Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-08-01017/USCOURTS-caDC-08-01017-0/pdf.json

Parties Involved:
Federal Communications Commission
Respondent
National Apartment Association
Petitioner
National Multi Housing Council
Petitioner
United States of America
Respondent

Document Text:

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued April 17, 2009 Decided May 26, 2009 

No. 08-1016 

NATIONAL CABLE & TELECOMMUNICATIONS ASSOCIATION, 

PETITIONER

v. 

FEDERAL COMMUNICATIONS COMMISSION AND UNITED 

STATES OF AMERICA, 

RESPONDENTS

AT&T INC., ET AL., 

INTERVENORS

Consolidated with 08-1017 

On Petitions for Review of an Order 

of the Federal Communications Commission 

Paul M. Smith argued the cause for petitioner National 

Cable & Telecommunications Association. With him on the 

briefs were Daniel L. Brenner, Neal M. Goldberg, and 

Michael S. Schooler. 

Matthew C. Ames argued the cause for petitioners 

National Multi Housing Council and National Apartment 

Association and intervenor Manufactured Housing Institute. 

With him on the briefs was John McDermott. 

USCA Case #08-1017 Document #1182133 Filed: 05/26/2009 Page 1 of 23
2 

Joel Marcus, Counsel, Federal Communications 

Commission, argued the cause for respondent. On the brief 

were Matthew B. Berry, General Counsel, Joseph R. Palmore, 

Deputy General Counsel, Daniel M. Armstrong, Associate 

General Counsel, and Laurence N. Bourne, Counsel. Nancy 

C. Garrison, Catherine G. O'Sullivan, and Kristen C. Limarzi,

Attorneys, U.S. Department of Justice, entered appearances. 

Andrew G. McBride argued the cause for intervenors 

AT&T Inc., et al. With him on the brief were Joshua S. 

Turner, David C. Rybicki, Gary Phillips, Christopher M. 

Heimann, Michael E. Glover, Edward Shakin, William H. 

Johnson, and Harry F. Cole. 

Before: TATEL and GARLAND, Circuit Judges, and 

SILBERMAN, Senior Circuit Judge. 

 Opinion for the Court filed by Circuit Judge TATEL. 

 Concurring opinion by Senior Circuit Judge SILBERMAN. 

 TATEL, Circuit Judge: Finding that exclusivity 

agreements between cable companies and owners of 

apartment buildings and other multi-unit developments have 

an anti-competitive effect on the cable market, the Federal 

Communications Commission banned such contracts. The 

Commission believes that these deals—which involve a cable 

company exchanging a valuable service like wiring a building 

for the exclusive right to provide service to the residents—

may be regulated under section 628 of the Communications 

Act as cable company practices that significantly impair the 

ability of their competitors to deliver programming to 

consumers. The Commission thus forbade cable operators 

not only from entering into new exclusivity contracts, 

but also from enforcing old ones. Petitioners, associations 

representing cable operators and apartment building owners, 

USCA Case #08-1017 Document #1182133 Filed: 05/26/2009 Page 2 of 23
3 

argue that the Commission exceeded its statutory authority, 

arbitrarily departed from precedent, and otherwise violated 

the Administrative Procedure Act. Having carefully 

considered the parties’ excellent submissions, we disagree and 

conclude that the Commission acted well within the bounds of 

both section 628 and general administrative law. 

I. 

Understanding this controversy requires that we begin by 

explaining a few unintuitive statutory terms. The provision at 

issue here, section 628(b) of the Communications Act, makes 

it unlawful “for a cable operator . . . to engage 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 

programming distributor from providing satellite cable 

programming or satellite broadcast programming to 

subscribers or consumers.” 47 U.S.C. § 548(b). “Cable 

operators” are just companies that deliver video programming 

by cable, like Comcast and Time-Warner. See 47 U.S.C. § 

522(5)–(7). “Multichannel video programming distributors” 

(MVPDs) are a broader set of companies that provide video 

programming to subscribers. MVPDs include not only cable 

operators like Comcast but also direct broadcast satellite 

companies like DirecTV. See § 522(13). Although “satellite 

cable programming” and “satellite broadcast programming” 

differ somewhat—they originate from slightly different kinds 

of entities, compare § 548(i)(1), and 47 U.S.C. § 605(d)(1), 

with § 548(i)(3)—both terms essentially refer to programming 

(i.e., television shows) transmitted to MVPDs via satellite for 

retransmission to subscribers. For our purposes, the important 

point about them is this: petitioners nowhere dispute the 

Commission’s finding that “most programming is delivered 

via satellite” and so falls within one of these two categories. 

Exclusive Service Contracts for Provision of Video Services in 

USCA Case #08-1017 Document #1182133 Filed: 05/26/2009 Page 3 of 23
4 

Multiple Dwelling Units and Other Real Estate Developments 

(“Order”), 22 F.C.C.R. 20,235, 20,255, ¶ 43 n.132 (2007). 

Section 628(b)’s plain terms thus prohibit cable company 

practices with the purpose or effect of preventing competing 

MVPDs, including other cable companies, from providing the 

two predominant types of programming to consumers. 

