Cable Vision System Corp. v. Federal Communications Commission

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued September 22, 2009 Decided March 12, 2010

No. 07-1425

CABLEVISION SYSTEMS CORPORATION,
PETITIONER

v.

FEDERAL COMMUNICATIONS COMMISSION AND UNITED
STATES OF AMERICA,
RESPONDENTS

AT&T INC. AND VERIZON,
INTERVENORS

Consolidated with 07-1487

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

Henk Brands argued the cause for petitioners. With him on
the briefs were David P. Murray and Howard J. Symons.

Nandan M. Joshi, Counsel, Federal Communications
Commission, argued the cause for respondents. With him on the
brief were Thomas O. Barnett, Assistant Attorney General, U.S.
Department of Justice, Catherine G. O’Sullivan and Nancy C.
 2

Garrison, Attorneys, Matthew B. Berry, General Counsel,
Federal Communications Commission, Joseph R. Palmore,
Deputy General Counsel, and Daniel M. Armstrong, Associate
General Counsel. Richard K. Welch, Deputy Associate General
Counsel, entered an appearance.

Helgi C. Walker argued the cause for intervenors Verizon,
et al. With her on the brief were Michael E. Glover, Edward
Shakin, William H. Johnson, Eve Klindera Reed, Christopher M.
Heimann, Gary L. Phillips, Lynn R. Charytan, Jack N.
Goodman, Heather M. Zachary, Dileep S. Srihari, and Pantelis
Michalopoulos.

Harry F. Cole was on the brief for amicus curiae
Broadband Service Providers Association in support of
respondents.

Before:SENTELLE, Chief Judge, GRIFFITH and
KAVANAUGH, Circuit Judges.

Opinion for the Court filed by Chief Judge SENTELLE.

Dissenting opinion filed by Circuit Judge KAVANAUGH.

SENTELLE, Chief Judge: In these consolidated cases,
Cablevision Systems Corporation and Comcast Corporation
petition for review of the Federal Communications
Commission’s decision to extend for five years a statutory
prohibition against exclusive contracts between cable operators
and cable affiliated programming networks. Petitioners assert
that the Commission misinterpreted the plain meaning of the
underlying statute. In addition, they argue the Commission’s
decision was arbitrary and capricious and therefore violates the
Administrative Procedure Act (APA). Lastly, petitioners claim
the decision fails under First Amendment intermediate scrutiny.
 3

We hold that the Commission’s interpretation of its statutory
mandate was reasonable. Because we also hold that the
Commission’s decision satisfies arbitrary and capricious review,
and that intermediate scrutiny is not applicable, we deny the
petitions for review.

I. Background

Multichannel video programming distributors (MVPDs),
such as cable television operators or direct broadcast satellite
providers, offer customers multiple channels of video
programming, generally by subscription. From the 1940s when
the first cable television systems were built until the 1990s, the
cable industry dominated this market. In most geographic areas,
cable operators were the only MVPDs, often enjoying local
cable monopolies because they were permitted to enter into
exclusive local franchises when they laid cables using public
rights of way and easements. As the market for cable
subscriptions grew, so did the market for cable programming to
supplement television broadcast programming. Cable
programmers began to develop programs for sale or license to
cable operators. These two halves of the cable industry often
had — and still have — overlapping ownership, with cable
operators having ownership interests in cable programmers, and
vice versa. Such companies constitute “vertically integrated”
entities.

In 1990, the Federal Communications Commission reported
to Congress that the cable operators’ monopolies in the MVPD
market persisted partly because competitors were unable to
secure programming owned by vertically integrated cable
companies. Competition, Rate Deregulation and the
Commission’s Policies Relating to the Provision of Cable
Television Service, 5 F.C.C.R. 4962, 5006–08 (1990). In
response to the Commission’s report, Congress enacted the
 4

Cable Television Consumer Protection and Competition Act of
1992 (Cable Act). Pub. L. No. 102-385, 106 Stat. 1460. Section
628 of the Act, 47 U.S.C. § 548, prohibits various activities that
inhibit competition in video programming. One provision, §
628(c)(2)(D), directs the Commission to promulgate regulations
prohibiting exclusive contracts for cable and broadcast
programming between a cable operator and a cable
programming vendor in which a cable operator has an
attributable interest, unless the Commission determines that the
contract would be in the public interest. This provision (“the
exclusivity prohibition”) applies to programming delivered to
distributors via satellite, the most common method of delivery,
but not to programming delivered by terrestrial lines such as
fiber optic cables. The exclusivity prohibition was subject to a
sunset provision, which provided that the exclusivity prohibition
would lapse ten years after the date of the Cable Act’s
enactment, “unless the Commission finds, in a proceeding
conducted during the last year of such 10-year period, that such
prohibition continues to be necessary to preserve and protect
competition and diversity in the distribution of video
programming.” 47 U.S.C. § 548(c)(5).

At the end of the ten year period, in 2002, the Commission
extended the exclusivity prohibition for five years with a
commitment to evaluate the market again at the end of the five
years. In its analysis, the Commission concluded that the
prohibition was “necessary” “if, in the absence of the
prohibition, competition and diversity would not be preserved
and protected.” Implementation of the Cable Television
Consumer Protection and Competition Act of 1992 and
Development of Competition and Diversity in Video
Programming Distribution: Section 628(c)(5) of the
Communications Act – Sunset of Exclusive Contract Prohibition,
Report and Order, 17 F.C.C.R. 12,124, 12,128-30 (2002).
Though competition in the multichannel video programming
 5

market had improved significantly since 1992, the Commission
found that conditions had not changed enough to allow the
prohibition to sunset.

Over the next five years, the markets for both multichannel
video programming distribution and programming creation
continued to change dramatically. When the Commission
compiled its report on the state of the MVPD market in 2007, it
recorded many differences between the 2002 and 2007 markets.
Implementation of the Cable Television Consumer Protection
and Competition Act of 1992 and Development of Competition
and Diversity in Video Programming Distribution: Section
628(c)(5) of the Communications Act – Sunset of Exclusive
Contract Prohibition, Report and Order and Notice of Proposed
Rulemaking, 22 F.C.C.R. 17791 (2007) (“2007 Order”). As of
2007, there were 531 national programming networks, up from
294 in 2002 and just 68 in 1992. The percentage of those
networks that were vertically integrated decreased to 22 percent
from 35 percent in 2002 and 57 percent in 1992. However,
many of the most popular networks were still cable affiliated;
seven of the Top 20 satellite-delivered networks as ranked by
prime time ratings, and almost half of all regional sports
networks, were affiliated with the four largest cable operators,
Comcast, Time Warner, Cox, and Cablevision.

The cable delivery market also changed significantly. At
the time of the Order, cable operators controlled 67 percent of
multichannel video programming distribution, down from 78
percent in 2002 and 95 percent in 1992. Direct broadcast
satellite operators such as DirecTV and EchoStar served 30
percent of the market, up from 18 percent in 2002. Since 2002,
telephone companies have begun offering wireline services
based on their telephone infrastructure. While wireline
competitors only represent a small share of the MVPD market,
they represent a potentially powerful force because they can
 6

offer the same bundled voice, broadband data, and video
services that cable operators provide but that direct broadcast
satellite cannot offer.

To monitor the geographic variations in the television
market, the Commission designates geographic television
markets, called “designated market areas,” based on local
viewing patterns. Each county in the United States is allocated
to a market based on which stations receive a preponderance of
total viewing hours in the county. 2007 Order at 17,828 n.276.
Examining these designated market areas individually, the
Commission noticed that in many areas consumers continue
overwhelmingly to subscribe to cable. Cable operators tend to
cluster regionally, and over the years smaller operators have
consolidated with large operators. Because of this clustering and
consolidation, a single geographic area can be highly susceptible
to near-monopoly control by a cable company. The four largest
cable operators have in fact increased their share of the national
MVPD market from 48 percent in 2002 to between 53 and 60
percent in 2007.

