United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued March 18, 2002 Decided June 28, 2002

No. 01-1153

Costa de Oro Television, Inc.,

Petitioner

v\.

Federal Communications Commission and

United States of America,

Respondents

CoxCom, Inc.,

Intervenor

On Petition for Review of Orders of the

Federal Communications Commission

Barry A. Friedman argued the cause for the petitioner.

Joel Marcus, Counsel, Federal Communications Commission, argued the
cause for the respondents. Jane E. Mago, General Counsel, Daniel M.
Armstrong, Associate General Counsel, Federal Communications Commission,
and Catherine G. O\'Sullivan and Andrea Limmer, Attorneys, United States
Department of Justice, were on brief.

Peter H. Feinberg and Scott Dailard were on brief for the intervenor.

Before: Ginsburg, Chief Judge, Henderson and Tatel, Circuit Judges.

Opinion for the court filed by Circuit Judge Henderson.

Karen LeCraft Henderson, Circuit Judge: This case involves a dispute
over the procedures the Federal Communications Commission (FCC or
Commission) uses to determine local television market designations
pursuant to the cable television mandatory carriage rules. In
particular, Costa de Oro Television, Inc. (Costa) petitions for review
of two FCC orders that sustain earlier market modification rulings but,
at the same time, change the market definition mechanism. Costa also
seeks review of the FCC decision promoting the use of certain data (the
Longley-Rice signal strength prediction methodology maps) in market
modification proceedings. Because we conclude that the Commission
\"articulated a rational explanation\" for its decisions, Eagle-Picher
Indus., Inc. v. EPA, 759 F.2d 905, 921 (D.C. Cir. 1985), we deny
Costa\'s petition.

I. Background

A. Statutory and Regulatory Background

Concerned that local television broadcast stations were no longer able
to compete with the growing cable industry,[^1] the Congress passed the
Cable Television Consumer Protection and Competition Act of 1992 (Cable
Act), 47 U.S.C. §§ 521 et seq. The Cable Act includes \"must-carry\"
provisions that require \"\[e\]ach cable operator\" to carry the signals
of a specific number of \"local commercial television stations.\" 47
U.S.C. § 534(a).[^2] A \"local commercial television station\" is
defined as \"any full power television broadcast station \... that, with
respect to a particular cable system, is within the same television
market as the cable system.\" 47 U.S.C. § 534(h)(1)(A). A local
commercial television station that exercises its statutory must-carry
right is entitled to cable carriage in its local market but it does not
receive compensation therefor from the cable operator. The Cable Act
also gives a broadcaster the option of cable carriage under a
retransmission consent provision that permits the broadcaster and the
cable operator to negotiate cable carriage arrangements and the
broadcast station to receive compensation in return. Id. § 325(b). Every
three years, the broadcaster is required to make an election between the
must-carry and the retransmission consent options. See id. §
325(b)(3)(B). The first three-year cycle began in June 1993. 47 C.F.R. §
76.64(f)(1). A broadcast station\'s \"market\" is \"determined by the
Commission by regulation or order using, where available, commercial
publications which delineate television markets based on viewing
patterns.\" 47 U.S.C. § 534(h)(1)(C)(i). In 1992, the year the Cable Act
was enacted, the Commission\'s rules, now codified at 47 C.F.R. §
76.55(e)(2), defined a station\'s market by reference to the Area of
Dominant Influence (ADI) data produced by Arbitron, an audience research
organization. Id. § 76.55(e)(1). The ADI describes a particular
geographic television market based on measured viewing patterns. See
Report and Order and Further Notice of Proposed Rulemaking, Definition
of Markets for Purposes of the Cable Television Broadcast Signal
Carriage Rules, 11 FCC Rcd 6201, 6203 p 4 (1996), (First Order). In
general, every American county is assigned to a discrete market
according to those local-market stations with a preponderance of total
viewing hours in the county. Id.

