United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued April 17, 2009 Decided May 26, 2009
No. 08-1016
NATIONAL CABLE & TELECOMMUNICATIONS ASSOCIATION,
PETITIONER
v.
FEDERAL COMMUNICATIONS COMMISSION AND UNITED
STATES OF AMERICA,
RESPONDENTS
AT&T INC., ET AL.,
INTERVENORS
Consolidated with 08-1017
On Petitions for Review of an Order
of the Federal Communications Commission
Paul M. Smith argued the cause for petitioner National
Cable & Telecommunications Association. With him on the
briefs were Daniel L. Brenner, Neal M. Goldberg, and
Michael S. Schooler.
Matthew C. Ames argued the cause for petitioners
National Multi Housing Council and National Apartment
Association and intervenor Manufactured Housing Institute.
With him on the briefs was John McDermott.
2
Joel Marcus, Counsel, Federal Communications
Commission, argued the cause for respondent. On the brief
were Matthew B. Berry, General Counsel, Joseph R. Palmore,
Deputy General Counsel, Daniel M. Armstrong, Associate
General Counsel, and Laurence N. Bourne, Counsel. Nancy
C. Garrison, Catherine G. O'Sullivan, and Kristen C. Limarzi,
Attorneys, U.S. Department of Justice, entered appearances.
Andrew G. McBride argued the cause for intervenors
AT&T Inc., et al. With him on the brief were Joshua S.
Turner, David C. Rybicki, Gary Phillips, Christopher M.
Heimann, Michael E. Glover, Edward Shakin, William H.
Johnson, and Harry F. Cole.
Before: TATEL and GARLAND, Circuit Judges, and
SILBERMAN, Senior Circuit Judge.
Opinion for the Court filed by Circuit Judge TATEL.
Concurring opinion by Senior Circuit Judge SILBERMAN.
TATEL, Circuit Judge: Finding that exclusivity
agreements between cable companies and owners of
apartment buildings and other multi-unit developments have
an anti-competitive effect on the cable market, the Federal
Communications Commission banned such contracts. The
Commission believes that these deals—which involve a cable
company exchanging a valuable service like wiring a building
for the exclusive right to provide service to the residents—
may be regulated under section 628 of the Communications
Act as cable company practices that significantly impair the
ability of their competitors to deliver programming to
consumers. The Commission thus forbade cable operators
not only from entering into new exclusivity contracts,
but also from enforcing old ones. Petitioners, associations
representing cable operators and apartment building owners,
3
argue that the Commission exceeded its statutory authority,
arbitrarily departed from precedent, and otherwise violated
the Administrative Procedure Act. Having carefully
considered the parties’ excellent submissions, we disagree and
conclude that the Commission acted well within the bounds of
both section 628 and general administrative law.
I.
Understanding this controversy requires that we begin by
explaining a few unintuitive statutory terms. The provision at
issue here, section 628(b) of the Communications Act, makes
it unlawful “for a cable operator . . . to engage 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
programming distributor from providing satellite cable
programming or satellite broadcast programming to
subscribers or consumers.” 47 U.S.C. § 548(b). “Cable
operators” are just companies that deliver video programming
by cable, like Comcast and Time-Warner. See 47 U.S.C. §
522(5)–(7). “Multichannel video programming distributors”
(MVPDs) are a broader set of companies that provide video
programming to subscribers. MVPDs include not only cable
operators like Comcast but also direct broadcast satellite
companies like DirecTV. See § 522(13). Although “satellite
cable programming” and “satellite broadcast programming”
differ somewhat—they originate from slightly different kinds
of entities, compare § 548(i)(1), and 47 U.S.C. § 605(d)(1),
with § 548(i)(3)—both terms essentially refer to programming
(i.e., television shows) transmitted to MVPDs via satellite for
retransmission to subscribers. For our purposes, the important
point about them is this: petitioners nowhere dispute the
Commission’s finding that “most programming is delivered
via satellite” and so falls within one of these two categories.
Exclusive Service Contracts for Provision of Video Services in
4
Multiple Dwelling Units and Other Real Estate Developments
(“Order”), 22 F.C.C.R. 20,235, 20,255, ¶ 43 n.132 (2007).
Section 628(b)’s plain terms thus prohibit cable company
practices with the purpose or effect of preventing competing
MVPDs, including other cable companies, from providing the
two predominant types of programming to consumers.
