Petition for Writ of Certiorari — Alliance for Community Media v. Federal Communications Commission (No. 08-1027)

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Supreme Court, U.S.

FILED

Wi () 081027 FEB 10 2009

| OF Fecé OF THE CLERK

No. Whitam K. Suter, Clerk

In the

SUPREME COURT OF THE UNITED STATES

ALLIANCE FOR COMMUNITY MEDIA, ET AL.

Petitioners,

“uy

Vv.

UNITED STATES OF AMERICA:

FEDERAL COMMUNICATIONS COMMISSION

Respondent.

On Petition for a Writ of Certiorari

to the United States Court of Appeals

for the Sixth Circuit

PETITION FOR A WRIT OF CERTIORARI

JOSEPH VAN EATON RONALD K. CHEN

Counsel of Record Public Advocate

FREDERICK E. ELLRCD III STEFANIE A. BRAND

MATTHEW K. SCHETTENHELM Director

Miller & Van Eaton, PLLC CHRISTOPHER J. WHITE

Suite 1000 Deputy Public Advocate

1155 Connecticut Avenue, N.W Division of Rate Counsel

Washington, DC 20036 31 Clinton Street, 11 Floor

(202) 785-0600 P.O. Box 46005

Newark, NJ 07101

(973) 648-2690

Counsel for Petitioners

QUESTIONS PRESENTED

In 1984, Congress adopted the Cable

Communications Policy Act of 1984, 47 U.S.C. §§ 521

et seq. (the “Cable Act’), which reserved solely to

state and local governments the right to issue cable

franchises authorizing cable operators to place cable

systems on local and state property. 47 U.S.C.

§ 541(a)(1). In 1992, Congress amended the Cable

Act to provide that “a franchising authority ... may

not unreasonably refuse to award an additional

competitive franchise,” and to provide for a court

appeal of any such refusal. /d.

¥ In light of constitutional restraints and the

Communications Act’s express limitations upon FCC

authority, did the Sixth Circuit err in finding that

Section 201(b) of the Communications Act authorizes

the FCC to implement 47 U.S.C. § 541(a)(1) by

deeming a local franchise granted or by otherwise

controlling state or local franchising processes?

2. Did the Sixth Circuit err in finding that under

Chevron USA v. NRDC, 467 U.S. 837 (1984), the

phrase “unreasonably refuse,” coupled with a court

remedy, permits the FCC to set franchise terms,

control franchising procedures, and deem local

franchises granted?

3. Did the Sixth Circuit err in finding that

substantial evidence supports the FCC’s Order,

where the court failed to consider “whatever in the

record fairly detracts” from evidence relied upon by

the FCC, as required by Universal Camera Corp. uv.

NLRB, 340 U.S. 474, 488 (1951)?

PARTIES TO THE PROCEEDING

Petitioners are the Alliance for Community

Media; the Alliance for Communications Democracy;

the National Association of Telecommunications

Officers and Advisors; City of Los Angeles, CA; City

of Dubuque, LA; Carroll County, MD; Montgomery

County, MD; City of White Plains, NY; City of

Charlotte, NC; Greater Metro Telecommunications

Consortium; and the New Jersey Department of the

Public Advocate, Division of Rate Counsel.

Respondents are the United States of America

and the FCC.

The Sixth Circuit consolidated various

petitions for review under Docket # 07-3391. Other

parties in the consolidated cases include: National

League of Cities; United States Conference of

Mayors; National Association of Counties; City and

County of San Francisco, CA; City of Wilmington,

DE; City of Tampa, FL; City of Chicago, IL; City of

St. Louis, MO; Anne Arundel County, MD; City of

Boston, MA; Charles County, MD; Villages of

Larchmont and Mamaroneck, NY; Town of

Mamaroneck, NY; City of New York, NY; City of

Laredo, TX; Fairfax County, VA; City of Milwaukee,

WI; State of Hawaii; National Cabie &

Telecommunications Association; Ad Hoc Telecom

Manufacturer Coalition; Qwest Communications

International, Inc.; U.S. Telecom; Verizon; and

AT&T.

ill

RULE 29.6 STATEMENT

No parent or publicly held company owns 10%

or more of the Alhance for Communications

Democracy, the Alliance for Community Media, the

Greater Metro Telecommunications Consortium, or

the National Association of Telecommunications

Officers and Advisors. No other Petitioner is a

nongovernmental corporation.

TABLE OF CONTENTS

QUESTIONS PRESENTED

PARTIES TO THE PROCEEDING

RULE 29.6 STATEMENT

TABLE OF AUTHORITIES

JURISDICTION

CONSTITUTIONAL AND STATUTORY

PROVISIONS

STAT EDEN EG OF THE CASE ..cccsccccsscsosscscccserceserse 2

A. Statutory Framework. ................00008 3

B. BE FAS Citic cc css cniecenceeccaczcaccoesers

C. The Sixth Circuit Appeal 12

REASONS FOR GRANTING THE WRIT 14

I. Certiorari Should Be Granted To

Restore the Franchising Balance Struck

by Congress in the Cable Act. ....................

A, The Act Is Not Silent As to Where

Franchising Authority Resides. ......

B. The Sixth Circuit’s Reading of the

Cable Act As Empowering the

FCC To Control the Franchising

Process and ‘lo Deem Local

Franchises Granted Conflicts

with Decisions of this Court and

Other Courts of Appeals.................. 2

Granting the Petition Is

Appropriate To Restore the

Division of Authority Required by

the Cable Act, the Constitution,

PE GPT SI GRIIGI os ccic vn cveccaciccsecscascns 22

Certiorari Is Appropriate To Clarify

That Section 201(b) Does Not Authorize

the FCC To Exercise Franchising

Authority or To Control the Franchising

NS, fois ta cine deusaecaaceabimadiapanneneeeien Z

The Court Should Grant Certiorari To

Review the Sixth Circuit’s

Misapplication of Chevron. ........c.ccccceeceeeees

A. The Sixth Circuit Mistakenly

Concluded that Section 621(a)(1)

Was “Ambiguous.”

In Context, Section 621(a)(1) Is

Not Ambiguous and Leaves No

Gap for the FCC To Fill. ...c............. 32

Even Assuming the FCC Had

Authority To Implement Section

621(a)(1), It Could Not Do So ina

Manner Inconsistent with the

Certiorari is Appropriate In Light of the

Sixth Circuit’s Failure To Conduct the

Analysis Required By Universal

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COC EIEN viccsiccvcssicenss Sepeait aay taineiaiets Gale pianaeries 4]

APPENDIX

Opinion of the United States Court

of Appeals for the Sixth Circuit

(June 27, 2008)

Judgment of the United States

Court of Appeals for the Sixth

Circuit (une 27, 2008)...............00.. SGA

Federal Communications

Commission Report and Order and

Further Notice of Proposed

Rulemaking (March 5, 2007) ...........55a

Order of the United States Court of

Appeals for the Sixth Circuit

Denying Petitions for Rehearing

(Clatower BO, ZOOB) .....ccrcccccsceccsceceses GOR

Constitutional and Statutory

ae sa ele caseuieneavenibh 332a

TABLE OF AUTHORITIES

Cases

Accuracy in Media, Inc. v. FCC, 521 F.2d 288

(D.C. Cir. 1975)

ACLU v. FCC, 823 F.2d 1554 (D.C. Cir. 1987)

Adams Fruit Co. v. Barrett, 494 U.S. 638

Alaska Dept. of Envtl. Conservation v. EPA,

540 U.S. 461 (2004)

AT&T Corp. v. lowa Utils. Bd., 525 U.S. 366

ERNE ok cud katevoccesuaeentandanesousbunxecueeuere 13, 15

Brown v. Gardner, 513 U.S. 115 (1994) ..................30

Chevron U.S.A. Inc. v. Echazabal, 536 U.S.

Pe MI rib coichs shee cacidintuesevasadened iva ccmmcescete

Chevron U.S.A. Inc. v. NRDC, 467 U.S. 837

(1984) passim

City of Chicago v. Envtl. Def. Fund, 511 U.S.

City of Dallas v. FCC, 165 F.3d 341 (5th Cir.

Piri sckiecitidncsd Rivivestadindinc arc: Ee ee ee

City of New York v. FCC,

486 U.S. 57 (4968) ..............5............8, 4 14, 22

City of New York v. United States, 505 U.S.

144 (1992)

Dunn v. CFTC, 519 U.S. 465 (1997).......... EVER

Esiate of Cowart v. Nicklos Drilling Co., 505

i cis cesasavonsisvivinddoe 30

FCC v. Midwest Video Corp., 440 U.S. 689

(1979)

Global Crossing Telecomms., Inc. v.

Metrophones Telecomms., Inc., 550

ee kad sas peuniuneanest

Gonzales v. Oregon, 546 U.S. 243 (2006)

Indep. Ins. Agents of Am., Inc. v. Hawke, 211

F.3d 6388 (D.C. Cir. 2000)

K Mart Corp. v. Cartier, Inc., 486 U.S. 281

ear a a euannaaes 3¢

Loretto v. Teleprompter Manhattan CATV

Corp., 458 U.S. 419 (1982) ‘Acie

NCTA v. Brand X Internet Servus., 545 U.S.

I a od ce wena 24

NCTA v. FCC, 33 F.3d 66 (D.C. Cir. 1994)

Ragsdale v. Wolverine World Wide, Inc., 535

Se RE RR eee a.

Solid Waste Agency of Northern Cook County

v. U.S. Army Corps of Engineers, 531

U.S. 159 (2001)

Union CATV v. City of Sturgis, 107 F.3d 434

OI PIII ovis cocincensinscosssscninsvecssiel

Universe! Camera Corp. v. NLRB, 340 USS.

474 (1951)

Constitutional Provisions

U.S. Clone, Se ccncnovcocess 20

U7... COret ee ag cousceccccces BO

BS UC. SB Te ai iies vecescescorsceseccces l

28 U.S.C. § 2344.......... eisadianiatinbndas TG sdseissecsiessess 12

ys BARE OB” Be wee

47 U.S. § 181... TTT incase csenterscsvesssensese 4

47 U.8.0. © 362 cence EEE A 4,19, 26

47 U.S.C. § 201 ciscaameeeeens 8, 9, 10, 23, 24, 25

AT U SSAC. BB irc caa ee aaa ae ssessvenessecesces. 19

47 UB. 3 202 Accu Ee 24

47 GBS, FG rrcceak aetna adaccvisveveccsccccccs. 12

PURER ROR Bo 0) ye 8 ee +.

47 U.S.C. § 522(9)-(10) ....cccecceccsccecceseesssscseeeees 4,17, 18

AT UC. SoBe sesso re EEE abst ncscanesesssccecc1000O

BT VI. & GBF ccc sc cae saat ies ssevesvessceses010 98

YOUR Ree Y.” ) Pe passim

47 U.S.C. & Ga icici scstace see eee otescanstesees 11, 36, $7

47 USC. © GRR i icnssscccisss..... 5

47 UBC. © GB cc ccc .e.. PAaSSIM

47 U.S.C. §

Other Authorities

1 C. Ferris & F. Lloyd, Telecommunications

PUOAATERSIOTS CIGD ose secscncccecsvenencessversessevsvesesenseotl

H.R. Rep. No. 98-934, 1984 U.S.C.C.A.N. 4655

(1984)... eld ee a pa ee ee

FE. BRO. INO, EOZ-BZ8 CLGIZ) oicccccssscncccrcoscccessvcrsscsesecess ey

In re Cal. Water & Tel. Co., 40 Rad. Reg. 2d 419 at

1G CII iii WR sccatcececsentassss pisearemeicocdoceccer: 19

In re Implementation of Section 621(a)(1) of

Cable Television Consumer Protection

and Competition Act of 1992, 20

FR pee Be CAPUUEED uicukdccbabccee<odaceekevccscaes 7,8

In re Implementation of Section 621(a)(1) of

the Cable Communications Policy Act

of 1984 as Amended by the Cable

Television Consumer Protection and

Competition Act of 1992, 22 F.C.C.R.

re MT Ficicc ceccesnved saves dandaasense¥hcsdunats passim

In re Implementation of Section 621(a)(1) of

the Cable Television Consumer

Protection and Competition Act of

1992, 22 F.C.C.R. IGSSS CAOOT) ovcccvesescsccccccesss 7

PETITION FOR A WRIT OF CERTIORARI

The above-named Petitioners respectfully

petition for a writ of certiorari to review the

judgment of the United States Court of Appeals for

the Sixth Circuit.

OPINION AND ORDER BELOW

The FCC order subject to the Petitions for

Review, In re Implementation of Section 621(a)(1) of

the Cable Communications Policy Act of 1984 as

Amended by the Cable Television Consumer

Protection and Competition Act of 1992 (the-“Order’)

(App. C, infra) is published at 22 F.C.C.R. 5101

(2007).

The court of appeals’ opinion denying the

Petitions for Review (App. A, infra) is published at

529 I.3d 763.

JURISDICTION

The court of appeals entered its judgment

(App. B, infra) on June 27, 2008. The court of

appeals denied a petition for rehearing or rehearing

en banc by an order dated October 29, 2008 (App. D,

infra). This Court has jurisdiction pursuant to 28

U.S.C. § 1254(1).

CONSTITUTIONAL AND STATUTORY

PROVISIONS

The relevant constitutional and = statutory

provisions are set out in the appendix (App. E,

infra). The relevant constitutional provisions are:

U.S. Const. amend. V and U.S. Const. amend. X.

The relevant statutory provisions are: 47 U.S.C.

§ 151; 47 U.S.C. § 152; 47 U.S.C. § 201; 47 U.S.C.

§ 224; 47 U.S.C. § 303; 47 U.S.C. § 522; 47 U.S.C.

§ 541; 47 U.S.C. § 542; and 47 U.S.C. § 555.

STATEMENT OF THE CASE

This case involves an important question

concerning the FCC’s claim of jurisdiction under the

Cable Act over state and local governments and their

property.

In this case, the FCC has read the statutory

command in Section 621(a)(1) that a_ local

government may not “unreasonably refuse to award”

a competitive cable franchise (a command expressly

tied to judicial review) as empowering it — a federal

administrative agency — to control local franchising

procedures, to establish the reasonableness of local

franchise terms and conditions, and to issue local

franchises by deeming franchises granted. The FCC

uncovers all of these powers in the phrase

“unreasonably refuse” despite the fact that the Cable

Act does not give the FCC a role in the local

franchising process, and despite the fact that Section

621(a)(1), the specific provision on which the FCC

grounded such authority, gives courts, not the FCC,

the right to resolve franchising disputes. Until the

FCC issued its Order, the agency had never claimed

such authority over state or local governments. The

Sixth Circuit denied Petitions for Review that

challenged the agency’s authority and_ the

reasonableness of the regulations it adopted.

A. Statutory Framework.

To provide service in a community, a cable

system uses and occupies rights-of-way that are the

property of state and local governments. The state

and local governments control this property and

issue permission to use and occupy it through the

exercise of legislative power. City of Dallas v. FCC,

165 F.3d 341, 345-46 (5th Cir. 1999). The

permission given to cable operators to place cable

systems in the rights-of-way typically takes the form

of a franchise, which, once accepted, constitutes a

bilateral contract between the franchising authority

and the franchised cable operator. 1 C. Ferris & F.

Lloyd, Telecommunications Regulation { 13.14 [1]

(2005).

Prior to enactment of the 1984 Cable Act, Pub.

L. No. 98-549 (1984), the FCC regulated cable in the

exercise of its ancillary jurisdiction over

broadcasters. FCC v. Midwest Video Corp., 440 U.S.

689 (1979). The FCC did not issue, or claim the

authority to issue, franchises to cable systems

authorizing use of state and local property. Instead,

consistent with the rights of states and localities to

control their property, the FCC recognized a “dual

regulatory regime” under which states and localities

granted franchises, while the FCC regulated

“operational aspects” of cable television service, City

of New York v. FCC, 486 U.S. 57 (1988); NCTA v.

FCC, 33 F.3d 66, 68-69 (D.C. Cir. 1994). This dual

regime was also consistent with the reach of the

FCC’s authority under the Communications Act of

1934 as amended, 47 U.S.C. § 151 et seqg., which

extends to the regulation of “interstate and foreign

commerce in communication by wire and radio,” and

persons “engaged within the United States in such

communication.” 47 U.S.C. §§ 151-152.

In the Cable Act, Congress amended the

Communications Act to delineate “the authority of

Federal, state and local governments” to regulate

cable. H.R. Rep. No. 98-934, 1984 U.S.C.C.A.N.

4655, 4659. One of the central choices made by

Congress was to leave “franchising to state or local

authorities,’ New York, 486 U.S. at 61. This choice

was reflected in Section 621(b)(1), which requires

cable operators to obtain a franchise; and Sections

602(9) and (10), 47 U.S.C. §§ 522(9)-(10), which,

respectively, define a franchise as an authorization

to use property granted by a franchising authority,

and define “franchising authority” so that only state

and local governments are authorized to issue cable

franchises for state and local property.! Congress

intended to fix responsibility for franchising firmly

at the local ievel, so that it would not be “continually

altered by Federal, State and local regulation.” 1984

U.S.C.C.A.N. at 4661; ACLU v. FCC, 823 F.2d 1554,

1559 (D.C. Cir. 1987).

Congress explained that Section 602(19) also permits a

federal agency authorized to do so to issue a cable franchise for

federal property that the agency controls (military bases being

an example). H.R. Rep. No. 98-934, 1984 U.S.C.C.A.N. 4655,

4682 (1984).

