United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued February 5, 2002 Decided June 11, 2002

No. 01-1032

EchoStar Communications Corporation,

Petitioner

v\.

Federal Communications Commission and

United States of America,

Respondents

Comcast Corporation, et al.,

Intervenors

On Petition for Review of an Order of the

Federal Communications Commission

Pantelis Michalopoulos argued the cause for petitioner. With him on the
briefs were Charles G. Cole, Philip L. Malet and Rhonda M. Bolton.

Louis E. Peraertz, Special Counsel, Federal Communications Commission,
argued the cause for respondent. With him on the brief were Jane E.
Mago, General Counsel, and Daniel M. Armstrong, Associate General
Counsel. Catherine G. O\'Sullivan and Robert J. Wiggers, Attorneys, U.S.
Department of Justice, entered appearances.

David E. Mills argued the cause for intervenors. With him on the brief
was David J. Wittenstein.

Before: Ginsburg, Chief Judge, Edwards and Sentelle, Circuit Judges.

Opinion for the court filed by Chief Judge Ginsburg.

Ginsburg, Chief Judge: EchoStar petitions for review of an order of the
Federal Communications Commission dismissing the Company\'s program
access complaint against Comcast Corporation and two of its affiliates,
and denying its motion to compel Comcast to produce certain documents.
Comcast has intervened and filed a brief in support of the Commission.
Because we conclude that the Commission\'s order is reasonable and
supported by substantial evidence, we deny review.

I. Background

EchoStar, a nationwide provider of direct broadcast satellite (DBS)
television service, competes in the Philadelphia market with Comcast,
which provides cable television service. Affiliates of Comcast produce
\"Comcast SportsNet,\" a cable network that features a variety of sports
programming, including the games of several of Philadelphia\'s
professional sports teams. Some of those games had previously been
carried by two other cable networks, SportsChannel Philadelphia, which
was distributed by satellite, and PRISM, which was, like Comcast
SportsNet, delivered to cable systems terrestrially. After failing to
persuade Comcast to sell it the right to carry SportsNet, EchoStar filed
a program access complaint with the Commission pursuant to 47 U.S.C. §
548 and the regulations promulgated thereunder.

Section 548(b) prohibits a \"satellite cable programming vendor\"
affiliated with a cable operator from engaging in:

unfair methods of competition or unfair or deceptive acts or practices,
the purpose or effect of which is to hinder significantly or to prevent
any multichannel video programing distributor \[MVPD\] from providing
satellite cable programming\....

47 U.S.C. § 548(b). Section 548(c)(2) instructs the Commission to
promulgate regulations to prevent a cable operator from \"unduly or
improperly influencing\" the sales decisions of its affiliated satellite
cable programming vendor, and to prohibit an affiliated satellite cable
programming vendor from discriminating in the prices, terms, and
conditions of sale or delivery of satellite cable programming, which the
Commission has done, see 47 C.F.R. § 76.1002.

The Cable Services Bureau denied EchoStar\'s complaint in its entirety.
The Bureau held first that EchoStar\'s claims under the regulations \--
based upon the Comcast affiliates\' refusal to sell it SportsNet, and
upon Comcast\'s unduly influencing its affiliates \-- failed because
SportsNet, being terrestrially distributed, is not \"satellite cable
programming.\" EchoStar Communications Corp. v. Comcast Corp., 14 F.C.C.
Rcd. 2089, p 21 (CSB 1999) (Bureau Order). Next the Bureau \-- assuming,
as EchoStar had argued in its complaint, that the Commission could
prohibit an attempt to evade the regulations \-- concluded that Comcast
had not switched SportsNet from satellite to terrestrial delivery with a
purpose of evasion. Id. p 27. The Bureau made two findings on its way to
that conclusion: (1) SportsNet is a \"new service,\" not \"simply a
service moved from satellite to terrestrial distribution\"; and (2)
Comcast \"employed terrestrial distribution for legitimate business
means\" \[sic\], namely, because terrestrial distribution of SportsNet
is \"dramatically less expensive\" than satellite distribution would be.
Id. pp 23-24, 26. Having found no evasion, the Bureau held that Comcast
had not engaged in any unfair method of competition or unfair practice
under § 548(b). Id. p 28. Finally, the Bureau denied as unnecessary
EchoStar\'s Motion to Compel Production of Documents by Comcast. Id. pp
30-31.