The Commission first considered exclusivity contracts
between cable operators and so-called multiple dwelling units
(MDUs) as an ancillary part of its “2003 Inside Wiring
Order.” See In re Telecommunications Services Inside
Wiring, 18 F.C.C.R. 1342, 1366–70, ¶¶ 63–71 (2003). That
proceeding primarily concerned the ownership status of
certain wiring inside MDUs, and the Commission’s order
considered some thirteen different issues presented by its new
wiring rules. But the Commission also addressed a related
issue raised in a separate notice of proposed rulemaking,
namely “whether it would be appropriate to cap exclusive
contracts to open up MDUs to potential competition on a
building-wide or unit-to-unit basis, and, if so, what would
represent a reasonable cap.” Id. at 1366, ¶ 63. Reviewing the
evidence then available, the Commission found that there was
no “sufficient basis in this record to ban or cap the term of
exclusive contracts.” Id. at 1369, ¶ 68; see also id. at
1369–70, ¶¶ 69–71.
Four years later, the Commission returned to exclusivity
contracts in a rulemaking devoted solely to that question. See
Order, 22 F.C.C.R. at 20,235–64, ¶¶ 1–60. Analyzing the
competitive harms and benefits of exclusivity clauses, see id.
at 20,241–51, ¶¶ 11–29, the Commission this time concluded
that “exclusivity clauses cause significant harm to
competition and consumers that the record did not reflect at
the time of our 2003 Inside Wiring Order,” id. at 20,248–49,
¶ 26; see also id. at 20,249–51, ¶¶ 27–29. And because the
5
Commission found that the record now supports regulation,
this time it extensively analyzed its authority to ban such
contracts, concluding that both section 628 and its “ancillary
authority” empower it to act. Id. at 20,254–64, ¶¶ 40–60.
The Commission accordingly prohibited cable companies
from “enforcing existing exclusivity clauses and executing
contracts containing new ones,” id. at 20,251, ¶ 30, rejecting
more limited remedial options, id. at 20,251–54, ¶¶ 33–39.
Petitioners, a cable industry group called the National
Cable & Telecommunications Association (NCTA) and a pair
of affiliated real estate groups (“real estate petitioners”), find
various faults with this regulatory turnabout. They believe
that the Commission failed to justify its change in policy and
to consider the retroactive effects of its action. They also
believe that the Commission ventured into real-estate affairs
over which it has no jurisdiction and should have enacted a
more limited remedy. But most fundamentally, they believe
that the Commission exceeded its section 628 authority in
regulating exclusivity deals at all. It is to this question of
statutory construction that we first turn.
II.
Because this issue involves an agency’s interpretation of
its governing statute, Chevron’s familiar framework applies.
Chevron U.S.A. v. Natural Res. Def. Council, 467 U.S. 837,
842–43 (1984). First, we ask if the statute unambiguously
forecloses the agency’s interpretation. E.g., Hazardous Waste
Treatment Council v. EPA, 886 F.2d 355, 361 (D.C. Cir.
1989). If so, we disregard the agency’s view and “give effect
to the unambiguously expressed intent of Congress.”
Chevron, 467 U.S. at 843. If the statute is ambiguous enough
to permit the agency’s reading, however, we defer to that
interpretation so long as it is reasonable. E.g., Consumer
Elecs. Ass’n v. FCC, 347 F.3d 291, 299 (D.C. Cir. 2003).
6
Conceding that on a literal reading of the statute
exclusivity contracts do have the “effect” of preventing
competing MVPDs from “providing satellite cable
programming or satellite broadcast programming to
subscribers or consumers,” § 548(b); see Oral Arg. 3:03–3:34,
petitioners nonetheless argue that section 628’s text, structure,
and history demonstrate that it was addressed to a different
evil altogether. Cf. Pharm. Research & Mfrs. of Am. v.
Thompson, 251 F.3d 219, 224 (D.C. Cir. 2001) (using all
“traditional tools of statutory interpretation,” including “text,
structure, purpose, and legislative history,” to ascertain
Congress’s intent at Chevron step one). Congress, they argue,
was concerned not with barriers to service but with practices
that prevent cable competitors from obtaining certain kinds of
programming that the American public wants to watch.
Textually, they emphasize Congress’s identification of
“satellite cable programming” and “satellite broadcast
programming” in particular, arguing that the Commission has
read these well-defined terms out of the statute. Structurally,
they emphasize section 628(c), which directs the Commission
to implement subsection (b) with rules and procedures
focused on fair dealing between programming vendors and
MVPDs, not on anti-competitive barriers to service generally.
And for legislative history they cite the bill’s sponsor, who
intended his legislation to “require[] the cable monopoly to
stop refusing to deal, to stop refusing to sell its products to
other distributors of television programs,” 138 Cong. Rec.
H6487, H6533 (Rep. Tauzin), thus addressing his concern
that “the hot shows are controlled by cable,” id. at H6534; see
also id. at H6533 (“[T]his bill says to the cable industry, ‘You
have to stop what you have been doing, and that is killing off
your competition by denying it products.’” (emphasis added)).
