Agape Church, Inc. v. Federal Communications Commission

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued September 27, 2013 Decided December 27, 2013

No. 12-1334

AGAPE CHURCH, INC., ET AL.,

PETITIONERS

v.

FEDERAL COMMUNICATIONS COMMISSION AND UNITED

STATES OF AMERICA,

RESPONDENTS

NATIONAL HISPANIC MEDIA COALITION, ET AL.,

INTERVENORS

On Petition for Review of an Order of

the Federal Communications Commission

William S. Consovoy argued the cause for Petitioners. On

the briefs were Helgi C. Walker, Kathleen A. Kirby, Eve

Klindera Reed, and Christiane M. McKnight. Jane E. Mago

and Jerianne Timmerman entered appearances.

Andrew Jay Schwartzman argued the cause and filed the

brief for intervenor National Hispanic Media Coalition.

Joel Marcus, Counsel, Federal Communications

Commission, argued the cause for respondents. With him on

the brief were William J. Baer, Assistant Attorney General,

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and Robert B. Nicholson and Kristen C. Limarzi, Attorneys,

U.S. Department of Justice; Sean A. Lev, General Counsel,

Peter Karanjia, Deputy General Counsel, and Jacob M.

Lewis, Associate General Counsel, Federal Communications

Commission. Richard K. Welch, Deputy Associate General

Counsel, and Laurence N. Bourne, Counsel, Federal

Communications Commission, entered appearances.

Matthew A. Brill argued the cause for intervenors

National Cable & Telecommunications Association and Time

Warner Cable, Incorporated. With him on the brief were

Richard P. Bress, Amanda E. Potter, Katherine I. Twomey,

Rick C. Chessen, Michael S. Schooler, and Diane B. Burstein.

Before: KAVANAUGH, Circuit Judge, and EDWARDS and

WILLIAMS, Senior Circuit Judges.

Opinion for the Court filed by Senior Circuit Judge

EDWARDS.

Concurring opinion filed by Circuit Judge KAVANAUGH.

EDWARDS, Senior Circuit Judge: In the Cable Television

Consumer Protection and Competition Act of 1992 (the

“Cable Act”), Congress enacted provisions requiring cable

television systems to dedicate some of their channels to local

broadcast stations, creating so-called “must-carry” rights for

stations electing such mandatory carriage. See 47 U.S.C. §§

534-35. Section 614(b)(7), the principal statutory provision at

issue in this case, states that must-carry broadcast signals

“shall be viewable via cable on all television receivers of a

subscriber which are connected to a cable system by a cable

operator or for which a cable operator provides a connection.”

47 U.S.C. § 534(b)(7).

3

In 2007, with the growing prominence of digital

broadcasting, the Federal Communications Commission

(“FCC” or “Commission”) promulgated a rule requiring

“hybrid” cable companies – i.e., those that provide both

analog and digital cable service – to “downconvert” from

digital to analog broadcast signals from must-carry stations

for subscribers with analog television sets. Carriage of

Digital Television Broadcast Signals, Third Report and Order,

22 FCC Rcd. 21,064 (2007) (“Viewability Rule”). This

downconversion requirement ensured that digital broadcast

programs from protected must-carry stations would be

converted by the cable companies from digital to analog

signals before transmission to customers. In other words,

cable subscribers with analog television sets would be able to

view the digital programs from must-carry broadcast stations

without the need of special equipment. By its terms, the

Viewability Rule was scheduled to expire in 2012, unless

extended by the Commission.

In 2012, following notice and comment rulemaking, the

FCC allowed the downconversion requirement to expire. In

place of the Viewability Rule, the Commission promulgated a

new rule that allows cable operators to provide conversion

equipment to analog customers, either “for free or at an

affordable cost that does not substantially deter use of the

equipment.” Carriage of Digital Television Broadcast

Signals, Fifth Report and Order, 27 FCC Rcd. 6529, 6534

(2012) (“Sunset Order”). Petitioners, a group of must-carry

broadcasters, now seek review of the Sunset Order.

Petitioners claim that the FCC’s new rule cannot be squared

with Congress’s mandate that must-carry broadcast signals

“shall be viewable via cable on all television receivers of a

subscriber which are connected to a cable system.” 47 U.S.C.

§ 534(b)(7) (emphasis added).

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Petitioners have advanced four claims in support of their

petition for review.

• First, Petitioners contend that the Commission’s new

rule violates the plain terms of the statute and, thus,

cannot survive review under Chevron Step One.

Chevron U.S.A., Inc. v. Natural Res. Def. Council,

Inc., 467 U.S. 837, 843 n.9 (1984) (“The judiciary . . .

must reject administrative constructions which are

contrary to clear congressional intent. If a court,

employing traditional tools of statutory construction,

ascertains that Congress had an intention on the

precise question at issue, that intention is the law and

must be given effect.” (citations omitted)).

• Second, Petitioners essentially assert that the new rule

is manifestly contrary to the statute and, therefore,

cannot survive scrutiny under Chevron Step Two. Id. at

843-44.

• Third, Petitioners claim that the FCC’s new rule is not

supported by reasoned decisionmaking and, therefore,

is arbitrary and capricious. Motor Vehicle Mfrs. Ass’n

of the U.S. v. State Farm Mut. Auto. Ins. Co., 463 U.S.

29, 43 (1983) (“Normally, an agency rule would be

arbitrary and capricious if the agency has 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.”).

• Finally, Petitioners argue that the FCC’s notice and

comment rulemaking procedures were fatally flawed

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because the agency’s Sunset Rule was not a logical

outgrowth of the agency’s notice of proposed

rulemaking. CSX Transp., Inc. v. Surface Transp. Bd.,

584 F.3d 1076, 1080 (D.C. Cir. 2009) (“[A] final rule

fails the logical outgrowth test and thus violates the

APA’s notice requirement where interested parties

would have had to divine the agency’s unspoken

thoughts, because the final rule was surprisingly

distant from the proposed rule.” (quotation and

citation omitted)).

