Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-95-01026/USCOURTS-caDC-95-01026-0/pdf.json

Parties Involved:
Adelphia Communications Corp.
Petitioner
Federal Communications Commission
Respondent
United States of America
Respondent

Document Text:

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United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued December 18, 1995 Decided July 23, 1996

No. 95-1026

ADELPHIA COMMUNICATIONS CORP.,

PETITIONER

v.

FEDERAL COMMUNICATIONS COMMISSION AND

UNITED STATES OF AMERICA,

RESPONDENTS

On Petition for Review of an Order of the

Federal Communications Commission

Terry S. Bienstock argued the cause for petitioner with whom Ira I. Hershkowitz, Seth A. Davidson

and Randall D. Fisher were on the briefs. Richard B. Beckner entered an appearance.

Clifford G. Pash, Jr., Counsel, Federal Communications Commission, argued the cause for

respondents, with whom William E. Kennard, General Counsel, Daniel M. Armstrong, Associate

General Counsel, Anne K. Bingaman, Assistant Attorney General, United States Department of

Justice, Catherine G. O'Sullivan and Nancy C. Garrison, Attorneys, were on the brief. John E.

Ingle, Deputy Associate General Counsel, and Laurence N. Bourne entered appearances.

Before: EDWARDS, Chief Judge, SILBERMAN and GINSBURG, Circuit Judges.

Opinion for the court by GINSBURG, Circuit Judge.

GINSBURG, Circuit Judge: Adelphia Communications petitions for review of a Federal

CommunicationsCommission regulation governing the ratesthat a cable systemoperator maycharge

for a discounted package of premium programming, i.e., a package of channels and programs that

may also be purchased individually. Having concluded that the Commission acted within its authority

under the Cable Act to impose such a regulation, and that the Commission acted reasonably in

adopting the regulation, we deny the petition.

I. Background

Eight years after enacting the Cable Communications Policy Act of 1984, which resulted in

deregulation ofthe ratesthat cable television systemoperators charge theirsubscribers, theCongress

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reimposed federal regulation of those rates. In Time Warner Entertainment Co., L.P. v. FCC, 56

F.3d 151, 162-63 (D.C. Cir. 1995), we described at some length the regulatory regime established

by the Cable Television Consumer Protection and Competition Act of 1992. Pub. L. No. 102-385,

106 Stat. 1460. Here we re-state only the details most relevant to the present case.

Except with respect to so-called premiumprogramming (of which more in a moment), a cable

system that does not face "effective competition" as that term is defined in the Actand the "vast

majority" of cable systems do not, Time Warner, 56 F.3d at 179-80is subject to rate regulation

under the Act. 47 U.S.C. § 543(a)(2); see also 47 U.S.C. § 543(l)(1) (defining "effective

competition"); 47 C.F.R. § 76.906 (lack of effective competition presumed). Thus, the Act (1)

requires that most cable systems offer a "basic service tier" subject to rate regulation by a state or

local franchising authority pursuant to rules established by the FCC, 47 U.S.C. § 543(a)(2)-(6) and

(b)(1); see also 47 U.S.C. § 543(b)(7) (defining "basic service tier"), and (2) subjects to regulation

by the FCC itselfthe ratesthese systems charge for so-called "cable programming service," i.e., a tier

of video programming that is neither part of the basic service tier nor offered on a per channel or per

program basis. § 543(a)(2)(B) & (c); see also § 543(l)(2) (defining "cable programming service").

Finally, the Act (3) exempts from rate regulation all premium programming, which it refers to as

video programming that is offered on a per channel or per program basis (such as the Home Box

Office channels and championship boxing matches), regardless whether the cable operator issubject

to "effective competition." § 543(a)(1)-(2), (l)(2).

The Act does not say whether the rate that a cable system operator charges for a package of

premium channels or programsthat are also offered separatelyoxymoronically called an "a la carte

package" in FCC jargonis subject to regulation. Noting that this question had generated "sharply

conflicting comments" from cable operators and programmers on one side and from municipalities

and subscriber advocates on the other, the Commission initially concluded that the rate charged for

an a la carte package ought not be regulated "so long as two essential conditions are met."

