*1 (c) 10(a) fulfill at least one of §§ do & 10(b) TIME ENTERTAINMENT 10, § is sev- WARNER § when even
purposes L.P., al., Petitioners, CO., et Singer, 2 NORMAN J. ered. See Sutherland Statutory v. & Construction on Statutes 1993) (5th (If 44.07, a statute § at 518 ed. FEDERAL COMMUNICATIONS objects more “attempts accomplish two or COMMISSION; United States one, may still valid as and is void as America, Respondents, others.”) (citation omitted). to the Nynex al., Corporation, et Intervenors. 10(b) 10(a) severed, § no less § Once 93-1723, 93-1727, 93-1729, 93-1730, Nos. 94- 10(c) be constitutional. See than would 94-1355, 94-1367, 1066, 94-1354, 94-1366, II;4 majority opinion Part see also generally 94-1380, 94-1382, 94-1375-94-1378, 94- Judge dissenting opinion of Chief Edwards 94-1401, 94-1407, 94-1408, 1400, 94-1432- Although question 94-1438, 94-1440-94-1442, 94-1444, is not without at 146. 94- (e) 10(a) §§ to cable difficulty, that & restore 1445 and 94-1448. control over a narrow editorial Appeals, United States Court dissenting speech, class of see content-based Circuit. District of Columbia not render opinion Judge Wald at does Argued Dec. 1994. majority opinion See them unconstitutional. 6, 1995. Decided June regula- the alternative at 114-115. Without scheme, tory imposing the combined techni- Rehearing Suggestion Rehearing administrative, July cal, In Banc 1995.* and financial burdens Denied 10(b), operators as exists under option, on the operator is left with the hand, allow, encourage, or facilitate one or, hand, to speech, on the other
indecent speech; impede indecent
ban or otherwise imposed on the
there is no state burden
choice. judgment
Accordingly, I concur 10(e) 10(d), 10(a), §§ upholding
the court III holding in Part I dissent from
but government has met its burden
that the 10(b) al- is the least restrictive
show
ternative; join regard I Parts II and in that dissenting opinion. Judge
III of Wald’s opinion Judge dissenting Wald reasoning See agree B forums.” with the in Part II I petition- at 134 n. 8. concludes that the extent that the court * Tatel, record, here, Wald, Judges, did Circuit on this Henderson ers have failed to show participate matter. "public in this the leased access and PEG channels
153
155
157
Harding appearance an for entered Time Co., L.P. Warner Entertainment III, Ellrod, cause, argued E. Frederick Austin, TX, petitioners City City for OH, IA, Dayton, City Dubuque, King WA, Council, County, Valley Miami Cable MD, Louis, Montgomery County, St. MO and Wadsworth, him City of With OH. on the Joseph briefs was Van Eaton. Lisa S. Gelb an appear- and Nicholas P. Miller entered ance. Bickart, cause, argued
David for Communications, petitioner Blade Inc. With him on Terrence B. the briefs were Adam- son, Gastfreund, Gary Thompson Irving and Byers. Fritz Brenda Fox and Michael S. L. Schooler briefs, petitioners were on for Cable Ass’n, Comcast Telecommunications Cable Communications, Inc., Cox Cable Communi- cations, Inc., Corp. Cablevision Industries Broadcasting Corp. and Newhouse J. Chris- topher Redding H. Feinberg and Peter en- appearances, Corp. tered for Comcast Corp. Stephen Cablevision Industries R. Effros, Ungar James H. Ewalt and Robert briefs, petitioner were on the for Cable Tele- Lloyd, communications Ass’n. Frank W. III Kimm, appearances, and Peter Jr. entered for Cable Telecommunications Ass’n. Lex J. Smith, Joel A. Nomkin and Charles Blanch- briefs, petitioner ard were for on the Centu- ry Corp. Stephen Communications R. Ross Kathryn briefs, A. Hutton were on the petitioner Holdings, Armstrong for Inc. Cole, Jr., P. Paul John Glist were on the briefs, petitioners for Benchmark Communi- cations, L.P., Associates, L.P., Columbia Cablevision, Inc., Media, Daniels Greater Farr, III, cause, argued H. Bartow for Inc., Co., Inc., McDonald Investment Prime Ass’n, petitioner Inc. Nat. Cable Television Corp., Corp., Cable Teleeable United Video With him on briefs were Richard G. Cablevision, Inc. and Western Communica- Taranto, Brenner, L. Daniel Neal M. Gillespie, tion. F. David G. Gardner Leitch Goldberg Diane B. Bur stein. briefs, and James J. Moor were on the Gold, cause, argued Systems, Inc., peti- C-TEC Cable Ho-
Stuart W. Co., I, L.P., Cable, L.P., L.P. rizon tioner Time Warner Entertainment Clinton Har- Joffe, Corp., were ron With him on the briefs Robert D. Communications Coalition of Weiss, Jaso, System Operators, Corp., Eric H. Prime Cable Edward J. Brian Con- Small II, boy, Whitehouse, Douglas Corp. Case Francis M. Communications Theodore Wometco Buono, Fleischman, Georgia Corp., Aaron I. R. Bruce Beck- Cable Cable Partners and *10 Partners, Kleppe ner Atlanta L.P. and McClelland. Arthur H. Jill Wright, Deputy Opinion by for the Christopher J. Gen. Coun- Court filed Circuit sel, Armstrong, Judge M. Associate Gen. GINSBURG. Daniel Counsel, Counsel, Bourne, and Laurence N. Opinion by for the Court filed Circuit cause, F.C.C., respondents. argued the for Judge RANDOLPH. E. them on the briefs were William With Lawson, Kennard, Counsel, D. Carl C. Gen. Opinion by for the Court filed Circuit Pash, Jr., M. Aliza F. Grey James Carr and Judge ROGERS. Counsel, F.C.C., Katz, Bingaman, K. Anne Opinion dissenting part filed Circuit Gen., and Atty. Catherine G. O’Sullivan
Asst. Judge RANDOLPH. Garrison, Attys., Dept, of Nancy U.S. C. Licht, Counsel, Renee F.C.C. en- Justice. PER CURIAM. an Robert B. Nicholson appearance.
tered cases, In these consolidated various cable Attys., Dept, Wiggers, U.S. and Robert J. companies municipalities petition for re- Justice, appearances. entered view of several orders of the Federal Com- implementing munications Commission Tribe, Massey, Laurence H. Jonathan S. Cable Television Consumer Protection And Young, D. III and Michael E. Glover Edward 102-385, Competition Act of Pub.L. No. briefs, Atlan- were on the for intervenor Bell (codified 106 Stat. 1460 in scattered sections appearance tic. Thorne entered an for John U.S.C.). issuing separate of 47 We are three Wueste, intervenor Bell Atlantic. Ward W. opinions, addressing category each a distinct briefs, Raposa F. on the Jr. and John were opinion In of issues. for the court au- Corp. R. for intervenor GTE Service James by Judge Ginsburg, thored we address what Hobson, Polivy Jeffrey L. More- Gail issues,” parties call the “rate various appearances, for intervenor GTE no entered challenges brought under the 1992 Cable Act Corp. Thomas J. Tallerico and Eric Service and the Administrative Procedure Act to cer- briefs, E. Breisach were on the for interve- concerning tain FCC decisions the rates that nor Small Cable Business Ass’n. Richard regulated companies may charge. In Blumenthal, Gundling, R. William B. Jane opinion by Judge for the court authored Stephen Rosenberg and R. Park were on the Randolph, we claim of consider the various briefs, Atty. for intervenor Gen. of the State FCC, companies implement- that the briefs, Bradley of Conn. Stillman was ing the Cable violated the First Amend- intervenor Consumer Federation ment to the United States Constitution. Fi- America. nally, opinion for the court authored Shelley appearance, Rogers E. Harms entered an by Judge parties what the we review Nynex Corp. Matthew R. for intervenor issues,” call the “rules various claims made appearance, for Sutherland entered an inter- companies group and a of cities Telecommunications, Inc. venor BellSouth scope concerning the of the FCC’s cable Gary appearance, Epstein M. entered an regulations governments role of local and the DirecTv, Larry Inc. intervenor S. Solomon regulating cable. appearance, for entered an intervenor Liber- Co., ty Cable Inc. Robert A. Garrett en- GINSBURG, Judge: Circuit appearance, Nat. tered an for intervenor issues,” addressing the “rate we consid- Ass’n Telecommunications Officers challenges by group of cable com- er made ap- Howard Barr entered an Advisors. J. cities, panies, by group Blade pearance, for intervenor Service Electric Ca- Communications, Inc., an individual cable Jersey. ble TV of New company. simply, Put the argue ratemaking new re- the FCC’s GINSBURG, RANDOLPH, and Before gime in rates that are too low and results ROGERS, Judges. Circuit that it be set aside both because should Act and because it is
violates 1992 Cable capricious in arbitrary and violation of the Statement for the Court filed PER Procedure Act. Blade Com- Administrative CURIAM. *11 543(i)(l). system Only § a cable specifically that the U.S.C. argues more munications situa- itself in one of those three penalize it for that finds improperly rules Commission’s tions, respective- calls which the Commission were lower than those having had rates that system,” an “over- ly penetration “low systems prior to the charged by most cable build,” exempt “municipal system,” is and a argue that The cities imposition of controls. 543(a)(2). § regulation. rate 47 U.S.C. ratemaking regime run from aspects other of the Cable Act and of the 1992 afoul both of a the cable services The Act divides APA; they ask us to set aside generally, subject regulation into system is to rate FCC’s rules parts those of the (1) tier; service categories: the basic three charge un- companies to permit cable claim (3) (2) service; and video programming lawfully high rates. per per or programming offered on a channel basis, subject to alone is not program that, exception, the Com- with one We hold 543(a)(1), §§ regulation. be- appropriate balance struck an mission (¿X2). tier includes local The basic service of the cable competing interests tween the channels; those non-commercial broadcast subscribers, in violation companies and their educational, government-access public, Act nor of the 1992 Cable neither of the by system required channels that the cable exception is the Commis- APA. The one carry; and such additional its franchise gap-period so-called ex- sion’s treatment of operator may in its channels as the cable issue, costs; grant on that we ternal include in this tier. 47 U.S.C. discretion petition and vacate the rule. companies’ 543(b)(7). provides § The Act that a cable purchase the service subscriber must basic I. BACKGROUND gain in order to access to other service tier tiers, 543(b)(7), § and instructs 1992, any U.S.C. Act of Under the Cable regulations that “en- Commission to establish competi- “effective system that does not face for the basic service tier sure that the rates subject tion,” to rate as defined in the reasonable[,]” “designed to 543(a)(2). and are § defi- regulation. 47 U.S.C. goal protecting subscribers achieve the competition includes three nition of effective ... from rates ... that exceed the rates situations, types to wit: if charged for the basic service tier would be (A) of the house- percent than 30 fewer system such cable were effective franchise area holds subscribe 543(b)(1). § Each competition.” U.S.C. system; of a cable the cable service authority franchising that has been cer- local (B) franchise area is— may the FCC enforce the FCC’s tified (i) two unaffiliated served at least regulations basic service tier rate within programming dis- multichannel video 543(a)(2)-(6). §§ franchise area. 47 U.S.C. compa- each of which offers tributors all programming service includes ca- programming to at least rable video part that are neither of the ble channels percent the households offering offered system’s basic tier nor area; and franchise per program basis. 47 per on a channel or (ii) subscrib- the number of households 543(Z)(2). charges The Act U.S.C. offered ing programming services (rather franchising than local programming by multichannel video authorities) reg- enforcement of the rate largest other than the distributors service, 47 programming ulations for cable programming dis- multichannel video 543(a)(2)(B); the Commission must percent tributor exceeds identify pro- create establish criteria to area; franchise or households lowering “unreasonable” rate cedures for (C) programming service. 47 U.S.C. programming dis- for cable multichannel video 543(c)(1). review of rates for cable au- FCC operated
tributor
triggered on a case-
programming service is
thority
that franchise area offers vid-
subscriber, franchising
by-case
when a
percent
basis
eo
least 50
authority,
or local
or other relevant State
in that franchise area.
the households
*12
(2)
rates;
“going-forward”
.47 initial
and
entity
complaint.
governmental
files
(c)(3).
543(c)(1)(B),
rules.
§§
challenges
Insofar as the various
in
Act,
promul-
the FCC
implementing
interpretation
volve the FCC’s
of the 1992
determining
highest rate
gated rules for
apply
we
the rule of Chevron
system could
regulated cable
that each
NRDC,
837, 842-43,
Inc. v.
U.S.A.