Petitioners’ claims lack merit. The FCC’s 2007

Viewability Rule was not mandated by the statute. Rather, the

rule was promulgated by the Commission as a stopgap

measure to preserve access to must-carry broadcast programs

for the significant number of cable customers with analog

television sets. Since 2007, however, the telecommunications

market – including the technology in use by broadcasters,

cable distributors, and customers – has changed dramatically.

The congressionally mandated transition from analog to

digital broadcasting is complete, nearly all new televisions on

the market are digital-ready, and many cable companies have

abandoned analog service altogether in favor of all-digital

operations. And, most critically, in 2012 there were

significantly more home conversion devices in use (27

million) to display digital channels on analog sets than there

were customers actually subscribing to analog cable service

with downconversion (12.6 million). Petitioners do not

dispute that these trends are expected to continue. Rather,

Petitioners take the position that the Cable Act requires the

FCC to maintain the regulatory scheme embodied in the

Viewability Rule so long as there are hybrid cable companies

providing service to subscribers who use analog television

sets. Petitioners’ argument effectively freezes time in the face

of shifting technology and finds no support in the law.

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The FCC’s new rule allowing cable operators to offer

analog subscribers equipment in lieu of downconversion was

within its authority under the statute, supported by reasoned

decisionmaking, and properly promulgated pursuant to notice

and comment rulemaking procedures in which interested

parties should have anticipated that the change was possible.

We therefore deny the petition for review.

I. BACKGROUND

The history of the Cable Act is recounted in detail in

Turner Broadcasting System, Inc. v. FCC (Turner II), 520

U.S. 180 (1997), and Turner Broadcasting System, Inc. v.

FCC (Turner I), 512 U.S. 622 (1994). As the Court noted in

Turner II:

[The] must-carry [requirement in the Cable Act] was

designed to serve three interrelated interests: (1)

preserving the benefits of free, over-the-air local

broadcast television, (2) promoting the widespread

dissemination of information from a multiplicity of

sources, and (3) promoting fair competition in the market

for television programming. . . . [E]ach of those is an

important governmental interest. We have been most

explicit in holding that protecting noncable households

from loss of regular television broadcasting service due

to competition from cable systems is an important federal

interest. Forty percent of American households continue

to rely on over-the-air signals for television

programming. Despite the growing importance of cable

television and alternative technologies, broadcasting is

demonstrably a principal source of information and

entertainment for a great part of the Nation’s population.

We have identified a corresponding governmental

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purpose of the highest order in ensuring public access to

a multiplicity of information sources. And it is

undisputed the Government has an interest in eliminating

restraints on fair competition, even when the individuals

or entities subject to particular regulations are engaged in

expressive activity protected by the First Amendment.

520 U.S. at 189-90 (citations and quotations omitted).

Likewise, the events leading to the Viewability Rule, and

its content and purposes, are fully explored in C-SPAN v.

FCC, 545 F.3d 1051, 1052-54 (D.C. Cir. 2008). The court

noted that the Viewability Rule was adopted in response to

“the prospect that some local broadcast stations might not be

available to analog cable subscribers.” Id. at 1053. The

Viewability Rule required that,

to the extent that cable subscribers do not have the

capability of viewing digital signals, cable systems must

carry the signals of commercial and non-commercial

must-carry stations in analog format to those subscribers,

after downconverting the signals from their original

digital format. Under separate regulations promulgated in

2001 regarding material degradation, 47 U.S.C.

§§ 534(b)(4)(A), 535(g)(2), where a must-carry

broadcaster delivers its signal to a cable operator in

[High-Definition] HD digital format (as opposed to

[Standard-Definition] SD), the cable operator is required

to transmit the must-carry station in HD. Thus, the

combined effect of the material degradation regulations

and the Viewability Order is that cable systems with

analog and digital subscribers (“hybrid systems”) are

effectively required to allocate two channels to each

must-carry HD broadcaster. Alternatively, cable systems

are permitted to become all-digital, with all subscribers

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able to view digital signals; under this option, only digital

must-carry signals need be broadcast. The Commission

specified that “any downconversion costs will be borne

by the cable operator,” and further provided that the

viewability mandate would apply for an initial three-year

period following the February 2009 digital transition

date.

Id. (some citations, quotations, and alterations omitted).

Because the decisions in Turner I, Turner II, and C-SPAN

adequately explain the histories of the Cable Act and the

Viewability Rule, it is unnecessary to repeat these narratives

in full here. Rather, we will focus on the Sunset Order and the

Commission’s justifications for adopting a new rule to replace

the expiring Viewability Rule.

When the Cable Act was passed, most broadcasters’

programs were in analog format, most cable companies

transmitted in analog, and most cable subscribers had analog

television sets. As a result, no serious problems were

encountered in the early 1990s when cable companies

transmitted must-carry broadcasters’ programs to viewers.

However, when Congress enacted the Cable Act, it was

prescient in anticipating that significant technological changes

were on the horizon. In a provision entitled “Advanced

television,” the statute provides that:

At such time as the Commission prescribes modifications

of the standards for television broadcast signals, the

Commission shall initiate a proceeding to establish any

changes in the signal carriage requirements of cable

television systems necessary to ensure cable carriage of

such broadcast signals of local commercial television

9

stations which have been changed to conform with such

modified standards.

47 U.S.C. § 534(b)(4)(B). The FCC was thus charged with

prescribing “modifications of the standards for television

broadcast signals” to account for technological and market

changes. Id.

The advent of digital television brought new challenges

to the continued fulfillment of the Cable Act’s objectives. In

1997, Congress and the FCC adopted plans to transition the

broadcast industry from analog to digital technology, setting

December 31, 2006 as the initial deadline. Advanced

Television Systems and Their Impact upon the Existing

Television Broadcast Service, Fifth Report and Order, 12 FCC

Rcd. 12,809, 12,850 (1997); 47 U.S.C. §§ 309(j)(3),

309(j)(14)(A) (2004). Congress later enacted legislation

setting February 17, 2009 as the deadline for the digital

transition. Digital Television Transition and Public Safety Act

of 2005, Pub. L. No. 109-171, § 3002, 120 Stat. 4, 21-22

(2006). This deadline was later changed to June 12, 2009.