In the 2007 Order, the Commission also assessed the
incentives of vertically integrated cable companies to withhold
programming from competitors. In order to make this
evaluation, the Commission extrapolated from exclusive
contracts that are allowed to and do exist. See 2007 Order,
App’x C, 22 F.C.C.R. at 17,883. Because the exclusivity
prohibition only applies to programming delivered to
distributors via satellite, vertically integrated cable companies
can and do enter into exclusive contracts for programming to be
delivered through terrestrial cables. These programming
networks tend to be regional, such as Comcast SportsNet
Philadelphia or CN8, a Comcast-owned local news and
information channel serving 20 television markets. Comcast
currently withholds its SportsNet Philadelphia network from
 7

competitors, and the FCC used this example as a case study to
reverse engineer what market conditions make withholding
profitable. The Commission then extrapolated from these data
to predict how many satellite-delivered regional and national
networks would be withheld by vertically integrated cable
companies if the prohibition lapsed. Depending on the values
for certain variables – including whether subscribers who switch
from a competitor sign up for cable service alone or for bundled
services such as phone and internet services – somewhere
between 26 and 59 market areas would be susceptible to
withholding of a regional network owned by Time Warner or
Comcast.

For popular national networks, withholding could be
profitable for Comcast if as few as 1.9 percent of competitors’
subscribers switched to the affiliated cable operator, assuming
ideal conditions for the cable company. However, if the popular
national network were owned by Time Warner and new
subscribers only bought video services, the required amount of
switching might be as high as 63.6 percent of competitors’
customers. Id. at 17,890-91. Given these calculations, the
Commission concluded that, at least in some circumstances,
vertically integrated cable companies would enter into exclusive
contracts for programming if they were allowed to. Though it
acknowledged that exclusive contracts sometimes can be
beneficial for competition and consumers, the Commission
stated that it did not believe “that these purported benefits
[would] outweigh the harm to competition and diversity in the
video distribution marketplace that would result if we were to
lift the exclusive contract prohibition.” Id. at ¶ 63, 22 F.C.C.R.
at 17,835. Given its observations of the market and predictions
about the effect of lifting the prohibition, the Commission
ultimately decided that the prohibition remained necessary under
its 2002 Order definition of that term in the sunset provision.
The Commission therefore extended the prohibition for another
 8

five years with a possibility for an earlier review if the market
changed rapidly. Id. at ¶ 1, 22 F.C.C.R. at 17,792.

Petitioners Cablevision and Comcast subsequently filed
petitions for this Court to review the 2007 Order.

II. Analysis

A. Standard of Review

The Commission’s interpretation of its statutory mandate
must satisfy the two step test under Chevron USA, Inc. v.
Natural Resources Defense Council, 467 U.S. 837 (1984).
Under step one, if a statute “has directly spoken to the precise
question at issue,” id. at 842, the court and the agency “must
give effect to the unabiguously expressed intent of Congress,”
id. at 843. Under step two, when the statute is silent or
ambiguous, the court asks “whether the agency’s answer is
based on a permissible construction of the statute.” Id.

We review the Commission’s decisionmaking process
under the Administrative Procedure Act. 5 U.S.C. § 706. We
will vacate an agency’s decision as arbitrary and capricious “if
[its] factual determinations lack substantial evidence,” Pan-
Alberta Gas, Ltd. v. F.E.R.C., 251 F.3d 173, 176 (D.C. Cir.
2001), or if the agency “relied on factors which Congress has
not intended it to consider, entirely failed to consider an
important aspect of the problem, offered an explanation for its
decision that runs counter to the evidence before the agency, or
is so implausible that it could not be ascribed to a difference in
view or the product of agency expertise,” Mount Royal Joint
Venture v. Kempthorne, 477 F.3d 745, 753 (D.C. Cir. 2007)
(quoting Motor Vehicle Mfrs Ass’n v. State Farm Mutual Auto
Ins. Co., 463 U.S. 29, 43 (1983)). However, we will not
substitute our judgment for the agency’s, especially when, as
 9

here, the decision under review requires expert policy judgment
of a technical, complex, and dynamic subject. See Nat’l Cable
& Telecomms. Ass’n v. Brand X Internet Servs., 545 U.S. 967,
1002-03 (2005).

Petitioners argue that we must also evaluate the 2007 Order
under First Amendment intermediate scrutiny because, they
contend, forcing a company to share programming it owns or
creates discourages and impedes free speech. The First
Amendment standard would require the Commission’s decision
to draw “reasonable inferences based on substantial evidence,”
Turner Broad. Sys., Inc. v. F.C.C., 512 U.S. 622, 666 (1994)
(plurality). Under intermediate scrutiny, the Commission’s
findings of fact would not warrant the same degree of deference
as under the APA alone. The government would need to show
that its restriction of speech is narrowly tailored to an important
governmental interest, rather than rely on the deference we
generally afford agencies. See United States v. Doe, 968 F.2d
86, 90 (D.C. Cir. 1992) (“Where constitutionally protected
activity is implicated, we cannot simply defer to the
[agency]. . . .”).

This Court analyzed the exclusivity prohibition under First
Amendment intermediate scrutiny once before. In Time Warner
Entertainment Co., L.P. v. F.C.C., 93 F.3d 957 (D.C. Cir. 1996),
we considered a facial challenge to the constitutionality of
several parts of the Cable Act, including the exclusivity
provision. In deciding what level of scrutiny to apply, we
looked to the Supreme Court’s decision in Turner Broadcasting
System, which held that rules requiring cable systems to carry
certain local commercial television stations and noncommercial
education stations were subject to intermediate scrutiny. 512
U.S. at 643. Applying the Turner Court’s logic to the
exclusivity provision, we held that the rule is “likewise ‘justified
by special characteristics’ of the affected companies: both ‘the
 10

bottleneck monopoly power exercised by cable operators,’ and
the unique power that vertically integrated companies have in
the cable market.” Time Warner, 93 F.3d at 978 (quoting
Turner, 512 U.S. at 661) (citations omitted). We therefore held
intermediate scrutiny to be the appropriate standard to apply,
noting that the provision is content-neutral on its face because
it “regulat[es] cable programmers and operators on the basis of
the ‘economics of ownership,’ a characteristic unrelated to the
content of speech.” Id. at 977 (quoting Daniels Cablevision,
Inc. v. United States, 835 F.Supp. 1, 7 (D.D.C. 1993)). Under
intermediate scrutiny, a court must uphold a statutory provision
if “it furthers an important or substantial governmental interest;
if the governmental interest is unrelated to the suppression of
free expression; and if the incidental restriction on alleged First
Amendment freedoms is no greater than is essential to the
furtherance of that interest.” Id. (quoting United States v.
O’Brien, 391 U.S. 367, 377 (1968)). Applying that standard, we
held the exclusivity prohibition to be facially constitutional. Id.
at 979.

Because it addressed only a facial challenge to the
provision, Time Warner left open the possibility of a future as-
applied challenge. However, petitioners here do not actually
present that challenge. Instead, they merely invoke the
terminology of First Amendment scrutiny in passing, and hope
that we find the exclusivity prohibition’s burden on MVPDs so
heavy and so unnecessary that an as-applied challenge appears
on its own. We refuse to manufacture an as-applied challenge
for the petitioners, and therefore are left with only a facial
challenge. For that issue, we simply refer to our decision in
Time Warner. We therefore find it unnecessary to evaluate the
2007 Order under the intermediate scrutiny standard.

Our dissenting colleague is able to tease out references to
the First Amendment from petitioners’ arguments. See
 11

Dissenting Op. at 4–8. Notwithstanding these mentions of the
Amendment, petitioners fail to make a specific, as-applied
challenge that distinguishes their current arguments from the
ones we already rejected in the facial challenge in Time Warner.
In this case, in providing the required Statement of Issues in its
brief, petitioners set forth the following:

I. Whether the FCC misapprehended the standard
governing the circumstances under which it may
prevent the exclusivity rule from sunsetting.