In December 1995, shortly after the first three-year election cycle
ended, Arbitron discontinued its television ratings business and ceased
publishing updated ADI data. In response and after notice and comment
rulemaking, the FCC determined to continue to use the ADI market list
for the 1996 election and to substitute Nielsen Media Research\'s
television ratings service beginning with the 1999 election. See First
Order, 11 FCC Rcd at 6206-07 p 14. Nielsen uses a market designation
called the \"designated market area\" (DMA). Both the ADI and the DMA
use audience survey information from cable and noncable households to
determine the assignment of counties to local television markets based
on local stations\' respective viewer shares. Id. at 6207-08 p 16.
Nonetheless, because of differences in methodology as well as sampling
and statistical variation, the switch to the DMA-based market resulted
in the reassignment of some counties. Id. Differences between the
1991-1992 ADI market list and the 1995-1996 DMA market list manifested a
change in 126 markets with approximately 79 markets gaining counties and
83 markets losing counties. Id. at 6208-09 p 18.

While a broadcast station\'s market is generally based on the ADI (now
DMA) data, section 614(h) directs the Commission to consider an
individual request for a change in market designation. The FCC may
\"with respect to a particular television broadcast station, include
additional communities within its television market or exclude
communities from such station\'s television market to better effectuate
the purposes of this section.\" 47 U.S.C. § 534(h)(1)(C)(i). In
considering such requests, the Commission \"shall afford particular
attention to the value of localism\" by taking into account the
following factors, among others:

\(I\) whether the station, or other stations located in the same area,
have been historically carried on the cable system or systems within
such community;

\(II\) whether the television station provides coverage or other local
service to such community;

\(III\) whether any other television station that is eligible to be
carried by a cable system in such community in fulfillment of the
requirements of this section provides new coverage of issues of concern
to such community or provides carriage or coverage of sporting and other
events of interest to the community;

\(IV\) evidence of viewing patterns in cable and noncable households
within the areas served by the cable system or systems in such
community.

Id. § 534(h)(1)(C)(ii)(I)-(IV). Typically, a request is made either by a
broadcast station wanting to be included as part of a cable system in a
market outside its DMA designation or by a cable operator attempting to
exclude a broadcast station from the cable operator\'s market. The Cable
Act\'s legislative history recites as a rationale of the 614(h) market
modification procedure that:

where the presumption in favor of ADI \[now DMA\] carriage would result
in cable subscribers losing access to local stations because they are
outside the ADI in which a local cable system operates, the FCC may make
an adjustment to include or exclude particular communities from a
television station\'s market consistent with Congress\' objective to
ensure that television stations be carried in the areas which they serve
and which form their economic market.

H.R. Rep. No. 102-628, at 97 (1992). During the period Arbitron\'s ADI
market areas were in use, the Commission ruled on numerous market
modification requests filed pursuant to section 614(h). See, e.g., In re
Complaints of Costa de Oro Television, Inc., 10 FCC Rcd 9468 (1995),
aff\'d on recons., 12 FCC Rcd 22, 464 (1997), pet. for review denied,
Costa de Oro Television, Inc. v. FCC, 172 F.3d 919 (D.C. Cir. 1998). The
interplay between the FCC\'s earlier market modification decisions under
the ADI regime and its move to a DMA-based market definition is the
focus of Costa\'s appeal.

B. History of Costa\'s License

Costa is the licensee of television station KJLA[^3] located in Ventura,
California. Ventura is in Ventura County. Although Arbitron included
Ventura County in the ADI market for greater Los Angeles, it assigned
KJLA to the Santa Barbara-Santa Maria-San Luis Obispo ADI market.
Nielson, however, has always placed KJLA in the Los Angeles DMA. The
change in market designation results in a corresponding change in
KJLA\'s must carry right because a broadcast station generally has a
right to carriage within its \"market\" only. While the Commission
ordered carriage of KJLA throughout the Los Angeles market once the
station was assigned to that DMA, it continued to exclude certain
communities that were the subject of earlier 614(h) market modification
rulings. See Costa de Oro Television, Inc., 15 FCC Rcd 15,069 (2000);
Costa de Oro Television, Inc., 15 FCC Rcd 12,637 (2000).