While broadcasters were obliged to switch to digital

technology, cable operators remained free to transition from

analog to digital services, or to offer both services, as they

saw fit. The Viewability Rule was promulgated in anticipation

of the broadcasters’ switching from analog to all-digital

programming.

When it adopted the Viewability Rule, the Commission

recognized that after the broadcasters’ transition to digital

programming, there would continue to be a large number of

cable subscribers with analog-only television sets –

approximately 35 percent of all television households – that

would be incapable of processing digital signals. Viewability

Rule, 22 FCC Rcd. at 21,065 n.3. The Commission also

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understood that the cable industry’s own transition to digital

would take some period of time beyond the broadcasters’

transition. Therefore, it adopted a rule giving cable systems

two choices to ensure that viewers with analog television sets

would still be able to receive broadcasters’ programs after the

digital transition: (1) convert all operations to digital, which

would require that all subscribers have the necessary

equipment to view the signal – either a digital television

capable of displaying the digital cable signal or a converter

that would allow an analog television to display a digital cable

signal; or (2) downconvert must-carry stations to an analog

format that could be decoded by analog television sets

without additional equipment. The Commission explained

that downconversion was necessary because without it “the

signals of must-carry stations w[ould] be completely

unavailable to analog cable subscribers” following the digital

transition. Id. at 21,091. The rule was set to sunset in 2012,

five years after its adoption and three years after the deadline

for the digital transition.

In limiting the Viewability Rule to three years, the

Commission stated:

In light of the numerous issues associated with the

transition, it is important to retain flexibility as we deal

with emerging concerns. A three-year sunset ensures that

both analog and digital cable subscribers will continue to

be able to view the signals of must-carry stations, and

provides the Commission with the opportunity after the

transition to review these rules in light of the potential

cost and service disruption to consumers, and the state of

technology and the marketplace.

Id. at 21,070 (emphasis added).

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On February 10, 2012, the Commission issued a Notice

of Proposed Rulemaking (“NPRM”) proposing to extend the

Viewability Rule to “June 12, 2015, unless the Commission

extends the requirements prior to that date.” Carriage of

Digital Television Broadcast Signals, Fourth Further Notice

of Proposed Rulemaking and Declaratory Order, 27 FCC Rcd.

1713, 1727 (2012). The NPRM sought comment on whether

to extend the Viewability Rule for an additional period of

time to ensure that cable subscribers “with analog

equipment[] continue to have access to must carry television

signals.” Id. at 1714. The FCC stated that it was “bound by

statute to ensure that must-carry signals are actually viewable

by all subscribers.” Id. at 1715. It sought comment, among

other things, on the pace of cable operators’ own transition to

digital, which, as noted above, would eliminate the need for

the Viewability Rule. Id. at 1719-20. However, the NPRM

also noted that, if the Viewability Rule expired, “many cable

subscribers would be required to pay more for access to must-

carry broadcast stations, by replacing existing and still-

functional analog equipment with digital equipment or leasing

set top boxes to view the complete service they currently pay

for and receive in analog.” Id. at 1718. With this in mind, the

Commission’s NPRM gave clear notice that many options

were open to the Commission going forward:

[W]e seek comment on how the sunset of the viewability

requirement would impact the financial resources of must

carry stations. We seek specific information that will

allow us to build a solid record that supports either the

retention or the sunset of the viewability rule. Also, given

that “viewability” of must-carry digital signals is

mandated by the Communications Act, we seek comment

on whether it is necessary to extend the rule in its current

form as opposed to relying on stations to file carriage

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complaints to enforce compliance with the statutory

mandate.

Id.

The rulemaking record reveals that extraordinary changes

occurred both in technology and in the marketplace during the

time between the promulgation of the Viewability Rule in

2007 and the adoption of the Sunset Order in 2012:

In 2007, roughly half of all television households were

analog-only cable subscribers, and there were no

inexpensive converters available to ensure that analog

subscribers would have the equipment needed for

viewability. In those circumstances, a significant number

of cable customers could lose access to must-carry

channels if hybrid systems were permitted to carry such

signals only in digital format.

Today, by contrast, the state of technology and the

marketplace is significantly different. At the time of the

order, about 20 percent of cable subscribers received

analog-only service. The Commission expected that

number to drop below 16 percent by the end of 2012.

Since cable accounts for about half of all television

households, analog-only subscribers were expected to

make up about 8 percent of the total television audience –

down from 40 percent five years earlier. And that number

is falling: the Commission predicted that the number of

analog cable subscribers is expected to continue to

decrease as more cable customers choose to upgrade to

full digital service and as more hybrid cable systems

complete their transition to all-digital systems.

13

Br. for Resp’t at 13-14 (citations, quotations, and alterations

omitted).

In comments opposing the sunset of the Viewability

Rule, the broadcasters argued that “allowing the current

viewability rule to expire on schedule will threaten the

viability of must-carry stations. According to the

broadcasters, approximately 12.6 million households receive

only analog cable service, representing approximately 11

percent of all U.S. television households, and removing that

percentage of a station’s audience could well have a profound

impact on affected stations.” Sunset Order, 27 FCC Rcd. at

6541-42 (quotation omitted). In response, the Commission

noted that:

[T]he broadcasters’ analysis overstates the impact on

such stations because it assumes that elimination of the

rule will automatically result in the broadcaster’s signal

being unavailable to all analog subscribers. To the

contrary, our new statutory interpretation – which hinges

on a cable operator making equipment available at no

cost or an affordable cost – will ensure that subscribers

on hybrid systems may continue to access these signals at

little or no additional expense.

Id. at 6542.

