EchoStar Comm Corp v. FCC

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued February 5, 2002 Decided June 11, 2002

No. 01-1032

EchoStar Communications Corporation,
Petitioner

v.

Federal Communications Commission and
United States of America,
Respondents

Comcast Corporation, et al.,
Intervenors

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

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

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

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

Before: Ginsburg, Chief Judge, Edwards and Sentelle,
Circuit Judges.

Opinion for the court filed by Chief Judge Ginsburg.

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

I. Background

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

Section 548(b) prohibits a "satellite cable programming
vendor" affiliated with a cable operator from engaging in:

 unfair methods of competition or unfair or deceptive acts
or practices, the purpose or effect of which is to hinder
significantly or to prevent any multichannel video pro-
graming distributor [MVPD] from providing satellite ca-
ble programming....

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

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

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

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

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

II. Analysis

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

A. Dismissal of the Complaint

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

1. Substantial evidence

With regard to the substantiality of the evidence underly-
ing the Commission's decision, EchoStar does not dispute
that the affidavit of Sam Schroeder, an executive of the
Comcast affiliate that owns SportsNet, supports the Commis-
sion's finding that terrestrial delivery costs Comcast signifi-
cantly less money than would satellite delivery. Instead,
EchoStar claims that Schroeder's declaration is not substan-
tial evidence because it is "unsupported and untested" and
hearsay, for which proposition it relies principally upon Con-
solidated Edison Co. v. NLRB, 305 U.S. 197, 230 (1938).

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

We have to agree with Comcast. There is no support for
EchoStar's claims that uncorroborated and untested testimo-
ny and hearsay testimony cannot constitute substantial evi-
dence. Although the Court in Consolidated Edison did say in
dicta that "[m]ere uncorroborated hearsay or rumor does not
constitute substantial evidence," 305 U.S. at 230, the Court
has long since made clear that this statement was "not a
blanket rejection by the Court of administrative reliance on

hearsay irrespective of reliability and probative value," Rich-
ardson, 402 U.S. at 407; hence in that case the Court
concluded that unsworn doctors' examination reports, contra-
dicted by direct medical testimony, constituted substantial
evidence upon which an agency could deny disability insur-
ance benefits under the Social Security Act. Id. at 402.
Moreover, we have held specifically that a complaint proceed-
ing brought under the Communications Act may be resolved
solely upon affidavits submitted by the parties, without allow-
ing discovery, see American Message Ctr. v. FCC, 50 F.3d 35,
41 (D.C. Cir. 1995); administrative agencies may consider
hearsay evidence as long as it "bear[s] satisfactory indicia of
reliability," Crawford, 50 F.3d at 49; and hearsay can consti-
tute substantial evidence if it is reliable and trustworthy, id.

The propriety of the Commission's reliance upon Schroe-
der's affidavit is particularly clear. First, the affidavit, al-
though technically hearsay, that is, an out of court statement
offered for the truth of the matter asserted, was made under
oath. Second, the facts contained therein were undisputed.
EchoStar submitted no contradictory evidence -- indeed, no
evidence whatsoever except two magazine articles. See Mot.
to Compel at 5-6. If the Commission could not rely upon the
uncontested, sworn affidavit of a witness speaking from per-
sonal knowledge, then one would be hard-pressed to under-
stand why a district court may, upon the basis of a sworn
declaration, grant summary judgment under Federal Rule of
Civil Procedure 56.

2. "Evidence" the Commission did not address

EchoStar argues the Commission ignored evidence that
Comcast intended to evade the requirements of s 548(c). In
this regard, EchoStar claims to have "proffered" the following
evidence: (1) an admission by an unnamed Comcast represen-
tative made at a July 23, 1998 meeting with the Commission;
and (2) a statement by Comcast President Brian Roberts, as
reported in Vanity Fair magazine. Relying principally upon
Green v. Shalala, 51 F.3d 96 (7th Cir. 1995), EchoStar argues
that "[a]n agency determination that fails to grapple with

significant record evidence is not supported by substantial
evidence, and is moreover, arbitrary and capricious."

The Commission argues that it was under no obligation to
address the Vanity Fair article in its order because "[t]here
is nothing in Mr. Robert's [sic] alleged quotes [sic] to suggest
that Comcast did anything unfair or to cast doubt on the
claim of significant cost advantages from terrestrial delivery."
Comcast agrees with that assessment and goes on to point
out that there is no record evidence of an admission made at
a July 23, 1998 meeting.

