Cablevision Systems Corp. v. Federal Communications Commission

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued February 14, 2011 Decided June 10, 2011

No. 10-1062

CABLEVISION SYSTEMS CORPORATION,

PETITIONER

v.

FEDERAL COMMUNICATIONS COMMISSION AND UNITED

STATES OF AMERICA,

RESPONDENTS

NATIONAL CABLE & TELECOMMUNICATIONS ASSOCIATION, ET

AL.,

INTERVENORS

Consolidated with 10-1088

On Petitions for Review of an Order

of the Federal Communications Commission

Henk J. Brands argued the cause for petitioners. With

him on the briefs were Howard J. Symons and Jeffrey A.

Lamken.

Neal M. Goldberg, Michael S. Schooler, Diane B.

Burstein, Samuel L. Feder, and Matthew E. Price were on the

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brief for intervenor National Cable & Telecommunications

Association in support of petitioner. Robert G. Kidwell

entered an appearance.

C. Grey Pash Jr., Counsel, Federal Communications

Commission, argued the cause for respondents. With him on

the brief were Catherine G. O’Sullivan and Nancy C.

Garrison, Attorneys, U.S. Department of Justice, Austin C.

Schlick, General Counsel, Federal Communications

Commission, Peter Karanjia, Deputy General Counsel, and

Daniel M. Armstrong III, Associate General Counsel. Richard

K. Welch, Deputy Associate General Counsel, and Nandan M.

Joshi, Counsel, entered appearances.

Jonathan E. Nuechterlein argued the cause for

intervenors AT&T, Inc., et al. in support of respondents. With

him on the brief were Heather M. Zachary, Christopher M.

Heimann, Gary L. Phillips, Scott H. Angstreich, Jeffrey M.

Harris, Michael E. Glover, Edward Shakin, William H.

Johnson, and Christopher J. Wright.

Before: ROGERS, TATEL, and GRIFFITH, Circuit Judges.

Opinion for the Court filed by Circuit Judge TATEL.

TATEL, Circuit Judge: Under section 628 of the

Communications Act, the Federal Communications

Commission has long imposed program access requirements

on vertically integrated cable companies in order to limit their

ability to withhold satellite programming from competitors in

the video distribution market. Recognizing that existing

regulations governing satellite video distribution allowed

vertically integrated cable companies to withhold terrestrially

delivered programming, a small but competitively significant

niche whose importance has increased with improved

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technology, the Commission issued an order adopting rules to

close the so-called terrestrial loophole. Challenging that order,

petitioners contend (among other things) that the Commission

lacks statutory authority to regulate the withholding of

terrestrial programming. But given section 628’s broad

language and purpose—promoting competition by restricting

vertically integrated cable companies from denying their

competitors access to popular programming networks—we

see nothing in the statute that unambiguously precludes the

Commission from extending its program access rules to

terrestrially delivered programming. Nor do we see any merit

in petitioners’ contention that the Commission’s rules violate

the First Amendment or in their various Administrative

Procedure Act challenges, save one: that the Commission

acted arbitrarily and capriciously by deciding to treat certain

conduct involving terrestrial programming withholding as

categorically “unfair” for purposes of section 628.

I.

To provide context for the challenged order, we begin

with a brief overview of the video programming industry and

the relevant terminology. The industry includes two essential

players: video programmers and video programming

distributors. Distributors, who provide video programming

directly to consumers, are called “multichannel video

programming distributors” (MVPDs). See 47 U.S.C.

§ 522(13). This general category includes “cable operators”

like Cablevision, Comcast, and TimeWarner who deliver

video programming by cable, id. § 522(5)–(7), direct

broadcast satellite (DBS) companies like DirecTV and Dish

Network who transmit programming via direct-to-home

satellites, and wireline companies like AT&T and Verizon

who transmit programming through fiber optics. See In re

Annual Assessment of the Status of Competition in the Market

for the Delivery of Video Programming: Thirteenth Annual

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Report, 24 FCC Rcd. 542, 544–48 ¶¶ 4–13 (2009) (providing

an overview of the MVPD market). Video programmers, also

referred to as video programming vendors, are television

networks like ESPN, TNT, and CNN who sell or license

programming to MVPDs. Particularly relevant to this case,

video programming, and by extension the programmers who

sell it, is classified based on the technology used to transmit it

to MVPDs, not on the technology MVPDs then use to

retransmit it to customers. Satellite programming refers to

programming transmitted to MVPDs via satellite for

retransmission to customers. See 47 U.S.C. § 548(i)(1), (3)

(providing definitions for both “satellite cable programming”

and “satellite broadcast programming”). By contrast,

terrestrial programming refers to programming delivered to

MVPDs over land-based networks, such as fiber optics. See

47 C.F.R. § 76.1000(l).

As we recently explained, “[f]rom the 1940s when the

first cable television systems were built until the 1990s, the

cable industry dominated [the MVPD retail] market,” with

cable operators often enjoying local monopolies. Cablevision

Sys. Corp. v. FCC, 597 F.3d 1306, 1308 (D.C. Cir. 2010).

While the market for cable operators flourished, the demand

for new cable programming to supplement traditional

broadcast programming also increased. “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.” Id. Recognizing that the

combination of horizontal concentration and vertical

integration in the video market created the “potential for

certain anticompetitive conduct” because “[v]ertically

integrated cable operators” could “deny alternative [MVPDs]

access to cable programming services” they needed to

compete for customers, the Commission presented a report to

Congress in 1990 recommending (among other things) that it

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restrict vertically integrated cable programmers from refusing

to share their programming with other MVPDs. See In re

Competition, Rate Deregulation & the Comm’n’s Policies

Relating to the Provision of Cable Television Serv., 5 FCC

Rcd. 4962, 4971–77 ¶¶ 13–14 (1990).

Two years later, Congress enacted the Cable Television

Consumer Protection and Competition Act of 1992 (“Cable

Act”), Pub. L. No. 102-385, 106 Stat. 1460, which amended

the Communications Act of 1934. Finding that “[t]he cable

industry had become vertically integrated” and that cable-

affiliated programmers had “the incentive and ability to favor

their affiliated cable operators over nonaffiliated cable

operators and programming distributors using other

technologies,” id. § 2(a)(5), Congress adopted section 628 to

“increas[e] competition and diversity in the multichannel

video programming market,” 47 U.S.C. § 548(a). Section

628(b) makes it

unlawful for a cable operator, a satellite cable

programming vendor in which a cable operator has

an attributable interest, or a satellite broadcast

programming vendor 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.

Id. § 548(b). To implement that prohibition, section 628(c)(1)

directs the Commission to issue regulations specifying

particular unlawful conduct, id. § 548(c)(1), and subsection

(c)(2) establishes “[m]inimum contents” for those regulations.

Specifically, subsection (c)(2) directs the Commission to

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prohibit three different kinds of practices. First, it must

prevent cable operators from “improperly influencing” actions

by affiliated satellite cable programming vendors and satellite

broadcasting vendors concerning the sale of satellite

programming to unaffiliated MVPDs. Id. § 548(c)(2)(A).

Second, the Commission must prohibit vertically integrated

satellite cable programming vendors and satellite broadcasting

vendors from discriminating between MVPDs in the sale of

their satellite programming (subject to limited exceptions). Id.

§ 548(c)(2)(B). Third, the Commission must bar exclusive

contracts for satellite programming between cable operators

and vertically integrated satellite programmers. Id.

§ 548(c)(2)(C)–(D). With respect to areas unserved by cable

at the time the Act was passed in October 1992, that

prohibition is absolute. Id. § 548(c)(2)(C). But in areas served

by cable prior to that date, the statute allows the Commission

to exempt exclusive contracts that it determines, based on

statutory criteria, are “in the public interest.” Id.

§ 548(c)(2)(D), (c)(4). The prohibition on exclusive contracts

in these areas was to sunset after ten years unless the

Commission determined that the prohibition remained

necessary to protect competition and diversity in video

programming distribution. Id. § 548(c)(5).

In order to implement section 628(c)(2)’s program access

provisions, the Commission issued regulations containing

(among other things) a complaint procedure to address alleged

violations. See In re Implementation of Sections 12 & 19 of

the Cable Television Consumer Prot. & Competition Act of

1992, 8 FCC Rcd. 3359 (1993). In doing so, the Commission

declined to identify additional specific “unfair” acts or

practices beyond those listed in subsection (c)(2) that could

violate subsection (b). It recognized, however, that subsection

(b) remained “a clear repository of Commission jurisdiction to

adopt additional rules or take additional actions” to “address[]

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those types of conduct, primarily associated with horizontal

and vertical concentration within the cable and satellite cable

programming field, that inhibit the development of

multichannel video distribution competition.” Id. at 3373–74

¶¶ 40–41. Since adopting these initial rules, the Commission

has twice extended subsection (c)(2)(D)’s prohibition on

exclusive contracts for satellite programming in previously

served areas. See Cablevision, 597 F.3d at 1312–15 (denying

petitions for review challenging the Commission’s most

recent extension in 2007).

Accordingly, since 1992, vertically integrated cable

companies have been subject to regulations that prohibit

exclusive dealing arrangements and other related

anticompetitive practices for satellite programming. But

because none of these restrictions applied to the withholding

of terrestrial programming, vertically integrated cable

operators have been free to enter into exclusivity deals with

cable-affiliated programmers for terrestrial programming and

thus to withhold such programming from competitor MVPDs.

See In re Review of the Comm’n’s Program Access Rules &

Examination of Program Tying Arrangements, 25 FCC Rcd.

746, 766–67 ¶ 30 (2010) [hereinafter 2010 Order] (citing

examples of terrestrial programming withholding).

