Comcast Cable Commc'ns, LLC v. Fed. Commc'ns Comm'n

• Decision Date: 28 May 2013
• Docket Number: No. 12–1337.,12–1337.
• Citation: 717 F.3d 982
• Parties: COMCAST CABLE COMMUNICATIONS, LLC, Petitioner v. FEDERAL COMMUNICATIONS COMMISSION and United States of America, Respondents. The Tennis Channel, Inc., Intervenor.
• Court: U.S. Court of Appeals — District of Columbia Circuit

717 F.3d 982

COMCAST CABLE COMMUNICATIONS, LLC, Petitioner

v.FEDERAL COMMUNICATIONS COMMISSION and United States of America, Respondents.

The Tennis Channel, Inc., Intervenor.

No. 12–1337.

United States Court of Appeals,District of Columbia Circuit.

Argued Feb. 25, 2013.

Decided May 28, 2013.

Miguel A. Estrada argued the cause for petitioners. With him on the briefs were Erik R. Zimmerman and Lynn R. Charytan.

H. Bartow Farr III, Rick Chessen, Neal M. Goldberg, Michael S. Schooler, and Diane B. Burstein were on the brief for amicus curiae The National Cable & Telecommunications Association in support of petitioner.

Peter Karanijia, Deputy General Counsel, Federal Communications Commission, argued the cause for respondents. With him on the brief were Catherine G. O'Sullivan and Robert J. Wiggers, Attorneys, U.S. Department of Justice, Sean A. Lev, General Counsel, Federal Communications Commission, Jacob M. Lewis, Associate General Counsel, and Laurel R. Bergold, Counsel. Richard K. Welch, Deputy Associate General Counsel, Federal Communications Commission, and James M. Carr and C. Grey Pash Jr., Counsel, entered appearances.

Robert A. Long Jr. argued the cause for intervenor. With him on the brief were Stephen A. Weiswasser and Mark W. Mosier.

Markham C. Erickson was on the brief for amicus curiae Bloomberg L.P. in support of respondent.

Before: KAVANAUGH, Circuit Judge, and EDWARDS and WILLIAMS, Senior Circuit Judges.

Opinion for the Court filed by Senior Circuit Judge WILLIAMS.

Concurring opinion filed by Circuit Judge KAVANAUGH.

Concurring opinion filed by Senior Circuit Judge EDWARDS.

WILLIAMS, Senior Circuit Judge:

Regulations of the Federal Communications Commission, adopted under the mandate of § 616 of the Communications Act of 1934 and virtually duplicating its language, bar a multichannel video programming distributor (“MVPD”) such as a cable company from discriminating against unaffiliated programming networks in decisions about content distribution. More specifically, the regulations bar such conduct when the effect of the discrimination is to “unreasonably restrain the ability of an unaffiliated video programming vendor to compete fairly.” 47 C.F.R. § 76.1301(c); see also 47 U.S.C. § 536(a)(3). Tennis Channel, a sports programming network and intervenor in this suit, filed a complaint against petitioner Comcast Cable, an MVPD, alleging that Comcast violated § 616 and the Commission's regulations by refusing to broadcast Tennis as widely (i.e., via the same relatively low-priced “tier”) as it did its own affiliated sports programming networks, Golf Channel and Versus. (Versus is now known as NBC Sports Network and was originally called Outdoor Life Network; for consistency with the order under review, we refer to it as “Versus.”) An administrative law judge ruled against Comcast, ordering that it provide Tennis carriage equal to what it affords Golf and Versus, and the Commission affirmed. See Tennis Channel, Inc. v. Comcast Cable Commc'ns, LLC, Memorandum Opinion and Order, 27 FCC Rcd. 8508, 2012 WL 3039209 (July 24, 2012) (“Order”).

Comcast's arguments on appeal are, broadly speaking, threefold. First, it contends that Tennis's complaint was untimely filed under 47 C.F.R. § 76.1302(h), given the meaning that the Commission apparently assigned that section when it last modified its language. See In re Implementation of the Cable Television Consumer Protection and Competition Act of 1992, 9 FCC Rcd. 4415, ¶ 24, 1994 WL 414309 (Aug. 5, 1994). Judge Edwards's concurring opinion addresses that issue. The panel need not do so, as the limitations period doesn't constitute a jurisdictional barrier. And as Judge Edwards notes, the Commission has launched a rulemaking apparently aimed in part at clearing up the confusion he identifies. In re Revision of the Commission's Program Carriage Rules, 26 FCC Rcd. 11494, 11522–23, ¶¶ 38–39, 2011 WL 3279328 (Aug. 1, 2011).

Second, Comcast poses a number of issues as to the meaning of § 616, including an argument that the Commission reads it so broadly as to violate Comcast's free speech rights under the First Amendment. We need not reach those issues, as Comcast prevails with its third set of arguments—that even under the Commission's interpretation of § 616 (the correctness of which we assume for purposes of this decision), the Commission has failed to identify adequate evidence of unlawful discrimination.