Applying the standard that EchoStar suggests, we cannot
fault the Commission for having ignored any "significant
record evidence." First, EchoStar points to no record evi-
dence of a July 23, 1998 meeting, much less an admission at
such a meeting. In its brief EchoStar refers to "evidence
that Comcast's refusal to deal with EchoStar was a 'purpose-
ful decision related to competition.' " It cites not to record
evidence, however, but to an allegation made by its counsel in
the Motion to Compel he submitted to the Bureau, which
motion conspicuously lacks any citation to evidence. Thus,
even if the statement is relevant -- which is doubtful inas-
much as it relates to Comcast's refusal to sell to EchoStar
and not to Comcast's decision to use terrestrial delivery --
the Commission could properly ignore the unsupported asser-
tion that the statement was made.

Second, the statement attributed to Roberts in Vanity Fair
lacks any probative value. Consider:

The question now is whether Roberts can capitalize on an
apparent loophole in the 1996 Telecommunications Act in
order to lock up the Philly area's sports programming.
"We don't like to use the words 'corner the market,'
because the government watches our behavior," Roberts
says with a laugh. "Let's just say we've been able to do
things before they're in vogue."

The New Establishment: Brian Roberts, Vanity Fair, Oct.
1997, at 166. Even if we assume the accuracy of the quota-
tion, it says nothing about whether Comcast moved from

satellite to terrestrial delivery in order to evade the program
access requirements of s 548(c). At most, Roberts concedes
that Comcast is taking advantage of SportsNet's not being
covered by s 548(c) because it is delivered terrestrially.

In its reply brief EchoStar argues for the first time before
this court that the Commission's finding that Comcast did not
intend to evade the requirements of s 548(c) is not supported
by substantial evidence because the Commission failed ade-
quately to address (1) a letter from Comcast in which it
stated that SportsNet would not be distributed "on any
satellite delivered service in the Philadelphia market"; (2)
Schroeder's statement that Comcast refused to sell SportsNet
to EchoStar in order to enhance its value to other purchasers;
and (3) EchoStar's offer to "cover a share of the uplink costs"
of delivering SportsNet via satellite. In the "Statement of
Facts" in its opening brief EchoStar noted that it had pre-
sented the evidence to the Bureau, but it nowhere in that
brief faulted the Commission for failing adequately to address
this evidence. Because the arguments to that effect were
raised for the first time in EchoStar's reply brief, they are
not properly before the court. McBride v. Merrell Dow
Pharm., Inc., 800 F.2d 1208, 1210-11 (D.C. Cir. 1986).

3. Failure to explain

EchoStar contends that the Commission's decision should
be set aside as arbitrary and capricious because the Commis-
sion failed in two respects to "articulate its reasons in a clear
and understandable manner." First, the Commission stated,
"we agree with the Bureau that the facts alleged are not
sufficient to constitute" a violation of s 548(b), even though it
is clear that the Commission's decision relied upon facts found
by the Bureau. See Commission Order at WW 13-14. Second,
EchoStar questions the weight the Commission placed upon
the Bureau's finding that SportsNet "was not a service that
was moved from satellite to terrestrial distribution, but was in
fact a new service." Id. p 14. EchoStar argues that it ought
to be irrelevant whether programming "is moved to terrestri-
al delivery" with an intent to evade access requirements or
whether "terrestrial delivery is used from the outset" with

that intent. EchoStar also notes that some of the content on
SportsNet "had previously been distributed to cable systems
by satellite."

In response, the Commission confirms that its determina-
tion that Comcast did not engage in unfair methods of
competition or unfair or deceptive acts or practices involved a
"factual inquiry." The Commission gives no explanation,
however, for the statement in its order that the "facts al-
leged" are insufficient to state a claim. With respect to
EchoStar's second argument, the Commission fails to explain
why choosing terrestrial delivery from the outset with an
intent to evade would not give rise to a violation of s 548(b).
Comcast does not respond at all to EchoStar's arguments.

Although EchoStar is correct that the Commission said it
was evaluating the s 548(b) claim based upon the "facts
alleged" when clearly it relied upon the findings made by the
Bureau, the misstatement is immaterial. Both the Commis-
sion's reasoning and its actual holding "may reasonably be
discerned." See Bowman Transp., Inc. v. Arkansas-Best
Freight System, Inc., 419 U.S. 281, 286 (1974). As for
EchoStar's argument that the Commission inadequately ex-
plained its reliance upon the Bureau's finding that SportsNet
is a new service, the Commission's conclusion that Comcast
chose terrestrial delivery for a valid business reason neces-
sarily precluded holding that Comcast acted to evade the
requirements of s 548(c), regardless whether it switched an
existing service to terrestrial delivery (as EchoStar alleged)
or chose terrestrial delivery from the outset of a new service
(as the Commission found). Making the obvious express
would have done no harm, but neither did leaving it implicit.