Although terrestrial programming accounts for only a

minority of video programming and is generally limited to

regional and local networks, improved technology has made

“terrestrial distribution . . . more cost effective.” Id. at 766

¶ 30. As a result, its use is “likely to continue and possibly

increase in the future.” Id. Moreover, the importance of

terrestrial programming to the video programming market

exceeds its share of that market. A significant number of

Regional Sports Networks (RSNs) are terrestrially delivered,

and the Commission has long recognized that such

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programming, given its “must have” and nonreplicable nature,

could drive the MVPD market. See In re Annual Assessment

of the Status of Competition in Markets for the Delivery of

Video Programming: Sixth Annual Report, 15 FCC Rcd. 978,

986 ¶ 16 (2000) (“We recognize that the terrestrial

distribution of programming, including in particular regional

sports programming, could eventually have a substantial

impact on the ability of alternative MVPDs to compete in the

video marketplace.”).

In 2010, following notice and comment, the Commission

decided to close the “terrestrial loophole.” 2010 Order, 25

FCC Rcd. at 747 ¶ 1. Recognizing that section 628(c)(2)

imposes specific prohibitions on satellite programming only

and that the “focus of the statute is not on the ability of an

MVPD to provide a particular terrestrially delivered

programming network,” id. at 758, 774 ¶¶ 20, 39, the

Commission located its authority to close the terrestrial

loophole in two places: subsection (b)’s broad prohibition and

subsection (c)(1)’s delegation of authority to promulgate

regulations implementing subsection (b). Although

acknowledging that subsection (b) contains no express

mandate to share terrestrial programming, the Commission

explained that the provision does prohibit unfair acts “that

have the purpose or effect of preventing or hindering

significantly an MVPD from providing satellite . . .

programming” to its customers. Id. at 751 ¶ 11 (citing 47

U.S.C. § 548(b)). And in some instances, according to the

Commission, record evidence demonstrated that withholding

terrestrial programming has just such an effect. Cable

operators continue to “own programming for which there may

be no good substitutes, and this ‘must-have’ programming is

necessary for viable competition in the video distribution

market.” Id. at 770 ¶ 34. In support, the Commission pointed

to a 2006 regression analysis finding that the withholding of

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terrestrial RSNs substantially lowered the percentage of

television households subscribing to DBS in two of three

studied markets from what would have been expected without

such withholding. See id. at 768 ¶ 32. Specifically, the study

concluded that terrestrial programming withholding decreased

a competitor MVPD’s market share from 14.5% to 8.6% in

Philadelphia and from 11.1% to 7.4% in San Diego, although

it found no statistically significant effect in Charlotte. See In

re Applications for Consent to the Assignment and/or

Transfer of Control of Licenses Adelphia Commc’ns, 21 FCC

Rcd. 8203, 8345–46 app. D ¶¶ 17–18 (2006).

The Commission acknowledged that when a cable-

affiliated company withholds terrestrial programming,

competitor MVPDs ordinarily remain able to deliver satellite

programming to customers. But in some cases, the

Commission determined, denying access to must-have

terrestrial programming, like RSNs, could discourage

alternative MVPDs “from entering new [geographic] markets

or . . . limit [their] ability . . . to provide a competitive

alternative to the incumbent cable operator.” 2010 Order, 25

FCC Rcd. at 774 ¶ 39. In other words, “the effect of denying

an MVPD the ability to provide certain terrestrially delivered,

cable-affiliated programming may be to significantly hinder

the MVPD from providing video programming in general,

including satellite . . . programming . . . , as well as

terrestrially delivered programming.” Id. (emphasis added).

This significant hindrance could, in turn, adversely affect

consumers by reducing competition, “allow[ing] cable

operators to raise rates and to refrain from innovating.” Id.

Having determined that it had statutory authority to close

the terrestrial loophole, the Commission, through the

challenged order, issued regulations authorizing the filing of

complaints alleging that an MVPD or satellite programming

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vendor violated section 628(b) by (1) engaging in unfair

terrestrial programming withholding that (2) prevented or

significantly impaired an MVPD from providing satellite

programming to customers. In those regulations, the

Commission identified the conduct it would consider “unfair”

under section 628(b). Specifically, MVPDs could file

complaints against cable operators and covered satellite

programming vendors for actions that would violate section

628(c)(2) “but for the terrestrial loophole,” i.e., conduct

involving undue influence, discrimination, or exclusive

agreements. Id. at 778–80 ¶¶ 48–49. Although the

Commission found subsection (c)(2)-like conduct involving

terrestrial programming to be categorically “unfair,” it

declined to ban such conduct outright. Instead, it required

complainants to show that the unfair act in fact had “the

purpose or effect of hindering significantly or preventing

[them] from providing satellite . . . programming to

subscribers or consumers.” Id. at 780–81 ¶ 50. “For most

terrestrially delivered, cable-affiliated programming” that is

“readily replicable” such as local news or local community

programming, the Commission indicated that “the record

contain[ed] no evidence” that subsection (c)(2)-like conduct

would generally have such a purpose or effect. Id. at 781 &

n.200 ¶ 51. But “especially given predictions that

programming will increasingly shift to terrestrial delivery,”

the Commission left open the possibility that complainants

could satisfy their burden of proof in individual cases. Id. at

781 ¶ 51. As to RSN programming, however, the Commission

found that its precedent and record evidence, such as the 2006

regression analysis discussed above, demonstrated that such

programming is “very likely to be both non-replicable and

highly valued by consumers.” Id. at 782–83 ¶ 52. As a result,

complainants could “invoke a rebuttable presumption that an

unfair act involving a terrestrially delivered, cable-affiliated

RSN has the purpose or effect set forth in [s]ection 628(b).”

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Id. The Commission extended this rebuttable presumption to

an RSN’s high definition (HD) programming feed, relying on

“substantial evidence regarding consumers’ preference for

HD programming.” Id. at 784–85 ¶¶ 54–55.

In designating the entities it could hold liable, the

Commission explained that section 628(b) required it to

address the unfair acts of cable operators and covered satellite

programming vendors “but not the unfair acts of other

programmers delivering programming only by terrestrial

means.” Id. at 786 ¶ 57. Applying section 628(b), the

Commission rejected the argument, made by several

commenters, that satellite programming vendors could not

possibly violate this provision because the distribution of

terrestrial programming falls outside such vendors’ statutorily

defined activities. According to the Commission, this

argument “read[] into the statute an additional condition that

is not there” because “[n]othing in the statute excludes an

otherwise covered entity from the reach of [s]ection 628(b)”

when such an entity engages in unlawful activities. Id. at 779

n.192 ¶ 49. To address unfair conduct by cable-affiliated

programmers who provide only terrestrially delivered

programming, the Commission imposed vicarious liability on

the cable operator or covered satellite programmer where the

complainant “establish[ed] that the [terrestrial] programmer is

wholly owned by, controlled by, or under common control

with one or more of these entities.” Id. at 786 ¶ 57. The

Commission explained that vicarious liability was “necessary

to give [s]ection 628(b) practical effect.” Id. Otherwise, a

cable-controlled terrestrial program supplier could circumvent

the regulations by “insist[ing] that a competitive MVPD pay

an exorbitant rate,” thereby “achieving the same result as an

exclusive contract.” Id.

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Cablevision Systems Corporation and Madison Square

Garden L.P., respectively a cable operator and video

programmer, own satellite and terrestrially delivered video

programming services and have a common controlling

shareholder. The two companies petition for review of the

Commission’s terrestrial programming order. Along with

their supporting intervenor, the National Cable

& Telecommunications Association (NCTA), petitioners raise

three principal objections. First, they contend that the

Commission exceeded its section 628 authority by extending

its program access rules to terrestrially delivered

programming. Second, they argue that the Commission’s

rules, which regulate speech activities of cable operators and

video programmers, violate the First Amendment. Third, they

argue that certain specific features of the rules run afoul of

section 628, the Administrative Procedure Act (APA), and/or

the First Amendment. We consider each argument in turn.

II.

Starting with petitioners’ statutory argument, we apply

the familiar Chevron framework to the Commission’s

interpretation of its governing statute. Chevron U.S.A. Inc. v.

Natural Res. Def. Council, 467 U.S. 837, 842–43 (1984). We

begin by asking “whether Congress has directly spoken to the

precise question at issue.” Id. at 842. If it has, we “give effect

to the unambiguously expressed intent of Congress.” Id. at

842–43. But if Congress has not unambiguously foreclosed

the agency’s construction of the statute, we defer to the

agency provided its construction is reasonable. See Nat’l

Cable & Telecomms. Ass’n v. Brand X Internet Servs., 545

U.S. 967, 980 (2005).

Petitioners face an uphill climb in arguing that the

Commission’s interpretation of section 628(b) fails under

Chevron step one. In National Cable & Telecommunications

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Ass’n v. FCC (“NCTA”), we described section 628(b)’s

prohibition as “broad and sweeping,” observing that its

language bars unfair “practices ‘the purpose or effect of which

is to hinder significantly or to prevent any multichannel video

programming distributor from providing satellite . . .

programming . . . to subscribers or consumers.’ ” 567 F.3d

659, 664 (D.C. Cir. 2009) (quoting 47 U.S.C. § 548(b)). This

broad language, we pointed out, “comports” with section

628’s similarly expansive “express purpose of ‘promot[ing]

the public interest, convenience, and necessity by increasing

competition and diversity in the multichannel video

programming market.’ ” Id. (quoting 47 U.S.C. § 548(a)).