Implementation of Sections of the Cable Television Consumer Protections and Competition Act of

1992: Rate Regulation (hereinafter "Rate Regulation"), MM Dkt. No. 92-266, 8 FCC Rcd 5631

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WW 325, 327 (April 1993). First, the cable operator had to continue to offer the component parts

of the package individually, id. at ¶ 328; and second, the price of the premium package could not

exceed "the sum of the individual charges for each component service," id. at ¶ 327. (Query, why

would anyone pay more for the package than for the parts?) The Commission believed that with

these "safeguards" market forces were "likely to ensure that rates [for a la carte packages remained]

reasonable"; regulation of such rates, therefore, "would not serve the purposes of the Cable Act"

which "contains a clear and explicit preference for competitive resolution of issues where that is

feasible". Id. at ¶ 329 & 2. Indeed, "regulation in such circumstances might be counterproductive"

because it might discourage operatorsfrom offering a discount (i.e., from piece prices) on a package

of premium services. Id. at ¶ 329.

At the same time, the Commission recognized that exempting premium packages from rate

regulation might invite operatorsto engage in evasive maneuversinconsistent with the policies of the

Act. The FCC made clear, therefore, that the first condition for regulatory exemptionthat the

operator continue to offer the components of the package individually"is satisfied only when the

per channel offering provides consumers with a realistic service choice." Id. ¶ 328 n.808. In this

regard the Commission referred to its statutory obligation not only to address evasive practices case

by case but also periodically to "review and revise [its] regulations on evasion." Id. ¶ 451.

Concern about evasive behavior and the difficulty involved in detecting it also prompted the

Commission to comment upon the possibility that the exemption of premium packages from rate

regulation would invite cable operators opportunistically to restructure their offerings. The

Commission stated its belief that the Cable Act does not "require [it] to restrict the movement of a

channel [from a regulated service tier] to premium and deregulated status," id. ¶ 441 n.1105, and

decided not to restrict such channelshifting because it had "no evidence that operators would or, as

a business matter, could shift programming previously offered as part of a tier to "a la carte' status

... to avoid the rate regulation applicable to tiers." Id. at ¶ 453 n.1161. At the same time, the

Commission reserved the question "whether a shift of programming from a tier to an "a la carte'

offering in and of itself would constitute evasion." Id.

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Five months later, but still a few days before the regulations took effect, the FCC defended

itsso-called "tier-neutral" approach to rate regulationmeaning that it appliesthe same "benchmark

formula and rollback requirements," see Time Warner, 56 F.3d at 180, to the basic and cable

programming service tiersagainst various complaintsincluding the claimthat tier-neutralregulation

creates an incentive to shift programming fromregulated to unregulated status by offering it a la carte

in order to avoid regulation. Rate Regulation, MM Dkt. No. 92-266, 9 FCC Rcd 1164 WW 31-35

(First Order on Reconsideration, August 1993). The Commission explained that by calling for

regulation to hold the ratesfor all tiers ofservice down to "reasonable" competitive levels, it wasthe

Cable Act itself, not the FCC'stier-neutral approach, that created the incentive for operatorsto avoid

regulation. Id. at ¶ 35. The Commission also stated its view that "restructuring program offerings

to provide more a la carte services is not per se undesirable" because it serves the statutory goal of

increasing consumer choice, and reiterated its doubt that "operators, as a business matter, have

unlimited ability to shift programming from tiers to per-channel offerings." Id.

Roughly seven months after the regulations took effect the Commission noticed that "a

number of operators ha[d] restructured service offeringsso that channelsthat could have been subject

to regulation [had] been removed from a regulated tier and [were] being offered on an "a la carte'

basis as well as on package basis." Rate Regulation, MM Dkt. No. 92-266, 9 FCC Rcd 4119 ¶ 193

(Second Order on Reconsideration, March 1994). Because operators could "raise their overall rates

for the same service by removing channels from regulated tiers and offering them on a package and

on an "a la carte' basis," id. at ¶ 193, and because the Commission had received commentssuggesting

"that some of these offerings may not comply with [the] requirement that subscribers must have a

realistic option to purchase [a la carte] channels that are not subject to regulation," id., the

Commission re-examined its position.

The FCC then re-affirmed its belief that it could better serve the public interest by leaving

unregulated the rate for any premium package the price of which did not exceed the sum of the

charges for the component services offered separately. Id. at ¶ 194. The Commission reiterated its

concern, however, that the a la carte offering be a "realistic service choice," id. at 194, and issued

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"interpretive guidelines" to help cable operators and regulators determine whether in a particular case

an offering of a la carte programmingpackaged and separatewould be considered an evasion of

rate regulation rather than a realistic service alternative. Id. at ¶ 195. These guidelines included five

factors that would count in favor of exemption and ten that would count in favor of regulation. Id.

at ¶ 196.

