Nat. Cable & Telecommunications Assoc. v. F.C.C.

• Citation: 567 F.3d 659
• Decision Date: 26 May 2009
• Docket Number: No. 08-1016.,No. 08-1017.,08-1016.,08-1017.
• Parties: NATIONAL CABLE & TELECOMMUNICATIONS ASSOCIATION, Petitioner v. FEDERAL COMMUNICATIONS COMMISSION and United States of America, Respondents AT&T Inc., et al., Intervenors.
• Court: United States Courts of Appeals. United States Court of Appeals (District of Columbia)

567 F.3d 659

NATIONAL CABLE & TELECOMMUNICATIONS ASSOCIATION, Petitioner v. FEDERAL COMMUNICATIONS COMMISSION and United States of America, Respondents AT&T Inc., et al., Intervenors.

No. 08-1016.

No. 08-1017.

United States Court of Appeals, District of Columbia Circuit.

Argued April 17, 2009.

Decided May 26, 2009.

Paul M. Smith argued the cause for petitioner National Cable & Telecommunications Association. With him on the briefs were Daniel L. Brenner, Neal M. Goldberg, and Michael S. Schooler.

Matthew C. Ames argued the cause for petitioners National Multi Housing Council and National Apartment Association and intervenor Manufactured Housing Institute. With him on the briefs was John McDermott.

Joel Marcus, Counsel, Federal Communications Commission, argued the cause for respondent. On the brief were Matthew B. Berry, General Counsel, Joseph R. Palmore, Deputy General Counsel, Daniel M. Armstrong, Associate General Counsel, and Laurence N. Bourne, Counsel. Nancy C. Garrison, Catherine G. O'Sullivan, and Kristen C. Limarzi, Attorneys, U.S. Department of Justice, entered appearances.

Andrew G. McBride argued the cause for intervenors AT & T Inc., et al. With him on the brief were Joshua S. Turner, David C. Rybicki, Gary Phillips, Christopher M. Heimann, Michael E. Glover, Edward Shakin, William H. Johnson, and Harry F. Cole.

Before: TATEL and GARLAND, Circuit Judges, and SILBERMAN, Senior Circuit Judge.

Concurring opinion by Senior Circuit Judge SILBERMAN.

TATEL, Circuit Judge.

Finding that exclusivity agreements between cable companies and owners of apartment buildings and other multi-unit developments have an anti-competitive effect on the cable market, the Federal Communications Commission banned such contracts. The Commission believes that these deals—which involve a cable company exchanging a valuable service like wiring a building for the exclusive right to provide service to the residents—may be regulated under section 628 of the Communications Act as cable company practices that significantly impair the ability of their competitors to deliver programming to consumers. The Commission thus forbade cable operators not only from entering into new exclusivity contracts, but also from enforcing old ones. Petitioners, associations representing cable operators and apartment building owners, argue that the Commission exceeded its statutory authority, arbitrarily departed from precedent, and otherwise violated the Administrative Procedure Act. Having carefully considered the parties' excellent submissions, we disagree and conclude that the Commission acted well within the bounds of both section 628 and general administrative law.

I.

Understanding this controversy requires that we begin by explaining a few unintuitive statutory terms. The provision at issue here, section 628(b) of the Communications Act, makes it unlawful "for a cable operator ... 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." 47 U.S.C. § 548(b). "Cable operators" are just companies that deliver video programming by cable, like Comcast and Time-Warner. See 47 U.S.C. § 522(5)-(7). "Multichannel video programming distributors" (MVPDs) are a broader set of companies that provide video programming to subscribers. MVPDs include not only cable operators like Comcast but also direct broadcast satellite companies like DirecTV. See § 522(13). Although "satellite cable programming" and "satellite broadcast programming" differ somewhat—they originate from slightly different kinds of entities, compare § 548(i)(1), and 47 U.S.C. § 605(d)(1), with § 548(i)(3)—both terms essentially refer to programming (i.e., television shows) transmitted to MVPDs via satellite for retransmission to subscribers. For our purposes, the important point about them is this: petitioners nowhere dispute the Commission's finding that "most programming is delivered via satellite" and so falls within one of these two categories. Exclusive Service Contracts for Provision of Video Services in Multiple Dwelling Units and Other Real Estate Developments ("Order"), 22 F.C.C.R. 20,235, 20,255, ¶ 43 n. 132 (2007). Section 628(b)'s plain terms thus prohibit cable company practices with the purpose or effect of preventing competing MVPDs, including other cable companies, from providing the two predominant types of programming to consumers.

