Opinion ID: 186449
Heading Depth: 3
Heading Rank: 2

Heading: Ancillary Jurisdiction Under the Communications Act of 1934

Text: 54 As explained above, the only basis advanced by the Commission as a source for its authority to adopt the broadcast flag regime was its ancillary jurisdiction under Title I of the Communications Act of 1934. See Flag Order, 18 F.C.C.R. at 23,563-64. As the Commission recognized, its ancillary jurisdiction is limited to circumstances where: (1) the Commission's general jurisdictional grant under Title I covers the subject of the regulations and (2) the regulations are reasonably ancillary to the Commission's effective performance of its statutorily mandated responsibilities. See id. at 23,563 (citing Southwestern Cable, 392 U.S. at 177-78, 88 S.Ct. 1994). 55 The insurmountable hurdle facing the FCC in this case is that the agency's general jurisdictional grant does not encompass the regulation of consumer electronics products that can be used for receipt of wire or radio communication when those devices are not engaged in the process of radio or wire transmission. Because the Flag Order does not require demodulator products to give effect to the broadcast flag until after the DTV broadcast has been completed, the regulations adopted in the Flag Order do not fall within the scope of the Commission's general jurisdictional grant. Therefore, the Commission cannot satisfy the first precondition to its assertion of ancillary jurisdiction. 56 The Supreme Court has delineated the parameters of the Commission's ancillary jurisdiction in three cases: United States v. Southwestern Cable Co., 392 U.S. 157, 88 S.Ct. 1994, 20 L.Ed.2d 1001 (1968), United States v. Midwest Video Corp., 406 U.S. 649, 92 S.Ct. 1860, 32 L.Ed.2d 390 (1972) ( Midwest Video I ), and FCC v. Midwest Video Corp., 440 U.S. 689, 99 S.Ct. 1435, 59 L.Ed.2d 692 (1979) ( Midwest Video II ). In Southwestern Cable and Midwest Video I, the Court upheld the Commission's regulation of cable television systems as a valid exercise of its ancillary jurisdiction, but also made clear that the Commission's ancillary authority has limits. In Midwest Video II, the Court found that the Commission had overstepped those limits. Because Southwestern Cable, Midwest Video I, and Midwest Video II are central to our analysis of whether the Commission lawfully exercised its ancillary jurisdiction in this case, we discuss these cases in some detail. 57 In Southwestern Cable, the Supreme Court recognized that the Communications Act confers a sphere of ancillary jurisdiction on the FCC. See 392 U.S. at 177-78, 88 S.Ct. 1994. The principal question presented was whether the FCC had the authority to regulate cable television systems (CATV), absent any express congressional grant of authority to the FCC to regulate in this area. See id. at 164-67, 88 S.Ct. 1994. The Court's conclusion that the FCC did have such authority rested on two factors. First, it was beyond doubt that CATV systems involved interstate `communication by wire or radio,' id. at 168, 88 S.Ct. 1994 (quoting 47 U.S.C. § 152(a)), and, thus, were covered by Title I's general jurisdictional grant. Second, the Court concluded that at least some level of CATV regulation was reasonably ancillary to the effective performance of the Commission's various responsibilities [delegated to it by Congress] for the regulation of television broadcasting. Id. at 178, 88 S.Ct. 1994. Because these two conditions were satisfied, the Court held that, to the degree it was in fact reasonably ancillary to the Commission's responsibilities over broadcast, the FCC had the power to regulate cable television as `public convenience, interest or necessity requires,' so long as the regulations were `not inconsistent with law.' Id. (quoting 47 U.S.C. § 303(r)). 58 Four years later, the Court applied the two-part test enunciated in Southwestern Cable to review a rule adopted by the FCC providing that no CATV system with 3,500 or more subscribers could carry the signal of any television broadcast station unless the system distributed programming that had originated from a source other than the broadcast signals and the system had facilities for local program production. See Midwest Video I, 406 U.S. at 653-54 & n. 6, 92 S.Ct. 1860. The regulation was designed to increase the number of outlets for community self-expression and the programming choices available to the public. See id. at 654, 92 S.Ct. 1860. 59 A closely divided Court held that the Commission's rule was a valid exercise of its ancillary jurisdiction. In an opinion by Justice Brennan, a plurality of the Court began its analysis by recognizing the two requirements for the Commission's exercise of ancillary jurisdiction: (1) that the regulation must cover interstate or foreign communication by wire or radio and (2) that the regulation must be reasonably ancillary to the Commission's effective performance of its statutorily mandated responsibilities. See id. at 662-63, 92 S.Ct. 1860. The parties before the Court in Midwest Video I did not dispute that the first precondition was met. See id. at 662, 92 S.Ct. 1860. Furthermore, the plurality concluded that the regulation was reasonably ancillary to the Commission's responsibilities for the regulation of broadcast television, because the Commission reasonably concluded that the rule would `further the achievement of long-established regulatory goals in the field of television broadcasting by increasing the number of outlets for community self-expression and augmenting the public's choice of programs and types of services.' Id. at 667-68, 92 S.Ct. 1860 (quoting Commission report accompanying the disputed regulation). 