming, 47
U.S.C. 548(b), the Commission's terrestrial programming
rules specifically target activities where the governmental
interest is greatest. Accordingly, to survive intermediate
scrutiny in this facial challenge, the Commission need show
only that vertically integrated cable operators remain
dominant in some video distribution markets, that the
withholding of highly desirable terrestrially delivered cable
programming, like RSNs, inhibits competition in those
markets, and that providing other MVPDs access to such
programming will "promot[e] . . . fair competition in the
video marketplace." Time Warner, 93 F.3d at 978. The
Commission has no obligation to establish that vertically
integrated cable companies retain a stranglehold on


USCA Case #10-1062 Document #1312593 Filed: 06/10/2011 Page 27 of 48
27
competition nationally or that all withholding of terrestrially
delivered programming negatively affects competition. For
these reasons, petitioners' reference to the Commission's
extending its program access rules by closing the terrestrial
loophole is a red herring. Although it is true that competition
in the MVPD industry has generally increased even absent
rules restricting terrestrial withholding, nothing prevents the
Commission from addressing any remaining barriers to
effective competition with appropriately tailored remedies.

With our inquiry thus focused, we believe that the
Commission's order serves an important governmental
interest and that the Commission has satisfied its
constitutional burden under intermediate scrutiny. As we
observed in Cablevision Systems Corp. v. FCC, the
transformation in the MVPD market, although significant,
presents a "mixed picture" when considered as a whole. 597
F.3d at 1314. Relying on the record from the Commission's
2007 program access order extension for satellite
programming, see supra p. 7, we observed that not only do
cable operators still control some two-thirds of the market
nationally, but also that they enjoy higher shares in several
markets. See Cablevision, 597 F.3d at 1314. We further
recognized that clustering and consolidation in the industry
bolsters the market power of cable operators because "a single
geographic area can be highly susceptible to near-monopoly
control by a cable company." Id. at 1309. On the
programming side, we cited the Commission's finding that
despite major gains in the amount and diversity of
programming, as of 2007 "the four largest cable operators
[were] still vertically integrated with six of the top 20 national
networks, some of the most popular premium networks, and
almost half of all regional sports networks." Id. at 1314. In the
order at issue here, the Commission reaffirmed these
observations about the MVPD market, finding "no evidence


USCA Case #10-1062 Document #1312593 Filed: 06/10/2011 Page 28 of 48
28
. . . that market shares have changed materially since" 2007,
and concluding that "cable operators still have a dominant
share of MVPD subscribers," that "there is evidence that
cable prices have risen in excess of inflation," and that "cable
operators still own significant programming." 2010 Order, 25
FCC Rcd. at 763, 776 27, 42. Petitioners have given us no
reason to question these findings.

Moreover, the Commission's 2006 regression analysis
concerning the withholding of terrestrially delivered, cable-
affiliated RSN programming in the Philadelphia and San
Diego markets demonstrates that vertically integrated cable
companies can in fact withhold terrestrially delivered
programming to limit the market share of rival MVPDs.
Applying APA review, we relied on this study in Cablevision
to reject a challenge to the Commission's five-year extension
of its prohibition on exclusive contracts for satellite
programming between cable operators and cable-affiliated
programmers for satellite programming. See Cablevision, 597
F.3d at 1314 (recognizing that "predictive calculations are a
murky science" and deferring to the agency's expert view of
the evidence). First Amendment intermediate scrutiny is, of
course, substantially more demanding than arbitrary and
capricious review of agency action. See Century Commc'ns
Corp. v. FCC, 835 F.2d 292, 299 (D.C. Cir. 1987). But given
how directly this study supports the Commission's present
order, which adopts case-by-case restrictions on terrestrial
programming, as compared to the Commission's earlier
decision, which extended the general ban on exclusive
contracts for cable-affiliated satellite programming, we give
the study significant weight here as well.

Petitioners also contend, though somewhat in passing,
that the Commission's order is unconstitutionally
underinclusive because it applies only to cable operators, not


USCA Case #10-1062 Document #1312593 Filed: 06/10/2011 Page 29 of 48
29
to all MVPDs. But the Commission's terrestrial programming
rules, like all of its section 628 regulations, focus on vertically
integrated cable companies due to their " `special
characteristics' " and their unique ability to impact
competition. See Time Warner, 93 F.3d at 978 (quoting
Turner Broad. Sys., 512 U.S. at 66061). Were the
Commission to persist in regulating only the conduct of cable
operators in the face of evidence that exclusive dealing
arrangements involving other MVPDs have similar negative
impacts on competition, then our analysis would necessarily
change. But nothing in the present record suggests such
unjustified discrimination. Indeed, far from neglecting the
issue, the Commission reported that it is considering whether
to expand its exclusive contract prohibition to programmers
affiliated with non-cable MVPDs. See 2010 Order, 25 FCC
Rcd. at 777 45. We therefore decline to strike down the
Commission's order as "fatally underinclusive simply because
an alternative regulation, which would restrict more speech or
the speech of more people, could be more effective." Blount
v. SEC, 61 F.3d 938, 946 (D.C. Cir. 1995).