Many arguments within this third set involve complex and at least potentially sophisticated disputes. See, e.g., Order ¶¶ 71–74 (relating to calculation of “penetration rates” for purposes of determining whether Comcast treated Tennis more or less favorably than did other MVPDs and of measuring the degree of harm caused by any such difference). But Comcast also argued that the Commission could not lawfully find discrimination because Tennis offered no evidence that its rejected proposal would have afforded Comcast any benefit. If this is correct, as we conclude below, the Commission has nothing to refute Comcast's contention that its rejection of Tennis's proposal was simply “a straight up financial analysis,” as one of its executives put it. Joint Appendix (“J.A.”) 300.

* * *

Comcast, the largest MVPD in the United States, offers cable television programming to its subscribers in several different distribution “tiers,” or packages of programming services, at different prices. Since Versus's and Golf's launches in 1995, Comcast—which originally had a minority interest in the two networks, and now has 100% ownership—has generally carried the networks on its most broadly distributed tiers, Expanded Basic or the digital counterpart Digital Starter. Order ¶ 12; J.A. 1223–24.

Tennis Channel, launched in 2003, initially sought distribution of its content on Comcast's less broadly distributed sports tier, a package of 10 to 15 sports networks that Comcast's subscribers can access for an extra $5 to $8 per month. In 2005, Tennis entered a carriage contract that gave the Comcast the “right to carry” Tennis “on any ... tier of service,” subject to exclusions irrelevant here. Comcast in fact placed Tennis on the sports tier.

In 2009, however, Tennis approached Comcast with proposals that Comcast reposition Tennis onto a tier with broader distribution. Order ¶¶ 12, 33. Tennis's proposed agreement called for Comcast to pay Tennis for distribution on a per-subscriber basis. Tennis provided a detailed analysis—which is sealed in this proceeding—of what Comcast would likely pay for that broader distribution; even with the discounts that Tennis offered, the amounts are substantial. Neither the analysis provided at the time, nor testimony received in this litigation, made (much less substantiated) projections of any resulting increase in revenue for Comcast, let alone revenue sufficient to offset the increased fees.

Comcast entertained the proposal, checking with “division and system employees to gauge local and subscriber interest.” J.A. 402. After those consultations, and based on previous analyses of interest in Tennis, Comcast rejected the proposal in June 2009. Tennis then filed its complaint with the Commission in January 2010, which led to the order now under review. By way of remedy, the ALJ ordered, and the Commission affirmed, that Comcast must “carry [Tennis] on the same distribution tier, reaching the same number of subscribers, as it does [Golf] and Versus.” Order ¶ 92.

The parties agree that Comcast distributes the content of affiliates Golf and Versus more broadly than it does that of Tennis. The question is whether that difference violates § 616 and the implementing regulations. There is also no dispute that the statute prohibits only discrimination based on affiliation. Thus, if the MVPD treats vendors differently based on a reasonable business purpose (obviously excluding any purpose to illegitimately hobble the competition from Tennis), there is no violation. The Commission has so interpreted the statute, Mid–Atlantic Sports Network v. Time Warner Cable Inc., 25 FCC Rcd. 18099, ¶ 22 (2010), and the Commission's attorney conceded as much at oral argument, see Oral Arg. Tr. at 24–25; see also TCR Sports Broad. Holding L.L.P. v. FCC, 679 F.3d 269, 274–77 (4th Cir.2012) (discussing the legitimate, non-discriminatory reasons for an MVPD's differential treatment of a non-affiliated network).

In contrast with the detailed, concrete explanation of Comcast's additional costs under the proposed tier change, Tennis showed no corresponding benefits that would accrue to Comcast by its accepting the change. Testimony from one of Comcast's executives identifies some of the factors it considers when deciding whether to move a channel to broader distribution:

In deciding whether to carry a network and at what cost, Comcast Cable must balance the costs and benefits associated with a wide range of factors, including: the amount of the licensing fees (which is generally the most important factor); the nature of the programming content involved; the intensity and size of the fan base for that content; the level of service sought by the network; the network's carriage on other MVPDs; the extent of [most favored nation] ¹ protection provided; the term of the contract sought; and a variety of other operational issues.

J.A. 408, ¶ 32. Of course the record is very strong on the proposed increment in licensing fees, in itself a clear negative. The question is whether the other factors, and perhaps ones unmentioned by Comcast, establish reason to expect a net benefit.

But neither Tennis nor the Commission offers such an analysis on either a qualitative or a quantitative basis. Instead, the best the Commission offers, both in the Order and at oral argument, is that Tennis charges less per “rating point” than does either Golf or Versus. Order ¶ 78 n. 243; Oral Arg. Tr. at 25–29. But those differentials are not affirmative evidence that acceptance of Tennis's 2009 proposal could...