Petitioners thus argue that in enacting section 628(b),
Congress intended to prevent the cable industry from starving
its competition of programming—nothing more, nothing less.
7
For its part, the Commission concedes that Congress’s
primary purpose in enacting section 628 was indeed to expand
competition for programming, not service. But this primary
purpose is hardly dispositive, it argues, because “statutory
prohibitions often go beyond the principal evil to cover
reasonably comparable evils, and it is ultimately the
provisions of our laws rather than the principal concerns of
our legislators by which we are governed.” Oncale v.
Sundowner Offshore Servs., Inc., 523 U.S. 75, 79 (1998).
Reviewing the same text, structure, and legislative history, the
Commission interprets section 628 to permit regulation of
exclusive service agreements as an evil that easily falls within
the literal terms of the statute and is reasonably comparable to
the paradigmatic anti-competitive practices that section 628
specifically targets. See Order, 22 F.C.C.R. at 20,254–64,
¶¶ 40–60. We agree.
Beginning, “as always, with the plain language of the
statute,” Citizens Coal Council v. Norton, 330 F.3d 478, 482
(D.C. Cir. 2003), we find nothing in section 628 that
unambiguously forecloses the Commission’s interpretation.
What the Commission forbade lies within the literal terms of
section 628(b)’s proscription. Indeed, exclusivity agreements
have both the proscribed “purpose” and the proscribed
“effect”—cable operators execute them precisely so that they
can be the sole company serving a building, and as petitioners
themselves put it, “if you can’t serve a building then you can’t
deliver satellite cable programming and satellite broadcast
programming,” Oral Arg. 3:29–3:34.
To be sure, if Congress specifically intended to forbid
practices having an anti-competitive effect on service
generally, focusing only on two particular kinds of
programming would have been an odd way to accomplish that
result. But the existing language would have been an equally
8
odd way of proscribing only unfair dealing between
programming vendors and MVPDs (as petitioners submit)
because the words Congress chose focus not on practices that
prevent MVPDs from obtaining satellite cable or satellite
broadcast programming, but on practices that prevent them
from “providing” that programming “to subscribers or
consumers.” § 548(b). Mindful that “statutes written in
broad, sweeping language should be given broad, sweeping
application,” Consumer Elecs., 347 F.3d at 298, we note
section 628(b)’s broad and sweeping terms, which prohibit
practices “the purpose or effect of which is to hinder
significantly or to prevent any multichannel video
programming distributor from providing satellite cable
programming or satellite broadcast programming to
subscribers or consumers.” § 548(b) (emphasis added). This
breadth comports with section 628’s express purpose of
“promot[ing] the public interest, convenience, and necessity
by increasing competition and diversity in the multichannel
video programming market,” 47 U.S.C. § 548(a). Thus, while
the specificity of section 628’s references to satellite cable
and satellite broadcast programming may reveal the primary
evil that Congress had in mind, nothing in the statute
unambiguously limits the Commission to regulating anti-
competitive practices in the delivery of those kinds of
programming by methods addressed to that narrow concern
alone. See Oncale, 523 U.S. at 79.
For their structural argument, petitioners emphasize that
subsections (c) through (f) of section 628 require regulations,
remedies, and procedures uniquely suited to the problem of
unfair dealing over television shows between programming
vendors controlled by cable and competing MVPDs.
See § 548(c)–(f). Section 628(c)(2)(C), which requires the
Commission to “prohibit practices . . . including exclusive
contracts . . . that prevent a multichannel video programming
9
distributor from obtaining such programming,” well
represents this point, see § 548(c)(2)(C), as does section
628(e)(1), which specifically authorizes the Commission to
remedy violations by setting “prices, terms, and conditions of
sale of programming,” § 548(e)(1). From this, petitioners
infer that the Commission’s focus on competition for service
rather than programming fits uncomfortably with Congress’s
focus on programming, not service.
But this structural argument is a double-edged sword, and
its second—perhaps, leading—edge cuts sharply against
petitioners. By its terms, section 628(c) describes only the
“[m]inimum contents of regulations,” § 548(c)(2), and as the
Commission itself noted, Congress’s enumeration of specific,
required regulations in subsection (c) actually suggests that
Congress intended subsection (b)’s generic language to cover
a broader field, see Order, 22 F.C.C.R. at 20,256, ¶ 44. The
Commission’s remedial powers similarly extend beyond the
kinds of unfair-dealing interventions Congress specifically
foresaw. Indeed, instead of limiting the Commission to those
powers, Congress broadly authorized the Commission to
“prescribe regulations to specify particular conduct that is
prohibited by subsection (b),” § 548(c)(1), to “prescribe
regulations to implement this section,” § 548(f), and to “order
appropriate remedies” including but expressly not limited to
the price-setting option, § 548(e)(1)–(2). Ultimately, then,
our view of section 628’s structure mirrors our view of its
text: Congress had a particular manifestation of a problem in
mind, but in no way expressed an unambiguous intent to limit
the Commission’s power solely to that version of the problem.
