ECHOSTAR SATELLITE L.L.C., Pеtitioner v. FEDERAL COMMUNICATIONS COMMISSION and United States Of America, Respondents National Cable & Telecommunications Association, Intervenor.
Nos. 04-1033, 04-1109.
United States Court of Appeals, District of Columbia Circuit.
Argued Sept. 14, 2012. Decided Jan. 15, 2013.
704 F.3d 992
Leaving these questions for their proper day has an аdded benefit: it gives Congress time to consider lifting the prohibition on the use of appropriated funds for the implementation of
For the foregoing reasons, we affirm the district court‘s dismissal of this action.
So ordered.
James M. Carr, Counsel, Federal Communications Commission, argued the cause for respondents. With him on the briefs were Catherine G. O‘Sullivan and James J. Fredricks, Attorneys, U.S. Department of Justice, Austin C. Schlick, General Counsel, Federal Communication Commission, Peter Karanjia, Deputy General Counsel, and Jacob M. Lewis, Associate General Counsel. Riсhard K. Welch, Deputy Associate General Counsel, Daniel M. Armstrong III, Associate General Counsel, and John A. Rogovin entered appearances.
Paul Glist and Neal M. Goldberg were on the brief for intervenor National Cable & Telecommunications Association in support of respondent. Loretta P. Polk entered an appearance.
Before: BROWN, Circuit Judge, and EDWARDS and RANDOLPH, Senior Circuit Judges.
Opinion for the court filed by Circuit Judge BROWN.
Concurring opinion filed by Senior Judge EDWARDS.
BROWN, Circuit Judge:
In an industry marked by constant innovation and year-to-year change, the dispute over the regulations in this case has lasted a full decade. DISH Nеtwork L.L.C. (“DISH“),1 is a direct broadcast satellite provider. DISH challenges two orders of the Federal Communications Commission because they impose “encoding rules,” which limit the means of encoding that cable and satellite service providers may employ to prevent unauthorized access to their broadcasts. We conclude the FCC lacked statutory authority to im-
I
Multichannel video programming distributors (“MVPDs“)—a category that includes both cable and satellite television service providers—commonly offer access to thеir content through navigation devices, such as converter boxes. See
In 2002, with FCC prompting, cable television service providers negotiated with representatives of the consumer electronics industry to arrive at uniform standards that would allow compatibility across all cable systems. In particular, the FCC sought standards enabling “plug and play,” which would allow consumers to connect digital television receivers directly to their cable systems, thus circumventing the need for an external navigation device. The negotiations resulted in a memorandum of understanding (“MOU“)—a set of joint recommendations to the FCC—including rules prescribing what distributors could encode within their programming streams, and banning “selectable output control,” which allows distributors and content providers to remotely shut off a connector or output on a program-by-program basis (e.g., preventing a subscriber from recording a certain television program). The agreement was contingent on application of the encoding rules to all MVPDs, not just cable television service providers.
The FCC issued a notice of proposed rulemaking in January 2003 soliciting comment on the MOU‘s proposed rules. During the comment period, various satellite carriers criticized the proposed application of the encoding rules to all MVPDs. They both complained that satellite carriers were excluded from the negotiations that gave rise to the MOU and also characterized imposition of the encoding rules on all MVPDs as a quid pro quo for cable service providers’ acquiescence to plug-and-play standards. The FCC nevertheless adopted the proposed rules with only minor changes in Implementation of Section 304 of the Telecommunications Act of 1996, Second Report and Order, 18 FCC Rcd. 20885 (2003) (“Order“). As the MOU recommended, the Order‘s encoding rules barred selectable output control. The adopted encoding rules also addressed two related issues: prohibiting down-resolution of broadcast programming—which involves streaming content at an intentionally degraded resolution quality—and limiting the level of copy protection encoding applicable to certain categories of programming. In the FCC‘s view, applying the encoding
DISH now petitions for review of the Order and the Reconsideration Order.
II
DISH argues the FCC‘s decision to apply the encoding rules to all MVPDs exceeded the agency‘s statutory authority. Because we agree the FCC lacked the power to impose the encoding rules on all MVPDs, we need not reach DISH‘s alternate contention that the decision was arbitrary and capricious. But first we must satisfy ourselves of our jurisdiction to review DISH‘s challenge.
A
As a threshold matter, the FCC insists
Because
The Order‘s discussion of the FCC‘s authority satisfies us that
B
The FCC cites three sources for its authority:
Certainly,
As an alternative justification, the FCC also reasoned that the encoding rules “are an essential component of the MOU,” and that the MOU “will assure the commercial availability of navigation devices.” Id. ¶ 147, 18 FCC Rcd. at 20906. But this cannot be enough to tether the encoding rules to
We next turn to the FCC‘s assertion of its ancillary jurisdiction under both
The FCC contends the encoding rules are reasonably ancillary to its mission of assuring the commercial availability of navigation devices because they removed one of the “stumbling blocks” to the consumer electronics industry‘s production of such equipment for retail: the “inability of industry to agree on a comprehensive set of technical copy protection measures and corresponding encoding rules” that would “ensure the availability of high value сontent to consumers in a protected digital environment.” Order ¶ 55, 18 FCC Rcd. at 20909. Yet by this standard, there is little the FCC could not regulate in the name of fulfilling
The encoding rules fare no better under
The FCC is powerless to wield its ancillary jurisdiction, however, where “there are strong indications that agency flexibility was to be sharply delimited.” Midwest Video II, 440 U.S. at 708. Section 624A‘s textual delegation of authority to regulate cable systems, as opposed to all MVPDs, is precisely such an indication. True, application of the expressio unius est exclusio alterius canon5 is not robotic. But its use is appropriate when “one can be confident that a normal draftsman when he expressed ‘the one thing’ would have likely considered the alternatives that are arguably precluded.” Shook v. D.C. Fin. Responsibility & Mgmt. Assistance Auth., 132 F.3d 775, 782 (D.C. Cir. 1998). Here, there is every reason to believe
Nor is the position espoused by the National Cable and Telecommunications Association (“NCTA“), acting as intervenor, persuasive. The NCTA adоpts a more circumspect view of the FCC‘s authority, acknowledging the obvious implausibility of interpreting
In the end, we are left with two provisions, neither of which authorizes the encoding rules at issue. Section 629‘s text provides no direct authority for the encoding rules, and the FCC‘s arguments in favor of such an interpretation are unconvincing. Section 624A addresses encoding, but only in the context of cable systems. The FCC‘s application of encoding rules to all MVPDs was therefore ultra vires.
