Echostar Communications Corp. v. F.C.C., 01-1032.

• Decision Date: 11 June 2002
• Docket Number: No. 01-1032.,01-1032.
• Citation: 292 F.3d 749
• Parties: ECHOSTAR COMMUNICATIONS CORPORATION, Petitioner v. FEDERAL COMMUNICATIONS COMMISSION and United States of America, Respondents Comcast Corporation, et al., Intervenors
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 749

292 F.3d 749

ECHOSTAR COMMUNICATIONS CORPORATION, Petitioner v. FEDERAL COMMUNICATIONS COMMISSION and United States of America, Respondents Comcast Corporation, et al., Intervenors

No. 01-1032.

United States Court of Appeals, District of Columbia Circuit.

Argued February 5, 2002.

Decided June 11, 2002.

COPYRIGHT MATERIAL OMITTED

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

Pantelis Michalopoulos argued the cause for petitioner. With him on the briefs were Charles G. Cole, Philip L. Malet and Rhonda M. Bolton.

Louis E. Peraertz, Special Counsel, Federal Communications Commission, argued the cause for respondent. With him on the brief were Jane E. Mago, General Counsel, and Daniel M. Armstrong, Associate General Counsel. Catherine G. O'Sullivan and Robert J. Wiggers, Attorneys, U.S. Department of Justice, entered appearances.

David E. Mills argued the cause for intervenors. With him on the brief was David J. Wittenstein.

Before: GINSBURG, Chief Judge, EDWARDS and SENTELLE, Circuit Judges.

Opinion for the court filed by Chief Judge GINSBURG.

GINSBURG, Chief Judge:

EchoStar petitions for review of an order of the Federal Communications Commission dismissing the Company's program access complaint against Comcast Corporation and two of its affiliates, and denying its motion to compel Comcast to produce certain documents. Comcast has intervened and filed a brief in support of the Commission. Because we conclude that the Commission's order is reasonable and supported by substantial evidence, we deny review.

I. Background

EchoStar, a nationwide provider of direct broadcast satellite (DBS) television service, competes in the Philadelphia market with Comcast, which provides cable television service. Affiliates of Comcast produce "Comcast SportsNet," a cable network that features a variety of sports programming, including the games of several of Philadelphia's professional sports teams. Some of those games had previously been carried by two other cable networks, SportsChannel Philadelphia, which was distributed by satellite, and PRISM, which was, like Comcast SportsNet, delivered to cable systems terrestrially. After failing to persuade Comcast to sell it the right to carry SportsNet, EchoStar filed a program access complaint with the Commission pursuant to 47 U.S.C. § 548 and the regulations promulgated thereunder.

Section 548(b) prohibits a "satellite cable programming vendor" affiliated with a cable operator from engaging 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 programing distributor [MVPD] from providing satellite cable programming....

47 U.S.C. § 548(b). Section 548(c)(2) instructs the Commission to promulgate regulations to prevent a cable operator from "unduly or improperly influencing" the sales decisions of its affiliated satellite cable programming vendor, and to prohibit an affiliated satellite cable programming vendor from discriminating in the prices, terms, and conditions of sale or delivery of satellite cable programming, which the Commission has done, see 47 C.F.R. § 76.1002.

The Cable Services Bureau denied EchoStar's complaint in its entirety. The Bureau held first that EchoStar's claims under the regulations — based upon the Comcast affiliates' refusal to sell it SportsNet, and upon Comcast's unduly influencing its affiliates — failed because SportsNet, being terrestrially distributed, is not "satellite cable programming." EchoStar Communications Corp. v. Comcast Corp., 14 F.C.C. Rcd.2089, ¶ 21 (CSB 1999) (Bureau Order). Next the Bureau — assuming, as EchoStar had argued in its complaint, that the Commission could prohibit an attempt to evade the regulations — concluded that Comcast had not switched SportsNet from satellite to terrestrial delivery with a purpose of evasion. Id. ¶ 27. The Bureau made two findings on its way to that conclusion: (1) SportsNet is a "new service," not "simply a service moved from satellite to terrestrial distribution"; and (2) Comcast "employed terrestrial distribution for legitimate business means" [sic], namely, because terrestrial distribution of SportsNet is "dramatically less expensive" than satellite distribution would be. Id. ¶¶ 23-24, 26. Having found no evasion, the Bureau held that Comcast had not engaged in any unfair method of competition or unfair practice under § 548(b). Id. ¶ 28. Finally, the Bureau denied as unnecessary EchoStar's Motion to Compel Production of Documents by Comcast. Id. ¶¶ 30-31.