467 U.S.
initially,
calculat-
charge
as well as rules for
2778, 2781-82,
104 S.Ct.
A. Regulation, tition Act Rate 1992: Second considering a number of alternative After Reconsideration, Report Order Fourth determining whether service ways basic Order, Proposed Notice Fifth reasonable, tier rates are (herein- (1994) Rulemaking, 9 F.C.C.R. 4119 rely upon yardstick primarily decided Reconsideration”). after “Second *13 provided by systems that face com- effective Order, re-analyzed petition. 8 the Rate F.C.C.R. at 5761-67. Commission data con- end, cerning gathered aggregate To the Commission the difference the this between other) (and sys- by systems charged sys- information from 141 cable rates that do and satisfy competition, tems that statutory standard for do not face effective tems that competitive as well ran- and competition, as from a determined that the differ- effective sys- actually percent was sample approximately 300 cable ential 17 rather than dom of 10 Order, percent. Rate at increase tems that do not. 8 F.C.C.R. Id. Most of the traces to multiple regression analysis, two Using refinements the Commission’s meth- 5761. odology. First, multiple originally regres- isolated factors oth- in a further the FCC three analysis, system’s sion competition er than that affect a the FCC isolated and con- offers, it trolled for factors rates: the number channels certain additional that af- has, system’s it and the num- fect a Id. at 4155-59. number subscribers rates. More by however, significant, change in signals way ber of it receives satellite. Id. at is the 5768-69, Controlling weighted 6143-44. for those fac- the Commission the rate data. In tors, Order, compared 5644, Rate the rates 8 F.C.C.R. at by non-competitive charged percent and the com- Commission had arrived at the 10 petitive competitive systems by and found that was a aggregating there differential differential,” “competitive systems for percent facing competition 10 mean- data effective (as defined) average, non-competitive systems comparing ing that on the result to the charged percent systems than similar rate data not face about more for that do effec- systems competition. competition. systems faced effective Id. tive that Because 79 of the data, Using at in the group facing competition 6145. the same effective (com- developed group a penetration systems Commission also benchmark for- were low calculating per pared municipals), mula for channel rate 46 overbuilds and 16 subject system approach competi- gave greatest weight effective this to the charge, taking penetration systems tion into account the data for would low and the channels, subscribers, weight municipal number of and of least sys- to the data for provided signals by Reconsideration, satellite-delivered tems. the Second system. 4153-55, at Id. 5770-71. F.C.C.R. at the Commission di- saggregated the data for the three types of systems Originally the FCC decided that systems facing competition effective cal- facing competition effective would be re- culated a competitive differential for each quired the benchmark to use formula set group. approach yielded competitive This rates, except system initial that no their approximately percent differentials of one for required existing would be to reduce its rates penetration systems, percent low for over- by percent. than 10 more Id. at 5771-72. builds, percent municipal systems. and 37 at or Any system that was below its bench- Id. not have to mark rate would reduce its rates id., all, any system opt below, could out of For reasons discussed various entirely by regime requesting sample pro- its FCC decided that the overbuild by set means of conventional cost-of- vides the rates be best indicator of the effects of regulation. competition Id. at Al- upon service 5797-5800. rates. Id. at 4160-66. The Commission, upon adjusted though figure FCC reconsidera- the overbuild from 13 rules, tion, however, percent percent, refused to alter these First factoring first Reconsideration, 1173-77, percentage system 9 F.C.C.R. at of each in that agreed changes. group actually to make a compet- later substantial overbuilt system. Implementation ing at 4162. The See Sections the Cable Id. goal competitive protecting to achieve the subscribers differentials
then used ... systems only ... from rates that exceed the municipal rates penetration low charged if would be for the basic service tier deciding to raise the overall factors system subject [the] cable were to effective percent, id. at 4165- further differential 543(b)(1). competition.” also more below. of which “in prescribing Act further states that such percent new 17 Having established the regulations, the Commission ... shall take differential, the FCC de- competitive further factors, listed into account” seven one facing effective that all cided any, systems, which is “the rates for if must their initial rates competition reduce competition....” that are to effective Id. at The Commis- percent. 4166-68. 543(b)(2). may provisions These however, did, provide important some sion Commission, require establishing well First, regime, qualifications. as in the old *14 rates, “reasonable” initial to consider infor- (now system can the automatic avoid cable systems facing compe- mation about effective percent) by opting for cost-of-ser- reduction tition, course, is, precisely what the which Second, regulation. Id. 4168. if a 17 vice at not, however, They has do even FCC done. percent put particular a ca- reduction would suggest weigh how the Commission should rates system’s below the allowable ble sys- subcategory the rate data from each formula, sys- then the the benchmark under Indeed, facing competition. tems effective only required to its rates to the tem is reduce history and its legislative the text of the Act the level until time as Com- benchmark such any provide the do even Commission accuracy of the the 17 mission has confirmed guidance weigh how to the seven fac- about by gathering percent competitive differential account, supposed to tors that it is take into analyzing industry data. cost Id. weigh subeategories let alone to of data how Similarly, operators,” “small de- 4168-69. particular relevant to one factor. as those that have fined the Commission 15,000 that gives or fewer subscribers and are not only The other direction that the Act larger operator, are affiliated with a not re- the FCC for the establishment of rates quired implement initial rate reductions at to the basic is that it must to reduce tier “seek subscribers, completes analy- all until the Commission the administrative burdens on industry authorities, operators, franchising sis cost Id. data. Commission,” adopt “may to which end it the Companies’ The Petitions Cable proce- formulas other mechanisms and or (B). 543(b)(2)(A), The dures.” 47 U.S.C. array petitioners advance a wide The micromanag- Congress thus refrained from arguments challenging the methods way ing the that the Commission per- arrived at the 17 which the Commission the In the petitioners now ask court to do. differential; competitive cent also chal- statutory requirement absence of require regulated lenge its decision to all to require could be read the Commission (with systems exceptions mentioned weight” rates give “proportionate to the above) percent rate to institute the 17 reduc- charged by penetration systems, howev- low arguments, though impressive in tion. Their er, liberty oblige peti- we not at ultimately unconvincing. scope, are tioners. a. Low Penetration Data futility Perhaps anticipating weight” argument, petitioners “proportionate first
The cable contend that the companies argue in the alternative violated the Act assign weight” requires failing assign “proportionate to Act weight penetration penetration systems least low the data for low in es some data, to do competitive failed tablishing the differential and that the Commission Al- factually incorrect. the basis for initial rate reductions so. This claim forms though percent competitive differen- agency required. Recall that the Act the 37 the Com- provides “regulations municipal tial for caused ensure the rea [to percent differ- mission that the 16 designed of basic shall be to believe rates] sonableness low, was too Congress’s purposes ential for overbuilds the Com- enacting declared municipal system [the mission “discounted was to eliminate the effects of somewhat ... on account of data] [its] con- 2(b)(5), power, undue market see we con- penetration systems, sideration of low give clude that the FCC’s decision to percent competitive had one differen- penetration systems data for low only limited Reconsideration) tial.” Second 9 F.C.C.R. at weight was reasonable. 4166, 4195. Thus we see the Commis- give weight sion did some to the data for low b. Overbuild Data systems.
penetration petitioners challenge The cable next (1) give FCC’s decisions to: greatest further contend (2) weight data; adjust that even if the to the overbuild Commission’s treatment of penetration the low percent data did not overbuild differential from violate the to 16 (3) arbitrary capri percent; adjust was nonetheless competitive the final agency given cious for the not to percent have differential further from 16 to 17 greater weight. Commission, data percent. how ever, powerful articulated economic ratio petitioners’ statutory The cable chal according only nale for weight minimal lenge to the give Commission’s decision to those data. greatest weight to the overbuild data is *15 statute, system Under the a cable falls into upon premise based the same statutory as its penetration the low category if it serves less challenge to the agency’s give decision to percent than 30 of the homes in its franchise weight penetration data, little to the low and area, regardless penetration of its rate for therefore fails for the reasons in discussed the of actually passes. subset homes that it previous the section. Therefore it remains 543(Z)(1)(A). The Commission only for us to decide whether the Commis noted that both industry its own data and an arbitrary sion’s action capricious. was study suggest that a substantial number of The FCC reasoned that because overbuilds systems the penetration group the low face actual competition, they head-to-head serve more than percent of the homes provide the most pur- accurate data for the they pass. Reconsideration, Second pose simulating competitive rates, of cable F.C.C.R. at 4162. The Commission reason- Reconsideration, Second 9 F.C.C.R. at ably concluded, therefore, pen- that low proposition glance seems at first to be may etration only geographic reflect the limi- nearly petitioners self-evident. The cable system tations of pres- the rather than the point out, however, competitive that the dif- ence of substitutes that restrain the cable systems ferential for overbuilt falls over exercising power; from market thus trend, they time. That argue, suggests that penetration the group may low well include newly overbuilt engage systems that, power, due to market are able “price wars”: Either system the incumbent to charge substantially rates above the com- charges designed below-cost rates to drive petitive equilibrium point. entering competitor out of the market or verify FCC could not possibility this charges the new entrant below-cost rates collecting without analyzing extensive “greenmail” order to the incumbent into of- data concerning penetration group’s the low fering buy upon to it out favorable terms. costs, but realistically this was not possible Accordingly, companies suggest that the
within 180-day statutory deadline for the sample artificially overbuild reflects low rates promulgate FCC to regulations. 47 U.S.C. and, correspondingly, an artificially large dif- § 543(b)(2); Regulato see National Ass’n of non-competitive systems. ferential from ry Utility FCC, Comm’rs v. 737 F.2d 1124, 1138-42(D.C.Cir.1984) (accepting agen Reconsideration, In the Second cy ratemaking upon agency’s 4163-64, decision based F.C.C.R. at the Commission offered expertise and best available information hypothesis de its own that the diminution in the spite agency’s failure amass additional competitive differential over time could be data). useful Bearing in mind that one of emergence “parallel due to the of or coordi- According hypothe- 4284-85. The Commission Id. at 4163-64. pricing.” nated theory, companies competing equal that not all overbuilds be- sized are in, tacitly to intensity competition time to collude or over how of the that an learn cause coordinate, their and therefore exer pricing system likely vary faces is with overbuilt be power than would greater market actually cise overlaps extent to which it truly As competing. possible if were system. competing Id. 4284. That as- theory gains this suggested, the Commission reasonable, sumption completely seems typically there from fact that support it do not take issue with area, which only systems in overbuilt two They argue, a theoretical matter. howev- more tacit coordination makes collusion or er, unreasonably as- plausible it would be. More than otherwise intensity competition sumed over, rates is because information about directly proportional percentage to the do not readily companies available and cable and, data, overlap, adequate it lacked where long-term sub into contracts with their enter unreasonably percentage that the assumed scribers, duopolist would able each be overlap possible given per- was the least against the other’s retaliate detect centage franchise covered total area upon slightest departure from respective systems. impliedly agreed. or expressly two had objection, regard to the first we sim- With Id.; Alan S. also William J. Baumol & see assumption of ply note that the Commission’s Binder, Policy Principles and Economics: relationship varia- a linear between the two (5th 1991) (ability to secret ed. offer reasonable, certainly only was if because bles ability oligopoly to undermines discounts virtually impossible have it would been cartelize). explanation therefore FCC’s understanding precise a more of the derive suggests light structure overlap relationship between the extent of market, may local intensity competition in the time and the competi early stages of direct head-to-head *16 NARUC, See 737 F.2d at available. charge systems actually tion that overbuilt (The “scope expertise agency of is often Although competitive rates. the Commis by circumscribed ... the need pragmatically explanation proven be without cannot sion’s ... respond regulatory problems to ... data, to although theory of “[a] additional and time”). period of reasonable, a reasonable explained, within ratemaking must supported,” not to the same it “is objection, it would As for the second while principle as the substantial ev substantiation possible to the actual have been determine factfinding.” Na applicable to idence test of com- overlap pair of between each amount Greeting v. Ass’n Card Publishers tional already systems it for which did not peting (D.C.Cir. States, 392, 607 F.2d United datum, Commission’s decision have that the 1979) Inc. v. (quoting Airlines Continental one; compet- logical do so a new not to was (D.C.Cir.1977)). CAB, F.2d itor, compete head-to- attempting before theory implausi is not so The Commission’s incumbent, lay typically the will head with unreasonable, it is upon that reliance ble which the in areas of the franchise to there is especially when one considers that already pro- existing system does not record, or in either anecdotal no evidence the light in the time Especially service. vide analytical, provide empirical support for the dif- the faced and constraint Commission companies’ price hypothesis. war the cable information, ficulty gathering additional reject petitioners’ we the cable Therefore making nothing unreasonable in its we see rely that the Commission’s decision claim assumption. simplifying that upon is arbi primarily the overbuild data capricious. trary and challenge to companies’ The cable adjusting the overbuild differen above, FCC’s adjust the the As mentioned FCC competitive percent to the final tial of 16 percent figure from to 16 ed the overbuild no better. percent of 17 fares factoring percentage overlap be differential the adjustment improper argue is They that this systems in that pair overbuilt tween each assumption Reconsideration, upon ly based the Commission’s group. 9 F.C.C.R. Second parallel pricing that or one of those coordinated between substitutes —additional broad- systems artificially overbuilt an cast television no resulted channels —and found evi- power small overbuild differential. We have al- dence that it limits the market of cable course, ready companies. is, Although possi- that it held Commission’s reliance upon parallel pricing proffered or coordinated theo- ble that the other do substitutes ry arbitrary capricious. power, finding limit not More- cable’s market con- over, rely solely cerning not did broadcast television—which intuitive- theory reaching upon ly decision to seems to be closest substitute for cable adopt percent figure; in the much of Second television —takes the wind out of the Reconsideration, petitioners’ sails. Commission made clear that it also relied however, important, More the FCC’s re- (which upon municipal systems the data sponse originally when faced the issue differential) larger indicated a much and the rulemaking course demonstrates availability of ratemaking the cost-of-service large systems that its decision not to treat any system alternative the rates of which differently arbitrary capricious. was unduly