Finally, petitioners argue that given the robust
competition in the New York City video market where they
operate, the Commission's terrestrial programming rules are
unconstitutional as applied to them. According to the
Commission, however, this as-applied preenforcement
challenge is unripe for judicial review. "In applying the
ripeness doctrine," we look to "both the fitness of the issues
for judicial decision and the hardship to the parties of
withholding court consideration." Munsell v. Dep't of Agric.,
509 F.3d 572, 58586 (D.C. Cir. 2007) (internal quotation
marks omitted). We agree with the Commission that this
particular challenge is unfit for review because there is no
way of knowing whether the Commission's new restrictions,
which it will base on case-by-case determinations, will even


USCA Case #10-1062 Document #1312593 Filed: 06/10/2011 Page 30 of 48
30
apply to petitioners. See Texas v. United States, 523 U.S. 296,
300 (1998) ("A claim is not ripe for adjudication if it rests
upon contingent future events that may not occur as
anticipated, or indeed may not occur at all." (internal
quotation marks omitted)). Indeed, as the Commission
observes, if petitioners are correct about the state of
competition in the market they serve, then, should they face
an enforcement proceeding, they will have powerful evidence
that their terrestrial programming withholding has no
significant impact on the delivery of satellite programming. In
any event, because petitioners' as-applied challenge depends
on facts about the New York City market that are absent from
the administrative record, we believe that "further factual
development" in a ruling by the Commission with respect to a
specific complaint would "significantly advance our ability to
deal with the legal issues presented." Nat'l Park Hospitality
Ass'n v. Dep't of Interior, 538 U.S. 803, 812 (2003) (internal
quotation marks omitted). As to hardship, the possibility that
petitioners may need to defend their terrestrial withholding
practices in a proceeding before the Commission is
insufficient to outweigh the strong institutional interests
favoring postponing judicial review of such a fact-bound
constitutional question. See Fed. Express Corp. v. Mineta,
373 F.3d 112, 118 (D.C. Cir. 2004) ("In applying the ripeness
doctrine to agency action we balance the interests of the court
and the agency in delaying review against the petitioner's
interest in prompt consideration of allegedly unlawful agency
action." (internal quotation marks omitted)).

IV.


We now move on to consider petitioners' challenges to
several specific aspects of the Commission's order. Recall
that the order allows complainants to bring claims against
cable operators or covered satellite programmers for engaging
in section 628(c)(2)-like conduct involving terrestrial


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31
programming. Complainants must then demonstrate that the
cable operator or satellite programmer's unfair act has "the
purpose or effect of . . . hinder[ing] significantly or . . .
prevent[ing]" the provision of satellite programming to
customers. 47 U.S.C. 548(b). When RSN programming is at
issue, including RSN HD programming, petitioners may
invoke a rebuttable presumption that the unfair act of
withholding has such a purpose or effect. See 2010 Order, 25
FCC Rcd. at 78285 5255. In addition, in cases involving
alleged discriminatory conduct by a cable-affiliated
programmer providing only terrestrially delivered
programming, complainants must establish that the
programmer is wholly owned by, controlled by, or under
common control with the cable operators or covered satellite
programming vendors against whom the complaint is filed.
See id. at 78687 57.

Petitioners challenge the order's rebuttable presumptions
and its liability rules, as well as the Commission's
determination that all section 628(c)(2)-like conduct involving
terrestrial programming is "unfair" as that term is used in
subsection (b). We review petitioners' challenges to the
Commission's decisionmaking process under the APA,
upholding its actions unless they are " `arbitrary, capricious,
an abuse of discretion, or otherwise not in accordance with
law,' or not supported by `substantial evidence.' " NetworkIP,
LLC v. FCC, 548 F.3d 116, 121 (D.C. Cir. 2008) (quoting 5
U.S.C. 706(2)). An agency decision is arbitrary and
capricious if it "relied on factors which Congress has not
intended it to consider, entirely failed to consider an important
aspect of the problem, offered an explanation for its decision
that runs counter to the evidence before the agency, or is so
implausible that it could not be ascribed to a difference in
view or the product of agency expertise." Motor Vehicle Mfrs.
Ass'n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S.