Petitioners’ legislative history argument suffers from the
same deficiency. Although they point to considerable
evidence that Congress was specifically concerned with unfair
dealing over programming, they offer no evidence from the
10
legislative record to show that Congress chose its language so
as to limit the Commission solely to that particular abuse of
market power. True, Representative Tauzin introduced this
legislation to “say[] to the cable industry, ‘You have to
stop . . . killing off your competition by denying it products,’”
138 Cong. Rec. H6487, H6533 (Rep. Tauzin), but the
principal concern of one congressman helps little in locating
the limits of the language chosen by all members of both
houses. See Oncale, 523 U.S. at 79 (“[I]t is ultimately the
provisions of our laws rather than the principal concerns of
our legislators by which we are governed.”). Nor is the
legislative history one-sided: the House of Representatives
preferred section 628(b)’s broad language to another
contemporaneous suggestion expressly limited to
unreasonable refusals to deal. See H.R. 1303, 102d Cong. § 8
(1992). Thus, even if legislative history could carry
petitioners all the way from statutory language that literally
authorizes the Commission’s action to the proposition that the
statute unambiguously forecloses the agency’s view, this
legislative history cannot.
Petitioners counter with an insightful hypothetical.
Suppose the statute replaced the terms “satellite cable
programming or satellite broadcast programming” with
“Spanish-language programming.” Could the Commission
still forbid exclusivity contracts by reasoning that “if
competitors can’t serve a building, they can’t provide
Telemundo”? If so, petitioners have raised the specter of a
statutory grant without bounds, for one would be hard pressed
to imagine any cable industry practice not having at least a
marginal effect on competitors’ ability to provide particular
kinds of programming.
11
We think this apparent overbreadth argument is best
analyzed at Chevron step two—as claiming, in effect, that
although the statute does not unambiguously limit the kinds of
practices that the Commission may regulate as having the
proscribed “effect,” the Commission might still act
unreasonably by extrapolating from a narrow effect (i.e., an
effect on Spanish TV) to any practice causing it, however
removed (i.e., TV service generally). That argument has
merit as far as it goes: in proscribing an overbroad set of
practices with the statutorily identified effect, an agency
might stray so far from the paradigm case as to render its
interpretation unreasonable, arbitrary, or capricious. See, e.g.,
AFL-CIO v. Chao, 409 F.3d 377, 384 (D.C. Cir. 2005)
(“[W]hatever ambiguity may exist cannot render nugatory
restrictions that Congress has imposed.”). That said, the
argument just doesn’t go very far in this case. Petitioners’
hypothetical derives whatever force it has from the fact that
Spanish-language programming would rightly be understood
as a niche—a fact that would lend special force to the view
that the Commission, in regulating all service as affecting
Spanish programming, was taking unreasonably overbroad
action to achieve an objective Congress never intended to
authorize. But satellite programming is hardly a niche.
Indeed, petitioners nowhere dispute that it encompasses “most
programming,” Order, 22 F.C.C.R. at 20,255, ¶ 43 n.132.
Thus, in regulating exclusivity deals as having the purpose or
effect of hindering delivery of these kinds of programming,
the Commission barely reached beyond the paradigm case at
all. In this regard, we think it noteworthy that among the
many narrower remedies commenters suggested, not one
urged the Commission to modify its rule so as to ban
exclusivity deals only to the extent they affect satellite cable
or satellite broadcast programming alone.
12
In the end, petitioners are unable to satisfy their heavy
burden. To prevail at Chevron step one, they must show that
section 628(b) is unambiguously limited to Congress’s
principal concern with unfair program hoarding. Because
Section 628’s actual words reach the behavior the
Commission prohibited, petitioners are left to argue “that the
Commission relies almost entirely on a literal reading of the
statutory language—not the most damning criticism when it
comes to statutory interpretation.” Consumer Elecs., 347 F.3d
at 297 (internal quotation marks and citation omitted). And
while the statute’s text, structure, and history do support the
proposition that Congress was, in fact, principally concerned
with program hoarding, none suggests that Congress chose its
language to limit the Commission to regulating that evil
alone. Indeed, having employed all available tools of
statutory construction, we find little that suggests any
congressional intent to limit section 628(b) to competition for
programming, and so are unable to conclude that a reading
literally permitted is nonetheless unambiguously foreclosed.