EchoStar then applied to the Commission for review, which was denied.
See In the Matter of DIRECTV, Inc. and EchoStar Communications Corp. v.
Comcast Corp., 15 F.C.C. Rcd. 22802, p 2 (2000) (Commission Order). With
respect to Comcast\'s alleged evasion, the Commission

acknowledge\[d\] that there may be some circumstances where moving
programming from satellite to terrestrial delivery could be cognizable
under \[47 U.S.C. § 548(b)\] as an unfair method of competition or
deceptive practice if it precluded competitive MVPDs from providing
satellite cable programming.

Id. p 13. The Commission nonetheless dismissed EchoStar\'s § 548(b)
claim based upon the Bureau\'s factual findings that SportsNet is a new
service and that terrestrial delivery has cost advantages for Comcast.
Id. WW 13-14. The Commission did not discuss the Bureau\'s denial of
EchoStar\'s motion to compel the production of documents.

II\. Analysis

On review in this court EchoStar challenges the Commission\'s holding
that Comcast did not violate § 548(b) by moving programming from
satellite to terrestrial delivery in order to evade the program access
requirements of § 548(c), and the denial of its motion for discovery. We
review the decision of the Commission under the Administrative Procedure
Act, 5 U.S.C. § 706, to determine whether it is \"arbitrary, capricious,
an abuse of discretion, or otherwise not in accordance with law.\" We
will uphold the decision if the Commission made factual findings
supported by substantial evidence, considered the relevant factors, and
\"articulate\[d\] a rational connection between the facts found and the
choice made.\" Motor Vehicles Ass\'n v. State Farm Mut. Auto Ins. Co.,
463 U.S. 29, 43 (1983); Ass\'n of Data Processing Serv. Orgs. v. Bd. of
Governors, 745 F.2d 677, 683-86 (D.C. Cir. 1984) (arbitrary and
capricious standard incorporates substantial evidence test).

A. Dismissal of the Complaint

EchoStar raises three challenges to the Commission\'s order dismissing
its complaint: The Commission\'s decision is not supported by
substantial evidence; the Commission disregarded certain evidence of
evasion; and the Commission failed adequately to explain its decision.

1\. Substantial evidence

With regard to the substantiality of the evidence underlying the
Commission\'s decision, EchoStar does not dispute that the affidavit of
Sam Schroeder, an executive of the Comcast affiliate that owns
SportsNet, supports the Commission\'s finding that terrestrial delivery
costs Comcast significantly less money than would satellite delivery.
Instead, EchoStar claims that Schroeder\'s declaration is not
substantial evidence because it is \"unsupported and untested\" and
hearsay, for which proposition it relies principally upon Consolidated
Edison Co. v. NLRB, 305 U.S. 197, 230 (1938).

The Commission inexplicably fails to address these arguments in its
brief, but Comcast comes to the Commission\'s rescue. First, Comcast
argues that the Commission could rely upon Schroeder\'s affidavit
because it was given under oath, the affiant had personal knowledge of
the facts he recounts, EchoStar does not challenge his cost estimates,
and there is no requirement that an affidavit be corroborated. Second,
Comcast argues that it is well-settled not only that hearsay can be
considered by an administrative agency but that it can constitute
substantial evidence. See Richardson v. Perales, 402 U.S. 389, 407
(1971); Crawford v. United States Dep\'t of Agric., 50 F.3d 46, 49 (D.C.
Cir. 1995).

