Agape Church, Inc. v. Federal Communications Commission , 738 F.3d 397 ( 2013 )

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued September 27, 2013 Decided December 27, 2013
No. 12-1334
AGAPE CHURCH, INC., ET AL.,
PETITIONERS
v.
FEDERAL COMMUNICATIONS COMMISSION AND UNITED
STATES OF AMERICA,
RESPONDENTS
NATIONAL HISPANIC MEDIA COALITION, ET AL.,
INTERVENORS
On Petition for Review of an Order of
the Federal Communications Commission
William S. Consovoy argued the cause for Petitioners. On
the briefs were Helgi C. Walker, Kathleen A. Kirby, Eve
Klindera Reed, and Christiane M. McKnight. Jane E. Mago
and Jerianne Timmerman entered appearances.
Andrew Jay Schwartzman argued the cause and filed the
brief for intervenor National Hispanic Media Coalition.
Joel Marcus, Counsel, Federal Communications
Commission, argued the cause for respondents. With him on
the brief were William J. Baer, Assistant Attorney General,
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and Robert B. Nicholson and Kristen C. Limarzi, Attorneys,
U.S. Department of Justice; Sean A. Lev, General Counsel,
Peter Karanjia, Deputy General Counsel, and Jacob M.
Lewis, Associate General Counsel, Federal Communications
Commission. Richard K. Welch, Deputy Associate General
Counsel, and Laurence N. Bourne, Counsel, Federal
Communications Commission, entered appearances.
Matthew A. Brill argued the cause for intervenors
National Cable & Telecommunications Association and Time
Warner Cable, Incorporated. With him on the brief were
Richard P. Bress, Amanda E. Potter, Katherine I. Twomey,
Rick C. Chessen, Michael S. Schooler, and Diane B. Burstein.
Before: KAVANAUGH, Circuit Judge, and EDWARDS and
WILLIAMS, Senior Circuit Judges.
Opinion for the Court filed by Senior Circuit Judge
EDWARDS.
Concurring opinion filed by Circuit Judge KAVANAUGH.
EDWARDS, Senior Circuit Judge: In the Cable Television
Consumer Protection and Competition Act of 1992 (the
“Cable Act”), Congress enacted provisions requiring cable
television systems to dedicate some of their channels to local
broadcast stations, creating so-called “must-carry” rights for
stations electing such mandatory carriage. See 47 U.S.C. §§
534-35. Section 614(b)(7), the principal statutory provision at
issue in this case, states that must-carry broadcast signals
“shall be viewable via cable on all television receivers of a
subscriber which are connected to a cable system by a cable
operator or for which a cable operator provides a connection.”
47 U.S.C. § 534(b)(7).
3
In 2007, with the growing prominence of digital
broadcasting, the Federal Communications Commission
(“FCC” or “Commission”) promulgated a rule requiring
“hybrid” cable companies – i.e., those that provide both
analog and digital cable service – to “downconvert” from
digital to analog broadcast signals from must-carry stations
for subscribers with analog television sets. Carriage of
Digital Television Broadcast Signals, Third Report and Order,
22 FCC Rcd. 21,064 (2007) (“Viewability Rule”). This
downconversion requirement ensured that digital broadcast
programs from protected must-carry stations would be
converted by the cable companies from digital to analog
signals before transmission to customers. In other words,
cable subscribers with analog television sets would be able to
view the digital programs from must-carry broadcast stations
without the need of special equipment. By its terms, the
Viewability Rule was scheduled to expire in 2012, unless
extended by the Commission.
In 2012, following notice and comment rulemaking, the
FCC allowed the downconversion requirement to expire. In
place of the Viewability Rule, the Commission promulgated a
new rule that allows cable operators to provide conversion
equipment to analog customers, either “for free or at an
affordable cost that does not substantially deter use of the
equipment.” Carriage of Digital Television Broadcast
Signals, Fifth Report and Order, 27 FCC Rcd. 6529, 6534
(2012) (“Sunset Order”). Petitioners, a group of must-carry
broadcasters, now seek review of the Sunset Order.
Petitioners claim that the FCC’s new rule cannot be squared
with Congress’s mandate that must-carry broadcast signals
“shall be viewable via cable on all television receivers of a
subscriber which are connected to a cable system.” 47 U.S.C.
§ 534(b)(7) (emphasis added).
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Petitioners have advanced four claims in support of their
petition for review.
• First, Petitioners contend that the Commission’s new
rule violates the plain terms of the statute and, thus,
cannot survive review under Chevron Step One.
Chevron U.S.A., Inc. v. Natural Res. Def. Council,
Inc., 467 U.S. 837, 843 n.9 (1984) (“The judiciary . . .
must reject administrative constructions which are
contrary to clear congressional intent. If a court,
employing traditional tools of statutory construction,
ascertains that Congress had an intention on the
precise question at issue, that intention is the law and
must be given effect.” (citations omitted)).
• Second, Petitioners essentially assert that the new rule
is manifestly contrary to the statute and, therefore,
cannot survive scrutiny under Chevron Step Two. Id. at
843-44.
• Third, Petitioners claim that the FCC’s new rule is not
supported by reasoned decisionmaking and, therefore,
is arbitrary and capricious. Motor Vehicle Mfrs. Ass’n
of the U.S. v. State Farm Mut. Auto. Ins. Co., 463 U.S.
29, 43 (1983) (“Normally, an agency rule would be
arbitrary and capricious if the agency has relied on
factors which Congress has not intended it to consider,
entirely failed to consider an important aspect of the
problem, offered an explanation for its decision that
runs counter to the evidence before the agency, or is so
implausible that it could not be ascribed to a difference
in view or the product of agency expertise.”).
• Finally, Petitioners argue that the FCC’s notice and
comment rulemaking procedures were fatally flawed
5
because the agency’s Sunset Rule was not a logical
outgrowth of the agency’s notice of proposed
rulemaking. CSX Transp., Inc. v. Surface Transp. Bd.,
584 F.3d 1076, 1080 (D.C. Cir. 2009) (“[A] final rule
fails the logical outgrowth test and thus violates the
APA’s notice requirement where interested parties
would have had to divine the agency’s unspoken
thoughts, because the final rule was surprisingly
distant from the proposed rule.” (quotation and
citation omitted)).