In the NPRM, the Commission reported that a “recent

survey indicates that 31 percent of homes do not have a

digital television.” 27 FCC Rcd. at 1718 n.34. However,

through the notice and comment process, it also found that

many of these consumers are already subscribing to digital

services by using converting equipment at home to view the

signals on analog sets. The FCC explained that, according to

industry reports, “about 27 million DTAs [Digital Transport

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Adapters, which are consumer-operated converters] were

already deployed by year-end 2011,” Sunset Order, 27 FCC

Rcd. at 6540, and that some cable operators provide the

adapters to customers for free and others charge a nominal fee

of $1 or $2 per month, id. at 6541. And because most

televisions sold since 2007 are digital-ready, an increasing

number of customers are prepared for digital service simply

through the television sales market. Id. at 6539 n.59.

After considering the comments submitted in the

rulemaking proceeding, the FCC issued the Sunset Order

which allowed the Viewability Rule to expire with only a six-

month extension. The Commission reasoned that, with the

increased number of digital subscribers and the availability of

cheap or free conversion devices, it was no longer necessary

or efficient to continue burdening cable companies with the

obligation to downconvert broadcast programs. Under the

Sunset Order, cable subscribers with analog television sets

may be required by their cable companies to purchase or lease

equipment that converts broadcast signals from digital to

analog. Hybrid cable companies are thus no longer required to

downconvert digital signals to subscribers with analog

television sets.

In sum, the disputed Sunset Order allows an equipment-

based alternative to downconversion, giving cable operators

“flexibility” to cease carriage of analog must-carry signals. In

other words, the new rule permits cable operators to satisfy

the statutory viewability mandate with an “offer” of additional

equipment, provided that the equipment is “affordable.” The

availability of the must-carry stations is still required by

statute; however, cable companies may now choose to

downconvert, to switch all their operations to digital

distribution, or to provide analog subscribers with low or

no-cost conversion devices.

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II. DISCUSSION

A. Chevron Step One

The Petitioners’ first argument is that, “[a]pplying

traditional tools of statutory construction, it is evident from

the plain language and structure of Section 614(b)(7), its

legislative history, the essential purpose of the must-carry

regime, and the Cable Act’s overall statutory scheme that

Congress intended that must-carry signals be actually

viewable without added equipment.” Joint Br. for Pet’rs at 20.

Thus, according to Petitioners, the Sunset Order is “unlawful”

because it is based on a “new statutory interpretation” that

“conflicts with Congress’s unambiguously expressed intent.”

Id. at 20-21. This argument does not square with the plain

meaning of the text, historical context, or the overall purpose

of the Cable Act.

Under Chevron Step One, if Congress “has directly

spoken to the precise question at issue,” the court and the

agency “must give effect to the unambiguously expressed

intent.” Chevron, 467 U.S. at 842-43. The statute states only

that must-carry broadcast signals “shall be viewable via cable

on all television receivers of a subscriber which are

connected to a cable system by a cable operator or for which

a cable operator provides a connection.” 47 U.S.C.

§ 534(b)(7). Petitioners say that “this Section mandates that

must-carry signals be actually viewable. The Order falls short

of this legal standard, adopting a regime that, at best, ensures

only that cable operators that have not yet transitioned to all-

digital will offer consumers the ability to make signals

viewable on analog receivers using additional purchased or

leased equipment.” Joint Br. for Pet’rs at 21. The fallacy in

Petitioners’ argument is that it assumes that actual viewability

is not permissibly achieved if subscribers are required to use

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equipment beyond their televisions to receive must-carry

signals. The statute simply does not require what Petitioners

seek because “viewable” is susceptible to the Commission’s

reading, i.e., viewable with the assistance of a low- or no-cost

converter.

Petitioners argue, in effect, that Congress spoke

definitively on a narrow, technological issue concerning

technology that was not in wide use at the time of enactment.

The viewability requirement, enacted in 1992, was written

before a digital transition was even contemplated by

Congress, so it is fruitless to speculate on what amount of

equipment Congress meant to allow in order to ensure that

digital electronic signals would be viewable. Furthermore,

electronic signals – whether analog or digital – are not

actually “viewable” to the human eye, so it is clear that

Congress understood that some equipment or process would

be required to allow viewers to see broadcast programs. As

noted above, in enacting § 534(b)(4)(B), Congress left it to

the Commission to determine how best to implement the

viewability requirement to account for technological and

market changes.

In January 2001, in its first report and order applying the

carriage requirements to digital signals, the FCC noted that

“[a]llowing digital-to-analog conversion for a limited time

during a critical stage of the transition period” would facilitate

the overall transition. Carriage of Digital Television

Broadcast Signals, First Report and Order, 16 FCC Rcd.

2598, 2630 (2001). In 2007, after the digital transition was

underway, the Commission evaluated the market and

determined that there were still so many analog customers

that, in order to successfully make the must-carry channels

“viewable” to all customers, the cable companies should be

required, for the next five years, to downconvert those

17

channels to analog before transmitting them to analog

customers. The Commission never said that downconversion

was mandated by the statute. It was merely a means to

achieve an end. And nothing in the record indicates that the

FCC or any of the affected parties expected downconversion

to be a permanent obligation imposed upon cable companies.

Indeed, the Viewability Rule, which imposed the

downconversion requirement, was scheduled to sunset three

years after its effective date.

Furthermore, under the FCC’s 2001, 2007, and 2012

rules, analog subscribers were required to install additional

equipment in order to receive broadcasters’ digital programs

whenever a cable company switched from “hybrid” to all-

digital service. Neither Congress nor the FCC has ever stated

that the statutory viewability requirement cannot be met if

subscribers are required to use equipment beyond their

televisions to receive must-carry signals. Therefore,

§ 534(b)(7) cannot be construed otherwise. And the literal

terms of § 534(b)(7) certainly do not support the

interpretation advanced by Petitioners.