would otherwise be reduced. Cumu- companies’ ap- Concerned latively, adequately support those factors proach “statistically risky” was because it adjust competi- decision Commission’s subdividing already involved small sam- upwards by tive differential additional ple systems facing competition effective percent. one into sub-samples, still-smaller Recon- Second sideration, 9 F.C.C.R. at the Commis- System c. Large Data analyzed sion systems the data for of all sizes (if relationship The cable an effort to note that when discern the gathered any) system the rate data between size rates. Id. 4159-4160,4301-03. large systems, sup- divided between and small The results lent no 5,000 port being companies’ line of demarcation set at contention that subscribers, large systems competitive imposed without the differential for constraint large systems statistically insignificant. competition” charge “effective rates near- observation, upon competitive Based er to the do conclude level than small Moreover, systems. large separate not face Id. do effective statis- (as Act) competition analysis defined in the tical that the do not FCC did take ac- power (i.e., percentage exercise market do count of the charge overlap between ov- *17 rates), systems which, seen, supracompetitive thus erbuilt the Com as we have the and — reasonably apply percent gives mission’s decision to the 17 Commission believes more large systems of competitiveness reduction of initial rates to accurate measure the of a was arbitrary capricious. sys- When the cable market —showed that effect of the petitioners argument competitive made the tem size on same to the the differential is not any significant. light at explana Commission did not offer Id. 4159-60. In of both large why systems analyses tion of that do not Commission’s statistical and the face competition petitioners provide effective cannot failure of either or for the cable to support power (beyond comparison systems some reason do not of exercise market to mark) 5,000 raise rates. In on of their their either side brief before this subscriber court, however, companies theory, for their suggest new we cannot conclude that systems unjustified large generally applying located in FCC was the 17 percent areas competitive large that have more both entertainment alterna differential to (e.g., channels, systems. tives broadcast and small television vid cinemas, stores, entertainment, eo and live events)
including sporting Application and that d. these the 17 Percent Initial of deprive companies Systems substitutes the cable of Rate Reduction to All Not power. market Facing Competition Effective responds companies’ The FCC to (including Communications) theory by noting already analyzed percent that it has Blade 17 attack the as, effect, its area more than too sumers in were inclined rate blunt initial reduction they argue Specifically, forego average market to an instrument. consumers capricious it falls arbitrary because it is subscribing higher. to cable if rates were systems, upon regulated all without equally fully expect the current We Commission’s partic- much a how regard whether study plight address the which Blade system’s past rates exceeded amount ular claims find itself. charged it been it would have had Recognizing percent that the 17 reduction competition. effective systems— could excessive for still other percent impose To an across-the-board facing high high costs rather than elas- those systems upon regulated all rate reduction ticity demand —the also Commission low-priced historically an might force indeed valve,” adopted “safety the cost-of-service competi- system to lower its rates below any system the 17 whereby percent for which level, is not the Commis- tive what but unreasonably reduction would result low with the statuto- has done here. Faced sion opt its rates can instead to have rates set placing an ad- ry command to avoid undue costs. Re- basis of individual Second upon authori- ministrative burden consideration, 4195-97; at F.C.C.R. Rate subscribers, itself, ties, operators, Order, By thus 8 F.C.C.R. 5797-5800. 543(b)(2)(A), and armed with easily general establishing applied an rule adopt statutory permission to formu- express along well-targeted exceptions, with the FCC requirement, meet las in order to this effectively responsibilities balanced its twin 543(b)(2)(B), the Commission estab- ensuring reducing rates and reasonable only general percent rule lished administrative burdens. exceptions important but also a number recognized Specifically thereto. because sum, plight Blade’s with the concern systems possibility low-priced that some fanciful, low-priced systems, though has may significant market not have exercised adequately by the been addressed Commis- rates, past the Commission power to raise addressed, too has Commission sion. So (as systems as unaffiliat- accorded those well safety-valve, via the the con- cost-of-service subscribers) 15,000 systems or ed fewer unusually high systems cerns that face percent from rule. “transition relief’ input costs.1 Reconsideration, 4167- Second Low-priced systems 4172-82. —defined Petition The Cities’ by the Commission rates initial- The cities attack the Commission’s below their revised bench- which would be perspective, argu- from a different rules percent mark if the full 17 reduction rates ing imposed required reduce that the rates allowed their were —are high accomplish purposes to their revised benchmark level are too rates completes analysis an They challenge percent until the both the the Act. (still systems face on-going) of whether such figure itself and several decisions *18 demand, influences” “unusual cost or other applying in it. Commission made percent that render 17 reduction would challenge per direct Their 4168-69, 4176-79. excessive. Id. at Presum- long light of figure need not detain us cent any near ably system kept that rates figure above discussion of that our extensive level, notwithstanding competitive the ab- argu cursory of the cities’ and the nature competition,” of did so not sence “effective apparently sug Citing that ment. studies an charity of but because it faced “unusu- out demand,” competitive lev- gest cable rates exceed meaning that con- that [elasticity of] al however, sponte by reversing al sua itself The also contend that incomplete system a lowing systems is insofar as increases for infla transition relief those to take allowed to take entitled to such relief Implementation Sections tion. See going-forward increases inflation under the for Competition Television Consumer Protection effect of has been to rules until the inflation Regulation, Ninth Order 1992: Rate (frozen) percent rate in real reduce its - Reconsideration, (1995). - F.C.C.R. concern, this terms. FCC has since mooted The percent, than 17 the cities con- that the els more Commission concluded cost- single in their main option tend in a sentence brief of-service should be made available to ample had “safety-valve” that FCC evidence before it operators “[t]he as a limited that, anything, if suggesting differential operator in which unusual cases “would far too [the identified was still low.” FCC] by applying percent be [17 harmed us, slightly question different before Reconsideration, Second reduction].” however, is whether the Commission had ad- 4166; Order, F.C.C.R. at accord Rate equate evidence for the conclusions it F.C.C.R. at 5755-56. That conclusion seems upon analysis It relied own reached. its light possibility wise of the distinct that an industry rather than the studies of unexceptioned rate reduction could unconsti others, hardly that in but itself renders its tutionally yield confiscatory rates for cable improper. gath- decision The Commission systems pow that have not market exercised industry ered extensive rate data both from past. er significantly to raise rates systems that do and from that do FCC, See Southern Bell Tel. & v. Tel. Co. competition not face effective and did a vari- (D.C.Cir.1986) (“rates 209, 214 F.2d obviously ety regression analyses designed to con- do not fall within a zone of reasonableness if competition trol for variables other than they constitutionally are so low as to be agency brought could affect rates. The its Moreover, confiscatory”). because cost-of- expertise experience deciding bear in regulatory expensive proceeding service (i.e., weigh how to data sets various Order, operator, for the cable see Rate overbuild, penetration, low municipal F.C.C.R. at be FCC can confident systems), ultimately as arriving we have seen that an will lightly choose that percent at the 17 differential. The cities’ option will and it indeed remain a limited eonelusory gives assertion us no reason to exception general to the rule. approach believe that the FCC’s was less reliable than the outside studies which the By imposing percent a broad 17 re point elaborating upon cities without allowing duction while a limited eost-of-ser methodologies, assumptions, or data used in safety-valve, effectively vice sum, them. sup- the Commission has statutory goal reducing balanced the ad ported percent its 17 rule substantial ministrative burdens and the constitutional has evidence and articulated a rational con- necessity avoiding confiscatory rates. upon nection between the it facts that found likely upset This careful balance be would if the basis of its evidence and ultimate local authorities were allowed to adopt percent decision to the 17 initial rate impose regulation. cost-of-service In view of reduction; meanwhile have the cities failed to during the comments filed the cities provide convincing evidence the Com- review, Order, proceedings under see Rate mission erred. 5754, appears significant F.C.C.R. at municipalities impose number of would cost- The cities next two challenges offer ratemaking upon of-service if particular way to the FCC so, statutory authorized to do and that the implemented First, percent the 17 rule. goal efficiency of administrative would be argue that the eost-of-serviee alternative that severely compromised thereby. Nor could improperly Commission made available such efficiency a loss of administrative operators: favors operator may opt an justified, as it would be in the current if cost-of-service it believes scheme, necessary prevent an low, unconsti would be too rates otherwise but *19 Although stop tutional franchising authority may the local outcome. we short of not sub ject concluding allowing franchising that authori the to method of that rate- setting impose regulation ties to if it believes cost-of-service that cable rates would (a high. argument question too would the Act pro otherwise be This violate we need not here), misunderstanding ceeds from a do of the statu decide we conclude that the FCC’s tory asymmetrical give mandate and the authority constitu decision not to them that was imperative tional that the FCC faces. light reasonable in of the Commission’s statu-
171 quarterly in to bur- inflation and order reflect to administrative tory mandate reduce changes in certain of its that the costs Com- dens.2 effectively beyond mission considers be challenge to cities’ other the The operator’s control. Second Recon- per 17 implementation of the Commission’s sideration, 4200-04; at 9 F.C.C.R. Rate Or- it goes to the transition relief af cent rule der, 8 F.C.C.R. at 5782-83. These so-called systems, low-priced small and forded (1) “external costs” are: the retransmission the say purpose of Act. frustrates the operators pay to consent fees cable broad- argue that because the Commis The cities (2) (3) costs; taxes; casters; large rules a relief allow sion’s transition (4) and franchise and costs fees the associat- companies all to avoid percentage of cable requirements, ed franchise includ- with other percent, 17 reducing the full their rates educational, ing provision public, and of statutory to meet has failed FCC governmental-access programming. Second As ensure reasonable rates. dis mandate to Reconsideration, 4201-02; 9 F.C.C.R. at peti regard to cable cussed with above Order, 8 Rate F.C.C.R. 5783-90. promulgated challenges, the FCC tioners’ exceptions general percent rule and the 17 price cap The decided to use a Commission package that was reason for transition as a regime costly it would less because be competing ably designed to meet the Act’s than traditional cost-of-service administer efficiency and reason goals of administrative regulation and would have the added advan- discussion, add To that we here able rates. tage an providing of incentive only that the transition relief the observation of is a to be efficient —the lack which notori- transitory; proposes the FCC ulti is fact regulation— ous drawback of cost-of-service mately percent rule to small apply 17 ensuring while still that rates remain reason- systems its further low-priced unless Order, 5776-77; able. Rate 8 F.C.C.R. at cf. a study produces support evidence to differ FCC, National Rural Telecom Ass’n v. Reconsideration, ent rate. Second (D.C.Cir.1993) (describing F.2d 177-78 Although the F.C.C.R. at 4176-77. cap regu- price to be efficient under incentive possibility completion cities raise lation). off, may yet far need not study we arguments array an cities advance The now; argues concern no one address that arbitrary capricious that these rules are elapsed thus at all exces that the time far Cable Act. and inconsistent with complexity of the Commis light sive challenge spe- one sion’s task. arbitrary capricious. provision cific as Setting “Going-For- B. Rules for Petition The Cities’ Rates ward” outset, suggest At the cities setting for First. Having established the methods cap keyed price regulated system may formula rate a because (the al- regulated charge initially percent to the rates that rate-reduction initially, only amplify alternative), charge will the Com- lowed to and the cost-of-service (the of those rates. Of cap regime the unreasonableness adopted price mission so- rules) course, general depends upon contention regulating “going-forward” called upon attack of the cities’ generally, future See Recon- success rates. Second initial sideration, 4200-07; percent rates validity Rate rule 9 F.C.C.R. at Or- seen, which, already We der, we failed. that re- have 5774-95. Under F.C.C.R. specific more system may adjust turn therefore to the cities’ gime, a its initial annually points. per order reflect channel TelevisionCon- the Cable mentation Sections
2. The
also criticize
FCC's decision
cities
Competition Act
1992:
regula-
companies,
year
sumer Protection and
allow
after one
Order,
tion,
Report
Regulation,
Third
opt
Rate
for cost-of-service
on
Therefore,
cities, however,
(1993)).
the cities’
tier-specific
have not
basis. The
challenge
properly
before the
issue is
this
petition
filed a
for review of the order which
{viz.,
adopted
Imple-
this
court.
rule
*20
sideration,
4201-02,
that
Second. The cities claim
the
cities’
is
concern
unwarranted.
not have treated franchise-relat
FCC should
(including
paid
franchising
ed
fees
to
costs
challenge
Fourth. The cities next
authorities)
programming
exter
and
costs as
one-sided the
to
Commission’s decision
allow
companies in
nal because cable
fact have
companies
adjust
cable
to
for
rates
external
Al
significant control over those costs.
quarterly
requiring
cost increases
while
them
may
though
operators
indeed have
cable
adjust
to
rates for external cost decreases
bargaining power
franchising
some
vis-a-vis
year. Although
once a
Commission
programmers,
and
there
no
authorities
recognized
allowing quarterly
that
increases
support
to
evidence in the record
the cities’
add
would
to the administrative burdens it
operators
that
have
contention
substantial
faces,
provide
opportunity
to
decided
this
program
control over franchise-related and
operators
unduly
lest cable
burdened
costs, ie.,
ming
that
authorities
having to
up
absorb cost
to a
increases
price
programmers
and
takers. More
Reconsideration,
year. First
9 F.C.C.R. at
over,
grant
decision to
ex
the Commission’s
well-founded,
That
1233-35.
concern seems
part
in
ternal treatment
to such costs was
(1)
particularly
light
in
the constitutional
give
specific provisions
meant to
effect to the
company
concern that
if a
arises
require
that
the Act
the Commission to
required
point
to absorb costs to
that
its
account,
regula
prescribing
take into
in
confiscatory,
allowed rates become
see South
tier,
tions for the basic service
both franchise
Co.,
Bell
ern
Tel. & Tel.