II. Whether, under the correct standard, the FCC was
required to allow the exclusivity rule to sunset.

III. Whether the FCC erred in refusing to narrow the
exclusivity rule.

IV. Whether the order under review should be vacated.

Pet. Br. at 3. Conspicuously, petitioners’ recitation of the issues
before the court makes no mention of constitutionality. “Federal
courts should not decide constitutional questions unless it is
necessary to do so,” Kalka v. Hawk, 215 F.3d 90 (D.C. Cir.
2000) (citing Ashwander v. Tennessee Valley Authority, 297
U.S. 288, 347 (1936) (Brandeis, J., concurring)), nor should they
“decide [a] constitutional question unless it is ‘presented with
the clarity needed for effective adjudication,’” U.S. v. Byers, 740
F.2d 1104, 1128 (D.C. Cir. 1984) (quoting Socialist Labor Party
v. Gilligan, 406 U.S. 583, 587 n.2 (1972)). It is hardly necessary
for us to decide an issue of constitutionality which petitioner
does not even set forth as an issue in the case and to which it
refers only obliquely.
 12

B. Merits

Petitioners object to three conclusions made by the
Commission in reaching its decision to prolong the exclusivity
prohibition. First, the Commission decided to continue to use its
2002 interpretation of the proper standard of review dictated by
the statutory sunset clause. Second, the Commission concluded
that cable companies would most likely enter into competition-
hindering exclusive contracts if allowed to do so. The
Commission came to this conclusion using calculations
extrapolated from information about existing exclusive contracts
for non-satellite delivered programming. Finally, the
Commission considered and decided against changing the scope
of the prohibition to allow certain types of currently prohibited
exclusive contracts.

i. Statutory Interpretation

As noted above, the sunset provision of the Cable Act
dictates that the exclusivity prohibition shall cease “unless the
Commission finds . . . that such prohibition continues to be
necessary to preserve and protect competition and diversity in
the distribution of video programming.” 47 U.S.C. § 548(c)(5).
Petitioners first argue that the 2007 Order applied the wrong
definition of “necessary.” The term, however, “is not language
of plain meaning.” Cellco P’ship v. F.C.C., 357 F.3d 88, 97
(D.C. Cir. 2004). Depending on context, the term can mean
anything from “useful” or “convenient” to “indispensable” or
“essential.” The statutory language of the sunset provision gives
little guidance on which definition is most appropriate. Here,
the Commission decided to use the same interpretation it used
in 2002: the prohibition continues to be necessary “if, in the
absence of the prohibition, competition and diversity in the
distribution of video programming would not be preserved and
protected.” 2007 Order at ¶ 13, 22 F.C.C.R. at 17,801. This
 13

interpretation is well within the Commission’s discretion to
interpret statutory language under Chevron.

Petitioners also argue that the 2007 Order misinterprets the
mandate to preserve and protect competition as a requirement to
protect competitors, analogizing the Commission’s current
analysis to its faulty analysis vacated in AT&T Corporation v.
Iowa Utilities Board, 525 U.S. 366 (1999). In that case, the
statutory language at issue required telephone companies to
share their networks with competitors whenever failure to do so
would “impair” competitors’ ability to provide service. The
Commission interpreted the provision to require sharing
whenever a failure to share would result in any increase in cost,
decrease in quality, or delay to providing services. The Supreme
Court held this interpretation invalid because the statute clearly
envisioned that some sharing would not be required, but the
Commission’s interpretation would result in requiring any and
all sharing that would be at all useful to competitors. However,
the order before us is easily distinguishable from the one
reviewed in Iowa Utilities Board. There, the Commission
explicitly stated a standard that equated impairing competitors
with any lack of sharing. Here, the Commission’s order
discusses harm to consumers and competition that results from
harm to competitors, rather than incorrectly believing one harm
to be equivalent to the other. See, e.g., 2007 Order ¶ 40, 22
F.C.C.R. at 17,819 (explaining that withholding programming
from rivals can significantly impact subscribership, which can
“in turn, predictably harm competition and diversity in the
distribution of video programming, to the detriment of
consumers” (emphasis added)); id. at ¶ 53, 22 F.C.C.R. at
17,829 (“In the long term, a withholding strategy may result in
a reduction in competition . . . , thereby allowing the affiliated
cable operator to raise rates.”). While the Order does often
measure effects on MVPDs rather than directly measuring
consumer effects, the Commission sufficiently linked the two to
 14

justify its conclusion that market conditions do not yet warrant
letting the exclusivity prohibition lapse. We trust that the
Commission was sincere when it explicitly anticipated that a
market may develop in which exclusive programming could
exist but not be harmful to competition, and “caution[ed]
competitive MVPDs to take any steps they deem appropriate to
prepare for the eventual sunset of the prohibition.” 2007 Order
at ¶ 29, 22 F.C.C.R. at 17,810.

ii. Decisionmaking Process

Petitioners’ second contention is that the Commission did
not rely on substantial evidence when it concluded that
vertically integrated cable companies would enter into
competition-harming exclusive contracts if the exclusivity
prohibition were allowed to lapse. Noting that conclusions
based on FCC’s predictive judgment and technical analysis are
just the type of conclusions that warrant deference from this
Court, we disagree with petitioners’ characterization of the 2007
Order.

It is true that the MVPD market has transformed
substantially since the Cable Act was enacted in 1992.
However, as described above, the transformation presents a
mixed picture. While cable no longer controls 95 percent of the
MVPD market, as it did in 1992, cable still controls two thirds
of the market nationally. In designated market areas in which a
single cable company controls a clustered region, market
penetration of competitive MVPDs is even lower than
nationwide rates. 2007 Order at ¶ 55, 22 F.C.C.R. at 17,830.

The amount and diversity of programming has expanded
rapidly, giving MVPDs more programming options even if one
network were unavailable to them because of an exclusive
contract. However, the four largest cable operators are still
 15

vertically integrated with six of the top 20 national networks,
some of the most popular premium networks, and almost half of
all regional sports networks. The Commission believes the
ability and incentive for vertically integrated cable companies to
withhold “must-have” programming remains substantial enough
to require the further extension of the exclusivity prohibition.
We must defer to the Commission’s analysis.

It is also true that the Commission’s calculations on the
likelihood of future withholding appear susceptible to questions
about their predictive power. What is true about Comcast
SportsNet Philadelphia may not be equally true for all regional
networks and even less true for national networks, yet the
Commission still used that one station as the basis for much of
its analysis. But predictive calculations are a murky science in
the best of circumstances, and the Commission naturally has no
access to infallible data about the nature of contracts that do not
exist. “[W]e do not sit as a panel of referees on a professional
economic journal, but as a panel of generalist judges obliged to
defer to a reasonable judgment by an agency acting pursuant to
congressionally delegated authority.” City of Los Angeles v.
U.S. Dep’t of Transp., 165 F.3d 972, 977 (D.C. Cir. 1999). The
Commission has recognized and analyzed complicated pictures
of the MVPD market both current and projected. These data
qualify as substantial evidence for arbitrary and capricious
review. The Commission’s decision does not run counter to the
evidence, nor is it implausible or irrational. See Mount Royal
Joint Venture, 477 F.3d at 753; Center for Auto Safety v. Peck,
751 F.2d 1336, 1373 (D.C. Cir. 1985). In short, it is not
arbitrary and capricious.

We anticipate that cable’s dominance in the MVPD market
will have diminished still more by the time the Commission next
reviews the prohibition, and expect that at that time the
Commission will weigh heavily Congress’s intention that the
 16

exclusive contract prohibition will eventually sunset. Petitioners
are correct in pointing out that the MVPD market has changed
drastically since 1992. We expect that if the market continues
to evolve at such a rapid pace, the Commission will soon be able
to conclude that the exclusivity prohibition is no longer
necessary to preserve and protect competition and diversity in
the distribution of video programming.

Petitioners’ last criticism of the 2007 Order is that the Order
failed to narrow the exclusivity rule to apply only to certain
types of cable companies or certain types of programming.
While the current rule includes a procedure for obtaining an
exemption from the prohibition on a case by case basis,
petitioners claim that this procedure is not sufficient to save the
rule from being invalid because it still prohibits more exclusive
contracts than is absolutely necessary to preserve and protect
competition and diversity in the market. During the notice and
comment period for the 2007 Order, petitioners offered several
suggestions for narrowing the rule, each of which the
Commission rejected. It was not arbitrary and capricious for
the Commission to reject these suggestions and decide instead
to adhere to Congress’s statutory design. Because we hold that
the Commission was reasonable in its conclusion that the
prohibition – in its original form – continues to be necessary, we
also hold that the Commission was reasonable to keep the same
prohibition in that same form.

For the reasons set forth above, the petitions for review are

Denied.
 KAVANAUGH, Circuit Judge, dissenting:

I respectfully dissent. Approved by the required two-
thirds of the House and Senate in 1789 and ratified by three-
quarters of the state legislatures by 1791, the text of the First
Amendment to the Constitution is straightforward and
expansive: “Congress shall make no law . . . abridging the
freedom of speech, or of the press.” U.S. CONST. amend. I.
The First Amendment endures, and it applies to modern
means of communication as it did to the publishers,
pamphleteers, and newspapers of the founding era. The
Supreme Court has repeatedly ruled that video programming
distributors (such as Comcast, DIRECTV, DISH, Time
Warner, Cablevision, Verizon, and AT&T) and video
programming networks (TNT, ESPN, Fox News, MSNBC,
and several hundred others) are editors and speakers protected
by the First Amendment’s guarantees of freedom of speech
and of the press. Under Supreme Court precedent, the
Government may adopt a content-neutral regulation
interfering with those entities’ First Amendment rights only if
the regulation furthers an “important” or “substantial”
government interest and the restriction on speech is “no
greater than is essential to the furtherance of that interest.”
Turner Broad. Sys., Inc. v. FCC, 512 U.S. 622, 662 (1994)
(articulating First Amendment intermediate scrutiny
standard).