“Mindful that statutes written in broad, sweeping language

should be given broad, sweeping application,” id. (internal

quotation marks omitted), we rejected a challenge to a

Commission order banning exclusivity agreements between

cable operators and the owners of apartment buildings and

other multiple dwelling units (the “MDU order”). We

concluded that the Commission acted “well within the bounds

of . . . section 628” because such exclusivity agreements have

both the purpose and effect of preventing rival MVPDs from

providing satellite programming to customers. Id. at 661,

663–64.

Notwithstanding NCTA and section 628’s broad

language, petitioners insist that the statute unambiguously

precludes the Commission’s terrestrial program access rules.

First, highlighting section 628(c)(2)’s repeated references to

satellite programming, they claim that Congress deliberately

exempted terrestrial programming from the Commission’s

program access regime and that the Commission may not use

its subsection (b) and (c)(1) general authority to disturb that

choice. Second, petitioners maintain that the order conflicts

with section 628(b)’s designation of the entities that can be

held liable for violating the prohibition. As the Commission

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acknowledged, section 628(b) applies to cable operators and

to two types of satellite programming vendors, but not to

purely terrestrial programmers. 2010 Order, 25 FCC Rcd. at

786–87 ¶ 57. According to petitioners, “it is inconceivable

that, if Congress intended to authorize the FCC to prohibit the

withholding of terrestrial programming, it would have

drafted” the statute in this way. Pet’rs’ Br. 38. Finally,

petitioners contend that the Commission’s order violates

section 628(b)’s requirement that prohibited unfair acts

prevent or significantly hinder an MVPD “from providing

satellite . . . programming to subscribers and consumers.” 47

U.S.C. § 548(b) (emphasis added). Interpreting “to provide”

to mean “to furnish” or “to make available,” petitioners argue

that when a vertically integrated cable company withholds

terrestrial programming, it places no restrictions whatever on

a rival MVPD’s ability to make satellite programming

available to willing customers.

Petitioners’ first argument—that section 628(c)(2)’s

limitations implicitly restrict the scope of section 628(b)’s

general prohibition—fails for the same reason we rejected a

similar argument in NCTA. “By its terms, section 628(c)[(2)]

describes only the ‘[m]inimum contents of regulations. . . .’ ”

NCTA, 567 F.3d at 664–65 (quoting 47 U.S.C. § 548(c)(2)).

Indeed, “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.” Id. at 665. Petitioners’ reliance on cases holding that

agencies may not use their general rulemaking authority to

override a more specific statutory directive is thus misplaced.

See, e.g., Nat’l Mining Ass’n v. Dep’t of Interior, 105 F.3d

691, 693–94 (D.C. Cir. 1997) (holding that a general grant of

rulemaking authority did not authorize the agency to

supplement statutory conditions for when mining permits

would be withheld); Natural Res. Def. Council, Inc. v. Reilly,

15

976 F.2d 36, 41 (D.C. Cir. 1992) (holding that the EPA could

not use its general grant of rulemaking authority to stay

regulations subject to statutory deadlines). Because section

628(c)(2) establishes a floor rather than a ceiling, the

Commission’s reliance on subsections (b) and (c)(1) to

regulate conduct that subsection (c)(2) leaves unrestricted in

no way contravenes congressional intent.

Petitioners acknowledge that given subsection (c)(2)’s

“minimum contents” caption, the Commission necessarily has

authority to issue rules that go beyond that subsection. This,

they nonetheless insist, is “no answer” to their argument that

subsection (c)(2) expresses a congressional decision to

exempt terrestrial programming withholding from regulation.

Pet’rs’ Br. 37. Congress “carefully considered prohibiting

cable operators from withholding terrestrial programming but

conspicuously stopped short of doing so.” Id. at 35. In

support, petitioners point out that Congress adopted the House

version of section 628(c)(2), which applied only to satellite

programming, instead of the Senate version, which would

have imposed fair dealing restrictions on cable-affiliated

programmers without distinguishing between methods of

programming transmission. See H.R. Rep. No. 102-862, at 91

(1992) (Conf. Rep.), reprinted in 1992 U.S.C.C.A.N. 1231,

1273. Therefore, petitioners claim, even though subsection

(c)(2) is not a ceiling, expanding the program access rules

beyond satellite programming is impermissible because “[b]y

starkly and specifically exempting a small category of

programming, Congress made clear that it did not wish that

category to be subject to the specified rules.” Pet’rs’ Br. 36–

37. To illustrate the point, petitioners offer an analogy.

Suppose Congress passed a statute requiring EPA to regulate

emissions by “non-hybrid cars.” Under such a statute, EPA

could invoke its general rulemaking authority to promulgate

additional emissions regulations, perhaps by regulating

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emissions from non-hybrid trucks, but it would have no

authority, according to petitioners, to regulate hybrid car

emissions.

It does not follow, however, that just because Congress

required mandatory minimum regulations for some

technologies, it intended to exclude other technologies from

regulation. Hardly clairvoyant, especially with respect to

rapidly evolving technologies, Congress may well have

targeted satellite programming in section 628(c)(2) simply

because it was at the time far and away the dominant form of

video programming and thus the focus of concerns about

anticompetitive withholding. See Intervenors in Support of the

Comm’n Br. 12 (“[T]errestrial delivery was rarely used when

the statute was passed.”). The legislative history sheds no

light on Congress’s intent, as there is neither any explanation

in the House committee reports concerning its decision to use

the term “satellite programming” rather than “video

programming” nor any indication in the conference report that

Congress adopted the House language to restrict the statute’s

coverage. See Mead Corp. v. Tilley, 490 U.S. 714, 723 (1989)

(“We do not attach decisive significance to the unexplained

disappearance of one word from an unenacted bill because

mute intermediate legislative maneuvers are not reliable

indicators of congressional intent.” (internal quotation marks

omitted)). To the contrary, the conference report emphasizes

the statute’s expansive goals, explaining that “the conferees

expect the Commission to address and resolve the problems

of unreasonable cable industry practices, including restricting

the availability of programming and charging discriminatory

prices to non-cable technologies.” See H.R. Rep. No. 102-

862, at 93, reprinted in 1992 U.S.C.C.A.N. at 1275. We thus

see no justification for construing Congress’s reference to

satellite programming withholding in subsection (c)(2) as an

effort to prevent the Commission from addressing similar

17

unfair practices that—two decades later—have either the

purpose or effect that subsection (b) proscribes. See NCTA,

567 F.3d at 665 (“The Commission’s remedial powers . . .

extend beyond the kinds of unfair-dealing interventions

Congress specifically foresaw.”).

Moreover, even were there reason to believe that

Congress deliberately phrased subsection (c)(2) to exclude

terrestrial programming, as opposed to simply using a term

that captured the overwhelming majority of video

programming at the time, we still see nothing in the statute

that would unambiguously preclude the Commission from

extending its rules to terrestrial programming on a case-by-

case basis. Congress may well have wanted to avoid dictating

the rules the Commission must adopt for a nascent technology

while leaving it with authority to act should regulation prove

necessary. Petitioners’ “non-hybrid car” analogy overlooks

this possibility.

For similar reasons, we reject petitioners’ second

argument—that by leaving terrestrial programmers off the list

of entities covered by section 628(b), Congress

unambiguously placed terrestrially delivered programming

beyond Commission jurisdiction. Much like petitioners’ first

argument, this contention fails because it establishes nothing

more than that when enacting the Cable Act, Congress was

not attuned to the possibility that vertically integrated cable

companies would engage in anticompetitive conduct

regarding terrestrial programming. When Congress delegates

broad authority to an agency to achieve a particular objective,

agency action pursuant to that delegated authority may extend

beyond the specific manifestations of the problem that

prompted Congress to legislate in the first place. See

Consumer Elecs. Ass’n v. FCC, 347 F.3d 291, 297–99 (D.C.

Cir. 2003) (rejecting a Chevron step one challenge contending

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that the Commission’s statutory authority was limited to only

the immediate concern Congress empowered the Commission

to address and indicating that the use of “broad language” to

solve a relatively specific problem “militates strongly in favor

of giving [the statute] broad application”). In this case,

although Congress may not have “foreseen the development

of [terrestrial delivery],” section 628’s expansive language

suggests that it intended to give the Commission sufficient

flexibility “to maintain . . . a grip on the dynamic aspects of

[video programming]” so that it could pursue the statute’s

objectives as industry technology evolves. United States v.

Sw. Cable Co., 392 U.S. 157, 172 (1968) (internal quotation

marks omitted); see also Massachusetts v. EPA, 549 U.S. 497,

532 (2007) (“While the Congresses that drafted [section]

202(a)(1) [of the Clean Air Act] might not have appreciated

the possibility that burning fossil fuels could lead to global

warming, they did understand that without regulatory

flexibility, changing circumstances and scientific

developments would soon render the . . . Act obsolete. The

broad language of [section] 202(a)(1) reflects an intentional

effort to confer the flexibility necessary to forestall such

obsolescence.”).

Petitioners also claim that the supposedly poor fit

between section 628(b) and the regulation of terrestrial

programming withholding has led the Commission to adopt

liability rules that are arbitrary, capricious, or otherwise

unlawful. We address their specific objections in Part IV. For

present purposes, it suffices to note that even if the

Commission acted unlawfully by, for example, establishing

vicarious liability for cable operators based on the conduct of

affiliated terrestrial programmers, that would provide no

reason for barring the Commission from holding liable cable

operators and satellite programming vendors when they

19

engage directly in unfair conduct that has the purpose or

effect the statute proscribes.

