Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-04-01033/USCOURTS-caDC-04-01033-0/pdf.json

Parties Involved:
EchoStar Satellite L.L.C.
Petitioner
Federal Communications Commission
Respondent
National Cable & Telecommunications Association
Intervenor
United States of America
Respondent

Document Text:

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued September 14, 2012 Decided January 15, 2013

No. 04-1033

ECHOSTAR SATELLITE L.L.C.,

PETITIONER

v.

FEDERAL COMMUNICATIONS COMMISSION 

AND UNITED STATES OF AMERICA,

RESPONDENTS

NATIONAL CABLE & TELECOMMUNICATIONS ASSOCIATION,

INTERVENOR

Consolidated with 04-1109

On Petitions for Review of Orders of

the Federal Communications Commission

Pantelis Michalopoulos argued the cause for petitioner. 

With him on the briefs were Stephanie A. Roy and Andrew W. 

Guhr.

James M. Carr, Counsel, Federal Communications 

Commission, argued the cause for respondents. With him on 

the briefs were Catherine G. O’Sullivan and James J. 

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

USCA Case #04-1033 Document #1415172 Filed: 01/15/2013 Page 1 of 17
2

Schlick, General Counsel, Federal Communication 

Commission, Peter Karanjia, Deputy General Counsel, and 

Jacob M. Lewis, Associate General Counsel. Richard K. 

Welch, Deputy Associate General Counsel, Daniel M. 

Armstrong III, Associate General Counsel, and John A. 

Rogovin entered appearances.

Paul Glist and Neal M. Goldberg were on the brief for 

intervenor National Cable & Telecommunications Association 

in support of respondent. Loretta P. Polk entered an 

appearance.

Before: BROWN, Circuit Judge, and EDWARDS and 

RANDOLPH, Senior Circuit Judges.

Opinion for the court filed by Circuit Judge Brown.

Concurring opinion filed by Senior Judge Edwards.

BROWN, Circuit Judge: In an industry marked by constant 

innovation and year-to-year change, the dispute over the 

regulations in this case has lasted a full decade. DISH

Network L.L.C. (“DISH”),

1 is a direct broadcast satellite 

provider. DISH challenges two orders of the Federal 

Communications Commission because they impose “encoding 

rules,” which limit the means of encoding that cable and 

satellite service providers may employ to prevent unauthorized 

access to their broadcasts. We conclude the FCC lacked 

statutory authority to impose these rules and grant DISH’s 

petitions for review.

I

 1 DISH formerly did business as EchoStar Satellite L.L.C.

USCA Case #04-1033 Document #1415172 Filed: 01/15/2013 Page 2 of 17
3

Multichannel video programming distributors (“MVPDs”)

— a category that includes both cable and satellite television 

service providers — commonly offer access to their content 

through navigation devices, such as converter boxes. See 47 

C.F.R. § 76.1200(a)–(c). Traditionally, cable television 

subscribers leased their navigation devices directly from their 

cable providers. See Gen. Instrument Corp. v. FCC, 213 F.3d 

724, 727 (D.C. Cir. 2000). But Congress, anxious to create 

separate markets for navigation devices and cable television 

services, added § 629 to the Communications Act as part of the 

Telecommunications Act of 1996. See id. That provision 

attempts to strike a balance: On the one hand, § 629 directs the 

FCC to “adopt regulations to assure the commercial 

availability” of “equipment used by consumers to access 

[MVP] services . . . from [independent] manufacturers, 

retailers, and other vendors.” 47 U.S.C. § 549(a). At the 

same time, the regulations must not “jeopardize security of 

multichannel video programming . . . or impede the legal rights 

of a provider of such services to prevent theft of service.” Id. 

§ 549(b). Achieving this dual mandate demands technical 

standardization among MVPDs so that navigation devices can 

be marketed nationally while still proving capable of thwarting

unauthorized access to service. 

In 2002, with FCC prompting, cable television service 

providers negotiated with representatives of the consumer 

electronics industry to arrive at uniform standards that would 

allow compatibility across all cable systems. In particular, the 

FCC sought standards enabling “plug and play,” which would 

allow consumers to connect digital television receivers directly 

to their cable systems, thus circumventing the need for an 

external navigation device. The negotiations resulted in a 

memorandum of understanding (“MOU”) — a set of joint 

recommendations to the FCC — including rules prescribing 

what distributors could encode within their programming 

USCA Case #04-1033 Document #1415172 Filed: 01/15/2013 Page 3 of 17
4

streams, and banning “selectable output control,” which allows 

distributors and content providers to remotely shut off a 

connector or output on a program-by-program basis (e.g., 

preventing a subscriber from recording a certain television 

program). The agreement was contingent on application of 

the encoding rules to all MVPDs, not just cable television 

service providers. 