Petitioners’ claims lack merit. The FCC’s 2007
Viewability Rule was not mandated by the statute. Rather, the
rule was promulgated by the Commission as a stopgap
measure to preserve access to must-carry broadcast programs
for the significant number of cable customers with analog
television sets. Since 2007, however, the telecommunications
market – including the technology in use by broadcasters,
cable distributors, and customers – has changed dramatically.
The congressionally mandated transition from analog to
digital broadcasting is complete, nearly all new televisions on
the market are digital-ready, and many cable companies have
abandoned analog service altogether in favor of all-digital
operations. And, most critically, in 2012 there were
significantly more home conversion devices in use (27
million) to display digital channels on analog sets than there
were customers actually subscribing to analog cable service
with downconversion (12.6 million). Petitioners do not
dispute that these trends are expected to continue. Rather,
Petitioners take the position that the Cable Act requires the
FCC to maintain the regulatory scheme embodied in the
Viewability Rule so long as there are hybrid cable companies
providing service to subscribers who use analog television
sets. Petitioners’ argument effectively freezes time in the face
of shifting technology and finds no support in the law.
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The FCC’s new rule allowing cable operators to offer
analog subscribers equipment in lieu of downconversion was
within its authority under the statute, supported by reasoned
decisionmaking, and properly promulgated pursuant to notice
and comment rulemaking procedures in which interested
parties should have anticipated that the change was possible.
We therefore deny the petition for review.
I. BACKGROUND
The history of the Cable Act is recounted in detail in
Turner Broadcasting System, Inc. v. FCC (Turner II), 520
U.S. 180 (1997), and Turner Broadcasting System, Inc. v.
FCC (Turner I), 512 U.S. 622 (1994). As the Court noted in
Turner II:
[The] must-carry [requirement in the Cable Act] was
designed to serve three interrelated interests: (1)
preserving the benefits of free, over-the-air local
broadcast television, (2) promoting the widespread
dissemination of information from a multiplicity of
sources, and (3) promoting fair competition in the market
for television programming. . . . [E]ach of those is an
important governmental interest. We have been most
explicit in holding that protecting noncable households
from loss of regular television broadcasting service due
to competition from cable systems is an important federal
interest. Forty percent of American households continue
to rely on over-the-air signals for television
programming. Despite the growing importance of cable
television and alternative technologies, broadcasting is
demonstrably a principal source of information and
entertainment for a great part of the Nation’s population.
We have identified a corresponding governmental
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purpose of the highest order in ensuring public access to
a multiplicity of information sources. And it is
undisputed the Government has an interest in eliminating
restraints on fair competition, even when the individuals
or entities subject to particular regulations are engaged in
expressive activity protected by the First Amendment.
520 U.S. at 189-90 (citations and quotations omitted).
Likewise, the events leading to the Viewability Rule, and
its content and purposes, are fully explored in C-SPAN v.
FCC, 545 F.3d 1051, 1052-54 (D.C. Cir. 2008). The court
noted that the Viewability Rule was adopted in response to
“the prospect that some local broadcast stations might not be
available to analog cable subscribers.” Id. at 1053. The
Viewability Rule required that,
to the extent that cable subscribers do not have the
capability of viewing digital signals, cable systems must
carry the signals of commercial and non-commercial
must-carry stations in analog format to those subscribers,
after downconverting the signals from their original
digital format. Under separate regulations promulgated in
2001 regarding material degradation, 47 U.S.C.
§§ 534(b)(4)(A), 535(g)(2), where a must-carry
broadcaster delivers its signal to a cable operator in
[High-Definition] HD digital format (as opposed to
[Standard-Definition] SD), the cable operator is required
to transmit the must-carry station in HD. Thus, the
combined effect of the material degradation regulations
and the Viewability Order is that cable systems with
analog and digital subscribers (“hybrid systems”) are
effectively required to allocate two channels to each
must-carry HD broadcaster. Alternatively, cable systems
are permitted to become all-digital, with all subscribers
8
able to view digital signals; under this option, only digital
must-carry signals need be broadcast. The Commission
specified that “any downconversion costs will be borne
by the cable operator,” and further provided that the
viewability mandate would apply for an initial three-year
period following the February 2009 digital transition
date.
Id. (some citations, quotations, and alterations omitted).
Because the decisions in Turner I, Turner II, and C-SPAN
adequately explain the histories of the Cable Act and the
Viewability Rule, it is unnecessary to repeat these narratives
in full here. Rather, we will focus on the Sunset Order and the
Commission’s justifications for adopting a new rule to replace
the expiring Viewability Rule.
When the Cable Act was passed, most broadcasters’
programs were in analog format, most cable companies
transmitted in analog, and most cable subscribers had analog
television sets. As a result, no serious problems were
encountered in the early 1990s when cable companies
transmitted must-carry broadcasters’ programs to viewers.
However, when Congress enacted the Cable Act, it was
prescient in anticipating that significant technological changes
were on the horizon. In a provision entitled “Advanced
television,” the statute provides that:
At such time as the Commission prescribes modifications
of the standards for television broadcast signals, the
Commission shall initiate a proceeding to establish any
changes in the signal carriage requirements of cable
television systems necessary to ensure cable carriage of
such broadcast signals of local commercial television
9
stations which have been changed to conform with such
modified standards.
47 U.S.C. § 534(b)(4)(B). The FCC was thus charged with
prescribing “modifications of the standards for television
broadcast signals” to account for technological and market
changes. Id.