The Commission issued the guidelines in March 1994, but by November experience with

"cable operators [that had] evaded rate regulation by purporting to offer channels a la carte, when

in fact the individual offerings were not a realistic service alternative," had persuaded theCommission

that the guidelines could not accomplish their purpose. Rate Regulation, MM Dkt. No. 92-266 ¶ 45

(Sixth Order on Reconsideration, November 1994):

[W]e must acknowledge that there is merit to the industry's claim that neither our

original two-part test nor our interpretive guidelines provides a clear answer with

respect to the permissibility of some a la carte packages that have been offered.

Indeed, it is perhaps inevitable that our test would not be capable of precise

application in many instances because it is not clear how various factors should be

weighed and applied.

The Commission therefore concluded that a premium package should be regulated as a tier

of cable programming service. Id. at ¶ 46; see also 47 C.F.R. § 76.986(a). In support of this new

position the agency drew upon the terms of the Cable Act, its legislative history, and practical

considerations. See id. at WW 46-53.

Although theCommission changed its position onpremiumpackages, it did not alter its earlier

decision to "grandfather" packages composed entirely of programming continuously available on a

per channel or per program basis since the agency'sinitial order (April 1, 1993). Id. at WW 41 & 51.

Henceforth, a cable operator would be free to create packages of premium channels under new rules

governing "new product tiers" and to price those new offerings as it saw fit. 47 C.F.R. § 76.987(a).

Operators would not be allowed, however, to move a channel from a regulated tier to a new product

tier. Id. at ¶ 51; 47 C.F.R. § 76.986(c)(1).

The "difficult question" facing the FCC concerned the treatment of a la carte offerings created

between April 1993 and the change to the new regulatory regime in September 1994. Id. Seeing

"little reason to require an operator to "reverse migrate' a package that was not clearly ineligible for

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unregulated treatment under [itsformer] a la carte policy," the Commission decided to treat as a new

product tier anypremiumpackage first offered under the old regime if(1) the operator had reasonable

grounds for believing that the package was exempt, and (2) the package does not contain more than

"a small number of migrated channels." Id.; 47 C.F.R. § 76.986(c)(2).

Meanwhile, in 1993 Adelphia had restructured the rate and service offerings of most of its

cable systems so that every channel previously offered on a bundled basis could be purchased both

a la carte and as part of a discounted package. Under the Commission's Sixth Order on

Reconsideration, however, such package prices were deemed subject to rate regulation; they were

not eligible for the grandfather clause and did not meet the requirement of the "small-number rule."

Adelphia therefore petitioned this court for review of the Sixth Order on Reconsideration insofar as

it instituted rate regulation and the small-number rule.

II. Analysis

Adelphia raises two challenges to the rules promulgated in the Sixth Order on

Reconsideration. First, Adelphia argues that the 1992 Cable Act does not authorize the FCC to

regulate the rate a cable operator may charge for a discounted package of video programming

services each of which the operator offers also on an individual basis. Second, Adelphia argues that

even if the Cable Act does authorize such regulation, the Commission's distinction among a la carte

packages based upon the number of migrated channels they contain (a) is arbitrary and capricious in

that the FCC has justified neither the distinction nor its retroactive application and (b) violates the

First Amendment of the United States Constitution. 

A. Authority to Regulate Rates

Adelphia arguesthat the text, the purpose, and the legislative history of the Cable Act plainly

deny the Commission authority to regulate the rate a cable system operator may charge for a

discounted package of premium programming that it also offers a la carte. Adelphia also asks us not

to defer under Chevron U.S.A., Inc. v. Natural Resources Defense Counsel, Inc., 467 U.S. 837

(1984), to the Commission's current interpretation of the Act, because the agency has not adequately

explained the reason for abandoning its original interpretation. None of Adelphia's arguments has

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merit.

The FCC may regulate the rate an operator charges for "cable programming service." 47

U.S.C. § 543(a)(2)(B). The question whether the FCC has the authority it claims to regulate a

package of premiumprogramming all the elements of which are also offered a la carte turns upon the

meaning of the quoted phrase, which is defined in § 543(l)(2) as:

any video programming provided over a cable system, regardless of service tier,

including installation or rental of equipment used for the receipt of such video

programming, other than (A) video programming carried on the basic service tier, and

(B) video programming offered on a per channel or per program basis.