 The Commission first considered exclusivity contracts 

between cable operators and so-called multiple dwelling units 

(MDUs) as an ancillary part of its “2003 Inside Wiring 

Order.” See In re Telecommunications Services Inside 

Wiring, 18 F.C.C.R. 1342, 1366–70, ¶¶ 63–71 (2003). That 

proceeding primarily concerned the ownership status of 

certain wiring inside MDUs, and the Commission’s order 

considered some thirteen different issues presented by its new 

wiring rules. But the Commission also addressed a related 

issue raised in a separate notice of proposed rulemaking, 

namely “whether it would be appropriate to cap exclusive 

contracts to open up MDUs to potential competition on a 

building-wide or unit-to-unit basis, and, if so, what would 

represent a reasonable cap.” Id. at 1366, ¶ 63. Reviewing the 

evidence then available, the Commission found that there was 

no “sufficient basis in this record to ban or cap the term of 

exclusive contracts.” Id. at 1369, ¶ 68; see also id. at 

1369–70, ¶¶ 69–71. 

 Four years later, the Commission returned to exclusivity 

contracts in a rulemaking devoted solely to that question. See 

Order, 22 F.C.C.R. at 20,235–64, ¶¶ 1–60. Analyzing the 

competitive harms and benefits of exclusivity clauses, see id.

at 20,241–51, ¶¶ 11–29, the Commission this time concluded 

that “exclusivity clauses cause significant harm to 

competition and consumers that the record did not reflect at 

the time of our 2003 Inside Wiring Order,” id. at 20,248–49, 

¶ 26; see also id. at 20,249–51, ¶¶ 27–29. And because the 

USCA Case #08-1017 Document #1182133 Filed: 05/26/2009 Page 4 of 23
5 

Commission found that the record now supports regulation, 

this time it extensively analyzed its authority to ban such 

contracts, concluding that both section 628 and its “ancillary 

authority” empower it to act. Id. at 20,254–64, ¶¶ 40–60. 

The Commission accordingly prohibited cable companies 

from “enforcing existing exclusivity clauses and executing 

contracts containing new ones,” id. at 20,251, ¶ 30, rejecting 

more limited remedial options, id. at 20,251–54, ¶¶ 33–39. 

 Petitioners, a cable industry group called the National 

Cable & Telecommunications Association (NCTA) and a pair 

of affiliated real estate groups (“real estate petitioners”), find 

various faults with this regulatory turnabout. They believe 

that the Commission failed to justify its change in policy and 

to consider the retroactive effects of its action. They also 

believe that the Commission ventured into real-estate affairs 

over which it has no jurisdiction and should have enacted a 

more limited remedy. But most fundamentally, they believe 

that the Commission exceeded its section 628 authority in 

regulating exclusivity deals at all. It is to this question of 

statutory construction that we first turn. 

II. 

Because this issue involves an agency’s interpretation of 

its governing statute, Chevron’s familiar framework applies. 

Chevron U.S.A. v. Natural Res. Def. Council, 467 U.S. 837, 

842–43 (1984). First, we ask if the statute unambiguously 

forecloses the agency’s interpretation. E.g., Hazardous Waste 

Treatment Council v. EPA, 886 F.2d 355, 361 (D.C. Cir. 

1989). If so, we disregard the agency’s view and “give effect 

to the unambiguously expressed intent of Congress.” 

Chevron, 467 U.S. at 843. If the statute is ambiguous enough 

to permit the agency’s reading, however, we defer to that 

interpretation so long as it is reasonable. E.g., Consumer 

Elecs. Ass’n v. FCC, 347 F.3d 291, 299 (D.C. Cir. 2003). 

USCA Case #08-1017 Document #1182133 Filed: 05/26/2009 Page 5 of 23
6 

 Conceding that on a literal reading of the statute 

exclusivity contracts do have the “effect” of preventing 

competing MVPDs from “providing satellite cable 

programming or satellite broadcast programming to 

subscribers or consumers,” § 548(b); see Oral Arg. 3:03–3:34, 

petitioners nonetheless argue that section 628’s text, structure, 

and history demonstrate that it was addressed to a different 

evil altogether. Cf. Pharm. Research & Mfrs. of Am. v. 

Thompson, 251 F.3d 219, 224 (D.C. Cir. 2001) (using all 

“traditional tools of statutory interpretation,” including “text, 

structure, purpose, and legislative history,” to ascertain 

Congress’s intent at Chevron step one). Congress, they argue, 

was concerned not with barriers to service but with practices 

that prevent cable competitors from obtaining certain kinds of 

programming that the American public wants to watch. 

Textually, they emphasize Congress’s identification of 

“satellite cable programming” and “satellite broadcast 

programming” in particular, arguing that the Commission has 

read these well-defined terms out of the statute. Structurally, 

they emphasize section 628(c), which directs the Commission 

to implement subsection (b) with rules and procedures 

focused on fair dealing between programming vendors and 

MVPDs, not on anti-competitive barriers to service generally. 

And for legislative history they cite the bill’s sponsor, who 

intended his legislation to “require[] the cable monopoly to 

stop refusing to deal, to stop refusing to sell its products to 

other distributors of television programs,” 138 Cong. Rec. 