The Cable Act’s legislative history discusses

the Congressional policy choice underlying this

allocation of authority over cable. Congress wished

to ensure “that cable systems are responsive to the

needs and interests of the local community.” 47

U.S.C. § 521(2). Congress found that “city officials

have the best understanding of local communications

needs and can require cable operators to tailor the

cable system to meet those _ needs.” 1984

U.S.C.C.A.N. at 4661. Accordingly, the Cable Act

continued “reliance on the local franchising process

as the primary means of cable television regulation,

while defining and lmiting the authority that a

franchising authority may exercise through the

franchise process.” Jd. at 4656. The Act permits

local governments, on a case-by-case basis, to

investigate local cable-related needs and interests,

and then to issue requests for franchise proposals

that require operators to address those needs and

interests. ?

As initially enacted, the central provision at

issue in this case, Section 621(a)(1), allowed local

2 TL.FAs may issue a “request for proposals” for initial or renewal

franchises that contain, inter alia, “requirements for capacity

for public, educational and government use (47 U.S.C.

§ 531(a)); and requirements for “facilities and equipment” (47

U.S.C. § 544(b)), including requirements for “channel capacity,

system configuration and capacity ... and any other facility or

equipment requirement, which is related to the establishment

and operation of a cable system, including . . . studios and

production facilities, vans and cameras for PEG use.” 1984

U.S.C.C.A.N. at 4705; see also id. at 4660.

and state franchising authorities to decide whether

to issue one or more franchises for a particular area.

In 1992, Congress amended Section 621(a)(1) to add:

A franchising authority may award, in

accordance with the provisions of this

title, 1 or more franchises within its

jurisdiction; except that a franchising

authority may not grant an exclusive

franchise and may not unreasonably

refuse to award an_ additional

competitive franchise. Any applicant

whose application for a_ second

franchise has been denied by a final

decision of the franchising authority

may appeal such final’ decision

pursuant to the provisions of section

635 for failure to comply with this

subsection.

P.L. No. 102-385 § 7, 106 Stat. 1460 (emphasis

added). Congress simultaneously amended Section

635, 47 U.S.C. § 555, to permit an operator to

commence an action in state or federal court within

120 days of receiving notice of an adverse

franchising decision. The legislative history does not

indicate that the amendment of Section 621(a,(1)

was intended to alter Congress’s 1984 allocation of

franchising authority to state and local governments.

Instead, it reaffirms that the Cable Act “clarified a

system of local, state and Federal regulation” and

was intended “to create a_ statutory balance”

emphasizing reliance on local franchising processes

“as the primary means of cable _ television

regulation.” H.R. Rep. No. 102-628 at 29. The FCC

never adopted regulations implementing Section

621(a)(1), or suggested that it could do so, until it

adopted the Order.

B. The FCC Order.

In November 2005, the Commission issued a

Notice of Proposed Rulemaking to determine

whether local franchising authorities (“LFAs”) were

unreasonably refusing to award competitive

franchises and whether it should adopt regulations

implementing Section 62 1(a)(1). In re

Implementation of Section 621(a)(1) of the Cable

Communications Policy Act of 1984 as amended by

the Cable Television Consumer Protection and

Competition Act of 1992, 20 F.C.C.R. 18581 (2005).

In 2007, the FCC issued the Order, which applied

only to new cable market entrants.

In the Order, the FCC concluded that the local

franchising process itself was delaying competitive

entry. This was because “the franchising process

differs significantly from locality to locality,” Pet.

App. 72a 4 14, so that providers often “must become

3 The FCC subsequently issued an order, In re Implementation

of Section 621(a)(1) of the Cable Communications Policy Act of

1984 as amended by the Cable Television Consumer Protection

and Competition Act of 1992, Second Report and Order, 22

F.C.C.R. 19633 (2007) ("Second Order"), which extended some

of the Order’s rules to incumbent operators. This Second Order

is on appeal ard subject to limited petitions for reconsideration.

That proceeding does not affect this petition.

familiar with all applicable regulations” in more

than one jurisdiction. /d. 74a, { 15. The FCC noted

that while some states have recently reformed their

franchising processes to provide “more uniformity,”

other states have not. Jd. 75a-77a, J 16-17. The

Commission concluded that there had_ been

significant local abuses of the franchising process.

Id. 80a, | 20.

Based on these findings, the FCC decided it

was necessary to reform the local franchising

process. Id. 78a, § 18. While the FCC asserted the

authority to regulate states and localities, the FCC

concluded the record did not justify adoption of rules

directly regulating states, or localities in states that

controlled the exercise of cable franchising authority.

Id. 56a, §| 1, n.2.

The FCC concluded that it was authorized to

reform the local franchising process under Section

621(a)(1) through its rulemaking power in Section

201(b) of the Communications Act, 47 U.S.C.

§ 201(b), “reinforced by” Sections 2, 4(1) and 303(r).

Id. 123a-140a, 99 53-64. Moreover, the FCC found

that, pursuant to this authority, it could and should

(a) define franchise procedures and deadlines that

state and local governments would be required to

follow, id. 141a, {| 67; (b) preempt public hearing

requirements and other requirements on which local

legislative authority depends, id. 150a, {| 73; (c)

define what franchise requirements were

unreasonable and reasonable, without regard to local

conditions, id. 140a-199a, 94] 65-124; and (d) exercise

remedial authority to deem a franchise granted on

the terms proposed by the franchise applicant, at

least temporarily, if a franchising authority failed to

comply with the FCC’s rules, id. 154a, 4] 77. While

the FCC recognized that under the Cable Act

franchising authority lies with states and _ local

governments, id. 62a, § 6 n.8, it concluded that its

“broad authority” to adopt rules gave it power to

deem franchises granted, and that ultimately,

“fallthough we have’ determined that local

authorities ought to have the widest scope in

franchising cable operators, the final responsibility is

ours.” Id. 157a, § 79 (FCC’s emphasis).

The Order specifically addresses five issues:

pA Time Limits & “Deeming a

Franchise Granted.” Franchising authorities

must act on a complete franchise application within

90 days for an entity with existing access to the

LFA’s rights-of-way, td. 147a, 4 71, and 180 days for

all other applicants. Jd. 149a, §, 72. If the LFA fails

to act within these limits, “the LFA will be deemed

to have granted the applicant an interim franchise

based on the terms proposed in the application.” Jd.

154a-155a, {| 77. The FCC preempted any local

laws respecting voting, notice, public hearing, and

other predicates for local legislative actions granting

a franchise to the extent those prevented a locality

from meeting the FCC’s new deadlines. Jd. 150a,

q 73.

A Build-out. The FCC placed limits on

local authority to require an applicant for a second

franchise to agree to “build out” its system

throughout a community. Jd. 159a-169a, {4 82-93.

3. Franchise Fees. ‘the FCC issued rules

interpreting Section 622, the franchise fee provision

of the Cable Act. Id. 169a-187a, 4 94-109.

Section 622(g)(2)(D) excludes from the

franchise fee cap “requirements or charges

incidental to the awarding or enforcing of the

franchise, including payments for’ bonds,

security funds, letters of credit, insurance,

indemnification, penalties, or liquidated

damages.” Those “incidental” charges can be

collected in addition to the franchise fee. The

FCC ruled that the specific list appearing

after the word “including” was exhaustive,

except for “minor” expenses. Among other

things, anything other than clerical processing

fees was deemed non-incidental. Legal costs

and consulting costs associated with

conducting studies to identify community

needs were specifically treated as non-

incidental, and must be paid for by the

franchising authority. /d. 178a-181la, 4 103-

04.

The FCC ruled that any LFA requests for “in-

kind contributions that are unrelated to the

provision of cable services” are subject to the

franchise fee cap. Id. 185a, J 108.

Additionally, the FCC interpreted Section

622(g)(2)(C), which excludes from the

“franchise fee” any “capital costs which are

required by the franchise to be incurred by the

cable operator for public, educational, or

governmental access facilities.” 47 U.S.C.

§ 542(g)(2)(C). Id. 186a, 4 109.

e The FCC ruled that “a cable operator is not

required to pay franchise fees on revenues

from non-cable services.” /d. 174a, 4 98.

4, Public, Educational, and

Governmental Access. Section 621(a)(4)(B)

provides that an LFA “may require adequate

assurance that the cable operator will provide

adequate public, educational, and governmental

access channel capacity, facilities, or financial

support.” 47 U.S.C. § 541(a)(4)(B). The FCC

interpreted the word “adequate” to mean

“satisfactory or sufficient,” not “significant.” Pet.

App. 189a, 4 112. The FCC ruled that “it is

unreasonable for an LFA to require a new entrant to

provide PEG support that is in excess of the

incumbent cable operator’s obligations,” even if the

new entrant’s franchise would cover a very different

time period than the incumbent’s, and regardless of

changes in community needs since the incumbent’s

franchise was granted. /d. 196a, § 120.

5. Mixed-Use Networks. Finally, the

FCC assessed an LFA’s regulation of cable systems

that were used to deliver multiple services and

concluded that “an LFA may not use its video

franchising authority to attempt to regulate a LEC’s

entire network beyond the provision of cable

services.” Jd. 198a, {| 122.

The FCC concluded that by definition, a

violation of any of the rules or any part or its Order

would be an “unreasonable refusal” to issue a

franchise within the meaning of Section 621(a)(1).

Id, 200a, | 125a.

Commissioners Adelstein and Copps

dissented, finding that the Order exceeded the FCC’s

authority, was inconsistent with the basic structure

of the Cable Act, and was unsupported by the record.

Id. 287a, 292a.

GC. The Sixth Circuit Appeal.

The Order was appealed by numerous parties

pursuant to 47 U.S.C. § 402(a) and 28 U.S.C. § 2344.

On April 10, 2007, the petitions were consolidated in

the Sixth Circuit.

The Petitioners raised both statutory and

constitutional objections to the rules. On June 27,

2008, the Sixth Circuit released an opinion and

judgment denying the Petitions for Review. Pet.

App. la, 53a.

The Sixth Circuit first addressed the FCC’s

authority to adopt the rules. It stated that Section

621(a)(1) “is silent” as to the FCC’s role “in the

process of awarding cable franchises.” Pet. App.

19a. Given that silence, the Sixth Circuit found that

AT&T Corp. v. Iowa Utilities Board, 525 U.S. 366

(1999), compelled the conclusion that the

Commission could adopt cable franchising

regulations pursuant to Section 201(b) of the

Communications Act, which provides that the

Commission “may prescribe such rules’ and

regulations as may be necessary in the_ public

interest to carry out the provisions of this Act.”

Satisfied that the FCC had jurisdiction, the

court applied Chevron USA v, NRDC, 467 U.S. 837

(1984), and found that the FCC had permissibly

interpreted Section 621(a)(1). Pet. App. 25a.

Applying “step one” of Chevron, the court found that

the phrase “unreasonably refuse to award an

additional competitive franchise” was ambiguous,

because Congress provided for judicial review of a

franchising authority's decision. Pet. App. 28a-30a.

The court felt that the “legislative decision to

delegate to jurists the task of construing and

enforcing section 621(a)(1)’s insistence on

reasonableness suggests that the statutory phrase at

issue 1s capable of multiple meanings.” Jd.

Applying Chevron’s “step two,” the court of

appeals found that the FCC’s regulations, including

the regulations that deem a local franchise granted

and that preempt local legislative processes, were

reasonable. Jd. 30a-49a. The court did not analyze

the FCC’s rules in light of the specific structure of

the Cable Act, or in light of the Cable Act’s

requirements for case-by-case local franchising.

Finally, the court examined the amount of

evidence supporting the FCC’s findings that the

franchising process was delaying local entry, and

concluded that the FCC’s rulemaking activity “was

rooted in a sufficient evidentiary basis.” /d. 49a-52a

REASONS FOR GRANTING THE WRIT

This case raises important issues as to the

division of authority among “federal, state, and local

authorities to regulate different aspects of cable

television.” New York, 486 U.S. at 59. As New York

suggests, this Court has consistently granted

petitions to resolve such disputes, recognizing that,

because of a cable system’s use of sovereign state

and local property, the division of authority between

the federal and state governments implicates basic

principles of federalism. Jd. For almost two decades,

this Court has not been required to address the

allocation of authority because the Cable Act had

been interpreted — as intended by Congress

leave control of local cable franchising and the local

franchising process to states and localities, subject to

review by the courts.

In the Order, however, the FCC asserts for the

first time the right to deem local franchises granted;

to establish terms and conditions for franchises

(beyond the terms specifically prescribed elsewhere

in the Act); and to control the franchising process by

preempting local laws that provide for public

hearings, public notice, and other incidents of the

legislative process through which franchises are

issued. This Court should intervene to restore the

careful balance struck by Congress in the Cable Act.

Granting the Petition is also appropriate because the

Order is inconsistent with decisions of this Court

and other courts, which recognize that the Cable Act

reserved the franchising power to state and local

governments.

Within this statutory framework, the case

raises three significant issues of administrative law.

First, the Sixth Circuit read this Court’s

decision in AT&T’ v. Jowa Utilities Board, 525 U.S.

366 (1999), to mean that insertion of any new

provision into the Communications Act of 1934 will

always confer jurisdiction and broad remedial

powers upon the FCC with respect to that newly

added provision, no matter what the context of the

provision. Hence, the Sixth Circuit deemed itself

“bound” by Section 621(a)(1)’s insertion into the

Communications Act to find that the Commission

could deem local franchises granted, even though the

Cable Act and its legislative history make clear that

Congress never empowered the FCC to do so. This

Court should grant this petition to make clear that

the Commission's remedial authority and

jurisdiction have to be evaluated not based on

“insertion into the Act” alone, but by applying

traditional toois of statutory interpretation

particularly where, as here, Congress's plain

language and stated goals divide authority among

state, local, and federal governments. The Sixth

Circuit's approach calls into question limits on the

agency's authority long considered settled. See, e.g.,

Accuracy in Media, Inc. v. FCC, 521 F.2d 288 (D.C,

Cir. 1975) (applying traditional tools of statutory

interpretation to find that the FCC’s’ general

regulatory powers did not permit it to enforce 47

U.S.C. § 396(g)(1)(A) against the CPB).

Second, the Sixth Circuit erred at both steps

of its Chevron analysis. First, the court incorrectly

found that the “legislative decision” to permit courts

to determine whether a locality had “unreasonably

refuse[d]” to grant a cable franchise necessarily

meant that the phrase was so ambiguous as to

empower the FCC to adopt franchising rules. This is

a dangerous and unlikely rule for statutory analysis.

[It would paradoxically mean that Congress’s explicit

assignment of responsibility for reviewing

franchising decisions to the courts means an agency

has more, not less, authority. Reading a provision

for court review as a per se indicator of ambiguity

under Chevron also denies the obvious: Congress

may provide for court review (as here) because it

wishes to have the courts resolve disputes on a case-

by-case basis, and with due regard for the important

federalism interests at stake. This Court should

grant this Petition to clarify that a_ statute’s

inclusion of a standard for judicial review does not in

and of itself mean a statute is ambiguous under

Chevron. Had the Sixth Circuit applied standard

statutory tools of construction instead of the per se

rule, it would have concluded that Section 621(a)(1)

In context 1s not ambiguous

In appiying Step 2 of Chevron, the Sixth

Circuit rejected application of traditional analytical

tools that this Court has repeatedly applied in

administrative contexts. The result is an Order that

squeezes into the words “unreasonably refuse” a host

of substantive requirements inconsistent with the

Cable Act’s basic structure and plain language. For

example, the Sixth Circuit upheld the FCC’s rule

deeming local franchises granted as a “reasonable”

interpretation of Section 621(a)(1)’s instruction that

a “franchising authority” shall not “unreasonably

refuse to award a franchise” — while ignoring other

provisions reserving franchising authority to state

and local governments. See, e.g., 47 U.S.C. § 522(9)-

(10).

Finally, the Order makes clear that the

agency would not have adopted any rules but for its

finding that there were significant local abuses of

the franchising power. The Sixth Circuit recognized

that this finding had to be supported by substantial

evidence. Pet. App. 49a. Under Universal Camera

Corp. v. NLRB, 340 U.S. 474, 488 (1951), the Sixth

Circuit therefore was obligated to review the FCC’s

finding taking into account not just the evidence that

supported the agency, but also the evidence that

detracted from the agency’s conclusions. Instead,

the Sixth Circuit simply considered whether there

was evidence in the record to support the FCC’s

conclusion — precisely the test rejected in Universal

Camera. The Court should grant this Petition to

prevent the Sixth Circuit’s misreading of Universal

Camera from justifying intrusions into the local

franchising process.

I. Certiorari Should Be Granted To Restore

the Franchising Balance Struck by

Congress in the Cable Act.

A. The Act Is Not Silent As to Where

Franchising Authority Resides.

The Sixth Circuit’s conclusion that Section

621(a)(1) is “silent” as to the FCC’s role “in the

process of awarding cable franchises,” (Pet. App.

19a), is correct in one sense: the FCC is not

mentioned in Section 621(a)(1). But the Act is rar

from silent as to who is to award franchises and

control the franchising process. The definitions of

“franchise” and “franchising authority,” supra at 4,

recognize state and local governments as the only

cable franchising authorities for state and local

property. The legislative history, quoted above, is

exceedingly clear that this division was intended,

supra 4-6.

No other provision of the Communications Act

gives the FCC authority to issue franchises for state

and local property or to control the franchising

process, explicitly or impliedly. Section 152 states

that the provisions of the Act apply to

“communications by wire” and to “persons engaged

in. . . such communication,” and further provides

that the provisions of the Act apply to cable service,

to persons engaged in providing cable service, and to

the facilities of cable operators “as provided in Title

VI,” the Cable Act. 47 U.S.C. § 152(a). Provisions of

Title II that permit the FCC to set rates and terms

and conditions for access to rights-of-way specifically

exempt municipal rights-of-way from FCC control.

47 U.S.C. § 224 (FCC authorized to set rates, terms

and conditions for access to utility rights-of-way, but

not municipal rights-of-way).4 The Sixth Circuit’s

decision is inconsistent with these explicit

provisions.