to doubt cable exter- 2(a)(1) Act, they during gap period, yet suggest of the that nal costs the under its the only Congress found regulations they able to basic cable rates would never be re- Although were coup opting those costs short of for cost-of- excessive. section be- gins with service be akin a reference to then-recent increas- would to —which service, shooting es in flya a the rates for basic cable it ends with blunderbuss. Because with justifications the broader aver- proffered “[t]he the Commission’s conclusion are age monthly completely cable has unacceptable, we hold that its increased almost de- preclude adjustment 3 times much the designed cision a rate as as Consumer Price in changes deregulation.” to recover Index since rate it is external costs incurred While possible meant, arbitrary the during gap period capri- Congress the is and as the petitioners suggest, only average cable cious. monthly rates for cable basic service had CPI, not increased thrice the that is what Companies’ C. Other Chal- Moreover, provision says. the after review- lenges ing Congress’s findings the rest the petitioners The cable make two other that, proper regardless becomes clear of the claims, question both of which the FCC’s 2(a)(1), Congress construction of the was interpretation provisions of certain of the perceived concerned with what it to be the challenge Act. Neither can surmount the general, excessiveness cable rates in not set hurdle for it Chevron. particular the type rates a of service. Indeed, Congress immediately the followed the finding referenced operators the cable Neutrality 1. Tier (in 2(a)(2)) general finding a that ca- I, As Part discussed in ble serving most cable subscribers apply ratemaking decided rules in a competition do not face effective and conse- fashion, meaning “tier-neutral” that the same quently power. exercise undue market That methodologies and standards used to are es- finding admits of no distinction between basic tablish allowable rates for the both basic tier programming and cable service. Simi- programming tier service and the cable ser- larly, Congress findings the made in- about tier(s). Reconsideration, vice First 9 creasing concentration and vertical inte- 1182-85; Order, Rate F.C.C.R. gration industry generally. in cable the See 5759-60, 5881-82. It did order so (5). 2(a)(4), §§ creating any opera- avoid incentive for cable broadly The statute is even clearer when it programming tors to move the between basic states that: programming and service cable service tiers policy It is Congress this Act by making any such move revenue neutral. to ... Reconsideration, See First 9 F.C.C.R. at (4) where cable television are 1183; Order, Rate 8 F.C.C.R. at 5759-5760. competition, to effective en- explained The FCC further that because it is pro- sure that consumer interests are simpler, approach the tier-neutral also serves service; receipt tected of cable upon to reduce the administrative burden all (5) opera- ensure that cable television concerned. Id. power tors do not have undue market programmers video vis-a-vis and con- The cable contend that sumers. structure, language, legislative histo (5). ry simply 2(b)(4), §§ 1992 Cable Act do Although petition- permit to apply policy ers same would like limit that to the basic regulatory tier, standard the basic service tier service fact stubborn remains that programming to cable Congress industry service. That to the directed it contention, however, premised upon sig general. simply, legislature’s gen- Put misunderstanding nificant Act. approach formulating problem eralized ante, whether, objectives ing as the basic service tier ex enumerating and to reasonable, peti- support yet proposed do not rate would be simply statute position that the Act concerned question respecting pro- tioners’ formulate the more) (or with rates for whether, concerned gramming post, even ex an service with rates for basic service tier than existing rate is unreasonable. Because those service; anything, if key strikingly and the terms similar *23 findings poli- Congress’s non-tier-specific slight easily is ex- difference between them support the FCC’s view that cy statement plained product proce- as a of the different regulation appropriate. is tier-neutral arise, postures they in will we dural sig- petitioners actually supports also mistake the this the The cable conclude that text substantive differences approach nificance of certain rather Commission’s tier-neutral govern statutory that the sections companies. between than the the contentions of cable tier and cable respectively the basic service petitioners point The cable also to other Although Act re- programming service. the regulatory regimes the differences between regula- quires the Commission to establish pro- for the basic tier and for cable service for the to ensure “reasonable” rates tions note, gramming They example, for service. 543(b)(1), tier, § with 47 U.S.C. basic service establishing provides that “in that the Act it au- respect programming cable service determining for in individual criteria to correct “unrea- thorizes programming for cases whether rates cable 543(c)(1)(A). § rates. 47 U.S.C. sonable” services are unreasonable” the Commission perceive petitioners a middle The cable factors, six 47 shall “consider” U.S.C. ground the “reasonable” between 543(c)(2), § which are several of different “unreasonable,” light suggesting that in requires from the that the statute factors regu- differing terms the those Commission’s in prescrib- to take into account Commission must programming service be lation ing govern for regulations to rates the basic than its of the basic more lenient They upon six service tier. focus two suggestion That is at the least service tier. statutory similarly for factors —“rates situat- counterintuitive; Congress if the intended to systems offering comparable cable ed cable stringen- regulatory levels of invoke different services,” programming U.S.C. unlikely cy, it seems most that would 543(c)(2)(A), history § rates and “the cognate those terms to describe have used services,” programming regimes. two for cable U.S.C. 543(e)(2)(C) § argue that the Commis- —and Moreover, explanation— the Commission’s for in sion failed to account those factors terminological difference reflects a regulation. opting for tier-neutral procedural a distinc- rather than substantive regulatory in two schemes —is a tion argument unpersuasive is for This Order, good persuasive. deal more See Rate First, by its reasons. the statute several Although Act re- requires the merely Commission terms actively quires loeal authorities deciding how best the six factors consider regulate for the service tier in rates basic a rate is unreasonable. whether determine standards, with established FCC accordance 543(c)(2). That means U.S.C. reviewing precludes the from it express it an and considered must “reach system’s programming a rates for cable ser- factor, bearing but about the conclusion” complaint vice and until it receives a unless any specific weight” required give “to is not subscriber, franchising authority, from ICC, Ry., v. Inc. to it. Central Vermont govern- or local or some other relevant state Therefore, (D.C.Cir.1983). 543(b) F.2d entity. Compare 47 mental Commission, expressly con after 543(c). when Consequently, history sidering potential role of the rate always tier will be rates the basic service factor, ultimately concluded that should pro- ex ante while rates reviewed Order, 8 any weight, see Rate given only be ex gramming service will reviewed 5764-65, 5766, n. it did post. It makes that the Con- F.C.C.R. therefore sense respect- not violate the statute. gress question formulate would simply The cable programming are whether a for cable ser- wrong suggesting Commission vice unreasonable than it has determin- of “similarly ing never considered the role situat whether a rate for the basic service tier reasonable; mean, systems.” provides: ed it does not as the cable petitioners appear suggest, that the Com- establishing determining the criteria for permit program- mission must rates for cable cases individual whether rates for cable ming higher service are than those that programming services unreasonable system subject occur would were the to effec- consider, among ... the Commission shall competition. In adopting tive the tier-neu- (A) ... similarly other factors the rates for approach, ignore tral the Commission did not systems offering comparable situated cable relatively minor constraints the Act services, taking into places upon determining it in what consti- facilities, regulatory account similarities in *24 an pro- tutes unreasonable rate for cable costs, governmental the number service; gramming quite contrary, the the subscribers, and other relevant factors.... requirements Commission met those and ex- 543(c)(2). § This the Commission reject ceeded them. We therefore the cable by gathering non-competi- did both data for petitioners’ claim that the Commission can- competitive systems performing tive and apply competition” the “effective lodestar multiple regression analyses in to order iso- to rates for both the basic service tier and late and to control for factors that affect programming cable service. degree competi- cable than rates other the recapitulate: statutory To the findings and tiveness in the market. That was in exercise policy statement, provi- and the text of the comparison similarly effect a ca- situated requiring sions that the pre- Commission systems ble in undertaken order to deter- scribe “reasonable” rates for basic service (such types mine which characteristics proscribe “unreasonable” rates for cable facilities, etc.) number of subscribers have an programming support service all the Com- Reconsideration, effect on rates. See Second mission’s approach. tier-neutral Although 165, 4288-4301; 9 F.C.C.R. at 4178 n. Rate there are in some differences the factors that Order, 5768-69, F.C.C.R. at 6143-47. We the Commission must in crafting consider reject petitioners’ the therefore cable claim regulations tiers, for the two different the that adequately the Commission did not con- agency did consider those factors and ac- similarly systems. sider situated count for adopting them in the tier-neutral Finally, petitioners upon the cable seize approach. We therefore conclude that the requirement provision the in regulating the approach tier-neutral is upon permis- based the basic service tier that the Commission’s interpretation sible of the Act. regulations designed “shall be to achieve the goal protecting ... Finally subscribers from rates the cable contend for the service that basic tier the if exceed that even approach per the tier-neutral is charged rates that be ... if would such cable mitted Commission erred system subject competi- were failing to effective give option each cable 543(b)(1). tion.” 47 Although U.S.C. instead to come under an overall rate limit provision regulating programming by lowering cable ser- for its rates the basic tier and includes, vice as one of six raising factors that its rates programming for cable ser the Commission must consider in They argue establish- vice. that such an “umbrella” ing the criteria for determining option nobody whether would harm it because would unreasonable, rates are the “rates cable preclude operators for still from raising cable systems competition,” rates, ... to effective aggregate, their above what 543(c)(2)(B), it does not contain would be allowed under the ap tier-neutral express an directive that rates not proach, exceed the and would benefit some subscribers level, competitive provision as does the for provide because it would with the basic service tier. All that flexibility difference to lower their rates for the establish, however, could is that the Commis- basic service tier all subscribers are greater sion determining has required purchase discretion under Act. option might surprisingly, compa- Not Although umbrella rates, would, interpretation; nies offer a more narrow higher it as the Com- result argue provision that the does not extend to significantly explained, increase mission any equipment part regu- used to receive associated administrative burden Order, programming Equipment service. lating Rate 8 F.C.C.R. at rates. part programming Indeed, used in to receive cable having one set rather than 5759-60. would, tiers, companies’ service under the regulated applies all of rules view, regulated in require accordance with the option would of the umbrella addition general regime for cable an set develop alternative service, meaning that the rates for such opt have of rules those Also, equipment may not be “unreasonable.” Al- aggregate. their rates reviewed clear, pri- though the statute is far from franchising authorities because local interpretation permissible Commission’s responsible monitoring rates for marily one, prevail. and therefore must tier while rates for cable the basic service exclusively within fall programming service petitioners’ interpretation is The cable sus- purview, 47 U.S.C. the Commission’s First, pect for two reasons. does violence 543(a)(2), approach umbrella would add meaning the natural term “used”: by requiring greater administrative burdens normally term is not understood to regulators. coordination between the two exclusively,” effectively mean “used which is *25 light requirement the Com- of the Act’s Second, interpretation propose. the bur- seek to reduce administrative mission important, actual and more because the cost 543(b)(2)(A), dens, § hold that 47 U.S.C. we provision expressly equipment re- includes reject to the um- the Commission’s decision quired unregulated program- to access video not option brella was unreasonable. pro- per per ming offered on channel or basis, interpreta- gram petitioners’ the cable Regulatory Equipment Treatment of produce the tion would rather anomalous re- By Used Subscribers unregu- equipment sult that used to receive regulated at would be actual lated channels provides The Cable Act that: part equipment cost used to receive while Com regulations prescribed the The regulated programming service chan- tier] under basic service sub [the mission viz., leniently, regulated nels more would establish, section shall include standards to prohibit to rates that are “unreason- cost, price or rate on the basis of actual petitioners able.” The cable have been for— why convincing explanation for able to offer a (A) equipment and of installation lease intentionally Congress would have creat- to the ba- used subscribers receive arrangement. ed an odd such tier, including service a converter sic not, however, petitioners The cable and, if and a control unit box remote support in the statute for their some without subscriber, by the such requested ad- program- “cable position. They note that dressable converter box or other ming is defined as: service” equipment required is to access per sys- over a cable programming any programming offered on video [video tier, tem, including per program regardless of service basis.] channel or equipment used for or rental of installation 543(b)(3). provi- § Because this U.S.C. receipt programming, such video that a sion limits actual costs (A) programming video carried other than may charge equipment, (B) tier, service and video on the basic scope importance. is of considerable economic per programming on a channel or offered interpreted has it to cover per program basis. equipment all that a subscriber uses re- 543(i)(2). They much § make system in a tier U.S.C. ceive the basic service receipt for the phrase “equipment used competition; in- effective arguing programming,” video equipment that is also used to receive such cludes equipment to receive Order, used F.C.C.R. means that other cable services. Rate arbitrary capricious service falls within the are neither nor con- trary given agency “unreasonable rate” standard to the charter programming service, applicable Therefore, to cable see 1992 Act. grant we 543(e), § companies’ petitions rather than the “actual and vacate the 543(b)(3). § Although cost” standard fo- rule insofar as the FCC denied them recov- cusing upon phrase might ery gap-period first seem of their external increas- cost cause, help petitioners’ es; it begs deny companies’ we petitions the cable 543(b)(3) question; § ultimate both those Blade Communications and of 543(i )(2) § equipment to the respects refer “used” to the cities all concerning other question programming, receive so the rate issues. effectively
which one
means “used exclusive-
So ordered.
ly?”
The cable
Commis-
candidate,
each
sion
have their
of course—
RANDOLPH,
Judge:
Circuit
)(2)
543(i
§if
the Commission wins
receives
modifier,
companies
the additional
petitions
These are consolidated
for review
543(b)(3)
applies
if that limitation
—and
of three Federal Communications Commis-
suggestion is
neither
unreasonable.
orders,1 implementing
sion
section 3 of the
Cable Television Consumer Protection and
Although
snippets
legis-
each side cites
Competition
102-385,
Act of
Pub.L. No.
history,
point
anything
lative
neither can
(codified
1460,1464-71
106 Stat.
at 47 U.S.C.
remotely
dispositive.
close to
areWe
there-
1992)).2
(Supp.
question
IV
to be
heat,
fore left with a virtual dead
save for the
opinion
decided
this
whether the Com-
petitioners’
observation that the cable
inter-
regulations
mission’s rate
issued under sec-
pretation
produce
would
the more anomalous
tion 3 of the 1992 Cable
Obviously,
Congress
result.
did not ad-
rights
violate
First
Amendment
specific
dress
issue
us.
before
There-
*26
operators
peti-
cable
are
who
before us as
fore,
having
permissible
the FCC
offered a
tioners.3
statute,
interpretation of the
we are bound to
Chevron,
842-43,
it.
accept
S.Ct. 2781-82. I 1950s, inception Almost from its