Finally, we are unpersuaded by petitioners’ contention

that the Commission lacks authority to regulate terrestrial

programming withholding under section 628(b) because, in

their view, the effect of such withholding on the provision of

satellite programming is too attenuated. According to

petitioners and their supporting intervenor, section 628(b)

gives the Commission authority to regulate practices that

prevent or significantly impair an MVPD from either

obtaining satellite programming (which the subsection (c)(2)

program access rules address) or delivering satellite

programming to customers (which the MDU order in NCTA

dealt with). Terrestrial programming withholding, they insist,

has no effect on a rival MVPD’s ability either to obtain

satellite programming or to deliver such programming

because even when cable-affiliated terrestrial programmers

refuse to share, the MVPD remains fully able to make satellite

programming available to interested customers.

Acknowledging that terrestrial programming withholding may

limit the number of customers an MVPD can attract, thus

reducing its market share, petitioners contend that commercial

attractiveness has nothing to do with whether the MVPD can

provide satellite programming.

The problem with petitioners’ argument is that it wrongly

assumes an MVPD’s lack of commercial attractiveness will

never prevent or significantly hinder it from providing

satellite programming. Indeed, as explained above, see supra

pp. 4–5, Congress enacted section 628 largely on the theory

that “exclusive arrangements” for programming “may tend to

establish a barrier to entry and inhibit the development of

competition in the market.” S. Rep. No. 102-92, at 28 (1991),

reprinted in 1992 U.S.C.C.A.N. 1133, 1161; see also

20

Cablevision, 597 F.3d at 1308 (discussing the Commission’s

1990 report that led Congress to adopt section 628 and

summarizing the Commission’s view that “the cable

operators’ monopolies in the MVPD market persisted partly

because competitors were unable to secure programming

owned by vertically integrated cable companies”). When a

vertically integrated cable programmer limits access to

programming that customers want and that competitors are

unable to duplicate—like the games of a local team selling

broadcast rights to a single sports network—competitor

MVPDs will find themselves at a serious disadvantage when

trying to attract customers away from the incumbent cable

company. To use a concrete example, we doubt that

Philadelphia baseball fans would switch from cable to an

alternative MVPD if doing so would mean they could no

longer watch Roy Halladay, Cliff Lee, Roy Oswalt, and Cole

Hamels take the mound, even if they thought the alternative

MVPD was otherwise superior in terms of price and quality.

Facing such a structural disadvantage, a potential MVPD

competitor might realistically conclude that expanding its

presence in the Philadelphia market would be uneconomical,

thus limiting its ability to provide video programming—and

hence satellite video programming—to customers.

Another hypothetical proves the point. Suppose the

impact of withholding a particular cable-affiliated terrestrial

programming network in a particular market is so great that it

drives existing non-cable MVPDs completely out of the

market and keeps others from entering. In that case, no one

would doubt that terrestrial programming withholding

prevented MVPDs from providing satellite programming. Just

as “if you can’t serve a building then you can’t deliver

satellite . . . programming,” NCTA, 567 F.3d at 664 (internal

quotation marks omitted), if you can’t enter or survive in a

market, then you can’t deliver satellite programming in that

21

market. Petitioners conceded at oral argument that the

Commission would possess section 628(b) authority in such a

case, but they insisted there is no evidence that terrestrial

withholding has ever made it completely impossible for

potential competitors to enter or survive in a market. See Oral

Arg. Tr. at 6:19–8:10. Of course, petitioners are right about

this: the Commission has never suggested that there are

situations in which terrestrial withholding has completely

prevented an MVPD from serving a market. But given

petitioners’ concession that the Commission can in principle

regulate terrestrial withholding when such withholding

completely prevents an MVPD from competing, thus

preventing that MVPD from providing satellite programming,

they have no basis for arguing that section 628

unambiguously precludes the Commission from regulating

where it has evidence that such withholding “hinder[s]

significantly,” 47 U.S.C. § 548(b), an MVPD from competing

with the incumbent cable operator to deliver satellite

programming to customers.

Before leaving Chevron step one, we pause to consider

petitioners’ additional argument that we may not defer to the

Commission’s interpretation of section 628(b) because

extending the program access rules to terrestrial programming

“raises grave constitutional questions.” Petr’s’ Br. 41 (internal

quotation marks omitted). Although the canon of

constitutional avoidance does indeed “trump[] Chevron

deference,” we “do not abandon Chevron deference at the

mere mention of a possible constitutional problem.” Nat’l

Mining Ass’n v. Kempthorne, 512 F.3d 702, 711 (D.C. Cir.

2008). In any event, as we explain in Part III, there is nothing

to avoid.

Having rejected petitioners’ arguments that section

628(b) unambiguously forecloses the Commission’s

22

interpretation, we are left to decide whether that interpretation

is reasonable under Chevron step two’s “highly deferential

standard.” Nat’l Rifle Ass’n of Am., Inc. v. Reno, 216 F.3d

122, 137 (D.C. Cir. 2000). It is. As the Commission

explained, through section 628 “Congress intended to

encourage entry and facilitate competition in the video

distribution market by existing or potential competitors to

traditional cable systems by, among other things, making

available to those entities the programming they need to

compete in the video distribution market.” 2010 Order, 25

FCC Rcd. at 754 ¶ 13. And according to the Commission,

terrestrially delivered programming, or at least some kinds of

terrestrial programming like RSNs that are both non-

replicable and highly coveted, have become necessary for

MVPDs to compete fully with vertically integrated cable

companies. Id. at 768–71 ¶¶ 32–35. Petitioners have given us

no reason to disturb the Commission’s effort to pursue

Congress’s objectives as the video distribution industry

evolves.

Relying on language from NCTA, petitioners argue that

the Commission’s interpretation of section 628(b) creates “the

specter of a statutory grant without bounds” because by

interpreting a statute focused on the provision of satellite

programming to authorize terrestrial withholding regulations,

the Commission has “stray[ed] so far from the paradigm case

as to render its interpretation unreasonable, arbitrary, or

capricious.” 567 F.3d at 665. In our view, however, the

Commission has “barely reached beyond the paradigm case at

all.” Id. at 666. Indeed, the order at issue here actually aligns

more closely with Congress’s core purpose in enacting section

628 than did the MDU order. After all, preventing vertically

integrated cable companies from engaging in unfair dealing

over programming, precisely the conduct the challenged order

addresses, was the primary reason Congress enacted section

23

628. See id. at 663 (acknowledging that “Congress’s primary

purpose in enacting section 628 was . . . to expand

competition for programming, not service”).

Finally, in addition to challenging the substance of the

Commission’s interpretation, petitioners argue that prior to

issuing the challenged order, the Commission had taken the

position that it lacked authority to regulate terrestrial

programming, and that it departed from that position without

acknowledgment. See FCC v. Fox Television Stations, Inc.,

__U.S.__, 129 S. Ct. 1800, 1810–11 (2009) (holding that

although the APA imposes no heightened standard of judicial

review when an agency changes its position, “the requirement

that an agency provide reasoned explanation for its action

[will] ordinarily demand that it display awareness that it is

changing position”). In its order, however, the Commission

pointed out that it had recognized that complaints concerning

terrestrial withholding might, under some circumstances, be

cognizable under subsection (b). See 2010 Order, 25 FCC

Rcd. at 759–60 & n.80 ¶ 22. True, the Commission also

acknowledged that some decisions by its former Cable

Services Bureau could be read to suggest that subsection

(c)(2) affirmatively limits the Commission’s ability to

regulate terrestrial withholding. See id. at 759–60 & n.77 ¶ 22

(collecting Bureau decisions indicating “that [s]ection 628(b)

may not be used categorically to preclude programming

practices that are related to practices” that subsection (c)(2)

addresses but does not reach). But the Commission explained

that not only are the Bureau’s statements distinguishable from

the present order—they addressed only the permissibility of

an across-the-board ban on terrestrial withholding—but also

“staff-level” Bureau decisions “are not binding on the

Commission.” Id. at 760 ¶ 22. The Commission added that

even if prior decisions could be read to preclude

“consideration of program access complaints involving

24

terrestrially delivered, cable-affiliated programming,” it was

now “reject[ing] that view.” Id. Given the care the

Commission took to explain its prior actions, we see no basis

for concluding that it “casually ignored” prior policies and

interpretations or otherwise failed to provide a reasoned

explanation for its order. Dillmon v. Nat’l Transp. Safety Bd.,

588 F.3d 1085, 1089 (D.C. Cir. 2009) (internal quotation

marks omitted).

III.

Petitioners next contend that the Commission’s order

violates the First Amendment, both on its face and as applied,

because the program access rules for terrestrial programming

burden the speech and association rights of cable operators

and video programmers. As to that claim, this court has

already done much of the heavy lifting. In Time Warner

Entertainment Co. v. FCC, 93 F.3d 957, 977–78 (D.C. Cir.

1996) (per curiam), we held that intermediate scrutiny applied

to a facial challenge to the Commission’s satellite

programming access rules established pursuant to section

628(c)(2). Under that standard, we will sustain a regulation 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.’ ” Turner Broad.

Sys., Inc. v. FCC, 512 U.S. 622, 662 (1994) (quoting United

States v. O’Brien, 391 U.S. 367, 377 (1968)). Concluding that

regulating vertically integrated programmers and operators to

promote competition in the video marketplace “furthers an

important government interest [that] is unrelated to the

suppression of free expression” and that subsection (c)(2)’s

restrictions did not “burden substantially more speech than is

necessary to further” that interest, we upheld the

Commission’s program access rules against a facial challenge.

25

Time Warner, 93 F.3d at 978–79 (internal quotation marks

omitted).