USCA Case #10-1062 Document #1312593 Filed: 06/10/2011 Page 32 of 48
32
29, 43 (1983). APA review is "very deferential," Rural
Cellular Ass'n v. FCC, 588 F.3d 1095, 1105 (D.C. Cir. 2009),
especially where, as here, "the decision under review requires
expert policy judgment of a technical, complex, and dynamic
subject," Cablevision, 597 F.3d at 1311. To the extent
petitioners' specific challenges are statutory or constitutional,
we apply the relevant standards of review as described above.
See supra Parts II & III.

Before considering petitioners' specific arguments,
however, we must address the Commission's threshold
contention that they are unripe for judicial review. In contrast
to our conclusion regarding petitioners' as-applied First
Amendment claim, we believe that these challenges are ripe
even though the Commission has yet to apply its new rules in
individual proceedings. All of petitioners' challenges,
including their APA claims, raise purely legal questions, and
we have "often observed that a purely legal claim in the
context of a facial challenge . . . is presumptively reviewable."
Nat'l Ass'n of Home Builders v. U.S. Army Corps of Eng'rs,
417 F.3d 1272, 1282 (D.C. Cir. 2005) (internal quotation
marks omitted). Most significantly--and this is what clearly
distinguishes these challenges from petitioners' as-applied
First Amendment argument--the legality of the rules at issue
is generally "not `intertwined with how the Commission
might exercise its discretion in the future.' " Nat'l Ass'n of
Home Builders v. U.S. Army Corps of Eng'rs, 440 F.3d 459,
46465 (D.C. Cir. 2006) (quoting Sprint Corp. v. FCC, 331
F.3d 952, 954 (D.C. Cir. 2003)). Although the order does
reserve some matters for case-by-case adjudication, the
portions that petitioners challenge--such as the Commission's
determination that section 628(c)(2)-like conduct involving
terrestrial programming is always unfair, see 2010 Order, 25
FCC Rcd. at 77980 49--have been finally resolved and
will not be at issue in individual enforcement proceedings.


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33
See Associated Gas Distribs. v. FERC, 824 F.2d 981, 1032
(D.C. Cir. 1987) ("That some issues are unresolved does not
in itself render unfit the ones that the agency has clearly
determined."). Moreover, in contrast to Sprint Corp. v. FCC,
on which the Commission relies, petitioners' claims "rest[]
not on the assumption that the [Commission] will exercise its
discretion unlawfully in applying the regulation but on
whether its faithful application would" violate the law. Nat'l
Ass'n of Home Builders, 440 F.3d at 465 (internal quotation
marks omitted) (distinguishing Sprint Corp.). For these
reasons, we feel well equipped to resolve these legal questions
now and see no reason for believing that our review would
materially benefit from a more "concrete setting." Id. at 464.

In addition to its general ripeness argument, the
Commission contends that petitioners' challenges to the
order's rebuttable presumptions are especially premature. To
be sure, as-applied challenges to the use of rebuttable
presumptions are generally unfit for review before the agency
has actually implemented them. See S. Co. Servs., Inc. v.
FCC, 313 F.3d 574, 58182 (D.C. Cir. 2002). But whether
rebuttable presumptions are facially unreasonable presents a
distinct question that courts, depending on the nature of the
presumption and the development of the record, might well be
able to address prior to enforcement. Compare, e.g., Fed.
Express Corp., 373 F.3d at 11819 (concluding that
accounting presumptions for air carrier compensation were
unripe for review), with Nat'l Mining Ass'n v. Babbitt, 172
F.3d 906, 90913 (D.C. Cir. 1999) (reviewing and finding
arbitrary and capricious the Secretary of the Interior's
adoption of a rebuttable presumption as to the cause of
damage resulting from earth movement near underground
mines). In this case, the administrative record is sufficiently
developed to allow us to review the facial reasonableness of


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34
the Commission's rebuttable presumptions even before
knowing how those presumptions will actually be applied.

Where "no institutional interests favor[] postponement of
review, a petitioner need not satisfy the hardship prong" of
our ripeness test. AT&T Corp. v. FCC, 349 F.3d 692, 700
(D.C. Cir. 2003); see also Teva Pharm. USA, Inc. v. Sebelius,
595 F.3d 1303, 1310 (D.C. Cir. 2010) (collecting cases
indicating that "hardship is not a sine qua non of ripeness").
Even so, to the extent the Commission's rules may make it
more likely that petitioners' terrestrial withholding will be
found unlawful, they create an incentive for petitioners to
alter their business affairs, establishing at least some degree of
hardship.