The advent of digital television brought new challenges
to the continued fulfillment of the Cable Act’s objectives. In
1997, Congress and the FCC adopted plans to transition the
broadcast industry from analog to digital technology, setting
December 31, 2006 as the initial deadline. Advanced
Television Systems and Their Impact upon the Existing
Television Broadcast Service, Fifth Report and Order, 12 FCC
Rcd. 12,809, 12,850 (1997); 47 U.S.C. §§ 309(j)(3),
309(j)(14)(A) (2004). Congress later enacted legislation
setting February 17, 2009 as the deadline for the digital
transition. Digital Television Transition and Public Safety Act
of 2005, Pub. L. No. 109-171, § 3002, 120 Stat. 4, 21-22
(2006). This deadline was later changed to June 12, 2009.
While broadcasters were obliged to switch to digital
technology, cable operators remained free to transition from
analog to digital services, or to offer both services, as they
saw fit. The Viewability Rule was promulgated in anticipation
of the broadcasters’ switching from analog to all-digital
programming.
When it adopted the Viewability Rule, the Commission
recognized that after the broadcasters’ transition to digital
programming, there would continue to be a large number of
cable subscribers with analog-only television sets –
approximately 35 percent of all television households – that
would be incapable of processing digital signals. Viewability
Rule, 22 FCC Rcd. at 21,065 n.3. The Commission also
10
understood that the cable industry’s own transition to digital
would take some period of time beyond the broadcasters’
transition. Therefore, it adopted a rule giving cable systems
two choices to ensure that viewers with analog television sets
would still be able to receive broadcasters’ programs after the
digital transition: (1) convert all operations to digital, which
would require that all subscribers have the necessary
equipment to view the signal – either a digital television
capable of displaying the digital cable signal or a converter
that would allow an analog television to display a digital cable
signal; or (2) downconvert must-carry stations to an analog
format that could be decoded by analog television sets
without additional equipment. The Commission explained
that downconversion was necessary because without it “the
signals of must-carry stations w[ould] be completely
unavailable to analog cable subscribers” following the digital
transition. Id. at 21,091. The rule was set to sunset in 2012,
five years after its adoption and three years after the deadline
for the digital transition.
In limiting the Viewability Rule to three years, the
Commission stated:
In light of the numerous issues associated with the
transition, it is important to retain flexibility as we deal
with emerging concerns. A three-year sunset ensures that
both analog and digital cable subscribers will continue to
be able to view the signals of must-carry stations, and
provides the Commission with the opportunity after the
transition to review these rules in light of the potential
cost and service disruption to consumers, and the state of
technology and the marketplace.
Id. at 21,070 (emphasis added).
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On February 10, 2012, the Commission issued a Notice
of Proposed Rulemaking (“NPRM”) proposing to extend the
Viewability Rule to “June 12, 2015, unless the Commission
extends the requirements prior to that date.” Carriage of
Digital Television Broadcast Signals, Fourth Further Notice
of Proposed Rulemaking and Declaratory Order, 27 FCC Rcd.
1713, 1727 (2012). The NPRM sought comment on whether
to extend the Viewability Rule for an additional period of
time to ensure that cable subscribers “with analog
equipment[] continue to have access to must carry television
signals.” Id. at 1714. The FCC stated that it was “bound by
statute to ensure that must-carry signals are actually viewable
by all subscribers.” Id. at 1715. It sought comment, among
other things, on the pace of cable operators’ own transition to
digital, which, as noted above, would eliminate the need for
the Viewability Rule. Id. at 1719-20. However, the NPRM
also noted that, if the Viewability Rule expired, “many cable
subscribers would be required to pay more for access to must-
carry broadcast stations, by replacing existing and still-
functional analog equipment with digital equipment or leasing
set top boxes to view the complete service they currently pay
for and receive in analog.” Id. at 1718. With this in mind, the
Commission’s NPRM gave clear notice that many options
were open to the Commission going forward:
[W]e seek comment on how the sunset of the viewability
requirement would impact the financial resources of must
carry stations. We seek specific information that will
allow us to build a solid record that supports either the
retention or the sunset of the viewability rule. Also, given
that “viewability” of must-carry digital signals is
mandated by the Communications Act, we seek comment
on whether it is necessary to extend the rule in its current
form as opposed to relying on stations to file carriage
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complaints to enforce compliance with the statutory
mandate.
Id.
The rulemaking record reveals that extraordinary changes
occurred both in technology and in the marketplace during the
time between the promulgation of the Viewability Rule in
2007 and the adoption of the Sunset Order in 2012:
In 2007, roughly half of all television households were
analog-only cable subscribers, and there were no
inexpensive converters available to ensure that analog
subscribers would have the equipment needed for
viewability. In those circumstances, a significant number
of cable customers could lose access to must-carry
channels if hybrid systems were permitted to carry such
signals only in digital format.
Today, by contrast, the state of technology and the
marketplace is significantly different. At the time of the
order, about 20 percent of cable subscribers received
analog-only service. The Commission expected that
number to drop below 16 percent by the end of 2012.
Since cable accounts for about half of all television
households, analog-only subscribers were expected to
make up about 8 percent of the total television audience –
down from 40 percent five years earlier. And that number
is falling: the Commission predicted that the number of
analog cable subscribers is expected to continue to
decrease as more cable customers choose to upgrade to
full digital service and as more hybrid cable systems
complete their transition to all-digital systems.
13
Br. for Resp’t at 13-14 (citations, quotations, and alterations
omitted).
In comments opposing the sunset of the Viewability
Rule, the broadcasters argued that “allowing the current
viewability rule to expire on schedule will threaten the
viability of must-carry stations. According to the
broadcasters, approximately 12.6 million households receive
only analog cable service, representing approximately 11
percent of all U.S. television households, and removing that
percentage of a station’s audience could well have a profound
impact on affected stations.” Sunset Order, 27 FCC Rcd. at
6541-42 (quotation omitted). In response, the Commission
noted that:
[T]he broadcasters’ analysis overstates the impact on
such stations because it assumes that elimination of the
rule will automatically result in the broadcaster’s signal
being unavailable to all analog subscribers. To the
contrary, our new statutory interpretation – which hinges
on a cable operator making equipment available at no
cost or an affordable cost – will ensure that subscribers
on hybrid systems may continue to access these signals at
little or no additional expense.