In this case, therefore, we apply intermediate scrutiny to

the Commission’s order, recognizing that we have already

concluded that its asserted justification—promoting

competition in the MVPD market—represents an important

governmental interest. Of course, just because the

government’s “asserted interests are important in the abstract

does not mean” that the Commission’s terrestrial

programming withholding rules “will in fact advance those

interests.” Turner Broad. Sys., 512 U.S. at 664. “When the

[g]overnment defends a regulation on speech as a means to

redress past harms or prevent anticipated harms, it 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. Pointing to dramatic

changes in the video programming industry since Congress

passed the Cable Act in 1992, and in particular to significant

gains in market share enjoyed by MVPD competitors to cable,

petitioners contend that the Commission’s imposition of any

program access obligations no longer serves an important

governmental interest and therefore violates the First

Amendment. “At a minimum,” they assert, the extension of

program access rules to terrestrially delivered programming

fails intermediate scrutiny because “competition in the MVPD

industry has flourished even though terrestrial programming

was never required to be shared.” Pet’rs’ Br. 32.

The video programming industry does indeed look very

different today than it did when Congress passed the Cable

Act in 1992. See Cablevision, 597 F.3d at 1313–14 (“It is true

that the MVPD market has transformed substantially since the

Cable Act was enacted in 1992.”); Comcast Corp. v. FCC,

579 F.3d 1, 8 (D.C. Cir. 2009) (describing the “overwhelming

26

evidence concerning the dynamic nature of the

communications marketplace, and the entry of new

competitors at both the programming and the distribution

levels” (internal quotation marks and citation omitted)).

Although cable operators then controlled approximately 95%

of the national market for video programming, see

Cablevision, 597 F.3d at 1309, by 2007 their share had

decreased to 67%, and it has apparently continued dropping in

the face of competition from DBS providers and, more

recently, from telephone companies offering fiber optic

services, see 2010 Order, 25 FCC Rcd. at 763 ¶ 27. In

addition, the number of programming networks has increased

dramatically while the percentage of networks vertically

integrated with cable operators has declined. See Cablevision,

597 F.3d at 1309, 1314.

Contrary to petitioners’ argument, however, these market

changes do not mean that the Commission’s order fails

intermediate scrutiny. By imposing liability only when

complainants demonstrate that a company’s unfair act has

“the purpose or effect” of “hinder[ing] significantly or . . .

prevent[ing]” the provision of satellite programming, 47

U.S.C. § 548(b), the Commission’s terrestrial programming

rules specifically target activities where the governmental

interest is greatest. Accordingly, to survive intermediate

scrutiny in this facial challenge, the Commission need show

only that vertically integrated cable operators remain

dominant in some video distribution markets, that the

withholding of highly desirable terrestrially delivered cable

programming, like RSNs, inhibits competition in those

markets, and that providing other MVPDs access to such

programming will “promot[e] . . . fair competition in the

video marketplace.” Time Warner, 93 F.3d at 978. The

Commission has no obligation to establish that vertically

integrated cable companies retain a stranglehold on

27

competition nationally or that all withholding of terrestrially

delivered programming negatively affects competition. For

these reasons, petitioners’ reference to the Commission’s

extending its program access rules by closing the terrestrial

loophole is a red herring. Although it is true that competition

in the MVPD industry has generally increased even absent

rules restricting terrestrial withholding, nothing prevents the

Commission from addressing any remaining barriers to

effective competition with appropriately tailored remedies.

With our inquiry thus focused, we believe that the

Commission’s order serves an important governmental

interest and that the Commission has satisfied its

constitutional burden under intermediate scrutiny. As we

observed in Cablevision Systems Corp. v. FCC, the

transformation in the MVPD market, although significant,

presents a “mixed picture” when considered as a whole. 597

F.3d at 1314. Relying on the record from the Commission’s

2007 program access order extension for satellite

programming, see supra p. 7, we observed that not only do

cable operators still control some two-thirds of the market

nationally, but also that they enjoy higher shares in several

markets. See Cablevision, 597 F.3d at 1314. We further

recognized that clustering and consolidation in the industry

bolsters the market power of cable operators because “a single

geographic area can be highly susceptible to near-monopoly

control by a cable company.” Id. at 1309. On the

programming side, we cited the Commission’s finding that

despite major gains in the amount and diversity of

programming, as of 2007 “the four largest cable operators

[were] still 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.” Id. at 1314. In the

order at issue here, the Commission reaffirmed these

observations about the MVPD market, finding “no evidence

28

. . . that market shares have changed materially since” 2007,

and concluding that “cable operators still have a dominant

share of MVPD subscribers,” that “there is evidence that

cable prices have risen in excess of inflation,” and that “cable

operators still own significant programming.” 2010 Order, 25

FCC Rcd. at 763, 776 ¶¶ 27, 42. Petitioners have given us no

reason to question these findings.

Moreover, the Commission’s 2006 regression analysis

concerning the withholding of terrestrially delivered, cable-

affiliated RSN programming in the Philadelphia and San

Diego markets demonstrates that vertically integrated cable

companies can in fact withhold terrestrially delivered

programming to limit the market share of rival MVPDs.

Applying APA review, we relied on this study in Cablevision

to reject a challenge to the Commission’s five-year extension

of its prohibition on exclusive contracts for satellite

programming between cable operators and cable-affiliated

programmers for satellite programming. See Cablevision, 597

F.3d at 1314 (recognizing that “predictive calculations are a

murky science” and deferring to the agency’s expert view of

the evidence). First Amendment intermediate scrutiny is, of

course, substantially more demanding than arbitrary and

capricious review of agency action. See Century Commc’ns

Corp. v. FCC, 835 F.2d 292, 299 (D.C. Cir. 1987). But given

how directly this study supports the Commission’s present

order, which adopts case-by-case restrictions on terrestrial

programming, as compared to the Commission’s earlier

decision, which extended the general ban on exclusive

contracts for cable-affiliated satellite programming, we give

the study significant weight here as well.

Petitioners also contend, though somewhat in passing,

that the Commission’s order is unconstitutionally

underinclusive because it applies only to cable operators, not

29

to all MVPDs. But the Commission’s terrestrial programming

rules, like all of its section 628 regulations, focus on vertically

integrated cable companies due to their “ ‘special

characteristics’ ” and their unique ability to impact

competition. See Time Warner, 93 F.3d at 978 (quoting

Turner Broad. Sys., 512 U.S. at 660–61). Were the

Commission to persist in regulating only the conduct of cable

operators in the face of evidence that exclusive dealing

arrangements involving other MVPDs have similar negative

impacts on competition, then our analysis would necessarily

change. But nothing in the present record suggests such

unjustified discrimination. Indeed, far from neglecting the

issue, the Commission reported that it is considering whether

to expand its exclusive contract prohibition to programmers

affiliated with non-cable MVPDs. See 2010 Order, 25 FCC

Rcd. at 777 ¶ 45. We therefore decline to strike down the

Commission’s order as “fatally underinclusive simply because

an alternative regulation, which would restrict more speech or

the speech of more people, could be more effective.” Blount

v. SEC, 61 F.3d 938, 946 (D.C. Cir. 1995).

Finally, petitioners argue that given the robust

competition in the New York City video market where they

operate, the Commission’s terrestrial programming rules are

unconstitutional as applied to them. According to the

Commission, however, this as-applied preenforcement

challenge is unripe for judicial review. “In applying the

ripeness doctrine,” we look to “both the fitness of the issues

for judicial decision and the hardship to the parties of

withholding court consideration.” Munsell v. Dep’t of Agric.,

509 F.3d 572, 585–86 (D.C. Cir. 2007) (internal quotation

marks omitted). We agree with the Commission that this

particular challenge is unfit for review because there is no

way of knowing whether the Commission’s new restrictions,

which it will base on case-by-case determinations, will even

30

apply to petitioners. See Texas v. United States, 523 U.S. 296,

300 (1998) (“A claim is not ripe for adjudication if it rests

upon contingent future events that may not occur as

anticipated, or indeed may not occur at all.” (internal

quotation marks omitted)). Indeed, as the Commission

observes, if petitioners are correct about the state of

competition in the market they serve, then, should they face

an enforcement proceeding, they will have powerful evidence

that their terrestrial programming withholding has no

significant impact on the delivery of satellite programming. In

any event, because petitioners’ as-applied challenge depends

on facts about the New York City market that are absent from

the administrative record, we believe that “further factual

development” in a ruling by the Commission with respect to a

specific complaint would “significantly advance our ability to

deal with the legal issues presented.” Nat’l Park Hospitality

Ass’n v. Dep’t of Interior, 538 U.S. 803, 812 (2003) (internal

quotation marks omitted). As to hardship, the possibility that

petitioners may need to defend their terrestrial withholding

practices in a proceeding before the Commission is

insufficient to outweigh the strong institutional interests

favoring postponing judicial review of such a fact-bound

constitutional question. See Fed. Express Corp. v. Mineta,

373 F.3d 112, 118 (D.C. Cir. 2004) (“In applying the ripeness

doctrine to agency action we balance the interests of the court

and the agency in delaying review against the petitioner’s

interest in prompt consideration of allegedly unlawful agency

action.” (internal quotation marks omitted)).

IV.

We now move on to consider petitioners’ challenges to

several specific aspects of the Commission’s order. Recall

that the order allows complainants to bring claims against

cable operators or covered satellite programmers for engaging

in section 628(c)(2)-like conduct involving terrestrial

31

programming. Complainants must then demonstrate that the

cable operator or satellite programmer’s unfair act has “the

purpose or effect of . . . hinder[ing] significantly or . . .

prevent[ing]” the provision of satellite programming to

customers. 47 U.S.C. § 548(b). When RSN programming is at

issue, including RSN HD programming, petitioners may

invoke a rebuttable presumption that the unfair act of

withholding has such a purpose or effect. See 2010 Order, 25

FCC Rcd. at 782–85 ¶¶ 52–55. In addition, in cases involving

alleged discriminatory conduct by a cable-affiliated

programmer providing only terrestrially delivered

programming, complainants must establish that the

programmer is wholly owned by, controlled by, or under

common control with the cable operators or covered satellite

programming vendors against whom the complaint is filed.