Rebuttable presumptions for RSN and RSN HD programming

Under the APA, agencies may adopt evidentiary
presumptions provided that the presumptions (1) shift the
burden of production and not the burden of persuasion, see
Garvey v. Nat'l Transp. Safety Bd., 190 F.3d 571, 57980
(D.C. Cir. 1999) (explaining that section 7(c) of the APA, 5
U.S.C. 556(d), forbids only the latter), and (2) are rational,
see id. at 579. Reviewing the Commission's order, we think it
clear that its rebuttable presumptions shift only the burden of
production. See 2010 Order, 25 FCC Rcd. at 783 52 ("[W]e
will not require litigants and the Commission staff to
undertake repetitive examinations of our RSN precedent and
the relevant historical evidence. Instead, we recognize the
weight of the existing precedent and categorical evidence
concerning RSNs by allowing complainants to invoke a
rebuttable presumption that an unfair act involving a
terrestrially delivered, cable-affiliated RSN has the purpose or
effect set forth in [s]ection 628(b)."). Given that petitioners'
challenge on this point is purely facial, we have no occasion
to consider whether the Commission's rebuttable


USCA Case #10-1062 Document #1312593 Filed: 06/10/2011 Page 35 of 48
35
presumptions might function differently in practice. See
Associated Gas Distribs., 824 F.2d at 103233 (declining to
review a claim that agency regulations adopting a rebuttable
presumption would "illegally switch[] the burden of proof"
because of the "highly abstract and speculative character" of
that allegation).


Turning to the question of whether the Commission's
rebuttable presumptions are rational, we "must defer to the
agency's judgment, but an evidentiary presumption is only
permissible if there is a sound and rational connection
between the proved and inferred facts, and when proof of one
fact renders the existence of another fact so probable that it is
sensible and timesaving to assume the truth of [the inferred]
fact . . . until the adversary disproves it." Nat'l Mining Ass'n
v. Dep't of Interior, 177 F.3d 1, 6 (D.C. Cir. 1999) (internal
citation and quotation marks omitted). According to
petitioners, the challenged presumptions flunk this test
because, they say, the record contains insufficient evidence
that subsection 628(c)(2)-like conduct involving RSN
terrestrial programming will significantly hinder the provision
of satellite cable programming. In particular, they criticize the
Commission's extrapolation from its 2006 regression
analysis, arguing not only that the study is both weak and
dated, but also that the Commission made no effort to
consider whether the study's sample, which involved
exclusive contracts for programming networks showing
professional sports teams, is representative of terrestrial RSNs
generally. Supporting intervenor NCTA argues that the
breadth of the Commission's definition of RSNs, which
extends to networks that carry at least 10% of a team's games
(including Division I college football and basketball teams
that play fewer games than professional teams), exacerbates
this problem. See 2010 Order, 25 FCC Rcd. at 78384 53
(defining RSN).


USCA Case #10-1062 Document #1312593 Filed: 06/10/2011 Page 36 of 48
36


Although petitioners' objections have some force, we
believe they are overcome by "the substantial deference we
owe the FCC's predictive judgments." Nuvio Corp. v. FCC,
473 F.3d 302, 306 (D.C. Cir. 2006). To begin with, relying on
its expertise and wealth of experience, the Commission
advanced compelling reasons to believe that withholding RSN
programming is, given its desirability and non-replicability,
uniquely likely to significantly impact the MVPD market. See
2010 Order, 25 FCC Rcd. at 750, 78283 & n.205 9, 52;
see also In re Gen. Motors Corp. & Hughes Elecs. Corp.,
Transferors & the News Corp. Ltd., Transferee, 19 FCC Rcd.
473, 535 133 (2004) ("RSNs[] typically purchase exclusive
rights to show sporting events and sports fans believe that
there is no good substitute for watching their local and/or
favorite team play an important game."), modified, 24 FCC
Rcd. 8674 (2009). Moreover, despite its limitations, the
Commission's 2006 regression analysis constitutes substantial
evidence that supports the Commission's adoption of a
presumption. "We generally defer to an agency's decision to
proceed on the basis of imperfect scientific information,
rather than to invest the resources to conduct the perfect
study." Sierra Club v. EPA, 167 F.3d 658, 662 (D.C. Cir.
1999) (internal quotation marks omitted); see also City of Los
Angeles v. U.S. Dep't of Transp., 165 F.3d 972, 977 (D.C.
Cir. 1999) ("In reviewing the [Commission'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."). Particularly given the
Commission's expert observations about RSN programming,
it reasonably extrapolated from this study to a prediction
about the impact RSN withholding would ordinarily have.
Indeed, in Cablevision we permitted the Commission to
extrapolate from this same study to a much greater degree.


USCA Case #10-1062 Document #1312593 Filed: 06/10/2011 Page 37 of 48
37
See supra p. 28. Although the study involved only RSNs, the
Commission used it to support predictions about the effects
lifting its ban on satellite programming withholding would
have for satellite cable-affiliated networks generally,
including for national networks. See 597 F.3d at 1314.