We have to agree with Comcast. There is no support for EchoStar\'s
claims that uncorroborated and untested testimony and hearsay testimony
cannot constitute substantial evidence. Although the Court in
Consolidated Edison did say in dicta that \"\[m\]ere uncorroborated
hearsay or rumor does not constitute substantial evidence,\" 305 U.S. at
230, the Court has long since made clear that this statement was \"not a
blanket rejection by the Court of administrative reliance on hearsay
irrespective of reliability and probative value,\" Richardson, 402 U.S.
at 407; hence in that case the Court concluded that unsworn doctors\'
examination reports, contradicted by direct medical testimony,
constituted substantial evidence upon which an agency could deny
disability insurance benefits under the Social Security Act. Id. at 402.
Moreover, we have held specifically that a complaint proceeding brought
under the Communications Act may be resolved solely upon affidavits
submitted by the parties, without allowing discovery, see American
Message Ctr. v. FCC, 50 F.3d 35, 41 (D.C. Cir. 1995); administrative
agencies may consider hearsay evidence as long as it \"bear\[s\]
satisfactory indicia of reliability,\" Crawford, 50 F.3d at 49; and
hearsay can constitute substantial evidence if it is reliable and
trustworthy, id.

The propriety of the Commission\'s reliance upon Schroeder\'s affidavit
is particularly clear. First, the affidavit, although technically
hearsay, that is, an out of court statement offered for the truth of the
matter asserted, was made under oath. Second, the facts contained
therein were undisputed. EchoStar submitted no contradictory evidence
\-- indeed, no evidence whatsoever except two magazine articles. See
Mot. to Compel at 5-6. If the Commission could not rely upon the
uncontested, sworn affidavit of a witness speaking from personal
knowledge, then one would be hard-pressed to under-stand why a district
court may, upon the basis of a sworn declaration, grant summary judgment
under Federal Rule of Civil Procedure 56.

2\. \"Evidence\" the Commission did not address

EchoStar argues the Commission ignored evidence that Comcast intended to
evade the requirements of § 548(c). In this regard, EchoStar claims to
have \"proffered\" the following evidence: (1) an admission by an
unnamed Comcast representative made at a July 23, 1998 meeting with the
Commission; and (2) a statement by Comcast President Brian Roberts, as
reported in Vanity Fair magazine. Relying principally upon Green v.
Shalala, 51 F.3d 96 (7th Cir. 1995), EchoStar argues that \"\[a\]n
agency determination that fails to grapple with significant record
evidence is not supported by substantial evidence, and is moreover,
arbitrary and capricious.\"

The Commission argues that it was under no obligation to address the
Vanity Fair article in its order because \"\[t\]here is nothing in Mr.
Robert\'s \[sic\] alleged quotes \[sic\] to suggest that Comcast did
anything unfair or to cast doubt on the claim of significant cost
advantages from terrestrial delivery.\" Comcast agrees with that
assessment and goes on to point out that there is no record evidence of
an admission made at a July 23, 1998 meeting.

Applying the standard that EchoStar suggests, we cannot fault the
Commission for having ignored any \"significant record evidence.\"
First, EchoStar points to no record evidence of a July 23, 1998 meeting,
much less an admission at such a meeting. In its brief EchoStar refers
to \"evidence that Comcast\'s refusal to deal with EchoStar was a
\'purposeful decision related to competition.\' \" It cites not to
record evidence, however, but to an allegation made by its counsel in
the Motion to Compel he submitted to the Bureau, which motion
conspicuously lacks any citation to evidence. Thus, even if the
statement is relevant \-- which is doubtful inasmuch as it relates to
Comcast\'s refusal to sell to EchoStar and not to Comcast\'s decision to
use terrestrial delivery \-- the Commission could properly ignore the
unsupported assertion that the statement was made.

Second, the statement attributed to Roberts in Vanity Fair lacks any
probative value. Consider:

The question now is whether Roberts can capitalize on an apparent
loophole in the 1996 Telecommunications Act in order to lock up the
Philly area\'s sports programming. \"We don\'t like to use the words
\'corner the market,\' because the government watches our behavior,\"
Roberts says with a laugh. \"Let\'s just say we\'ve been able to do
things before they\'re in vogue.\"

The New Establishment: Brian Roberts, Vanity Fair, Oct. 1997, at 166.
Even if we assume the accuracy of the quotation, it says nothing about
whether Comcast moved from satellite to terrestrial delivery in order to
evade the program access requirements of § 548(c). At most, Roberts
concedes that Comcast is taking advantage of SportsNet\'s not being
covered by § 548(c) because it is delivered terrestrially.