The FCC issued a notice of proposed rulemaking in 

January 2003 soliciting comment on the MOU’s proposed 

rules. During the comment period, various satellite carriers 

criticized the proposed application of the encoding rules to all 

MVPDs. They both complained that satellite carriers were 

excluded from the negotiations that gave rise to the MOU and 

also characterized imposition of the encoding rules on all 

MVPDs as a quid pro quo for cable service providers’

acquiescence to plug-and-play standards. The FCC 

nevertheless adopted the proposed rules with only minor 

changes in Implementation of Section 304 of the 

Telecommunications Act of 1996, Second Report and Order, 

18 FCC Rcd. 20885 (2003) (“Order”). As the MOU 

recommended, the Order’s encoding rules barred selectable 

output control. The adopted encoding rules also addressed

two related issues: prohibiting down-resolution of broadcast 

programming — which involves streaming content at an 

intentionally degraded resolution quality — and limiting the 

level of copy protection encoding applicable to certain 

categories of programming. In the FCC’s view, applying the 

encoding rules only to the cable industry “would create a 

permanent competitive imbalance,” whereas “[u]niform 

application of the proposed encoding caps serves the dual 

function of providing a competitive baseline for MVPDs while 

ensuring that consumers have equal access to content 

regardless of their service provider.” Order ¶ 71, 18 FCC Rcd. 

at 20916. Reaffirming its “stated goal . . . to strike a measured 

USCA Case #04-1033 Document #1415172 Filed: 01/15/2013 Page 4 of 17
5

balance between the rights of content owners and the home 

viewing expectations of consumers, while ensuring 

competitive parity among MVPDs,” the FCC later revised the 

encoding rules to clarify their application to encrypted and 

unencrypted broadcast programming. See Implementation of 

Section 304 of the Telecommunications Act of 1996, Order on 

Reconsideration, 18 FCC Rcd. 27059, 27059–60 (2003) 

(“Reconsideration Order”).

DISH now petitions for review of the Order and the 

Reconsideration Order. 

II

DISH argues the FCC’s decision to apply the encoding 

rules to all MVPDs exceeded the agency’s statutory authority.

Because we agree the FCC lacked the power to impose the 

encoding rules on all MVPDs, we need not reach DISH’s 

alternate contention that the decision was arbitrary and 

capricious. But first we must satisfy ourselves of our 

jurisdiction to review DISH’s challenge.

A

As a threshold matter, the FCC insists § 405 of the 

Communications Act bars review of DISH’s claim that the 

agency was without authority to apply encoding rules to all 

MVPDs. Section 405 bars judicial review of questions upon 

which the Commission, or its designated authority, has been 

afforded no opportunity to pass unless a party first files a

petition for reconsideration. 47 U.S.C. § 405(a). The 

question, then, is whether the FCC had an opportunity to 

consider DISH’s challenge to its authority to promulgate the 

encoding rules.

USCA Case #04-1033 Document #1415172 Filed: 01/15/2013 Page 5 of 17
6

Because § 405 is phrased in the passive voice, whether the 

FCC “has been afforded [an] opportunity to pass” on an 

argument does not depend on whether DISH raised it. See 

Time Warner Entm’t Co., L.P. v. FCC, 144 F.3d 75, 79 (D.C. 

Cir. 1998). Absolute precision is unnecessary; judicial review 

is permitted so long as “the issue is necessarily implicated by 

the argument made to the Commission.” Id. at 80. 

The Order’s discussion of the FCC’s authority satisfies us 

that § 405’s requirements have been met. See Order ¶¶ 45–47, 

55–57, 18 FCC Rcd. at 20905–10. In justifying the encoding 

rules, the FCC invoked both explicit and ancillary authority 

under § 629 of the Communications Act, as well as ancillary 

authority under § 624A of the Act, which covers “[c]onsumer 

electronics equipment compatibility.” 47 U.S.C. § 544a. 