The emphasized term "service tier" is in turn defined as "a category of cable service or other services

provided by a cable operator and for which a separate rate is charged by the cable operator." 47

U.S.C. § 522(16).

By joining the phrases "regardless ofservice tier" and "other than video programming offered

on a per channel or per program basis," Adelphia reads § 543(l)(2) as though it excluded from the

definition of "cable programming service" (and thus from the reach of rate regulation) not only

individual premium services offered a la carte but also a service tieri.e., a packageof such

offerings. Far from finding this proposition so patent as to preclude the contrary interpretation

adopted by the Commission, we think Adelphia's construction is strained and implausible; indeed,

Adelphia's reading is almost the opposite of what § 543(l)(2) actually says.

Still, Adelphia insiststhat the Commission'sinterpretation of § 543(l)(2) renderssuperfluous

§ 543(h), which grantsthe agencyauthority"to prevent [regulatory] evasions, including evasionsthat

result from retiering." Adelphia offers no reason to believe, however, what its argument necessarily

implies, namely that the Congress created this authority solely because it was concerned that cable

operators would shift programming from regulated tiers to unregulated a la carte packages. The

House Report pretty clearly suggests otherwise. See H.R. Rep. No. 628, 102d Cong., 2d Sess.

(1992)("For example, the Committee intendsfor the FCC to view a change in cable service from one

tier offering a broad package of programming for $15/month or two tiers offering the same

programming for $5/month (for the basic service tier) plus $15/month (for an expanded basic tier)

as a $5/month increase").

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Adelphia points to nothing in the legislative history of the Act nor to any purpose of the Act

the fulfillment of which requires a non-literal reading of § 543(l)(2). Its reference to a House

Committee statement concerning multiplexed premium services is way off the mark: "multiplexing"

there refersto the practice of offering "multiple channels of commonly-identified video programming

as a separate tier (e.g., HBO1, HBO2, and HBO3)," id. at 80, not the packaging of unrelated

premiumservices. And while deregulation of the rates charged for premium packages might well call

forth an increase in the supply of a la carte offeringswhich, considered in isolation, would serve the

statutory purpose of promoting competition and consumer choice, id. at 90; S. Rep. No. 92, 102d

Cong., 1st Sess. 77 (1991)Adelphia offers no reason to doubt the Commission'sjudgment that the

benefit to consumers of having more a la carte offerings could be more than offset by the increased

prices that cable system operators would charge if the rates for premium packages were not

regulated.

What we have said above renders Chevron deference to the Commission's interpretation of

the Act somewhat beside the point; the Commission's reading of § 543(l)(2) is not only reasonable,

it is far more reasonable than Adelphia's. We pause only briefly, therefore, to comment upon

Adelphia's charge that the FCC has forfeited its entitlement to deference because it did not give a

reasoned analysis for its "about-face" regarding the application of the Cable Act to premium

packages. Not only did the Commission provide a reasoned analysis based upon its experience under

the Second Order on Reconsideration, it turned somewhat less than 180 degrees from its original

interpretation of the statute.

The Commission has alwaysrecognized that § 543(l)(2), read literally, requiresregulation of

the rates charged for premium packages. Because the Commission anticipated that such regulation

might serve the purpose of the statute less well than would an unregulated market, however, it

initially decided not to apply § 543(l)(2) literally. Experience soon dispelled the basis for that

decision; the resulting opportunities for regulatory evasion exceeded what the Commission

anticipated or could adequately address case by case. As the Commission explained in other words,

when the facts changed, the agency changed its position. Even if we do not defer at all to the

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Commission's authority, therefore, we defer to the force of its reasoning. To do otherwise would be

to insist upon "a foolish consistency" indeed. 

B. The Small-Number Rule

As noted above, Adelphia challenges the small-number rule both as arbitrary and capricious,

presumably in violation of the Administrative Procedure Act, and as a violation ofitsrights under the

first amendment. The Commission urges us not to reach the merits of these claims either on the

ground that they were not raised before the Commission or because they are not yet ripe for review.

1. Threshhold Issues. We take up first the Commission's threshhold objections.

(a) Exhaustion of Administrative Remedies. Adelphia points out that Newhouse

Broadcasting, in response to theSecond Order onReconsideration, objected to the small-numberrule

on the ground that it lacks a "rational basis," and objected to its corollary, retroactive imposition of

refund liability, on the ground that it would be "grossly unfair" to make cable system operatorsliable

for refunds with respect to rates charged while the Commission's rules were unclear. Rate

Regulation, MM Dkt. No. 92-266 (Reply Comments of Newhouse Broadcasting, July 1994).

