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National Association of Telecommunications Officers and Advisors v. Federal Communications Commission

United States Court of Appeals, District of Columbia Circuit

July 7, 2017

National Association of Telecommunications Officers and Advisors, et al., Petitioners
Federal Communications Commission and United States of America, Respondents American Cable Association and National Cable & Telecommunications Association, Intervenors

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

          Stephen B. Kinnaird argued the cause for petitioners. With him on the briefs were Rick. Kaplan and Jerianne Timmerman.

          James M. Carr, Counsel, Federal Communications Commission, argued the cause for respondents. With him on the brief were William J. Baer, Assistant Attorney General, U.S. Department of Justice, Robert B. Nicholson and Steven J. Mintz, Attorneys, Jonathan B. Sallet, General Counsel, Federal Communications Commission, David M. Gossett, Deputy General Counsel, and Richard K. Welch, Deputy Associate General Counsel. Jacob M. Lewis, Associate General Counsel, and Maureen K. Flood, Counsel, entered an appearance.

          Matthew A. Brill, Matthew T. Murchison, Jonathan Y. Ellis, Matthew J. Glover, Jeffrey Alan Lamken, Rick C. Chessen, Michael S. Schooler, and Diane B. Burstein were on the joint brief for intervenors in support of respondents.

          Before: Henderson and Pillard, Circuit Judges, and Ginsburg, Senior Circuit Judge.


          Ginsburg, Senior Circuit Judge

         In 2015, the Federal Communications Commission reversed a decades-old, rebuttable presumption that determined whether state and local franchising authorities may regulate cable rates. Concerning Effective Competition; Implementation of Section 111 of the STELA Reauthorization Act, 80 Fed. Reg. 38001 (2015) (the Order) (to be codified at 47 C.F.R. pt. 76). The National Association of Telecommunications Officers and Advisors, the National Association of Broadcasters, and the Northern Dakota County Cable Communications Commission petition for review of the Order as an impermissible construction of the statute and as arbitrary and capricious. We deny their petition.

         I. Background

         The Cable Television Consumer Protection and Competition Act of 1992 (the Cable Act), which amended the Communications Act of 1934, authorized the Commission to certify a state or local franchising authority to regulate the rates for basic cable service charged by any cable system that it "finds" is "not subject to effective competition." Pub. L. No. 102-385, § 3, 106 Stat. 1460, 1464 (codified at 47 U.S.C. § 543); § 543(a)(2). The Order addresses the procedures to be used by the Commission to find a cable system is subject to the type of effective competition defined in § 543(l)(1)(B), which the Commission calls "Competing Provider Effective Competition." See 80 Fed. Reg. at 38001/3. Competing Provider Effective Competition is one of the four types of "effective competition" defined in the Communications Act; the Order does not affect the procedures for finding any of the other three types of effective competition. Id. at 38006/1.

         Competing Provider Effective Competition has two requirements: (i) the franchise area is "served by at least two unaffiliated multichannel video programming distributors [MVPDs[*] each of which offers comparable video programming to at least 50 percent of the households in the franchise area"; and (ii) "the number of households subscribing to programming services offered by [MVPDs] other than the largest [MVPD] exceeds 15 percent of the households in the franchise area." § 543 (l)(1)(B)(i) and (ii).

         When it first implemented the Cable Act, the Commission adopted a rebuttable presumption that cable operators were not subject to effective competition. Implementation of Sections of the Cable Television Consumer Prot. & Competition Act of 1992 Rate Regulation, 8 FCC Rcd. 5631, 5669-70 (1993) (1993 Order). A cable operator that wanted to avoid rate regulation bore the burden of proving it was subject to effective competition. Id. The cable operator or an "other interested party" could "petition" the Commission to "revoke the jurisdiction of such authority." § 543(a)(5).

         In the Order under review, the Commission, citing a changed competitive landscape, reversed the presumption. See 80 Fed. Reg. at 38001-02. Under its new Order, the Commission presumes there is Competing Provider Effective Competition and places the burden upon the franchising authority that wants to regulate basic cable rates to prove there is not effective competition in its area. Id. The Order also, with certain narrow exceptions not relevant here, automatically, i.e. without receiving a petition from the affected cable operator or any other "interested party, " terminated previously issued certifications of no effective competition. Id. at 38008.

         The Commission based its authority to promulgate the Order primarily upon § 623 of the Communications Act, 47 U.S.C. § 543, as it was before the changes dictated by the STELA Reauthorization Act of 2014 (the STELAR Act), Pub. L. No. 113-200, § 111, 128 Stat. 2059, 2066 (codified at 47 U.S.C. § 543(o)), which further extended the Satellite Television Extension and Localism Act of 2010 (STELA), Pub. L. No. 111-175, 124 Stat. 1218. See 80 Fed. Reg. at 38005. The Order would implement the STELAR Act insofar as it requires the Commission to "establish a streamlined process for filing of an effective competition petition pursuant to [§ 543] for small cable operators." 47 U.S.C. § 543(o)(1); 80 Fed. Reg. at 38005. The STELAR Act also provides that "[n]othing in this subsection shall be construed to have any effect on the duty of a small cable operator to prove the existence of effective competition under this section." § 543(o)(2). The Commission reasoned that the Order fulfilled the requirements of the STELAR Act because it "establish[ed] a streamlined process for all cable operators, including small operators, by reallocating the burden of providing evidence of Effective Competition in a manner that better comports with the current state of the marketplace." 80 Fed. Reg. at 38005/1.

         In the Order, the Commission describes how market conditions had changed since it erected the original presumption in 1993. 80 Fed. Reg. at 38002-04. For example, in 1993:

Incumbent cable operators had captured approximately 95 percent of MVPD subscribers. In the vast majority of franchise areas, only a single cable operator provided service and those operators had "substantial market power at the local distribution level." DBS service had not yet entered the market, and [phone companies] had not yet entered the MVPD business in any significant way.

Id. at 38002/1-2 (quoting Implementation of Section 19 of the Cable Television Consumer Prot. & Competition Act of 1992, 9 FCC Rcd. 7442, 7449 (1994)).

         Today, however, the Commission found two unaffiliated DBS providers each offer "comparable video programming" to almost all homes in the United States. Id. at 38002-03. The Commission determined that fact alone "presumptively satisfies" the first part of the Competing Provider ...

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