Two decades ago, local cable operators maintained
bottleneck monopolies over video programming distribution
and provided the only way most consumers could access and
view video programming networks. To prevent abuses of the
cable operators’ monopoly power, Congress enacted the 1992
Cable Act. The statute imposed forced-carriage requirements
on cable operators (known as must-carry, leased-access, and
channel-occupancy) and placed forced-sharing mandates on
cable programming networks (by banning exclusive contracts
between cable operators and their affiliated video
 2

programming networks). The Supreme Court and this Court
upheld various provisions of the Act against First Amendment
facial challenges. See Turner Broad. Sys., Inc. v. FCC, 520
U.S. 180, 224 (1997); Turner, 512 U.S. at 666-68; Time
Warner Entm’t Co. v. FCC, 93 F.3d 957, 979 (D.C. Cir.
1996). In so doing, the courts were careful to explain,
however, that the restrictions on the editorial and speech
rights of cable operators and programmers were permissible
on their face only because of the “bottleneck monopoly power
exercised by cable operators.” Turner, 512 U.S. at 661; Time
Warner, 93 F.3d at 978.

Since the 1992 Cable Act and those mid-1990s cases, the
video programming market has changed dramatically. Cable
operators no longer possess bottleneck monopoly power.
Today, almost every home consumer has the choice of at least
three video programming distributors – DIRECTV, DISH,
and the local cable operator (usually Comcast, Time Warner,
Cox, Charter, or Cablevision). Many consumers can choose a
fourth or sometimes also a fifth video programming
distributor, Verizon FiOS or AT&T U-verse. Moreover, all
video programming distributors – including individual cable
operators – compete against one another in the upstream
market in which the distributors contract with national
programming networks. At the same time, the number of
national video programming networks has also expanded
tremendously, growing from about 70 in 1992 to well over
500 today, with only about 22 percent now affiliated with a
video programming distributor. On top of all that, many
consumers today obtain video programming through a variety
of Internet applications, such as YouTube and Hulu.

The nearly two-decade-old FCC rule at issue in this case
bars exclusive contracts between cable operators and
 3

affiliated cable programming networks. The rule is
essentially a forced-sharing mandate that compels cable video
programming networks to share their content with all video
programming distributors. The original purpose was to
prevent bottleneck monopoly cable operators from thwarting
the development of competing video programming
distributors; the fear was that cable operators would deny
nascent video programming distributors access to cable-
affiliated programming networks. We upheld this
requirement on its face in Time Warner in 1996. But in
today’s competitive market, the justification we accepted in
Time Warner – counteracting the “bottleneck monopoly
power” of cable operators – has collapsed. Cable operators
no longer possess bottleneck monopoly power in the video
distribution market, a point we made rather emphatically just
a few months ago. See Comcast Corp. v. FCC, 579 F.3d 1, 8
(D.C. Cir. 2009). The FCC’s exclusivity ban thus is no longer
necessary to further competition – and no longer satisfies the
intermediate scrutiny standard set forth by the Supreme Court
for content-neutral restrictions on editorial and speech rights.
I would hold that the FCC’s exclusivity rule violates the First
Amendment, and thus also violates the 1992 Cable Act as
construed to conform to the First Amendment. I respectfully
dissent.

I

The initial question is whether Cablevision has raised any
First Amendment issue in this case. The majority opinion
states that Cablevision has not. See Maj. Op. at 10. It
proceeds to treat this as a purely statutory/administrative law
case, raising only the question whether the FCC’s five-year
extension of the exclusivity ban is still “necessary” for
purposes of the 1992 Cable Act. I respectfully disagree with
 4

the majority opinion’s characterization of Cablevision’s
argument.

The statutory standard governing the FCC’s decision
gives the Commission broad discretion to determine whether
the ban is still “necessary.” 47 U.S.C. § 548(c)(5). No doubt
recognizing the difficulty in establishing that the FCC’s
exclusivity rule violates that rather flexible statutory text, cf.
Chevron, U.S.A., Inc. v. Natural Res. Def. Council, 467 U.S.
837, 842-43 (1984), or of showing a violation of the
deferential APA arbitrary and capricious standard,
Cablevision expressly argued in its briefs and at oral
argument that we cannot resolve this case without regard to
the relevant First Amendment limits.

In its opening brief, for example, Cablevision contended
that:

• “[T]he exclusivity rule imposes a heavy burden on
First Amendment rights – a burden that should be
limited to instances where it is essential.” Cablevision
Br. at 23-24.

• “As the FCC acknowledged, the order under review is
also subject to intermediate First Amendment scrutiny.
The exclusivity rule imposes an onerous burden on
cable-affiliated video-programming services: it
requires them to speak when they would prefer to
remain silent. It thereby diminishes the incentive to
engage in speech in the first place, reducing output in
the marketplace of ideas.” Id. at 32 (footnotes
omitted).
 5

• “Intermediate First Amendment scrutiny poses a
standard that is similar to, but more exacting than, that
of the APA.” Id.

• “In particular, where intermediate scrutiny applies, the
agency bears the burden in every respect. It must
demonstrate that any predicted harms are real, not
merely conjectural, and that the regulation will in fact
alleviate these harms in a direct and material way.
The FCC must build a record that convincingly shows
a problem to exist. In doing so, the FCC must draw
reasonable inferences based on substantial evidence.
The FCC’s findings of fact are not entitled to
deference. To the extent predictions are susceptible of
empirical proof, they must be so proven. Where there
is no evidence of any urgent need for preventive
action, the agency is not entitled to the benefit of the
doubt.” Id. at 33-34 (internal quotation marks and
footnotes omitted).

• “The First Amendment also colors the reading of the
text of the statute: any statute must be construed, if
fairly possible, so as to avoid not only the conclusion
that it is unconstitutional but also grave doubts upon
that score. It is further well established that, where an
agency’s reading would generate significant
constitutional doubt, that reading is not entitled to
Chevron deference.” Id. at 34 (internal quotation
marks and footnote omitted).

In its opposition brief, even the FCC recognized that
Cablevision had raised a First Amendment argument:
 6

• “To the extent the Commission’s decision to extend
the exclusivity prohibition implicates the First
Amendment, it is subject to review under the
intermediate-scrutiny standard. A regulation will be
upheld under intermediate scrutiny if it advances
important governmental interests unrelated to the
suppression of free speech and does not burden
substantially more speech than necessary to further
those interests. In applying intermediate scrutiny to
federal statutes, the courts inquire not whether
Congress, as an objective matter, was correct that the
regulatory provision is necessary to achieve the
government’s objective, but rather whether the
legislative conclusion was reasonable and supported
by substantial evidence in the record before Congress.
As applied to the Commission’s predictive judgment,
the intermediate-scrutiny standard considers whether
the agency has drawn reasonable inferences based on
substantial evidence.” FCC Br. at 23-24 (citations and
internal quotation marks omitted).

• “Petitioners also briefly invoke the First Amendment.
It is true that, under the canon of constitutional
avoidance, a statute must be construed, if fairly
possible, so as to avoid not only the conclusion that it
is unconstitutional but also grave doubts upon that
score. To invoke the canon, however, the petitioner
must show one of those constructions creates a serious
likelihood that the statute will be held
unconstitutional. Petitioners have made no such
showing. Their back-door constitutional attack on the
exclusivity prohibition thus fares no better than the
facial attack on the statute that this Court has already
 7

rejected.” Id. at 31-32 (citations and internal quotation
marks omitted).