III. CONCLUSION industry subject cable has been to some form foregoing reasons, Initially, For we of regulation. conclude rate regulation rate upon present that, excep- generally by record with one municipalities was administered tion, regulations the Commission’s cable franchising rate and local other authorities “as a (1) Implementation 1. The orders are: petitioners” Armstrong Holdings, Sections 3."Cable are of Inc.; Partners, the Cable L.P.; Television Consumer Protection and Atlanta Cable Benchmark of Competition Regulation, Report Act Communications, Rate L.P.; Communications, Blade of1992: Proposed and Order and Further Notice of Rule- Inc.; Association; Cable Telecommunications making, (1993) ("Rate Order”); 8 F.C.C.R. 5631 Corporation; Century Cablevision Industries (2) Implementation Sections the Cable Tele- of of Cable, Corporation; Communications Clinton Competition vision Protection Consumer and Act L.P.; System Operators; Coalition of Small Co- Regulation, 1992: Rate First Order Recon- of sideration, Associates, L.P.; lumbia Comcast Commu- Cable Report Second and Order and Third nications, Inc.; Cablevision, Inc.; Continental Proposed Rulemaking, Notice of 1164 Communications, Inc.; Cox Cable C-TEC Cable (1993) ("First Reconsideration”); (3) Imple- and Inc.; Inc.; Cablevision, Systems, Doug- Daniels mentation Sections Cable TelevisionCon- of of II; Corp. Holding las Communications Falcon Competition sumer Protection and Act 1992: of L.P.; Partners; Group, Georgia Cable Greater Regulation, Rate Second Order on Reconsidera- Media, Inc.; Corp.; Harron Communications tion, Report Fourth and Order and Fifth Notice I, L.P.; Horizon Cable McDonald Investment Proposed (1994) Rulemaking, of 9 F.C.C.R. 4119 Inc.; Company, National Cable Asso- Television ("Second Reconsideration”). Inc.; ciation, Corpora- Broadcasting Newhouse tion; Corp.; today Corporation; Cable separate opinions 2. We have Prime TeleCable also issued L.P.; deciding petitioners' challenges Company, Time Warner Entertainment Commis- Cablevision, Inc.; (opinion J.) Ginsburg, sion’s formulas United Video Western Com- J.). munications; (opinion Rogers, Corp. Commission’s rules and Wometco Cable (id. 2(a)(1); Report § tion” see also prevent operators cable from Senate means (cid:127) 4-8), unreasonably high rates.” a charging Senate committee stated that H.R.Rep. 934, Cong., 2d Sess. 24 being 98th consumers in locations some were No. 1984, (1984), Cong. (Senate Report & Admin.News “gouged by operators” U.S.Code 1984, 4655, Congress 7, 4661. enacted pp. 1992, Cong. p. at U.S.Code & Admin.News Policy 1139). Pub.L. the Cable Communications Congress reregu- concluded that rate (“1984 Act”), 98-549, 98 Cable No. Stat. necessary lation was to ensure that cable policy concerning a ca- to “establish national operators would not exercise “undue market 521(1). § ble communications.” power programmers vis-a-vis-video and con Congress regulation, to rate respect With Act, 2(b)(5); see sumers.” Cable also governments local then that determined end, Report at To in Senate 8-9. regulate only permitted to should be Congress: systems those rates of basic service — statutory a provided “ef- definition subject competition” to “effective are competition” in fective order to increase S.Rep. See as the Commission. defined number are (“Sen- (1991) 92, Cong., 1st Sess. 4 No. 102d (47 regulation to rate U.S.C. H.R.Rep. 628, Cong., 102d Report”); No. ate § 543(0(1)); (1992) (“House Report”), 2d Sess. — “shall, required Cong. pp. & U.S.Code Admin.News rates for regulation, ensure definition of Commission’s light basic service tier reasonable” competition,” implemented “effective (47 statutorily prescribed standards 1986, effectively prohibited local authorities 543(b)(1), (2)); U.S.C. systems rates of regulating from approximately percent the nation’s com- — system basic service established 31; Report at also House see Sen- munities. tier rates under which local at 4. Report ate regulate pursuant to Commis- authorities (47 (b)); 543(a), sion rules U.S.C. Experience Cable Act’s under deregulatory regime Congress led to enact — required the Commission to establish Congress’s Contrary to the 1992 Cable Act. system of exclusive expectation competition to cable did Commission, according again to statutori- (House develop from satellite standards, ly-prescribed upper tier “ca- 26), Report a commentator noted that (47 ble services” *27 worse “consumers cannot be off than under 543(c)). § monopoly.” W. Ha- unregulated an Thomas provisions apply Although some of its more zlett, Competition Duopolistic in Cable Tele ratemaking provisions of broadly, the core Policy, Implications Public 7 vision: for application the Cable Act are limited 1992 Reg. (1990). In 86 J. Yale on among systems are not the to that cable Congress deregulated found that the cable subject systems types three defined as industry had become the “dominant nation 47 competition.” U.S.C. “effective' medium,” serving per wide video “over 543(a)(2). types systems § The three ex- with televisions.” cent of households (1) “low empted from rate are: 2(a)(3). legislative § The Cable systems” penetration with subscriber- industry was record also showed —those ship percent than of the households of less 2(a)(4). § In “highly Id. ad concentrated.” 543(i (47 )(1)(A)); § U.S.C. a franchise area dition, Congress that “most cable tele: found (2) subject to actual “overbuilds” —those opportunity no vision subscribers have competition another cable head-to-head with systems,” competing cable select between (3) (47 )(1)(B)); system .§ and U.S.C. power market and that result is undue 543« “[t]he by systems” operated mu- “municipal compared as to that of —those operators that com- 2(a)(2). nicipalities private or Congress § Id. also consumers.” by municipalities pete systems operated with average monthly cable rate found that 543(i)(l)(C)). (47 majori- § vast The U.S.C. had “almost 3 times as much increased country systems do not deregula ty of across the Price since rate cable Consumer Index basis, is, categories fall into those three and rates on a “tier-neutral” subject regulation. program- to rate both the hence are basic service and cable ¶ Act 1992 Cable directs the Commission to ming tiers.7 service Rate Order 396. ratemaking develop First, substantive standards adopted benchmark/competitive a standards, procedures those enforce differential scheme. Then when the initial Commission, implement- requires level, rates were lowered to a reasonable directives, ing array to consider an those price cap. instituted Commission a As an separately listed in the Act with factors re- benehmark/competi- alternative to both the spect to the “basic service tier” and “cable cap, tive price differential and the the Com- programming services.” See U.S.C. option. mission a offered cost-of-service (c). 543(b), against A price benchmark rate is a categories The Act divides of cable service given system’s compared. a rate is In (1) (2) tier;4 parts: into three basic service adopting benchmark/competitive a differen- service;5 (3) programming video scheme, compared tial the Commission data programming per-channel a offered on or systems from cable that were and were not per-program basis.6 The directs the subject regulation. The Commission de- regulations establish to “en- aggregate, price per termined sure that rates for the basic service tier noncompetitive systems channel of exceeded reasonable,” are and that the rates for other systems competitive percent. programming “cable services” not “un- ¶213. Order, See Rate In Order the Rate 543(b)(1), §§ reasonable.” U.S.C. required noncompetitive ca- 543(e)(1). ble to set their conform rates to ¶ the benchmark 214. formula. Id. tier, As to service local franchising basic Commission arrived at the benchmark for- generally pur- authorities oversee rates by determining similarly mula what rates suant to standards the Commission sets. See 543(a)(6). system operating competitive situated in a 543(a)(2)(A), §§ With ¶ marketplace charge. would Id. 213. If respect services, programming to cable required benchmark formula reduction Commission alone determines whether those greater aggregate competitive than the dif- rates See 47 are unreasonable. U.S.C. 543(a)(2)(B). percent, system ferential of 10 establishing regulations would rates, percent, have to lower its governing basic service rates tier Com- reducing rather than them mission must seek to reduce the to the benchmark. administra- ¶ subscribers, Also, operators, system tive Id. 217 & n. if burdens 544. was at authorities, itself. or See 47 below the benchmark rate the time it 543(b)(2)(A). regulation, The Commission im- became it would not be ¶216. plemented regulating required three methods of to reduce its rates. Id. 543(b)(7)(A) provides 4.Section "any mini- service is defined as *28 requirements mum carriage of basic service tier are: programming provided the system video a over cable signals; local (A) of commercial television programming ... other video than carried on carriage the of noncommercial educational tele- tier, (B) the program- basic service video vision; educational, public, governmental ming per per program a offered on channel or by programming required access the franchise of 543(f)(2). basis.” 47 U.S.C. subscribers; system provided the cable to be to signals provided and television broadcast station per-channel 6. Video a offered on subscriber, by operator except a basis, per-program pay-per- or which includes signal secondarily which is transmitted a sat- premium view channels and such channels as beyond ellite carrier the local service area Showtime, regula- HBO and is not to rate such station. 543(a)(2), 543(c)(2)(D) §§ tion. See 47 U.S.C. & only specified Since the statute minimum re- 543(1)(2). quirements, may cable add additional programming signals video or services to the 543(b)(7)(B); briefly statutory regulato- 7. We introduce the basic tier. service See 47 U.S.C. J., ry opinion Rogers, § 3 of the (requiring see scheme of 1992 Cable but the also 26-27 J., opinion Ginsburg, single that each cable offer a scheme in basic discusses the tier). detail. ¶¶ 245, price cap, compa- the tion 248. Under a largely reaffirmed The Commission In in Reconsideration. have an incentive reduce Rate the First nies costs and Order Reconsideration, however, By costs, the operate efficiently. reducing Second its the a reanalyzed data used company capture savings higher Commission could competitive dif- and revised the Rate Order profits. is, percent. That
ferential to 17 Commis- any unduly To harsh alleviate effect from noncompetitive systems determined sion reduction, required rate Commission rates, higher aver- charged percent on the a option offered eost-of-service as an alterna- counterparts. age, competitive than their benchmark/eompetitive tive to differen- figure by em- Commission reached this The price cap and the tial schemes. See Second heavily from more data the “over- phasizing ¶ 162; If 270. Reconsideration Rate Order penetrations low than data from the builds” systems Those cable whose costs so were competitive sys- municipals, the other high they were unable to their lower ¶¶ 90- Reconsideration tems. See Second rates accordance with the Commission’s addition, deter- 105. the Commission benchmark/eompetitive price differential or systems noncompetitive mined that all cap could to set their rates schemes choose Sep- their effect on had reduce rates on costs and revenues insure based their percent the revised 17 tember they profit. a realized reasonable See differential, regardless competitive whether ¶ n. But Reconsideration 162 & 212. Second they formula. Id. were above benchmark noted that the Commission eost-of-serviee ¶ percent placed If 109. a 17 reduction regulation primary not be the could means system’s rates below its benchmark regulation “applying because cost-of-ser- rate rate, temporary relief system could seek systems to thousands of cable viee by reducing rates to the benchmark level impose tremendous administrative would industry an until the conducted regulatory on authorities and cable burdens study appropriateness cost to determine ¶392. operators.” Rate Order ¶ Id. n. percent the 17 reduction. 111 & II initial reasonable Once it established First Amendment The forbids rates, employ decided to regulations some but not all economic affect per cap regulation, expressed price price a long as ing speech. laws survive so Some limit, going forward See channel basis. Other will have a rational basis. laws ¶¶223, 227-29; Rate Second Recon- Order extraordinary they rest on some fall unless ¶ gov- cap The formula price sideration 169. satisfy justification. other laws need Still changes by capping the rates erned rate two somewhere between these a standard their charge, could rather than rate As to Commission’s cable extremes. cap regime’s ini- price rates of return. know from Turner Broad regulations, we produced tial rates were based on the rates —FCC, -, 114 S.Ct. casting v. U.S. benchmark/competitive differ- either the (1994), 2445, 129 that rational L.Ed.2d showing. ential or cost-of-serviee the test. Turner Broadcast basis cannot be up according to could then move or down operators are ing holds entitled percentage formula that factored annual protection of the First Amendment’s change goods and in the cost of services Congress abridge the shall not command whole, by the economy as a as measured (id. speech, press or freedom Product Price and cer- National Index Gross *29 2456); -, of less 114 S.Ct. at laws beyond cable tain other external costs press general application ¶¶ aimed at the than operator’s control. Rate Order 239-54. “always to at of it are or elements opera- price caps penalize did The cable heightened degree of First some cap least adding programming. price tors for The at -, scrutiny.” 114 S.Ct. Amendment Id. adjustments for inflation and scheme allowed 2458; Minneapolis & Tribune Co. at see Star recovery programming expenses, full Revenue, 460 U.S. company if v. Minnesota Comm’r along profit with overhead and of 581, 103 1365, 1370, 575, 75 295 L.Ed.2d S.Ct. chose add channels. Second Reconsidera- 182
(1983).
“degree”?
question
systems
The
is what
tive
The
with bottleneck control
ones —
petitioners say
scrutiny
transport
must be
over
service.
“strict,”
means, among
things,
other
regulating
But if
cable rates is not done
government’s interest
that the
must be “com
according
programming,
the nature
pelling”
presumptively
law is
and that
may
affect
of
nevertheless
the content
Schuster,
See, e.g.,
invalid.
&
Inc. v.
Simon
transmitted,
programs
petition
so the cable
York State Crime
Members
the New
Vic
of
content,
say,
ers tell us.
on
impact
they
This
Bd.,
105, 115-16, 112
501,
tims
U.S.
S.Ct.
triggers
scrutiny
Riley
strict
under
v. Na
508,
(1991);
City
183
(1936),
arguendo,
447,
accept,
peti
is
rate
We
L.Ed.
80
660
impact on
will have a deleterious
regulations
government
tioners’ contention that the
could
programming transmitted.
content of the
Amendment,
not, consistently
the First
study
revealed that
the Commission’s
Yet
newspaper
of
cap
price
a
at 25 cents in
programming
of
was not one
content
monopoly profits
limit
order to
and make the
largely
key system characteristics that
three
paper more
But it
fol
affordable.
does not
charged
in rates
explained the variance
regulations
that cable
also
low
rate
must
systems
See Rate Order
cable
nationwide.
strictly judged.
not func
Cable
¶210.
operators
on
Pressure exerted
cable
tionally equivalent
newspapers.
As we
expensive
to add
drop
programming or
from
Broadcasting,
learned
Turner
the First
response
only inexpensive programming
prohibition against
Amendment’s
a law re
by the
lowering of
rates is relieved
a
their
carry
quiring
newspaper
a
which it
“that
“going forward”
A ca-
rules.
Commission’s
(Miami
print”
Herald
would not otherwise
may “fully
a
operator
ble
who adds
channel
Tornillo,
241, 256,
Publishing Co. v.
418 U.S.
...
the actual level
recover
2831, 2839,
(1974)),
mark/competitive
price
differential and the
engaged
expressive activity
protected
cap requires no reference to the content of
—
at -,
the First Amendment.”
U.S.
speech.9
Congress
S.Ct. at 2470.
had before it
must-carry
Like the
rules
showing
Turner
evidence
that “the cable television
Broadcasting,
regulations
industry
the cable rate
thus
has become a dominant nationwide
“are not
structured
manner
carries
video medium.” 1992 Cable
Pub.L. No.
undermining
102-385,
2(a)(3),
inherent
risk of
First
106 Stat. 1460. Cable
—
-,
Amendment
interests.”
systems
U.S. at
percent
serve 60
of American house
holds,
S.Ct.
2468. The fact that
regula-
yet only
percentage
small
apply only
tions
11,000
does not
approximately
make
especially suspect.
them
country
As economic
face competition from other cable
may incidentally
measures that
speech,
providers.
2(a)(2);
affect
service
Id.
Rate Order
nothing
9. There
petitioners’ argu
to the cable
preferential
not leave room for
treatment of a
particular
operator.
scrutiny
ment for
While the
strict
on the
1992 Cable
basis that the rate
Act authorized the
determine the
regulations
operators dependent
render cable
reduction,
initial level of rate
once this was done
discretion, forcing
official
curry
reg
them to
percent
the 17
handedly,
apply
reduction was to
even-
by engaging
ulators'
self-censorship.
favor
regard
without
con-
Movement,
Forsyth County
See
v. Nationalist
percent
tent.
If the 17
reduction turns out to be
123, - &
U.S.
n.
112 S.Ct.
system,
system
too onerous for a cable
can
(1992);
2402-03 & n.
185 ¶ by percent, only there had' been a 3.2 the 29 After Cable Communications n. 30. increase, 98-549, 623, 1984, percent per-channel signifi- § rate Pub.L. No. Policy Act of 2788-89, cantly than the Price Index. in- lower Consumer deregulated the 98 Stat. figures misleading per-channel ... But be- “average monthly rate dustry, cable the found, cause, the Commission “economies of the much as almost times as increased operators ... arise as channels to scale add Price Index.” 1992 Cable Consumer systems.” 2(a)(1). their Second Reconsideration Congress “[w]ithout found ¶40. operator As a cable more chan- video adds another multi-channel presence the (most 1980s), operator’s distributor, system did nels a cable spread costs are chan- is fixed over additional competition. The result no local faces per-channel decline. nels and its fixed costs power for market undue operators their fixed costs at Cable estimated that of and video compared as consumers 2(a)(2). per per month subscriber for basic ser- Id. programmers.” $20 ¶ 189. vice. Id. Absent evidence petitioners as- Although cable “doubt the during the marginal cost of added channels pervasive pric- premise monopoly serted unusually per- high, was the fact that 1980s Gov- ing,” Petitioners Rate Brief Cable thus not channel rates increased at all is Accounting sufficient- Office studies ernment petitioners’ helpful to the cable cause. Ac- ly August An support it. 1989 General survey average counting revealed an Office government’s is Since the interest in about “rate increase over 25% cable substantial, remaining question deals S.Rep: 138,102d years.” Cong., 1st Sess. regula No. with the manner which the rate (1991). believed, survey, may some promote Do the tions seek that interest.10 increases be- underestimated rate have substantially regulations “burden more “(1) systems large increases cause: necessary”? is v. Rock speech than Ward (2) the respond survey; Racism, did to the 781, 799, not Against 109 S.Ct. U.S. significant (1989). 2746, 2758, 105 with no increases L.Ed.2d 661 We shall great but also responded number requiring that rules assume systems may received many speech, of these have charge reasonable rates burden authority pri- do although increases from it is no clear how means petition- Still, deregulation.” or Id. rate are narrow regulations The cable so.11 only per-channel triggered increases enough: ers rate rate think offerings competition of effective and ceases should be considered: since channel absence competition emerges. The from to 30 while rates increased when effective increased competition” Act. For Congress nor in violation of the 1992 Cable defined "effective cious there, per- than 30 include situations which “fewer discussed we also conclude the reasons area of the households in the franchise cent of those that the Commission's treatment here system,” to the service of a cable subscribe any con- raise Amendment data does not First 543(1)(1). penetration Such "low regulated large systems and low Because cerns. systems” regula- are therefore not to rate reasonably systems may, penetration the FCC found, though, as the their tion even Commission concluded, significant power have market statistically group as a rates “are different rates, charge supracompetitive and be- therefore regula- systems subject to rate from the rates the cost-of- cause the Commission established ¶ 28. The cable tion.” Second Reconsideration protective safety-valve option aas for service regula- petitioners think this that the rate shows systems, be- there was no mismatch individual any prob- tailored "to the extent of tions are not problem solu- tween the and the Commission's monopoly pricing.” Petitioners lem of tion. is, they say, at 52. There a "mis- Rate Brief problem between the and the solution. match" petitioners do not claim 11. The cable petitioners The cable make a similar Id. at 53. should have determined actual Commission upon argument that for based the observation regulations speech that rate will effects on (5,000 subscribers) large systems or more plurality opinion in Turner cause. While greater regulated average among rate is no - U.S. at -, Broadcasting, S.Ct. at unregulated among counterparts. their than findings required to make such the district court Judge opinion the court Gins- written remand, point petitioners' to raise the failure burg, explain why we in detail the Commission's renders it or before the Commission penetration in this court data for treatment of the low capri- unnecessary us to it. arbitrary consider large systems was neither points out that it has light taken event be unworkable in of admin- steps designed reg- to ensure that istrative burdens such a scheme would entail. duration. ¶392.13 ulation will be of limited As the Rate Order recognize, “the Government provision vigorously promoting of video *33 through telephone-company service wires regulations subject The cable rate service).” (e.g., through video dialtone Cable scrutiny intermediate under the First Petitioners Rate Brief at 47 n. 38. In the Amendment and are not unconstitutional. meantime, the Commission’s benchmark es- government The has a demonstrated sub- pre- tablishes a level above which rates are reducing stantial interest in cable rates and If operator sumed unreasonable.12 be- regulations the Commission’s pursu- issued justified lieves that it in charging would be ant to section 3 of the 1992 Cable Act are rates, higher safety a there is valve: narrowly tailored to meet that interest. To operator may op- invoke cost-of-service extent, this every tion. This ensures that petitions The review are denied. will be able to recover its reasonable costs for percent and earn an 11.25 rate of return on Implementation investment. Sections ROGERS, Judge: Circuit the Cable Television Consumer Protection In appeals these consolidated from orders Competition Regula^ 1992: Rate of the Federal Communication Commission Adoption tion and a Accounting of Uniform implementing the Cable Television Consumer System Regulated Provision Cable for Competition Protection and Act of Service, Report and Order and Further No- (codified 102-385, No. Pub.L. 106 Stat. 1460 Proposed Rulemaking, tice of 9 F.C.C.R. U.S.C.) (the in scattered sections of 47 “1992 ¶ (1994). 4527, 4612 147 While cost-of-ser- Act”), opinion Cable this addresses chal- proceedings operators
vice
will cause
to incur
lenges to
the Commission’s rules
a num-
expenses, this
regula-
does not render the
(the
operators
ber of
petition-
“cable
necessary.