Id. at 6542.
In the NPRM, the Commission reported that a “recent
survey indicates that 31 percent of homes do not have a
digital television.” 27 FCC Rcd. at 1718 n.34. However,
through the notice and comment process, it also found that
many of these consumers are already subscribing to digital
services by using converting equipment at home to view the
signals on analog sets. The FCC explained that, according to
industry reports, “about 27 million DTAs [Digital Transport
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Adapters, which are consumer-operated converters] were
already deployed by year-end 2011,” Sunset Order, 27 FCC
Rcd. at 6540, and that some cable operators provide the
adapters to customers for free and others charge a nominal fee
of $1 or $2 per month, id. at 6541. And because most
televisions sold since 2007 are digital-ready, an increasing
number of customers are prepared for digital service simply
through the television sales market. Id. at 6539 n.59.
After considering the comments submitted in the
rulemaking proceeding, the FCC issued the Sunset Order
which allowed the Viewability Rule to expire with only a six-
month extension. The Commission reasoned that, with the
increased number of digital subscribers and the availability of
cheap or free conversion devices, it was no longer necessary
or efficient to continue burdening cable companies with the
obligation to downconvert broadcast programs. Under the
Sunset Order, cable subscribers with analog television sets
may be required by their cable companies to purchase or lease
equipment that converts broadcast signals from digital to
analog. Hybrid cable companies are thus no longer required to
downconvert digital signals to subscribers with analog
television sets.
In sum, the disputed Sunset Order allows an equipment-
based alternative to downconversion, giving cable operators
“flexibility” to cease carriage of analog must-carry signals. In
other words, the new rule permits cable operators to satisfy
the statutory viewability mandate with an “offer” of additional
equipment, provided that the equipment is “affordable.” The
availability of the must-carry stations is still required by
statute; however, cable companies may now choose to
downconvert, to switch all their operations to digital
distribution, or to provide analog subscribers with low or
no-cost conversion devices.
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II. DISCUSSION
A. Chevron Step One
The Petitioners’ first argument is that, “[a]pplying
traditional tools of statutory construction, it is evident from
the plain language and structure of Section 614(b)(7), its
legislative history, the essential purpose of the must-carry
regime, and the Cable Act’s overall statutory scheme that
Congress intended that must-carry signals be actually
viewable without added equipment.” Joint Br. for Pet’rs at 20.
Thus, according to Petitioners, the Sunset Order is “unlawful”
because it is based on a “new statutory interpretation” that
“conflicts with Congress’s unambiguously expressed intent.”
Id. at 20-21. This argument does not square with the plain
meaning of the text, historical context, or the overall purpose
of the Cable Act.
Under Chevron Step One, if Congress “has directly
spoken to the precise question at issue,” the court and the
agency “must give effect to the unambiguously expressed
intent.” Chevron, 467 U.S. at 842-43. The statute states only
that must-carry broadcast signals “shall be viewable via cable
on all television receivers of a subscriber which are
connected to a cable system by a cable operator or for which
a cable operator provides a connection.” 47 U.S.C.
§ 534(b)(7). Petitioners say that “this Section mandates that
must-carry signals be actually viewable. The Order falls short
of this legal standard, adopting a regime that, at best, ensures
only that cable operators that have not yet transitioned to all-
digital will offer consumers the ability to make signals
viewable on analog receivers using additional purchased or
leased equipment.” Joint Br. for Pet’rs at 21. The fallacy in
Petitioners’ argument is that it assumes that actual viewability
is not permissibly achieved if subscribers are required to use
16
equipment beyond their televisions to receive must-carry
signals. The statute simply does not require what Petitioners
seek because “viewable” is susceptible to the Commission’s
reading, i.e., viewable with the assistance of a low- or no-cost
converter.
Petitioners argue, in effect, that Congress spoke
definitively on a narrow, technological issue concerning
technology that was not in wide use at the time of enactment.
The viewability requirement, enacted in 1992, was written
before a digital transition was even contemplated by
Congress, so it is fruitless to speculate on what amount of
equipment Congress meant to allow in order to ensure that
digital electronic signals would be viewable. Furthermore,
electronic signals – whether analog or digital – are not
actually “viewable” to the human eye, so it is clear that
Congress understood that some equipment or process would
be required to allow viewers to see broadcast programs. As
noted above, in enacting § 534(b)(4)(B), Congress left it to
the Commission to determine how best to implement the
viewability requirement to account for technological and
market changes.
In January 2001, in its first report and order applying the
carriage requirements to digital signals, the FCC noted that
“[a]llowing digital-to-analog conversion for a limited time
during a critical stage of the transition period” would facilitate
the overall transition. Carriage of Digital Television
Broadcast Signals, First Report and Order, 16 FCC Rcd.
2598, 2630 (2001). In 2007, after the digital transition was
underway, the Commission evaluated the market and
determined that there were still so many analog customers
that, in order to successfully make the must-carry channels
“viewable” to all customers, the cable companies should be
required, for the next five years, to downconvert those
17
channels to analog before transmitting them to analog
customers. The Commission never said that downconversion
was mandated by the statute. It was merely a means to
achieve an end. And nothing in the record indicates that the
FCC or any of the affected parties expected downconversion
to be a permanent obligation imposed upon cable companies.
Indeed, the Viewability Rule, which imposed the
downconversion requirement, was scheduled to sunset three
years after its effective date.
Furthermore, under the FCC’s 2001, 2007, and 2012
rules, analog subscribers were required to install additional
equipment in order to receive broadcasters’ digital programs
whenever a cable company switched from “hybrid” to all-
digital service. Neither Congress nor the FCC has ever stated
that the statutory viewability requirement cannot be met if
subscribers are required to use equipment beyond their
televisions to receive must-carry signals. Therefore,
§ 534(b)(7) cannot be construed otherwise. And the literal
terms of § 534(b)(7) certainly do not support the
interpretation advanced by Petitioners.