Responding to the FCC’s treatment of its First
Amendment challenge, Cablevision’s reply brief argued:

• “Finally, the FCC disagrees that the First Amendment
tugs toward the ‘essential’ side of the spectrum.
According to the FCC, constitutional considerations
would affect the interpretation of the statute only if a
‘useful’ interpretation would create a serious
likelihood that the statute would be unconstitutional.
But, under intermediate scrutiny (which the FCC
agrees applies), the agency bears the burden of
demonstrating that the challenged regulation will in
fact alleviate non-conjectural harms in a direct and
material way. That formulation points to a ‘necessary’
standard: a ‘useful’ standard would risk perpetuating
the exclusivity rule even where it does not alleviate
harm to competition in a direct and material way.”
Cablevision Reply Br. at 9 (citations, internal
quotation marks, and footnote omitted).1

At oral argument, Cablevision further elaborated on its
constitutional claim:

1
In its 2007 order extending the ban, the FCC similarly
acknowledged the First Amendment issues raised by the exclusivity
ban: “We are mindful that our decision to extend the exclusive
contract prohibition must withstand an intermediate scrutiny test
pursuant to First Amendment jurisprudence.” Implementation of
the Cable Television Consumer Protection and Competition Act of
1992, 22 F.C.C.R. 17,791, 17,837 (2007).
 8

• “It’s conceded, the FCC agrees that intermediate
scrutiny applies.” Oral Arg. Tr. at 18.

• “I think all the roads lead to Rome here, so to speak.
Arbitrary and capricious in its analysis, the First
Amendment intermediate scrutiny analysis, and the
statute all require the same thing.” Id.

• “Page 32 of our opening brief, the exclusivity rule, the
FCC has acknowledged the order under review is also
subject to intermediate scrutiny. The exclusivity
ruling poses an onerous burden. We go on and on and
on talking about the First Amendment there.” Id. at
43.

• “The First Amendment challenge is simply this, under
intermediate scrutiny the Court cannot affirm unless it
finds that the FCC has shown, has borne its burden to
show by substantial evidence that there is a non-
conjectural problem that requires being solved. This
is a standard that is slightly more exacting than the
arbitrary and capricious standard, although that
standard gets the Court in the same place.” Id. at 44.

As these many excerpts demonstrate, Cablevision has
emphatically argued that we cannot uphold the FCC’s
exclusivity rule if it violates the First Amendment.
Cablevision has relatedly contended that the rule violates the
statute’s “necessary” standard as construed to conform to the
First Amendment. In that regard, Cablevision has invoked the
constitutional avoidance canon, which requires courts to
refrain from interpreting an ambiguous statute in a way that
raises serious constitutional questions. Cf. Public Citizen v.
U.S. Dep’t of Justice, 491 U.S. 440, 466 (1989); Ashwander v.
 9

Tenn. Valley Auth., 297 U.S. 288, 348 (1936) (Brandeis, J.,
concurring). We therefore cannot reject Cablevision’s
challenge to the exclusivity rule without analyzing the
contours of the First Amendment. Cf. Anthony Vitarelli,
Constitutional Avoidance Step Zero, 119 YALE L.J. 837
(2010). Notwithstanding Cablevision’s arguments, however,
the majority opinion proceeds to decide the case in complete
isolation from the Constitution’s constraints. The majority
opinion’s statement that it can deny Cablevision’s challenge
to the exclusivity ban without in any way analyzing the First
Amendment’s limits is mistaken, in my respectful judgment.
I will turn now to analysis of those First Amendment
boundaries.

II

A

The First Amendment inquiry in this case starts with a
description of the video programming industry. Although the
industry’s structure appears complicated at first glance, it in
fact resembles the “three-stage chain of production comprised
of manufacturers, wholesalers, and retailers that typifies the
distribution of many, if not most, physical goods in the U.S.
economy.” Christopher S. Yoo, Vertical Integration and
Media Regulation in the New Economy, 19 YALE J. ON REG.
171, 220 (2002).

The first stage – manufacturing – consists of entities that
create video programming, the program producers. That
portion of the market is principally populated by those “who
create original television programming, as well as syndicators
and others who hold the rights to programming that has
already been produced.” Id. at 221.
 10

The second stage of the chain – wholesale – is composed
of networks like ESPN, TNT, Disney, and USA, “which
acquire the right to air programs and aggregate them into
program packages.” Id. I will refer to these entities as “the
video programming networks.” It is not uncommon for these
firms to engage in both the manufacturing and wholesale
aspects of video programming, as networks sometimes
produce programs in-house. Id. For example, CNN primarily
airs news programs of its own making, and ESPN internally
produces SportsCenter.

The third stage – retail – consists of businesses
competing in the multichannel video programming distributor
(or MVPD) market to deliver packages of video programming
networks to the homes of consumers. These distributors
contract with video programming networks and sell the
package of networks as a single service to home consumers.
This aspect of the industry was once dominated by cable
operators, but today there is widespread competition among
firms delivering programming via cable (such as Comcast,
Time Warner, Cox, Charter, and Cablevision), satellite (such
as DIRECTV and DISH), and fiber-optics (such as Verizon
FiOS and AT&T U-verse). I will call these entities “the video
programming distributors.”

B

In the 1980s, it was common for one monopoly video
programming distributor – the local cable operator – to serve
an entire geographic area. A few large cable operators had
essentially carved up the country into different parts with one
cable operator typically exercising monopoly power in each
city or area. Because of the exorbitant costs of building a
 11

duplicative cable system (referred to as “overbuilding”), there
was little competition among cable operators in the home
consumer (i.e. retail) market. And obtaining video from
satellite or telephone-line programming distributors was not
yet a reality for most consumers. This meant that most home
consumers had one and only one choice in a multichannel
video programming distributor. The local cable operator
ordinarily maintained what was known as a bottleneck
monopoly; it possessed not only a huge market share but also
the exclusive physical connection for home consumers to
obtain multichannel video programming services.

Congress eventually grew concerned about the power
possessed by Big Cable – the bottleneck, monopolistic cable
operators. And Congress ultimately passed (over the veto of
President George H.W. Bush) the Cable Television Consumer
Protection and Competition Act of 1992. Pub. L. No. 102-
385, 106 Stat. 1460. The new law sought to “ensure that
cable television operators” could not exercise “undue market
power vis-a-vis video programmers and consumers,” and
thereby harm competition in the video programming
distribution and video programming markets. Id. § 2(b)(5),
106 Stat. at 1463. The Cable Act, and the FCC regulations
adopted pursuant to it, put forth a variety of measures to
constrain the market-dominant cable operators. Some
provisions, for example, imposed forced-carriage mandates
that in effect required cable operators to carry certain kinds of
networks or stations; these were known as must-carry, leased-
access, and channel-occupancy requirements.

As relevant here, the 1992 Cable Act also directed the
Federal Communications Commission to promulgate rules
prohibiting “exclusive contracts” for programming between a
cable operator and an affiliated cable programming network.
 12

47 U.S.C. § 548(c)(2)(D). This provision imposed a forced-
sharing requirement (also known as a “program access”
requirement). It mandated that cable-affiliated programming
networks be made available to competitors of cable operators
on the same terms they are made available to the affiliated
cable operators.2 As a result, cable programming networks
generally cannot refuse to deal with distributors that compete
with cable operators in the video programming distribution
market.

For example, Comcast partially owns several
programming networks, including the MLB Network, E!,
Versus, and the Golf Channel. Because Comcast is a cable
operator and possesses an attributable interest in those
programming networks, the networks must be made available
to Comcast’s competitors – like DIRECTV, DISH, and
Verizon – on the same terms on which they are provided to
Comcast.

The exclusivity ban arose out of a simple congressional
concern. Cable programming networks that were vertically
integrated with bottleneck monopoly cable operators might
“simply refuse to sell to potential competitors” in the video
programming distribution market, such as emerging “cable
operators, satellite dish owners, and wireless cable operators.”
S. REP. NO. 102-92, at 26 (1991). Instead, cable programming

2
This availability was further ensured by a provision of the
1992 Cable Act that prohibited “discrimination” by a cable-
affiliated programming network with respect to “prices, terms, and
conditions of sale or delivery” when dealing with unaffiliated
programming distributors. 47 U.S.C. § 548(c)(2)(B). When I refer
to the operation of the exclusivity ban throughout this opinion, I am
referring to it in conjunction with this nondiscrimination
requirement.
 13

networks might choose to deal only with their affiliated cable
operators. By depriving newly developing programming
distributors of key cable programming networks, the cable
companies could suppress the emergence of new video
programming distributors (like satellite) that might threaten
the monopoly of the cable operators. See STUART MINOR
BENJAMIN ET AL., TELECOMMUNICATIONS LAW AND POLICY
599 application note 1 (2d ed. 2006); Christopher S. Yoo,
Vertical Integration, 19 YALE J. ON REG. at 185.

