Cable Vision System Corp. v. Federal Communications Commission
389 U.S. App. D.C. 317, 597 F.3d 1306 (2010)
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Rule of Law:
An agency's interpretation of an ambiguous statutory term is permissible under Chevron if it is reasonable, and its predictive judgments in a complex, technical field will be upheld under the Administrative Procedure Act's arbitrary and capricious standard if supported by substantial evidence.
Facts:
- In 1992, Congress enacted the Cable Act to address the market dominance of cable television operators.
- Section 628 of the Act directed the Federal Communications Commission (FCC) to prohibit exclusive contracts for satellite-delivered programming between cable operators and programming vendors in which they have an ownership interest.
- This 'exclusivity prohibition' included a sunset provision, stating it would expire in ten years unless the FCC found it 'continues to be necessary to preserve and protect competition and diversity.'
- In 2002, the FCC determined the prohibition was still necessary and extended it for five years.
- By 2007, the multichannel video programming distributor (MVPD) market had become more competitive, with cable's national market share falling from 95% in 1992 to 67%, primarily due to the growth of direct broadcast satellite providers.
- Despite increased competition, the four largest cable operators—Comcast, Time Warner, Cox, and Cablevision—still controlled over half the national MVPD market and were affiliated with seven of the top 20 most popular satellite-delivered networks.
- These vertically integrated cable companies were entering into exclusive contracts for terrestrially-delivered programming (which was not covered by the prohibition), such as Comcast's withholding of its SportsNet Philadelphia network from competitors.
- Based on its analysis of these existing terrestrial contracts and the overall market, the FCC concluded that vertically integrated cable companies still possessed the incentive and ability to withhold popular satellite-delivered programming from competitors if the prohibition were to lapse.
Procedural Posture:
- The Federal Communications Commission (FCC) initiated a proceeding under the Cable Act's sunset provision to evaluate whether to extend the prohibition on exclusive contracts.
- In its 2007 Order, the FCC concluded that the prohibition remained necessary to preserve competition and extended it for an additional five years.
- Cablevision Systems Corporation and Comcast Corporation (petitioners) filed petitions for review of the FCC's 2007 Order in the U.S. Court of Appeals for the D.C. Circuit.
- The FCC was the respondent in the appeal.
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Issue:
Does the Federal Communications Commission's 2007 order, which extended a statutory prohibition on exclusive contracts between vertically integrated cable operators and their affiliated programming networks for five years, represent a permissible interpretation of its statutory authority under the Cable Act and a reasonable decision under the Administrative Procedure Act?
Opinions:
Majority - Chief Judge Sentelle
Yes, the FCC's order represents a permissible interpretation of its statutory authority and a reasonable decision. The term 'necessary' in the Cable Act's sunset provision is ambiguous, and the FCC's interpretation—that the prohibition is necessary if competition would not be preserved in its absence—is a permissible construction entitled to deference under Chevron. The Commission's decision to extend the prohibition was not arbitrary and capricious; it was a predictive judgment based on substantial evidence and its expert analysis of a complex, dynamic market. The FCC appropriately considered both the increase in competition and the continued market power of large cable operators, and the court will not substitute its judgment for the agency's. The petitioners' First Amendment claim is construed as a facial challenge, which this court has already rejected, and they failed to properly present an as-applied challenge, so the court declines to apply intermediate scrutiny.
Dissenting - Circuit Judge Kavanaugh
No, the FCC's order is not permissible because it violates the First Amendment. The majority improperly dismissed the petitioners' as-applied First Amendment challenge, which requires the court to apply intermediate scrutiny. The original justification for the exclusivity ban—the 'bottleneck monopoly power' of cable operators—has collapsed due to dramatic changes in the video programming market, which is now highly competitive. Consequently, the ban no longer furthers an important government interest and burdens more speech than is essential. Furthermore, the regulation is unconstitutional because it is discriminatory, applying only to cable operators while leaving competitors like satellite and telephone companies free to enter into exclusive contracts. The court should have applied the canon of constitutional avoidance to interpret the statute's 'necessary' standard more strictly, which the FCC's order could not satisfy.
Analysis:
This decision exemplifies the principle of judicial deference to administrative agencies, particularly in cases involving predictive judgments about complex and evolving industries like telecommunications. It underscores the high threshold for succeeding on an arbitrary and capricious claim under the APA when an agency has engaged in detailed analysis. The sharp disagreement between the majority and dissent on the First Amendment issue highlights a critical tension in media law: the balance between regulations aimed at promoting competition and the free speech and editorial rights of media companies. Judge Kavanaugh's dissent presages a more aggressive application of the First Amendment to economic regulations affecting speech, arguing that market changes can erode the constitutional justification for such rules.