Petitioners also contend that the FCC’s order violates
§ 534(b)(4)(A), which provides that “[t]he signals of local
commercial television stations that a cable operator carries
shall be carried without material degradation,” and that “the
quality of signal processing and carriage provided by a cable
system for the carriage of local commercial television stations
will be no less than that provided by the system for carriage of
any other type of signal.” Petitioners argue that the
Commission’s order “runs afoul of this provision by allowing
cable operators to provide better carriage conditions – i.e., a
viewable format – for some signals than they do for others.”
Joint Br. for Pet’rs at 29. This argument presupposes that
digital signals that are not downconverted by cable operators
18
are not in a viewable format, a contention that we have
already rejected. The quality of the picture being transmitted
is the same whether it is downconverted by the cable
company or converted by the customer, and Petitioners offer
no credible evidence to the contrary. Therefore, Petitioners’
arguments resting on § 534(b)(4)(A) certainly do not indicate
that the FCC’s new rule violates the plain meaning of the
statute.
In sum, we reject Petitioners’ arguments under Chevron
Step One.
B. Chevron Step Two
During oral argument, counsel for Petitioners pointed out
that, under the Sunset Order, the FCC requires only that
customers have access to a viewable signal, and leaves it to
them to seek out the equipment necessary to convert a digital
signal to analog. In other words, in abandoning the
Viewability Rule, the Commission now requires analog
subscribers to obtain, pay for, and install additional equipment
to receive must-carry signals. According to Petitioners’
counsel, the real issue in this case is who assumes the burden
– in terms of paying for, providing, and installing the
necessary equipment – of ensuring that analog subscribers can
view digital transmissions. Petitioners suggest that the
Commission’s new rule, which shifts the burden from the
cable companies to the subscribers is manifestly contrary to
the Cable Act and, therefore, cannot survive review under
Chevron Step Two. See Chevron, 467 U.S. at 843-44.
Petitioners do not seriously dispute that, if the FCC was
not limited by the plain meaning of the Cable Act and acted
pursuant to delegated authority, it was free to revise its
interpretation of the viewability requirement to take account
19
of changed circumstances. As the Supreme Court has noted,
“[a]n agency is not required to establish rules of conduct to
last forever, but rather must be given ample latitude to adapt
its rules and policies to the demands of changing
circumstances.” Rust v. Sullivan, 500 U.S. 173, 186-87 (1991)
(quotations, citations, and alteration omitted); accord FCC v.
Fox Television Stations, Inc., 556 U.S. 502, 514-15 (2009).
The only question we face is whether the Sunset Order’s
interpretation of the viewability requirement is “permissible
under the statute.” 556 U.S. at 515. We cannot “substitute our
judgment for the agency’s, especially when, as here, the
decision under review requires expert policy judgment of a
technical, complex, and dynamic subject.” Cablevision Sys.
Corp. v. FCC, 597 F.3d 1306, 1311 (D.C. Cir. 2010). We
must accord “substantial deference” to the FCC’s predictive
judgments. Cablevision Sys. Corp. v. FCC, 649 F.3d 695, 716
(D.C. Cir. 2011).
The disputed statutory language in this case – Section
614(b)(7) – is ambiguous. Therefore, the FCC had latitude,
within the bounds of the statute, “to adapt [its] rules and
policies to the demands of changing circumstances.” Rust,
500 U.S. at 187. We find that, in promulgating the Sunset
Order, the Commission acted reasonably within the compass
of its delegated authority. The Sunset Order is clearly
supported by changed circumstances – including advancing
technology and changes in the marketplace – and reasoned
decisionmaking. The order reflects a permissible
interpretation of the Cable Act and therefore survives review
under Chevron Step Two.
Petitioners argue that forcing analog subscribers to carry
the burden of securing, paying for, and installing the
equipment necessary to convert digital signals is not
compatible with the Cable Act. In support of this claim,
20
Petitioners point to the structure of Section 614(b)(7), which
states:
Signals carried in fulfillment of the requirements of this
section shall be provided to every subscriber of a cable
system. Such signals shall be viewable via cable on all
television receivers of a subscriber which are connected
to a cable system by a cable operator or for which a cable
operator provides a connection. If a cable operator
authorizes subscribers to install additional receiver
connections, but does not provide the subscriber with
such connections, or with the equipment and materials for
such connections, the operator shall notify such
subscribers of all broadcast stations carried on the cable
system which cannot be viewed via cable without a
converter box and shall offer to sell or lease such a
converter box to such subscribers at rates in accordance
with section 543(b)(3) of this title.
47 U.S.C. § 534(b)(7). According to Petitioners, “[t]he
Commission’s new interpretation conflicts with the statutory
structure . . . because it renders the distinction between the
second and third sentences of Section 614(b)(7) meaningless.”
Joint Br. for Pet’rs at 22. Petitioners misread the statute.
As the Commission points out:
The second and third sentences of the statute address
different situations and perform distinctive functions. The
second sentence – which contains the viewability
requirement that applies only to must-carry stations –
applies only to subscribers who are “connected to a cable
system by a cable operator or for which a cable operator
provides a connection.” 47 U.S.C. § 534(b)(7). By
contrast, the third sentence, which applies more broadly
21
to “all broadcast stations,” requires cable operators to
offer or sell converter boxes to subscribers to whom the
operator “does not provide” additional receiver
connections or “the equipment and materials for such
connections.” Ibid. (emphasis added). Thus, the third
sentence ensures that cable operators may not simply
refuse necessary equipment to customers who choose to
install their own connections, a function not addressed by
the second sentence. Moreover, the required price for
boxes supplied under the second sentence to satisfy the
viewability requirement – free or nominal – may be less
than the price for boxes supplied under the third sentence,
which can be based on the cost of the equipment.
Br. for Resp’t at 21-22.