In its reply brief EchoStar argues for the first time before this court
that the Commission\'s finding that Comcast did not intend to evade the
requirements of § 548(c) is not supported by substantial evidence
because the Commission failed adequately to address (1) a letter from
Comcast in which it stated that SportsNet would not be distributed \"on
any satellite delivered service in the Philadelphia market\"; (2)
Schroeder\'s statement that Comcast refused to sell SportsNet to
EchoStar in order to enhance its value to other purchasers; and (3)
EchoStar\'s offer to \"cover a share of the uplink costs\" of delivering
SportsNet via satellite. In the \"Statement of Facts\" in its opening
brief EchoStar noted that it had presented the evidence to the Bureau,
but it nowhere in that brief faulted the Commission for failing
adequately to address this evidence. Because the arguments to that
effect were raised for the first time in EchoStar\'s reply brief, they
are not properly before the court. McBride v. Merrell Dow Pharm., Inc.,
800 F.2d 1208, 1210-11 (D.C. Cir. 1986).

3\. Failure to explain

EchoStar contends that the Commission\'s decision should be set aside as
arbitrary and capricious because the Commission failed in two respects
to \"articulate its reasons in a clear and understandable manner.\"
First, the Commission stated, \"we agree with the Bureau that the facts
alleged are not sufficient to constitute\" a violation of § 548(b), even
though it is clear that the Commission\'s decision relied upon facts
found by the Bureau. See Commission Order at WW 13-14. Second, EchoStar
questions the weight the Commission placed upon the Bureau\'s finding
that SportsNet \"was not a service that was moved from satellite to
terrestrial distribution, but was in fact a new service.\" Id. p 14.
EchoStar argues that it ought to be irrelevant whether programming \"is
moved to terrestrial delivery\" with an intent to evade access
requirements or whether \"terrestrial delivery is used from the outset\"
with that intent. EchoStar also notes that some of the content on
SportsNet \"had previously been distributed to cable systems by
satellite.\"

In response, the Commission confirms that its determination that Comcast
did not engage in unfair methods of competition or unfair or deceptive
acts or practices involved a \"factual inquiry.\" The Commission gives
no explanation, however, for the statement in its order that the \"facts
alleged\" are insufficient to state a claim. With respect to EchoStar\'s
second argument, the Commission fails to explain why choosing
terrestrial delivery from the outset with an intent to evade would not
give rise to a violation of § 548(b). Comcast does not respond at all to
EchoStar\'s arguments.

Although EchoStar is correct that the Commission said it was evaluating
the § 548(b) claim based upon the \"facts alleged\" when clearly it
relied upon the findings made by the Bureau, the misstatement is
immaterial. Both the Commission\'s reasoning and its actual holding
\"may reasonably be discerned.\" See Bowman Transp., Inc. v.
Arkansas-Best Freight System, Inc., 419 U.S. 281, 286 (1974). As for
EchoStar\'s argument that the Commission inadequately explained its
reliance upon the Bureau\'s finding that SportsNet is a new service, the
Commission\'s conclusion that Comcast chose terrestrial delivery for a
valid business reason necessarily precluded holding that Comcast acted
to evade the requirements of § 548(c), regardless whether it switched an
existing service to terrestrial delivery (as EchoStar alleged) or chose
terrestrial delivery from the outset of a new service (as the Commission
found). Making the obvious express would have done no harm, but neither
did leaving it implicit.

B. Discovery

EchoStar\'s Motion to Compel Production of Documents was long on reasons
the evidence before the Bureau was already sufficient, and short on
reasons discovery was necessary, but the essence of its rationale for
discovery was the observation that: \"\[C\]orroborative evidence about
the unfairness of Comcast\'s conduct, as well as Comcast\'s motives \...
must necessarily lie in the exclusive custody of Comcast.\" To the
extent the Bureau was responsive to EchoStar\'s contention, its
explanation was terse: \"EchoStar has not persuaded us that discovery is
necessary or that the record compiled herein is insufficient.\" Bureau
Order p 31. Thus, the Commission\'s sub silentio denial of EchoStar\'s
Motion to Compel must stand or fall upon the Bureau\'s statement that
the record was already sufficient to decide the case.