H6487, H6533 (Rep. Tauzin), thus addressing his concern 

that “the hot shows are controlled by cable,” id. at H6534; see 

also id. at H6533 (“[T]his bill says to the cable industry, ‘You 

have to stop what you have been doing, and that is killing off 

your competition by denying it products.’” (emphasis added)). 

Petitioners thus argue that in enacting section 628(b), 

Congress intended to prevent the cable industry from starving 

its competition of programming—nothing more, nothing less. 

USCA Case #08-1017 Document #1182133 Filed: 05/26/2009 Page 6 of 23
7 

 For its part, the Commission concedes that Congress’s 

primary purpose in enacting section 628 was indeed to expand 

competition for programming, not service. But this primary 

purpose is hardly dispositive, it argues, because “statutory 

prohibitions often go beyond the principal evil to cover 

reasonably comparable evils, and it is ultimately the 

provisions of our laws rather than the principal concerns of 

our legislators by which we are governed.” Oncale v. 

Sundowner Offshore Servs., Inc., 523 U.S. 75, 79 (1998). 

Reviewing the same text, structure, and legislative history, the 

Commission interprets section 628 to permit regulation of 

exclusive service agreements as an evil that easily falls within 

the literal terms of the statute and is reasonably comparable to 

the paradigmatic anti-competitive practices that section 628 

specifically targets. See Order, 22 F.C.C.R. at 20,254–64, 

¶¶ 40–60. We agree. 

 Beginning, “as always, with the plain language of the 

statute,” Citizens Coal Council v. Norton, 330 F.3d 478, 482 

(D.C. Cir. 2003), we find nothing in section 628 that 

unambiguously forecloses the Commission’s interpretation. 

What the Commission forbade lies within the literal terms of 

section 628(b)’s proscription. Indeed, exclusivity agreements 

have both the proscribed “purpose” and the proscribed 

“effect”—cable operators execute them precisely so that they 

can be the sole company serving a building, and as petitioners 

themselves put it, “if you can’t serve a building then you can’t 

deliver satellite cable programming and satellite broadcast 

programming,” Oral Arg. 3:29–3:34. 

 To be sure, if Congress specifically intended to forbid 

practices having an anti-competitive effect on service 

generally, focusing only on two particular kinds of 

programming would have been an odd way to accomplish that 

result. But the existing language would have been an equally 

USCA Case #08-1017 Document #1182133 Filed: 05/26/2009 Page 7 of 23
8 

odd way of proscribing only unfair dealing between 

programming vendors and MVPDs (as petitioners submit) 

because the words Congress chose focus not on practices that 

prevent MVPDs from obtaining satellite cable or satellite 

broadcast programming, but on practices that prevent them 

from “providing” that programming “to subscribers or 

consumers.” § 548(b). Mindful that “statutes written in 

broad, sweeping language should be given broad, sweeping 

application,” Consumer Elecs., 347 F.3d at 298, we note 

section 628(b)’s broad and sweeping terms, which prohibit 

practices “the purpose or effect of which is to hinder 

significantly or to prevent any multichannel video 

programming distributor from providing satellite cable 

programming or satellite broadcast programming to 

subscribers or consumers.” § 548(b) (emphasis added). This 

breadth comports with section 628’s express purpose of 

“promot[ing] the public interest, convenience, and necessity 

by increasing competition and diversity in the multichannel 

video programming market,” 47 U.S.C. § 548(a). Thus, while 

the specificity of section 628’s references to satellite cable 

and satellite broadcast programming may reveal the primary 

evil that Congress had in mind, nothing in the statute 

unambiguously limits the Commission to regulating anticompetitive practices in the delivery of those kinds of 

programming by methods addressed to that narrow concern 

alone. See Oncale, 523 U.S. at 79. 

 For their structural argument, petitioners emphasize that 

subsections (c) through (f) of section 628 require regulations, 

remedies, and procedures uniquely suited to the problem of 

unfair dealing over television shows between programming 

vendors controlled by cable and competing MVPDs. 

See § 548(c)–(f). Section 628(c)(2)(C), which requires the 

Commission to “prohibit practices . . . including exclusive 

contracts . . . that prevent a multichannel video programming 

USCA Case #08-1017 Document #1182133 Filed: 05/26/2009 Page 8 of 23
9 

distributor from obtaining such programming,” well 

represents this point, see § 548(c)(2)(C), as does section 

628(e)(1), which specifically authorizes the Commission to 

remedy violations by setting “prices, terms, and conditions of 

sale of programming,” § 548(e)(1). From this, petitioners 

infer that the Commission’s focus on competition for service 

rather than programming fits uncomfortably with Congress’s 

focus on programming, not service. 

But this structural argument is a double-edged sword, and 

its second—perhaps, leading—edge cuts sharply against 

petitioners. By its terms, section 628(c) describes only the 

“[m]inimum contents of regulations,” § 548(c)(2), and as the 

Commission itself noted, Congress’s enumeration of specific, 

required regulations in subsection (c) actually suggests that 

Congress intended subsection (b)’s generic language to cover 

a broader field, see Order, 22 F.C.C.R. at 20,256, ¶ 44. The 

Commission’s remedial powers similarly extend beyond the 

kinds of unfair-dealing interventions Congress specifically 

foresaw. Indeed, instead of limiting the Commission to those 

powers, Congress broadly authorized the Commission to 

“prescribe regulations to specify particular conduct that is 

prohibited by subsection (b),” § 548(c)(1), to “prescribe 

regulations to implement this section,” § 548(f), and to “order 

appropriate remedies” including but expressly not limited to 

the price-setting option, § 548(e)(1)–(2). Ultimately, then, 

our view of section 628’s structure mirrors our view of its 

text: Congress had a particular manifestation of a problem in 

mind, but in no way expressed an unambiguous intent to limit 

the Commission’s power solely to that version of the problem. 