60 Chief Justice Burger provided the fifth vote to sustain the regulation at issue in Midwest Video I, but he concurred only in the judgment. Chief Justice Burger agreed that, in light of the pervasive powers conferred upon the Commission and its generations of experience, the Court should sustain the Commission's authority to impose the regulation at issue. Id. at 676, 92 S.Ct. 1860 (Burger, C.J., concurring in the result). Nonetheless, he noted: Candor requires acknowledgment, for me at least, that the Commission's position strains the outer limits of even the openended and pervasive jurisdiction that has evolved by decisions of the Commission and the courts. Id. 61 Seven years later, in Midwest Video II, the Court considered whether another FCC effort to regulate cable television was a permissible exercise of the Commission's ancillary jurisdiction. This time the Court decided that the Commission had gone too far. The rules at issue required that cable television systems carrying broadcast signals and having at least 3,500 subscribers develop at least a 20-channel capacity, make certain channels available for third-party access, and furnish equipment for access purposes. 440 U.S. at 691, 99 S.Ct. 1435. The Court held that the rules exceeded the Commission's authority. Id. at 708-09, 99 S.Ct. 1435. Specifically, because the Communications Act explicitly directed the Commission not to treat broadcasters as common carriers, the Court concluded that it was not reasonably ancillary to the Commission's effective performance of its responsibilities relating to broadcast television for the Commission to impose common-carrier obligations on cable television systems. See id. at 702-05, 708-09, 99 S.Ct. 1435. While the Court recognized that the statutory bar on treating broadcasters as common carriers did not apply explicitly to cable systems, the Court explained that, without reference to the provisions of the Act directly governing broadcasting, the Commission's jurisdiction under [Title I] would be unbounded. Id. at 706, 99 S.Ct. 1435. The Court refused to countenance such a boundless view of the Commission's jurisdiction, noting that, [t]hough afforded wide latitude in its supervision over communication by wire, the Commission was not delegated unrestrained authority. Id. As the Commission correctly explained in the Flag Order, Midwest Video II stands for the proposition that if the basis for jurisdiction over cable is that the authority is ancillary to the regulation of broadcasting, the cable regulation cannot be antithetical to a basic regulatory parameter established for broadcast. Flag Order, 18 F.C.C.R. at 23,563 n. 70. 62 The Court's decisions in Southwestern Cable, Midwest Video I, and Midwest Video II were principally focused on the second prong of the ancillary jurisdiction test. This is unsurprising, because the subject matter of the regulations at issue in those cases—cable television—constituted interstate communication by wire or radio, and thus fell within the scope of the Commission's general jurisdictional grant under Title I of the Communications Act. However, these cases leave no doubt that the Commission may not invoke its ancillary jurisdiction under Title I to regulate matters outside of the compass of communication by wire or radio. As we have explained: 63 While the Supreme Court has described the jurisdictional powers of the FCC as. . . expansive, there are limits to those powers. No case has ever permitted, and the Commission has never, to our knowledge, asserted jurisdiction over an entity not engaged in communication by wire or radio. 64 Accuracy in Media, Inc. v. FCC, 521 F.2d 288, 293 (D.C.Cir.1975) (additional internal quotation marks omitted) (citing Nat'l Broad. Co. v. United States, 319 U.S. 190, 219, 63 S.Ct. 997, 87 L.Ed. 1344 (1943)); see also id. at 294 (Jurisdiction over CATV [in Southwestern Cable ] was expressly predicated upon a finding that the transmission of video and aural signals via the cable was `interstate . . . communication by wire or radio.' (quoting Southwestern Cable, 392 U.S. at 168, 88 S.Ct. 1994)); Midwest Video I, 406 U.S. at 662, 92 S.Ct. 1860 (making clear that the Commission's jurisdiction is limited to activities involving communication by wire or radio). This principle is crucial, because the issue here is precisely whether the Flag Order asserts jurisdiction over matters that are beyond the compass of wire or radio communication. 