We likewise find reasonable the Commission's decision
to extend its rebuttable presumption to RSN HD
programming. Citing consumer survey data, evidence from
cable operators' marketing campaigns touting the carriage of
HD programming, and record comments describing the
rapidly growing demand for HD televisions, the Commission
found that "the record shows that MVPD subscribers do not
consider [standard definition (SD)] programming to be an
acceptable substitute for HD programming" and that "HD
programming has thus become an important part of a
competitive MVPD offering." 2010 Order, 25 FCC Rcd. at
78485 54. Given this evidence, as well as the respect we
owe Commission efforts to anticipate the effects of
technological change in a dynamic market, the Commission's
determination that the impact of RSN SD programming
withholding will extend to RSN HD programming "is a
predictive judgment that [the agency] is entitled to make and
to which we defer." Charter Commc'ns, Inc. v. FCC, 460
F.3d 31, 44 (D.C. Cir. 2006).


Petitioners also challenge the Commission's rebuttable
presumptions on First Amendment grounds. These arguments
fare no better. Petitioners' contention that the Commission's
presumptions are impermissibly content-based and therefore
deserve strict scrutiny is meritless. Although the presumptions
"might in a formal sense be described as content-based" given
that they are triggered by whether the programming at issue
involves sports, there is absolutely no evidence, nor even any
serious suggestion, that the Commission issued its regulations


USCA Case #10-1062 Document #1312593 Filed: 06/10/2011 Page 38 of 48
38
to disfavor certain messages or ideas. See BellSouth Corp. v.
FCC, 144 F.3d 58, 69 (D.C. Cir. 1998). The clear and
undisputed evidence shows that the Commission established
presumptions for RSN programming due to that
programming's economic characteristics, not to its
communicative
impact.
Thus content-neutral,
the
presumptions are subject only to intermediate scrutiny. See id.
(" `Government regulation of expressive activity is content
neutral so long as it is justified without reference to the
content of the regulated speech.' " (quoting Ward v. Rock
Against Racism, 491 U.S. 781, 791 (1989))). Finally,
petitioners' argument that the presumptions are too broad to
survive even intermediate scrutiny is equally meritless. Given
record evidence demonstrating the significant impact of RSN
programming withholding, the Commission's presumptions
represent a narrowly tailored effort to further the important
governmental interest of increasing competition in video
programming. See Turner Broad. Sys., 512 U.S. at 662.

Potentially liable entities

Petitioners contend that the Commission acted unlawfully
by providing that it may hold satellite cable programming
vendors liable for acts of terrestrial programming withholding
under section 628(b). According to petitioners, when an entity
engages in conduct with respect to terrestrial programming, it
is not, as section 628(i)(2) requires, "engaged in the . . .
distribution . . . of satellite cable programming," 47 U.S.C.
548(i)(2), and so may not be held liable as a satellite cable
programming vendor under section 628(b). We are
unpersuaded. As we held in a case involving strikingly similar
statutory language, "[t]here is nothing linguistically odd about
defining a set of firms subject to regulation in terms of the
conduct of particular activities, and yet also regulating some
other activities that are not part of the definition." WorldCom,
Inc. v. FCC, 246 F.3d 690, 69395 (D.C. Cir. 2001) (holding


USCA Case #10-1062 Document #1312593 Filed: 06/10/2011 Page 39 of 48
39
that the Commission had authority to regulate "local exchange
carriers" when they provided DSL services even though the
statute in question defined "local exchange carriers" to mean
"any person that is engaged in the provision of telephone
exchange service or exchange access"). In defining satellite
cable vendors, Congress could have required that an entity
would be covered "only `when' or `to the extent' that it
provides the regulation-triggering services." Id; see also 47
U.S.C. 153(51) ("A telecommunications carrier shall be
treated as a common carrier under this Act only to the extent
that it is engaged in providing telecommunications services
. . . ." (emphasis added)). But as the Commission recognized
in its order, Congress imposed no such limitation. See 2010
Order, 25 FCC Rcd. at 779 n.192 49.


Petitioners argue that the Commission's interpretation of
section 628(i)(2) leads to irrationally different treatment of
similarly situated entities because it subjects programmers
selling both satellite and terrestrial programming to liability
while exempting programmers selling only terrestrial
programming. Although we agree that section 628(b)'s
omission of terrestrial programmers creates an odd gap, we
reject petitioners' suggestion that the Commission must
address this disparity by expanding the gap to also exempt
dual programmers even though they (1) are covered by the
literal terms of the statute as satellite programming vendors,
and (2) can engage in conduct the statute expressly prohibits.
Aware of this problem, the Commission has chosen to go in
the opposite direction, relying on vicarious liability to
regulate indirectly the conduct of terrestrial-only
programmers. We turn, then, to the permissibility of that
move.


