406 F.3d 689 (D.C. Cir. 2005), 04-1037, American Library Ass'n. v. F.C.C.

Docket Nº:04-1037.
Citation:406 F.3d 689
Party Name:74 U.S.P.Q.2d 1545 AMERICAN LIBRARY ASSOCIATION, et al., Petitioners v. FEDERAL COMMUNICATIONS COMMISSION and United States of America, Respondents Motion Picture Association of America, Inc., et al. Intervenors
Case Date:May 06, 2005
Court:United States Courts of Appeals, Court of Appeals for the District of Columbia Circuit
 
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406 F.3d 689 (D.C. Cir. 2005)

74 U.S.P.Q.2d 1545

AMERICAN LIBRARY ASSOCIATION, et al., Petitioners

v.

FEDERAL COMMUNICATIONS COMMISSION and United States of America, Respondents

Motion Picture Association of America, Inc., et al. Intervenors

No. 04-1037.

United States Court of Appeals, District of Columbia Circuit

May 6, 2005

Argued Feb. 22, 2005.

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Pantelis Michalopoulos argued the cause for petitioners. With him on the briefs were Cynthia L. Quarterman, Rhonda M. Bolton, Lincoln L. Davies, and Gigi B. Sohn.

Jacob M. Lewis, Attorney, Federal Communications Commission, argued the cause for respondents. With him on the brief were R. Hewitt Pate, Assistant Attorney General, Catherine G. O'Sullivan and James J. Fredricks, Attorneys, John A. Rogovin, General Counsel, Federal Communications Commission, Austin C. Schlick, Deputy General Counsel, Daniel M. Armstrong, Associate General Counsel, and C. Grey Pash, Jr., Counsel.

Christopher Wolf, Bruce E. Boyden, Mace J. Rosenstein, and Catherine E. Stetson were on the brief for intervenor Motion Picture Association of America, Inc.

Before: EDWARDS, SENTELLE, and ROGERS, Circuit Judges.

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HARRY T. EDWARDS, Circuit Judge.

It is axiomatic that administrative agencies may issue regulations only pursuant to authority delegated to them by Congress. The principal question presented by this case is whether Congress delegated authority to the Federal Communications Commission ("Commission" or "FCC") in the Communications Act of 1934, 47 U.S.C. § 151 et seq. (2000) ( "Communications Act" or "Act"), to regulate apparatus that can receive television broadcasts when those apparatus are not engaged in the process of receiving a broadcast transmission. In the seven decades of its existence, the FCC has never before asserted such sweeping authority. Indeed, in the past, the FCC has informed Congress that it lacked any such authority. In our view, nothing has changed to give the FCC the authority that it now claims.

This case arises out of events related to the nation's transition from analog to digital television service ("DTV"). Since the 1940s, broadcast television stations have transmitted their programs over the air using an analog standard. DTV is a technological breakthrough that permits broadcasters to transmit more information over a channel of electromagnetic spectrum than is possible through analog broadcasting. Consumer Elecs. Ass'n v. FCC, 347 F.3d 291, 293 (D.C.Cir.2003). Congress has set December 31, 2006, as the target date for the replacement of analog television service with DTV. See 47 U.S.C. § 309(j)(14).

In August 2002, in conjunction with its consideration of the technological challenges related to the transition from analog service to DTV, the Commission issued a notice of proposed rulemaking to inquire, inter alia, whether rules were needed to prevent the unauthorized copying and redistribution of digital television programming. See Digital Broadcast Copy Protection, 17 F.C.C.R. 16,027, 16,028 (2002) ("NPRM"). Thousands of comments were filed in response to the agency's NPRM. Owners of digital content and television broadcasters urged the Commission to require DTV reception equipment to be manufactured with the capability to prevent unauthorized redistributions of digital content. Numerous other commenters voiced strong objections to any such regulations, contending that the FCC had no authority to control how broadcast content is used after it has been received. In November 2003, the Commission adopted "broadcast flag" regulations, requiring that digital television receivers and other devices capable of receiving digital television broadcast signals, manufactured on or after July 1, 2005, include technology allowing them to recognize the broadcast flag. See Digital Broadcast Content Protection, 18 F.C.C.R. 23,550 (2003) (codified at 47 C.F.R. pts. 73, 76). The broadcast flag is a digital code embedded in a DTV broadcasting stream, which prevents digital television reception equipment from redistributing broadcast content. The broadcast flag affects receiver devices only after a broadcast transmission is complete. The American Library Association, et al. ("American Library" or "petitioners"), nine organizations representing a large number of libraries and consumers, filed the present petition for review challenging these rules.