 Petitioners’ legislative history argument suffers from the 

same deficiency. Although they point to considerable 

evidence that Congress was specifically concerned with unfair 

dealing over programming, they offer no evidence from the 

USCA Case #08-1017 Document #1182133 Filed: 05/26/2009 Page 9 of 23
10 

legislative record to show that Congress chose its language so 

as to limit the Commission solely to that particular abuse of 

market power. True, Representative Tauzin introduced this 

legislation to “say[] to the cable industry, ‘You have to 

stop . . . killing off your competition by denying it products,’” 

138 Cong. Rec. H6487, H6533 (Rep. Tauzin), but the 

principal concern of one congressman helps little in locating 

the limits of the language chosen by all members of both 

houses. See Oncale, 523 U.S. at 79 (“[I]t is ultimately the 

provisions of our laws rather than the principal concerns of 

our legislators by which we are governed.”). Nor is the 

legislative history one-sided: the House of Representatives 

preferred section 628(b)’s broad language to another 

contemporaneous suggestion expressly limited to 

unreasonable refusals to deal. See H.R. 1303, 102d Cong. § 8 

(1992). Thus, even if legislative history could carry 

petitioners all the way from statutory language that literally 

authorizes the Commission’s action to the proposition that the 

statute unambiguously forecloses the agency’s view, this 

legislative history cannot. 

 Petitioners counter with an insightful hypothetical. 

Suppose the statute replaced the terms “satellite cable 

programming or satellite broadcast programming” with 

“Spanish-language programming.” Could the Commission 

still forbid exclusivity contracts by reasoning that “if 

competitors can’t serve a building, they can’t provide 

Telemundo”? If so, petitioners have raised the specter of a 

statutory grant without bounds, for one would be hard pressed 

to imagine any cable industry practice not having at least a 

marginal effect on competitors’ ability to provide particular 

kinds of programming. 

USCA Case #08-1017 Document #1182133 Filed: 05/26/2009 Page 10 of 23
11 

 We think this apparent overbreadth argument is best 

analyzed at Chevron step two—as claiming, in effect, that 

although the statute does not unambiguously limit the kinds of 

practices that the Commission may regulate as having the 

proscribed “effect,” the Commission might still act 

unreasonably by extrapolating from a narrow effect (i.e., an 

effect on Spanish TV) to any practice causing it, however 

removed (i.e., TV service generally). That argument has 

merit as far as it goes: in proscribing an overbroad set of 

practices with the statutorily identified effect, an agency 

might stray so far from the paradigm case as to render its 

interpretation unreasonable, arbitrary, or capricious. See, e.g., 

AFL-CIO v. Chao, 409 F.3d 377, 384 (D.C. Cir. 2005) 

(“[W]hatever ambiguity may exist cannot render nugatory 

restrictions that Congress has imposed.”). That said, the 

argument just doesn’t go very far in this case. Petitioners’ 

hypothetical derives whatever force it has from the fact that 

Spanish-language programming would rightly be understood 

as a niche—a fact that would lend special force to the view 

that the Commission, in regulating all service as affecting 

Spanish programming, was taking unreasonably overbroad 

action to achieve an objective Congress never intended to 

authorize. But satellite programming is hardly a niche. 

Indeed, petitioners nowhere dispute that it encompasses “most 

programming,” Order, 22 F.C.C.R. at 20,255, ¶ 43 n.132. 

Thus, in regulating exclusivity deals as having the purpose or 

effect of hindering delivery of these kinds of programming, 

the Commission barely reached beyond the paradigm case at 

all. In this regard, we think it noteworthy that among the 

many narrower remedies commenters suggested, not one 

urged the Commission to modify its rule so as to ban 

exclusivity deals only to the extent they affect satellite cable 

or satellite broadcast programming alone. 

USCA Case #08-1017 Document #1182133 Filed: 05/26/2009 Page 11 of 23
12 

 In the end, petitioners are unable to satisfy their heavy 

burden. To prevail at Chevron step one, they must show that 

section 628(b) is unambiguously limited to Congress’s 

principal concern with unfair program hoarding. Because 

Section 628’s actual words reach the behavior the 

Commission prohibited, petitioners are left to argue “that the 

Commission relies almost entirely on a literal reading of the 

statutory language—not the most damning criticism when it 

comes to statutory interpretation.” Consumer Elecs., 347 F.3d 

at 297 (internal quotation marks and citation omitted). And 

while the statute’s text, structure, and history do support the 

proposition that Congress was, in fact, principally concerned 

with program hoarding, none suggests that Congress chose its 

language to limit the Commission to regulating that evil 

alone. Indeed, having employed all available tools of 

statutory construction, we find little that suggests any 

congressional intent to limit section 628(b) to competition for 

programming, and so are unable to conclude that a reading 

literally permitted is nonetheless unambiguously foreclosed. 