The Commission first considered exclusivity contracts between cable operators and so-called multiple dwelling units (MDUs) as an ancillary part of its "2003 Inside Wiring Order." See In re Telecommunications Services Inside Wiring, 18 F.C.C.R. 1342, 1366-70, ¶¶ 63-71 (2003). That proceeding primarily concerned the ownership status of certain wiring inside MDUs, and the Commission's order considered some thirteen different issues presented by its new wiring rules. But the Commission also addressed a related issue raised in a separate notice of proposed rulemaking, namely "whether it would be appropriate to cap exclusive contracts to open up MDUs to potential competition on a building-wide or unit-to-unit basis, and, if so, what would represent a reasonable cap." Id. at 1366, ¶ 63. Reviewing the evidence then available, the Commission found that there was no "sufficient basis in this record to ban or cap the term of exclusive contracts." Id. at 1369, ¶ 68; see also id. at 1369-70, ¶¶ 69-71.

Four years later, the Commission returned to exclusivity contracts in a rulemaking devoted solely to that question. See Order, 22 F.C.C.R. at 20,235-64, ¶¶ 1-60. Analyzing the competitive harms and benefits of exclusivity clauses, see id. at 20,241-51, ¶¶ 11-29, the Commission this time concluded that "exclusivity clauses cause significant harm to competition and consumers that the record did not reflect at the time of our 2003 Inside Wiring Order," id. at 20,248-49, ¶ 26; see also id. at 20,249-51, ¶¶ 27-29. And because the Commission found that the record now supports regulation, this time it extensively analyzed its authority to ban such contracts, concluding that both section 628 and its "ancillary authority" empower it to act. Id. at 20,254-64, ¶¶ 40-60. The Commission accordingly prohibited cable companies from "enforcing existing exclusivity clauses and executing contracts containing new ones," id. at 20,251, ¶ 30, rejecting more limited remedial options, id. at 20,251-54, ¶¶ 33-39.

Petitioners, a cable industry group called the National Cable & Telecommunications Association (NCTA) and a pair of affiliated real estate groups ("real estate petitioners"), find various faults with this regulatory turnabout. They believe that the Commission failed to justify its change in policy and to consider the retroactive effects of its action. They also believe that the Commission ventured into real-estate affairs over which it has no jurisdiction and should have enacted a more limited remedy. But most fundamentally, they believe that the Commission exceeded its section 628 authority in regulating exclusivity deals at all. It is to this question of statutory construction that we first turn.

II.

Because this issue involves an agency's interpretation of its governing statute, Chevron's familiar framework applies. Chevron U.S.A. v. Natural Res. Def. Council, 467 U.S. 837, 842-43, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984). First, we ask if the statute unambiguously forecloses the agency's interpretation. E.g., Hazardous Waste Treatment Council v. EPA, 886 F.2d 355, 361 (D.C.Cir.1989). If so, we disregard the agency's view and "give effect to the unambiguously expressed intent of Congress." Chevron, 467 U.S. at 843, 104 S.Ct. 2778. If the statute is ambiguous enough to permit the agency's reading, however, we defer to that interpretation so long as it is reasonable. E.g., Consumer Elecs. Ass'n v. FCC, 347 F.3d 291, 299 (D.C.Cir.2003).

Conceding that on a literal reading of the statute exclusivity contracts do have the "effect" of preventing competing MVPDs from "providing satellite cable programming or satellite broadcast programming to subscribers or consumers," § 548(b); see Oral Arg. 3:03-3:34, petitioners nonetheless argue that section 628's text, structure, and history demonstrate that it was addressed to a different evil altogether. Cf. Pharm. Research & Mfrs. of Am. v. Thompson, 251 F.3d 219, 224 (D.C.Cir.2001) (using all "traditional tools of statutory interpretation," including "text, structure, purpose, and legislative history," to ascertain Congress's intent at Chevron step one). Congress, they argue, was concerned not with barriers to service but with practices that prevent cable competitors from obtaining certain kinds of programming that the American public wants to watch. Textually, they emphasize Congress's identification of "satellite cable programming" and "satellite broadcast programming" in particular, arguing that the Commission has read these well-defined terms out of the statute. Structurally, they emphasize section 628(c), which directs the Commission to implement subsection (b) with rules and procedures focused on fair dealing between programming vendors and MVPDs, not on anti-competitive barriers to service generally. And for legislative history they cite the bill's sponsor, who intended his legislation to "require[] the cable monopoly to stop refusing to deal, to stop refusing to sell its products to other distributors of television programs," 138 Cong. Rec. H6487, H6533 (Rep. Tauzin), thus addressing his concern that "the hot shows are controlled by cable," id. at H6534; see also id. at H6533 ("[T]his bill says to the cable industry, `You have to stop what you have been doing, and that is killing off your competition by denying it products.'" (emphasis added)). Petitioners thus...