Without even a reference to the Constitution let alone a suggestion that the rule burdens speech, this

objection does not raise any recognizable first amendment claim. Rather, the Newhouse filing reads

more like an arbitrary and capricious claim arising under the APA (although the statute is not cited

either).

Adelphia citesfootnote 3 inNorthwestern Indiana TelephoneCo., Inc. v. FCC, 872 F.2d 465,

470 (D.C. Cir. 1989), for the proposition that a facial constitutional challenge to an FCC rule is "not

generally subject to exhaustion requirements." While the court did not distinguish carefully between

the constitutional challenges advanced against the statute and against the regulation there at issue,

N.I.T.C. must be read in the light of our earlier decision in Continental Air Lines v. Dep't of

Transportation, 843 F.2d 1444 (D.C. Cir. 1988). There we made it clear that although a

constitutional attack upon a statute need not be raised before the agencyciting Weinberger v. Salfi,

422 U.S. 749, 765 (1975), as we did in the N.I.T.C. footnotea constitutional attack upon an

agency'sinterpretation of a statute issubject to the exhaustion requirement; the agency must be given

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"a shot at wrestling with the statute in a way that, in the agency's view, would comport with the

demands ofthe First Amendment." 843 F.2d at 1456. The Commission was not given that shot here,

and so we decline to reach the merits of Adelphia's constitutional claim.

(b) Ripeness. The Commission argues that Adelphia's APA challenges to the small-number

rule are not ripe for review because the agency has not yet applied the rule; therefore the

Commission's policy has not been fleshed out sufficiently to allow the court to see its "concrete

effects and implications." American Trucking Ass'ns, Inc. v. ICC, 747 F.2d 787, 789 (D.C. Cir.

1984). We believe, however, that the rule and its apparent purpose provide a sufficient basis for

addressing Adelphia's claim that the rule is arbitrary and capricious.

The Commission also argues that Adelphia's challenge to the retroactive application of this

rule is not ripe, and here the Commission is at least partially correct. Adelphia suggests that the new

rule may subject operatorsto retroactive rate rollbacks and to refund liabilityfor rates charged before

the Commission changed the rule, but points to no evidence suggesting the FCC has applied or

intends to apply the rule in the manner that Adelphia claims to fear. See Public Citizen v. NRC, 940

F.2d 679, 682-83 (D.C. Cir. 1991). Although the Commission has elsewhere required Adelphia to

justify a rate it has charged since September 1993, it did so only after concluding that the a la carte

offering in question "clearly" constituted a regulatory evasion even under the old rule. Adelphia

Cable Partners, L.P., South Dade County, Florida, DA 94-1277 WW 18-23; Adelphia Cable

Partners, L.P., South Dade County, Florida, FCC 95-378 ¶ 21 (Dec. 1, 1995) (affirming based upon

initial Rate Order). In other words, the Commission is not applying its new rule in that case.

We do, however, find Adelphia's retroactivity challenge ripe to the extent that it is based not

upon possible refund liability, but upon the defeated expectations of cable system operators who

created premium programming packages in the belief that they could charge unregulated rates. We

address that challenge in § II.B.2.(b) below.

2. Arbitrary and Capricious Rulemaking. Adelphia argues that the small-number rule, 47

C.F.R. § 76.986(c)(2), rests upon "the FCC's [implicit] assumption that cable operators who

unbundled more than a "small' number of channels[between April 1993 and September 1994] should

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have known that their actions would be deemed an "evasion' of the FCC's rules," and that the rule is

arbitraryand capricious because the underlying assumption isirrational. Adelphia's argument is itself,

however, based upon an implicit assumption, viz., that rate regulation of premium packages is a

sanction imposed by the Commission upon operators who had acted in bad faith under the ancien

regime of the Second Order on Reconsideration.

The purpose ofthe rate regulation instantiated in the SixthOrder onReconsideration is clearly

remedial rather than punitive. It turns not upon the cable operator's state of mind but upon the

likelihood that the operator's actions seriously compromised the goals of the Act. The Commission

defines "evasion" not in terms of the operator's intent, but in terms of its conduct, as "any practice

or action which avoids the rate regulation provisions of the Act or our rules contrary to the intent of

the Act or its underlying policies." Rate Regulation, MM Dkt. No. 92-266 ¶ 451 (Rate Order, May

1993). With the understanding that the Commission's interest lies in achieving its regulatory

objectives rather than in punishing bad faith, the basis for the small number rule is apparent.