In its order, the Commission established that when a
terrestrial programmer is wholly owned by, controlled by, or


USCA Case #10-1062 Document #1312593 Filed: 06/10/2011 Page 40 of 48
40
under common control with a cable operator or covered
satellite programming vendor, the latter entity "can
appropriately be held responsible for the discriminatory acts
of its program supplier affiliate because it controls the
supplier and the supplier's unfair actions are designed to
benefit [the entity]." 2010 Order, 25 FCC Rcd. at 786 57;
see also 47 C.F.R. 76.1001(b)(1)(ii) (codifying this rule).
Petitioners first argue that imposing liability on cable
operators based on control or common control runs afoul of
section 628 because such operators are liable under subsection
(c)(2)(A) only when they "unduly or improperly influenc[e]"
an affiliated programmer's decision. But for reasons
explained at length in Part II, see supra pp. 1417, subsection
(c)(2)'s minimum requirements impose no affirmative limits
on the Commission's ability to pursue its statutory objectives
under subsection (b).

Petitioners next contend that the Commission engaged in
arbitrary and capricious reasoning when it assumed that a
terrestrial programmer who withholds programming from an
MVPD always does so for the benefit of a commonly
controlled cable operator even when that operator is no more
than a sister subsidiary corporation. According to petitioners,
that assumption fails to account for the possibility that a
terrestrial programmer might enter an exclusive agreement
with an unaffiliated MVPD. Such a deal, petitioners claim,
would benefit only the unaffiliated MVPD (who gets the
exclusive programming) and the terrestrial programmer itself
(who secures an exclusivity premium). But the Commission
has determined, reasonably in our view, that discriminatory
practices by terrestrial programmers will often be intended in
part to benefit a cable operator under common ownership. See
2010 Order, 25 FCC Rcd. at 786 57. After all, the entire
theory underlying section 628 and the Commission's
implementing rules is that vertically integrated cable


USCA Case #10-1062 Document #1312593 Filed: 06/10/2011 Page 41 of 48
41
programmers have incentives to enter arrangements favoring
affiliated cable operators. See supra pp. 45. Even where
programmers enter exclusivity arrangements with unaffiliated
MVPDs, which petitioners do not suggest is nearly as
common as deals between cable-affiliated entities, the
programmer might enter the deal at least in part to benefit the
affiliated cable operator by closing some rivals out of the
market. For example, if a cable operator has one DBS
competitor and one wireline competitor but considers the
latter a greater threat to its dominant position, exclusive
arrangements between an affiliated terrestrial programmer and
the DBS company that keep must-have programming from the
wireline company will redound to the cable operator's benefit.


Advancing a third argument, petitioners contend that
section 628(b)'s plain language precludes vicarious liability
because that provision only prohibits a cable operator from
"engag[ing] in," 47 U.S.C. 548(b), certain conduct, which,
according to petitioners, presupposes direct liability. But
because petitioners first raised this argument in their reply
brief, we treat it as forfeited. See Gen. Elec. Co. v. Jackson,
610 F.3d 110, 123 (D.C. Cir. 2010).

Treating all section 628(c)(2)-like conduct involving
terrestrial programming as "unfair"

This brings us finally to petitioners' contention that the
Commission erred by concluding that section 628(c)(2)-like
conduct involving terrestrial programming constitutes "unfair
methods of competition or unfair or deceptive acts or
practices within the meaning of [s]ection 628(b)." 2010
Order, 25 FCC Rcd. at 779 49 (internal quotation marks
omitted). In reaching this judgment, the Commission relied
primarily on the fact that in proscribing such conduct in
section 628(c)(2), Congress had implicitly treated it as unfair.
By "defin[ing] certain conduct that must be included in the


USCA Case #10-1062 Document #1312593 Filed: 06/10/2011 Page 42 of 48
42
Commission's implementing regulations," the Commission
asserted, "Congress . . . made a conclusive legislative
judgment that the categories of conduct involving satellite-
delivered programming that are enumerated in [s]ection
628(c)(2) satisfy the requirements of [s]ection 628(b),
including the requirement of constituting an `unfair method[]
of competition or unfair or deceptive act[] or practice[].' " Id.
at 778 47 (quoting 47 U.S.C. 548(b)). Defending its
analysis here, the Commission maintains that given
subsection (c)(2), it "made sense for the Commission to
conclude that the mirror image of these acts in the nearly
identical context of terrestrially delivered programming also
should be `unfair acts' for purposes of [s]ection 628(b)."
Resp'ts' Br. 49.