As part of the ADI-to-DMA change, the Commission considered, and sought
comment on, the continuing validity of its earlier 614(h) market
modification rulings made using ADI data. Costa requested the Commission
to reconsider de novo any prior section 614(h) ruling based on ADI data
if, as in KJLA\'s case, the ADI-to-DMA change resulted in the
reassignment of a station to a new market. In the Second Report and
Order on Definition of Markets for Purposes of the Cable Television
Broadcast Signal Carriage Rates, 14 FCC Rcd 8366 (1999), (Second Order),
the Commission rejected Costa\'s request. It also decided to continue
using ADI data to process any market modification request filed before
the effective date of the change to DMA, that is, before January 1,
2000. In its Second Order, however, the FCC noted that, \"\[i\]n cases
in which the conversion to DMAs will have a direct consequence, we will
take the future DMA assignment into account.\" Second Order p 42. With
respect to prior market modification rulings, then, \"where the
Commission has previously decided to delete a community from a
station\'s ADI market, that deletion will remain in effect after the
conversion to DMAs.\" Second Order p 43. Costa petitioned for
reconsideration and the FCC denied the petition, stating that \"we
continue to believe that the reasoned determinations reached in market
modification proceedings should not be upset as a result of the
conversion to the DMA standard.\" Order on Reconsideration on Definition
of Markets for Purposes of the Cable Television Broadcast Signal
Carriage Rules, 16 FCC Rcd 5022 (2001), (Reconsideration Order) p 17.

In the First Order, the Commission sought comment on measures to
expedite the modification process by establishing more \"focused and
standardized evidentiary specifications.\" First Order, 11 FCC Rcd at
6225. It subsequently issued a list of information required to be
included in each modification request. Second Order, 14 FCC Rcd at
8385-86 p 44. Significant here, the Second Order also encouraged a
petitioner to provide \"a more specific technical coverage showing,
through the submission of service contour prediction maps that take
terrain into account, particularly maps using the Longley-Rice
prediction methodology.\" Id. at 8388 p 50. Costa\'s petition for
reconsideration challenged the use of the Longley-Rice method as
contrary to the intent of the Cable Act because it allegedly imposed an
unreasonable financial burden by reintroducing the \"UHF handicap.\" See
Costa\'s Pet. for Recons. at 7; see also Reconsideration Order, 16 FCC
Rcd at 5026 p 11 n.28 (\"UHF handicap\" refers to \"the difficulty that
UHF stations had in accessing all of their potential audience over the
air because of the inferior signal propagation characteristic of the UHF
band\"). Without questioning the accuracy of the Longley-Rice maps,
Costa\'s concern was that a cable company using Longley-Rice had \"yet
another quiver in \[its\] bow with which to avoid must-carry
obligations.\" Id. In the Reconsideration Order, the Commission
emphasized with regard to Longley-Rice that \"it is frequently important
in the market modification process to find as precisely as possible the
contours formed by a station\'s signal.\" Reconsideration Order, 16 FCC
Rcd at 5027 p 13-14.

Costa petitions for review of portions of both the Second Order and the
Reconsideration Order.

II\. Analysis

We review the Commission\'s orders \"under the deferential standard
mandated by section 706 of the Administrative Procedure Act, which
provides that a court must uphold the Commission\'s decision unless
\'arbitrary, capricious, an abuse of discretion, or otherwise not in
accordance with the law.\' \" Achernar Broad Co. v. FCC, 62 F.3d 1441,
1445 (D.C. Cir. 1995) (quoting 5 U.S.C. § 706). In this task, we do not
substitute our judgment for that of the agency but rather look to see
whether its decision is based on a \"consideration of the relevant
factors and whether there has been a clear error of judgment.\" Damsky
v. FCC, 199 F.3d 527, 533 (D.C. Cir. 2000) (citations omitted); see
Motor Vehicle Mfrs. Ass\'n v. State Farm Mut. Auto. Ins. Co., 463 U.S.
29, 42-44 (1983). Applying this standard, we conclude that the
Commission did not act arbitrarily in deciding not to reconsider its
prior market modification rulings.

Costa argues that with respect to a station that, like KJLA, has changed
markets, any prior market modification ruling made under the ADI
standard is obsolete. The FCC responds that market modification
decisions turn on fact-specific assessments of the four section 614(h)
factors, see supra pp. 4-5, irrespective of the initial ADI or DMA
market designation, and, therefore, a change in market assignment does
not change the Commission\'s assessment of a station\'s \"true market.\"
Nonetheless, Costa asserts, initial market designations \"exert broad
influence over market modification proceedings by determining the
presumption of carriage and the allocation of burden of proof,\" see
Reply Br. at 5. Because the prior market modification rulings could not
have considered a station\'s DMA market designation and consequent
\"carriage\" presumption, Costa urges, the FCC acted arbitrarily in not
reconsidering them.