65 Southwestern Cable, Midwest Video I, and Midwest Video II are also relevant to the present controversy for a second reason. In each of these decisions, the Court followed a very cautious approach in deciding whether the Commission had validly invoked its ancillary jurisdiction, even when the regulations under review clearly addressed communication by wire or radio. As the Seventh Circuit has noted: The Court [in Southwestern Cable ] appeared to be treading lightly even where the activity at issue involved cable television, which easily falls within Title I's general jurisdictional grant. Ill. Citizens Comm. for Broad. v. FCC, 467 F.2d 1397, 1400 (7th Cir.1972). The Seventh Circuit's characterization is equally apt with respect to the Court's opinions in Midwest Video I and Midwest Video II. 66 We think that the Supreme Court's cautionary approach in applying the second prong of the ancillary jurisdiction test suggests that we should be at least as cautious in this case. Great caution is warranted here, because the disputed broadcast flag regulations rest on no apparent statutory foundation and, thus, appear to be ancillary to nothing. Just as the Supreme Court refused to countenance an interpretation of the second prong of the ancillary jurisdiction test that would confer unbounded jurisdiction on the Commission, Midwest Video II, 440 U.S. at 706, 99 S.Ct. 1435, we will not construe the first prong in a manner that imposes no meaningful limits on the scope of the FCC's general jurisdictional grant. 67 In light of the parameters of the Commission's ancillary jurisdiction established by Southwestern Cable, Midwest Video I, and Midwest Video II, this case turns on one simple fact: the Flag Order does not require demodulator products to give effect to the broadcast flag until after the DTV broadcast is complete. The Flag Order does not regulate the actual transmission of the DTV broadcast. In other words, the Flag Order imposes regulations on devices that receive communications after those communications have occurred; it does not regulate the communications themselves. Because the demodulator products are not engaged in communication by wire or radio when they are subject to regulation under the Flag Order, the Commission plainly exceeded the scope of its general jurisdictional grant under Title I in this case. 68 In seeking to justify its assertion of jurisdiction in the Flag Order, the Commission relies on the fact that the Communications Act defines radio communication and wire communication to include not only the transmission of . . . writing, signs, signals, pictures, and sounds by aid of wire or radio, but also all instrumentalities, facilities, apparatus, and services (among other things, the receipt, forwarding, and delivery of communications) incidental to such transmission. 47 U.S.C. § 153(33) (defining radio communication); id. § 153(52) (defining wire communication). The Flag Order asserts: Based on this language, [the Commission finds] that television receivers are covered by the statutory definitions and therefore come within the scope of the Commission's general authority outlined in [Title I] of the Communications Act. 18 F.C.C.R. at 23,563-64. The Commission thus apparently believed that, given the definitions of wire communication and radio communication in Title I, it could assert jurisdiction over television receivers even when those receivers were not engaged in broadcast transmission simply because they are apparatus used for the receipt of communications. See also FCC Br. at 26. We reject this position, for it rests on a completely implausible construction of the Communications Act. 69 The statute does not give the FCC authority to regulate any apparatus that is associated with television broadcasts. Rather, the statutory language cited by the FCC refers only to apparatus that are incidental to . . . transmission. In other words, the language of § 153(33) and (52) plainly does not indicate that Congress intended for the Commission to have general jurisdiction over devices that can be used for receipt of wire or radio communication when those devices are not engaged in the process of radio or wire transmission. 70 The language relied upon by the Commission in the statutory definitions of wire communication and radio communication was part of the original Communications Act of 1934. See Pub.L. No. 73-416, § 3(a)-(b), 48 Stat. 1064, 1065; see also Southwestern Cable, 392 U.S. at 168, 88 S.Ct. 1994 (quoting this language). The Commission acknowledges that, in the more than 70 years that the Act has been in existence, it has never previously sought to exercise ancillary jurisdiction over reception equipment after the transmission of communication is complete. See Recording of Oral Argument at 34:45-35:23. This is not surprising, since the Commission's current interpretation of the statute's definitional language would render step one of the Supreme Court's two-part test for determining whether a subject is within the Commission's ancillary jurisdiction essentially meaningless. 