Without specifically attacking anything actually said in the Bureau\'s
order, EchoStar argues that the Agency\'s decision to deny it discovery
was arbitrary and capricious, denied it due process of law, and violated
EchoStar\'s right under § 556(d) of the APA to submit rebuttal evidence.
EchoStar does not appear to challenge the Commission\'s general rule
that discovery is available in program access cases only \"on a
case-by-case basis as deemed necessary by the Commission staff reviewing
the complaint.\" In the Matter of Implementation of Sections 12 and 19
of the Cable Television Consumer Protection and Competition Act of 1992,
First Report & Order, 8 F.C.C. Rcd. 3359, p 75 (1993). Rather, EchoStar
seems to contend that denying it discovery in this case was
fundamentally unfair because \"the Commission decided the unfair
practices claim based solely on Comcast\'s own assertions about its
motives\" and \"\[t\]he only way for EchoStar to meet its burden of
proof regarding these motives was for the FCC to allow discovery.\"

In response, the Commission invokes its general rule and faults
EchoStar\'s Motion to Compel upon a number of grounds not even arguably
relied upon by the Bureau. The Commission also argues, however, that
EchoStar failed to meet its burden of showing why discovery into
Comcast\'s motive for distributing SportsNet terrestrially was necessary
in light of the evidence before the Bureau that SportsNet was a new
service and that terrestrial delivery was less expensive than satellite
delivery, and EchoStar\'s failure to submit contradictory evidence.
Comcast adds the observation that agency decisions regarding discovery
are entitled to \"extreme deference.\" Hi-Tech Furnace Sys., Inc. v.
FCC, 224 F.3d 781, 789 (D.C. Cir. 2000).

Under a less deferential standard of review the cryptic nature of the
Bureau\'s decision might make this a close case. According the Agency
\"extreme deference,\" however, its \"path may reasonably be
discerned.\" Bowman Transp., 419 U.S. at 286.

Although requiring a party to present evidence indicating that discovery
is necessary might in some circumstances place that party in a difficult
situation, that is not a concern in the circumstances of this case.
EchoStar was free to put forward evidence about distribution services
rebutting, if it could, Schroeder\'s assertions about the cost of
terrestrial versus satellite delivery; and it could surely have
submitted an affidavit supporting its claim to have offered to pay for
the uplink and to have witnessed the statement allegedly made by Comcast
at a July 23 meeting.

In support of its suggestion that the denial of discovery in this case
violated its right to due process, EchoStar cites only McClelland v.
Andrus, 606 F.2d 1278 (D.C. Cir. 1979). On the facts of that case we
held that the agency\'s refusal to allow discovery of a particular
document \"could\" violate due process. Id. at 1286. Unlike EchoStar,
McClelland was faced with a severe deprivation at the hands of the
Government, namely, termination of his employment. Also unlike EchoStar,
McClelland was seeking a specific document \"uniquely relevant to
\[his\] case.\" Id. Nothing about the present case suggests that
EchoStar has a constitutional right to discovery.

Finally, EchoStar claims in a sentence that the Agency\'s decision is
contrary to § 556(d) of the APA, which provides that \"\[a\] party is
entitled to \... submit rebuttal evidence.\" 5 U.S.C. § 556(d). Neither
logic nor authority supports EchoStar\'s claim that the statute imposes
upon an agency the obligation to order discovery upon demand so that a
party may seek rebuttal evidence to submit. Nor are we at liberty so to
embroider the procedures of the APA. See Vermont Yankee Nuclear Power
Co. v. NRDC, 435 U.S. 519, 524 (1978).

III\. Conclusion

Because the decision of the Commission is reasonable and is supported by
substantial evidence, EchoStar\'s petition for review is

Denied.