Opinion ID: 532957
Heading Depth: 3
Heading Rank: 3

Heading: Effects on Program Supply

Text: 22 The weakest link in the FCC's causal chain is its claim that reinstating syndex protection will affect the supply of syndicated programming. And indeed, throughout the rulemaking proceeding, the Commission has always conceded that there is no direct, empirical evidence that syndex will actually increase program diversity, explaining that such evidence would be particularly difficult to obtain empirically. 3 F.C.C.Rcd at 5307; 4 F.C.C.Rcd at 2715; Brief for Respondent at 49. 23 We do not think that the absence of empirical evidence is fatal to the Commission's claim. Courts reviewing an agency's selection of means to accomplish policy goals are not entitled to insist on empirical data for every proposition on which the selection depends. Associated Gas Distributors v. FERC, 824 F.2d 981, 1008 (D.C.Cir.1987). In Century Communications Corp. v. FCC, 835 F.2d 292 (D.C.Cir.1987), cert. denied, --- U.S. ----, 108 S.Ct. 2014, 100 L.Ed.2d 602 (1988), which struck down the FCC's must-carry regulations, this court noted that an agency contention may be so obvious or commonsensical that it needs no empirical support to stand up. Id. at 302. 24 We think the Commission's conclusion about the link between lack of program diversity and lowered broadcast revenues due to lack of exclusivity is sufficiently in accord with accepted economic theory that it can stand without empirical support, particularly since we agree with the Commission that it would be very difficult for it to show the degree to which programs are currently not being produced because of the lack of syndex protection. We said in Associated Gas Distributors that no experiment was required before an agency could predict that competition would normally lead to lower prices. 824 F.2d at 1008-09. This case is similar: the FCC has assumed only that increasing the value of programs to broadcast companies will increase the amount paid for them, and that these higher prices will improve product supply. The Commission explains that [p]rogram suppliers, like other business people, respond to incentives.... Incentives to develop new programs are greatest when program suppliers are able to sell their programs wherever there are viewers (or advertisers) willing to pay for them. 3 F.C.C.Rcd at 5309. These claims, unlike the ones made by the FCC in Century Communications, 3 do not beg[ ] incredulity, 835 F.2d at 302; rather, they are reasonable. 25 The petitioners argue in response that despite the lack of syndex protection, syndicated programming and broadcast television are thriving. Absent any actual evidence that syndex would increase program supply, they claim that the current robust health of the market shows that syndicators and broadcast stations are suffering no harm that requires FCC correction. Brief for Petitioner CATA at 24-26, 35. However, the Commission properly rejected this argument as irrelevant. 3 F.C.C.Rcd at 5321; 4 F.C.C.Rcd at 2716. Syndicators may be doing well, but that does not show that they would not do better if they could capture the full value of their programs. The FCC is not empowered to regulate the market only in cases where regulation is necessary to save broadcast stations or syndicators from economic peril. Increasing program diversity is a valid FCC regulatory goal, Malrite TV of New York v. FCC, 652 F.2d 1140, 1151 (2d Cir.1981), cert. denied, 454 U.S. 1143, 102 S.Ct. 1002, 71 L.Ed.2d 295 (1982), and increasing revenues for program originators a likely means of achieving it. 4 26 Having tested each link in the Commission's causal chain, we find that it used valid reasoning to conclude that syndex rules will increase the diversity of programming options available to the public. Its imposition of syndex was adequately supported by the rulemaking record. C. Change in Agency Course 27 The petitioners complain that the Commission has not adequately explained why it is reinstating syndex rules only eight years after abandoning them, and only four years after reaffirming its decision to abandon them. However, the Commission's report, which examines in great detail its 1980 decision to eliminate syndex, meets this circuit's standard that an agency changing course must supply a reasoned analysis indicating that its prior policies and standards are being deliberately changed, not casually ignored. Action for Children's Television v. FCC, 821 F.2d 741, 745 (D.C.Cir.1987). 28 The Commission's report reviews in detail the history of the regulation of cable, including, in particular, the 1980 decision to eliminate syndex rules. 3 F.C.C.Rcd at 5300-05. The report notes several ways in which the Commission now feels the 1980 decision to have been inadequate. First, the report discusses how circumstances have changed since 1980. The principal change has been the unforeseen emergence of cable television as a full competitor to broadcast television. As the report documents, cable's audience and advertising revenues have increased dramatically and unexpectedly since 1980. In 1980, cable served 19% of television households, but in 1988 it served 51%, a percentage the FCC projected would rise to 60% by 1996. 3 F.C.C.Rcd at 5304. In 1980, the Commission had predicted that cable penetration would never go beyond 48%. Id. Cable advertising revenues were $45.5 million in 1980, but they grew to over $1 billion in 1988; cable's share of total television advertising revenue climbed from less than 0.5% to more than 6%. Id. This unexpected growth, the Commission notes, substantially undermines its 1980 findings that repeal of syndex would not cause significant audience diversion or otherwise harm broadcast stations. 29 The Commission also faults its earlier studies for focusing on the effects repeal of syndex would have on individual stations, rather than its effects on the competitive process and the incentive for production of new programs. Lack of syndex protection, as discussed above, distorts the broadcaster's promotional incentives and makes it impossible for syndicators to capture the full value of their programs. A competitive process in which exclusivity contracts are enforceable will, the Commission now believes, produce the best programming for the public. Id. at 5303. 30 The Commission's report also examines the negative aspects of syndex rules. It acknowledges the costs in reimposing syndex: cable companies will need to purchase new equipment to comply, and the necessity of deleting protected programs will cause some disruption in cable service. However, the report concludes that the equipment cable companies will need is currently available and reasonably priced, and disruption will be lessened by the one-year delay between the announcement and effective date of the rules. Id. at 5312. 31 The Commission in its report also acknowledges that the absence of syndex provides consumers with the benefit of time and episode diversity. A cable station, free of syndex restraints, may import a different episode of a program than the one aired by a broadcast station, or the same episode at a different time of day. The Commission suggests, however, that this diversity must be balanced against the lack of diversity engendered by duplication, and by the reduced incentive for the production of new programs. The Commission also suggests that market forces will allow duplication where viewers value it sufficiently, since stations with exclusive rights to a program can always sell the right to duplicate it. Finally, the Commission notes that the value of cable in providing time diversity has been lessened by the significant increase in the penetration of video cassette recorders (up from 1.5% of television households in 1979 to 58.1% today), since VCRs allow viewers to provide time diversity for themselves. Id. at 5307. 32 The Commission's report in toto suggests that it undertook a thoroughgoing review of the syndex question and came to a new result with full awareness of its prior choices. The petitioners compare the Commission's action to that overturned by this court in Action for Children's Television v. FCC, 821 F.2d 741 (D.C.Cir.1987). But the comparison is not valid. In that case, the Commission had issued a general rule repealing all quantitative commercial guidelines for television broadcasting. When asked to clarify whether this rule covered children's television, for which the Commission had traditionally required extra protection against overcommercialization, the Commission issued a mere two sentences to explain its new feeling that no extra protection was needed. This court held that the Commission had crosse[d] the line from the tolerably terse to the intolerably mute. Id. at 746. In the present case, the Commission's detailed report assures us that it has given full consideration to the change it made, and explains its reasons for doing so. Accordingly, we reject the petitioners' claim that the Commission's rules are arbitrary and capricious.