tions more restrictive than
The
ers”)
(“the Cities”)
and several cities
as
obvious
well
sys-
alternative
the Commission’s
separate
holding
challenges by Armstrong
proceeding
a cost-of-service
Hold-
tem—
regulated
system
ings,
(“Armstrong”)
each
Inc.
also
and the Small Cable
—would
expenses
(“Association”).1
cause
to incur
and would Business Association
ners, L.P.;
petitioners complain
revising
Communications, L.P.;
12. Cable
that in
Benchmark
competitive
percent
Communications, Inc.;
initial
differential from 10
Blade
Cable Telecommu-
percent,
employed guesswork
the Commission
Association;
nications
Cablevision Industries
arbitrary assumptions.
and made a number of
Corporation; Century
Corpora-
Communications
separate
opinion fully
Our
addresses this
tion;
Cable, L.P.;
Clinton
Coalition of Small
J.,
complaint.
opinion Ginsburg,
at 6-16.
See
Associates, L.P.;
System Operators; Columbia
say
formulating
Suffice it to
that in
the revised
Communications, Inc.;
Comcast Cable
Continen-
differential,
competitive
gave
Cablevision, Inc.;
tal
Cox Cable Communica-
greatest weight to the data from overbuilds and
tions, Inc.;
Inc.;
Systems,
C-TEC Cable
Daniels
adequately explained why
give
that it
it did not
Cablevision,
Inc.; Douglas Communications
equal weight
types
to the other two
II;
L.P.;
Corp.
Holding Group,
Georgia
Falcon
to rate
under the 1992
Partners;
Media, Inc.;
Cable
Greater
Harron
¶¶
Cable Act. See Second Reconsideration
29-
I, L.P.;
Corp.;
Communications
Horizon Cable
only requires
95-101. The statute itself
Inc.;
Company,
McDonald Investment
National
Commission to "take into account” or "consid-
Association, Inc.;
Cable Television
Newhouse
systems subject
er” the rates of
to "effective
Broadcasting Corporation;
Corp.;
Prime Cable
competition.”
543(c)(2).
543(b)(2)(C),
§§
47 U.S.C.
Corporation;
TeleCable
Time Warner Entertain-
L.P.;
Cablevision,
Company,
ment
United Video
13.
regula-
Because we do not believe the rate
Inc.;
Communications;
Western
and Wometco
any "grave”
tions
question,
raise
constitutional
Corp.
petitioners
Cable
The "Cities”
refers
presence
we do not decide whether the
a
such
Austin, Texas;
Ohio;
Iowa;
Dayton,
Dubuque,
question
paid
should alter the usual deference
King County, Washington;
Valley
Miami
the Commission’s
construction of
statute it
Council; Montgomery County, Maryland; St.
administers.
Louis, Missouri;
Wadsworth,
Ohio.
petitioners”
petitioners
The "cable
refers to
Inc.;
Armstrong Holdings,
Atlanta Cable Part-
(1984). Congress
spoken
partic-
If
has
to the
under
the rules
promulgated
issue,
(Supp.
question
ular
“that is the end of the
of the 1992 Cable
matter;
court,
agency,
“rate
as well as the
1992),
generally addresses
for the
IV
unambiguously
give
must
effect to the
ex-
regulation.”
pressed
Congress.” Id. at
intent of
essence,
contend
If,
hand,
at 2782.
on the other
Con-
S.Ct.
carry regulation
rules
that the Commission’s
spoken
gress has not
and the statute
either
oper-
categories of cable
by targeting
too far
respect
spe-
ambiguous
“silent or
to the
Congress intended
and services that
ators
issue,
question
the court
cific
regime.
Act’s rate
spare from the 1992 Cable
agency’s
whether the
answer is based on
contrast,
Cities,
primarily contend
permissible construction of the statute.” Id.
unduly restrict
rules
that the Commission’s
delegated
Finally, Congress
expressly
if
has
*34
government
by limiting local
regulation
cable
authority
agency
particular
fill
to the
to
industry. Arm-
the cable
supervision of
statute,
the ensu-
gap in the
we must affirm
concerns
Association raise
strong and the
“arbitrary, capri-
ing regulation unless it is
regulations
rate
relating
impact
to the
cious, manifestly contrary to the statute.”
or
operators and the Commis-
single tier
on
844,
Id. at
tion of cable rates in 97% of For “effec- competition,” franchises the United States. tive local authori- (a)(1). (and 2(a)(1), circumstances, § §Act 521 note ties U.S.C. certain the Com- mission) however, Contrary Congress’ expectation, regulate would rates for the basic 543(b)4 competition § and other video from satellites service tier under and the Com- emerge quickly expect- regulate sources did not as mission would 543(c).5 ed, began § operators Congress and cable to raise cable rates under Id. also By Congress prices. adopted, among provisions, require- found that other monthly average operators cable rate had increased ment offer a uniform area, throughout as much as the Consumer “almost 3 times rate structure a franchise deregulation.” 543(d), § prohibition Price Index since rate Id. and a Congress that rate “negative option billing,” namely, “charg[ing] concluded was necessary to ensure a subscriber for services the subscriber power affirmatively would not “undue market requested by exercise vis- has not name.” 543(f). programmers a-vis video consumers.” Id. (b)(5). 2(b)(5),
Id.
note
policy
With this
and structure in
Nevertheless, in the 1992 Cable Act Con-
mind,
petitioners’
turn
challenges
we
gress expressed
preference
a clear
for com-
*35
deciding
the Commission’s
In
rules.
whether
petition
regulation.
In
rather than rate
interpretations
comport
the Commission’s
legislative findings accompanying the 1992
with the 1992 Cable
we consider “the
(1)
Act, Congress
stated that it wished
language
design
and
of the statute as a
“promote
availability
public
to
to the
of a
whole,”
Program
American Scholastic TV
...(2)
diversity of views and information
to
FCC,
(D.C.Cir.
1173,
ming v.
46 F.3d
“rely
marketplace,
on the
to the maximum
1995) (quoting Fort Stewart Schools v.
feasible,
availability,”
extent
to achieve that
FLRA,
641, 645,
2043,
495 U.S.
110 S.Ct.
(3)
systems
and
“where cable television
are
(1990)), recognizing
company escape regulation rate even and 15% See by nar- Consequently, erred competi- only single, it faced a ineffective definition of “effective territory, along rowing the overbuild majority in a of its tor Congress. by See variety competitors competition” it enacted a niche to whom Chevron, 842-43, at 104 necessarily pro- 467 at S.Ct. compelled not U.S. would response to whom 2781-82.7 competitive vide a reports Congressional 522(12) cited in provides: committee 7. The
6. 47
guidance
offer no
the Commission’s brief
"multichannel video
term
as,
interpretation
See
person
overbuild definition.
but not
means a
such
distributor”
to,
862,
Cong.,
operator,
limited
multipoint
a cable
a multichannel
102d
2d Sess.
No.
H.R.Conf.Rep.
service,
p.
a direct broad-
(1992),
Cong.
distribution
&
U.S.Code
Admin.News
service,
receive-
cast satellite
only
or
television
(hereinafter
at 89.
“Conf.Rep.”);
Rep.
House
distributor,
program
who makes
Order,
satellite
be-
the Commission noted
Rate
As
purchase,
or cus-
available
subscribers
assumption
Congress’s simplifying
cause of
tomers,
program-
multiple channels of video
only
areas
face
in most franchise
will
ming.
does not
eluding
language
The Commission
contend
of the statute
interpretation
petitioners’
would
provide
specific
lead
“does not
answer” to
“absurd results.”
American
provision applies
Water whether the rate structure
Cf.
Works
v.
40 F.3d
competitive systems,
Ass’n
1270 to
the Commission de
EPA
(D.C.Cir.1994) (quoting Chemical
that exempting
systems comports
cided
such
Manufac
turers
v. Natural Resources
general
Ass’n
with “[t]he
thrust” of the 1992 Cable
Def
Council, Inc.,
116, 126,
Act,
470 U.S.
105 S.Ct.
regulation
is to decrease
as mar
(1985)).
1102, 1108,
Rather,
grow
193 statutory “neg- of the Television prohibition Cable Consumer Protection elusion of preempt, Competition not but option billing” Regula does Act 1992: ative Rate of with, pro- may tion, Reconsideration, coexist state consumer rather First Order Second 543(f) provides: Order, laws. Section Report tection and Third Notice of Pro 1164, charge posed Rulemaking, not a sub- 9 F.C.C.R. 1209 n. A cable shall (1993) (citation omitted) (“First any equipment or service 127 Reconsideration scriber ”).1 affirmatively re- subscriber has not 1 by purposes of this quested name. For Reconsideration, In Third subsection, to failure refuse subscriber’s to Commission further addressed the extent provide operator’s proposal to such a cable which state and local authorities should have equipment not be or shall deemed service jurisdiction option negative concurrent over request for ser- to be an affirmative such billing. pointed § of The Commission to 8 equipment. or vice provides: the 1992 “Noth Cable 543(f). § noted 47 U.S.C. Commission ing in this prohibit title shall be construed to preclude “not in the Rate Order that would any franchising authority State or from en adopting from and local authorities state acting enforcing protection or consumer taking relating action rules or enforcement law, specifically preempted not the extent equipment con or associated basic services 1484; by this title.” Stat. see U.S.C. adopt rules implementing with the we sistent 552(e)(1).12 Concluding § proscrip that the powers impose law to under state and their billing negative option tion of is a consumer Order, Rate 8 F.C.C.R. at 5905 penalties.” protection regula measure rather than rate reconsideration, the Commission n. 1095. On tion, the decided that state and Commission although regula state and local clarified regulation negative billing local option of billing permissi negative option was tion of 543(a)(1), § by rath not barred but ble, regulation could not interfere with such jur er is “concurrent with the Commission’s move right of negative billing regulate option isdiction to another, one tier to to the extent that from under the Act.” Third Re Communications such re had deemed “tier consideration, at 9 F.C.C.R. 4360-4361. Un structuring” protected by the 1992 Cable interpretation, der the state Commission’s Act: ... affirm that authori “We may governments and local enforce their may regulate restructuring in a not tier ties negative billing laws con option and other is inconsistent with the 1992 manner protection regulations long as the sumer so particular, Act. local authorities “approach[ actual ] enforcement does negative op precluded regulating from regulation provision o[f] ‘rates for of billing prevent restructuring tion tier re ” by rate frustrating requirement how service’ gardless of the local Implementation designed scheme the Commission.13 characterized.” Sections 1992); 552(c)(1) (West previously see also 47 U.S.C.A. 11. The Commission had determined tier, change 1994). Supp. in channels that “a the mix of United Code Service States channels, version, including will additions or deletions Large, the term the Statutes at uses like option billing pro- negative 552(c)(1). to the We follow the "title.” 47 U.S.C.S. vision, change[s] na- [it] unless the fundamental general the event a conflict be- rule that in [OJperators the tier.... need this flexi- ture of bility modify Large tween and the United the Statutes upgrade offerings their Code, language States in the Statutes Order, response marketplace changes.” Rate Welden, Large United v. controls. See States F.C.C.R. at If the Commission had al- 5906. 4, 95, 4, 1082, S.Ct. n. U.S. 98 n. application the blanket of state and local lowed (1964). L.Ed.2d 152 option billing changes negative to all tier laws operators, implemented local authorities is- 13.On November could, theory, against opera- take action Reconsideration, sued its which elaborated Sixth making unless tors for even minor modifications nega- in which state and local circumstances affirmatively requested consumer such option billing regulations might "approach” tive changes. preempted and therefore be subsection, Implementation Act. Sections 1992 Cable In the codified version of this place and Consumer Protection appears word Cable Television word "subsection” Reconsideration, 552(c)(1) (Supp. Order on IV Sixth "title.” See *40 petitioners The cable contend that does the 1992 explicitly prohibit negative option prohibiting billing laws state enforcing negative option the states from preempted are the 1992 Cable Act be 543(a)(1) billing regulations. Although prohibited they regula cause amount to rate precludes regulation “rates,” state of tion and conflict with the Commission’s over interpreted prohibition Commission has regulation all rate scheme. See 47 U.S.C. negative option billing pro- as a consumer 543(a)(1). They also maintain that provision tection regulation. rather than rate changed explana course without Commission Reconsideration, Third 4361. by stating in tion its First Reconsideration prohibition against negative op- Because the preempt that rate scheme would the federal billing entirely tion is directed at the terms negative option billing all state laws that purchase rates, and sale other than re-tiering arrangements, implicate but later interpretation Commission’s is reasonable. determining governments that and local state negative That option provision is not jurisdiction nega have full concurrent over regulation” supported by “rate is further option billing. tive Because of the Commis applies fact that it both to the basic and cable course, alleged change petitioners sion’s programming premium tiers and to channels jurisdiction contend that the concurrent deci programs, and a la exempt carte which are have, anything, only if prospec sion should from regulation” provisions the “rate of the because, tive effect after the First Reconsid 1992 Cable Act.15 eration, operators moved channels be tween tiers in reliance on the Commission’s maintain, petitioners The cable how re-tiering pro statement that such would be ever, if expressly even not does 543® prosecution from tected under state consum exempt negative option state and local billing protection er laws. laws, preempts they those laws insofar as prohibit permissible activities that are under
Although petitioners it is unclear whether the 1992 Cable Act. decline We to reach the arguing express preemption, are in favor of aspect petitioners’ merits of this preemption, preemp preemption,14 field or conflict we argument tion unpersuaded Congress preempted ripe judi because it not for negative billing statement, cial option state laws either review. The ex- Commission’s abstract, pressly through occupation or may field. the 1992 Cable Act or may Congress preempt The cable concede that state depending laws “preempt did not intend to they field” of con- whether “approach” rate protection industry. sumer in the cable Nor agency reviewable final action.16 See Conf.Rep. Order, Report Fifth and Seventh (provision Notice of 15. See at 65 “ensures that (1994) Proposed Rulemaking, 10 F.C.C.R. 1226 charge will not be able to cus- ("Sixth Reconsideration"). The packages tomers for tiers or concluded that when "there is an actual conflict equipment services or do not affirma- between federal and state law or where state law tively request individually-priced pro- as well as accomplishment stands as an obstacle to the Rep. channels"); grams (noting or House at 79 objectives Congress, execution of the full per-programming, per- that services offered channel, aon If, preempted.” state law is Id. at 1265. pay-per-view or basis are not example, protection a state consumer law would regulation). "require affirmative consent from subscribers be- passing through fore external costs and inflation Indeed, after the Sixth Reconsideration it is rules, adjustments permitted by” price cap preemption policy evident that the Commission's regime the law “would undermine the federal yet “crystallized” has not and that both the court governing cable rates” and would therefore be agency and the having would benefit from impermissible. Id. at 1266. Nor could a state question presented ain more concrete form. See bring against moving action a cable Industries, Inc., E.P.A., Eagle-Picher v. U.S. tier, long channels to a different so as such re- (D.C.Cir.1985); NARUC, F.2d 851 F.2d tiering "fundamentally does not alter the affected (quoting at 1428-29 State Farm Mutual Auto. tier.” Id. at 1267. Dole, (D.C.Cir. Ins. Co. v. 802 F.2d 1986)). Culinary 14.As the court observed in Jackson v. Commission stated in the Sixth Re Ltd., (D.C.Cir. determine, Washington, School 27 F.3d consideration abstract, it could not 1994), Supreme ways Court has defined three whether the 1992 Cable Act would regulations preempt in which preempt interfering federal laws and oper state laws with a cable state and ability local laws: ator’s to re-tier. See Sixth Reconsidera-
195
1212,
Similarly,
at 1220.