Moreover, implying an FCC power to deem

franchises granted and control the franchising

process is particularly troubling because Congress’s

careful division of authority over cable systems

between the state and federal governments has an

important constitutional dimension. As the Fifth

Circuit recognized, even in the absence of the Cable

Act, state and local governments possess the

authority to issue franchises because cable systems

require permission to use sovereign property. City of

Dallas v. FCC, 165 F.3d at 348. As the Fifth Circuit

also recognized, but as the Sixth Circuit did not, the

Cable Act affirms this pre-existing state and local

authority by requiring operators to obtain franchises

4 The Commission long ago conceded tha*+ its authority to

regulate “communications by wire” does not carry with it the

authority to regulate the property used in connection with

those communications, including public rights-of-way. Jn re

Cal. Water & Tel. Co., 40 Rad. Reg. 2d 419 at 4 15 (1977).

Section 224 was added to the Communications Act after the

FCC advised Congress that it did not have authority to

regulate the property of third parties without an affirmative

Cengressional grant.

before operating a cable system. An alternative

approach, uner which the federal government

issued franchises authorizing private parties to use

and occupy state and local property, would obviously

raise Fifth Amendment issues. U.S. Const. amend.

V; Loretto v. Teleprompter Manhattan CAT'V Corp.,

458 U.S. 419 (1982) (cable system’s occupancy of

property a per se taking). On the other hand,

directing state and local governments to grant

franchises (and thereby enter into bilateral

contracts) for use of state and local property would

raise significant Tenth Amendment issues. US.

Const. amend. X. “[T]he Constitution has never been

understood to confer upon Congress the ability to

require the States to govern according to Congress’

instructions.” New York v. United States, 505 U.S.

144, 162 (1992). In other words, the Cable Act does

not merely offer states and localities a choice to

regulate in accordance with federal standards, or to

forego regulation altogether and leave the regulation

to federal authorities. Instead, the Cable Act

recognizes the independent and sovereign powers of

the state and local governments and leaves cable

franchising authority with states and _ local

governments. The Sixth Circuit’s failure to

recognize this constitutional dimension led it to

imply FCC authority where none can be implied.

The Sixth Circuit's Reading of the

Cable Act As Empowering the FCC To

Control the Franchising Process and To

Deem __Local_ _Franchises__ Granted

Conflicts with Decisions of this Court

and Other Courts of Appeals.

Taking the structure of the Cable Act into

account, as this Court’s precedents require, the Fifth

Circuit concluded that the reservation of franchising

authority to localities prevents the FCC from

preempting local franchising authority. City of

Dallas v. FCC, 165 F.3d 341, 345-46 (5th Cir. 1999)

In 1996, Congress amended the Communications Act

to permit companies to provide video services via

open video systems (“OVS”) that = shared

characteristics of cable systems and common carrier

systems. ‘To foster development of video competition

and reduce the regulatory burdens on OVS,

Congress eliminated the _ federal franchise

requirement that applied to cable systems, 47 U.S.C.

§ 573(c)(1)(C). The FCC proceeded to preempt local

and state franchising requirements with respect to

OVS, finding those requirements interfered with

Congress’s OVS goals. The FCC concluded that the

federal issuance of an OVS certificate provided

sufficient authority for an OVS operator to occupy

state and local streets and rights-of-way — in effect,

deeming its own authorization a substitute for a

local franchise. The Fifth Circuit overturned the

rule, holding that:

[F]ranchising authority does not depend

on or grow out of § 621. While § 621

may have expressly recognized the power

of localities to impose franchise

requirements, it did not create that

power, and elimination of § 621 for OVS

operators does not’ eliminate local

franchising authority.

165 F.3d at 348. Section 621 thus recognizes

franchising authority — it does not create it, or

convey local franchising authority to any other

entity. Yet, here, the FCC finds its own authority

rooted in Section 621(a)(1) and proceeds to deem

local franchises granted and determine the times for

actions and procedures that local authorities must

follow. When the Sixth Circuit affirmed the FCC

rules, it put itself at odds with the — explicit

provisions of the Cable Act, the decision of the Fifth

Circuit in Dallas, as well as the decisions of this

Court and other courts which recognize that the

franchising power over state and local government

property resides with states and localities, not the

federal government.®

C. Granting the Petition Is Appropriate To

Restore the Division of Authority

Required by the Cable Act, the

Constitution, and Other Courts.

This Court should grant the Petition in light

of the conflicts between the Sixth Circuit’s decision,

the Cable Act, and the decisions of this and other

5 See, e.g., City of New York v. FCC, 486 U.S. 57 (1988); NCTA

v. FCC, 33 F.3d 66, 68-69 (D.C. Cir. 1994)

courts. Granting the Petition is particularly

appropriate in hght of the _ constitutional

implications of the FCC’s decision. This case raises

even more starkly the concerns of members of this

Court in similar settings. For example, under the

reasoning of the Sixth Circuit, the Cable Act “could

be said to confer on federal agencies ultimate

decision-making authority, relegating States to the

role of mere provinces or political corporations,

instead of coequal sovereigns entitled to the same

dignity and respect.”. Alaska Dept. of Envitl.

Conservation v. EPA, 540 U.S. 461, 518 (2004)

(Kennedy, J., dissenting). The intent of Congress in

the Cable Act was clear — and the FCC’s assertion of

ultimate franchising authority cannot be squared

with it. This Court should grant the Petition to

restore Congress’s division of authority.

II. Certiorari Is Appropriate To Clarify That

Section 201(b) Does Not Authorize the

FCC To Exercise Franchising Authority

or To Control] the Franchising Process.

The Sixth Circuit concluded that this Court’s

decision in AT&T Corp. v. Jowa Utilities Board, 525

U.S. 366 (1999), compelled it to find that 47 U.S.C. §

201(b) empowers the FCC to deem local franchises

granted and to otherwise regulate the franchising

process by defining what it means to “unreasonably

refuse” a request for a second franchise. Pet. App.

20a.

The court's conclusion is rooted in a

significant, and potentially far-reaching, misreading

of AT&T. Section 201(b) provides that the FCC may

adopt regulations necessary in the public interest to

carry out the “provisions of this Act.” 47 U.S.C.

§ 201(b). In AT&T, the Court considered whether

Section 201(b) authorized the FCC to adopt

regulations regarding the common = carricr

interconnection and unbundling provisions at 47

U.S.C. §251, which was added to the

Communications Act by the Telecommunications Act

of 1996. The Court first endorsed Justice Breyer’s

view that the FCC’s power to rely on Section 201(b)

to implement a later enacted amendment “depends

upon what that later enacted statute contemplates,”

525 U.S. at 420 (concurring in part, dissenting in

part) — a proposition the Court found to be

“assuredly true.” Jd. at 378 n.5. The Court then

proceeded to assess what the later’ statute

“determined,” and did so, in part, by focusing on the

provision’s “insertion” into the Communications Act

of 1934 which, given the nature of the provision at

issue, clearly brought Section 251 within the ambit

of the FCC’s authority. See also id. (noting that

Section 251(1) demonstrates Congress’s awareness of

Section 201(b) by referring to that section).

While “insertion” may be a strong indicator of

Congress’s intent to provide the FCC jurisdiction to

regulate, AT&T never suggests that it is controlling

in and of itself, regardless of what other provisions of

the Act say. The controlling factor is Congress’s

6 The Court has later cited AT&T in cases where FCC

jurisdiction was not directly at issue. In NCTA v. Brand X

Internet Servus., 545 U.S. 967, 980 (2005), the Court cited

intent, as determined applying traditional rules of

statutory interpretation.

Recognizing this paramount rule, this Court

has recently emphasized that the scope of the

Commission’s remedial authority under Section

201(b) must- be read in light of its “traditional,

historical subject matter” — common carriers. Global

Crossing Telecomms., Inc. vu. Metrophones

Telecomms., Inc., 550 U.S. 45, 127 S. Ct. 15138, 1523

(2007).7 The Sixth Circuit decision recognizes no

AT&T, but “no one question[ed]” the FCC’s jurisdiction. In

2006, the Court again cited AT&T in describing the

Communications Act as an example where “the statute gives an

agency broad power ...” Gonzales v. Oregon, 546 U.S. 243, 258-

59 (2006).

7 Global Crossing does not indicate whether the holding

extends only to the Commission’s exercise of remedial authority

under Section 201(b), or whether the limitation applies more

broadly to all regulations adopted pursuant to Section 201(b).

Section 201(b) has generally been applied in cases that involve

common carriers, or that raise issues that implicate common

carrier regulation. Reading Section 201(b) to apply regardless

of the nature of the issue before the agency is problematic.

First, such a reading renders Sections 303(r) and 4(i)

superfluous at best. The better approach is not to read these

provisions as redundant, but as referring to FCC authority over

different topics. Second, the reading requires the courts to

ignore the limitations on the FCC’s authority in Section 152

(requiring cable to be regulated as provided in Title VI) and in

Section 621(c) (cable systems may not be regulated as a

common carriers). Third, this reading ignores the legislative

history, which shows that the 1938 amendment that inserted

Section 201(b) into the Act was not designed to delegate

plenary rulemaking power to the FCC. 83 Cong. Rec. 6291

(1938) (statement of Sen. White). The Global Crossing

such distinction. Instead, it permits the FCC to

exercise its remedial authority to deem franchises

granted, directly contrary to the language of Section

602(10) (defining franchising authority) and Section

621(a)(3) (requiring operator to obtain a franchise

from a franchising authority). The Sixth Circuit

more generally concludes that the mere insertion of

the Cable Act into the Communications Act gives the

FCC authority to control the franchising process

notwithstanding Section 152 of the Act, which

provides that cable is to be regulated “as provided in

Title VI.” We are not aware of any other decision

that finds that through Section 201(b) (or any other

provision) Congress delegated franchising power to

the FCC over cable television, or over local

governments and their property.

The proper approach is illustrated by the D.C.

Circuit’s decision in Accuracy in Media, Inc., v. FCC,

021 F.2d 288 (D.C. Cir. 1975). There, the court of

appeals considered the FCC’s authority to enforce

Section 396(g)(1)(A) of the Communications Act

against the Corporation for Public Broadcasting

(“CPB’). Under the Sixth Circuit’s “insertion

controls” rule, the FCC would have jurisdiction over

the CPB, because Congress inserted Section 396 into

the Communications Act. Public

Telecommunications Financing Act of 1978, Pub. L.

No. 95-567, § 301, 92 Stat. 2405 (1978). However,

the D.C. Circuit analyzed Congress’s intent and

limitation avoids these problems; the Sixth Circuit decision

highlights them.

ruled otherwise. The D.C. Circuit noted that

another provision, Section 398, instructed that

“nothing in the 1962 or 1967 Acts ‘shall be deemed . .

. to authorize any... agency... of the United States

to exercise any direction, supervision or control over

educational television or radio broadcasting, or over

the Corporation or any of its’ grantees. or

contractors.” 521 F.2d at 292 (quoting 47 U.S.C.

§ 398(b)). The D.C. Circuit further explained that

finding FCC jurisdiction over the CPB would

constitute a “radical extension of the FCC’s basic

jurisdictional grant.” Id. at 293. As the court put it:

“no case has ever permitted, and the Commission

has never, to our knowledge, asserted jurisdiction

over an entity not engaged in “communication by

wire or radio,” at least absent specific Congressional

authorization. Jd.

This Court should clarify that AT&T does not

dictate that “insertion into the Act” is a replacement

for traditional statutory interpretation tools in

assessing the scope of the FCC’s jurisdiction.

Applying those tools, the Court should make clear

that neither Section 201(b) nor any other provision

of the Communications Act grants the Commission

authority to deem local franchises granted, or to

otherwise control the conduct of the franchising

process.

The Court Should Grant Certiorari To

Review the Sixth Circuit's

Misapplication of Chevron.

Even if the FCC had the power to “carry out

the provisions of’ Section 621(a)(1) per Section

201(b), it does not follow that under Chevron USA vu.

NRDC, 467 U.S. 837 (1984), the agency may

interpret “unreasonably refuse” to deem franchises

granted, regulate the local franchising process, or to

otherwise adopt the rules it did. ‘To upnold the

FCC’s regulations, the Sixth Circuit adopted a per se

rule that turns this Court’s Chevron teachings on

their head: that when Congress explicitly provides

for court review, it creates a substantive “gap” that

an agency may fill with regulations. The court

further compounded the problem by finding FCC

rules “reasonable” that are inconsistent with the

structure of the Cable Act. ‘These errors justify

granting the Petition.

The Sixth _ Mistakenly

Concluded that Section 621(a)(1) Was

“Ambiguous.”

l. The Sixth Circuit Erred = in

Concluding That Section

621(a)(1) is Ambiguous Because

[It Provides for Court Review.

The Sixth Circuit effectively concluded that

Congress shifted authority over local franchising

from local governments to the FCC and created a

gap for the agency to fill when it amended the Cable

Act in 1992 to prohibit localities from “unreasonably

dnd 4

refus[ing]” to issue a franchise and to provide for

court review of that determination Yhe Sixth

Circuit concluded that amendment was necessarily

“vague because:

[P]rovision of judicial review as a means

to monitor a given LFA’s compliance

with section 621(a)(1) suggests that it is

not instantaneously apparent whether a

refusal to grant a prospective

franchisee’s application is necessarily

reasonable or not. The legislative

decision to delegate to jurists the task of

construing and_~ enforcing — section

621(a)(1)’s insistence on reasonableness

suggests that the statutory phrase at

issue is capable of multiple meanings.

To choose between these _ several

meanings, courts will have to engage in

fact-finding and uncover the

particularities of the case at hand

Pet. App. 30a. It followed that the term left broad

room for agency action

This per se rule represents a fundamental

misapplication of Chevron that this Court should

correct. Under Chevron, a court applies traditional

statutory tools to determine whether Congress left a

yap for an agency to fill — that is, whether a statute

leaves an ambiguity that Congress intended the

agency to fill through regulation. If after applying

traditional interpretative tools, a court “ascertains

that Congress had an intention on the precise

question at issue, that intention is the law and must

be given effect.” Chevron, 467 U.S. at 843 n.9

(internal citations omitted).

To determine whether a statute is ambiguous,

a court looks to the plain language of the statutory

text itself, as well as dictionarics and legislative

history where necessary. See, e.g., Dunn v. CFTC,

519 U.S. 465, 470 (1997) (consulting legislative

history, treatises, and Black’s Law Dictionary to

interpret statute); Estate of Cowart v. WNicklos

Drilling Co., 505 U.S. 469 (1992) (examining

legislative history of long-shore’ statute and

employing canons of statutory construction).

Moreover, “laJmbiguity is a creature not of

definitional possibilities but of statutory context.”

Brown v. Gardner, 513 U.S. 115, 118 (1994) (citing

King v. St. Vincent's Hosp., 502 U.S. 215, 221

(1991)). A court must look to the particular

statutory language at issue, as well as the language

and design of the statute as a whole. K Mart Corp.

v. Cartier, Inc., 486 U.S. 281, 291 (1988).

The court’s conclusion that a phrase is

“ambiguous” or “vague” within the meaning of

Chevron merely because Congress provides for case-

by-case court review is inconsistent with that

approach. See, e.g., Adams Fruit Co. v. Barrett, 494

U.S. 638, 650 (1990). That courts may come to

different legal conclusions based on different facts

does not mean the underlying standard for review is

ambiguous; it simply means that the outcome may

change based on the facts. Further, manufacturing

a “gap” for an agency to fill from a judicial review

provision seems odd at best. It is especially

inappropriate here, where the legislative history oi

the Cable Act makes it clear that Congress intended

for what is “reasonable” or “unreasonable” to vary

case-by-case and community-by-community. The

Sixth Circuit’s view that Congress’s decision to

assign disputes to the courts under Sections 621(a)

and 635(a) serves to expand FCC authority so that

the FCC may define at the national level what may

be included in franchises necessarily frustrates,

rather than effectuates, this Congressional intent.

The Sixth Circuit’s approach also violates this

Court’s teaching that it is not appropriate to assume

an agency has been granted broad authority where,

as here, to do so would create _ significant

constitutional and federalism questions. See, supra,

Part I.A. As this Court recognized in Solid Waste

Agency of Northern Cook County v. U.S. Army Corps

of Engineers, 531 U.S. 159 (2001), a clear grant of

authority to the administrative agency is required

where an agency’s proposed interpretation of a

standard would “result in a significant impingement

of the States’ traditional and primary power over

land and water use.” Jd. at 174. The provision of

court review in the Cable Act can by no means be

viewed as such a clear grant.

In Context, Section 621(a)(1) Is Not

Ambiguous and Leaves No Gap for the

FCC To Fill.

Had the Sixth Circuit properly analyzed

Section 621(a)(1) in light of the principles above, it

would have found that the provision leaves no room

for FCC “implementation.” Section 621(a)(1) sets up

a complete process under which a locality makes the

determination as to whether a franchise should or

should not be granted, with court review available

under Section 635. As Congress contemplated, the

statute allows for assessment of needs by localities

on a case-by-case basis, and an evaluation of the

decision in light of local facts, rather than providing

for establishment of “one-size-fits-all” franchise

terms by the FCC.

Moreover, read in this context, the term

“unreasonably refuse” is not ambiguous in any

relevant sense. Rather, it defines the standard for

court review — a standard similar to standards that

the Sixth Circuit has had little trouble applying in

other cases. Section 626(c)(1)(D) of the Act permits a

locality to deny renewal if it determines that an

operator fails to submit a proposal “reasonable to

meet the future cable-related needs and interests.”

In Union CATV v. City of Sturgis, 107 F.3d 434,

440-441 (6th Cir. 1997), the Sixth Circuit concluded

that what is “reasonable” is determined by balancing

competing needs at the local level. This does not

lead, as the Sixth Circuit reasoned here, to an ad hoc

determination of reasonableness by the courts. Pet.