In adopting the broadcast flag rules, the FCC cited no specific statutory provision giving the agency authority to regulate consumers' use of television receiver apparatus after the completion of a broadcast transmission. Rather, the Commission relied exclusively on its ancillary jurisdiction under Title I of the Communications Act of 1934.

The Commission recognized that it may exercise ancillary jurisdiction only when two conditions are satisfied: (1) the Commission's general jurisdictional grant under

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Title I covers the regulated subject and (2) the regulations are reasonably ancillary to the Commission's effective performance of its statutorily mandated responsibilities. See 18 F.C.C.R. at 23,563. The Commission's general jurisdictional grant under Title I plainly encompasses the regulation of apparatus that can receive television broadcast content, but only while those apparatus are engaged in the process of receiving a television broadcast. Title I does not authorize the Commission to regulate receiver apparatus after a transmission is complete. As a result, the FCC's purported exercise of ancillary authority founders on the first condition. There is no statutory foundation for the broadcast flag rules, and consequently the rules are ancillary to nothing. Therefore, we hold that the Commission acted outside the scope of its delegated authority when it adopted the disputed broadcast flag regulations.

The result that we reach in this case finds support in the All Channel Receiver Act of 1962 and the Communications Amendments Act of 1982. These two statutory enactments confirm that Congress never conferred authority on the FCC to regulate consumers' use of television receiver apparatus after the completion of broadcast transmissions.

As petitioners point out, "the Broadcast Flag rules do not regulate interstate 'radio communications' as defined by Title I, because the Flag is not needed to make a DTV transmission, does not change whether DTV signals can be received, and has no effect until after the DTV transmission is complete." Petitioners' Br. at 23. We agree. Because the Commission overstepped the limits of its delegated authority, we grant the petition for review.

I. BACKGROUND

The Communications Act of 1934 was "implemented for the purpose of consolidating federal authority over communications in a single agency to assure 'an adequate communication system for this country.' " Motion Picture Ass'n of Am., Inc. v. FCC, 309 F.3d 796, 804 (D.C.Cir.2002) (quoting S. REP. No. 73-781, at 3 (1934)). Title I of the Act creates the Commission "[f]or the purpose of regulating interstate and foreign commerce in communication by wire and radio so as to make available, so far as possible, to all the people of the United States ... a rapid, efficient, Nation-wide, and world-wide wire and radio communication service with adequate facilities at reasonable charges." 47 U.S.C. § 151. Title I further provides that the Commission "shall execute and enforce the provisions" of the Act, id., and states that the Act's provisions "shall apply to all interstate and foreign communication by wire or radio," id. § 152(a).

The FCC may act either pursuant to express statutory authority to promulgate regulations addressing a variety of designated issues involving communications, see, e.g., 47 U.S.C. § 303(f) (granting the Commission authority to prevent interference among radio and television broadcast stations), or pursuant to ancillary jurisdiction, see, e.g., 47 U.S.C. § 154(i) ("[t]he Commission may perform any and all acts, make such rules and regulations, and issue such orders, not inconsistent with this chapter, as may be necessary in the execution of its functions").

Although somewhat amorphous, ancillary jurisdiction is nonetheless constrained. In order for the Commission to regulate under its ancillary jurisdiction, two conditions must be met. First, the subject of the regulation must be covered by the Commission's general grant of jurisdiction under Title I of the Communications Act, which, as noted above, encompasses " 'all interstate and foreign

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communication by wire or radio.' " United States v. Southwestern Cable Co., 392 U.S. 157, 167, 88 S.Ct. 1994, 20 L.Ed.2d 1001 (1968) (quoting 47 U.S.C. § 152(a)). Second, the subject of the regulation must be "reasonably ancillary to the effective performance of the Commission's various responsibilities." Id. at 178, 88 S.Ct. 1994. Digital television is a technological breakthrough that allows broadcasters to transmit either an extremely high quality video programming signal (known as high definition television) or multiple streams of video, voice, and data simultaneously within the same frequency band traditionally used for a single analog television broadcast. See Advanced Television Systems and Their Impact Upon the Existing Television Broadcast Service, 11 F.C.C.R. 17,771, 17,774 (1996). In 1997, the FCC set a target of 2006 for the cessation of analog service. See Advanced Television Systems and Their Impact Upon the Existing Television Broadcast Service, 12 F.C.C.R. 12,809, 12,850 (1997). Congress subsequently provided that television broadcast licenses authorizing analog service should not be renewed to authorize such service beyond December 31, 2006. See 47 U.S.C. § 309(j)(14).

In August 2002, the FCC issued a notice of proposed rulemaking regarding digital broadcast copy protection. See Digital Broadcast Copy Protection, 17 F.C.C.R. 16,027 (2002) ("NPRM"). The Commission...

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