This was no cursory reference; the FCC devoted several pages 

of the Order to discussing the statutory basis of its authority to 

promulgate encoding rules regulating all MVPDs. Even if no 

other party brought the matter to the agency’s attention, the 

FCC’s independent contemplation of the issue satisfies § 405’s 

mandate. See DIRECTV, Inc. v. FCC, 110 F.3d 816, 825 

(D.C. Cir. 1997). We thus proceed to the merits of DISH’s 

claim.

B

The FCC cites three sources for its authority: § 629’s 

mandate that the FCC “adopt regulations to assure the 

commercial availability . . . of converter boxes, interactive 

communications equipment, and other equipment used by 

consumers to access multichannel video programming,” 47 

U.S.C. § 549(a); authority ancillary to § 629; and authority 

ancillary to § 624A, which permits the FCC “to restrict cable 

systems in the manner in which they encrypt or scramble 

signals” to assure “compatibility between televisions and video 

USCA Case #04-1033 Document #1415172 Filed: 01/15/2013 Page 6 of 17
7

cassette recorders and cable systems,” 47 U.S.C. § 544a(b). 

None is availing. 

Section 629 provides no direct authority for the encoding 

rules, but deference to the FCC’s view of § 629’s meaning is 

appropriate so long as “Congress has not directly addressed the 

precise question at issue” and the FCC’s interpretation is 

“reasonable.” Chevron U.S.A., Inc. v. NRDC, 467 U.S. 837, 

843–44 (1984). 2 Here, the FCC’s reading founders on 

Chevron’s second step: though § 629’s directive to “adopt 

regulations to assure the commercial availability” of 

navigation devices may afford the FCC some wiggle room in 

crafting its regulatory regime, the statute’s language is not as

capacious as the agency suggests.

Certainly, § 629 provides no explicit textual basis for the 

encoding rules, instead authorizing “regulations to assure the 

commercial availability” of navigation devices. 47 U.S.C. 

§ 549(a). But the FCC points out the encoding rules fulfill 

“consumers’ expectations that their digital televisions and 

other equipment will work to their full capabilities.” Order 

¶ 60, 18 FCC Rcd. at 20911; see also id. ¶ 64, 18 FCC Rcd. at 

20913 (invoking the same argument to support restriction of

down-resolution); id. ¶ 68, 18 FCC Rcd. at 20915 (doing the 

same with respect to copy protection limits). Consumer 

satisfaction enhances consumer demand, ensuring a viable 

commercial market. However, as the FCC acknowledges, the 

encoding rules are not necessary to sustain a commercial 

market for direct broadcast satellite devices. In fact, the FCC 

 2 Whether application of Chevron in this context is sensible is 

an entirely different matter. See AKM LLC dba Volks Constructors 

v. Sec’y of Labor, 675 F.3d 752, 766 (D.C. Cir. 2012) (Brown, J., 

concurring). The Supreme Court recently granted certiorari to 

address this issue. See City of Arlington, Tex. v. FCC, 133 S. Ct. 

524 (Oct. 5, 2012) (mem.).

USCA Case #04-1033 Document #1415172 Filed: 01/15/2013 Page 7 of 17
8

concluded “differences in the marketplace for [direct broadcast 

satellite] equipment, where devices are available at retail and 

offer consumers a choice, as compared to equipment for other 

MVPD services, particularly cable operators, [justified] not 

applying” other § 629 rules to satellite service providers. 

Implementation of Section 304 of the Telecommunications Act 

of 1996, Report and Order, 13 FCC Rcd. 14775, 14800 (1998). 

And, as the Order itself recognizes, satellite equipment is

“already available at retail” and “portable nationwide.” Order 

¶ 46, 18 FCC Rcd. at 20905. Applying the encoding rules to 

cable providers may meet consumer expectations with respect 

to the market for cable devices, but that is no reason to impose 

these rules on all MVPDs.

As an alternative justification, the FCC also reasoned that 

the encoding rules “are an essential component of the MOU,” 

and that the MOU “will assure the commercial availability of 

navigation devices.” Id. ¶ 47, 18 FCC Rcd. at 20906. But 

this cannot be enough to tether the encoding rules to § 629. 

The FCC cannot simply impose any regulation stipulated in an

MOU as a means of promoting the commercial availability of 

navigation devices, no matter how tenuous its actual 

connection to § 629’s mandate. To read § 629 in this way 

would leave the FCC’s regulatory power unbridled — so long 

as the agency claimed to be working to make navigation 

devices commercially available. Nor does the FCC adhere to 

the view that rigid imposition of the encoding rules is essential 

to making navigation devices commercially available. 