FCC,
727 F.2d
Alascom,
1219 the abstract.”
727 F.2d
v.
Inc.
“approaches”
regula-
law
rate
whether state
(D.C.Cir.1984);
Standard Oil
also FTC v.
see
232, 241, 101
question
is a
that can
be decided
S.Ct.
tion
California, 449 U.S.
Co. of
(1981)
language
scope
(agency ac
after a review
494,
488,
416
66 L.Ed.2d
statute at issue.17
posi
the state
statement
a “definitive
tion must be
Utility
Regulatory
tion”);
Ass’n
National
so, while these considerations
Even
Energy,
Department
v.
Commissioners
against
petition
weigh
immediate review
(D.C.Cir.1988)
1424, 1428-29
F.2d
argument,
grant
would
preemption
we
ers’
(“NARUC”).
hardship
parties
if
judicial review “the
withholding
were
addition,
legal” of
court consideration”
“pure
unlike
In
Laboratories,
weighty
more
still. Abbott
presumptively renewa
are
questions, which
148-49,
1515;
Gardner,
at
at
87 S.Ct.
see also
ble,
v.
387 U.S.
Laboratories
see Abbott
States,
1507, 1515, 18
v.
Corp.
Rail
United
136, 149,
L.Ed.2d Consolidated
87 S.Ct.
U.S.
(D.C.Cir.1990).
574,
Although
(1967),
the 1992 896 F.2d
of whether
the issue
arising
petitioners point to harm
negative option the cable
state
preempts
Cable
arising
of lawsuits
under
ques
from the burden
a host of factual
billing laws involves
laws, the Commission has
in each
different state
state law at issue
peculiar to the
tions
Alascom,
1219-20;
plans
preempt
those
made clear that
727 F.2d at
case. See
negative option billing laws that inter
Energy Re
state
Elec. v.
compare
Gas &
Pacific
changes
“fun
Comm’n,
190, 201, 103
any tier
that do not
S.Ct.
fere with
461 U.S.
sources
(1983).
damentally
affected tier.” Sixth
1720,
alter the
State
75 L.Ed.2d
Reconsideration, 10 F.C.C.R. at 1267.18 To
their
vary in
as well as
their terms
laws will
fundamentally
a
changes
alter
negative option the extent
state
application. Certain
tier,
repeatedly indicat
the Commission has
may interfere with the Commis
billing laws
negative
changes
such
will violate the
“approach
ed that
and therefore
rate scheme
sion’s
billing provision of the 1992
Act.
others,
option
appearing simi
regulation” while
(“restruc
Order, 8
at 5908
face,
narrowly
Rate
F.C.C.R.
may have been
See
lar on their
negative option
turing
to the
avoiding any potential
will be
thereby
interpreted,
restructuring
a
if the
effects
billing provision,
Act. See Jones
the 1992 Cable
conflict with
519, 529,
change in the nature of the
Co.,
fundamental
Packing
430 U.S.
v. Rath
receive”);
(1977) (de
Sixth Recon
subscribers
service
we hold that is Challenges Cities’ C. Franchising 5. Refunds Local Preemption Agree- of Basic Tier Authorities. Cable also contend ments. The Commission determined that allowing the Commission erred fran preempts franchising the 1992 Cable Act au- chising authorities to order refunds reme regulating thorities from the number and dy unreasonable basic service rates. Rate type of channels that must be offered on the Order, 5725; 8 F.C.C.R. Third Reconsid Order, 5738; basic tier. Rate 8 F.C.C.R. at eration, 9 4351-52. Petitioners Reconsideration, First 9 F.C.C.R. at 1205- significant Congress deem the fact that ex 06. The Commission reasoned that Con- pressly contemplated remedy the refund gress preempt meant such tier, programming specified “components” when 543(c)(1)(C), § express but such omitted au 543(b)(7) basic service tier. pro- Section thorization for the basic service tier. Id. vides: 543(b)(5). States, v. Russello United Cf. (A) 296, MINIMUM CONTENTS. —Each ca- U.S. 104 S.Ct. (1983). system ble of a pro- L.Ed.2d 17 But the fact that Con shall gress provided separately for refunds of vide its “unreasonable” subscribers a available programming rates does not mean that subscription basic service tier to which is express the lack of such authorization for the required any for access to other tier of implicit tier basic service constituted an re shall, service. Such basic service tier at a jection appropriate remedy. of refunds as an minimum, following: consist of the Congress’s prescribe” “failure to the refund (i) signals All carried in fulfillment of remedy for basic tier rates “could mean ei [“must-carry”] requirements of [47 contemplated by ther that no [refunds were] §§ 534r-35]. Congress, Congress or that left the choice” (ii) educational, agency appro Any public, govern- to the whether refunds were priate. Corp. programming General Motors v. National ment access re- [“PEG”] additions,” sys- “permitted Congress tente” franchise of the
quired pro the minimum and maximum of defined to subscribers. provided tem to words, gramming possibilities. In other (iii) any signal of television broad- Any 543(b)(7)(A) el describes provided cast station ements that all must offer and subscriber, except sig- operator to 543(b)(7)(B) possible lists the universe of secondarily by a transmitted nal which *43 (A) Because neither subsection additions. beyond the local service carrier satellite (B) pro includes non-PE nor subsection G of such station. area authorities, by franchising grams required (B) TO BA- ADDITIONS PERMITTED Congress pro intend to include such did not operator may add cable TIER. —A SIC Second, gramming on the basic service tier. signals or programming video additional by providing tier must include that the basic tier- the basic service services franchise, required by programs the PEG Order, 543(b)(7); 8 § see Rate 47 U.S.C. suggests franchising that the 1992 Cable Act Reconsideration, 5738-39; First at types pro require cannot other authorities 1205-09. at 9 F.C.C.R. Third, because the grams on the basic tier. Commission, conclude, as did We specifically permits op Act 1992 Cable cable at statutory language “particular that programs of their choice to erators add design of issue, language as the as well tier, any programming limi the basic service whole,” Corp. K Mart v. as a statute posed by agreements would tations franchise Inc., 281, 291, Cartier, 108 S.Ct. 486 U.S. statutory express authoriz conflict with (1988), 1811, 1817, require L.Ed.2d 313 100 If, example, franchising au ation.20 speci franchising agreements preemption operator thority forbade a cable from offer service tier. fying contents of the basic tier, ing sports programs on its basic America, v. United Steelworkers See Dole deprived of operator cable would be its statu 41, 929, 937, 26, S.Ct. U.S. tory authority pro to “add additional video (1990). Although allowing fran L.Ed.2d 23 to the basic gramming signals or services pro to enforce basic tier chising authorities service tier.” Id.21 violate requirements would not gramming statute, language of the In addition to the Act, of the 1992 Cable any single provision franchising authorities’ control preemption of statute, whole, clearly expresses as a “the regu- the dual tier effectuates over basic program such Congress’ intention” to leave the 1992 Cable un- latory framework of Id. operators.19 ming decisions cable franchising pri- have der authorities at 938. 110 S.Ct. regulating mary responsibility for the basic regulates little service tier and the Commission of the statute leaves language franchising If that, programming services. apart programming re from the doubt 543(b)(7)(A), to define the con- § authorities were allowed quirements enumerated tier, effectively they could tent of the basic operators themselves have exclusive services onto the programming force cable on the basic programming control over tier, thereby depriving the First, by dividing the basic basic service tier. clearly Congress in- jurisdiction that con- of the components into “minimum tier
service
(leased
operator
over basic tier
control
§
access re-
visioned cable
19. But see
subject only
quirement).
to the minimum stat-
programming,
requirements.
utoiy
Report,
which describes
20. The Conference
[public
composition
as "all
ac-
of the basic tier
attempt
this lan-
to circumvent
21.The Cities'
signals required
[47
under
to be carried
cess]
agreements do
guage by arguing
franchise
educational,
535], any public,
§§ 534 &
U.S.C.
ability
operator's
to "add”
not interfere with the
any
programming,
governmental access
operator enters into such
channels because
provided
signal
station
broadcast
unconvincing.
"voluntarily"
Pro-
contracts
program-
operator,
well as other video
as
imposed by
gramming requirements
a franchis-
may
ming signals
choose
that the cable
obtaining
authority
a fran-
ing
a condition of
tier," Conf.Rep.
provide
on the basic
govern-
virtually equivalent
direct
chise are
p.
Cong.
& Admin.News
U.S.Code
regulation.
added),
Congress
ment
(emphasis
en-
underscores
§
programs
franchis-
exercise.
See
defines certain
tended it
543(a)(2)(B).
sum,
“language
both the
ing
require
authorities can
to be carried on
design
the statute as a whole”22
and the
Reading
the basic tier.
the two sections
545(d)
the 1992 Cable
demonstrate
harmony,23
opera-
means that cable
authority
franchising
control over
preempts
non-regu-
tor control over
tier, with
composition of the basic service
may
lated tiers
constrained
fran-
channels.
exception
of PEG
authorities,
chising
franchising
but-
authori-
may
aspect
ties
have limited control over one
however,
other,
Cities;
point to
still-
namely,
programming,
of basic tier
the local-
pre-1992
cable statute
intact sections
ly mandated PEG channels.
franchising
may reg-
authorities
under which
provided
ulate “services”
544(b)(2),
Nor does 47 U.S.C.
which au-
franchising
may
authorities
as evidence thát
thorizes
authorities to enforce
composition. They
tier
first
control basic
requirements governing
franchise
“broad cat-
*44
545(d),
provides
§
which
that
cite U.S.C.
egories
programming
of video
or other ser-
may rearrange programming
operators
vices,” support
position. Reading
the Cities’
“if the rates for all
between tiers
provision consistently
§
this
with
543 leads
in such actions are not
service tiers involved
to the
conclusion
authorities
”
subject
regulation under section 543....
to
may impose
governing
standards
the overall
Cities,
According
by expressly
to the
autho-
programming
service and
offered
rizing
reorganize
those
(with
system
may
exception
but
not
regulation,
not
tiers
channels)
programming
PEG
dictate what
545(d) implies
operators may
§
that cable
must be offered
the basic service tier.
rearrange
programming
tiers
provisions
pre-1992
Because the
from the
regulation.
do
face
cable statute are not
inconsistent
adequately
The Commission
re
provisions of the 1992 Cable Act discussed
sponded
argument
to this
in its First Recon
above, they
Congress’s
do not obscure
clear
sideration,
545(d)’s
concluding
§
“affir
preempt
intention
the 1992
Act to
rearrangement
mative authorization”
tier
regulation
components
local
of the
of the
unregulated
for
services “is not inconsistent
basic tier.24
that,
regulated
with the
...
in the
view
Requirement
single
2.
of a
basic
environment,
composed
the basic tier is
Order,
tier.
Report
its First
speci
of the
and access channels
broadcast
Commission, citing provisions in the 1992
fied in the statute and such other services
consistently
Cable Act that
refer to “basic
operator may
pro
‘that the cable
choose to
”
singular,
tier” in the
concluded that the stat
Contrary
vide.’
at 1208.
contemplates
operator
ute
that each cable
suggestion,
Cities’
the Commission’s inter
“only
must offer
pretation
superfluous
one basic tier.” 8 F.C.C.R.
does not make
545(d)’s
§
point
authorization of tier-
at 5744.25 The
an
affirmative
Cities
extant
switching
unregulated
from
services because
definition
thel984 Act as evidence that
1281,
(D.C.Cir.1994),
Programming,
22. American Scholastic TV
46 F.3d
28 F.3d
with Califor-
(citation omitted).