At the very best, petitioners have demonstrated some
ambiguity as to whether Congress intended to allow
regulation of exclusivity contracts along with unfair dealing
over programming—ambiguity the Commission reasonably
resolved in favor of its own interpretation. Thus, concluding
that section 628(b) authorizes the Commission’s action, we
needn’t consider the Commission’s ancillary authority.
Real estate petitioners’ separate attack on the
Commission’s authority has little merit. They argue that the
exclusivity ban impermissibly regulates the real estate
industry, which lies outside the Commission’s jurisdiction.
The terms of the challenged prohibition apply only to cable
companies, however, and they neither require nor prohibit any
action by MDUs. See Order, 22 F.C.C.R. at 20,253, ¶ 37
(“We merely prohibit the enforcement of existing exclusivity
13
clauses and the execution of new ones by cable operators.”
(emphasis added)). As we have emphasized, “no canon of
administrative law requires us to view the regulatory scope of
agency actions in terms of their practical or even foreseeable
effects.” Cable & Wireless, P.L.C. v. FCC, 166 F.3d 1224,
1230 (D.C. Cir. 1999). The alternative is untenable, as most
every agency action has relatively immediate effects for
parties beyond those directly subject to regulation. For just
one example, no one questions the Commission’s jurisdiction
to promulgate the 2003 Inside Wiring Order even though it
dealt with myriad issues affecting the MDU industry,
including such critical minutiae as whether wiring behind
sheet rock is “physically inaccessible” and so must be opened
to competing providers. 18 F.C.C.R. at 1362–62, ¶¶ 48–53;
see also Nat’l Cable & Telecomm. Ass’n v. FCC, No. 07-
1356, 2008 WL 4808911, at *1 (D.C. Cir. Oct. 23, 2008).
“Approximately 30 percent of Americans live in MDUs, and
their numbers are growing.” Order, 22 F.C.C.R. at 20,235,
¶ 1. We decline to put issues relating to their cable service
outside the Commission’s authority simply because those
issues also matter to their landlords.
III.
For their primary APA claim, petitioners argue that in
deciding “to bar [exclusivity contracts] now, after
affirmatively permitting them in 2003,” the Commission
failed to explain its change of heart and thus acted arbitrarily
and capriciously. NCTA Opening Br. 28. Of course, “it is
axiomatic that agency action must either be consistent with
prior action or offer a reasoned basis for its departure from
precedent.” Williams Gas Processing Gulf Coast Co. v.
FERC, 475 F.3d 319, 326 (D.C. Cir. 2006) (internal quotation
marks and brackets omitted). Yet it is equally axiomatic that
an agency is free to change its mind so long as it supplies “a
reasoned analysis,” Motor Vehicle Mfrs. Ass’n of the United
14
States v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 57
(1983) (internal quotation marks omitted), showing that “prior
policies and standards are being deliberately changed, not
casually ignored,” Greater Boston Television Corp. v. FCC,
444 F.2d 841, 852 (D.C. Cir. 1970) (Leventhal, J.); see also
FCC v. Fox Television Stations, Inc., 129 S. Ct. 1800, 1811
(2009) (“[T]he requirement that an agency provide reasoned
explanation for its action would ordinarily demand that it
display awareness that it is changing position.”). Petitioners
believe that the Commission has neither reasonably
disavowed the logic of the 2003 Inside Wiring Order nor
explained how that logic could fail to produce the same
outcome on the record now presented. Finding the
Commission’s extensive discussion of its change in approach
more than equal to our forgiving standard of review, we
disagree.
Petitioners’ argument begins with a substantial over-
reading of the 2003 Inside Wiring Order. Taking a few
preferred sentences out of context, they argue that the
Commission committed itself to an express logic: where cable
already faces increasingly effective competition, it is
inappropriate to interfere with exclusivity contracts. And
since competition continued to increase between 2003 and
2007, petitioners argue, the Commission’s own logic bars it
from acting differently now.
To be sure, as petitioners emphasize, the 2003 Inside
Wiring Order does conclude with the following two
sentences: “We note that competition in the MDU market is
improving, even with the existence of exclusive contracts.
Accordingly, we decline to intervene.” 18 F.C.C.R. at 1370,
¶ 71. But context matters, and here it makes clear that
petitioners have confused a mere contributing factor with a
sufficient condition. The uncited portions of that same
15
paragraph note that commenters “identified both pro-
competitive and anti-competitive aspects of exclusive
contracts,” and that the Commission was unable to “state,
based on the record, that exclusive contracts [were]
predominantly anti-competitive.” Id. (emphasis added).