Otherwise, it would not have permitted partial waiver, at the 

behest of the Motion Picture Association of America, of the 

ban on selectable output control. See Motion Picture 

Association of America, Petition for Expedited Special Relief; 

Petition for Waiver of the Commission’s Prohibition on the 

Use of Selectable Output Control (47 C.F.R. § 76.1903), 

Memorandum Opinion and Order, 25 FCC Rcd. 4799 (2010).

USCA Case #04-1033 Document #1415172 Filed: 01/15/2013 Page 8 of 17
9

We next turn to the FCC’s assertion of its ancillary 

jurisdiction under both § 629 and § 624A, which, under certain 

circumstances, extends the agency’s regulatory powers beyond 

express statutory mandates. Under § 4(i) of the 

Communications Act of 1934, the FCC is authorized to 

“perform any and all acts, make such rules and regulations, and 

issue such orders, not inconsistent with this chapter, as may be 

necessary in the execution of its functions,” 47 U.S.C. 

§ 154(i); see United States v. Sw. Cable Co., 392 U.S. 157, 178 

(1968); United States v. Midwest Video Corp. (“Midwest Video 

I”), 406 U.S. 649, 669–70 (1972) (plurality opinion); FCC v. 

Midwest Video Corp. (“Midwest Video II”), 440 U.S. 689, 

708–09 (1979). We have summarized the doctrine in a 

two-part test: the FCC may invoke its ancillary jurisdiction 

only when “(1) the Commission’s general jurisdictional grant 

under Title I [of the Communications Act] covers the regulated 

subject and (2) the regulations are reasonably ancillary to the 

Commission’s effective performance of its statutorily 

mandated responsibilities.” Am. Library Ass’n v. FCC, 406 

F.3d 689, 691–92 (D.C. Cir. 2005). Neither side disputes that 

the encoding rules, through their application to cable and 

satellite broadcasts, qualify as regulations of “radio and wire 

communication service” under Title I. At issue instead is 

whether the encoding rules were reasonably ancillary to the 

FCC’s effective execution of its duties under either § 629 or 

§ 624A.3

 3 We note that the FCC’s interpretation of the reach of its 

ancillary jurisdiction is owed no deference, since Chevron only 

applies in instances in which Congress has delegated an agency 

authority to regulate the area at issue. See United States v. Mead 

Corp., 533 U.S. 218, 226–27 (2001). Since we conclude Congress 

did not empower the FCC to apply the encoding rules to all MVPDs, 

deferring to the FCC’s own assertion of its authority on this point 

would beg the question. See Am. Library Ass’n, 406 F.3d at 699.

USCA Case #04-1033 Document #1415172 Filed: 01/15/2013 Page 9 of 17
10

The FCC contends the encoding rules are reasonably 

ancillary to its mission of assuring the commercial availability 

of navigation devices because they removed one of the 

“stumbling blocks” to the consumer electronics industry’s 

production of such equipment for retail: the “inability of 

industry to agree on a comprehensive set of technical copy 

protection measures and corresponding encoding rules” that 

would “ensure the availability of high value content to 

consumers in a protected digital environment.” Order ¶ 55, 18 

FCC Rcd. at 20909. Yet by this standard, there is little the 

FCC could not regulate in the name of fulfilling § 629’s 

mandate. Could cable providers have stipulated that their 

adoption of the MOU was premised on FCC restrictions on 

satellite providers’ content offerings? Could they have 

demanded the FCC limit the number of channels satellite 

providers might broadcast in high definition? Under the 

FCC’s view, its ancillary jurisdiction is effectively plenary. 

The FCC is not authorized under § 629 to take any action that 

lessens the competitive pressures posed by satellite providers

in order to induce cable operators to ratify an MOU the agency 

favors. Guided by the principle that ancillary jurisdiction is 

not “unrestrained authority,” Midwest Video II, 440 U.S. at

706, we refuse to interpret ancillary authority as a proxy for

omnibus powers limited only by the FCC’s creativity in linking 

its regulatory actions to the goal of commercial availability of

navigation devices. See also Ry. Labor Execs. Ass’n v. Nat’l 

Mediation Bd., 29 F.3d 655, 671 (D.C. Cir. 1994) (en banc) 

(“Were courts to presume a delegation of power absent an 

express withholding of such power, agencies would enjoy 

virtually limitless hegemony, a result plainly out of keeping

with Chevron and quite likely with the Constitution as well.”). 