See id. at 786–87 ¶ 57.

Petitioners challenge the order’s rebuttable presumptions

and its liability rules, as well as the Commission’s

determination that all section 628(c)(2)-like conduct involving

terrestrial programming is “unfair” as that term is used in

subsection (b). We review petitioners’ challenges to the

Commission’s decisionmaking process under the APA,

upholding its actions unless they are “ ‘arbitrary, capricious,

an abuse of discretion, or otherwise not in accordance with

law,’ or not supported by ‘substantial evidence.’ ” NetworkIP,

LLC v. FCC, 548 F.3d 116, 121 (D.C. Cir. 2008) (quoting 5

U.S.C. § 706(2)). An agency decision is arbitrary and

capricious if it “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.” Motor Vehicle Mfrs.

Ass’n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S.

32

29, 43 (1983). APA review is “very deferential,” Rural

Cellular Ass’n v. FCC, 588 F.3d 1095, 1105 (D.C. Cir. 2009),

especially where, as here, “the decision under review requires

expert policy judgment of a technical, complex, and dynamic

subject,” Cablevision, 597 F.3d at 1311. To the extent

petitioners’ specific challenges are statutory or constitutional,

we apply the relevant standards of review as described above.

See supra Parts II & III.

Before considering petitioners’ specific arguments,

however, we must address the Commission’s threshold

contention that they are unripe for judicial review. In contrast

to our conclusion regarding petitioners’ as-applied First

Amendment claim, we believe that these challenges are ripe

even though the Commission has yet to apply its new rules in

individual proceedings. All of petitioners’ challenges,

including their APA claims, raise purely legal questions, and

we have “often observed that a purely legal claim in the

context of a facial challenge . . . is presumptively reviewable.”

Nat’l Ass’n of Home Builders v. U.S. Army Corps of Eng’rs,

417 F.3d 1272, 1282 (D.C. Cir. 2005) (internal quotation

marks omitted). Most significantly—and this is what clearly

distinguishes these challenges from petitioners’ as-applied

First Amendment argument—the legality of the rules at issue

is generally “not ‘intertwined with how the Commission

might exercise its discretion in the future.’ ” Nat’l Ass’n of

Home Builders v. U.S. Army Corps of Eng’rs, 440 F.3d 459,

464–65 (D.C. Cir. 2006) (quoting Sprint Corp. v. FCC, 331

F.3d 952, 954 (D.C. Cir. 2003)). Although the order does

reserve some matters for case-by-case adjudication, the

portions that petitioners challenge—such as the Commission’s

determination that section 628(c)(2)-like conduct involving

terrestrial programming is always unfair, see 2010 Order, 25

FCC Rcd. at 779–80 ¶ 49—have been finally resolved and

will not be at issue in individual enforcement proceedings.

33

See Associated Gas Distribs. v. FERC, 824 F.2d 981, 1032

(D.C. Cir. 1987) (“That some issues are unresolved does not

in itself render unfit the ones that the agency has clearly

determined.”). Moreover, in contrast to Sprint Corp. v. FCC,

on which the Commission relies, petitioners’ claims “rest[]

not on the assumption that the [Commission] will exercise its

discretion unlawfully in applying the regulation but on

whether its faithful application would” violate the law. Nat’l

Ass’n of Home Builders, 440 F.3d at 465 (internal quotation

marks omitted) (distinguishing Sprint Corp.). For these

reasons, we feel well equipped to resolve these legal questions

now and see no reason for believing that our review would

materially benefit from a more “concrete setting.” Id. at 464.

In addition to its general ripeness argument, the

Commission contends that petitioners’ challenges to the

order’s rebuttable presumptions are especially premature. To

be sure, as-applied challenges to the use of rebuttable

presumptions are generally unfit for review before the agency

has actually implemented them. See S. Co. Servs., Inc. v.

FCC, 313 F.3d 574, 581–82 (D.C. Cir. 2002). But whether

rebuttable presumptions are facially unreasonable presents a

distinct question that courts, depending on the nature of the

presumption and the development of the record, might well be

able to address prior to enforcement. Compare, e.g., Fed.

Express Corp., 373 F.3d at 118–19 (concluding that

accounting presumptions for air carrier compensation were

unripe for review), with Nat’l Mining Ass’n v. Babbitt, 172

F.3d 906, 909–13 (D.C. Cir. 1999) (reviewing and finding

arbitrary and capricious the Secretary of the Interior’s

adoption of a rebuttable presumption as to the cause of

damage resulting from earth movement near underground

mines). In this case, the administrative record is sufficiently

developed to allow us to review the facial reasonableness of

34

the Commission’s rebuttable presumptions even before

knowing how those presumptions will actually be applied.

Where “no institutional interests favor[] postponement of

review, a petitioner need not satisfy the hardship prong” of

our ripeness test. AT&T Corp. v. FCC, 349 F.3d 692, 700

(D.C. Cir. 2003); see also Teva Pharm. USA, Inc. v. Sebelius,

595 F.3d 1303, 1310 (D.C. Cir. 2010) (collecting cases

indicating that “hardship is not a sine qua non of ripeness”).

Even so, to the extent the Commission’s rules may make it

more likely that petitioners’ terrestrial withholding will be

found unlawful, they create an incentive for petitioners to

alter their business affairs, establishing at least some degree of

hardship.

Rebuttable presumptions for RSN and RSN HD programming

Under the APA, agencies may adopt evidentiary

presumptions provided that the presumptions (1) shift the

burden of production and not the burden of persuasion, see

Garvey v. Nat’l Transp. Safety Bd., 190 F.3d 571, 579–80

(D.C. Cir. 1999) (explaining that section 7(c) of the APA, 5

U.S.C. § 556(d), forbids only the latter), and (2) are rational,

see id. at 579. Reviewing the Commission’s order, we think it

clear that its rebuttable presumptions shift only the burden of

production. See 2010 Order, 25 FCC Rcd. at 783 ¶ 52 (“[W]e

will not require litigants and the Commission staff to

undertake repetitive examinations of our RSN precedent and

the relevant historical evidence. Instead, we recognize the

weight of the existing precedent and categorical evidence

concerning RSNs by allowing complainants to invoke a

rebuttable presumption that an unfair act involving a

terrestrially delivered, cable-affiliated RSN has the purpose or

effect set forth in [s]ection 628(b).”). Given that petitioners’

challenge on this point is purely facial, we have no occasion

to consider whether the Commission’s rebuttable

35

presumptions might function differently in practice. See

Associated Gas Distribs., 824 F.2d at 1032–33 (declining to

review a claim that agency regulations adopting a rebuttable

presumption would “illegally switch[] the burden of proof”

because of the “highly abstract and speculative character” of

that allegation).

Turning to the question of whether the Commission’s

rebuttable presumptions are rational, we “must defer to the

agency’s judgment, but an evidentiary presumption is only

permissible if there is a sound and rational connection

between the proved and inferred facts, and when proof of one

fact renders the existence of another fact so probable that it is

sensible and timesaving to assume the truth of [the inferred]

fact . . . until the adversary disproves it.” Nat’l Mining Ass’n

v. Dep’t of Interior, 177 F.3d 1, 6 (D.C. Cir. 1999) (internal

citation and quotation marks omitted). According to

petitioners, the challenged presumptions flunk this test

because, they say, the record contains insufficient evidence

that subsection 628(c)(2)-like conduct involving RSN

terrestrial programming will significantly hinder the provision

of satellite cable programming. In particular, they criticize the

Commission’s extrapolation from its 2006 regression

analysis, arguing not only that the study is both weak and

dated, but also that the Commission made no effort to

consider whether the study’s sample, which involved

exclusive contracts for programming networks showing

professional sports teams, is representative of terrestrial RSNs

generally. Supporting intervenor NCTA argues that the

breadth of the Commission’s definition of RSNs, which

extends to networks that carry at least 10% of a team’s games

(including Division I college football and basketball teams

that play fewer games than professional teams), exacerbates

this problem. See 2010 Order, 25 FCC Rcd. at 783–84 ¶ 53

(defining RSN).

36

Although petitioners’ objections have some force, we

believe they are overcome by “the substantial deference we

owe the FCC’s predictive judgments.” Nuvio Corp. v. FCC,

473 F.3d 302, 306 (D.C. Cir. 2006). To begin with, relying on

its expertise and wealth of experience, the Commission

advanced compelling reasons to believe that withholding RSN

programming is, given its desirability and non-replicability,

uniquely likely to significantly impact the MVPD market. See

2010 Order, 25 FCC Rcd. at 750, 782–83 & n.205 ¶¶ 9, 52;

see also In re Gen. Motors Corp. & Hughes Elecs. Corp.,

Transferors & the News Corp. Ltd., Transferee, 19 FCC Rcd.

473, 535 ¶ 133 (2004) (“RSNs[] typically purchase exclusive

rights to show sporting events and sports fans believe that

there is no good substitute for watching their local and/or

favorite team play an important game.”), modified, 24 FCC

Rcd. 8674 (2009). Moreover, despite its limitations, the

Commission’s 2006 regression analysis constitutes substantial

evidence that supports the Commission’s adoption of a

presumption. “We generally defer to an agency’s decision to

proceed on the basis of imperfect scientific information,

rather than to invest the resources to conduct the perfect

study.” Sierra Club v. EPA, 167 F.3d 658, 662 (D.C. Cir.