Petitioners’ arguments regarding congressional intent and
the objectives of the must-carry regime are similarly
unavailing. The FCC has, as required by Congress, constantly
adapted its enforcement of the must-carry regime, from its
first implementation in 1994 to the tentative consideration of
downconversion in 2001, its adoption in 2007, and its sunset
in 2012. The flexibility demonstrated by this constantly
adjusted approach reflects the realities of the market and the
FCC’s role as an expert agency delegated authority to
exercise its judgment.
Finally, in terms of whether a consumer-operated
conversion device can, practically speaking, make a signal
“viewable,” the FCC has reasonably determined that
technology is now advanced enough to fulfill the statute’s
requirements. Low-cost converter boxes that can be installed
in consumers’ homes are, according to the record, now widely
available and in use in 27 million homes. Given these
dramatic shifts in the market and the increased feasibility of
22
consumer-operated conversion devices, it was within the
agency’s discretion to decline to continue requiring cable
companies to bear the expense of downconversion for a
shrinking audience with easily obtainable alternate means of
accessing the must-carry channels.
On the basis of these considerations, we hold that the
Sunset Order is not manifestly contrary to the viewability
requirement under the Cable Act.
C. Arbitrary and Capricious Review
The same points that address Petitioners’ Chevron Step
Two claim also make it clear that their arbitrary and
capricious claim fails. The analysis of disputed agency action
under Chevron Step Two and arbitrary and capricious review
is often “the same, because under Chevron step two, [the
court asks] whether an agency interpretation is arbitrary or
capricious in substance.” Judulang v. Holder, 132 S. Ct. 476,
483 n.7 (2011) (citing Mayo Found. for Med. Educ. &
Research v. United States, 131 S. Ct. 704, 711 (2011)). “[A]n
agency rule would be arbitrary and capricious if the agency
has relied on factors which Congress has not intended it to
consider, entirely failed to consider an important aspect of the
problem, offered an explanation for its decision that runs
counter to the evidence before the agency, or is so implausible
that it could not be ascribed to a difference in view or the
product of agency expertise.” State Farm, 463 U.S. at 43. The
Sunset Order suffers from none of these infirmities. It is
“rational, based on consideration of the relevant factors, and
within the scope of the authority delegated to the agency by
the statute.” Id. at 42.
The evidence in the record is sufficient to support the
FCC’s finding that an equipment-based means of complying
23
with the Cable Act is “effective” in providing “viewable”
signals as required. As noted above, the marketplace and
technology have shifted dramatically in the past several years,
and the Commission reasonably concluded that the number of
analog customers is dropping rapidly and that low-cost digital
equipment is now “readily available” as an option to analog
cable customers. Sunset Order, 27 FCC Rcd. at 6537-39.
Without any contrary evidence to disprove these findings,
Petitioners have not shown any arbitrary and capricious action
or abuse of discretion on the part of the Commission.
Furthermore, there is nothing in the record to support the
Intervenors’ assertion that the Sunset Order will drive
broadcasters out of business. On this point, the record
contains only a dubious study from the National Association
of Broadcasters on the financial effect of the Viewability
Rule’s sunset on must-carry stations, which assumes that none
of the 12.6 million analog customers reported in 2012 will
actually obtain the conversion equipment to continue viewing
digital must-carry channels on their analog sets (or upgrade to
digital sets and view the must-carry stations directly).
National Association of Broadcasters’ Ex Parte
Communication, CS Docket No. 98-120, reprinted in Joint
Appendix (“J.A.”) 170, 173 (“We will examine the impact of
the loss of 11% of viewership on certain types of stations and
estimate the effects on the financial health of these stations.”).
According to the evidence before the Commission as of June
2012, during the years when the downconversion rule was in
effect, the number of analog subscribers dropped from about
40 million households to 12 million households and was
expected to drop below 10 million households by the end of
the year. Sunset Order, 27 FCC Rcd. at 6539. In other words,
the impact of the Sunset Order is diminishing rapidly, as cable
viewers switch to digital subscriptions that are compatible
with must-carry broadcasts. It is self-evident that the loss of
24
downconversion services will have some effect on
broadcasters, but the Commission was “not persuaded” that
allowing the Viewability Rule to expire will “threaten the
viability of must-carry stations,” id. at 6541, and Petitioners
have offered no viable evidence to contradict its findings.
Petitioners also contended at oral argument that under the
new regulatory regime hybrid cable companies will be able to
give their customers superior access to their own analog
programs by downconverting those channels and then
requiring customers to go out and buy new equipment to get
access to the must-carry stations. Petitioners say that such
practices will be at odds with the viewability mandate and the
non-degradation and signal quality requirements found in
§ 534(b)(4). This is a valid concern, and it certainly animated
the Commission’s rulemaking in 2007. But there is no
evidence to indicate that this possibility will become a reality.
Moreover, the Commission’s Sunset Order states that,
a must-carry station may file a complaint pursuant to
Section 76.61 of our rules if it believes a cable operator
has failed to meet its statutory carriage obligations. [See
47 C.F.R. § 76.61.] In addition, we will consider informal
consumer complaints when evaluating compliance with
the statutory viewability requirement. If we receive a
significant number of well-founded consumer complaints
that an operator is not effectively making affordable set-
top boxes available to customers in lieu of analog
carriage of a channel, one of the possible remedies would
be to require the operator to resume analog carriage of
the channel.
Sunset Order, 27 FCC Rcd. at 6546. If, in fact, the cable
companies respond to the FCC’s Order by raising prices on
25
the conversion devices or making them otherwise
inconvenient for customers to obtain, they will be subject to
customer complaints, broadcaster complaints, and agency
action.
In sum, we find that the FCC’s new rule is supported by
changed circumstances, credible evidence, and reasoned
decisionmaking. The Sunset Order therefore survives
arbitrary and capricious review.
D. Adequacy of the Notice of Proposed Rulemaking
Finally, Petitioners argue that the Sunset Order “violates
the APA because the Commission failed to provide interested
parties with adequate notice that it was considering an
equipment-based alternative.” Joint Br. for Pet’rs at 52. We
find no merit in this contention.