71 We can find nothing in the statute, its legislative history, the applicable case law, or agency practice indicating that Congress meant to provide the sweeping authority the FCC now claims over receiver apparatus. And the agency's strained and implausible interpretations of the definitional provisions of the Communications Act of 1934 do not lend credence to its position. As the Supreme Court has reminded us, Congress does not . . . hide elephants in mouseholes. Whitman v. Am. Trucking Ass'n, 531 U.S. 457, 468, 121 S.Ct. 903, 149 L.Ed.2d 1 (2001). In sum, we hold that, at most, the Commission only has general authority under Title I to regulate apparatus used for the receipt of radio or wire communication while those apparatus are engaged in communication. 72 Our holding is consistent with the Seventh Circuit's well-reasoned decision in Illinois Citizens, which concluded that the FCC may not lawfully exercise jurisdiction over activities that do not constitute communication by wire or radio. See 467 F.2d at 1399-1400. In that case, the Illinois Citizens Committee for Broadcasting filed a complaint with the FCC, alleging that the proposed construction of the Sears Tower in Chicago would throw `multiple ghost images' on television receivers in many areas of the Greater Chicago Metropolitan Area. Id. at 1398. The petitioners called upon the FCC to take steps to prevent this interference, including, if necessary, ordering Sears, Roebuck & Co. to cease construction of the tower until the company had taken measures to ensure that television viewers would continue to receive an adequate signal. The Commission denied the requested relief on the ground that it lacked jurisdiction over the construction of the Sears Tower, and the Illinois Citizens Committee sought review by the Seventh Circuit. See id. at 1398-99. 73 The Illinois Citizens Committee argued that, in light of Southwestern Cable, the FCC had the power to regulate all activities which `substantially affect communications.' Id. at 1399. The Seventh Circuit flatly rejected this argument as unsupported by the Communications Act or judicial decisions interpreting the Act: 74 While we appreciate the need for a flexible approach to FCC jurisdiction, we believe the scope advanced by petitioners is far too broad. The affecting communications concept would result in expanding the FCC's already substantial responsibilities to include a wide range of activities, whether or not actually involving the transmission of radio or television signals much less being remotely electronic in nature. Nothing before us supports this extension. 75 Id. at 1400 (footnote omitted). 76 In Motion Picture Ass'n, this court concluded that the Commission lacked authority under Title I of the Communications Act to promulgate regulations that significantly implicated program content. Focusing specifically on 47 U.S.C. § 151, which is part of Title I and which the FCC conceded was the only possible source of authority that could justify its adoption of the video description rules at issue in the case, we explained: 77 Under [§ 151], Congress delegated authority to the FCC to expand radio and wire transmissions, so that they would be available to all U.S. citizens. Section [151] does not address the content of the programs with respect to which accessibility is to be ensured. In other words, the FCC's authority under [§ 151] is broad, but not without limits. 78 309 F.3d at 804 (full citations omitted) (citing Midwest Video I, 406 U.S. at 667-68, 92 S.Ct. 1860, and Southwestern Cable, 392 U.S. at 172, 88 S.Ct. 1994). Just as no provision in Title I addresses program content, no provision in Title I addresses requirements for demodulator products not engaged in communication by wire or radio. 79 In sum, because the rules promulgated by the Flag Order regulate demodulator products after the transmission of a DTV broadcast is complete, these regulations exceed the scope of authority Congress delegated to the FCC. And because the Commission can only issue regulations on subjects over which it has been delegated authority by Congress, the rules adopted by the Flag Order are invalid at the threshold jurisdictional inquiry. As was true in Aid Ass'n for Lutherans, our judgment in this case is the same whether we analyze the agency's statutory interpretation under Chevron Step One or Step Two. `In either situation, the agency's interpretation of the statute is not entitled to deference absent a delegation of authority from Congress to regulate in the areas at issue.' 321 F.3d at 1175 (quoting MPAA, 309 F.3d at 801). An agency construction of a statute cannot survive judicial review if a contested regulation reflects an action that exceeds the agency's authority. Id. at 1174. It does not matter whether the unlawful action arises because the regulations at issue are contrary to clear congressional intent as ascertained through use of the traditional tools of statutory construction, Chevron, 467 U.S. at 843 n. 9, 104 S.Ct. 2778, or utterly unreasonable and thus impermissible. Aid Ass'n for Lutherans, 321 F.3d at 1174. The FCC has no congressionally delegated authority to regulate receiver apparatus after a transmission is complete. We therefore hold that the broadcast flag regulations exceed the agency's delegated authority under the statute.