The Commission's reasoning by analogy has several
serious gaps. To begin with, it failed to justify its assumption
that just because Congress treated certain acts involving
satellite programming as unfair, the same acts are necessarily
unfair in the context of terrestrial programming. Although we
hold in this opinion that subsection (c)(2)'s focus on satellite
programming in no way restricts the Commission from
regulating terrestrial programming, see supra pp. 1417, it is
a different matter entirely for the Commission to assume that
apparent congressional judgments regarding satellite
programming necessarily apply in precisely the same way to
terrestrial programming. Of course, for purposes of evaluating
whether conduct within the video industry is unfair, it might
well be that nothing turns on the technology used to deliver
programming to MVPDs. That said, terrestrial programming
is typically local and regional, whereas satellite programming
includes national networks. See 2010 Order, 25 FCC Rcd. at
764 n.98 27. Which way this geographic distinction cuts is a
question we leave for the Commission to resolve in the first
instance. On the one hand, the Commission cited evidence


USCA Case #10-1062 Document #1312593 Filed: 06/10/2011 Page 43 of 48
43
that certain local and regional video distribution markets are
significantly less competitive than the national market,
making programming withholding in those markets
"potentially an even more profitable strategy" than is typically
the case. Id. at 76364 & n.99 27. On the other hand, the
Commission recognized that "exclusivity plays an important
role in the growth and viability of local cable news networks
and that permitting such exclusivity should not . . . dissuade
new MVPDs from developing their own competing regional
programming services." Id. at 781 n.200 51 (internal
quotation marks omitted). For our purposes, the point is
simply that the Commission needs to consider whether there
are relevant differences between satellite and terrestrial
programming before invoking Congress's regulation of
satellite withholding as a justification for treating terrestrial
withholding as categorically unfair.


Moreover, not only is the Commission's reasoning by
analogy incomplete, but its central premise, as petitioners
point out, is mistaken. In subsection (c)(2), Congress
established broad program access rules for satellite
programming, which suggests that Congress did believe that
withholding such programming was generally unfair, at least
given the state of the video market at the time. But Congress
also recognized an important exception. It allowed cable
operators and affiliated satellite programmers to enter
exclusive programming contracts in markets previously
served by cable if the Commission concluded, after receiving
an exemption request, that the contract "is in the public
interest." 47 U.S.C. 548(c)(2)(D). By creating this
exception, as well as by building a sunset provision into the
exclusive contract prohibition, id. 548(c)(5), Congress
sought to balance the need for regulatory intervention in
markets possessing significant barriers to competition with its
recognition that vertical integration and exclusive dealing


USCA Case #10-1062 Document #1312593 Filed: 06/10/2011 Page 44 of 48
44
arrangements are not always pernicious and, depending on
market conditions, may actually be procompetitive. See S.
Rep. No. 102-92, at 28, reprinted in 1992 U.S.C.C.A.N. at
1161 ("The Committee believes that exclusivity can be a
legitimate business strategy where there is effective
competition. Where there is no effective competition,
however, exclusive arrangements may tend to establish a
barrier to entry and inhibit the development of competition in
the market."). Reflecting this balanced approach, section
628(c)(4)'s public interest factors direct the Commission to
consider the effect of exclusive contracts on (1) "competition
in local and national [MVPD] markets," (2) "competition
from [MVPD] technologies," (3) "the attraction of capital
investment in the production and distribution of new satellite
cable programming," and (4) "diversity of programming in
the [MVPD] market," as well as (5) "the duration of the
exclusive contract." 47 U.S.C. 548(c)(4).


Congress's framework accords with the generally
accepted view in antitrust and other areas that exclusive
contracts may have both procompetitive and anticompetitive
purposes and effects. See, e.g., Tampa Elec. Co. v. Nashville
Coal Co., 365 U.S. 320, 327, 33435 (1961) (finding that an
exclusive dealing contract did not violate section 3 of the
Clayton Act because it did not "foreclose competition in a
substantial share of the line of commerce affected," and
recognizing that potential procompetitive justifications for the
contract were relevant to assessing its legality); United States
v. Microsoft Corp., 253 F.3d 34, 69 (D.C. Cir. 2001) (en
banc) ("Permitting an antitrust action to proceed any time a
firm enters into an exclusive deal would . . . discourage a
presumptively legitimate business practice. . . ."); 11 Herbert
Hovenkamp, Antitrust Law 1803a, at 100 (2d ed. 2005)
(describing
output
contracts
as
"presumptively
procompetitive"). Here, for example, "the ability to enter into


USCA Case #10-1062 Document #1312593 Filed: 06/10/2011 Page 45 of 48
45
exclusive contracts could create economic incentives to invest
in the development of new programming" by allowing a
vertically integrated cable operator to differentiate its service
and secure the benefits of creating and promoting its
programming networks. Time Warner, 93 F.3d at 979. Indeed,
the Commission itself has recognized that exclusivity can
further competition in certain circumstances. See In re
Implementation of the Cable Television Consumer Prot.
& Competition Act of 1992, 22 FCC Rcd. 17791, 17835 63
(2007) ("We recognize the benefits of exclusive contracts and
vertical integration cited by some cable [companies], such as
encouraging innovation and investment in programming and
allowing for `product differentiation' among distributors.").
For instance, as noted above, the Commission has taken the
position that "exclusivity plays an important role in the
growth and viability of local cable news networks." 2010
Order, 25 FCC Rcd. at 781 n.200 51. Yet under the
Commission's rules for terrestrial programming, exclusivity
even in this context is "unfair."