The exclusivity ban constituted one part of Congress’s
effort to counteract the bottleneck monopoly power of cable
operators. At the same time, in passing the 1992 Act
Congress recognized that the market was not static and that
competitive video programming distributors were sprouting.
And it acknowledged the bedrock competition principle that
exclusive contracts are ubiquitous and beneficial in a
competitive market – for example, a market with legitimate
competitors to cable operators. The Senate Report pointed
out that “exclusivity can be a legitimate business strategy
where there is effective competition.” S. REP. NO. 102-92, at
28. Therefore, the statute required that the exclusivity ban
sunset after 10 years unless the FCC found that it “continue[d]
to be necessary to preserve and protect competition and
diversity in the distribution of video programming.” 47
U.S.C. § 548(c)(5).

In 2002, at the end of the sunset period, the FCC found a
continued need for the prohibition and extended it for five
years. Implementation of the Cable Television Consumer
Protection and Competition Act of 1992, 17 F.C.C.R. 12,124,
12,124 (2002) (“2002 Order”). At that time, however,
Commissioner Martin termed it a “very close call,” and
Commissioner Abernathy dissented, stating that “in light of
 14

the significant competitive changes in the marketplace –
including the dramatic increase in both competition and
availability of programming – and the existence of other
provisions that protect competing MVPDs from
discriminatory treatment, including [bans on] ‘unreasonable
refusals to sell,’ I cannot find that this provision continues to
be necessary to preserve and protect competition and diversity
in the delivery of video programming.” Id. at 12,181,
12,178.

In 2007, the FCC extended the ban for another five years.
Implementation of the Cable Television Consumer Protection
and Competition Act of 1992, 22 F.C.C.R. 17,791, 17,792
(2007) (“2007 Order”). The 2007 Order prompted this case.

III

The fundamental question here is whether the FCC’s
continued ban on exclusive contracts between one category of
video programming distributors – cable operators – and their
affiliated video programming networks violates the First
Amendment and the 1992 Cable Act, as construed to conform
to the First Amendment.

A

The Supreme Court has stated that video programming
distributors and video programming networks “engage in and
transmit speech, and they are entitled to the protection of the
speech and press provisions of the First Amendment.” Turner
Broad. Sys., Inc. v. FCC, 512 U.S. 622, 636 (1994); see City
of L.A. v. Preferred Communications, Inc., 476 U.S. 488, 494
(1986); FCC v. Midwest Video Corp., 440 U.S. 689, 707
(1979).
 15

A video programming distributor (such as Cablevision,
DIRECTV, DISH, or Verizon) is constitutionally entitled to
exercise “editorial discretion over which stations or programs
to include in its repertoire.” Turner, 512 U.S. at 636 (quoting
City of L.A., 476 U.S. at 494). As a result, the Government
cannot compel video programming distributors to operate like
“dumb pipes” or “common carriers” that exercise no editorial
control. The video programming distributors are similar to
publishing houses, bookstores, playhouses, movie theaters, or
newsstands in the sense that they exercise editorial control in
picking the content they will provide to consumers.

Programming networks, such as ESPN, TNT, and CNN,
also have a First Amendment right to speak – that is, to
develop or purchase original programming and have it
distributed as they see fit. Id. Programming networks
resemble magazines and newspapers. They create and
aggregate content to entertain and inform a wide audience.
And they choose when and where to sell that content.

The 1992 Cable Act’s exclusivity ban implicates the First
Amendment rights of both cable operators and cable
programming networks.

As to the cable operators, the exclusivity ban dampens
their incentives to invest in new or existing programming
networks. They might not take the risk and spend the money
if they cannot fully reap the fruits of their investment.
Similarly, competitors of cable operators may feel less need to
invest in new programming networks because they can piggy-
back on the cable-affiliated networks. As a result, there may
be fewer new video programming networks than there
otherwise would be. As this Court has explained, the
 16

resulting reduction in speech (compared to what otherwise
would occur) implicates First Amendment interests. See Time
Warner Entm’t Co. v. FCC, 93 F.3d 957, 979 (D.C. Cir. 1996)
(“To be sure, because the ability to enter into exclusive
contracts could create economic incentives to invest in the
development of new programming, prohibiting such contracts
might result in reduced programming – that is, less speech.”);
cf. Verizon Communications Inc. v. Law Offices of Curtis V.
Trinko, LLP, 540 U.S. 398, 407-08 (2004) (“Compelling . . .
firms to share the source of their advantage . . . may lessen the
incentive for the monopolist, the rival, or both to invest in
those economically beneficial facilities.”); AT&T Corp. v.
Iowa Utils. Bd., 525 U.S. 366, 428-29 (1999) (Breyer, J.,
concurring in part and dissenting in part) (“a sharing
requirement may diminish the original owner’s incentive to
keep up or to improve the property by depriving the owner of
the fruits of value-creating investment, research, or labor”);
U.S. Telecom Ass’n v. FCC, 290 F.3d 415, 429 (D.C. Cir.
2002) (“mandatory unbundling comes at a cost, including
disincentives to research and development”).

As to cable programming networks, the exclusivity
prohibition forces them to sell to video programming
distributors when they might otherwise choose not to do so.
This forced-sharing mandate poses a First Amendment issue
because the right of a First Amendment-protected editor or
speaker not to speak and associate “serves the same ultimate
end as freedom of speech in its affirmative aspect” and is
entitled to similar constitutional protection. Pacific Gas &
Elec. Co. v. Pub. Utils. Comm’n of Cal., 475 U.S. 1, 11
(1986) (quoting Harper & Row Publishers, Inc. v. Nation
Enters., 471 U.S. 539, 559 (1985)); see also Riley v. Nat’l
Fed’n of the Blind of N.C., Inc., 487 U.S. 781, 790-91 (1988)
(“The First Amendment mandates that we presume that
 17

speakers, not the government, know best both what they want
to say and how to say it.”); Wooley v. Maynard, 430 U.S. 705,
713 (1977). “For corporations as for individuals, the choice
to speak includes within it the choice of what not to say.”
Pacific Gas, 475 U.S. at 16 (citing Miami Herald Publ’g Co.
v. Tornillo, 418 U.S. 241, 258 (1974)).

To be sure, the exclusivity ban’s interference with the
First Amendment interests of cable operators and
programming networks is considered content-neutral,
meaning that it is subject to intermediate rather than strict
scrutiny. Turner, 512 U.S. at 662. But intermediate scrutiny
is still tough scrutiny, not a judicial rubber stamp. To pass
muster, the ban must further “an important or substantial
governmental interest” and the restriction must be “no greater
than is essential to the furtherance of that interest.” Id.
(quoting United States v. O’Brien, 391 U.S. 367, 377 (1968)).
The Government “must demonstrate that the recited harms are
real, not merely conjectural, and that the regulation will in
fact alleviate these harms in a direct and material way.” Id. at
664 (plurality opinion). In applying this standard, the usual
deference afforded legislative or agency findings “does not
foreclose our independent judgment of the facts bearing on an
issue of constitutional law.” Id. at 666 (quoting Sable
Communications of Cal., Inc. v. FCC, 492 U.S. 115, 129
(1989)) (internal quotation marks omitted).

B

After enactment of the 1992 Cable Act, cable companies
brought facial First Amendment challenges to many of its
provisions, including the exclusivity ban. In 1996, this Court
held that the ban on exclusive contracting by vertically
integrated cable operators and programmers did not on its
 18

face violate the First Amendment. Time Warner, 93 F.3d at
979. Upholding this restriction on speech as necessary to
further the Government’s interest in fair competition, we
specifically relied on the “special characteristics” of the cable
industry at the time, including “the bottleneck monopoly
power exercised by cable operators, and the unique power that
vertically integrated companies have in the cable market.” Id.
at 978 (quoting Turner, 512 U.S. at 661) (internal quotation
marks omitted). But as I will explain, the relevant facts that
we relied on in Time Warner no longer exist, and Time
Warner’s facial ruling therefore does not control this as-
applied challenge. See Cutter v. Wilkinson, 544 U.S. 709, 726
(2005).