Both sides agree that generally a broadcast station has a presumptive
must-carry right in the ADI/DMA market in which it is located. Costa,
however, overstates the continued importance of the initial designation
once a broadcaster or cable operator requests a section 614(h) market
modification ruling. Based on the statute\'s plain language, the FCC
modifies a market with \"particular attention to the value of localism\"
by applying the factors listed in section 614(h)(1)(C)(ii) to the
specific circumstances of the station and community. In contrast, a
station\'s ADI/DMA market designation is merely the initial empirical
assessment of the station\'s market. In its Implementation of the Cable
Television Consumer Protection and Competition Act of 1992, the
Commission stated:

Section 614(h)(1)(C) of the 1992 Act permits the Commission to add to or
subtract communities from a station\'s television market to better
reflect the marketplace conditions following a written request. The
Commission also may determine that particular communities are part of
more than one television market. The procedures recognize that ADI
markets may not always accurately reflect the area in which a particular
television station should be entitled to cable carriage, and will help
ensure that disruption to subscribers over the broadcast signals they
receive is minimized.

8 FCC Rcd 2965, 2976 p 42 (1993). In response to a section 614(h)
request, the Commission assesses the initial ADI (now DMA) market
assignment using the statutory factors, including whether the station
provides coverage or other local service to the community. To be sure,
because a broadcast station enjoys a presumption of carriage in the ADI
or DMA in which it is located, the initial market designation may
dictate which party has the burden of seeking modification. For example,
a cable operator in the Los Angeles market must make a section 614(h)
request indicating that Costa does not serve the community (within the
Los Angeles market) in order to exclude Costa from the cable system\'s
channel lineup for that community. Once the cable operator comes
forward, the FCC must evaluate whether the \"value of localism\" (within
the meaning of section 614(h)) is met by permitting the cable operator
to exclude Costa from that community notwithstanding Costa\'s DMA
assignment to the Los Angeles market.[^4] There is no evidence that any
prior market modification ruling was based solely on the initial market
designation nor can Costa demonstrate that the cable operator must
shoulder anything more than the burden of production. Because the ADI
modification rulings turned on the statutory factors rather than on
KJLA\'s Santa Barbara or Los Angeles initial market designation, we
conclude that the Commission acted reasonably in rejecting Costa\'s
invitation to revisit the same factors.

Moreover, even if the initial market designation does \"color the entire
tenor of the modification process\" in some respect, Costa Br. at 14,
the Commission, beginning with its First Order, has pledged to consider
a station\'s current DMA assignment as part of any future section 614(h)
proceeding. See Second Order, 14 FCC Rcd at 8384 p 42 (\"In cases in
which the conversion to DMAs will have a direct consequence, we will
take the future DMA assignment into account, as we have done since the
First Order was released.\"). To the extent Costa disputes whether the
FCC will adequately weigh its current DMA assignment in a future
modification ruling, that ruling will be subject to review by this Court
at the appropriate time with the benefit of the facts of record.[^5]
Furthermore, the Commission\'s desire \"to avoid disturbing settled
expectations,\" Reconsideration Order, 16 FCC Rcd 5028 p 17, further
convinces this court that the Commission\'s decision to let the prior
modification rulings stand does not constitute a \"clear error of
judgment.\" Motor Vehicle Mfrs. Ass\'n, 463 U.S. at 43 (citations
omitted).