App. 30a. Rather, because “[t]he granting of a cable

franchise is a legislative act traditionally entitled to

considerable deference .. . [n]othing in the Cable Act

suggests that Congress intended to eliminate judicial

deference to a municipality's legislative acts.” Union

CATV, 107 F.3d at 441. Which is to say: courts are

to review municipal decisions tor “reasonableness” or

“unreasonableness” in much the same way that they

review administrative decisions.

C. Even Assuming the FCC Had Authonity

To Implement Section 621(a)(1),_ It

Could Not Do So in a Manner

Inconsistent with the Act.

The Sixth Circuit also erred at Step Two of

Chevron. As this Court explained in Ragsdale v.

Wolverine World Wide, Inc., 535 U.S. 81, 91 (2002),

even where an agency has some _ interpretive

authority, and no matter “how serious the problem

an admunistrative agency seeks to address” the

agency “may not exercise its authority in a manner

that is inconsistent with the administrative

structure that Congress enacted into law.

In determining whether an agency action is

consistent with a statute’s structure, a reviewing

court must again apply traditional tools of statutory

interpretation. Here, the Sixth Circuit expressly

abandoned those tools. Petitioners pointed out, inter

alia, that where Congress intended to establish

deadlines for local action, it expressly established

them in the Cable Act. See, e.g., 47 U.S.C. § 537 (120

days to approve transfer request); 47 U.S.C. § 545(b)

(120 days to approve franchise modification). Had

the Sixth Circuit applied the traditional interpretive

doctrine of “expressio unius est exclusio altertus,” in

light of the Act’s general reservation of franchising

to localities, it should have concluded that the

Congressional silence in Section 621(a)(1) indicated

Congress intended to leave the timing of the

franchising process to localities. The Sixth Circuit,

relying upon a D.C. Circuit case, concluded that the

doctrine had no application in an administrative

context; and therefore Congress’s silence with

respect to deadlines in Section 621 meant Congress

intended to have the FCC set deadlines. Pet. App.

34a.

The Sixth Circuit’s rejection of expressio unius

conflicts with this Court’s application of the doctrine

to bar an agency’s claim of Chevron authority under

a statute. City of Chicago v. Envtl. Def. Fund, 511

U.S. 328, 338-39 (1994). While the doctrine does not

always control, Chevron U.S.A. Inc. v. Echazabal,

536 U.S. 73, 79-87 (2002), this Court has not rejected

the canon, but instead applies it in the context of the

statutory scheme as a whole. In this respect, the

Sixth Circuit’s decision also conflicts with the D.C.

Circuit decision on which it relied. The D.C. Circuit

has required a complete analysis of the interplay of

the two doctrines:

True, we have rejected the canon in some

administrative law cases, but only where

the logic of the maxim . . . simply did not

hold up in the statutory context.

Indep. Ins. Agents of Am., Inc. v. Hawke, 211 F.3d

638, 644 (D.C. Cir. 2000) (internal citations omitted).

The Sixth Circuit’s approach cannot be squared with

the decisions of this Court, or even the decisions on

which it relied.

The problems with the Sixth Circuit’s decision

extend beyond the failure to take the expressio unius

doctrine into account. It is implausible that in a

statute that carefully divided authority among levels

of government, Congress buried within the phrase

“unreasonably refuse” the power for the FCC to

radically transform the local franchising process. In

those two words, the FCC unearths the following

powers over local governments and their property:

The FCC assumes the power to deem a local

franchise granted, in direct conflict with the

Cable Act’s careful definitions of who is a

“franchising authority,” and who may issue

“franchises.”

The FCC establishes deadlines for local

action, and preempts public hearing and

other processes to the extent these processes

would prevent a locality from meeting the

Commission’s deadlines. Pet. App. 141a,

4] 67; id. 150a, § 73. The local processes the

FCC preempted are significant means by

which a local or state legislature gains the

“understanding of local communications

needs’ that allows it to tailor requirements to

local needs. H.R. Rep. No. 98-934, at 24, 1984

U.S.C.C.A.N. at 4661. A rule that limits local

ability to determine needs is inconsistent

with an Act that is focused on Iecal needs.

The FCC rules that a local community cannot

establish requirements for public, educational

and government access that are more

burdensome than those imposed on the

incumbent. Pet. App. 19la, 4114. But

franchise agreements are issued for long

terms. To “tailor” requirements to “needs and

interests,” the Cable Act plainly intends that

localities will look forward to assess what is

“adequate” in the future. However, the FCC

compels localities to look backward,

effectively locking in the assessment of PEG

“needs” embodied in a dated franchise

agreement.

Although the Act permits localities to recover

costs “incidental to” the awarding and

enforcing of a franchise in addition to

collecting a franchise fee, 47 U.S.C.

§ 542(g)(2)(D), the FCC rules that consultant

and attorney costs need not be incurred by a

local authority in connection with the grant of

a local franchise, and so are not “incidental”

costs within the meaning of the Cable Act.

Pet. App. 176a, { 99. The Act specifically

cont:>~plates that localities may need to

conduct expert studies as part of the

franchising process, H.R. Rep. No. 98-934,

1984 U.S.C.C.A.N. at 4711-12 (surveys may

be important in establishing community

needs), and it is disingenuous to suggest that

legal help is not needed to review and comply

with an FCC Order that is more than 100

pages long. The FCC effectively requires

localities to use franchise fees to defray

regulatory costs, which it may not do under

47 U.S.C. § 542(h).§

These inconsistencies justify granting the

Petition. There is, in addition, a broader

inconsistency that pervades the Order and that

requires this Court’s review. As shown in the

Statement of the Case, the FCC’s decisions were

bluntly driven by its dissatisfaction with the delays

it believed were inherently caused by a franchising

process rooted in “reasonable” local decisions.2? But

that ts the process Congress adopted. By replacing

Congress’s choice with a list of substantive federal

rules, the FCC has not permissibly implemented the

words “unreasonably refuse,” because Congress

intended reasonableness of franchise requirements

to be assessed on a case-by-case basis, through a

local process. In a similar case, where the Secretary

of Labor had the power to adopt regulations

8 The FCC’s analysis of “incidental to” also suffers from a

Chevron Step One problem — it is inconsistent with the plain

language of the Act. The FCC found that a list of examples of

“incidental” costs was effectively exhaustive, and that the term

“incidental” means “small” as opposed to “in connection with.”

Only the latter makes linguistic sense.

9 See Part IV, infra.

“necessary to carry out” an Act, 29 U.S.C. § 2654, the

Court rejected a remedy that the Secretary believed

would be superior to a “fact-specific inquiry.”

Ragsdale v. Wolverine World Wide, Inc., 535 U.S. 81,

91 (2002). The Court explained that the Secretary

could not, indirectly by regulation, resolve issues

that Congress had directly left for the courts to

resolve on a case-by-case basis:

By its nature, the remedy created by

Congress requires the retrospective, case-

by-case examination the Secretary now

seeks to elisinate. .. . Though the

Secretary could not enact’ rules

purporting to make these kinds of

determinations for the courts, fits rulc]

has this precise effect. 1°

Id. (internal citations omitted). The rules here are

equally objectionable

10 Prios to 1992, Section 635, 47 U.S.C. § 555, specified the

remedy available to operators where an LFA denied a request

for modification or renewal: it provided for case-by-case court

review. The 1992 amendments that are the subject of this

Petition expanded this remedy; that a cable operator whose

request for an initial franchise wa: denied could also obtain

court review. Reading the 1992 amendments to grant the FCC

powers to grant franchises and establish franchise terms is

inconsistent with this pre-existing remedial scheme, and

cannot be squared with Ragsdale.

Certiorari is Appropriate In Light of the

Sixth Circuit’s Failure To Conduct the

Analysis Required By Universal Camera.

The Order makes clear that the decision to

impose rules on local governments was dependent

upon agency’s finding that local governments were

abusing the franchising process and delaying

competitive entry. Pet. App. 60a, § 4. However, the

Sixth Circuit failed to conduct the analysis required

by this Court’s precedents to determine whether that

conclusion was supported by the record.

Universal Camera Corp. v. NLRB, 340 U.S.

474, 488 (1951), requires a court reviewing the

substantiality of the evidence before the agency to

“take into account whatever in the record fairly

detracts from its weight.” This standard was

embodied statutorily in the Administrative

Procedure Act to prevent agencies from adopting

rules by pointing to evidence that supported the

desired conclusion, while ignoring that which

undercut it. Jd. at 478 (irresponsible weighing of

evidence was thougnt to create “serious menace’).

There was reason to carefully review the

record in this case. Dissenting Commissioner

Ade!stein noted that “the majority simply accepts in

every case th.t the phone companies are right and

the local governments are wrong, all without

bothering to examine the facts behind these

competing claims, or conducting any independent

fact-finding.” Pet. App. 298a.

The Sixth Circuit, nonetheless upheld the

FCCs finding because it concluded that there was

evidence supporting the agency’s finding. Pet. App.

5la. This is the test Universal Camera rejected.

Had the court of appeals conducted the necessary

analysis, it would have discovered that the FCC

failed to weigh evidence contrary to its conclusions,

just as Commissioner’ Adelstein = suggested.

Particularly given the impact of the FCC rules on

he local franchising process and _ franchising

officials, it 1s appropriate for this Court to grant

certiorari, and to require that the record be analyzed

under the proper standard.

CONCLUSION

For the foregoing reasons, the petition for a

writ of certiorari should be granted.

Respectfully submitted,

JOSEPH VAN EATON

Counsel of Record

FREDERICK EK. ELLROD ill]

MATTHEW K. SCHETTENHELM

MILLER & VAN EATON, PLLC

Suite 1000

1155 Connecticut Avenue, N.W.

Washington, DC 20036

(202) 785-0600

RONALD K. CHEN

Public Advocate

STEFANIE A, BRAND

Director

CHRISTOPHER J. WHITE

Deputy Public Advocate

Division of Rate Counsel

31 Clinton Street, 11“ Floor

P.O. Box 46005

Newark, NJ 07101

(973) 648-2690

February 10, 2009

APPENDIX

APPENDIX A

Opinion of the United States Court of Appeals

for the Sixth Circuit (June 27, 2008)

Nos. 07-3391/3569/ 3570/ 3571/ 3572/3573/

3574/3673/ 3674/3675/ 3676/3677/ 3824

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

Alliance for Community Media, et al.,

Petitioners,

State of Hawaii; City and County of San Francisco;

National Cable & 'Telecommunications Association,

Inc.; City of New York; City of Milwaukee,

Wisconsin; City of White Plains, New York;

City of Wilmington, Delaware,

Intervenors,

Federal Communications Commission: United

States of America,

Respondents,

Ad Hoc Telecom Manufacturer Coalition; Qwest

Communiations International, Inc.. US'Telecom:

Verizon; AT&T,

Intervenors.

On Petition for Review of an Order of the

Federal Communications Commission.

No. 05-311.

Argued: February 6, 2008

Decided and Filed: June 27, 2008

Before: SUHRHEINRICH, COLE, and CIBBONS,

Circuit Judges.

OPINION

R. GUY COLE, JR., Circuit Judge. Following a

notice-end-comment rulemaking procedure, the

Federal Communications Commission (“FCC,”

“Commission,” or “the agency’) released an order

(“the Order’) adopting rules interpreting and

implementing section 621 (a)(1) of the

Communications Act of 1934 (“the Act’), 47 U.S.C.

§ 541(a)(1), which prohibits’ local franchising

authorities from “unreasonably refus[ing] to award”

competitive cable franchises. The FCC released the

Order on March 5, 2007 on the basis of record

evidence that the operation of the local franchising

process was unreasonably impeding competitive

entry into the cable television market. A summary of

the Order was subsequently published in the Federal

Petitioners and _ intervenors, consisting

primarily of various local franchising authorities

(“LIFAs”), their representative organizations, and the

“2s

incumbent cable industry’s trade association, request

us to reverse the FCC’s decision and declare the

Order void in its entirety, asserting that the FCC

lacks the requisite authority to promulgate the Order

and, in the alternative, that the FCC’s interpretation

is not entitled to deference and is arbitrary and

capricious. For the following reasons, we find that

the FCC acted well within its statutorily delineated

authority in enacting the Order and that there exists

sufficient record evidence to indicate that the FCC did

not engage in arbitrary-and-capricious rulemaking

activity. Accordingly, we DENY the petitions for

review.

I. BACKGROUND

A. Factual Background

Given the complexity of the regulatory regime at issue,

we begin by tracing the historical evolution of cable

regulation and the role of the FCC therein. The

public at large first obtained access to cable

television in the 1950s. See generally City of Dallas,

Tex. v. FCC, 165 F.3d 341, 345-46 (5th Cir. 1999)

During this first decade in which cable television

was publicly available, the FCC abstained from

regulating in this arena because it believed it lacked

the authority to do so under existing statutory

provisions. Jd. at 345. By the mid-1960s, however,

cable television had proliferated to such a degree that

the FCC determined that it must regulate cable

franchises in order to carry out its statutory duty to

oversee all forms of broadcasting on behalf of the

public interest. [d. The Supreme Court subsequently

affirmed the FCC’s regulatory authority over cable

television, holding that the agency was authorized to

issue rules that were “reasonably ancillary to the

effective performance of the Commission’s various

responsibilities for the regulation of television

broadcasting.” United States v. Southwestern Cable

Co., 392 U.S. 157, 178 (1968).

Regulation of cable services did not fall entirely

on the shoulders of the FCC, however. Municipalities,

or LFAs, also exerted an interest in regulating the

cable medium. See generally American Civil Liberties

Union v. FCC, 823 F.2d 1554, 1558 (D.C. Cir. 1987).

Specifically, they retained discretion to decide

whether to grant cable franchises to applicants in

their communities. Id. at 1558. As part of this

negotiation process, cable operators frequently agreed

te perform various activities on behalf of the public

interest in exchange for a franchise. Jd.

Given the overlapping jurisdiction of the FCC

and the municipalities, in 1972 the agency issued a

report to delineate the contours of its jurisdiction

vis-a-vis the LFAs. Cable Television Report and

Order, 36 F.C.C. 2d 143, on reconsideration, 36 F.C.C.

2d 326 (1972), affd sub. nom. Americon Civil Liberties

Union v. FCC, 523 F.2d 1344 (9th Cir. 1975). In this

report, the agency carved out a_e system of

“deliberately structured dualism.” Jd. Within this

binary regulatory regime, “state or local government

issued franchises while the FCC exercised exclusive

authority over all operational aspects of cable

communication, including technical standards and

signal carriage.” National Cable Television Ass’n v.

FCC, 33 F.3d 66, 68-69 (D.C. Cir. 1994) (internal

quotations omitted).

This was the. state of the cable

communications market until 1984. At this time,

approximately twenty years following the FCC’s foray

into the cable television market, Congress conveyed

its input for the first time through passage of a

legislative amendment to the Communications Act},

entitled the Cable Communications Policy Act of

1984, Pub. L. No. 98-549, 98 Stat. 2779. The 1984 Act

was a response to the “illdefined [sic] ... state of

regulatory uncertainty” resulting from the overlapping

authority of the FCC and municipalities. American

Civil Liberties Union, 823 F.2d at 1559.

Accordingly, the legislation enlarged the

Communications Act by inserting Title VI

provisions governing the operation of cable

providers and franchises. The purpose of these

provisions was to “establish[] a national policy that

clarifie[d] the current system of local, state and

federal regulation of cable television” and _ to

“continue[] reliance on the local franchising process as

the primary means of cable television regulation,

while defining and limiting the authority that a

franchising authority may exercise through the

“The Communications Act of 1934, Pub. L. No.73-416, 48

Stat. 1064 .... grants the FCC broad authority to regulate all

aspects of interstate communication by wire or radio.” American

Civil Liberties Union v. FCC, 823 F.2d 1554, 1557-58 (D.C. Cir.

1987).

franchise process.” H.R. Rep. No. 98-934 at 24. Thus,

the regulatory guidelites incorporated into Title VI

aimed to “both . . . reliev[e] the cable industry from

unnecessary, burdensome regulation and

ensur[e] that cable systems remain responsive to the

needs of the public.” American Civil Liberties Union,

823 F.2d at 1559. In so doing, the amendments

“balance[d] two conflicting goals: preserv[ing] the

critical role of municipal governments in the franchise

process ... while affirming the FCC’s’ exclusive

jurisdiction over cable service, and overall facilities

which relate to such service.” City of New York v.

FCC, 814 F.2d 720, 723 (D.C. Cir. 1987) (Gnternal

quotations and citations omitted).

As a result of the amendment, when an entity

now chooses to enter the market and offer services

as a “cable operator,”’? it must comply with the

dictates of Title VI. Section 621 of Title VI—the

provision at issue in the instant case—enumerates

various requirements cable operators must follow to

acquire cable franchises. Specifically, subsection (b)(1)

of Section 621, 47 U.S.C. § 541(b)(1), situates the

securing of cable franchises as a mandatory

247 U.S.C. § 542(5) (defining “cable operator” as “any

person or group of persons (A) who provides cable services over

a cable system and directly or through one or more affiliates

owns a significant interest in a cable system, or (B) who

otherwise controls or is_ responsible for, through any

arrangement, the management and operation of such a cable

system.”)

Coad

precondition for providing cable services,? and

subsection (a)(1), 47 U.S.C. § 541(a)(1), authorizes

LFAs to award these franchises.4 By delegating this

task to LFAs, the 1984 Act effectively “preserve[d]

the role of municipalities in cable regulation.” City of

Dallas, Tex., 165 F.3d at 345.

Subsequently, in 1992, Congress once again

weighed in on the regulation of cable television and

clarified the role of LFAs through enactment of the

Cable Television Consumer Protection and

Competition Act, Pub. L.. No. 102-385, 106 Stat. 1460.