Having encountered practical difficulties in administering its original regulation, the

Commission dropped the exemption of premium packages and classified themas cable programming

service tiers. Sixth Order on Reconsideration at WW 42-53; 47 C.F.R. § 76.986(a). In other words,

unless a cable system can demonstrate that it faces "effective competition," the FCC will ensure that

the operator does not charge an "unreasonable" rate for any regulated tier. 47 U.S.C. § 543(c); 47

C.F.R. § 76.906. In the case of a "new product tier," however, the FCC decided to treat as

reasonable whatever rate the operator charges. 47 C.F.R. § 76.987.

The Commission's willingness in effect to presume that the rate is reasonable in any case in

which "the operator had reasonable grounds to believe the collective offering involving only a small

number ofmigrated channels complied with the Commission'srequirements as of the date it wasfirst

offered," 47 C.F.R. § 76.986(c)(2), manifestly reflects the agency's desire to balance equity and

regulatory purpose. See Sixth Order on Reconsideration at ¶ 51. Whether a cable operator had

reasonable grounds to believe that an a la carte package met the Commission's former criteria for

unregulated treatment bears not only upon its subjective good faith but also upon the likelihood that

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it's offerings significantly compromised the purpose of the regulatory regime. Although the former

rule proved generally unworkable, it is not unreasonable for the agency to suppose that the most

egregious transgressors were also the most obvious. In other words, the Commission could

reasonably suppose that cases in which the package was "not clearly ineligible" for the exemption,

id., and in which few channels had been moved from regulated tiers to unregulated a la carte

offerings, are likely to be the cases in which the Commission's regulatory goals were least infringed.

"[Seeing] little reason to require an operator to reverse migrate" in these cases, id., the Commission

has indulged its equitable instincts. We see nothing arbitrary or capricious in that.

3. Retroactive Application. Adelphia argues that application of the small-number rule to

premium packages created between April 1993 and September 1994 impairs substantive rights of

cable systemoperators who created such packagesin reliance upon the regulatoryregime established

by the Commission'sinitialRate Order and elaborated upon in its Second Order on Reconsideration.

The express premise of this argument is that nothing the Commission did or said prior to its Sixth

Order on Reconsideration gave the operators any indication that future regulatory exemption would

depend upon the number of channels that an operator had shifted from regulated to unregulated

status. At that level of specificity, however, the premise is trivial.

Starting with the initial Rate Order the Commission clearly expressed its concern that

exempting premium packages from regulation would create opportunities for regulatory avoidance

inconsistent with the goals of the Cable Act. Rate Order ¶ 328 n.808. For this reason the

Commission warned that a premium package would not be exempt from regulation unless the

operator's a la carte offering was a "realistic service choice," and the Commission retained discretion

to determine whether any particular offering met this standard. Id. Further, acknowledging the

difficulty of anticipating evasive stratagems, the Commission reminded operators that it has a

statutory mandate "periodically [to] review and revise [its] regulations on evasion." Rate Order at

¶ 451.

From the outset, therefore, cable system operators had notice that the Commission might

change the rules in order to address evasive conduct. By the time of the Sixth Order on

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Reconsideration, because experience had taught the Commission that the problemof evasion wastoo

great to be handled under the regime of the Second Order on Reconsideration, the Commission

changed the rules. If the cable operators had disregarded the possibility of a rule change, then they

misread the Commission from the outset; that does not give them an "equitable claim" against

application of the new rule. New England Tel. & Tel. Co. v. FCC, 826 F.2d 1101, 1110 (D.C. Cir.

1987).

III. Conclusion

We agree with the Commission that the Cable Act, 47 U.S.C. § 543, authorizes the agency

to regulate the ratesthat a cable operator may charge for a discounted package of video programming

that it also offers a la carte, and we find nothing arbitrary or capricious about the small-number rule

that the Commission adopted in order to implement that provision of the statute. To the extent that

Adelphia's objection to retroactive application of the rule isripe, supra § II.B.1(b), the rule does not

impair any substantive right upon which Adelphia was entitled to rely. Finally, having failed to raise

its constitutional objection to this rule before the Commission, Adelphia cannot raise it here. It

follows that Adelphia's petition must be

Denied.

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