When an agency promulgates a rule pursuant to
congressionally delegated authority, it must provide the public
with adequate notice of the proposed rule followed by an
opportunity to comment on the rule’s content. 5 U.S.C.
§ 553(b)(3) (requiring agencies to provide notice of proposed
rulemaking that includes “either the terms or substance of the
proposed rule or a description of the subjects and issues
involved”). The final rule need not be the one proposed in the
NPRM. Rather, “[a]n agency’s final rule need only be a
logical outgrowth of its notice.” Covad Commc’ns Co. v.
FCC, 450 F.3d 528, 548 (D.C. Cir. 2006) (quotation omitted).
An agency’s final rule qualifies as the logical outgrowth
of its NPRM “if interested parties should have anticipated
that the change was possible, and thus reasonably should
have filed their comments on the subject during the
notice-and-comment period.” CSX Transp., Inc. v.
26
Surface Transp. Bd., 584 F.3d 1076, 1079–80 (D.C. Cir.
2009). By contrast, a final rule fails the logical outgrowth
test and thus violates the APA’s notice requirement
where “interested parties would have had to divine the
agency’s unspoken thoughts, because the final rule was
surprisingly distant from the proposed rule.” Id. at 1080.
EDWARDS, ELLIOTT & LEVY, FEDERAL STANDARDS OF
REVIEW 195 (2d ed. 2013).
The Commission’s February 2012 NPRM stated that the
Viewability Rule would “expire on June 12, 2012 unless we
take action to extend it,” and sought comment on “whether it
would be in the public interest to extend” the rule for three
more years. 27 FCC Rcd. at 1713-14. The NPRM also stated
that, if the Viewability Rule expired, “many cable subscribers
would be required to pay more for access to must-carry
broadcast stations, by replacing existing and still-functional
analog equipment with digital equipment or leasing set top
boxes to view the complete service they currently pay for and
receive in analog.” Id. at 1718. The final action taken by the
FCC was not something that the agency had expressly
proposed in its NPRM. Nonetheless, the Commission clearly
solicited comment on whether it should allow the Viewability
Rule to sunset and explained that subscribers might be
required to pay for and use digital equipment in place of
downconversion to view digital programs from must-carry
broadcasters. This notice was more than adequate to alert
must-carry broadcasters that the rule requiring
downconversion might be in jeopardy.
Petitioners argue that the FCC “expressly proposed to
extend the viewability rule until June 12, 2015,” and that
interested parties only learned that the agency was
considering an equipment-based proposal “through press
27
accounts.” Joint Br. for Pet’rs at 52. Petitioners are right in
pointing out that an agency “cannot bootstrap notice from a
comment, . . . or from third-party accounts of what the agency
might be considering.” Id. (citing Small Refiner Lead Phase-
Down Task Force v. EPA, 705 F.2d 506, 549 (D.C. Cir.
1983); Shell Oil Co. v. EPA, 950 F.2d 741, 751 (D.C. Cir.
1991)). But Petitioners are wrong in suggesting that notice is
inadequate if the NPRM and the final rule are not
coterminous. Whether the “logical outgrowth” test is satisfied
depends on whether the affected party “should have
anticipated” the agency’s final course in light of the initial
notice. Small Refiner, 705 F.2d at 548-49. The broadcasters in
this case certainly should have anticipated that the final rule
was a viable result in light of the NPRM, and also in light of
the fact that the Viewability Rule was due to sunset unless
extended.
As the FCC convincingly argues:
The Commission described the proceeding initiated by
the Sunset Notice as “an opportunity . . . to determine
whether extending the current rule is necessary to fulfill
th[e] statutory [viewability] mandate, given the current
state of technology and the marketplace.” Id. ¶5 (J.A. 71)
(emphasis added). In particular, the Commission noted
that set-top boxes would be required in the absence of an
analog carriage requirement and asked interested parties
to provide data on “the range of costs per digital
[converter] box . . . , and the range of rental fees” for
boxes, and “any marketplace or other changes” since
2007. Id. ¶¶10, 13, 16 (J.A. 74, 75, 77). Market
developments such as the availability and cost of signal
converters were plainly raised as topics relevant to the
Commission’s ultimate decision.
28
Furthermore, the Commission noted in the Sunset
Notice that in the Viewability Order it had considered and
rejected “possible alternatives,” such as “a rule that
would allow [cable systems] to carry must-carry signals
in digital so long as they made [signal conversion]
equipment available for lease or sale to subscribers.”
Sunset Notice ¶14 & n.48 (JA 76). When the agency
called for comment on “proposals that would achieve the
results necessary to assure the viewability of must carry
signals through an approach different than that of [the]
existing rule,” including solutions “that will satisfy the
statute in a less burdensome manner,” id. ¶16 (JA 77), it
was referring to such things as the previously rejected
approach. The Sunset Notice thus unquestionably gave
interested parties fair notice that device-based viewability
was one of the issues presented.
Br. for Resp’t at 58-60. We agree.
III. CONCLUSION
For the reasons given above, we hereby deny the petition
for review.
KAVANAUGH, Circuit Judge, concurring: I join the
Court’s fine opinion in full. I add this brief separate opinion
simply to note that the FCC also invoked the principle of
constitutional avoidance to support its result here. In my
view, the Commission was right to perceive a serious First
Amendment problem with the Viewability Rule.
In its Order allowing the Viewability Rule to sunset, the
FCC explained that “dramatic changes in technology and the
marketplace” since the adoption of the Viewability Rule in
2007 had rendered “less certain the constitutional foundation
for an inflexible rule compelling carriage of broadcast signals
in both digital and analog formats.” Carriage of Digital
Television Broadcast Signals, Fifth Report and Order, 27 FCC
Rcd. 6529, 6537 (2012). As a result of those dramatic
marketplace changes, the FCC concluded that it could no
longer justify “imposing a rigid analog-carriage requirement
on cable operators, where the record establishes a reasonable,
less burdensome alternative that meets the statutory
objectives.” Id.