1999) (internal quotation marks omitted); see also City of Los

Angeles v. U.S. Dep’t of Transp., 165 F.3d 972, 977 (D.C.

Cir. 1999) (“In reviewing the [Commission’s] order, we do

not sit as a panel of referees on a professional economics

journal, but as a panel of generalist judges obliged to defer to

a reasonable judgment by an agency acting pursuant to

congressionally delegated authority.”). Particularly given the

Commission’s expert observations about RSN programming,

it reasonably extrapolated from this study to a prediction

about the impact RSN withholding would ordinarily have.

Indeed, in Cablevision we permitted the Commission to

extrapolate from this same study to a much greater degree.

37

See supra p. 28. Although the study involved only RSNs, the

Commission used it to support predictions about the effects

lifting its ban on satellite programming withholding would

have for satellite cable-affiliated networks generally,

including for national networks. See 597 F.3d at 1314.

We likewise find reasonable the Commission’s decision

to extend its rebuttable presumption to RSN HD

programming. Citing consumer survey data, evidence from

cable operators’ marketing campaigns touting the carriage of

HD programming, and record comments describing the

rapidly growing demand for HD televisions, the Commission

found that “the record shows that MVPD subscribers do not

consider [standard definition (SD)] programming to be an

acceptable substitute for HD programming” and that “HD

programming has thus become an important part of a

competitive MVPD offering.” 2010 Order, 25 FCC Rcd. at

784–85 ¶ 54. Given this evidence, as well as the respect we

owe Commission efforts to anticipate the effects of

technological change in a dynamic market, the Commission’s

determination that the impact of RSN SD programming

withholding will extend to RSN HD programming “is a

predictive judgment that [the agency] is entitled to make and

to which we defer.” Charter Commc’ns, Inc. v. FCC, 460

F.3d 31, 44 (D.C. Cir. 2006).

Petitioners also challenge the Commission’s rebuttable

presumptions on First Amendment grounds. These arguments

fare no better. Petitioners’ contention that the Commission’s

presumptions are impermissibly content-based and therefore

deserve strict scrutiny is meritless. Although the presumptions

“might in a formal sense be described as content-based” given

that they are triggered by whether the programming at issue

involves sports, there is absolutely no evidence, nor even any

serious suggestion, that the Commission issued its regulations

38

to disfavor certain messages or ideas. See BellSouth Corp. v.

FCC, 144 F.3d 58, 69 (D.C. Cir. 1998). The clear and

undisputed evidence shows that the Commission established

presumptions for RSN programming due to that

programming’s economic characteristics, not to its

communicative impact. Thus content-neutral, the

presumptions are subject only to intermediate scrutiny. See id.

(“ ‘Government regulation of expressive activity is content

neutral so long as it is justified without reference to the

content of the regulated speech.’ ” (quoting Ward v. Rock

Against Racism, 491 U.S. 781, 791 (1989))). Finally,

petitioners’ argument that the presumptions are too broad to

survive even intermediate scrutiny is equally meritless. Given

record evidence demonstrating the significant impact of RSN

programming withholding, the Commission’s presumptions

represent a narrowly tailored effort to further the important

governmental interest of increasing competition in video

programming. See Turner Broad. Sys., 512 U.S. at 662.

Potentially liable entities

Petitioners contend that the Commission acted unlawfully

by providing that it may hold satellite cable programming

vendors liable for acts of terrestrial programming withholding

under section 628(b). According to petitioners, when an entity

engages in conduct with respect to terrestrial programming, it

is not, as section 628(i)(2) requires, “engaged in the . . .

distribution . . . of satellite cable programming,” 47 U.S.C.

§ 548(i)(2), and so may not be held liable as a satellite cable

programming vendor under section 628(b). We are

unpersuaded. As we held in a case involving strikingly similar

statutory language, “[t]here is nothing linguistically odd about

defining a set of firms subject to regulation in terms of the

conduct of particular activities, and yet also regulating some

other activities that are not part of the definition.” WorldCom,

Inc. v. FCC, 246 F.3d 690, 693–95 (D.C. Cir. 2001) (holding

39

that the Commission had authority to regulate “local exchange

carriers” when they provided DSL services even though the

statute in question defined “local exchange carriers” to mean

“any person that is engaged in the provision of telephone

exchange service or exchange access”). In defining satellite

cable vendors, Congress could have required that an entity

would be covered “only ‘when’ or ‘to the extent’ that it

provides the regulation-triggering services.” Id; see also 47

U.S.C. § 153(51) (“A telecommunications carrier shall be

treated as a common carrier under this Act only to the extent

that it is engaged in providing telecommunications services

. . . .” (emphasis added)). But as the Commission recognized

in its order, Congress imposed no such limitation. See 2010

Order, 25 FCC Rcd. at 779 n.192 ¶ 49.

Petitioners argue that the Commission’s interpretation of

section 628(i)(2) leads to irrationally different treatment of

similarly situated entities because it subjects programmers

selling both satellite and terrestrial programming to liability

while exempting programmers selling only terrestrial

programming. Although we agree that section 628(b)’s

omission of terrestrial programmers creates an odd gap, we

reject petitioners’ suggestion that the Commission must

address this disparity by expanding the gap to also exempt

dual programmers even though they (1) are covered by the

literal terms of the statute as satellite programming vendors,

and (2) can engage in conduct the statute expressly prohibits.

Aware of this problem, the Commission has chosen to go in

the opposite direction, relying on vicarious liability to

regulate indirectly the conduct of terrestrial-only

programmers. We turn, then, to the permissibility of that

move.

In its order, the Commission established that when a

terrestrial programmer is wholly owned by, controlled by, or

40

under common control with a cable operator or covered

satellite programming vendor, the latter entity “can

appropriately be held responsible for the discriminatory acts

of its program supplier affiliate because it controls the

supplier and the supplier’s unfair actions are designed to

benefit [the entity].” 2010 Order, 25 FCC Rcd. at 786 ¶ 57;

see also 47 C.F.R. § 76.1001(b)(1)(ii) (codifying this rule).

Petitioners first argue that imposing liability on cable

operators based on control or common control runs afoul of

section 628 because such operators are liable under subsection

(c)(2)(A) only when they “unduly or improperly influenc[e]”

an affiliated programmer’s decision. But for reasons

explained at length in Part II, see supra pp. 14–17, subsection

(c)(2)’s minimum requirements impose no affirmative limits

on the Commission’s ability to pursue its statutory objectives

under subsection (b).

Petitioners next contend that the Commission engaged in

arbitrary and capricious reasoning when it assumed that a

terrestrial programmer who withholds programming from an

MVPD always does so for the benefit of a commonly

controlled cable operator even when that operator is no more

than a sister subsidiary corporation. According to petitioners,

that assumption fails to account for the possibility that a

terrestrial programmer might enter an exclusive agreement

with an unaffiliated MVPD. Such a deal, petitioners claim,

would benefit only the unaffiliated MVPD (who gets the

exclusive programming) and the terrestrial programmer itself

(who secures an exclusivity premium). But the Commission

has determined, reasonably in our view, that discriminatory

practices by terrestrial programmers will often be intended in

part to benefit a cable operator under common ownership. See

2010 Order, 25 FCC Rcd. at 786 ¶ 57. After all, the entire

theory underlying section 628 and the Commission’s

implementing rules is that vertically integrated cable

41

programmers have incentives to enter arrangements favoring

affiliated cable operators. See supra pp. 4–5. Even where

programmers enter exclusivity arrangements with unaffiliated

MVPDs, which petitioners do not suggest is nearly as

common as deals between cable-affiliated entities, the

programmer might enter the deal at least in part to benefit the

affiliated cable operator by closing some rivals out of the

market. For example, if a cable operator has one DBS

competitor and one wireline competitor but considers the

latter a greater threat to its dominant position, exclusive

arrangements between an affiliated terrestrial programmer and

the DBS company that keep must-have programming from the

wireline company will redound to the cable operator’s benefit.

Advancing a third argument, petitioners contend that

section 628(b)’s plain language precludes vicarious liability

because that provision only prohibits a cable operator from

“engag[ing] in,” 47 U.S.C. § 548(b), certain conduct, which,

according to petitioners, presupposes direct liability. But

because petitioners first raised this argument in their reply

brief, we treat it as forfeited. See Gen. Elec. Co. v. Jackson,

610 F.3d 110, 123 (D.C. Cir. 2010).

Treating all section 628(c)(2)-like conduct involving

terrestrial programming as “unfair”

This brings us finally to petitioners’ contention that the

Commission erred by concluding that section 628(c)(2)-like

conduct involving terrestrial programming constitutes “unfair

methods of competition or unfair or deceptive acts or

practices within the meaning of [s]ection 628(b).” 2010

Order, 25 FCC Rcd. at 779 ¶ 49 (internal quotation marks

omitted). In reaching this judgment, the Commission relied

primarily on the fact that in proscribing such conduct in

section 628(c)(2), Congress had implicitly treated it as unfair.

By “defin[ing] certain conduct that must be included in the

42

Commission’s implementing regulations,” the Commission

asserted, “Congress . . . made a conclusive legislative

judgment that the categories of conduct involving satellite-

delivered programming that are enumerated in [s]ection

628(c)(2) satisfy the requirements of [s]ection 628(b),

including the requirement of constituting an ‘unfair method[]

of competition or unfair or deceptive act[] or practice[].’ ” Id.

at 778 ¶ 47 (quoting 47 U.S.C. § 548(b)). Defending its

analysis here, the Commission maintains that given

subsection (c)(2), it “made sense for the Commission to

conclude that the mirror image of these acts in the nearly

identical context of terrestrially delivered programming also

should be ‘unfair acts’ for purposes of [s]ection 628(b).”