B. Discovery

EchoStar's Motion to Compel Production of Documents
was long on reasons the evidence before the Bureau was
already sufficient, and short on reasons discovery was neces-
sary, but the essence of its rationale for discovery was the
observation that: "[C]orroborative evidence about the unfair-
ness of Comcast's conduct, as well as Comcast's motives ...
must necessarily lie in the exclusive custody of Comcast." To

the extent the Bureau was responsive to EchoStar's conten-
tion, its explanation was terse: "EchoStar has not persuaded
us that discovery is necessary or that the record compiled
herein is insufficient." Bureau Order p 31. Thus, the Com-
mission's sub silentio denial of EchoStar's Motion to Compel
must stand or fall upon the Bureau's statement that the
record was already sufficient to decide the case.

Without specifically attacking anything actually said in the
Bureau's order, EchoStar argues that the Agency's decision
to deny it discovery was arbitrary and capricious, denied it
due process of law, and violated EchoStar's right under
s 556(d) of the APA to submit rebuttal evidence. EchoStar
does not appear to challenge the Commission's general rule
that discovery is available in program access cases only "on a
case-by-case basis as deemed necessary by the Commission
staff reviewing the complaint." In the Matter of Implemen-
tation of Sections 12 and 19 of the Cable Television Consum-
er Protection and Competition Act of 1992, First Report &
Order, 8 F.C.C. Rcd. 3359, p 75 (1993). Rather, EchoStar
seems to contend that denying it discovery in this case was
fundamentally unfair because "the Commission decided the
unfair practices claim based solely on Comcast's own asser-
tions about its motives" and "[t]he only way for EchoStar to
meet its burden of proof regarding these motives was for the
FCC to allow discovery."

In response, the Commission invokes its general rule and
faults EchoStar's Motion to Compel upon a number of
grounds not even arguably relied upon by the Bureau. The
Commission also argues, however, that EchoStar failed to
meet its burden of showing why discovery into Comcast's
motive for distributing SportsNet terrestrially was necessary
in light of the evidence before the Bureau that SportsNet was
a new service and that terrestrial delivery was less expensive
than satellite delivery, and EchoStar's failure to submit con-
tradictory evidence. Comcast adds the observation that
agency decisions regarding discovery are entitled to "extreme
deference." Hi-Tech Furnace Sys., Inc. v. FCC, 224 F.3d
781, 789 (D.C. Cir. 2000).

 Under a less deferential standard of review the cryptic
nature of the Bureau's decision might make this a close case.
According the Agency "extreme deference," however, its
"path may reasonably be discerned." Bowman Transp., 419
U.S. at 286.

Although requiring a party to present evidence indicating
that discovery is necessary might in some circumstances place
that party in a difficult situation, that is not a concern in the
circumstances of this case. EchoStar was free to put forward
evidence about distribution services rebutting, if it could,
Schroeder's assertions about the cost of terrestrial versus
satellite delivery; and it could surely have submitted an
affidavit supporting its claim to have offered to pay for the
uplink and to have witnessed the statement allegedly made by
Comcast at a July 23 meeting.

In support of its suggestion that the denial of discovery in
this case violated its right to due process, EchoStar cites only
McClelland v. Andrus, 606 F.2d 1278 (D.C. Cir. 1979). On
the facts of that case we held that the agency's refusal to
allow discovery of a particular document "could" violate due
process. Id. at 1286. Unlike EchoStar, McClelland was
faced with a severe deprivation at the hands of the Govern-
ment, namely, termination of his employment. Also unlike
EchoStar, McClelland was seeking a specific document
"uniquely relevant to [his] case." Id. Nothing about the
present case suggests that EchoStar has a constitutional right
to discovery.

Finally, EchoStar claims in a sentence that the Agency's
decision is contrary to s 556(d) of the APA, which provides
that "[a] party is entitled to ... submit rebuttal evidence." 5
U.S.C. s 556(d). Neither logic nor authority supports Ech-
oStar's claim that the statute imposes upon an agency the
obligation to order discovery upon demand so that a party
may seek rebuttal evidence to submit. Nor are we at liberty
so to embroider the procedures of the APA. See Vermont
Yankee Nuclear Power Co. v. NRDC, 435 U.S. 519, 524
(1978).

 III. Conclusion

Because the decision of the Commission is reasonable and
is supported by substantial evidence, EchoStar's petition for
review is

Denied.