At the very best, petitioners have demonstrated some 

ambiguity as to whether Congress intended to allow 

regulation of exclusivity contracts along with unfair dealing 

over programming—ambiguity the Commission reasonably 

resolved in favor of its own interpretation. Thus, concluding 

that section 628(b) authorizes the Commission’s action, we 

needn’t consider the Commission’s ancillary authority. 

 Real estate petitioners’ separate attack on the 

Commission’s authority has little merit. They argue that the 

exclusivity ban impermissibly regulates the real estate 

industry, which lies outside the Commission’s jurisdiction. 

The terms of the challenged prohibition apply only to cable 

companies, however, and they neither require nor prohibit any 

action by MDUs. See Order, 22 F.C.C.R. at 20,253, ¶ 37 

(“We merely prohibit the enforcement of existing exclusivity 

USCA Case #08-1017 Document #1182133 Filed: 05/26/2009 Page 12 of 23
13 

clauses and the execution of new ones by cable operators.” 

(emphasis added)). As we have emphasized, “no canon of 

administrative law requires us to view the regulatory scope of 

agency actions in terms of their practical or even foreseeable 

effects.” Cable & Wireless, P.L.C. v. FCC, 166 F.3d 1224, 

1230 (D.C. Cir. 1999). The alternative is untenable, as most 

every agency action has relatively immediate effects for 

parties beyond those directly subject to regulation. For just 

one example, no one questions the Commission’s jurisdiction 

to promulgate the 2003 Inside Wiring Order even though it 

dealt with myriad issues affecting the MDU industry, 

including such critical minutiae as whether wiring behind 

sheet rock is “physically inaccessible” and so must be opened 

to competing providers. 18 F.C.C.R. at 1362–62, ¶¶ 48–53; 

see also Nat’l Cable & Telecomm. Ass’n v. FCC, No. 07-

1356, 2008 WL 4808911, at *1 (D.C. Cir. Oct. 23, 2008). 

“Approximately 30 percent of Americans live in MDUs, and 

their numbers are growing.” Order, 22 F.C.C.R. at 20,235, 

¶ 1. We decline to put issues relating to their cable service 

outside the Commission’s authority simply because those 

issues also matter to their landlords. 

III. 

For their primary APA claim, petitioners argue that in 

deciding “to bar [exclusivity contracts] now, after 

affirmatively permitting them in 2003,” the Commission 

failed to explain its change of heart and thus acted arbitrarily 

and capriciously. NCTA Opening Br. 28. Of course, “it is 

axiomatic that agency action must either be consistent with 

prior action or offer a reasoned basis for its departure from 

precedent.” Williams Gas Processing Gulf Coast Co. v. 

FERC, 475 F.3d 319, 326 (D.C. Cir. 2006) (internal quotation 

marks and brackets omitted). Yet it is equally axiomatic that 

an agency is free to change its mind so long as it supplies “a 

reasoned analysis,” Motor Vehicle Mfrs. Ass’n of the United 

USCA Case #08-1017 Document #1182133 Filed: 05/26/2009 Page 13 of 23
14 

States v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 57 

(1983) (internal quotation marks omitted), showing that “prior 

policies and standards are being deliberately changed, not 

casually ignored,” Greater Boston Television Corp. v. FCC, 

444 F.2d 841, 852 (D.C. Cir. 1970) (Leventhal, J.); see also 

FCC v. Fox Television Stations, Inc., 129 S. Ct. 1800, 1811 

(2009) (“[T]he requirement that an agency provide reasoned 

explanation for its action would ordinarily demand that it 

display awareness that it is changing position.”). Petitioners 

believe that the Commission has neither reasonably 

disavowed the logic of the 2003 Inside Wiring Order nor 

explained how that logic could fail to produce the same 

outcome on the record now presented. Finding the 

Commission’s extensive discussion of its change in approach 

more than equal to our forgiving standard of review, we 

disagree. 

 Petitioners’ argument begins with a substantial overreading of the 2003 Inside Wiring Order. Taking a few 

preferred sentences out of context, they argue that the 

Commission committed itself to an express logic: where cable 

already faces increasingly effective competition, it is 

inappropriate to interfere with exclusivity contracts. And 

since competition continued to increase between 2003 and 

2007, petitioners argue, the Commission’s own logic bars it 

from acting differently now. 

 To be sure, as petitioners emphasize, the 2003 Inside 

Wiring Order does conclude with the following two 

sentences: “We note that competition in the MDU market is 

improving, even with the existence of exclusive contracts. 

Accordingly, we decline to intervene.” 18 F.C.C.R. at 1370, 

¶ 71. But context matters, and here it makes clear that 

petitioners have confused a mere contributing factor with a 

sufficient condition. The uncited portions of that same 

USCA Case #08-1017 Document #1182133 Filed: 05/26/2009 Page 14 of 23
15 

paragraph note that commenters “identified both procompetitive and anti-competitive aspects of exclusive 

contracts,” and that the Commission was unable to “state, 

based on the record, that exclusive contracts [were] 

predominantly anti-competitive.” Id. (emphasis added). 