The major change since our 1996 Time Warner decision
is that cable operators no longer possess bottleneck monopoly
power in the video programming distribution market in any
geographic area in the continental United States. As we
recently explained in Comcast Corp. v. FCC, 579 F.3d 1, 6
(D.C. Cir. 2009), home consumers can obtain service from the
local cable operator, DIRECTV, DISH, and in many places
Verizon FiOS and AT&T as well. Providers of programming
on the Internet – like Hulu, YouTube, iTunes, and Apple TV
– also increase competition in the market. Indeed, it seems
plausible that traditional video programming viewed on
television and video programming viewed over the Internet
will soon merge in many households. Based on a careful
assessment of the market in our recent Comcast decision, we
definitively concluded that cable operators “no longer have
the bottleneck power over programming that concerned the
Congress in 1992.” Id. at 8. For that reason, we vacated the
FCC’s longstanding 30 percent cap on how many video
programming subscribers an individual cable operator could
serve nationwide.
 19

Given the difficulty in justifying the exclusivity ban in
light of the aggressive competition in today’s video
programming distribution market, the FCC also points to
alleged impediments to competition among video
programming networks, claiming that some networks are
“must-have.” This is an odd argument because no video
programming network comes close to possessing market
power. In 1992, there were 68 national programming
networks, and 57 percent of them were vertically integrated
with cable operators. By 2007, there were well over 500
national programming networks, and only 22 percent of them
were vertically integrated with a cable operator. In a market
with well over 500 national programming networks, it is
nearly impossible (and would make a mockery of textbook
antitrust and free speech principles) to say that any one
national network is the equivalent of an essential facility – a
must-have network that the Government can thereby compel
the cable company to share with all other video programming
distributors.3 Moreover, the flaw in the theory runs even

3
In this regard, it is also important to appreciate that the
market for video programming networks generally “is national in
scope” and nationally competitive. Christopher S. Yoo, Vertical
Integration and Media Regulation in the New Economy, 19 YALE J.
ON REG. 171, 227 (2002). Therefore, even though large cable
operators like Time Warner, Comcast, Cox, Charter, and
Cablevision often do not compete with each other in the
downstream market for in-home consumers, they do compete with
each other in the upstream market to purchase rights to carry
national video programming networks. And in both the upstream
and downstream markets, they compete against other video
programming distributors like DIRECTV, DISH, Verizon, and
AT&T. So if Comcast wanted to enter into an exclusive contract
with ESPN, Comcast presumably would have to compete against
 20

deeper because any supposed must-have consumer
preferences typically relate to programs not networks. And
other than certain live sports events, see infra n.6, the
popularity of these programs often shifts rapidly, transforming
today’s must-have into tomorrow’s has-been.

This radically changed and highly competitive
marketplace – where no cable operator exercises market
power in the downstream or upstream markets and no national
video programming network is so powerful as to dominate the
programming market – completely eviscerates the
justification we relied on in Time Warner for the ban on
exclusive contracts. One of the leading scholars on
communications law concluded eight years ago “that the
restrictions on vertical integration in the cable industry

all the members of the video programming distributor market – all
the other cable operators such as Time Warner, Cox, Charter, and
Cablevision, as well as DIRECTV, DISH, Verizon, and AT&T. In
other words, in the upstream national market for purchase of
nationally available video programming networks, it does not make
much sense to talk about the power of cable versus satellite; it
instead makes more sense to talk about the relative power of
individual firms – Comcast, DIRECTV, DISH, Time Warner, Cox,
Charter, Cablevision, Verizon, AT&T, and others. The largest of
those firms – Comcast – serves only about 25 percent of the
consumers who obtain service through a multichannel video
programming distributor. In such a market, the video programming
networks usually have little incentive to limit their networks to only
one distributor. And programming producers in turn often have
little incentive to limit their shows to a network that will not sell
nationally to a distributor that reaches all home consumers. For that
reason, this case may be a tempest in a teapot: It seems unlikely
that the market would yield that many high-profile exclusive
arrangements because they likely would not be profitable for the
relevant parties.
 21

enacted by the 1992 Cable Act are not economically
justified.” Christopher S. Yoo, Vertical Integration, 19 YALE
J. ON REG. at 226; see also Christopher S. Yoo, Network
Neutrality, Consumers, and Innovation, 2008 U. CHI. LEGAL
F. 179, 183 (“coordination of content and conduit through
vertical integration or contractual exclusivity generally
benefits consumers”). That conclusion is even more correct
in the year 2010. The Government can no longer show that
the ban on exclusive contracts furthers the interest in fair
competition.

C

To be sure, some might contend that exclusive vertical
contracts are a problem even in a competitive market – that is,
even in this market with several vibrant video programming
distributors and hundreds of national programming networks.
But such an argument flouts well-settled American antitrust
principles. See 3B PHILLIP E. AREEDA & HERBERT
HOVENKAMP, ANTITRUST LAW ¶ 755a, at 6 (3d ed. 2008) (“To
be sure, even competitively harmless vertical integration can
injure rivals or vertically related firms, but such injuries are
not the concern of the antitrust laws.”); cf. Leegin Creative
Leather Prods., Inc. v. PSKS, Inc., 551 U.S. 877, 882 (2007)
(recognizing the pro-competitive effects of vertical
relationships); Continental T.V., Inc. v. GTE Sylvania, Inc.,
433 U.S. 36, 54-55 (1977) (identifying the market benefits of
vertical combinations such as the promotion of interbrand
competition).

Exclusivity agreements are ubiquitous in all sectors of the
economy. For example, Apple and AT&T maintain an
exclusive agreement with respect to service for the iPhone,
Walt Disney and Wal-Mart have an exclusive agreement for
 22

the sale of Hannah Montana-themed clothing, and DIRECTV
and the National Football League have an exclusive
agreement for distribution of the full slate of NFL games. See
Andria Chang, Retailers Seek More Exclusives, WALL ST. J.,
July 2, 2008, at B5A.

At least unless a company possesses market power in the
relevant market, vertical integration and exclusive vertical
contracts are not anti-competitive; on the contrary, such
arrangements are “presumptively procompetitive.” 11
HERBERT HOVENKAMP, ANTITRUST LAW ¶ 1803, at 100 (2d
ed. 2005).4 Exclusive agreements can benefit consumers by
strengthening a business’s incentives to innovate and invest,
to create new products, and to differentiate its products from
its competitor’s products. If parties who have not shared the
risks are able to come in as equal partners on a successful
investment, and avoid payments for losses, the incentive to
invest declines. Indeed, the FCC itself has recognized this
fundamental economic principle, as has Congress.5 In

4
See 3B AREEDA & HOVENKAMP, ANTITRUST LAW ¶ 755a, at
9 (“Without substantial market power at any relevant production or
distribution stage, vertical integration . . . . is either competitively
neutral or affirmatively desirable.”); ROBERT H. BORK, THE
ANTITRUST PARADOX 309 (1978) (“The truth appears to be that
there has never been a case in which exclusive dealing or
requirements contracts were shown to injure competition.”).
5
The Seventh Circuit has recognized the competitive benefits
of exclusivity arrangements in the newspaper industry in terms that
are instructive: “A market in which every newspaper carried the
same stories, columns, and cartoons would be a less vigorous
market than the existing one. And a market in which the creators of
intellectual property (such as the New York Times) could not decide
how best to market it for maximum profit would be a market with
less (or less interesting) intellectual property created in the first
 23

renewing the exclusivity ban in 2007, the FCC recounted “the
benefits of exclusive contracts and vertical integration . . .
such as encouraging innovation and investment in
programming and allowing for ‘product differentiation’
among distributors.” 2007 Order at 17,835. And when
enacting the 1992 Cable Act, the Senate recognized that
“exclusivity can be a legitimate business strategy where there
is effective competition.” S. REP. NO. 102-92, at 28 (1991).

Because both the video programming distributor market
and video programming network market are competitive, a
ban on exclusive vertical contracts does not serve the
Government’s interest in competition; if anything, it thwarts
that interest. The FCC’s exclusivity ban therefore fails the
intermediate scrutiny test, and its infringement on the editorial
and speech rights of cable operators and cable programmers
cannot be squared with the First Amendment.6

place. No one can take the supply of well researched and written
news as a given; legal rulings that diminish the incentive to find and
explicate the news (by reducing the return from that business) have
little to commend them.” Paddock Publ’ns, Inc. v. Chicago
Tribune Co., 103 F.3d 42, 45 (7th Cir. 1996). The same can be said
of the video programming distribution market – forbidding
exclusive agreements may result in more homogeneous, less
diverse, and less competitive video programming.
6
In so concluding, it bears emphasis that First Amendment
editors and speakers remain subject to generally applicable laws,
including the antitrust laws that prohibit certain anti-competitive
behavior. Moreover, I would leave open the possibility that the
Government might still impose a prospective ban on some
exclusive agreements between video programming distributors and
affiliated regional video programming networks, particularly
regional sports networks. That is because the upstream market in
which video programming distributors contract with regional
networks is less competitive than the national market: There may be
 24

IV

The FCC’s exclusivity ban fails because it no longer
serves an important government interest and it burdens more
speech than essential to achieve its aims. But even if the
Government were justified in maintaining a ban on exclusive
contracts, it would have to do so even-handedly to satisfy the
First Amendment. The FCC’s exclusivity rule also fails that
bedrock equal-treatment requirement.