Resp’ts’ Br. 49.

The Commission’s reasoning by analogy has several

serious gaps. To begin with, it failed to justify its assumption

that just because Congress treated certain acts involving

satellite programming as unfair, the same acts are necessarily

unfair in the context of terrestrial programming. Although we

hold in this opinion that subsection (c)(2)’s focus on satellite

programming in no way restricts the Commission from

regulating terrestrial programming, see supra pp. 14–17, it is

a different matter entirely for the Commission to assume that

apparent congressional judgments regarding satellite

programming necessarily apply in precisely the same way to

terrestrial programming. Of course, for purposes of evaluating

whether conduct within the video industry is unfair, it might

well be that nothing turns on the technology used to deliver

programming to MVPDs. That said, terrestrial programming

is typically local and regional, whereas satellite programming

includes national networks. See 2010 Order, 25 FCC Rcd. at

764 n.98 ¶ 27. Which way this geographic distinction cuts is a

question we leave for the Commission to resolve in the first

instance. On the one hand, the Commission cited evidence

43

that certain local and regional video distribution markets are

significantly less competitive than the national market,

making programming withholding in those markets

“potentially an even more profitable strategy” than is typically

the case. Id. at 763–64 & n.99 ¶ 27. On the other hand, the

Commission recognized that “exclusivity plays an important

role in the growth and viability of local cable news networks

and that permitting such exclusivity should not . . . dissuade

new MVPDs from developing their own competing regional

programming services.” Id. at 781 n.200 ¶ 51 (internal

quotation marks omitted). For our purposes, the point is

simply that the Commission needs to consider whether there

are relevant differences between satellite and terrestrial

programming before invoking Congress’s regulation of

satellite withholding as a justification for treating terrestrial

withholding as categorically unfair.

Moreover, not only is the Commission’s reasoning by

analogy incomplete, but its central premise, as petitioners

point out, is mistaken. In subsection (c)(2), Congress

established broad program access rules for satellite

programming, which suggests that Congress did believe that

withholding such programming was generally unfair, at least

given the state of the video market at the time. But Congress

also recognized an important exception. It allowed cable

operators and affiliated satellite programmers to enter

exclusive programming contracts in markets previously

served by cable if the Commission concluded, after receiving

an exemption request, that the contract “is in the public

interest.” 47 U.S.C. § 548(c)(2)(D). By creating this

exception, as well as by building a sunset provision into the

exclusive contract prohibition, id. § 548(c)(5), Congress

sought to balance the need for regulatory intervention in

markets possessing significant barriers to competition with its

recognition that vertical integration and exclusive dealing

44

arrangements are not always pernicious and, depending on

market conditions, may actually be procompetitive. See S.

Rep. No. 102-92, at 28, reprinted in 1992 U.S.C.C.A.N. at

1161 (“The Committee believes that exclusivity can be a

legitimate business strategy where there is effective

competition. Where there is no effective competition,

however, exclusive arrangements may tend to establish a

barrier to entry and inhibit the development of competition in

the market.”). Reflecting this balanced approach, section

628(c)(4)’s public interest factors direct the Commission to

consider the effect of exclusive contracts on (1) “competition

in local and national [MVPD] markets,” (2) “competition

from [MVPD] technologies,” (3) “the attraction of capital

investment in the production and distribution of new satellite

cable programming,” and (4) “diversity of programming in

the [MVPD] market,” as well as (5) “the duration of the

exclusive contract.” 47 U.S.C. § 548(c)(4).

Congress’s framework accords with the generally

accepted view in antitrust and other areas that exclusive

contracts may have both procompetitive and anticompetitive

purposes and effects. See, e.g., Tampa Elec. Co. v. Nashville

Coal Co., 365 U.S. 320, 327, 334–35 (1961) (finding that an

exclusive dealing contract did not violate section 3 of the

Clayton Act because it did not “foreclose competition in a

substantial share of the line of commerce affected,” and

recognizing that potential procompetitive justifications for the

contract were relevant to assessing its legality); United States

v. Microsoft Corp., 253 F.3d 34, 69 (D.C. Cir. 2001) (en

banc) (“Permitting an antitrust action to proceed any time a

firm enters into an exclusive deal would . . . discourage a

presumptively legitimate business practice. . . .”); 11 Herbert

Hovenkamp, Antitrust Law ¶ 1803a, at 100 (2d ed. 2005)

(describing output contracts as “presumptively

procompetitive”). Here, for example, “the ability to enter into

45

exclusive contracts could create economic incentives to invest

in the development of new programming” by allowing a

vertically integrated cable operator to differentiate its service

and secure the benefits of creating and promoting its

programming networks. Time Warner, 93 F.3d at 979. Indeed,

the Commission itself has recognized that exclusivity can

further competition in certain circumstances. See In re

Implementation of the Cable Television Consumer Prot.

& Competition Act of 1992, 22 FCC Rcd. 17791, 17835 ¶ 63

(2007) (“We recognize the benefits of exclusive contracts and

vertical integration cited by some cable [companies], such as

encouraging innovation and investment in programming and

allowing for ‘product differentiation’ among distributors.”).

For instance, as noted above, the Commission has taken the

position that “exclusivity plays an important role in the

growth and viability of local cable news networks.” 2010

Order, 25 FCC Rcd. at 781 n.200 ¶ 51. Yet under the

Commission’s rules for terrestrial programming, exclusivity

even in this context is “unfair.”

The Commission responds that determining whether

particular conduct is unfair represents only half the section

628(b) inquiry contemplated by their new regulations.

Complainants must also show that an unfair act of terrestrial

programming withholding has “the purpose or effect of . . .

hinder[ing] significantly or . . . prevent[ing]” any MVPD from

providing satellite programming to customers. 47 U.S.C.

§ 548(b). This case-by-case approach for terrestrial

programming, the Commission contends, provides “an even

broader ‘escape valve’ ” for procompetitive or benign

exclusive contracts than does the public interest exception for

satellite programming. Resp’ts’ Br. 51.

Of course, the Commission is correct that it has

substantially narrowed the scope of its regulations by focusing

46

on the effect of terrestrial withholding in individual cases.

Indeed, this is one reason why its rules survive First

Amendment scrutiny. See supra pp. 26–27. But the case-by-

case inquiry into purposes or effects may fail to capture

whether a particular act of terrestrial withholding should be

considered unfair. For example, although the Commission has

indicated it is “highly unlikely that an unfair act involving

local news and local community or educational programming

will have the [proscribed] purpose or effect under [s]ection

628(b)”—because “[u]nlike RSN programming, local news

and local community or educational programming is readily

replicable by competitive MVPDs,” 2010 Order, 25 FCC

Rcd. at 781 n.200 ¶ 51—the logic of the Commission’s order

dictates that should a complainant establish such a purpose or

effect with respect to withholding by a terrestrially delivered

local news network, then the Commission would require the

network to share its programming. That result would follow

even if the network’s popularity and market impact stemmed

from substantial investment in news content and advertising

by the cable operator affiliated with the network, and even if

MVPD competitors could duplicate those investments but

have refrained from doing so. By contrast, if our hypothetical

news network were delivered to MVPDs by satellite, the

Commission would, if presented with an exemption

application, consider whether an exclusive contract involving

this programmer would be in the public interest despite the

contract’s negative impact on current free-riding competitors.

In addition to relying by analogy on the congressional

judgment reflected in section 628(c)(2), the Commission

indicated that subsection (c)(2)-like acts involving terrestrial

programming are unfair because such acts “have the potential

to impede entry into the video distribution market and to

hinder existing competition in the market.” Id. at 779 ¶ 48.

But by labeling conduct unfair simply because it might in

47

some circumstances negatively affect competition in the video

distribution market, the Commission failed to consider

whether it should treat conduct as unfair despite it being

procompetitive in a given instance. Indeed, even though

reducing prices amounts to paradigmatic legitimate

competition, a cable operator’s decision to cut its prices could

conceivably qualify under the Commission’s reasoning as

“unfair” under section 628(b) because of the theoretical

“potential” for a cable operator to engage in predatory pricing

to drive its competitors from the market.

Given the Commission’s failure to “articulate a

satisfactory explanation for its action” in defining certain acts

of terrestrial withholding as categorically unfair, this part of

its terrestrial programming order is arbitrary and capricious.

State Farm Mut. Auto Ins. Co., 463 U.S. at 43; see also

Kristin Brooks Hope Ctr. v. FCC, 626 F.3d 586, 589–91

(D.C. Cir. 2010) (vacating a Commission decision as arbitrary

and capricious for failure to provide “a reasonable

explanation”). That said, we take no position on the ultimate

issue of exactly how the Commission should define the

inherently ambiguous statutory term “unfair.” See Chevron,

467 U.S. at 842–43. But if the Commission believes that

conduct involving the withholding of terrestrial programming

should be treated as categorically unfair, as opposed to

assessing fairness on a case-by-case basis or perhaps adopting

a public interest exception mirroring the one for satellite

programming, see 47 U.S.C. § 628(c)(2)(D), (c)(4), then it

must grapple with whether its definition of unfairness would

apply to conduct that appears procompetitive and, if so,

whether that result would comport with section 628.

V.

The petitions for review are denied in part and granted in

part. We vacate that portion of the Commission’s order

48

treating certain acts of terrestrially delivered programming

withholding as categorically unfair and remand to the

Commission for further proceedings consistent with this

opinion.

So ordered.