Petitioners also contend that the FCC’s order violates

§ 534(b)(4)(A), which provides that “[t]he signals of local

commercial television stations that a cable operator carries

shall be carried without material degradation,” and that “the

quality of signal processing and carriage provided by a cable

system for the carriage of local commercial television stations

will be no less than that provided by the system for carriage of

any other type of signal.” Petitioners argue that the

Commission’s order “runs afoul of this provision by allowing

cable operators to provide better carriage conditions – i.e., a

viewable format – for some signals than they do for others.”

Joint Br. for Pet’rs at 29. This argument presupposes that

digital signals that are not downconverted by cable operators

18

are not in a viewable format, a contention that we have

already rejected. The quality of the picture being transmitted

is the same whether it is downconverted by the cable

company or converted by the customer, and Petitioners offer

no credible evidence to the contrary. Therefore, Petitioners’

arguments resting on § 534(b)(4)(A) certainly do not indicate

that the FCC’s new rule violates the plain meaning of the

statute.

In sum, we reject Petitioners’ arguments under Chevron

Step One.

B. Chevron Step Two

During oral argument, counsel for Petitioners pointed out

that, under the Sunset Order, the FCC requires only that

customers have access to a viewable signal, and leaves it to

them to seek out the equipment necessary to convert a digital

signal to analog. In other words, in abandoning the

Viewability Rule, the Commission now requires analog

subscribers to obtain, pay for, and install additional equipment

to receive must-carry signals. According to Petitioners’

counsel, the real issue in this case is who assumes the burden

– in terms of paying for, providing, and installing the

necessary equipment – of ensuring that analog subscribers can

view digital transmissions. Petitioners suggest that the

Commission’s new rule, which shifts the burden from the

cable companies to the subscribers is manifestly contrary to

the Cable Act and, therefore, cannot survive review under

Chevron Step Two. See Chevron, 467 U.S. at 843-44.

Petitioners do not seriously dispute that, if the FCC was

not limited by the plain meaning of the Cable Act and acted

pursuant to delegated authority, it was free to revise its

interpretation of the viewability requirement to take account

19

of changed circumstances. As the Supreme Court has noted,

“[a]n agency is not required to establish rules of conduct to

last forever, but rather must be given ample latitude to adapt

its rules and policies to the demands of changing

circumstances.” Rust v. Sullivan, 500 U.S. 173, 186-87 (1991)

(quotations, citations, and alteration omitted); accord FCC v.

Fox Television Stations, Inc., 556 U.S. 502, 514-15 (2009).

The only question we face is whether the Sunset Order’s

interpretation of the viewability requirement is “permissible

under the statute.” 556 U.S. at 515. We cannot “substitute our

judgment for the agency’s, especially when, as here, the

decision under review requires expert policy judgment of a

technical, complex, and dynamic subject.” Cablevision Sys.

Corp. v. FCC, 597 F.3d 1306, 1311 (D.C. Cir. 2010). We

must accord “substantial deference” to the FCC’s predictive

judgments. Cablevision Sys. Corp. v. FCC, 649 F.3d 695, 716

(D.C. Cir. 2011).

The disputed statutory language in this case – Section

614(b)(7) – is ambiguous. Therefore, the FCC had latitude,

within the bounds of the statute, “to adapt [its] rules and

policies to the demands of changing circumstances.” Rust,

500 U.S. at 187. We find that, in promulgating the Sunset

Order, the Commission acted reasonably within the compass

of its delegated authority. The Sunset Order is clearly

supported by changed circumstances – including advancing

technology and changes in the marketplace – and reasoned

decisionmaking. The order reflects a permissible

interpretation of the Cable Act and therefore survives review

under Chevron Step Two.

Petitioners argue that forcing analog subscribers to carry

the burden of securing, paying for, and installing the

equipment necessary to convert digital signals is not

compatible with the Cable Act. In support of this claim,

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Petitioners point to the structure of Section 614(b)(7), which

states:

Signals carried in fulfillment of the requirements of this

section shall be provided to every subscriber of a cable

system. Such signals shall be viewable via cable on all

television receivers of a subscriber which are connected

to a cable system by a cable operator or for which a cable

operator provides a connection. If a cable operator

authorizes subscribers to install additional receiver

connections, but does not provide the subscriber with

such connections, or with the equipment and materials for

such connections, the operator shall notify such

subscribers of all broadcast stations carried on the cable

system which cannot be viewed via cable without a

converter box and shall offer to sell or lease such a

converter box to such subscribers at rates in accordance

with section 543(b)(3) of this title.

47 U.S.C. § 534(b)(7). According to Petitioners, “[t]he

Commission’s new interpretation conflicts with the statutory

structure . . . because it renders the distinction between the

second and third sentences of Section 614(b)(7) meaningless.”

Joint Br. for Pet’rs at 22. Petitioners misread the statute.

As the Commission points out:

The second and third sentences of the statute address

different situations and perform distinctive functions. The

second sentence – which contains the viewability

requirement that applies only to must-carry stations –

applies only to subscribers who are “connected to a cable

system by a cable operator or for which a cable operator

provides a connection.” 47 U.S.C. § 534(b)(7). By

contrast, the third sentence, which applies more broadly

21

to “all broadcast stations,” requires cable operators to

offer or sell converter boxes to subscribers to whom the

operator “does not provide” additional receiver

connections or “the equipment and materials for such

connections.” Ibid. (emphasis added). Thus, the third

sentence ensures that cable operators may not simply

refuse necessary equipment to customers who choose to

install their own connections, a function not addressed by

the second sentence. Moreover, the required price for

boxes supplied under the second sentence to satisfy the

viewability requirement – free or nominal – may be less

than the price for boxes supplied under the third sentence,

which can be based on the cost of the equipment.

Br. for Resp’t at 21-22.