Indeed, reading the four short paragraphs the Commission
devoted to the issue in their entirety, we think it quite clear
that the Commission based its unwillingness to intervene in
2003 primarily on the absence of a sufficient record. See id.
at 1369, ¶ 68 (“[W]e do not find a sufficient basis in this
record to ban or cap the term of exclusive contracts.”); id. at
1369, ¶ 69 (“The record does not indicate the extent to which
exclusive contracts have been utilized . . . .”); id. at 1369, ¶ 70
(“[T]he current record is insufficient to justify government-
sanctioned caps of any length . . . .”); id. at 1370, ¶ 71 (“[T]he
record does not support a prohibition on exclusive
contracts . . . .”). In short, the Commission acknowledged in
its 2003 Inside Wiring Order that exclusivity contracts could
either foster competition over entire buildings or foil
competition over individual units, and that decision indicates
only that the record then available was insufficient to resolve
this question. Contrary to petitioners’ claim, nothing about
this logic commits the Commission to abstaining from
regulation whenever competition is increasing—one could
easily imagine that, however much competition improved
despite exclusivity agreements, it would have improved more
without them.
Conversely, petitioners give the Commission far too little
credit for its extensive analysis of this issue in the order
before us today. Rather than merely observing, as it did in
2003, that exclusivity agreements could theoretically have
both pro-competitive and anti-competitive effects, in 2007 the
Commission extensively analyzed the question, see Order, 22
F.C.C.R. at 20,243–51, ¶¶ 16–29, and concluded that “the
16
harms significantly outweigh the benefits in ways they did not
at the time of the Commission’s 2003 Inside Wiring Order.”
Id. at 20,243, ¶ 16. The Commission found that exclusivity
agreements would likely raise prices, limit access to certain
programming, and delay deployment of fiber optic and
broadband technologies. Id. at 20,244–46, ¶¶ 17–20. It
placed particular emphasis on so-called “triple play”—where
phone or cable companies use modern wiring to provide
video, telephone, and internet service as a bundled package.
Such packages are uniquely relevant, as they represent a
highly effective form of competition between large, pre-
existing companies that has expanded since the 2003 Inside
Wiring Order. Id. at 20,245–46, ¶¶ 19–21. The Commission
found that triple play competition between phone and cable
providers lowers prices, spurs deployment of advanced
technology, and facilitates efficiency and simplicity in the
market. Id. If the incumbent has exclusive rights to video
service, however, then competitors will be unable to offer a
bundle, thus inhibiting new entry and denying consumers the
competitive and efficiency benefits of triple play. Id. at
20,246, ¶ 21. “These harms to consumers are greater than
they were several years ago,” the Commission found, because
in 2003 “new entry by [phone companies] had not yet begun
on a large scale, the recent increase in fiber construction had
not yet materialized, and the popularity of triple play was
unproven.” Id. at 20,245, ¶ 19.
Moreover, the Commission fully considered contrary
comments. Specifically, it acknowledged the view that
exclusivity contracts might spur investment by allowing cable
operators some certainty that they could recoup their sunk
costs, or might enable MDU residents to pool their bargaining
power and thus extract cable company concessions. Id. at
20,247–48, ¶¶ 24–25. In the end, however, the Commission
meticulously rejected these arguments as unpersuasive,
17
finding that the interests of MDU owners would not always
align with those of the residents, that agreements may have
been signed before competition even existed, and that, for
many other reasons, the record failed to substantiate
the practical reality of these theoretical benefits. See id.
at 20,246–47, ¶ 22, 20,249–51, ¶¶ 28–29. Contrary to
petitioners’ argument, this balancing of harms and benefits
did not repudiate the logic of the 2003 Inside Wiring Order.
Instead, it merely resolved the very question on which the
Commission found the earlier record insufficient.
Indeed, even were the analysis in the 2003 Inside Wiring
Order more extensive, and even had it expressly committed
the Commission to petitioners’ preferred logic, the 2007
Order’s analysis would still easily satisfy our deferential
standard of review. As the Supreme Court recently put it,
“[the Commission] need not demonstrate to a court’s
satisfaction that the reasons for the new policy are better than
the reasons for the old one; it suffices that the new policy is
permissible under the statute, that there are good reasons for
it, and that the agency believes it to be better.” Fox
Television, 129 S. Ct. at 1811. In other words, the existence
of contrary agency precedent gives us no more power
than usual to question the Commission’s substantive
determinations. We still ask only whether the Commission
has adequately explained the reasons for its current action and
whether those reasons themselves reflect a “‘clear error of
judgment.’” DirecTV, Inc. v. FCC, 110 F.3d 816, 826 (D.C.