FTC,
Optometry
State Bd.
nia
v.
910 F.2d
(D.C.Cir.1990).
979-82
capable
"[W]hen
23.
two statutes are
of co-exis-
tence,
courts,
duty
clearly
543(b)(5)(D) (subscribers
it is the
of the
25.E.g.,
absent
§
expressed congressional
intention to the con-
availability
must "receive notice of the
trary,
Mancan,
regard
each as effective.”
v.
tier”);
543(b)(6) (cable
Morton
§
opera-
basic service
id.
535, 551,
2474, 2483,
417 U.S.
94 S.Ct.
days'
“provide-
tor must
advance notice to a
(1974).
[I]n authorities based on the lacking regulate placed regulation by the resources to can affir- tance on that the re- "contracts,” however, ing franchising any proviso suggesting into such sion. It does not contain clearly functioning regulators; authorities are indeed, as approve that the Commission must "unreason- "contract,” as consideration for such a simply franchising able” rates because authori- franchising authority agrees pursue not to Indeed, agree suggests ties to them. the Act proceedings against unfair-rate power otherwise, —a by requiring deny the Commission to regulatory intrinsic to its role. In addi- any franchising authority certification of tion, out, points as the Commission the 1992 adopts regulations "that are not consistent gives Cable Act the Commission a broad mandate regulations prescribed by with the the Commis- rates, to ensure "reasonable” cable as deter- 543(a)(4)(A). sion” under the Act. 47 U.S.C. mined under standards created the Commis- speetive franchising authority.” particular Third Re- to a ties use of franchise fees is consideration, In inconsistent 9 F.C.C.R. at 1084. other with the statute. For both of reasons, words, these interpreta- reasons that it is not the Commission’s 543(b), fees, tion of 47 allowing it directly regulating the use of franchise assume upon the basic tier using but is instead the existence of such fees showing by franchising authority a franchising authority to decide whether its franchise fees are insufficient to cover the support because it needs Commission’s regulation, impermissible. costs regulate cannot afford to itself. The Commission nevertheless erred II. adopting presumption franchising receiving
authorities franchise fees have the Regulation single A. tier cable regulate presump resources to because the operators. Armstrong Petitioner Holdings, implies franchising authority tion Inc., an contesting filed individual brief must use available franchise fees for regulations applied Commission’s to “sin purposes regulation. deciding gle-tier operators.” of rate Armstrong offers all of authority regulate it had the single basic tier subscribers a tier sepa rather than upon request rate basic rates authori and cable tiers. Ac cording Armstrong, regulate, ties that lacked the the Commission’s resources determining method for reasonable rates un Commission relied on its “broad mandate der the Second arbitrary Reconsideration is over basic service ‘The rates: Commission capricious penalizes single-tier because it shall, by regulation, ensure that the rates for ” systems. Implementation Sections the basic tier are service reasonable.’ Rate e Cabl Television Consumer Protection and Order, (quoting 8 F.C.C.R. at 5675 Competition Regulation, 1992: Rate 543(b)). (as provision interpreted If this Reconsideration, Second Order on Fourth be) reasonably can to authorize the Com Order, Report and and Fifth Notice of Pro regulate mission to rates franchise areas (1994) posed Rulemaking, 9 F.C.C.R. 4119 government regula cannot where afford (“Second ”). Reconsideration tion, mandatory then under its terms the regulate Commission must all such areas. notes, As the Commission because Arm Although the could also have strong did not raise the issue before the reasonably provision concluded that this does *47 instance, pre Commission in first the it is any way step not in authorize it to in when raising appeal. cluded from it on See Flori regu authorities cannot afford to Corp. da Cellular Mobil Communications v. late, provision possibly support the cannot FCC, 191, (D.C.Cir.1994); 28 F.3d 200-01 present the Commission’s view that it allows FCC, Alianza Federal de Mercedes v. 539 step the in Commission at its discretion. 732, (D.C.Cir.1976). Armstrong F.2d 739 addition, even if the Commission could single could have raised the tier issue either determining consider relevant criteria in in petition comments or in a for reconsidera franchising authority whether a can afford to Broadcasting, tion. See Southern Indiana regulate, it could not use those criteria to (D.C.Cir. FCC, 1340, Ltd. v. 935 F.2d 1342 542(i) accomplish indirectly directly what 405(a). 1991); Although proscribes. Notwithstanding explanation recognized exceptions court has pru to this nothing that its rule is more than a test requirement, dential “exhaustion” see South making focused on the most efficient of use Indiana, 1342; ern 935 F.2d at Office of resources, limited Commission Third Recon Communication the United Church of sideration, 4333, 9 F.C.C.R. at the effect of (D.C.Cir. FCC, 702, Christ v. 779 F.2d 706-07 require Commission’s test is to that 1985), such apply there is no an occasion such franchise fees be dedicated to cable rate exception Armstrong here. offers no reason regulation purposes. A test ties the single for its failure to raise the tier issue assumption Commission, responsibili- of the Commission’s before the and because no other
202
issue,
challenges
properly
are not
before
party presented the
SBA
Compare
Although
may,
to address it.
in its
opportunity
had no
court.
the court
discretion,
challenges
only by
United
Communication
address
raised
Office
Christ,
intervenors,
ation’s Com- interpretative The immediate question is regulations mission’s under the SBA and whether program- “multichannel video properly RFA are before the court.31 543(Z)(l)(B)(ii) ming § distributors” in are Accordingly, grant Conclusion. we only 543(i )(l)(B)(i)— § those mentioned in petitioners’ petition respect to the Com- unaffiliated, having comparable program- interpretation mission’s of the overbuild defi- ming, offering percent to 50 of house- buy- competition, nition for effective the tier question holds. The is of regu- considerable through provision, and the uniform rate latory importance. Distributors are immune provision; grant pe- structure we the Cities’ from the Commission’s ratemaHng rules if respect tition with to the Commission’s at- they competition,” are to “effective if fees; tempt regulate the use of franchise are, words, in other in a franchise area deny petitions we otherwise 543(Z)(l)(B)’s meeting § description. Under Cities, except and the reading, the Commission’s competi- effective contention, petitioners’ preemption tion does not exist unless the distributors unripe. Finally, which we dismiss we (i) satisfying part are the ones whose sub- petition by Armstrong. dismiss the filed up percent scribers add to more than 15 (ii). part under majority, on the other RANDOLPH, Judge, dissenting Circuit hand, views it as irrelevant whether part: percent more-than-15 consists of distribu- disagree majority’s I with the decision in- (i); satisfy tors who distributors will do. rejects sofar as it the Federal Communica- interpretation tions Commission’s of 47 difference, appreciate To consider an 543(Z)(1)(B). signed up area where one distributor has percent of the households. One of its com- 543(Z)(1)(B) entirety: Here is in its petitors comparable offers service to more As used in this section— households, than half of per- but (1) competition” term “effective players cent subscribe. Two other minor means that— percent the area each have a 5 In share. [******] this example, the Commission would not find competition.” My colleagues “effective (B) the franchise area is— would, pro- because the “multichannel video (i) served at least two unaffiliated (ii) gramming distributors” mentioned in programming multichannel video distrib- any particular category. confined comparable utors each of which offers programming per- video to at least 50 examining competing interpreta- these cent the households in the franchise tions, we must first decide whether area; and 543(Z)(1)(B) what, employing in the sci- mind, (ii) language ence of and the is called “co- number households sub- gives scribing reference.” Professor Pinker this illus- of- services “Say you talking tration: program- fered multichannel video start about an indi- ming largest by referring distributors other than the vidual to him as the tall blond *49 appear apply going-for- 30. It does not from the record before the er to SBA size standards on a (other any petitioner court that than the Associa- Implementation ward basis. Sections the of of tion) pro- raised the SBA and RFA issues in the Compe- Cable TelevisionConsumer Protection and ceedings before the Commission. Regulation, Rate tition 1992: Fifth Order of Proposed on Reconsideration and Notice of Rule- Although incorporate the Commission did not (1994). Thus, making, 9 F.C.C.R. 5327 the Asso- SBA size standards in its initial Rate Order or the may, prospectively, at ciation least obtain the here, regulations at issue it has since initiated a relief it seeks. process notice and comment to determine wheth- in companies ag- the to considered shoe. The second time be with one black man you conversation are to him in the you refer gregating subscribership” under subsection man; time, him the third likely to call the (ii). (i) (ii) appears at to limit least in Since expressions just But the three do him. regard qualification, to the affiliation it is ways people or even to three of to three refer (ii) plausible suppose limits that it also single person; second thinking about the qualifica- regarding 50-percent-offering the saving just ways are of breath.” and third tion —that what we have here is indeed co- Language PinkeR, The 79- Instinct Steven (ii) words, would reference. In other be (1994). interpreted if it number as said: “the 543(i )(1)(B). §at first look The Now subscribing programming households ser- is if the class of distribu- thing I notice that said, by vices or [such offered or those or (ii) by in is in no wise limited tors mentioned just perhaps even multichannel video the] (i), comprising the class of distributors the programming other than distributors the My rea- appears rather senseless. statute largest programming multichannel video dis- provision effec- soning is this. The describes competi- percent competition. There cannot be tributor exceeds of the households tive if all the area are tion distributors in franchise area.” company. Congress divisions of same way testing plausibility One this you why get That cannot be- knew this. is reading, reading which is the embraced (i) yond unless are “unaffili- the distributors (ii) Commission, expressly does not contain pre- ated.” While see how others qualifier, think the one would distribu- sumably language familiar with (ii) Why? in must be “unaffiliated.” tors also Raymond it. See Randolph, statute read A. to think that Because would be absurd Dictionaries, Meaning, Plain and Context in company one division of a holds an 84 when Statutory Interpretation, 17 Haev.J.L. & percent market and another share Pub.Pol’y (1994). 71, 77 The House Commit- company per- division of same holds 16 543(Z)(1)(B) tee drafted stated in cent, competition.” there would “effective be report competition” that “effective would ex- (To simplify analysis, I an have assumed that if ist least two “at sources multichannel unaffiliated distributor offered service to ev- programming percent video to 50 offered (i), thereby eryone, satisfying but no one households and subscribed to least subscribed.) (i) requires Notice also H.R.Rep. percent competing “compa- offer of households.” that the distributors No. (ii) service,” (1992). does mention rable while Cong., 102d 2d Sess. The (i) qualifier. The idea behind must be this explained Conference Committee effec- competition” that “effective entails head-to- competition present tive would if a be fran- competition. head When dominant dis- chise “is served two area at least unaffili- and the tributor offers channels nondomi- offering comparable ated [distributors] video (i) nant distributor offers subsection percent least 50 not “compara- is not satisfied. service is area, in and at households the franchise least 76.905(g). If ble.” See C.F.R. percent of the households the franchise (i) “comparable qualifier service” does not area subscribe to smaller of these two (ii), limit class of distributors the result H.R.Conf.Rep. systems.” 102d No. exceedingly strikes me as odd: “effective (1992), Cong., Cong. 2d Sess. 62 U.S.Code & competition” although could said to exist be 1992, p. Admin.News 1244. Both statements making up percent those the 15 share under support reading; tend Commission’s (ii) offering solely consisted of distributors (ii) percenter that the 15 markedly assume to the services inferior dominant distributor’s. percen- of the 50 same distributor one (i). great place ters in I do not mean correct, my analysis
If far is thus significance on these statements. Com- majority may quite saying mistaken in (i) acknowledged any way forthrightly that subsection not limit in “does mission *50 specific issue report addresses the “[n]either
confronting us here: how to measure the INTERNATIONAL LONGSHOREMEN’S subscribership is more than one com- if there ASSOCIATION, AFL-CIO, programming dis- petitive multichannel video Petitioner, Implementor in the franchise area.” tributor v. the Cable Television Con- tion Sections of NATIONAL LABOR RELATIONS Competition sumer Protection BOARD, Respondent, Regulation, Report and Order 1992: Rate Proposed Rulemaking, and Further Notice Authority, Canaveral Port (1993). n. 8 F.C.C.R. al., et Intervenors. No. 93-1812. I think the
Where does all this lead? 543(i )(1)(B)yields firm con- language of no Appeals, United States Court of clusion, certainly meaning” “plain no as the District of Columbia Circuit. True, majority supposes. unlike subsection Argued May 11, 1995. (ii) (i), contains no modifiers subsection “multichannel video Decided June distribu- 1995. (ii) say
tors.” But to that the distributors of Rehearing Suggestions Rehearing distributors are therefore not limited to the Aug. Banc Denied (i) beg question. is to Does the ab- or a sence of a “such” or a “those” or a “said” signify the classes
“the” a difference between subsections, or is
of distributors the two merely drafting? a con-
this inartful Would necessarily
gressional away reader come majority’s of the statute? all view With respect my colleagues,
due honest view, is, questions my
answer to these
“Maybe, maybe not.” this state of Given
affairs, plausible interpre- the Commission’s
tation, interpretation an based on the sort of
policy choice the is entitled to
make,
day.
should have carried the
notes
has filed waiver re-
further
protesting
barred from
the Commission’s
quest,
currently
under consideration
regulations
grounds
presented by
not
if the
re-
the Commission. Even
waiver
petitioners.
quest gives
oppor-
the Commission sufficient
tunity
impact
to consider the
rules on
The cable
do mention the SBA
single
operators,
not
tier
the Commission has
arguments in
and RFA
a short two-sentence
review
the court
concluded its
does
However,
in their
footnote
brief.
the foot
agency’s
have the
decision and
benefit
explains
develops
note neither
nor
the statu
explanation.
reasoned
tory challenges,
noting
inter-
“[t]he
venors’ brief will discuss this
This
issue.”
reasons,
single
For
tier
these
issue is
complex
regulatory
terse reference
case
properly
before
court. See Coalition
insufficient
raise an issue unrelated to
Hispanic
the Preservation
Broadcast
petitioners’
challenges
other
and not dis
FCC,
(D.C.Cir.),
78,
ing v.
F.2d
76-77
cussed elsewhere in
briefs
men
their
or even
denied,
907,
298,
cert.
502 U.S.
S.Ct.
petition
in their
tioned
review. See Rail
(1991);
Federal,
L.Ed.2d 242
Alianza
way
v.
Labor Executives Ass’n
States
United
F.2d at 739.
Retirement,
856,
(D.C.Cir.
R.R.
749 F.2d
1984);
Regan, 714
Carducci v.
F.2d
B. Small Cable Business As
(D.C.Cir.1983);
Development
Human
Challenges.
cf.
sociation’s
Intervenor Small
NLRB,
(D.C.Cir.1991),
Ass’n v.
937 F.2d
(“the
Cable Business Association
Associa
denied,
rt.
503 U.S.
112 S.Ct.
tion”)
challenge
ce
raises the additional
that the
(1992).
1512,