III
Because the FCC denies that the challenged orders could operate absent the encoding rules—indeed, its argument is premised on this very notion—the encoding rules are not severable. See MD/DC/DE Broadcasters Ass‘n v. FCC, 236 F.3d 13, 22 (D.C. Cir. 2001) (“Whether the offending portion of a regulation is severable depends upon the intent of the agency and upon whether the remainder of the regulation could function sensibly without the stricken provision.“). In granting DISH‘s petitions for reviеw, we therefore vacate the Order and Reconsideration Order in their entirety.
IV
For the foregoing reasons, the petitions for review are
Granted.
EDWARDS, Senior Circuit Judge, concurring:
I agree with the majority that the Federal Communications Commission (“FCC” or “Commission“) has neither direct nor ancillary authority under
I do not read thе majority opinion to say that the FCC has no authority under
Petitioner readily concedes that “the plug-and-play standards” adopted by the FCC “may be deemed within the scope of Section 629.” Pet‘r Br. at 20. Petitioner‘s concern is that “the nature of the encoding rules as a quid pro quo to get a private party to agree to these standards is not a sufficient nexus to Section 629.” Id. Nexus, however, is not necessarily a matter of authority; rather, it concerns a connection, bond, or link between different things. I agree that, in this case, the FCC has failed to show the necessary link between the imposition of encoding rules on satellite carriers and the mandate of
In some circumstances, there is an overlap in the analysis required pursuant to Chevron Step Two, 467 U.S. at 843-45, and that required under the arbitrary and capricious standard enunciated in State Farm, 463 U.S. at 42-44. See, e.g., Arent v. Shalala, 70 F.3d 610, 616 n. 6 (D.C. Cir. 1995); see also id. at 620 (Wald, J., concurring in the judgment) (“Because both standards require the reviewing court to ask whether the agency has considered all of the factors made relevant by the statute, this court has often found the State Farm line of cases relevant to a Chevron step two analysis.“). Nonetheless, absent plain meaning in the authorizing statute, а court should be loathe to preemptively declare that an agency has no authority to apply a certain operating standard when it is impossible to know whether the disputed standard might be permissible under different circumstances. See Nat‘l Cable & Telecomms. Ass‘n v. Brand X Internet Servs., 545 U.S. 967, 985, 125 S.Ct. 2688, 162 L.Ed.2d 820 (2005) (holding that, “[b]efore a judicial construction of a statute, whether contained in a precedent or not, may trump an agency‘s, the court must hold that the statute unambiguously
Petitioner has pressed the point that, in the circumstances at hand, the Commission‘s application of the encoding rules to all Multichannel Video Programming Distributors (“MVPD“) is arbitrary and capricious. See Pet‘r Br. at 40-48. Indeed, Petitioner convincingly shows that the FCC adopted the disputed encoding rules here to serve the interests of the cable industry and consumer electronics manufacturers in almost total disregard of the interests of satellite carriers.
The FCC acknowledged the fait accompli nature of the [disputed] rules: “[a]bsent аdoption of these encoding rules, the cable and consumer electronics industries have indicated that the compromise agreement reached in the [Memorandum of Understanding Among Cable MSOs and Consumer Electronics Manufacturers (“MOU“)] will be upset and their efforts to produce unidirectional digital cable products will falter.” Plug and Play Order, 18 FCC Rcd. at 20906 ¶ 47. The very speed with which the FCC placed the MOU and its rules on public notice (22 days) foreshadowed the FCC‘s acquiescence. The FCC appears to have taken little time to independently review and consider the proposal based on statutory objectives. The FCC did not propose any independent revisions to the proposed rules, and instead simply issued the MOU-proposed rules as its own proposal. The Plug and Play Order went on to adopt the encoding rules in their entirety, and apply them to all MVPD providers for one principal reason—lest the MOU fall apart and leave the FCC with unfulfilled directives under Sections 624A and 629.
This reasoning is of suspect validity at best. First, the FCC did not have its hands tied; it could promulgate its own set of rules—a better set оf rules that considers the positions of all MVPD providers. Second, the threat of defection from a private agreement should not carry weight in an agency‘s deliberation. The FCC acts pursuant to statutory authority and objectives, and the FCC‘s reasoning that its directive would be frustrated were the MOU to falter is reasoning that is far too attenuated. Pet‘r Br. at 42-43.
Much of what Petitioner says is on the mark and unrefuted by the FCC. However, I reject Petitioner‘s suggestion that FCC rulemaking may never take into account the threat of defection from a private agreement. This argument overreaches. The telling point in this case is that the FCC relied on a threat of defection that was tied to a condition—requiring satellite carriers to adopt encoding rules—that was patently unreasonable. Apart from the threat of defection, the FCC failed to explain how requiring satellite carriers to adopt encoding rules was necessary to assure the commercial availability of converter boxes and other equipment pursuant to
In sum, it is clear that the action taken by the FCC pursuant to its аsserted authority under