Cir. 1997) (quoting State Farm, 463 U.S. at 43). Here, the
Commission could hardly have made its “good reasons” for
its current policy clearer: it believes that individual consumers
are more likely to capture the benefits of competition in the
absence of exclusivity agreements. It reasoned that
18
although “competition for the MDU” may have
some theoretical advantages in some cases
over competition for individual consumers, it
may not describe reality in many cases. Even
if it does, in general we find that the best
results for consumers come from preserving
their ability to play an active role in making an
individual choice rather than allowing cable
operators using exclusivity clauses to foreclose
individual choice. In addition, as noted above,
exclusivity contracts tend to insulate the
incumbent from any need to improve its
service. Thus, we conclude that exclusivity
clauses generally do not benefit MDU
residents.
Order, 22 F.C.C.R. at 20,250, ¶ 28. Given this explanation,
together with the rest of the Commission’s extensive analysis
of exclusivity contracts, we can easily see a clear articulation
of the concerns driving its change in policy, as well as the
basis for the new, reasonable inferences the Commission drew
from a significantly updated record. This marks the limits of
our review.
Petitioners also dispute certain findings relevant to the
Commission’s decision, including the increased importance of
triple play and the fact that incumbents are responding to this
increased competition by using exclusivity agreements to
“lock-up” large clients like MDUs. Id. at 20,240–41, ¶ 10.
These findings rest on substantial record evidence, however,
see, e.g., id. at 20,240–41, ¶ 10 & nn.23–34, 20,243, ¶ 14
(discussing various commenters identifying exclusivity deals
as locking out competitive providers), and the Commission
reasonably explained that the lack of even more evidence of
exclusivity clauses was attributable to the fact that “many
19
MDU owners are unwilling or legally unable to make public
the contracts containing them,” id. at 20,242, ¶ 12. Thus, the
Commission used the evidence before it to make a reasonable
prediction about the likely present and future effects of
changing competitive pressures on the cable market. In that
setting, “[s]ubstantial evidence does not require a complete
factual record—we must give appropriate deference to
predictive judgments that necessarily involve the expertise
and experience of the agency.” Time Warner Entm't Co. v.
FCC, 240 F.3d 1126, 1133 (D.C. Cir. 2001).
Mounting a separate complaint, real estate petitioners
argue that the Commission acted arbitrarily by rejecting their
proposed alternative remedies, including case-by-case
adjudication. This argument runs aground on bedrock
administrative law, which puts “the choice . . . between
proceeding by general rule or by individual, ad hoc litigation
. . . primarily in the informed discretion of the administrative
agency.” SEC v. Chenery Corp., 332 U.S. 194, 203 (1947).
The case-by-case approach the MDU owners prefer makes
sense in the context of the fact-specific, price-setting remedy
contemplated by sections 628(d) and (e) for violations such as
unfair refusals to deal. In the context of a general problem
like exclusivity agreements, however, we see considerable
wisdom in the Commission’s determination to “avoid the
burden that would be imposed by numerous individual
adjudications,” Order, 22 F.C.C.R. at 20,254, ¶ 38—
a judgment petitioners have given us no reason to doubt.
IV.
The final issue presented concerns the Commission’s
decision to apply its rule to existing contracts. According to
petitioners, this amounts to “directly retroactive” action
barred by the APA’s requirement that “legislative rules . . . be
given future effect only,” Chadmoore Comm’ns, Inc. v. FCC,
20
113 F.3d 235, 240 (D.C. Cir. 1997) (internal quotation marks
omitted), or, alternatively, to agency action with harmful,
secondarily retroactive effects that the Commission failed to
consider, see, e.g., Yakima Valley Cablevision, Inc. v. FCC,
794 F.2d 737, 745 (D.C. Cir. 1986) (“[R]etroactive
modification or rescission of [a] regulation can cause great
mischief. An agency must balance this mischief against the
salutary effects, if any, of retroactivity.”). Neither argument
persuades.
First, we think it readily apparent that the Commission’s
action has only “future effect” as the APA and our precedents
use that term. The exclusivity ban purports to alter only the
present situation, not “the past legal consequences of past
actions.” Mobile Relay Assocs. v. FCC, 457 F.3d 1, 11
(D.C. Cir. 2006) (quoting Bowen v. Georgetown Univ. Hosp.,
488 U.S. 204, 219 (1988) (Scalia, J., concurring)). Petitioners
insist that under our precedent, “[t]he critical question” is only
whether the Commission’s rule “changes the legal landscape.”
Nat’l Mining Ass’n v. Dep’t of Labor, 292 F.3d 849, 859
(D.C. Cir. 2002) (internal quotation marks omitted). Of
course, if that were all it took to render a rule impermissible
under the APA, it would spell the end of informal rulemaking.
We have thus repeatedly made clear that an agency order that
only “upsets expectations based on prior law is not
retroactive,” Mobile Relay Assocs., 457 F.3d at 11 (internal
quotation marks omitted). That describes precisely this case.