The dramatically changed marketplace that the
Commission aptly recognized in this case undermines the
constitutional foundation of the Viewability Rule and, indeed,
of the broader must-carry regime as well. In the Cable
Television Consumer Protection and Competition Act of
1992, Congress imposed many significant restrictions –
including the must-carry regime – that infringe on cable
operators’ “editorial discretion over which stations or
programs” to carry. Turner Broadcasting System, Inc. v.
FCC, 512 U.S. 622, 636 (1994) (Turner I) (quoting Los
Angeles v. Preferred Communications, Inc., 476 U.S. 488,
494 (1986)); see Cable Act of 1992, Pub. L. No. 102-385, 106
Stat. 1460. The Supreme Court upheld the must-carry
requirements against a First Amendment challenge only after
determining that must-carry advanced “important
governmental interests unrelated to the suppression of free
2
speech” and did “not burden substantially more speech than
necessary to further those interests.” Turner Broadcasting
System, Inc. v. FCC, 520 U.S. 180, 189 (1997) (Turner II)
(applying “intermediate scrutiny”).
Turner identified the important governmental interest
underlying the regulations as the interest in counteracting the
effects of monopoly. And Turner rested its approval of the
must-carry regime on the fact that cable operators in the early
1990s possessed “bottleneck monopoly power.” Turner I,
512 U.S. at 661; see Cable Act of 1992, § 2(a)(2) (finding
“undue market power for the cable operator”). Only because
of the “real threat” that cable operators would exploit their
monopoly power and discriminate unfairly against disfavored
or unaffiliated broadcasters did the Court approve Congress’s
dictate forcing cable operators to carry the signals of certain
preferred broadcasters. Turner II, 520 U.S. at 196
(controlling opinion of Kennedy, J.).
Things have changed. In the two decades since Congress
enacted the Cable Act of 1992, the video programming
marketplace has radically transformed. Cable operators today
face intense competition from a burgeoning number of
satellite, fiber optic, and Internet television providers – none
of whom are saddled with the same program carriage and
non-discrimination burdens that cable operators bear. As this
Court has flatly stated, cable operators “no longer have the
bottleneck power over programming that concerned the
Congress in 1992.” Comcast Corp. v. FCC, 579 F.3d 1, 8
(D.C. Cir. 2009); see also Comcast Cable Communications,
LLC v. FCC, 717 F.3d 982, 992-94 (D.C. Cir. 2013)
(Kavanaugh, J., concurring); Cablevision Systems Corp. v.
FCC, 597 F.3d 1306, 1316 (D.C. Cir. 2010) (Kavanaugh, J.,
dissenting); Randolph J. May, Charting a New Constitutional
Jurisprudence for the Digital Age, 3 CHARLESTON L. REV.
3
373, 393-94 (2009); Christopher S. Yoo, Vertical Integration
and Media Regulation in the New Economy, 19 YALE J. ON
REG. 171, 229 (2002); Note, Enabling Television Competition
in a Converged Market, 126 HARV. L. REV. 2083 (2013); R.
Matthew Warner, Note, Reassessing Turner and Litigating the
Must-Carry Law Beyond a Facial Challenge, 60 FED. COMM.
L.J. 359 (2008).
Unsurprisingly, cable regulations adopted in the era of
Cheers and The Cosby Show are ill-suited to a marketplace
populated by Homeland and House of Cards. And the
constitutional problems infecting the 1992 Cable Act’s
various program carriage and non-discrimination
requirements grow more significant every day, as new video
programming distributors emerge and prosper. The upshot is
that the cable “bottleneck monopoly” on which Turner rested
no longer exists – and, as a result, the Act’s infringements on
cable operators’ editorial discretion no longer can withstand
First Amendment scrutiny.
Turner’s conclusion was expressly based on the state of
the marketplace in the early 1990s. See Turner II, 520 U.S. at
197-207 (controlling opinion of Kennedy, J.). Contrary to
petitioners’ suggestion to this Court, a Supreme Court
decision that says, in essence, “Because there is now a
monopoly, this regulation is permissible” does not mean
“Even when there is no monopoly, this regulation is
permissible.” Cf. Time Warner Cable Inc. v. FCC, 729 F.3d
137, 161 (2d Cir. 2013). Suppose the Supreme Court
considers an antitrust case and concludes that Company X has
an 80 percent market share, that anything over 50 percent
constitutes market power in that market, and that it is
unlawful under the antitrust laws for a company such as
Company X with market power to engage in certain activities.
In a future case, a lower court would be bound by vertical
4
stare decisis to say that a company with a market share over
50 percent in the relevant market had market power and thus
could not lawfully engage in those activities. But if Company
X’s market share in the relevant market declined to 10 percent
– meaning that it no longer had market power – a lower court
would obviously not be bound to hold that Company X still
could not engage in those activities. So it is here. A contrary
approach to precedent in these circumstances would reflect a
mindless perversion of stare decisis, not a faithful application
of stare decisis.
When the cable operators’ monopoly collapsed, the
constitutional foundation supporting the 1992 Cable Act’s
program carriage and non-discrimination regimes collapsed
with it. Stare decisis requires courts (and, in the first instance,
the FCC) to carefully and faithfully follow the constitutional
principles that undergird Turner: First, “cable operators
engage in and transmit speech, and they are entitled to the
protection of the speech and press provisions of the First
Amendment.” Turner I, 512 U.S. at 636. And second, absent
a finding of market power, the Government may not infringe
on the cable operators’ editorial discretion. See id. at 661.
Applying those principles to today’s highly competitive video
programming distribution marketplace leads to an entirely
different result than it did 20 years ago. Because cable
operators no longer wield market power, the Government can
no more tell a cable operator today which video programming
networks it must carry than it can tell a bookstore what books
to sell or tell a newspaper what columnists to publish.
In short, as a matter of constitutional law and
technological reality, the 1992 Cable Act’s various program
carriage and non-discrimination regimes rest on a hollowed-
out foundation. The Commission was right to see the First
Amendment problem in this case – and further cases like this
5
no doubt loom on the horizon. With that observation, I join
the opinion of the Court.