Indeed, reading the four short paragraphs the Commission 

devoted to the issue in their entirety, we think it quite clear 

that the Commission based its unwillingness to intervene in 

2003 primarily on the absence of a sufficient record. See id. 

at 1369, ¶ 68 (“[W]e do not find a sufficient basis in this 

record to ban or cap the term of exclusive contracts.”); id. at 

1369, ¶ 69 (“The record does not indicate the extent to which 

exclusive contracts have been utilized . . . .”); id. at 1369, ¶ 70 

(“[T]he current record is insufficient to justify governmentsanctioned caps of any length . . . .”); id. at 1370, ¶ 71 (“[T]he 

record does not support a prohibition on exclusive 

contracts . . . .”). In short, the Commission acknowledged in 

its 2003 Inside Wiring Order that exclusivity contracts could 

either foster competition over entire buildings or foil 

competition over individual units, and that decision indicates 

only that the record then available was insufficient to resolve 

this question. Contrary to petitioners’ claim, nothing about 

this logic commits the Commission to abstaining from 

regulation whenever competition is increasing—one could 

easily imagine that, however much competition improved 

despite exclusivity agreements, it would have improved more 

without them. 

 Conversely, petitioners give the Commission far too little 

credit for its extensive analysis of this issue in the order 

before us today. Rather than merely observing, as it did in 

2003, that exclusivity agreements could theoretically have 

both pro-competitive and anti-competitive effects, in 2007 the 

Commission extensively analyzed the question, see Order, 22 

F.C.C.R. at 20,243–51, ¶¶ 16–29, and concluded that “the 

USCA Case #08-1017 Document #1182133 Filed: 05/26/2009 Page 15 of 23
16 

harms significantly outweigh the benefits in ways they did not 

at the time of the Commission’s 2003 Inside Wiring Order.” 

Id. at 20,243, ¶ 16. The Commission found that exclusivity 

agreements would likely raise prices, limit access to certain 

programming, and delay deployment of fiber optic and 

broadband technologies. Id. at 20,244–46, ¶¶ 17–20. It 

placed particular emphasis on so-called “triple play”—where 

phone or cable companies use modern wiring to provide 

video, telephone, and internet service as a bundled package. 

Such packages are uniquely relevant, as they represent a 

highly effective form of competition between large, preexisting companies that has expanded since the 2003 Inside 

Wiring Order. Id. at 20,245–46, ¶¶ 19–21. The Commission 

found that triple play competition between phone and cable 

providers lowers prices, spurs deployment of advanced 

technology, and facilitates efficiency and simplicity in the 

market. Id. If the incumbent has exclusive rights to video 

service, however, then competitors will be unable to offer a 

bundle, thus inhibiting new entry and denying consumers the 

competitive and efficiency benefits of triple play. Id. at 

20,246, ¶ 21. “These harms to consumers are greater than 

they were several years ago,” the Commission found, because 

in 2003 “new entry by [phone companies] had not yet begun 

on a large scale, the recent increase in fiber construction had 

not yet materialized, and the popularity of triple play was 

unproven.” Id. at 20,245, ¶ 19. 

 Moreover, the Commission fully considered contrary 

comments. Specifically, it acknowledged the view that 

exclusivity contracts might spur investment by allowing cable 

operators some certainty that they could recoup their sunk 

costs, or might enable MDU residents to pool their bargaining 

power and thus extract cable company concessions. Id. at 

20,247–48, ¶¶ 24–25. In the end, however, the Commission 

meticulously rejected these arguments as unpersuasive, 

USCA Case #08-1017 Document #1182133 Filed: 05/26/2009 Page 16 of 23
17 

finding that the interests of MDU owners would not always 

align with those of the residents, that agreements may have 

been signed before competition even existed, and that, for 

many other reasons, the record failed to substantiate 

the practical reality of these theoretical benefits. See id. 

at 20,246–47, ¶ 22, 20,249–51, ¶¶ 28–29. Contrary to 

petitioners’ argument, this balancing of harms and benefits 

did not repudiate the logic of the 2003 Inside Wiring Order. 

Instead, it merely resolved the very question on which the 

Commission found the earlier record insufficient. 

 Indeed, even were the analysis in the 2003 Inside Wiring 

Order more extensive, and even had it expressly committed 

the Commission to petitioners’ preferred logic, the 2007 

Order’s analysis would still easily satisfy our deferential 

standard of review. As the Supreme Court recently put it, 

“[the Commission] need not demonstrate to a court’s 

satisfaction that the reasons for the new policy are better than 

the reasons for the old one; it suffices that the new policy is 

permissible under the statute, that there are good reasons for 

it, and that the agency believes it to be better.” Fox 

Television, 129 S. Ct. at 1811. In other words, the existence 

of contrary agency precedent gives us no more power 

than usual to question the Commission’s substantive 

determinations. We still ask only whether the Commission 

has adequately explained the reasons for its current action and 

whether those reasons themselves reflect a “‘clear error of 

judgment.’” DirecTV, Inc. v. FCC, 110 F.3d 816, 826 (D.C. 