Here the Commission has impaired the future value of past
bargains but has not rendered past actions illegal or otherwise
sanctionable. “It is often the case that a business will
undertake a certain course of conduct based on the current
law, and will then find its expectations frustrated when the
law changes.” Chem. Waste Mgmt. v. EPA, 869 F.2d 1526,
1536 (D.C. Cir. 1989). Such expectations, however
21
legitimate, cannot furnish a sufficient basis for identifying
impermissibly retroactive rules.
Petitioners’ alternative argument regarding secondary
retroactivity fares somewhat better, but not well enough. Our
case law does require that agencies balance the harmful
“secondary retroactivity” of upsetting prior expectations or
existing investments against the benefits of applying their
rules to those preexisting interests. See, e.g., Bergerco
Canada v. U.S. Treasury Dep’t, 129 F.3d 189, 192–93 (D.C.
Cir. 1997). And by significantly altering the bargained-for
benefits of now-unenforceable exclusivity agreements, the
Commission has undoubtedly created the kinds of secondary
retroactive effects that require agency attention and balancing.
Petitioners’ argument nonetheless fails for an obvious reason:
the Commission did expressly consider the relative benefits
and burdens of applying its rule to existing contracts and,
after extensive analysis, concluded that banning enforcement
of existing contracts was essential. Order, 22 F.C.C.R. at
20,252–53, ¶ 35–37. The Commission found it “strongly in
the public interest” to prevent the harms from existing
contracts “to continue for years,” or to “continue indefinitely
in the cases of exclusivity clauses that last perpetually.” Id. at
20,252, ¶ 35. Legitimate expectations, it noted, were left
largely undisturbed, because “[t]he lawfulness of exclusivity
clauses ha[d] been under [the Commission’s] active scrutiny
for a decade,” and both the Commission and several
individual states had already taken similar actions. Id. at
20,252–53, ¶ 36. Finally, the Commission explained that
incumbent operators would continue to reap the benefits of
their natural monopolies, as they “will still be able to use their
equipment in MDUs to provide service to residents who wish
to continue to subscribe to their services.” Id. at 20,253, ¶ 37.
22
Once again, we think this extensive discussion easily
satisfies the Commission’s obligation under our deferential
standard of review. The Commission balanced benefits
against harms and expressly determined that applying the rule
to existing contracts was worth its costs. Indeed, it devoted as
much analysis to this narrow issue as it did to the entire
question of exclusivity contracts in the 2003 Inside Wiring
Order on which petitioners claim they reasonably relied.
Thus, although petitioners believe that the 2003 order
promised them that their exclusivity deals would remain
valid, we agree with the Commission that any cautious
administrative lawyer would have understood that the
Commission could later take precisely the action it decided
against in 2003. That agencies may change their minds is,
after all, a matter of hornbook law—all the more so where, as
here, the initial decision not to act was based on the
insufficiency of the record. We thus see nothing unreasonable
in the Commission’s balancing of the benefits and costs and,
following familiar principles of judicial review, we decline to
rebalance those factors for ourselves.
V.
In sum, we see the challenged order as fully authorized
by section 628 and the product of careful agency
reconsideration. The petitions for review are denied.
So ordered.
SILBERMAN, Senior Circuit Judge, concurring: I fully agree
with the court’s opinion. Petitioners, without citing the case, are
relying, in part, on the holding of the Supreme Court in Holy
Trinity Church v. United States, 143 U.S. 457 (1892). In that
case, the Court was faced with a statute that unequivocally made
it a crime to assist or encourage any alien to move to the United
States to perform “labor or service of any kind.” Id. at 458
(emphasis added). The Church had brought a minister from
England to lead a New York congregation. The Court looked to
legislative history to conclude that Congress was concerned with
the importation of cheap, unskilled labor–not the likes of a
clergyman (although, just as in our case, nothing in the
legislative history indicated a limit on the broad statutory
language). The Court fatefully said, “a thing may be within the
letter of the statute and yet not within the statute because not
within its spirit, nor within the intention of its makers.” The
seminal article criticizing that approach is John Manning,
Textualism and the Equity of the Statute, 101 Columbia L. Rev.
1, 14 (2001).
Holy Trinity Church has been used by the Supreme Court
ever since–at least up to recent times–to justify statutory
interpretation which, in truth, accorded with a judicial view of
wise policy. See, e.g., NLRB v. Fruit and Vegetable Packers
and Warehousemen Local 766, 377 U.S. 58, 72 (1964).
However, even justices who might have otherwise been
sympathetic to the Holy Trinity “methodology” would not have
been inclined to favor petitioners’ policy position.