Specifically, Congress revised section 621(a)(1) to

codify restraints on the hcensing activities of an LFA

such that it may grant “1 or more franchises within

its jurisdiction; except that a franchising authority

may not grant an exclusive franchise and may not

unreasonably refuse to award an additional competitive

franchise.” (emphasis « ded). Through this

amendment, Congress tu: ier endowed potential

entrants with a judicial remedy by entitling them to

commence an action in a federal or state court

within 120 days after receiving a final, adverse

347 U.S.C. § 541(b)(1) (Except to the extent provided in

paragraph (2) and subsection (f), a cable operator may not

provide cable service without a franchise.”)

447 U.S.C. § 541(a)(1) (stating that a “franchising

authority may award, in accordance with the provisions of this

title, 1 or more franchises within its jurisdiction.”) A

“franchising authority” is defined to encompass “any

governmental entity empowered by Federal, State, or local law

to grant a franchise.” Section 602(10) of the Communications

Act, 47 U.S.C. § 522(10).

decision from an LFA.® It is the legitimacy and

precise import of these restraints that give rise to

the instant controversy.

According to the legislative history, Congress

enacted this amendment in part because the local

franchising requirements provided most cable

subscribers with “no opportunity to select between

competing cable systems.” H.R. Conf. Rep. No. 102-

862, at 55 (1992). Therefore, the purpose of these

constraints was to foster heightened competition in

the cable market:

Based on the evidence in the record taken

as a whole, it is clear that there are

benefits from competition between two

cable systems. Thus, the Committee

believes that local franchising

authorities should be encouraged to

award second franchises. Accordingly,

[the 1992 Cable Act,] as reported,

prohibits local franchising authorities

from unreasonably refusing to grant

second franchises.

S. Rep. No. 102-92, at 13 (1991).

“Any applicant whose application for a_ second

franchise has been denied by a final decision of the franchising

authority may appeal such final decision pursuant to the

provisions of section {635 of the Act] ‘or failure to comply with

this subsection.” 47 U.S.C. § 541(a)(1).

Overall then, the legislators adopted a revised version

of section 621(a)(1) because they “believe[d] that

exclusive franchises are directly contrary to federal

policy . . . which is intended to promote the

development of competition.” H.R. Conf. Rep. No.

102-862, at 77 (1992).

B. Procedural Background

Over a decade following the passage of the

1992 amendments to the Communications Act, the

FCC compiled data suggesting that competition had

yet to materialize as a reality for the cable market. S.

Rep. No. 102-92. To investigate the state of the

cable market, on November 3, 2005, the FCC

adopted a Notice of Proposed Rulemaking (“NPRM”)

and subsequently released it on November 18, 2005.

In the NPRM, the FCC invited comment on

approaches to implementing Section 621(a)(1) of the

Communications Act of 1934. Responding to charges

from potential entrants into the cable marketplace

that “the current operation of the local franchising

process serves as a barrier to entry/,]” the FCC

solicited comment on “whether the franchising

process unreasonably impedes the achievement of the

interrelated federal goals of enhanced _ cable

competition and accelerated broadband deployment

and, if so, how the Commission should act to address

that problem.” Specifically, in issuing the NPRM, the

FCC sought to d°**rmine whether LFAs “are

carrying out legitimate policy objectives allowed by the

{Communications} Act or are hindering the federal

communications policy objectives of increased

10a

competition in the delivery of video programming and

accelerated broadband deployment.”

The FCC further called for comment on

formulating a definition of “what constitutes an

unreasonable refusal to award an_ additional

competitive franchise under Section 621(a)(1).” In

making initial headway toward a definition, the FCC

tentatively concluded in the NPRM that “Section

621(a)(1) prohibits not only the ultimate refusal to

award a competitive franchise, but also the

establishment of procedures and other requirements

that have the effect of unreasonably interfering with

the ability of a would-be competitor to obtain a

competitive franchise.” (JA 475.) In addition to

soliciting comments on the ease of entry into the

cable market, the FCC also tentatively concluded

that it possesses legitimate authority to implement

Section 621(a)(1) “to ensure that the local

franchising process does not unreasonably interfere

with the ability of any potential new entrant to

provide video programming to consumers.” (JA 474.)

After reviewing the “voluminous record”

generated by the rulemaking proceeding, consisting of

“comments filed by new entrants, incumbent cable

operators, LFAs, consumer groups, and others[,]” the

FCC ascertained the need for new rules to ensure

that the local franchising process operated in a fully

competitive fashion, free of barriers to entry. (JA

500.) Accordingly, on December 20, 2006, by a vote of

three to two, the FCC adopted the Order at issue. The

Order was released on March 5, 2007 and became

lla

final on March 21, 2007, when it was published in

the Federal Register. (JA 491-599; 72 Fed. Reg.

13230 (2007).) Attached to the Order was the

dissenting opinion of Commissioner Jonathan 5S.

Adelstein. The thrust of Commissioner Adelstein’s

dissent was that the Order “substitutes [the FCC’s]

judgment as to what is reasonable—or unreasonable—

for that of local officials—all in violation of the

franchising framework established in the

Communications Act.” (JA 586.)

Notwithstanding Commissioner Adelstein’s

dissent, as a threshold matter, the Order first

established the FCC’s “broad rulemaking authority

to implement the provisions of the Communications

Act, including Title VI generally and Section 621(a)(1)

in particular.” (JA 493.) The FCC derived support for

its rulemaking authority from various statutory

provisions, including 47 U.S.C. § 3037), which

empowers the agency to implement “such rules and

regulations . . ., not inconsistent with law, as may be

necessary to carry out the provisions of thie]

[Communications] Act[,]” 47 U.S.C. § 201(b), which

authorizes the FCC to “prescribe such rules and

regulations as may be necessary in the public

interest to carry out the provisions of this Actf[,]”

and 47 U.S.C. § 4), which states that the FCC “may

perform any and all acts, make such rules and

regulations, and issue such orders ... as may be

necessary in the execution of its functions.” (JA

518.) The agency also justified its actions on the

basis that “Congress specifically charged [it] with

the administration of the Cable Act, including Section

12a

621” and that “federal courts have consistently upheld

... [its] authority in this area.” (/d.)

In response to comments from incumbent cable

operators that the judicial review provisions of

sections 621(a)(1) and 635 of the Communications Act

invested the federal courts with exclusive jurisdiction

to interpret and enforce section 621(a)(1), the FCC

explained that the availability of judicial review did

not in any way attenuate its rulemaking authority.

(JA 518-19.) The agency insisted that the “mere

existence of a judicial review provision in the

Communications Act does not, by itself, strip the

Commission of its otherwise undeniable rulemaking

authority.” (JA 519.) “As a general matter,” the FCC

continued, “the fact that Congress provides a

mechanism for judicial review to remedy a violation

of a statutory provision does not deprive an agency of

the authority to issue rules interpreting the

statutory provision.” (/d.)

Upon establishing its broad rulemaking

authority, the FCC then proceeded to address the

merits of the most pressing problems it identified in

the cable franchising process. Based on the factual

record before it, the FCC found that “the current

operation of the franchising process can constitute an

unreasonable barrier to entry for potential cable

competitors, and thus justifies Commission action.”

(JA 500.) The agency opined that “absent

Commission action, deployment of competitive video

services by new cable entrants will continue to be

unreasonably delayed or, at worst, derailed.” (Ud.)

l3a

To avoid such ends and to further the goals of

reducing barriers to entry into the cable market and

facilitating investment in broadband facilities, the

Order codified five rules construing the meaning of

“unreasonable” within section 621(a)(1). First, the

FCC ruled that “an LFA’s failure to issue a decision

on a competitive application within the time frames

specified herein constitutes an unreasonable refusal

to award a competitive franchise.” (JA 493.) The

FCC accordingly delineated two applicable time

frames: ninety days for applicants, such as telephone

companies, with already existing authorizations for

access to rights-of-way, and six months for all other

competitive franchise applicants. As a means of

enforcement, the FCC declared that if an LFA failed

to issue a final decision within the requisite time

frame, the applicant’s proposal would be deemed

granted on an interim basis until the LFA delivered

a final decision.

Second, the FCC ruled that “an LFA’s refusal

to grant a competitive franchise because of an

applicant’s unwillingness to agree to unreasonable

build-out mandates® constitutes an unreasonable

6‘Build-out requirements necessitate that a franchisee

deploy cable services to all households in a given franchise area

within a specified duration. The principal statutory limitation

on the right of LFAs to impose build-out requirements is that

they allow the applicant a reasonable time period to do so. 47

U.S.C. § 541(a)(4)(A). The build-out provisions are intended to

meet community needs and facilitate one of the goals of the

Communications Act, that “cable service is not denied to any

group of potential residential cable subscribers because of the

l4a

refusal to award a competitive franchise.” (JA 493.)

While the agency characterized build-out

requirements as “eminently sensible” under the prior

regime, in which incumbent cable providers were

granted community-wide monopolies, under the

current, competitive regime, these requirements

“make entry so expensive that the prospective

provider withdraws its application and simply

declines to serve any portion of the community.” WA

532-33.) Given the entry-deterring effects of build-out

requirements, the agency exercised its rulemaking

authority to proscribe LFAs from conditioning

franchises on these requirements.

Third, the Order included a ruling regarding

franchise fees. ‘The FCC declared that “unless certain

specified costs, fees, and other compensation

required by LFAs are counted toward the statutory

[five] percent cap on franchise fees, demanding them

could result in an unreasonable refusal to award a

competitive franchise.” (JA 493.) ‘The Order went on

to explain that “a cable operator is not required to

pay franchise fees on revenues from non-cable

services.’ (JA 536.) Similarly, the FCC mandated

that “any requests made by LFAs that are unrelated

to the provision of cable services by a new

competitive entrant are subject to the statutory [five]

percent franchise fee cap.” (JA 539.)

income of the residents of the local area in which such group

resides,” see id., a practice commonly known as “redlining.”

L5a

Fourth, the FCC ruled that while LFAs may

seek assurances from prospective cable operators

that they will provide public, educational, and

governmental (“PEG”) access channel capacity,

“LF As may not make unreasonable demands of

competitive applicants for PEG.” (JA 541.) As an

example of such an unreasonable demand, the FCC

stated that it would be “unreasonable for an LFA to

impose on a new entrant more burdensome PEG

carriage obligations than it has imposed upon the

incumbent cable operator,” (JA 543.) In contrast, the

agency approved a “pro rata cost sharing approach” in

which a “new entrant agrees to share pro rata costs

with the incumbent operator” as “per se reasonable.”

(JA 544.)

Lastly, the FCC clanfied that “the LFA’s

jurisdiction apphes only to the provision of cable

services over cable systems.” (JA 545.) Based on this

limited jurisdiction, the Order characterizes as

“unreasonable” an LFA’s refusal to issue a franchise

based on issues related to non-cable services or

facilities. Ud.) For example, the FCC explained that an

“LFA may not use its video franchising authority to

attempt to regulate a [local exchange carrier’s] entire

network beyond the provision of cable services.” (/d.)

Beyond codifying these five rules, the FCC’s

Order also “preemptied] local laws, regulations,

practices, and requirements to the extent that: (1)

provisions in those laws, regulations, practices, and

agreements conflict with the rules or guidance adopted

in this Order; and (2) such provisions are not

16a

specifically authorized by state law.” (JA 546.)

Despite its preemption of local laws and regulations,

however, the Order declined to preempt state laws,

state-level franchising decisions, or local franchising

decisions “specifically authorized by state law.” (/d.)

The FCC refrained from preemption of state

regulations because it lacked “a sufficient record to

evaluate whether and how such state laws may lead to

unreasonable refusals to award additional competitive

franchises.” (/d.)

In conjunction with the Order, the FCC issued

a Further Notice of Proposed Rulemaking. This

Notice underscored that since the Order

implemented section 621(a)(1), its immediate

applicability was only to applicants’ seeking

“additional competitive franchises,” not to existing

franchisees. (JA 535, 554). Accordingly, the FCC

initiated a second round of rulemaking, “seeking

comment on how [its] findings in [its] Order should

affect existing franchisees” and “on local consumer

protection and customer service standards as applied

to new entrants.” (JA 494, 554-58.)

Following publication of the Order, on April 3,

2007, the Alliance for Community Media (“ACM”), the

National Association of Counties (“NAC”), the

National Association of Telecommunications Officers

and Advisors (“NATOA”), the National League of

Cities (“NLC”), the United States Conference of

Mayors (“USCM”), and Alliance for Communications

17a

Democracy (“ACD”)? (collectively, “petitioners”) timely

filed petitions for review of the Order in courts of

proper venue under 28 U.S.C. § 2343. ACM’s petition

for review typifies the claims of petitioners in

challenging the Order “on the grounds that it exceeds

the FCC’s statutory authority, is arbitrary and

capricious, an abuse of discretion, unsupported by

substantial evidence, in violation of the United

States Constitution ... and is otherwise contrary to

law.” (JA 600-01.) On April 10, 2007, the Judicial

Panel on Miultidistrict Litigation exercised its

authority under 28 U.S.C. § 2112(a) to consolidate the

petitions for review of the Order and randomly

designated this Court to hear the matter. Petitioners

thereafter requested this Court to stay the Order's

applicability pending judicial review, but this Court

denied that request on July 24, 2007.

II. DISCUSSION

A. The FCC’s Authority to Issue the Order

At the outset, petitioners contest the FCC’s

underlying authority to promulgate rules

implementing section 621(a)(1) of the

Communications Act. Petitioners maintain that the

FCC exceeded the bounds of its authority when it

adopted the Order because Congress never explicitly

7ACM, NAC, and NATOA filed petitions for review on

April 3, 2007 with the United States Courts of Appeals for the

Sixth, Third, and Fourth Circuits, respectively. ACD, USCM,

and NLC filed petitions for review on May 17, 2007 with the

United States Court of Appeals for the D.C. Circuit.

18a

or implicitly delegated power to the FCC to interpret

section 621(a)(1). In contrast, the FCC insists that it

undoubtedly possesses the requisite authority to

implement the Order and that petitioners’ argument

“rest[s] on a fundamental misunderstanding of the

statutory scheme.” (Respondent’s Br. 21.)

In support of its jurisdictional argument,

petitioners emphasize that nowhere in the plain

language of section 621(a)(1) does any reference to

the Commission appear. Turning to the text, section

621(a)(1) reads as follows:

(a) Authority to award franchises; public

rights-of-way and easements; equal

access to service; time for provision of

service; assurances

(1) A franchising authority may

award, in accordance with the

provisions of this subchapter, 1 or

more franchises’ within its

jurisdiction; except that a

franchising authority may not

grant an exclusive franchise and

may not unreasonably refuse to

award an additional competitive

franchise. Any applicant whose

application tor a second franchise

has been denied by a final decision

of the franchising authority may

appeal such final decision

pursuant to the provisions of

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section 555 of this title for failure

to comply with this subsection.

47 U.S.C. § 541(a)(1) (emphasis added).

Petitioners are thus correct in noting that, while the

text expressly references franchising authorities, it is

silent as to the agency’s role in the process of awarding

cable franchises. Where petitioners’ argument falls

short, however, is in equating the omission of the

agency from section 621(a)(1) with an absence of

rulemaking authority.

In AT&T Corp. v. lowa Utilities Board, 525

U.S. 366 (1999), the Supreme Court considered a

challenge by state utility commissions and _ local

exchange carriers to local competition rules issued by

the FCC pursuant to the Telecommunications Act of

1996. In considering whether the FCC possessed the

regulatory authority to interpret the provisions of the

Telecommunications Act of 1996 at issue, the Court

hinged its analysis on section 201(b), a 1938

amendment to the Communications Act of 1934.

AT&T Corp., 525 U.S. at 377. Section 201(b) provides,

in relevant part, that “[t}he Commission may prescribe

such rules and regulations as may be necessary in the

public interest to carry out the provisions of this

Act.” 47 U.S.C. § 201(b). The Court reasoned that

“{s]ince Congress expressly directed that the 1996

Act, along with its local-competition provisions, be

inserted into the Communications Act of 1934... the

Commission’s rulemaking authority would seem to

extend to implementation of the local competition

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provisions.” AT&T Corp., 525 U.S. at 377-78. In other

words, AT&T Corp. espoused a plain reading of section

201(b): “We think that the grant in § 201(b) means

what it says: The FCC has rulemaking authority to

carry out the ‘provisions of this Act,’ which include

§§ 251 and 252, added by the Telecommunications

Act of 1996.” Jd. at 378.

We find that the logic of AT&T Corp. controls

the disposition of the jurisdictional argument

petitioners raise here. Just as Congress ratified the

Telecommunications Act of 1996 as an amendment to

be incorporated into the original Communications Act

of 1934, Congress likewise passed the Cable

Television Consumer Protection and Competition Act

of 1992, Pub. L. No. 102-385, 106 Stat. 1460, which

revised section 621(a)(1) to include the bar on

unreasonable refusals to award additional

franchises, as an amendment to the original

Communications Act of 1934. Through this process

of amendment, Congress incorporated section

621(a)(1) into the Communications Act of 1934, and

the statutory language at issue here thus qualifies

as a “provision[] of this Act” within the meaning of

section 201(b). Thus, because “the grant in § 201(b)

means what it says|,|” we are bound by this plain

meaning and thereby conclude that, pursuant to

section 201(b), the FCC possesses clear jurisdictional

authority to formulate rules and_ regulations

interpreting the contours of section 621(a)(1). See

AT&T Corp., 525 U.S. at 378.