The FCC’s ancillary jurisdiction may be broad, but it is not 

unbounded. 

USCA Case #04-1033 Document #1415172 Filed: 01/15/2013 Page 10 of 17
11

The encoding rules fare no better under § 624A. Unlike 

§ 629, § 624A actually discusses encoding of the sort 

addressed by the Order. See 47 U.S.C. § 544a(a)(1). But 

whereas § 629 applies to all MVPDs, § 624A’s reach is limited

by its plain language to cable systems, directing the FCC to 

adopt regulations “as are necessary to assure . . . compatibility” 

between cable systems on the one hand and televisions and 

video cassette recorders on the other. 4 47 U.S.C. 

§ 544a(b)(1). By invoking its ancillary authority in 

conjunction with § 624A’s compatibility mandate, the FCC 

seeks to square this circle. 

The FCC is powerless to wield its ancillary jurisdiction, 

however, where “there are strong indications that agency 

flexibility was to be sharply delimited.” Midwest Video II, 

440 U.S. at 708. Section 624A’s textual delegation of

authority to regulate cable systems, as opposed to all MVPDs, 

is precisely such an indication. True, application of the

expressio unius est exclusio alterius canon5 is not robotic. 

But its use is appropriate when “one can be confident that a 

normal draftsman when he expressed ‘the one thing’ would 

have likely considered the alternatives that are arguably 

precluded.” Shook v. D.C. Fin. Responsibility & Mgmt. 

Assistance Auth., 132 F.3d 775, 782 (D.C. Cir. 1998). Here, 

there is every reason to believe § 624A was directed at cable 

systems alone. The provision was enacted as part of the Cable 

Television Consumer Protection and Competition Act of 1992 

 4 We set aside for now whether § 624A’s reference to “video 

cassette recorders,” now a largely antiquated technology, is adequate 

to sustain the FCC’s purported interest in the ability of consumers to 

retain “the full benefits of . . . the functionality” of their recording 

devices. Order ¶ 56, 18 FCC Rcd. at 20910. 

5 “A canon of construction holding that to express or include 

one thing implies the exclusion of the other, or of the alternative.” 

BLACK’S LAW DICTIONARY 661 (9th ed. 2009).

USCA Case #04-1033 Document #1415172 Filed: 01/15/2013 Page 11 of 17
12

(“Cable Act”), which also amended the Communications Act 

to include the term “multichannel video programming 

distributor,” defining it to include “direct broadcast satellite 

service.” Pub. L. No. 102-385, sec. 2(c)(6), § 602(c)(12), 106 

Stat. 1460, 1463 (codified as amended at 47 U.S.C. 

§ 522(c)(13)). In fact, one of the Cable Act’s stated goals was 

“to increase the availability of satellite cable programming and 

satellite broadcast programming.” Cable Act, sec. 19, § 628,

106 Stat. at 1494 (codified at 47 U.S.C. § 547). Clearly, 

Congress was adept at using the terms “satellite” and 

“multichannel video programming distributor” when it so 

chose. In contrast to cable television technology in 

Southwestern Cable, satellite television was not some new 

phenomenon Congress had no opportunity to contemplate 

when enacting § 624A. See 392 U.S. at 172–73. It is one 

thing for the FCC to invoke its ancillary authority in 

furtherance of express congressional directives. But it is quite 

another when the FCC invokes its ancillary jurisdiction to 

override Congress’s clearly expressed will.

Nor is the position espoused by the National Cable and 

Telecommunications Association (“NCTA”), acting as 

intervenor, persuasive. The NCTA adopts a more 

circumspect view of the FCC’s authority, acknowledging the 

obvious implausibility of interpreting § 629 as empowering the 

FCC to take any action it deems useful in its quest to make

navigation devices commercially available. Instead, the 

NCTA suggests that § 629 sweeps all MVPDs, not just cable 

providers, under the ambit of § 624A: “If Section 629 means 

anything, it means that the Commission now has authority to 

apply to all MVPDs the same encoding rules that both DISH 

and the Commission agree the Commission could 

independently impose on cable operators under Section 

624A.” The NCTA’s theory of the interplay between the two 

statutes is novel — perhaps because it ignores § 629(f), which 

USCA Case #04-1033 Document #1415172 Filed: 01/15/2013 Page 12 of 17
13

cautions, “Nothing in this section shall be construed as 

expanding or limiting any authority that the Commission may 

have under law in effect before” enactment of the 

Telecommunications Act of 1996. 47 U.S.C. § 549(f). The

NCTA interprets § 629 to mean the exact opposite. 