Cir. 1997) (quoting State Farm, 463 U.S. at 43). Here, the 

Commission could hardly have made its “good reasons” for 

its current policy clearer: it believes that individual consumers 

are more likely to capture the benefits of competition in the 

absence of exclusivity agreements. It reasoned that 

USCA Case #08-1017 Document #1182133 Filed: 05/26/2009 Page 17 of 23
18 

although “competition for the MDU” may have 

some theoretical advantages in some cases 

over competition for individual consumers, it 

may not describe reality in many cases. Even 

if it does, in general we find that the best 

results for consumers come from preserving 

their ability to play an active role in making an 

individual choice rather than allowing cable 

operators using exclusivity clauses to foreclose 

individual choice. In addition, as noted above, 

exclusivity contracts tend to insulate the 

incumbent from any need to improve its 

service. Thus, we conclude that exclusivity 

clauses generally do not benefit MDU 

residents. 

Order, 22 F.C.C.R. at 20,250, ¶ 28. Given this explanation, 

together with the rest of the Commission’s extensive analysis 

of exclusivity contracts, we can easily see a clear articulation 

of the concerns driving its change in policy, as well as the 

basis for the new, reasonable inferences the Commission drew 

from a significantly updated record. This marks the limits of 

our review. 

 Petitioners also dispute certain findings relevant to the 

Commission’s decision, including the increased importance of 

triple play and the fact that incumbents are responding to this 

increased competition by using exclusivity agreements to 

“lock-up” large clients like MDUs. Id. at 20,240–41, ¶ 10. 

These findings rest on substantial record evidence, however, 

see, e.g., id. at 20,240–41, ¶ 10 & nn.23–34, 20,243, ¶ 14 

(discussing various commenters identifying exclusivity deals 

as locking out competitive providers), and the Commission 

reasonably explained that the lack of even more evidence of 

exclusivity clauses was attributable to the fact that “many 

USCA Case #08-1017 Document #1182133 Filed: 05/26/2009 Page 18 of 23
19 

MDU owners are unwilling or legally unable to make public 

the contracts containing them,” id. at 20,242, ¶ 12. Thus, the 

Commission used the evidence before it to make a reasonable 

prediction about the likely present and future effects of 

changing competitive pressures on the cable market. In that 

setting, “[s]ubstantial evidence does not require a complete 

factual record—we must give appropriate deference to 

predictive judgments that necessarily involve the expertise 

and experience of the agency.” Time Warner Entm't Co. v. 

FCC, 240 F.3d 1126, 1133 (D.C. Cir. 2001). 

 Mounting a separate complaint, real estate petitioners 

argue that the Commission acted arbitrarily by rejecting their 

proposed alternative remedies, including case-by-case 

adjudication. This argument runs aground on bedrock 

administrative law, which puts “the choice . . . between 

proceeding by general rule or by individual, ad hoc litigation 

. . . primarily in the informed discretion of the administrative 

agency.” SEC v. Chenery Corp., 332 U.S. 194, 203 (1947). 

The case-by-case approach the MDU owners prefer makes 

sense in the context of the fact-specific, price-setting remedy 

contemplated by sections 628(d) and (e) for violations such as 

unfair refusals to deal. In the context of a general problem 

like exclusivity agreements, however, we see considerable 

wisdom in the Commission’s determination to “avoid the 

burden that would be imposed by numerous individual 

adjudications,” Order, 22 F.C.C.R. at 20,254, ¶ 38— 

a judgment petitioners have given us no reason to doubt. 

IV. 

The final issue presented concerns the Commission’s 

decision to apply its rule to existing contracts. According to 

petitioners, this amounts to “directly retroactive” action 

barred by the APA’s requirement that “legislative rules . . . be 

given future effect only,” Chadmoore Comm’ns, Inc. v. FCC, 

USCA Case #08-1017 Document #1182133 Filed: 05/26/2009 Page 19 of 23
20 

113 F.3d 235, 240 (D.C. Cir. 1997) (internal quotation marks 

omitted), or, alternatively, to agency action with harmful, 

secondarily retroactive effects that the Commission failed to 

consider, see, e.g., Yakima Valley Cablevision, Inc. v. FCC, 

794 F.2d 737, 745 (D.C. Cir. 1986) (“[R]etroactive 

modification or rescission of [a] regulation can cause great 

mischief. An agency must balance this mischief against the 

salutary effects, if any, of retroactivity.”). Neither argument 

persuades. 

 First, we think it readily apparent that the Commission’s 

action has only “future effect” as the APA and our precedents 

use that term. The exclusivity ban purports to alter only the 

present situation, not “the past legal consequences of past 

actions.” Mobile Relay Assocs. v. FCC, 457 F.3d 1, 11 

(D.C. Cir. 2006) (quoting Bowen v. Georgetown Univ. Hosp., 

488 U.S. 204, 219 (1988) (Scalia, J., concurring)). Petitioners 

insist that under our precedent, “[t]he critical question” is only 

whether the Commission’s rule “changes the legal landscape.” 

Nat’l Mining Ass’n v. Dep’t of Labor, 292 F.3d 849, 859 

(D.C. Cir. 2002) (internal quotation marks omitted). Of 

course, if that were all it took to render a rule impermissible 

under the APA, it would spell the end of informal rulemaking. 

We have thus repeatedly made clear that an agency order that 

only “upsets expectations based on prior law is not 

retroactive,” Mobile Relay Assocs., 457 F.3d at 11 (internal 

quotation marks omitted). That describes precisely this case. 