Z2la

Locating jurisdictional support for the FCC’s

rulemaking in section 201(b) further explains the

absence of any reference to the Commission in the

language of section 621(a)(1). Facing a similar

argument regarding statutory silence with respect to

an agency's rulemaking authority, the Supreme Court

underscored that there is an “obvious difference

between a statutory requirement ... and a statutory

authorization.” Alaska Dept. of Environmental

Conservation v. E.P.A., 540 U. S. 461, 491 (2004)

(emphasis in original). In the specific context of the

Communications Act, the Court has observed that it

is “not peculiar that the [congressionally] mandated

regulations should be specifically referenced, whereas

regulations permitted pursuant to the Commission’s

§ 201(b) authority are not.” AvY&T Corp., 525 U.S.

at 385. Standing alone then, the statutory silence

in section 621(a)(1) regarding the agency’s rulemaking

power does not divest the agency of its express authority

to prescribe rules interpreting that provision.

Cases from our sister circuits interpreting

section 621 lend further support to our finding of the

agency's jurisdiction here. In City of Chicago v. FCC,

199 F.3d 424, 428 (7th Cir. 1999), for example, the

Seventh Circuit squarely addressed the issue of

whether the “FCC was ... granted regulatory

authority over 47 U.S.C. § 541, the statute setting

out general franchise requirements.” In answering

this question, the court explained that “the FCC is

charged by Congress with administration of the Cable

Act... We are not convinced that for some reason the

FCC has well-accepted authority under the Act but

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lacks authority to interpret § 541 and to determine

what systems are exempt from franchising

requirements.” City of Chicago, 199 F.3d at 428

(internal citations omitted).

Likewise, in National Cable Television Ass'n v.

FCC, 33 F.3d 66 (D.C. Cir. 1994), the D.C. Circuit

confronted the question of whether the FCC’s

interpretation of the franchise requirements set

forth in section 621(b)(1) was a_ reasonable

construction of the statute. Although not addressing

the jurisdictional question directly, the court

concluded that the regulations at issue represented

reasonable constructions of section 621(b)(1) and

therefore denied the petitions for review. Id. at 75.

Implicit in the court’s deference to the FCC’s

interpretations was an acknowledgment that the

agency possessed the underlying regulatory authority

to promulgate rules construing section 621. Thus, our

jurisdictional holding today reinforces the

conclusions of our sister circuits.

As a final jurisdictional challenge, petitioners

focus their argument on the availability of judicial

review under section 621(a)(1). Immediately after

assigning LFAs the task of awarding franchises, the

next sentence of section 621(a)(1), by cross-

referencing section 635 of Title VI, identifies the

courts as the forum for aggrieved cable operators

to obtain relief. See 47 U.S.C. § 555(a)(1),(2) “Any

cable operator adversely affected by any final

determination made by a franchising authority

under section 54l(a)(1) . . . of this title may

commence an action within 120 days after receiving

notice of such determination, which may be brought

in (1) the district court of the United States for any

judicial district in which the cable system is located;

or (2) in any state court of general jurisdiction having

jurisdiction over the parties.”). In light of this judicial

review provision, petitioners challenge the Order for

‘ignor[ing] this basic statutory structure .. . [by] in

effect, add[ing] a third clause to Section 635(a) that

would allow local franchising matters under Section

621(a)(1) to be ruled upon by the FCC.” (Petitioner

ACM’s Br. 18; see also Petitioner NCTA’s Br. 24-26;

Petitioner Tampa’s Br. 16-17; Petitioner New Jersey’s

Br. 16-17.) Petitioners contend that the FCC’s

intervention in _ franchising’ decisions’ violates

Congressional intent that the courts serve as the only

other body with concurrent jurisdiction over section

621(a)(1). By issuing the Order, their argument goes,

the FCC has impermissibly encroached on the

exclusive role of the courts in providing redress to

aggrieved cable operators.

In effect, petitioners’ argument calls upon us

to determine whether the judicial review provisions

in the second part of section 621(a)(1) are exclusive

and thereby override the FCC's” exertion of

rulemaking authority. Our inquiry leads us to a

negative answer: the availability of a judicial

remedy for unreasonable denials of competitive

franchise applications does not foreclose the

agency's rulemaking authority over section 621(a)(1).

While the Order equips LFAs with guidance on

reasonable versus unreasonable distribution of

24a

franchises, the courts ultimately retain their

Congressionally-granted jurisdiction to hear appeals

involving denials of competitive franchises. Although

the courts may have to grant deference to the Order,

this does not in any way impede the courts’ fact-

finding or legal analysis during actual judicial

proceedings.

Our conclusion today that the FCC possesses

jurisdiction over section 621 (a)(1) coextensive with that

of the courts is buttressed by the Supreme Court’s

analogous decisions in AT&T’ Corp. and U.S. uv.

Haggar Apparel Co., 526 U.S. 380 (1999). In the

former case, although the Communications Act

specifically provides for judicial review of state

commission decisions arbitrating interconnection

disputes among telephone companies, 47 U.S.C.

§ 252(e)(6), the Supreme Court upheld the FCC’s

authority to issue rules’ governing the states’

resolution of such disputes. AT&T Corp., 525 U.S. at

377-85. ‘The Court reasoned that Congress’s

“assignment[]” of the adjudicatory task to state

commissions did not “logically preclude the [FCC]’s

issuance of rules to guide the state-commission

judgments.” Jd. at 385

Likewise, in Haggar Apparel, a manufacturer

of imported clothing brought an action to challenge

regulations issued by the United States Customs

Service through the notice-and-comment rulemaking

process. 526 U.S. at 380. Specifically, the company

contested the applicable scope of the rules, arguing

that they applied only to customs officers and not to

25a

the Court of International Trade in importers’

refund suits. Jd. at 386-87. The Court, however,

rejected Haggar Apparel’s attempt to release the

Court of International Trade from adherence to the

rules and ultimately held that “[djeference can be

given to the regulations without impairing the

authority of the [Court of International Trade] to

make factual determinations, and to apply those

determinations to the law, de novo.” TId. at 391.

Similarly, in the instant case, we believe that courts

can grant deference to the Order while maintaining

their Congressionally-granted authority to make

factual'determinations and provide relief to aggrieved

cable operators.

B. Chevron Analysis

Because we find that the agency possesses the

underlying authority to issue the Order, our

subsequent task is to ascertain whether the contents

of the Order merit our deference pursuant to Chevron

USA v. Natural Resources Defense Council, 467 U.S.

837 (1984). In Chevron, the Supreme Court observed

that, pursuant to the principle of deference to

administrative interpretations, “considerable weight

should be accorded to an executive department's

construction of a statutory scheme it is entrusted to

administer.’ 467 U.S. at 844. To determine whether

such deference is warranted, the Chevron analysis,

colloquially referred to as the “Chevron two-step,”

requires the following inquiry: “the court [must] ask

‘whether the statute is silent or ambiguous with

respect to the specific issue before it; uf so, the

26a

question for the court [is] whether the agency’s

answer is based on a permissible construction of the

statute.” Singh v. Gonzales, 451 F.3d 400, 403-04

(6th Cir. 2006) (citation and quotation marks

omitted). Within this analytical framework, judicial

deference to an agency’s construction of a statute is

justified because the “statute’s ambiguity constitutes

an implicit delegation from Congress to the agency to

fill in the statutory gaps.” FDA v. Brown &

Williamson Tobacco Corp., 529 U.S. 120, 159 (2000).

The Supreme Court has explained that “a very good

indicator of delegation meriting Chevron treatment

is express congressional authorizations to engage in

the process of rulemaking .. . that produces

regulations or rulings for which deference is

claimed.” United States v. Mead Corporation, 533

U.S. 218, 229 (2001).

Applying the dictates of Chevron, we find that

the Order is entitled to our deference. At the outset,

we note that, as reflected by the NPRM, the sixty-day

comment period, and the ninety-day reply comment

period, the FCC promulgated the Order through the

formal channels of notice-and-comment rulemaking

pursuant to section 553 of the APA. According to the

Supreme Court's pronouncement in Mead, the FCC’s

conformance with notice-and-comment procedures

serves as a “very yood indicator of delegation

meriting Chevron treatment.” 533 U.S. at 229: see

also, Estate of Gerson v. C.1.R., 507 F.3d 435, 438 (6th

Cir. 2007) (finding that a Treasury Regulation

adopted by the IRS deserved deference because “the

IRS regularly engages in notice and comment

27a

procedures for its general-authority regulations; these

procedures foster fairness and_ deliberation.”);

Cleveland Nat. Air Show, Inc. v. U.S. Dept. of

Transp., 430 F.3d 757, 763 (6th Cir. 2005) (noting

that a “formal process is one signal that an agency

deserves Chevron deference.’).

Turning to the Chevron two-step analysis, we

are of the view that the language at issue in section

621(a)(1) is indeed ambiguous, and that the FCC's

construal of the language in the Order amounts to a

permissible construction of this language.

1. Chevron Step 1; Statutory Ambiguity

The initial question under step one of the

Chevron framework is “whether Congress has

directly spoken to the precise question at issue” by

employing precise, unambiguous statutory language.

Chevron, 467 U.S. at 842. This first step is

informed by the recognition that “[t]he judiciary is

the final authority on issues of statutory construction

and must reject administrative constructions which

are contrary to clear congressional intent.” Jd. at

843, n.9. When conducting the inquiry required by

Chevron’s first step, “our primary goal is to effectuate

legislative intent using traditional tools of statutory

interpretation.” Estate of Gerson, 507 F.3d at 439. In

harnessing these tools, we must construe statutory

language “in pertinent context rather than = in

isolation.” /d.

28a

In the case at bar, the statutory phrase within

section 621(a)(1) which emerges as a candidate for

ambiguity is “unreasonably refuse to award an

additional competitive franchise.” 47 U.S.C.

§ 541(a)(1) (emphasis added). Language is ambiguous

when “to give thle] phrase meaning requires a specific

factual scenario that can give rise to two or more

different meanings of the phrase.” Beck v. City of

Cleveland, Ohio, 390 F.3d 912, 920 (6th Cir. 2004).

While we have not previously interpreted the

phrase “unreasonably” under section 621(a)(1), in the

context of other provisions of the Communications Act,

courts called upon to ascertain the ambiguity of

descriptors such as “reasonable” and “unreasonable”

have found these words subject to multiple

constructions. In Orloff v. FCC, 352 F.3d 415 (D.C.

Cir. 2003), cert. denied, 542 U.S. 937 (2004), for

example, the petitioner filed a petition for review of

an FCC adjudication which found that Verizon's

practice of granting sales concessions to certain

prospective customers did not rise to “unjust or

unreasonable” discrimination in violation of 47 U.S.C.

§ 202(a). In conducting the requisite Chevron

analysis, that court stated that “the generality of

these terms—unjust, unreasonable-opens a _ rather

large area for the free play of agency discretion,

limited of course by familiar arbitrary and capricious

standard in the Administrative Procedure Act.”

Orloff, 352 F.3d at 420 (internal quotations omitted).

Similarly, confronting section 201(b) of the

Communications Act, which mandates that any

interstate communications charge be “just and

reasonable” and characterizes as unlawful any

communications charge that is “unjust. or

unreasonable,” the panel majority explained that

“[blecause ‘just,’ ‘unjust,’ ‘reasonable,’ and

‘unreasonable’ are ambiguous statutory terms, this

court owes substantial deference to the interpretation

the Commission accords them.” Capital Network

System, Inc. v. FCC, 28 F.3d 201, 204 (D.C. Cir.

1994).

Of course, the detection of inherent ambiguity

in words such as “reasonable” and “unreasonable” by

other courts in other sections of the Communications

Act does not terminate the analysis here, because

such observations are divorced from the specific

context of Title VI. See Bower v. Federal Exp. Corp.,

96 F.3d 290, 208-09 (6th Cir. 1996) (“[E]ven facially

ambiguous provisions can have their meanings

clarified and rendered unambiguous by reference to

the statute’s structure or to other unambiguous terms

in the statute.”). <As_ petitioners argue, while

“unreasonable” may generally engender ambiguity

and multiplicity of meaning, it is not inconceivable

that its particular usage within section 621(a)(1) is

perfectly clear. Thus, we must probe the structure and

history surrounding the enactment of section

621(a)(1) to establish wvhether the use _ of

“unreasonable” in this case fosters ambiguity

Immediately following section 621(a)(1)’s

limitation on unreasonable refusals to award

additional franchises, the provision cross-references

30a

section 635 and thereby charges the courts with the

task of determining whether there has been a “failure

to comply with this subsection.” 47 U.S.C. § 541(a)(1).

Congress's provision of judicial review as a means

to monitor a given LFA’s compliance with section

621(a)(1) suggests that it is not instantaneously

apparent whether a refusal to grant a prospective

franchisee’s application is necessarily reasonable or

not. The legislative decision to delegate to jurists the

task of construing and enforcing section 621(a)(1)’s

insistence on reasonableness suggests that the

statutory phrase at issue is capable of multiple

meanings. To choose between these several meanings,

courts will have to engage in fact-finding and uncover

the particularities of the case at hand. Thus, to give

meaning to an “unreasonable denial” will depend upon

“a specific factual scenario.” Beck, 390 F.3d at 920,

Coupled with case law finding the term “reasonable”

generally to engender ambiguity, the fact-sensitive

nature of the reasonableness inquiry in the instant

context indicates that section 621(a)(1)s usage of

“unreasonably” is ambiguous under Chevron’s first

step. Accordingly, our next task is to determine

whether the ICC’s explication of this statutory

ambiguity is reasonable.

Chevron Step 2: Reasonableness of the

Order

At this juncture, we must decide whether the

FCC's Order constitutes a permissible construction of

the pivotal statutory phrase, “unreasonably refuse

to award,” within section 621(a)({1). In answering this

sla

question, we “need not conclude that the agency

construction was the only one it permissibly could

have adopted to uphold the construction, or even the

reading [we] would have reached if the question

initially had arisen in a judicial proceeding.” Battle

Creek Health System v. Leavitt, 498 IF'.3d 401, 408-09

(6th Cir. 2007) (internal quotations omitted). A

review of the legislative history as well the language

of the provision at issue is the chief method by which

we approach the second step of Chevron. Difford v.

Secretary of Health and Human Services, 910 F.2d

1316, 1318 (6th Cir. 1990). Because the Order

encompasses four different rules specifying the

meaning of “unreasonably refuse” within section

621(a)(1), we proceed by assessing the

reasonableness of each rule in its own right.

a. Rule 1: Timing Requirements for

Awarding New Franchises

The first rule contained in the Order concerns

the time period within which LFAs must address

franchise applications to satisfy section 621(a)(1)’s

requirement of reasonableness. The FCC selected 90

days and six months as the time frames within which

LFAs must respectively rule on the proposals of

applicants with existing access to rights-of-way and

wholly new applicants. The FCC further prescribed

temporary interim franchises as a remedy for an

LFA’s failure to comply with the applicable time

frame.

VK TS. ae 2” Seer eee _

32a

Urging this Court to reject the timing

requirement as an impermissible construction of the

statute, petitioners characterize this portion of the

Order as “creating an arbitrary shot-clock for new

franchise applications” and “spawning unilaterally-

imposed interim franchises permitting unauthorized

access to public and private property and denying

community needs and interests.” (Petitioner ACM’s

Br. 28-29.) The FCC, on the other hand, insists that

the time frames are a lawful and _ reasonable

regulatory response to “unreasonable delays in the

franchising process.” (Respondent’s Br. 39-40.)

To determine whether we should defer to the

time limits as a permissible construction of the Act, it

is instructive to examine how durational

requirements surface in other portions of Title VI. In

several other sections of the Act addressing cable

franchises, Congress expressly incorporated timing

requirements into the statutory language. Section

617, for example, relates to the sale of cable systems

and states that, if the issuance of a franchise requires

that an LFA approve the sale or transfer of a cable

system, the LFA must act within 120 days. 47 U.S.C.

§ 537. Likewise, section 625 mandates. that

modifications of franchise terms occur within 120

days of the request. 47 U.S.C. § 545.

While express durational requirements govern

these aspects of the franchising process, the statutory

scheme is silent with respect to time limits governing

the issuance of new franchises under section

621(a)(1). In hght of this silence, petitioners urge us

33a

to adopt the canon of construction expressio unius est

exclusio alterius—explicit direction for something in

one provision, and its absence in a parallel provision,

implies an intent to negate it in the second. That is,

according to petitioners, if Congress nad intended that

LF As act within a certain time period in awarding new

franchises, it seems logical to assume that it would

have followed the course of these other sections by

integrating express durational requirements into the

statutory language of section 621(a)( ). Thus, under

petitioners’ view, even if the language of section

621(a)(1) is ambiguous, the agency has formulated an

impermissible construction of the statute by reading

into the text durational requirements that

contravene Congress’s intentional decision to forego

such requirements. See Whitman v. American

Trucking Ass’n., 531 U.S. 457, 467 (2001) (refusing

to “find implicit in ambiguous sections of the [Clean

Air Act] an authorization to consider costs that has

elsewhere, and so often, been expressly granted.”);

General Motors Corp. v. United States, 496 U.S. 530,

538 (1990) (explaining that “[slince the statutory

language does not expressly impose a 4-month

deadline and Congress expressly included other

deadlines in the statute, it seems likely that Congress

acted intentionally in omitting the 4-month deadline

in § 110(a)(8)(A).”); Russello v. United States, 464

U.S. 16, 23 (1983) (“[W]here Congress includes

particular language in one section of a statute but

omits it in another section of the same Act, it is

generally presumed that Congress acts intentionaily

and purposely in the disparate inclusion § or

exclusion.”).