The Commission responds that determining whether
particular conduct is unfair represents only half the section
628(b) inquiry contemplated by their new regulations.
Complainants must also show that an unfair act of terrestrial
programming withholding has "the purpose or effect of . . .
hinder[ing] significantly or . . . prevent[ing]" any MVPD from
providing satellite programming to customers. 47 U.S.C.
548(b). This case-by-case approach for terrestrial
programming, the Commission contends, provides "an even
broader `escape valve' " for procompetitive or benign
exclusive contracts than does the public interest exception for
satellite programming. Resp'ts' Br. 51.

Of course, the Commission is correct that it has
substantially narrowed the scope of its regulations by focusing


USCA Case #10-1062 Document #1312593 Filed: 06/10/2011 Page 46 of 48
46
on the effect of terrestrial withholding in individual cases.
Indeed, this is one reason why its rules survive First
Amendment scrutiny. See supra pp. 2627. But the case-by-
case inquiry into purposes or effects may fail to capture
whether a particular act of terrestrial withholding should be
considered unfair. For example, although the Commission has
indicated it is "highly unlikely that an unfair act involving
local news and local community or educational programming
will have the [proscribed] purpose or effect under [s]ection
628(b)"--because "[u]nlike RSN programming, local news
and local community or educational programming is readily
replicable by competitive MVPDs," 2010 Order, 25 FCC
Rcd. at 781 n.200 51--the logic of the Commission's order
dictates that should a complainant establish such a purpose or
effect with respect to withholding by a terrestrially delivered
local news network, then the Commission would require the
network to share its programming. That result would follow
even if the network's popularity and market impact stemmed
from substantial investment in news content and advertising
by the cable operator affiliated with the network, and even if
MVPD competitors could duplicate those investments but
have refrained from doing so. By contrast, if our hypothetical
news network were delivered to MVPDs by satellite, the
Commission would, if presented with an exemption
application, consider whether an exclusive contract involving
this programmer would be in the public interest despite the
contract's negative impact on current free-riding competitors.

In addition to relying by analogy on the congressional
judgment reflected in section 628(c)(2), the Commission
indicated that subsection (c)(2)-like acts involving terrestrial
programming are unfair because such acts "have the potential
to impede entry into the video distribution market and to
hinder existing competition in the market." Id. at 779 48.
But by labeling conduct unfair simply because it might in


USCA Case #10-1062 Document #1312593 Filed: 06/10/2011 Page 47 of 48
47
some circumstances negatively affect competition in the video
distribution market, the Commission failed to consider
whether it should treat conduct as unfair despite it being
procompetitive in a given instance. Indeed, even though
reducing prices amounts to paradigmatic legitimate
competition, a cable operator's decision to cut its prices could
conceivably qualify under the Commission's reasoning as
"unfair" under section 628(b) because of the theoretical
"potential" for a cable operator to engage in predatory pricing
to drive its competitors from the market.


Given the Commission's failure to "articulate a
satisfactory explanation for its action" in defining certain acts
of terrestrial withholding as categorically unfair, this part of
its terrestrial programming order is arbitrary and capricious.
State Farm Mut. Auto Ins. Co., 463 U.S. at 43; see also
Kristin Brooks Hope Ctr. v. FCC, 626 F.3d 586, 58991
(D.C. Cir. 2010) (vacating a Commission decision as arbitrary
and capricious for failure to provide "a reasonable
explanation"). That said, we take no position on the ultimate
issue of exactly how the Commission should define the
inherently ambiguous statutory term "unfair." See Chevron,
467 U.S. at 84243. But if the Commission believes that
conduct involving the withholding of terrestrial programming
should be treated as categorically unfair, as opposed to
assessing fairness on a case-by-case basis or perhaps adopting
a public interest exception mirroring the one for satellite
programming, see 47 U.S.C. 628(c)(2)(D), (c)(4), then it
must grapple with whether its definition of unfairness would
apply to conduct that appears procompetitive and, if so,
whether that result would comport with section 628.

V.


The petitions for review are denied in part and granted in
part. We vacate that portion of the Commission's order


USCA Case #10-1062 Document #1312593 Filed: 06/10/2011 Page 48 of 48
48
treating certain acts of terrestrially delivered programming
withholding as categorically unfair and remand to the
Commission for further proceedings consistent with this
opinion.

So ordered.


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