Finally, Costa\'s challenge to the Commission\'s decision to encourage
use of Longley-Rice maps misses the mark. At oral argument, Costa
appeared to maintain that the Commission must rely on Grade B contour
maps (even if Longley-Rice maps more accurately assess a station\'s
signal) simply because a cable operator may use Longley-Rice maps to
exclude broadcast stations. A Grade B contour map shows the area in
which 50 per cent of television sets receive a viewable signal via
antenna 50 per cent of the time. See 47 C.F.R. § 73.684 (1997). The
Grade B contour map, however, indicates only \"the approximate extent of
coverage over average terrain in the absence of interference from other
television stations.\" See id. § 73.683(a) (2002); see also ACLU v. FCC,
823 F.2d 1554, 1560-61 n.8 (D.C. Cir. 1987) (Grade B contour \"is based
on general engineering principles, and does not take into account
site-specific factors that could affect the actual broadcast signal
strength in a community\"). In contrast, the Longley-Rice model
\"provides a more accurate representation of a station\'s technical
coverage area because it takes into account such factors as mountains
and valleys that are not specifically reflected in a traditional Grade B
contour analysis.\" Second Order, 14 FCC Rcd at 8388 p 52. In
determining whether a television station in fact provides \"coverage or
other local service\" to a community, the Longley-Rice model enables the
Commission to assess this section 614(h) factor with the best available
evidence. The Commission has plainly provided \"more than \[the\]
modicum of reasoned analysis\" required to affirm its decision to
promote the use of Longley-Rice maps in market modification proceedings.
Hispanic Info. & Telecomms. Network, Inc. v. FCC, 865 F.3d 1289, 1297-98
(D.C. Cir. 1989). Moreover, the Commission\'s conclusion that
Longley-Rice maps are more accurate than Grade B contours is \"precisely
the type of technical issue on which we defer to the Commission\'s
expertise.\" Keller Communications v. FCC, 130 F.3d 1073, 1077 (D.C.
Cir. 1997) (citing MCI Cellular Tel. Co. v. FCC, 738 F.2d 1322, 1333
(D.C.Cir.1984)). Regarding Costa\'s concern that in some instances the
Grade B contour maps may give more accurate assessments of a station\'s
coverage, we find the Commission\'s response in its Reconsideration
Order sufficient: \"The Second Report and Order encourages parties to
provide maps using the Longley-Rice methodology. They are not required
to do so. Parties may submit traditional Grade B contour maps in
addition to, or instead of, Longley-Rice maps and may explain why they
believe Grade B analysis is more relevant.\" Reconsideration Order, 16
FCC Rcd at 5027 p 50 (emphasis added).

For the foregoing reasons, Costa\'s petition for review is

Denied.

[^1]: See Congressional Findings and Policy: Cable Television Consumer
    Protection and Competition Act of 1992, Pub. L. No. 102-385, § 2(a),
    106 Stat. 1460 (1992), reprinted in 47 U.S.C.A. § 521 note.

[^2]: These provisions are found in section 4 of the Cable Act, adding
    new sections 614 and 615 to the Communications Act of 1934
    (Communications Act), 47 U.S.C. §§ 151 et seq. In upholding the
    constitutionality of the must-carry provisions, the United States
    Supreme Court noted, \"Congress sought to preserve the existing
    structure of the Nation\'s broadcast television medium while
    permitting the concomitant expansion and development of cable
    television, and, in particular, to ensure that broadcast television
    remains available as a source of video programming for those without
    cable.\" Turner Broad. Sys., Inc. v. FCC, 512 U.S. 622, 652 (1994).

[^3]: The station was formerly known by the call letters KSTV-TV. The
    call letters were changed to KJLA(TV) on July 20, 1998. See Call
    Sign Report No. 336, located at
    http://www.fcc.gov/Bureaus/Mass_Media/Public_Notices/Call_Sign_Changes/pnmm8110.txt.

[^4]: The Los Angeles market is geographically large, stretching
    approximately 300 miles north to south and 250 miles east to west.
    FCC Br. at 7 (citing Media One of Los Angeles, Inc., 15 FCC Rcd at
    19,393). Ventura County, where KJLA\'s transmitters are located,
    lies in the northwestern part of the market separated from most of
    the market by several moutain ranges.

[^5]: Costa points to a prior market modification ruling to demonstrate
    the importance of the initial market designation. See In re Petition
    of Costa de Oro Television, Inc. for Modification of Market, 13 FCC
    Rcd 4360 (1998). There, the FCC stated that it generally uses an
    \"extra measure of caution\" when a \"station from one market is
    proposing to obtain mandatory carriage rights in the core of another
    market.\" Id. at 4374 p 29. It then concluded, however, that \"this
    concern\" has \"less significance here than it might in other
    cases,\" id., acknowledging the fact that Costa\'s prospective DMA
    assignment to the Los Angeles market would moot the issue.