34a

While petitioners are correct in identifying the

expressio tool as one canon of _— statutory

interpretation, their analysis fails to recognize that

the utility of the expressio canon in the context of the

Chevron inquiry has been questioned. In Cheney

R.R. Co. v. I.C.C., 902 F.2d 66, 69 (D.C. Cir. 1990),

for example, the D.C. Circuit explained that, under

Chevron, Congressional silence is to be construed as

creating a presumption of a gap-filling delegation to

agencies. Against this presumption, the expressio

canon emerges as “an especially feeble helper in an

administrative setting, where Congress is presumed

to have left to reasonable agency discretion

questions that it has not directly resolved.” Cheney

R.R. Co., 902 F.2d at 69. Likewise, in General

Motors Corp. v. NHTSA, 898 F.2d 165, 170 (D.C. Cir.

1990), the D.C. Circuit held that, where a statute

includes an “express deadline” for one category of

decisions but not another, the absence of a statutory

deadline for the latter category “could mean either

that no deadline was contemplated by Congress, or

that Congress left the choice to [the agency] whether

or not to impose a deadline.” We find the reasoning in

General Motors Corp. to be persuasive. That is, the

absence of a statutory deadline in section 621(a)(1)

leads us to conclude that Congress authorized, but

did not require, the FCC to impose time limits on the

issuance of new franchises.

Moreover, the nature of the franchising

process counsels in favor the reasonableness of the

time limits the FCC selected. We have previously

35a

noted that administrative lines “need not be drawn

with mathematical precision.” Kirk v. Secretary of

Health & Human Serv., 667 F.2d 524, 532 (6th Cir.

1981). Courts are “generally unwilling to review line-

drawing performed by the Commission unless a

petitioner can demonstrate that lines drawn... are

patently unreasonable, having no relationship to the

underlying regulatory problem.” Covad Comm. Co. v.

FCC, 450 F.3d 528, 541 (D.C. Cir. 2006) (internal

quotations omitted). We concluue that petitioners

have failed to demonstrate the patent

unreasonableness of the durational requirements.

First, the reasons mobilizing the FCC to

promulgate these time limits appear more than

reasonable. Due to protracted franchise negotiations,

the agency found that prospective entrants were

abandoning attempts to join the cable market and

acceding to otherwise unacceptable franchise terms

simply to expedite the process. The Commission thus

prescribed the time frames as a way to remedy the

“excessive delays result[ing] in unreasonable refusals

to award competitive franchises,” and reverse the

factors “depriv({ing] consumers of competitive video

services” and “hamperf[ing] broadband deployment.”

Ud.) In furtherance of these ends, the FCC

reasonably found that six months would provide

L:*As with “a reasonable amount of time to negotiate

with an entity that is not already authorized to

occupy” rights-of-way. (JA 527.) This determination

was predicated on “substantial [record] evidence that

six months provides LIFAs sufficient time to review an

36a

applicant’s proposal, negotiate acceptable terms, and

award or deny a competitive franchise.” (/d.)

Similarly, for companies with existing access to

rights-of-way, the FCC reasonably found that their

cable franchise applications should take less time to

review and process because “an LFA need not devote

substantial attention to issues of rights-of-way

management.” (JA 525.) Specifically, the agency

explained that since incumbent cable operators

already demonstrated their “legal, technical, and

financial fitness” to use rights-of-way to provide

service, “an LFA need not spend a significant amount

of time considering the fitness of such applicants to

access public rights-of-way.” (JA 526.) ‘That 90 days

represents a reasonable time frame for incumbent

providers is underscored by the fact that numerous

state statutes require decisions on cable franchise

applications in fewer than 90 days. @WJA 499.)

Accordingly, we conclude that the first rule included in

the Order represents a permissible construction of

the statute.

b. Rule 2: Limitations on Build-Out

Requirements

The second rule contained in the Order places

limits on the use of build-out requirements as a

franchise term. Specifically, the Commission

explained that “an LFA’s refusal to grant a

competitive franchise because of an _ applicant’s

unwillingness to agree to unreasonable build-out

mandates constitutes an unreasonable refusal to

37a

award a competitive franchise.” (JA 493.) The Order

further stipulates types of mandates that would

qualify as unreasonable, such as requiriny an operator

to serve everyone in a given area as a precondition

for providing service, req» iring incumbent operators

to “build out beyond the footprint of their existing

facilities before they have even begun providing

service,’ and placing more. stringent’ ser ice

requirements on new entrants than those facing

incumbent operators. (JA 533.) In contrast, the

agency described as reasonable an LFA’s

consideration of “benchmarks requiring the new

entrant to increase its build-out after a reasonable

period of time had passed after initiating service and

taking into account its market success.” (Id.)

In arguing for the unreasonabicness of this

second rule, petitioners assert that the agency has

effectively “amend{ed] the will of Congress by adding

exceptions to a statute that do not otherwise exist.”

(Petitioner ACM’s Br. 33; see also Petitioner Tampa’s

Br. 43; Petitioner New York City’s Br. 7). That is,

petitioners claim that “[s]everal of the scenarios

identified by the FCC as examples of ‘unreasonable

build-out mandates’ involve issues that have nothing

to do with the one and only condition placed on an LFA

by Congress — namely, that an LFA must allow a

reasonable period of time for build-out.” (Petitioner

ACM's Br. 34.)

The agency, in turn, retorts that this second

rule is both lawful and reasonable because it

sensibly responds to the state of the record evidence.

oka

Based on the its extensive fact-finding, the FCC

discovered that commanding prospective’ cable

entrants to expand rapidly their networks “greatly

hinder/s] the deployment of new video and broadband

services.” (Respondent’s Br. 33; JA 506.) Beyond the

entry-deterring effects of build-out requirements, the

agency maintains that its limitations on build-out

mandates are “in effect timing restrictions” that

accordingly fall well within Congress’s requirement

that LFAs provide a reasonable period of time for

Luild-out. (Respondent’s Br. 55.)

Despite their differing interpretations of the

provision, petitioners and _ respondent correctly

identify section 621(a)(4)(A) of the Act as the

appropriate starting point for establishing the

reasonableness of the Order’s second rule. Under

this sectior, the only express constraint on an LFA’s

ability to impose build-out requirements is that it

“shall allow the applicant’s cable system a reasonable

period of time to become capable of providing cable

service to all households in the franchise area.” 47

U.S.C. § 541(a)(4)(A). The question before us then is

whether the FCC’s_ restrictions on build-out

requirements represent a reasonable construction of

section 621(a)(4)(A).

At the most fundamental level, petitioners and

respondent are enmeshed in a quarrel over whether

section 621(a)(4)(A) conters on LFAs the right to

impose build-out requirements (as petitioners would

have it) or amounts to a limitation on the authority of

LFAs to secure build-out requirements’ through

39a

franchise negotiations (as respondent would have it).

In ascertaining the reasonableness of this second rule

under Chevron, the legislative history of section

621(a)(4)(A) can help to illuminate whether the

statutory text is better characterized as 4 rights-

conferring or an authority-limiting provision.

When integrating section 621(a)(4)(A) into the Act

through the 1984 Amendments, Congress enacted the

current version of the statute from which the following

language was excised: an LFA’s “refusal to award a

franchise shall not be unreasonable if, for example,

such refusal is on the ground . . . of inadequate

assurance that the cable operator will, within a

reasonable period of time, provide universal service

throughout the entire franchise area.” H.R. Rep. No.

102-628 at 9 (1992). That is, Congress explicitly

considered and rejected the preceding language,

which would have — situated all build-out

requirements as presumptively reasonable. Under

this discarded version, the key phrase “shall not be

unreasonable” indicates that LFAs would have

exercised the affirmative right to impose build-out

requirements on prospective entrants.

In contrast, under the existing version of

section 621(a\(4)(A), the statutory language fixes a

durational requirement on LFAs when attaching

build-out mandates to the terms of a franchise. The

language, however, does not establish a presumption

of reasonableness underlying all build-out

requirements. That is, it is quite possible for an LFA

to furnish a cable entrant with “a reasonable period

40a

of time to become cable of providing cable service to

all households in the franchise area” yet still act

unreasonably overall in imposing the _ build-out

requirement on the entrant in the first place. Thus,

in hght of Congress’s patent consideration and

rejection of statutory language that would have

created a presumption of reasonableness

surrounding build-out requirements, we find the

FCC to have the better argument. Accordingly,

section 621(a)(4)(A) is more aptly designated as a

limitation on the authority of LFAs, rather than an

affirmative bestowal of rights. The FCC’s subsequent

explication of this’ limitation on _ build-out

requirements, in the context of section 621(a)(1)’s

requirement of reasonableness, thus appears to us a

permissible construction of the Act, which warrants

judicial deferenc? under Chevron.

c. Rule 3: Franchise Fees

As part of its third rule addressing franchise

fees, the Order construes the scope of the statutory

five percent cap on fees located under section 622(b)

of the Act. 47 U.S.C. § 542(b). This cap prohibits an

LFA from charging a franchise fee in excess of five

percent of a cable operator's revenues from the

provision of cable services. Jd. Excluded from the

definition of “franchise fee” and thereby from the five

percent cap, however, are “requirements or charges

incidental to the awarding or enforcing of the

franchise, including payments for bonds, security

funds, letters of credit, insurance, indemnification,

4ila

penalties, or liquidated damages.” 47 U.S.C.

§ 542(¢g)(2)(D).

Interpreting sections 622(b) and 622(g)(2)(D) in

light of section 621(a)(1)'s reasonableness

requirement, the Order enumerates the non

incidental charges that must fall within the purview

of the statutory cap, including attorneys’ and

consultants’ fees, “application or processing fees that

exceed the reasonable cost of processing’ the

application, acceptance fees, free or discounted

services provided to an LFA, any requirement to

lease or purchase equipment from an LIA at prices

higher than market value, and in-kind payments.”

(JA 539.) Likewise, “any requests made by LF As that

are unrelated to the provision of cable services by a

new competitive entrant are subject to the statutory

5 percent franchise fee cap.” (JA 539.) The Orde:

further insists that “a cable operator is not required

to pay franchise fees on revenues from non-cable

services. (JA 536.)

Asserting the unreasonableness’ of the

Commission's fee regulations, petitioners contend that

the FCC’s interpretation of “incidental to” in section

622(g)(2)(D) violates the plain meaning of “incidental”,

which is defined as “happening or likely to happen in

an unplanned or subordinate conjunction § with

somcthing else” or “incurred casually and in addition

to the regular or main amount.” (Petitioner Fairfax

County's Br. 53.) In other words, petitioners contest

the FCC’s per se listing of fees that count as non-

incidental because such an approach contravenes the

“statutory test [which] is whether an item is related

to the awarding or enforcing of the franchise.” (/d.)

Rather than prioritizing relatedness to the awarding

of a franchise, petitioners insist that the FCC's list

prioritizes the substantiality of the charges. They

point to application fees and expenses incurred in

review of an application as examples of charges that,

regardless of their size or relation to market value,

undoubtedly arise in connection with the award of a

franchise. By confounding “incidental to” with

“substantial,” petitioners urge this Court to reject

the FCC’s rules on franchise fees as unreasonable.

The FCC, in contrast, supports its position in

the Order by marshaling case law from three district

court opinions, 7ime Warner Entertainment vu. Briggs,

1993 WL 23710 (D. Mass. Jan 14, 1993), Birmingham

Cable Comm, v, City of Birmingham, 1989 WL 253850

(N.D. Ala. 1989), and Robin Cable Sys. v. City of Sierra

Vista, 842 I. Supp. 380 (D. Ariz. 1993). In Time Warner

Entertainment, the court found that reimbursements

for attorney's and consultant's fees imposed during a

franchise award constituted “franchise fees” within

the meaning of 47 U.S.C. §542 and were thus

subject to the statutory cap. 1993 WL 23710 at *6.

The court in Birmingham Cable, addressing the

phrase “incidental to,” held that “it would be an

aberrant construction . to conclude that the phrase

embraces consultant fees incurred solely by the

City.” 1989 WL 253850 at *1, n.2. And in Robin Cable

Systems, the court explained that exceptions to the

franchise fee cap are to be “narrowly tailored.” 842 F.

Supp. at 381. Taken together, the FCC asserts that

43a

these three decisions further cast its interpretation as

reasonable.

Considering the foreguing, we grant Chevron

deference to the FCC’s rules regarding fees because

they qualify as reasonable constructions of

sections 622(b) and 622(g2)(2)(D). In

circumscribing the boundaries of our role under the

Chevron doctrine, we have emphasized that we “need

not conclude that the agency construction was the

only one it permissibly could have adopted ... or even

the reading [we] would have reached if the question

initially had arisen in a judicial proceeding.” Battle

Creek Health System, 498 F.3d at 408-09 (internal

quotations omitted). Thus, the fact that “incidental

to” lends itself to multiple readings—the one

highlighted by petitioners and the one highlighted by

the agency—is alone insufficient to render the

Commission's interpretation unreasonable. Moreover,

while not binding precedent on us, the fact that

three district courts independently arrived at the

same interpretation of “incidental to” as_ the

Commission lends further credence to the rules

governing franchise fees in the Order. Since

petitioners have provided no evidence to refute the

reasonableness of a necessity requirement built into

the “incidental to” criterion, we defer to the agency's

interpretation as reasonable

d. Rule 4; Limitations on PEG Capacity

The tourth rule the FCC formulated concerns

PEG requirements. In conducting the inquiry called

1S =4

44a

for by Chevron, the pivotal statutory language appears

in section 622(g)(2)(C), which exempts from the

definition of “franchise fee” the “capital costs which

are required by the franchise to be incurred by the

cable operator for public, educational, or

governmental [PEG] access facilities.” 47 U.S.C.

§ 542(p)(2)(C). Faced with section 622(g)(2)(C), the

agency differentiated between “costs incurred in or

associated with the construction of PEG access

facilities,” which qualify as capital costs and therefore

fall into the franchisee fee exclusion, and “payments in

support of the use of PEG access facilities,” which do

not qualify as capital costs and so are subject to the

statutory cap on franchise fees. (JA 540-41.) Salaries

and training in support of the use of PEG access

facilities fall into the latter category, for example,

and so are counted toward the five percent limit.

The agency further concluded that while LFAs

may seek assurances from prospective cable operators

that they will provide PEG access channel capacity,

they “may not make unreasonable demands of

competitive applicants for PEG.” (JA 541.) For

instance, it would be “unreasonable for an LFA to

impose on a new entrant more burdensome PEG

carriage obligations than it has imposed upon the

incumbent cable operator.” (JA 543.) On the other

hand, the agency classified as “per se reasonable” a

“pro rata cost sharing approach” in which a “new

entrant agrees to share pro rata costs with the

incumbent operator.” (JA 544.)

45a

Confronting the agency’s interpretation of

“capital costs,” petitioners maintain that it is

unreasonable and contrary to Congress’s intent.

First, petitioners attack the rule for its supposed

distinction between PEG facilities versus PEG

equipment. In laying out this argument, petitioners

state that the FCC’s reading narrows “capital costs”

to only the “costs related to the construction of PEG

facilities.” (Petitioner Fairfax County’s Br. 56.) This

interpretation overlooks the fact that “[mJany LFAs

. including Fairfax County .. . receive payments

from cable operators that are used not simply for the

construction of PEG access studios, but also for the

acquisition of equipment needed to produce PEG

access programming such as cameras and editing

equipment.” Ud.) Fairfax County thus asserts that, “to

the extent that the FCC apparently meant to exclude

equipment from the term ‘capital costs,’ the Order

directly contradicts the language of the statute.” Ud.)

In response, the FCC insists that its

interpretation does not signify that the term “capital

costs” necessarily excludes equipment.

(Respondent’s Br. 71.) Instead, the Commission

underscores that the central test for determining

whether an expense is a capital cost is whether it is

“Incurred in or associated with the construction of

PEG access facilities.” Ud.) This definition could

potentially encompass the cost of purchasing

equipment, as long as that equipment relates to the

construction of actual facilities.

46a

To determine the permissibility of the

Commission’s construction of section 622(g)(2)(C), we

start by consulting the legislative history. During

the enactment of this provision, Congress made clear

that it intended section 622(g)(2)(C) to reach “capital

costs associated with the construction of [PEG] access

facilities.” H.R. Rep. No. 98-934, at 26 (emphasis

added). Against this legislative pronouncement, the

FCC’s limitation of “capital costs” to those “incurred

in or associated with the construction fo PEG access

facilities” represents an eminently reasonable

construction of section 622(g)(2)(C).

The next question that arises is whether the

FCC intended to limit its definition of capital costs

only to facilities and not to equipment and, if so,

whether this is a permissible construction of section

622(g)(2)(C). In clarifying the precise scope of the term

“PEG access facilities,” Congress explained that it

refers to “channel capacity (including any channel or

portion of any channel) designated for public,

educational, or governmental use, as well as

facilities and equipment for the use of such channel

capacity.” H. R. Rep. No. 98-934, at 45 (emphasis

added). In further detail, Congress specified that

“(t]his may include vans, studios, cameras, or other

equipment relating to the use of public, educational,

or governmental channel capacity.” Jd. Thus, the

unambiguous expression of Congress confirms that

“PEG access capacity” extends not only to facilities

but to related equipment as well. Considering both

this clear Congressional statement, coupled with the

fact that the agency concedes that its definition of

47a

“capital costs” covers the expense of equipment as

long as it is “incurred in or associated with the

construction of PEG access facilities,” we _ reject

Fairfax County’s attempt to create an arbitrary

distinction between facilities and equipment as

baseless.

To sustain the fourth rule’s reasonableness in

its entirety, the last question we must address is

whether the Order’s _ stipulation regarding

unreasonable PEG carriage obligations and pro rata

sharing schemes is a permissible construction of

sections 611 and 621. Section 611(a) establishes the

authority of LFAs to call for franchise terms relating to

the “use of channel capacity for public, educational, or

governmental use” but “only to the extent provided

in this. section.” 47 U.S.C. §531(a). Section

621(a)(4)(B), in turn, states that, “in awarding a

franchise,” an LFA “may require adequate assurance

that the cable operator will provide adequate public,

educational, or governmental access’ channel

capacity, facilities, or financial support.” 47 U.S.C.