In the end, we are left with two provisions, neither of 

which authorizes the encoding rules at issue. Section 629’s 

text provides no direct authority for the encoding rules, and the 

FCC’s arguments in favor of such an interpretation are 

unconvincing. Section 624A addresses encoding, but only in 

the context of cable systems. The FCC’s application of 

encoding rules to all MVPDs was therefore ultra vires.

III

Because the FCC denies that the challenged orders could 

operate absent the encoding rules — indeed, its argument is 

premised on this very notion — the encoding rules are not 

severable. See MD/DC/DE Broadcasters Ass’n v. FCC, 236 

F.3d 13, 22 (D.C. Cir. 2001) (“Whether the offending portion 

of a regulation is severable depends upon the intent of the 

agency and upon whether the remainder of the regulation could 

function sensibly without the stricken provision.”). In 

granting DISH’s petitions for review, we therefore vacate the 

Order and Reconsideration Order in their entirety.

IV

For the foregoing reasons, the petitions for review are

Granted.

USCA Case #04-1033 Document #1415172 Filed: 01/15/2013 Page 13 of 17
EDWARDS, Senior Circuit Judge, concurring: I agree with

the majority that the Federal Communications Commission

(“FCC” or “Commission”) has neither direct nor ancillary

authority under Section 624A of the Communications Act, 47

U.S.C. § 544a, nor ancillary authority under Section 629(a) of

the Act, 47 U.S.C. § 549(a), to impose the disputed “encoding

rules” on satellite carriers. The Commission’s positions on these

points cannot survive scrutiny under Chevron Step One or Step

Two. See Chevron, U.S.A., Inc. v. Natural Resources Defense

Council, Inc., 467 U.S. 837, 842-45 (1984). As the majority

opinion makes clear, the claims advanced by the FCC are

entitled to no deference because they are “manifestly contrary to

the statute.” Id. at 844.

I do not read the majority opinion to say that the FCC has

no authority under Section 629 to impose encoding rules on

satellite carriers, however. This court certainly cannot say that

Congress’ direction to the FCC to ensure the commercial

availability of navigation devices may never be reasonably

interpreted to support the application of encoding rules on

satellite carriers. We simply do not know this. Congress

obviously afforded the FCC considerable discretion in directing

the agency to promulgate standards “to assure the commercial

availability . . . of converter boxes, interactive communications

equipment, and other equipment used by consumers to access

multichannel video programming and other services offered

over multichannel video programming systems, from

manufacturers, retailers, and other vendors not affiliated with

any multichannel video programming distributor.” 47 U.S.C.

§549(a). The statute does not by its terms prohibit the

requirement of encoding rules. Rather, any challenge to the

agency’s exercise of its discretion under Section 629 must take

into account the circumstances presented and the Commission’s

explanation for the action in question. 

Petitioner readily concedes that “the plug-and-play

standards” adopted by the FCC “may be deemed within the

scope of Section 629.” Pet’r Br. at 20. Petitioner’s concern is

USCA Case #04-1033 Document #1415172 Filed: 01/15/2013 Page 14 of 17
2

that “the nature of the encoding rules as a quid pro quo to get a

private party to agree to these standards is not a sufficient nexus

to Section 629.” Id. Nexus, however, is not necessarily a matter

of authority; rather, it concerns a connection, bond, or link

between different things. I agree that, in this case, the FCC has

failed to show the necessary link between the imposition of

encoding rules on satellite carriers and the mandate of Section

629. Therefore, the agency’s decision fails for want of reasoned

decisionmaking, not for lack of authority. See Motor Vehicle

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

463 U.S. 29, 43 (1983) (holding that, to survive arbitrary and

capricious review, “the agency must examine the relevant data

and articulate a satisfactory explanation for its action including

a rational connection between the facts found and the choice

made”); see also Judulang v. Holder, 132 S. Ct. 476, 483-85 &

n.7 (2011) (holding that an irrational application of a statute is

arbitrary and capricious).