The exclusivity prohibition, by its text, applies only to
cable operators that have an attributable interest in a
programming network. 47 U.S.C. § 548(c)(2)(D). Because
the ban governs only cable operators and not DIRECTV,
DISH, Verizon, or AT&T, the rule discriminates among
similarly situated video programming distributors and video
programming networks. Programming networks that are
affiliated with cable operators must share their content with
other operators, whereas those that are affiliated with satellite
companies (such as DIRECTV or DISH) or with Verizon or
AT&T may refrain from doing so.

only a few video programming distributors in the market to
purchase regional programming networks, and market share and
other relevant factors in certain areas may dictate tolerance of a
narrow exclusivity ban. Situations where a highly desirable “must
have” regional sports network is controlled by one video
programming distributor might justify a targeted restraint on such
regional exclusivity arrangements. I need not definitively address
such a possibility in this case. In any event, regional concerns of
this sort cannot serve as the justification for the FCC’s draconian
and vastly overbroad national ban. It is telling, in that regard, that
the FCC has pointed to regional sports networks as the primary
justification for this national ban.
 25

Indeed, DIRECTV and DISH, which are the second- and
third-largest video programming distributors nationally and
together serve over 30 percent of in-home video programming
consumers, are not subject to the FCC’s exclusivity ban. But
Cablevision, which now is the seventh-largest national video
programming distributor, is subject to the ban. What
justification is there for such discrimination against a less
powerful entity? None – or at least none that the FCC has
provided. It bears mention, moreover, that this discrimination
against certain video programming distributors was not a
considered legislative decision; it is simply an unintended
relic of the far different video programming distributor market
that existed in 1992 when Congress passed the Cable Act.

This discrimination raises significant First Amendment
issues. As the Supreme Court has said, “[r]egulations that
discriminate among media, or among different speakers
within a single medium, often present serious First
Amendment concerns.” Turner Broad. Sys., Inc. v. FCC, 512
U.S. 622, 659 (1994); see Leathers v. Medlock, 499 U.S. 439,
448 (1991) (regulations that discriminate among speakers
threaten to “distort the market for ideas”); Minneapolis Star &
Tribune Co. v. Minn. Comm’r of Revenue, 460 U.S. 575, 585
(1983) (laws discriminating among speakers must be
“justified by some special characteristic” of the speaker). In
fact, “restrictions distinguishing among different speakers,
allowing speech by some but not others” are frequently found
constitutionally invalid. Citizens United v. FEC, No. 08-205,
slip op. at 24 (U.S. Jan. 21, 2010).

The question, therefore, is whether a substantial
government interest supports the discriminatory treatment.
See Quincy Cable TV, Inc. v. FCC, 768 F.2d 1434, 1450-51
(D.C. Cir. 1985). In my judgment, the answer is no. The
 26

competitive conditions of the market can no longer justify
imposing this restriction on the speech of cable operators and
cable programmers, but not on video programming
distributors and video programming networks that provide the
same services through the use of other technologies.
“[D]ifferential treatment” of this sort “cannot be squared with
the First Amendment.” Citizens United, No. 08-205, slip op.
at 37.

If the Government is to impose an exclusivity ban, it
must apply it in an even-handed manner to similarly situated
video programming distributors, or it must articulate a
substantial government interest for any discriminatory
treatment. The Government has not done so here. For that
alternative reason as well, the FCC’s exclusivity ban violates
the First Amendment.

V

In conclusion, I briefly offer a few additional
observations.

First, the lag time for Congress and a regulatory agency
to catch up to the realities of a changing market ordinarily
would not be cause for much judicial concern. Congress has
the constitutional authority to enact and update competition
laws, and executive and independent agencies may adopt and
change competition rules as they reasonably see fit within the
bounds specified by Congress. Neither Lochner-style
substantive due process analysis nor its statutory first cousin –
overly aggressive APA arbitrary and capricious review of
agency rules – is an appropriate tool for courts to employ in
ordinary economic regulation cases. See American Radio
Relay League, Inc. v. FCC, 524 F.3d 227, 247-48 (D.C. Cir.
 27

2008) (Kavanaugh, J., concurring in part and dissenting in
part).

But this is not just another economic regulation dispute; it
is a First Amendment case. The First Amendment
contemplates a more “laissez-faire regime.” Columbia Broad.
Sys., Inc. v. Democratic Nat’l Comm., 412 U.S. 94, 161
(Douglas, J., concurring in the judgment). It greatly limits the
Government’s ability to interfere with speech in
communication markets – as compared to the Government’s
power to regulate, for example, energy, labor relations, the
environment, or securities transactions.

Second, some claim that the exclusivity ban has been
effective in achieving competition, so why not continue it?
Even accepting arguendo the premise, the argument reflects a
misunderstanding of the interaction of competition principles
and the First Amendment. When a speech market is not
competitive, content-neutral government intervention may
sometimes be permissible. See Turner Broad. Sys., Inc. v.
FCC, 512 U.S. 622, 647 (1994). But when a market is
competitive, direct interference with First Amendment free
speech rights in the name of competition is typically
unnecessary and constitutionally inappropriate. That is
particularly true in this case because antitrust law tells us that
vertical integration and exclusive vertical contracts may
actually further competition and consumer welfare when, as
here, the market has become competitive.

Third, some contend that the greatest threat to free speech
today comes from private entities not from the Government.
Whatever the merits of that argument as a philosophical
matter, the First Amendment is a restriction on governmental
power. Columbia Broad. Sys., Inc., 412 U.S. at 114 (plurality
 28

opinion). The First Amendment is not an authorization for
the Government to restrict the speech of some so as to
enhance or equalize the influence of others. Indeed, the
Supreme Court has described such a theory as “wholly
foreign to the First Amendment.” Buckley v. Valeo, 424 U.S.
1, 49 (1976).

Fourth, it is entirely understandable that the FCC wants
to ensure that consumers can view certain programming
networks no matter whether they choose cable, DIRECTV,
DISH, Verizon, AT&T, or some other distributor. But a
governmental desire that every programming distributor carry
the same networks can no more justify interference with
Cablevision’s First Amendment rights than it could justify the
Government telling Barnes & Noble what publisher’s books it
had to sell, or telling a bookstore-affiliated publishing
company that it had to make certain books available to all
bookstores, or telling a movie production company what
theaters it had to contract with in selling its movie, or telling
the Washington Post that its best political columnist or
reporter had to be shared with other competing newspapers. I
readily concede that the First Amendment rights of a
Cablevision or ESPN do not tug at the free speech heartstrings
in the same way as the iconic political protester who lies at
the core of the First Amendment. But if video programming
distributors are like bookstores and movie theaters and
newsstands – and the Supreme Court has repeatedly and
emphatically said they are – we cannot brush aside the vital
First Amendment interests at stake here.

Fifth, I respect the FCC’s well-intentioned efforts to
navigate this difficult issue. The FCC is often between a rock
and a hard place in deciding the right time to loosen
restrictions adopted as a result of the 1992 Cable Act, and in
 29

exercising its other critical responsibilities. I have no
question about the FCC’s good faith in seeking to discharge
its duties and to achieve legitimate policy objectives.

That said, courts occupy a different place in the
constitutional architecture. If by our best lights we conclude
that a law or regulation violates the First Amendment as the
Amendment has been interpreted by the Supreme Court, then
it is our duty to so rule, notwithstanding the good intentions of
the political branches or the legitimacy of the policy goal. See
United States v. Eichman, 496 U.S. 310, 316-19 (1990); Texas
v. Johnson, 491 U.S. 397, 420-21 (1989) (Kennedy, J.,
concurring). When asked to uphold First Amendment free
speech rights, the courts must exercise their independent
constitutional judgment, not abdicate that responsibility to the
political branches. See Marbury v. Madison, 5 U.S. (1
Cranch) 137, 155-62 (1803); THE FEDERALIST NO. 78.

***

I would hold that the FCC’s exclusivity rule violates the
First Amendment and therefore also violates the 1992 Cable
Act as construed to conform to the First Amendment. I
respectfully dissent.