§ 541(a)(4)(B). The FCC claims that its rules

regarding PEG carriage obligations and pro rata

sharing give concrete meaning to the statutory term

“adequate” in section 621(a)(4)(B). That is, the term

“adequate” takes shape in relation to section

621(a)(1)’s reasonableness requirement: “LFAs

that impose PEG ... commitments on new entrants

in excess of what is “adequate”... violate section

621(a)’s prohibition on ‘unreasonable refusals’ to

award competitive franchises.” (Respondent’s Br. 72.)

48a

Rejecting the guidelines the agency adopted to

clarify the meaning of “adequate,” petitioners argue

that “adequate” does not lend itself to the formulation

of per se rules. Furthermore, petitioner ACM insists

that the agency’s prescription of rigid rules regarding

PEG carriage obligations impedes the ability of LFAs

to respond to changing community needs. Both sets

of arguments, however, are without merit

First, Congress’s use of the word “adequate” in

section 621(a)(4)(B) is an example of a statute that is

“ambiguous . .. for purposes of Chevron analysis,

without being inartful or deficient.” Haggar Apparel,

526 U.S. at 392. Congress’s reliance on the term

“adequate” “exemplifies the familiar proposition that

fit} need not, and likely cannot, anticipate all

circumstances in which a general policy must be

given specific effect.” Jd. The Commission thus acted

well within its discretion when it ruled that “LFAs

are free to establish their own requirements for

PEG,” subject to the limited constraints imposed to

prevent violations of section 621(a)(1). (JA 542.) Such

rule-making by the agency represents a_ lawful

exercise of its gap-filling authority and thus deserves

our deference under Chevron.

Likewise, petitioners’ charge that the FCC’s

rules regarding PEG: carriage obligations prevent

attention to community needs is also tenuous at

best. While the FCC’s guidelines prohibit LFAs from

requiring new entrants to assume “more burdensome”

PEG obligations than existing providers, nothing in

this standard prevents LF/s from harmonizing the

49a

PEG obligations new suppliers do assume with local

interests. Moreover, nothing in the Order bars LFAs

from updating the PEG obligations incumbents face

during franchise renewal proceedings, thereby

permitting the PEG obligations new entrants shoulder

to likewise reflect the most current needs of the

community. Overall then, the FCC’s construal of

PEG access facilities and “capital costs” comport

with the legislative history and the overall statutory

structure and thereby qualify for deference under

Chevron.

C. Arbitrary and Capricious Analysis

As their final ground for relief, petitioners

challenge the FCC’s’ rule-making activity § as

arbitrary, capricious, an abuse of discretion, and

otherwise not in accordance with the law.

Specifically, petitioners insist that the Order is

based on a record replete with “allegations against

LFAs which are anonymous, __hearsay-based,

inaccurate, and outdated.” (Petitioner ACM’s Br. 7.)

Notwithstanding petitioners’ contention, we conclude

that the FCC’s rulemaking activity was rooted in a

sufficient evidentiary basis. The contours of judicial

review for arbitrary and capricious agency behavior

are well-established. Courts deem agency action to

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

50a

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. v. State

Farm Mut. Auto Ins. Co., 463 U.S. 29, 43

(1983).

Likewise, agency action is “not in accordance with the

law” when “it is in conflict with the language of the

statute relied upon by the agency.” City of Cleveland

v. Ohio, 508 F.3d 827, 838 (6th Cir. 2007). Pursuant

to arbitrary-and-capricious review, we must canvass

the record to’ determine whether there exists a

“rational connection between the facts found and the

choice made.” State Farm Mut. Auto Ins. Co., 463 U.S.

at 43 (quoting Burlington Truck Lines v. United States,

371 U.S. 156, 168 (1962)). Upon conducting this

searching inquiry, we are required to grant

“controlling weight” to the agency’s regulatory activity

“unless it is plainly erroneous or inconsistent with” the

. underlying statute. Battle Creek Health System, 498

F.3d at 409.

Turning to the record, it appears that the FCC

spearheaded its regulatory activity only after pursuing

a more than adequate fact-finding endeavor. That is,

there is ample record evidence supporting the

Commission’s finding that the operation of the

franchising process had impeded competitive entry in

multiple ways. Prior to promulgating the Order, the

bla

FCC obtained a massive record consisting of 465

comments. These 465 comments created a picture of

excessive delay in the grant of new franchises. For

example, Verizon’ s comments indicated that, of its 113

franchise negotiations pending as of March 2005,

only ten resulted in franchise grants after one year.

Likewise, comments from petitioner NTCA reflected

that a “common complaint... is that applications for

franchising authority languish, unreasonably delaying

the franchise process and the ability of competitors to

offer service.” (JA 1587.) Similar comments from

BellSouth and other service providers make clear that

the Order’s attempt to remedy the problem of undue

delay was consistent with the evidence before the

Commission and represents a “rational connection

between the facts found and the choice made.” State

Farm Mut. Auto Ins. Co., 463 U.S. at 43 (quoting

Burlington Truck Lines, 371 U.S. at 168).

In a similar vein, the 465 comments presented

to the Commission contained substantial evidence

that build-out requirements were posing significant

obstacles to new entrants in providing video and

broadband _ services. For example, comments

submitted by service provider Qwest indicated that

it withdrew franchise applications in eight different

regions due to economically burdensome build-out

requirements. Likewise, the record demonstrated that

LFAs were imposing various demands on _ service

providers, including those unrelated to cable service,

those involving excessive franchise fees, and those

involving excessive PEG requirements, that were

significantly escalating prospective entrants’ costs

o2a

and thereby deterring entry. Based on the foregoing,

we conclude that the administrative record fully

supported the agency’s rulemaking and belies any

claims of arbitrary or capricious regulatory activity.

Ill. CONCLUSION

For the reasons articulated above, we DENY

the petitions for review.

53a

APPENDIX B

Judgment of the United States Court of Appeals

for the Sixth Circuit (June 27, 2008)

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

Nos. 07-3391/3569/35 70/357 1/357 2/3573/3574/

3673/367 4/367 5/36 76/367 7/3824

ALLIANCE FOR COMMUNITY MEDIA, et al.,

Petitioners,

STATE OF HAWAII; CITY AND COUNTY OF SAN

FRANCISCO; NATIONAL CABLE &

TELECOMMUNICATIONS ASSOCIATION, INC.;

CITY OF NEW YORK; CITY OF MILWAUKEE,

WISCONSIN; CITY OF WHITE PLAINS, NEW

YORK; CITY OF WILMINGTON, DELAWARE,

Intervenors,

Vv.

FEDERAL COMMUNICATIONS COMMISSION;

UNITED STATES OF AMERICA,

Respondents,

AD HOC TELECOM MANUFACTURER COALITION;

QWEST COMMUNICATIONS INTERNATIONAL,

INC.; USTELECOM; VERIZON; AT&T,

Intervenors.

Before: SUHRHEINRICH, COLE, and

GIBBONS, Circuit Judges.

o4a

JUDGMENT

THIS MATTER came before the court upon

petitions for review of an order of the Federal

Communications Commission.

UPON FULL REVIEW of the record and the

briefs and arguments of counsel,

IT IS ORDERED, that the petitions for review

are DENIED.

ENTERED BY ORDER OF THE COURT

Leonard Green

Clerk

June 27. 2008

55a

APPENDIX C

Federal Communications Commission Report

and Order and Further Notice of Proposed

Rulemaking

Before the

Federal Communications Commission

Washington, D.C. 20554

In the Matter of

MB Docket No.

05-311

Implementation of Section

621(a)(1) of the Cable

Communications Policy Act of

1984 as amended by the Cable

Television Consumer Protection

and Competition Act of 1992

)

REPORT AND ORDER AND FURTHER

NOTICE OF PROPOSED RULEMAKING

Adopted: December 20, 2006

Released: March 5, 2007

By the Commission: Chairman Martin,

Commissioners ‘Tate and McDowell

issuing separate statements;

Commissioners Copps and Adelstein

dissenting and issuing separate

statements.

56a

Re INTRODUCTION

1. In this Report and Order (“Order”), we

adopt rules and provide guidance to implement

Section 621(a)(1) of the Communications Act of 1934,

as amended (the “Communications Act”), which

prohibits franchising authorities from unreasonably

refusing to award competitive franchises for the

provision of cable services.' We find that the current

operation of the local franchising process in many

jurisdictions constitutes an unreasonable barrier to

entry that impedes the achievement of the

interrelated federal goals of enhanced cable

competition and accelerated broadband deployment.?

147 U.S.C. § 541(a)(1).

While there is a sufficient record before us to generally

determine what constitutes an “unreasonable refusal to award

an additional competitive franchise” at the local level under

Section 621(a)(1), we do not have sufficient information to

make such determinations with respect to franchising decisions

where a state is involved, either by issuing franchises at the

state level or enacting laws governing specific aspects of the

franchising process. We therefore expressly limit our findings

and regulations tn this Order to actions or inactions at the local

level where a state has not specifically circumscribed the LFA’s

authority. In light of the differences between the scope of

franchises issued at the state level and those issued at the local

level, we do not address the reasonableness of demands made

hy state level franchising authorities, such as Hawan, which

may need to be evaluated by different criteria than those

apphed to the demands of local franchising authorities.

Additionally, what constitutes an unreasonable period of time

for a state level franchising authority to take to review an

application may differ from what constitutes am unreasonable

(continued)

57a

(Continued from previous page)

period of time at the local level. Moreover, as discussed infra,

many states have enacted comprehensive franchise reform laws

designed to facilitate competitive entry. Some of these laws

allow compctitive entrants to obtain statewide franchises while

others establish a comprehensive set of statewide parameters

that cabin the discretion of LFAs. Compare TEX. UTIL. CODE

ANN. §§ 66.001-66.017 with VA. CODE ANN. §§ 15.2-2108.19 et

seq. In light of the fact that many of these laws have only been

in effect for a short period of time, and we do not have an

adequate record from those relatively few states that have had

statewide franchising for a longer period of time to draw

general conclusions with respect to the operation of the

franchising process where there is state involvement, we lack a

sufficient record to evaluate whether and how such state laws

may lead to unreasonable refusals to award additional

competitive franchises. As a result, our Order today only

addresses decisions made by county- or municipal-level

franchising authorities. See U.S. Cellular Corp. v. FCC, 254

F.3d 78, 86 (D.C. Cir. 2001) (“agencies need not address all

problems in one fell swoop”) (citations and internal quotation

marks omitted); Personal Watercraft Industry Assoc, v. Dept. of

Commerce, 48 F.3d 540, 544 (D.C. Cir. 1995) (“An agency does

not have to ‘make progress on every front before it can make

progress on any front.’) (quoting United States v. Edge

Broadcasting Co., 509 U.S. 418, 434 (1993)); National

Association of Broadcasters v. FCC, 740 F.2d 1190, 1207 (D.C.

Cir. 1984) (“[A]gencies, while entitled to less deference than

Congress, nonetheless need not deal in one fell swoop with the

entire breadth of a novel development; instead, ‘reform may

take place one step at a time, addressing itself to the phase of

the problem which seems most acute to the [regulatory]

mind,”’) (citations and internal quotation marks omitted,

alteration in onginal). Moreover, it does not address any

aspect of an LFA’s\decision-making to the extent that such

aspect is specifically addressed by state law. For example, the

state of Massachusetts provides LFAs with 12 months from the

(continued)

58a

We further find that Commission action to address

this problem is both authorized and necessary.

Accordingly, we adopt measures to address a variety

of means by which local franchising authorities, i.e.,

county- or municipal-level franchising authorities

(“LFAs”), are unreasonably refusing to award

competitive franchises. We anticipate that the rules

and guidance we adopt today will facilitate and

expedite entry of new cable competitors into the

market for the delivery of video programming,® and

accelerate broadband deployment consistent with

our statutory responsibilities,

2. New competitors are entering markets

for the delivery of services historically offered by

monopolists: traditional phone companies are

primed to enter the cable market, while traditional

cable companies are competing in the telephony

market. Ultimately, both types of companies are

projected to offer customers a “triple play” of voice,

high-speed Internet access, and video services over

(Continued from previous page)

date of their decision to begin the licensing process to approve

or deny a franchise application. 207 Mass. Code Regs. 3.02

(2006). These laws are not addressed by this decision.

Consequently, unless otherwise stated. references herein to

“the franchising process” or “franchising” refer solely to

processes controlled by county- or municipal-level franchising

authorities, including but not limited to the ultimate decision

to award a franchise.

' References throughout this Order to “video programming” or

“video services” are intended to mean cable services.

59a

their respective networks. We believe this

competition for delivery of bundled services will

benefit consumers by driving down prices and

improving the quality of service offerings. We are

concerned, however, that traditional phone

companies seeking to enter the video market face

unreasonable regulatory obstacles, to the detriment

of competition generally and cable subscribers in

particular.

3. The Communications Act sets forth the

basic rules concerning what franchising authorities

may and may not do in evaluating applications for

competitive franchises. Despite the parameters

established by the Communications Act, however,

operation of the franchising process has proven far

more complex and time consuming than it should be,

particularly with respect to facilities-based

telecommunications and broadband providers that

already have access to rights-of-way. New entrants

have demonstrated that they are willing and able to

upgrade their networks to provide video services, but

the current operation of the franchising process at

the local level unreasonably delays and, in some

cases, derails these efforts due to JFAs’

unreasonable demands on competitive applicants.

These delays discourage investment in the fiber-

based infrastructure necessary for the provision of

advanced broadband services, because franchise

applicants do not have the promise of revenues from

video services to offset the costs of such deployment.

Thus, the current operation of the franchising

process often not only contravenes the statutory

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imperative to foster competition in the multichannel

video programming distribution (“MVPD”) market,

but also defeats the congressional goal of

encouraging broadband deployment.

4. In light of the problems with the

current operation of the franchising process, we

beheve that it is now appropriate for the

Commission to exercise its authority and take steps

to prevent LFAs from unreasonably refusing to

award competitive franchises. We have broad

rulemaking authority to implement the provisions of

the Communications Act, including Title VI

generally and Section 621(a)(1) in particular. In

addition, Section 706 of the Telecommunications Act

of 1996 directs the Commission to encourage

broadband deployment by removing barriers to

infrastructure investment, and the U.S. Court of

Appeals for the District of Columbia Circuit has held

that the Commission may fashion its rules to fulfill

the goals of Section 706.4

5. To eliminate the unreasonable barriers

to entry into the cable market, and to encourage

investment in broadband facilities, we: (1) find that

an LFA’s failure to issue a decision on a competitive

application within the time frames specified herein

constitutes an unreasonable refusal to award a

competitive franchise within the meaning of Section

621(a)(1); (2) find that an LFA’s refusal to grant a

4 See USTA v. FCC, 359 F.3d 554, 579-80 (D.C. Cir. 2004).

6la

competitive franchise because of an applicant’s

unwillingness to agree to unreasonable build-out

mandates constitutes an unreasonable refusal to

award a competitive franchise within the meaning of

Section 621(a)(1); (3) find that unless certain

specified costs, fees, and other compensation

required by LFAs are counted toward the statutory 5

percent cap on franchise fees, demanding them could

result in an unreasonable refusal to award a

competitive franchise; (4) find that it would be an

unreasonable refusal to award a _ competitive

franchise if the LFA denied an application based

upon a new entrant’s refusal to undertake certain

obligations relating to public, educational, and

government (“PEG”) and institutional networks (“I-

Nets”) and (5) find that it is unreasonable under

Section 621(a)(1) for an LFA to refuse to grant a

franchise based on issues related to non-cable

services or facilities. Furthermore, we preempt local

laws, regulations, and requirements, including ievel-

playing-field provisions, to the extent they permit

LFAs to impose greater restrictions on market entry

than the rules adopted herein. We also adopt a

Further Notice of Proposed Rulemaking (“FNPRM”)

seeking comment on how our findings in this Order

should affect existing franchisees. In addition, the

FNPRM asks for comment on local consumer

protection and customer service standards as applied

to new entrants.

62a

il. BACKGROUND

6. Section 621. Any new entrant seeking

to offer “cable service’® as a “cable operator’®

becomes subject to the requirements of Title VI.

Section 621 of Title VI sets forth general cable

franchise requirements. Subsection (b)(1) of Section

621 prohibits a cable operator from providing cable

service in a particular area without first obtaining a

cable franchise,’ and subsection (a)(1) grants to

franchising authorities the power to award such

franchises.

5 Section 602(6) of the Communications Act, 47 U.S.C. § 522(6)

(defining “cable service” as “(A) the one-way transmission to

subscribers of (1) video programming, or (ii) other programming

service, and (B) subscriber interaction, if any, which is required

for the selection or use of such video programming or other

programming service”).

6 Section 602(5) of the Communications Act, 47 U.S.C. § 522(5)

(defining “cable operator” as “any person or group of persons

(A) who provides cable service over a cable system and directly

or through one or more affiliates owns a significant interest in

a cable system, or (B) who otherwise controls or is responsible

for, through any arrangement, the management and operation

of such a cable system’).

7 47 U.S.C. § 541(b)1) (“Except to the extent provided in

paragraph (2) and subsection (f), a cable operetor may not

provide cable service without a franchise.”).

* 47 U.S.C. § 541{a)(1) (stating that “[a] franchising authority

may award, in accordance with the provisions of this title, 1 or

more franchises within its jurisdiction’). A “franchising

authority” is defined to mean “any governmental entity

empowered by Federal, State, or local law to grant a franchise.”

(continued)

63a

7. The initial purpose of Section 621(a)(1),

which was added to the Communications Act by the

Cable Communications Policy Act of 1984 (the “1984

Cable Act’”),? was to delineate the role of LFAs in the

franchising process.'° As originally enacted, Section

621(a)(1) simply stated that “la] franchising

(Continued from prev

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