Petitioners’ arguments regarding congressional intent and

the objectives of the must-carry regime are similarly

unavailing. The FCC has, as required by Congress, constantly

adapted its enforcement of the must-carry regime, from its

first implementation in 1994 to the tentative consideration of

downconversion in 2001, its adoption in 2007, and its sunset

in 2012. The flexibility demonstrated by this constantly

adjusted approach reflects the realities of the market and the

FCC’s role as an expert agency delegated authority to

exercise its judgment.

Finally, in terms of whether a consumer-operated

conversion device can, practically speaking, make a signal

“viewable,” the FCC has reasonably determined that

technology is now advanced enough to fulfill the statute’s

requirements. Low-cost converter boxes that can be installed

in consumers’ homes are, according to the record, now widely

available and in use in 27 million homes. Given these

dramatic shifts in the market and the increased feasibility of

22

consumer-operated conversion devices, it was within the

agency’s discretion to decline to continue requiring cable

companies to bear the expense of downconversion for a

shrinking audience with easily obtainable alternate means of

accessing the must-carry channels.

On the basis of these considerations, we hold that the

Sunset Order is not manifestly contrary to the viewability

requirement under the Cable Act.

C. Arbitrary and Capricious Review

The same points that address Petitioners’ Chevron Step

Two claim also make it clear that their arbitrary and

capricious claim fails. The analysis of disputed agency action

under Chevron Step Two and arbitrary and capricious review

is often “the same, because under Chevron step two, [the

court asks] whether an agency interpretation is arbitrary or

capricious in substance.” Judulang v. Holder, 132 S. Ct. 476,

483 n.7 (2011) (citing Mayo Found. for Med. Educ. &

Research v. United States, 131 S. Ct. 704, 711 (2011)). “[A]n

agency rule would be arbitrary and capricious if the agency

has 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.” State Farm, 463 U.S. at 43. The

Sunset Order suffers from none of these infirmities. It is

“rational, based on consideration of the relevant factors, and

within the scope of the authority delegated to the agency by

the statute.” Id. at 42.

The evidence in the record is sufficient to support the

FCC’s finding that an equipment-based means of complying

23

with the Cable Act is “effective” in providing “viewable”

signals as required. As noted above, the marketplace and

technology have shifted dramatically in the past several years,

and the Commission reasonably concluded that the number of

analog customers is dropping rapidly and that low-cost digital

equipment is now “readily available” as an option to analog

cable customers. Sunset Order, 27 FCC Rcd. at 6537-39.

Without any contrary evidence to disprove these findings,

Petitioners have not shown any arbitrary and capricious action

or abuse of discretion on the part of the Commission.

Furthermore, there is nothing in the record to support the

Intervenors’ assertion that the Sunset Order will drive

broadcasters out of business. On this point, the record

contains only a dubious study from the National Association

of Broadcasters on the financial effect of the Viewability

Rule’s sunset on must-carry stations, which assumes that none

of the 12.6 million analog customers reported in 2012 will

actually obtain the conversion equipment to continue viewing

digital must-carry channels on their analog sets (or upgrade to

digital sets and view the must-carry stations directly).

National Association of Broadcasters’ Ex Parte

Communication, CS Docket No. 98-120, reprinted in Joint

Appendix (“J.A.”) 170, 173 (“We will examine the impact of

the loss of 11% of viewership on certain types of stations and

estimate the effects on the financial health of these stations.”).

According to the evidence before the Commission as of June

2012, during the years when the downconversion rule was in

effect, the number of analog subscribers dropped from about

40 million households to 12 million households and was

expected to drop below 10 million households by the end of

the year. Sunset Order, 27 FCC Rcd. at 6539. In other words,

the impact of the Sunset Order is diminishing rapidly, as cable

viewers switch to digital subscriptions that are compatible

with must-carry broadcasts. It is self-evident that the loss of

24

downconversion services will have some effect on

broadcasters, but the Commission was “not persuaded” that

allowing the Viewability Rule to expire will “threaten the

viability of must-carry stations,” id. at 6541, and Petitioners

have offered no viable evidence to contradict its findings.

Petitioners also contended at oral argument that under the

new regulatory regime hybrid cable companies will be able to

give their customers superior access to their own analog

programs by downconverting those channels and then

requiring customers to go out and buy new equipment to get

access to the must-carry stations. Petitioners say that such

practices will be at odds with the viewability mandate and the

non-degradation and signal quality requirements found in

§ 534(b)(4). This is a valid concern, and it certainly animated

the Commission’s rulemaking in 2007. But there is no

evidence to indicate that this possibility will become a reality.

Moreover, the Commission’s Sunset Order states that,

a must-carry station may file a complaint pursuant to

Section 76.61 of our rules if it believes a cable operator

has failed to meet its statutory carriage obligations. [See

47 C.F.R. § 76.61.] In addition, we will consider informal

consumer complaints when evaluating compliance with

the statutory viewability requirement. If we receive a

significant number of well-founded consumer complaints

that an operator is not effectively making affordable set-

top boxes available to customers in lieu of analog

carriage of a channel, one of the possible remedies would

be to require the operator to resume analog carriage of

the channel.

Sunset Order, 27 FCC Rcd. at 6546. If, in fact, the cable

companies respond to the FCC’s Order by raising prices on

25

the conversion devices or making them otherwise

inconvenient for customers to obtain, they will be subject to

customer complaints, broadcaster complaints, and agency

action.

In sum, we find that the FCC’s new rule is supported by

changed circumstances, credible evidence, and reasoned

decisionmaking. The Sunset Order therefore survives

arbitrary and capricious review.

D. Adequacy of the Notice of Proposed Rulemaking

Finally, Petitioners argue that the Sunset Order “violates

the APA because the Commission failed to provide interested

parties with adequate notice that it was considering an

equipment-based alternative.” Joint Br. for Pet’rs at 52. We

find no merit in this contention.

When an agency promulgates a rule pursuant to

congressionally delegated authority, it must provide the public

with adequate notice of the proposed rule followed by an

opportunity to comment on the rule’s content. 5 U.S.C.