EchoStar then applied to the Commission for review, which was denied. See In the Matter of DIRECTV, Inc. and EchoStar Communications Corp. v. Comcast Corp., 15 F.C.C. Rcd. 22802, ¶ 2 (2000) (Commission Order). With respect to Comcast's alleged evasion, the Commission

acknowledge[d] that there may be some circumstances where moving programming from satellite to terrestrial delivery could be cognizable under [47 U.S.C. § 548(b)] as an unfair method of competition or deceptive practice if it precluded competitive MVPDs from providing satellite cable programming.

Id. ¶ 13. The Commission nonetheless dismissed EchoStar's § 548(b) claim based upon the Bureau's factual findings that SportsNet is a new service and that terrestrial delivery has cost advantages for Comcast. Id. ¶¶ 13-14. The Commission did not discuss the Bureau's denial of EchoStar's motion to compel the production of documents.

II. Analysis

On review in this court EchoStar challenges the Commission's holding that Comcast did not violate § 548(b) by moving programming from satellite to terrestrial delivery in order to evade the program access requirements of § 548(c), and the denial of its motion for discovery. We review the decision of the Commission under the Administrative Procedure Act, 5 U.S.C. § 706, to determine whether it is "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." We will uphold the decision if the Commission made factual findings supported by substantial evidence, considered the relevant factors, and "articulate[d] a rational connection between the facts found and the choice made." Motor Vehicle Ass'n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43, 103 S.Ct. 2856, 77 L.Ed.2d 443 (1983); Ass'n of Data Processing Serv. Orgs. v. Bd. of Governors, 745 F.2d 677, 683-86 (D.C.Cir.1984) (arbitrary and capricious standard incorporates substantial evidence test).

A. Dismissal of the Complaint

EchoStar raises three challenges to the Commission's order dismissing its complaint: The Commission's decision is not supported by substantial evidence; the Commission disregarded certain evidence of evasion; and the Commission failed adequately to explain its decision.

1. Substantial evidence

With regard to the substantiality of the evidence underlying the Commission's decision, EchoStar does not dispute that the affidavit of Sam Schroeder, an executive of the Comcast affiliate that owns SportsNet, supports the Commission's finding that terrestrial delivery costs Comcast significantly less money than would satellite delivery. Instead, EchoStar claims that Schroeder's declaration is not substantial evidence because it is "unsupported and untested" and hearsay, for which proposition it relies principally upon Consolidated Edison Co. v. NLRB, 305 U.S. 197, 230, 59 S.Ct. 206, 83 L.Ed. 126 (1938).

The Commission inexplicably fails to address these arguments in its brief, but Comcast comes to the Commission's rescue. First, Comcast argues that the Commission could rely upon Schroeder's affidavit because it was given under oath, the affiant had personal knowledge of the facts he recounts, EchoStar does not challenge his cost estimates, and there is no requirement that an affidavit be corroborated. Second, Comcast argues that it is well-settled not only that hearsay can be considered by an administrative agency but that it can constitute substantial evidence. See Richardson v. Perales, 402 U.S. 389, 407, 91 S.Ct. 1420, 28 L.Ed.2d 842 (1971); Crawford v. United States Dep't of Agric., 50 F.3d 46, 49 (D.C.Cir.1995).

We have to agree with Comcast. There is no support for EchoStar's claims that uncorroborated and untested testimony and hearsay testimony cannot constitute substantial evidence. Although the Court in Consolidated Edison did say in dicta that "[m]ere uncorroborated hearsay or rumor does not constitute substantial evidence," 305 U.S. at 230, 59 S.Ct. 206, the Court has long since made clear that this statement was "not a blanket rejection by the Court of administrative reliance on hearsay irrespective of reliability and probative value," Richardson, 402 U.S. at 407, 91 S.Ct. 1420; hence in that case the Court concluded that unsworn doctors' examination reports, contradicted by direct medical testimony, constituted substantial evidence upon which an agency could deny disability insurance benefits under the Social Security Act. Id. at 402, 91 S.Ct. 1420. Moreover, we have held specifically that a complaint proceeding brought under the Communications Act may be resolved solely upon affidavits submitted by the parties, without allowing discovery, see American Message Ctr. v. FCC, 50 F.3d 35, 41 (D.C.Cir.1995); administrative agencies may consider hearsay evidence as long as it "bear[s] satisfactory indicia of reliability," Crawford, 50 F.3d at 49; and hearsay can constitute substantial evidence if it is reliable and trustworthy, id.

The propriety of the Commission's reliance upon Schroeder's affidavit is particularly clear. First, the affidavit, although technically hearsay, that is, an out of court statement offered for the truth of the matter asserted, was made under oath. Second, the facts contained therein were undisputed. EchoStar submitted no contradictory evidence — indeed, no evidence whatsoever except two magazine articles. See Mot. to Compel at 5-6. If the...