Here the Commission has impaired the future value of past 

bargains but has not rendered past actions illegal or otherwise 

sanctionable. “It is often the case that a business will 

undertake a certain course of conduct based on the current 

law, and will then find its expectations frustrated when the 

law changes.” Chem. Waste Mgmt. v. EPA, 869 F.2d 1526, 

1536 (D.C. Cir. 1989). Such expectations, however 

USCA Case #08-1017 Document #1182133 Filed: 05/26/2009 Page 20 of 23
21 

legitimate, cannot furnish a sufficient basis for identifying 

impermissibly retroactive rules. 

 Petitioners’ alternative argument regarding secondary 

retroactivity fares somewhat better, but not well enough. Our 

case law does require that agencies balance the harmful 

“secondary retroactivity” of upsetting prior expectations or 

existing investments against the benefits of applying their 

rules to those preexisting interests. See, e.g., Bergerco 

Canada v. U.S. Treasury Dep’t, 129 F.3d 189, 192–93 (D.C. 

Cir. 1997). And by significantly altering the bargained-for 

benefits of now-unenforceable exclusivity agreements, the 

Commission has undoubtedly created the kinds of secondary 

retroactive effects that require agency attention and balancing. 

Petitioners’ argument nonetheless fails for an obvious reason: 

the Commission did expressly consider the relative benefits 

and burdens of applying its rule to existing contracts and, 

after extensive analysis, concluded that banning enforcement 

of existing contracts was essential. Order, 22 F.C.C.R. at 

20,252–53, ¶ 35–37. The Commission found it “strongly in 

the public interest” to prevent the harms from existing 

contracts “to continue for years,” or to “continue indefinitely 

in the cases of exclusivity clauses that last perpetually.” Id. at 

20,252, ¶ 35. Legitimate expectations, it noted, were left 

largely undisturbed, because “[t]he lawfulness of exclusivity 

clauses ha[d] been under [the Commission’s] active scrutiny 

for a decade,” and both the Commission and several 

individual states had already taken similar actions. Id. at 

20,252–53, ¶ 36. Finally, the Commission explained that 

incumbent operators would continue to reap the benefits of 

their natural monopolies, as they “will still be able to use their 

equipment in MDUs to provide service to residents who wish 

to continue to subscribe to their services.” Id. at 20,253, ¶ 37. 

USCA Case #08-1017 Document #1182133 Filed: 05/26/2009 Page 21 of 23
22 

 Once again, we think this extensive discussion easily 

satisfies the Commission’s obligation under our deferential 

standard of review. The Commission balanced benefits 

against harms and expressly determined that applying the rule 

to existing contracts was worth its costs. Indeed, it devoted as 

much analysis to this narrow issue as it did to the entire 

question of exclusivity contracts in the 2003 Inside Wiring 

Order on which petitioners claim they reasonably relied. 

Thus, although petitioners believe that the 2003 order 

promised them that their exclusivity deals would remain 

valid, we agree with the Commission that any cautious 

administrative lawyer would have understood that the 

Commission could later take precisely the action it decided 

against in 2003. That agencies may change their minds is, 

after all, a matter of hornbook law—all the more so where, as 

here, the initial decision not to act was based on the 

insufficiency of the record. We thus see nothing unreasonable 

in the Commission’s balancing of the benefits and costs and, 

following familiar principles of judicial review, we decline to 

rebalance those factors for ourselves. 

V. 

In sum, we see the challenged order as fully authorized 

by section 628 and the product of careful agency 

reconsideration. The petitions for review are denied. 

So ordered. 

USCA Case #08-1017 Document #1182133 Filed: 05/26/2009 Page 22 of 23
SILBERMAN, SeniorCircuit Judge, concurring: I fully agree

with the court’s opinion. Petitioners, without citing the case, are

relying, in part, on the holding of the Supreme Court in Holy

Trinity Church v. United States, 143 U.S. 457 (1892). In that

case, the Court was faced with a statute that unequivocally made

it a crime to assist or encourage any alien to move to the United

States to perform “labor or service of any kind.” Id. at 458

(emphasis added). The Church had brought a minister from

England to lead a New York congregation. The Court looked to

legislative history to conclude that Congress was concerned with

the importation of cheap, unskilled labor–not the likes of a

clergyman (although, just as in our case, nothing in the

legislative history indicated a limit on the broad statutory

language). The Court fatefully said, “a thing may be within the

letter of the statute and yet not within the statute because not

within its spirit, nor within the intention of its makers.” The

seminal article criticizing that approach is John Manning,

Textualism and the Equity of the Statute, 101 Columbia L. Rev.

1, 14 (2001). 

Holy Trinity Church has been used by the Supreme Court

ever since–at least up to recent times–to justify statutory

interpretation which, in truth, accorded with a judicial view of

wise policy. See, e.g., NLRB v. Fruit and Vegetable Packers

and Warehousemen Local 766, 377 U.S. 58, 72 (1964).

However, even justices who might have otherwise been

sympathetic to the Holy Trinity “methodology” would not have

been inclined to favor petitioners’ policy position.

USCA Case #08-1017 Document #1182133 Filed: 05/26/2009 Page 23 of 23