§ 553(b)(3) (requiring agencies to provide notice of proposed

rulemaking that includes “either the terms or substance of the

proposed rule or a description of the subjects and issues

involved”). The final rule need not be the one proposed in the

NPRM. Rather, “[a]n agency’s final rule need only be a

logical outgrowth of its notice.” Covad Commc’ns Co. v.

FCC, 450 F.3d 528, 548 (D.C. Cir. 2006) (quotation omitted).

An agency’s final rule qualifies as the logical outgrowth

of its NPRM “if interested parties should have anticipated

that the change was possible, and thus reasonably should

have filed their comments on the subject during the

notice-and-comment period.” CSX Transp., Inc. v.

26

Surface Transp. Bd., 584 F.3d 1076, 1079–80 (D.C. Cir.

2009). By contrast, a final rule fails the logical outgrowth

test and thus violates the APA’s notice requirement

where “interested parties would have had to divine the

agency’s unspoken thoughts, because the final rule was

surprisingly distant from the proposed rule.” Id. at 1080.

EDWARDS, ELLIOTT & LEVY, FEDERAL STANDARDS OF

REVIEW 195 (2d ed. 2013).

The Commission’s February 2012 NPRM stated that the

Viewability Rule would “expire on June 12, 2012 unless we

take action to extend it,” and sought comment on “whether it

would be in the public interest to extend” the rule for three

more years. 27 FCC Rcd. at 1713-14. The NPRM also stated

that, if the Viewability Rule expired, “many cable subscribers

would be required to pay more for access to must-carry

broadcast stations, by replacing existing and still-functional

analog equipment with digital equipment or leasing set top

boxes to view the complete service they currently pay for and

receive in analog.” Id. at 1718. The final action taken by the

FCC was not something that the agency had expressly

proposed in its NPRM. Nonetheless, the Commission clearly

solicited comment on whether it should allow the Viewability

Rule to sunset and explained that subscribers might be

required to pay for and use digital equipment in place of

downconversion to view digital programs from must-carry

broadcasters. This notice was more than adequate to alert

must-carry broadcasters that the rule requiring

downconversion might be in jeopardy.

Petitioners argue that the FCC “expressly proposed to

extend the viewability rule until June 12, 2015,” and that

interested parties only learned that the agency was

considering an equipment-based proposal “through press

27

accounts.” Joint Br. for Pet’rs at 52. Petitioners are right in

pointing out that an agency “cannot bootstrap notice from a

comment, . . . or from third-party accounts of what the agency

might be considering.” Id. (citing Small Refiner Lead Phase-

Down Task Force v. EPA, 705 F.2d 506, 549 (D.C. Cir.

1983); Shell Oil Co. v. EPA, 950 F.2d 741, 751 (D.C. Cir.

1991)). But Petitioners are wrong in suggesting that notice is

inadequate if the NPRM and the final rule are not

coterminous. Whether the “logical outgrowth” test is satisfied

depends on whether the affected party “should have

anticipated” the agency’s final course in light of the initial

notice. Small Refiner, 705 F.2d at 548-49. The broadcasters in

this case certainly should have anticipated that the final rule

was a viable result in light of the NPRM, and also in light of

the fact that the Viewability Rule was due to sunset unless

extended.

As the FCC convincingly argues:

The Commission described the proceeding initiated by

the Sunset Notice as “an opportunity . . . to determine

whether extending the current rule is necessary to fulfill

th[e] statutory [viewability] mandate, given the current

state of technology and the marketplace.” Id. ¶5 (J.A. 71)

(emphasis added). In particular, the Commission noted

that set-top boxes would be required in the absence of an

analog carriage requirement and asked interested parties

to provide data on “the range of costs per digital

[converter] box . . . , and the range of rental fees” for

boxes, and “any marketplace or other changes” since

2007. Id. ¶¶10, 13, 16 (J.A. 74, 75, 77). Market

developments such as the availability and cost of signal

converters were plainly raised as topics relevant to the

Commission’s ultimate decision.

28

Furthermore, the Commission noted in the Sunset

Notice that in the Viewability Order it had considered and

rejected “possible alternatives,” such as “a rule that

would allow [cable systems] to carry must-carry signals

in digital so long as they made [signal conversion]

equipment available for lease or sale to subscribers.”

Sunset Notice ¶14 & n.48 (JA 76). When the agency

called for comment on “proposals that would achieve the

results necessary to assure the viewability of must carry

signals through an approach different than that of [the]

existing rule,” including solutions “that will satisfy the

statute in a less burdensome manner,” id. ¶16 (JA 77), it

was referring to such things as the previously rejected

approach. The Sunset Notice thus unquestionably gave

interested parties fair notice that device-based viewability

was one of the issues presented.

Br. for Resp’t at 58-60. We agree.

III. CONCLUSION

For the reasons given above, we hereby deny the petition

for review.

KAVANAUGH, Circuit Judge, concurring: I join the

Court’s fine opinion in full. I add this brief separate opinion

simply to note that the FCC also invoked the principle of

constitutional avoidance to support its result here. In my

view, the Commission was right to perceive a serious First

Amendment problem with the Viewability Rule.

In its Order allowing the Viewability Rule to sunset, the

FCC explained that “dramatic changes in technology and the

marketplace” since the adoption of the Viewability Rule in

2007 had rendered “less certain the constitutional foundation

for an inflexible rule compelling carriage of broadcast signals

in both digital and analog formats.” Carriage of Digital

Television Broadcast Signals, Fifth Report and Order, 27 FCC

Rcd. 6529, 6537 (2012). As a result of those dramatic

marketplace changes, the FCC concluded that it could no

longer justify “imposing a rigid analog-carriage requirement

on cable operators, where the record establishes a reasonable,

less burdensome alternative that meets the statutory

objectives.” Id.