In some circumstances, there is an overlap in the analysis

required pursuant to Chevron Step Two, 467 U.S. at 843-45, and

that required under the arbitrary and capricious standard

enunciated in State Farm, 463 U.S. at 42-44. See, e.g., Arent v.

Shalala, 70 F.3d 610, 616 n.6 (D.C. Cir. 1995); see also id. at

620 (Wald, J., concurring in the judgment) (“Because both

standards require the reviewing court to ask whether the agency

has considered all of the factors made relevant by the statute,

this court has often found the State Farm line of cases relevant

to a Chevron step two analysis.”). Nonetheless, absent plain

meaning in the authorizing statute, a court should be loathe to

preemptively declare that an agency has no authority to apply a

certain operating standard when it is impossible to know

whether the disputed standard might be permissible under

different circumstances. See Nat’l Cable & Telecomms. Ass’n v.

Brand X Internet Servs., 545 U.S. 967, 985 (2005) (holding that,

“[b]efore a judicial construction of a statute, whether contained

in a precedent or not, may trump an agency’s, the court must

USCA Case #04-1033 Document #1415172 Filed: 01/15/2013 Page 15 of 17
3

hold that the statute unambiguously requires the court’s

construction”). On this record, the court cannot possibly know

whether or to what extent the FCC might permissibly impose

encoding rules on satellite carriers pursuant to Section 629. 

Petitioner has pressed the point that, in the circumstances at

hand, the Commission’s application of the encoding rules to all

Multichannel Video Programming Distributors (“MVPD”) is

arbitrary and capricious. See Pet’r Br. at 40-48. Indeed,

Petitioner convincingly shows that the FCC adopted the disputed

encoding rules here to serve the interests of the cable industry

and consumer electronics manufacturers in almost total

disregard of the interests of satellite carriers.

The FCC acknowledged the fait accompli nature of the

[disputed] rules: “[a]bsent adoption of these encoding rules,

the cable and consumer electronics industries have

indicated that the compromise agreement reached in the

[Memorandum of Understanding Among Cable MSOs and

Consumer Electronics Manufacturers (“MOU”)] will be

upset and their efforts to produce unidirectional digital

cable products will falter.” Plug and Play Order, 18 FCC

Rcd. at 20906 ¶ 47. The very speed with which the FCC

placed the MOU and its rules on public notice (22 days)

foreshadowed the FCC’s acquiescence. The FCC appears to

have taken little time to independently review and consider

the proposal based on statutory objectives. The FCC did not

propose any independent revisions to the proposed rules,

and instead simply issued the MOU-proposed rules as its

own proposal. The Plug and Play Order went on to adopt

the encoding rules in their entirety, and apply them to all

MVPD providers for one principal reason – lest the MOU

fall apart and leave the FCC with unfulfilled directives

under Sections 624A and 629.

This reasoning is of suspect validity at best. First, the

FCC did not have its hands tied; it could promulgate its own

USCA Case #04-1033 Document #1415172 Filed: 01/15/2013 Page 16 of 17
4

set of rules – a better set of rules that considers the positions

of all MVPD providers. Second, the threat of defection

from a private agreement should not carry weight in an

agency’s deliberation. The FCC acts pursuant to statutory

authority and objectives, and the FCC’s reasoning that its

directive would be frustrated were the MOU to falter is

reasoning that is far too attenuated.

Pet’r Br. at 42-43. 

Much of what Petitioner says is on the mark and unrefuted

by the FCC. However, I reject Petitioner’s suggestion that FCC

rulemaking may never take into account the threat of defection

from a private agreement. This argument overreaches. The

telling point in this case is that the FCC relied on a threat of

defection that was tied to a condition – requiring satellite

carriers to adopt encoding rules – that was patently

unreasonable. Apart from the threat of defection, the FCC failed

to explain how requiring satellite carriers to adopt encoding

rules was necessary to assure the commercial availability of

converter boxes and other equipment pursuant to Section 629.

In sum, it is clear that the action taken by the FCC pursuant

to its asserted authority under Section 629 was the antithesis of

reasoned decisionmaking and, thus, arbitrary and capacious. In

my view, there is no Chevron issue to be decided by this court.

See Judulang, 132 S. Ct. at 483 n.7. On this record, the

imposition of the disputed encoding rules on satellite carriers

fails for lack of reasoned decisionmaking.

USCA Case #04-1033 Document #1415172 Filed: 01/15/2013 Page 17 of 17