The dramatically changed marketplace that the

Commission aptly recognized in this case undermines the

constitutional foundation of the Viewability Rule and, indeed,

of the broader must-carry regime as well. In the Cable

Television Consumer Protection and Competition Act of

1992, Congress imposed many significant restrictions –

including the must-carry regime – that infringe on cable

operators’ “editorial discretion over which stations or

programs” to carry. Turner Broadcasting System, Inc. v.

FCC, 512 U.S. 622, 636 (1994) (Turner I) (quoting Los

Angeles v. Preferred Communications, Inc., 476 U.S. 488,

494 (1986)); see Cable Act of 1992, Pub. L. No. 102-385, 106

Stat. 1460. The Supreme Court upheld the must-carry

requirements against a First Amendment challenge only after

determining that must-carry advanced “important

governmental interests unrelated to the suppression of free

2

speech” and did “not burden substantially more speech than

necessary to further those interests.” Turner Broadcasting

System, Inc. v. FCC, 520 U.S. 180, 189 (1997) (Turner II)

(applying “intermediate scrutiny”).

Turner identified the important governmental interest

underlying the regulations as the interest in counteracting the

effects of monopoly. And Turner rested its approval of the

must-carry regime on the fact that cable operators in the early

1990s possessed “bottleneck monopoly power.” Turner I,

512 U.S. at 661; see Cable Act of 1992, § 2(a)(2) (finding

“undue market power for the cable operator”). Only because

of the “real threat” that cable operators would exploit their

monopoly power and discriminate unfairly against disfavored

or unaffiliated broadcasters did the Court approve Congress’s

dictate forcing cable operators to carry the signals of certain

preferred broadcasters. Turner II, 520 U.S. at 196

(controlling opinion of Kennedy, J.).

Things have changed. In the two decades since Congress

enacted the Cable Act of 1992, the video programming

marketplace has radically transformed. Cable operators today

face intense competition from a burgeoning number of

satellite, fiber optic, and Internet television providers – none

of whom are saddled with the same program carriage and

non-discrimination burdens that cable operators bear. As this

Court has flatly stated, cable operators “no longer have the

bottleneck power over programming that concerned the

Congress in 1992.” Comcast Corp. v. FCC, 579 F.3d 1, 8

(D.C. Cir. 2009); see also Comcast Cable Communications,

LLC v. FCC, 717 F.3d 982, 992-94 (D.C. Cir. 2013)

(Kavanaugh, J., concurring); Cablevision Systems Corp. v.

FCC, 597 F.3d 1306, 1316 (D.C. Cir. 2010) (Kavanaugh, J.,

dissenting); Randolph J. May, Charting a New Constitutional

Jurisprudence for the Digital Age, 3 CHARLESTON L. REV.

3

373, 393-94 (2009); Christopher S. Yoo, Vertical Integration

and Media Regulation in the New Economy, 19 YALE J. ON

REG. 171, 229 (2002); Note, Enabling Television Competition

in a Converged Market, 126 HARV. L. REV. 2083 (2013); R.

Matthew Warner, Note, Reassessing Turner and Litigating the

Must-Carry Law Beyond a Facial Challenge, 60 FED. COMM.

L.J. 359 (2008).

Unsurprisingly, cable regulations adopted in the era of

Cheers and The Cosby Show are ill-suited to a marketplace

populated by Homeland and House of Cards. And the

constitutional problems infecting the 1992 Cable Act’s

various program carriage and non-discrimination

requirements grow more significant every day, as new video

programming distributors emerge and prosper. The upshot is

that the cable “bottleneck monopoly” on which Turner rested

no longer exists – and, as a result, the Act’s infringements on

cable operators’ editorial discretion no longer can withstand

First Amendment scrutiny.

Turner’s conclusion was expressly based on the state of

the marketplace in the early 1990s. See Turner II, 520 U.S. at

197-207 (controlling opinion of Kennedy, J.). Contrary to

petitioners’ suggestion to this Court, a Supreme Court

decision that says, in essence, “Because there is now a

monopoly, this regulation is permissible” does not mean

“Even when there is no monopoly, this regulation is

permissible.” Cf. Time Warner Cable Inc. v. FCC, 729 F.3d

137, 161 (2d Cir. 2013). Suppose the Supreme Court

considers an antitrust case and concludes that Company X has

an 80 percent market share, that anything over 50 percent

constitutes market power in that market, and that it is

unlawful under the antitrust laws for a company such as

Company X with market power to engage in certain activities.

In a future case, a lower court would be bound by vertical

4

stare decisis to say that a company with a market share over

50 percent in the relevant market had market power and thus

could not lawfully engage in those activities. But if Company

X’s market share in the relevant market declined to 10 percent

– meaning that it no longer had market power – a lower court

would obviously not be bound to hold that Company X still

could not engage in those activities. So it is here. A contrary

approach to precedent in these circumstances would reflect a

mindless perversion of stare decisis, not a faithful application

of stare decisis.

When the cable operators’ monopoly collapsed, the

constitutional foundation supporting the 1992 Cable Act’s

program carriage and non-discrimination regimes collapsed

with it. Stare decisis requires courts (and, in the first instance,

the FCC) to carefully and faithfully follow the constitutional

principles that undergird Turner: First, “cable operators

engage in and transmit speech, and they are entitled to the

protection of the speech and press provisions of the First

Amendment.” Turner I, 512 U.S. at 636. And second, absent

a finding of market power, the Government may not infringe

on the cable operators’ editorial discretion. See id. at 661.

Applying those principles to today’s highly competitive video

programming distribution marketplace leads to an entirely

different result than it did 20 years ago. Because cable

operators no longer wield market power, the Government can

no more tell a cable operator today which video programming

networks it must carry than it can tell a bookstore what books

to sell or tell a newspaper what columnists to publish.

In short, as a matter of constitutional law and

technological reality, the 1992 Cable Act’s various program

carriage and non-discrimination regimes rest on a hollowed-

out foundation. The Commission was right to see the First

Amendment problem in this case – and further cases like this

5

no doubt loom on the horizon. With that observation, I join

the opinion of the Court.