Court Opinion

ID: 185368
Source: CourtListenerOpinion
Date Created: 2011-02-05 02:31:11+00
Date Added: 2024-06-11T17:26:15.314260
License: Public Domain

240 F.3d 1126 (D.C. Cir. 2001)
Time Warner Entertainment Co., L.P. Petitionerv.Federal Communications Commission and United States of America, Respondents BellSouth Corporation, et al., Intervenors
No. 94-1035 Consolidated with 95-1337, 99-1503, 99-1504, 99-1522, 99-1541, 99-1542, 00-1086
United States Court of Appeals FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued October 17, 2000Decided March 2, 2001

On Petitions for Review of Orders of the Federal Communications Commission
David W. Carpenter argued the cause for petitioners  AT&T Corporation and Time Warner Entertainment Co., L.P.  With him on the briefs were Peter Keisler, David L.  Lawson, C. Frederick Beckner III, Henk Brands and Robert  D. Joffe.  Charles S. Walsh, Richard B Beckner, Stuart W.  Gold and Marc C. Rosenblum entered appearances.
Robert D. Joffe and Henk Brands were on the briefs for  petitioner Time Warner Entertainment Co., L.P.  Charles S.  Walsh, Richard B. Beckner and Stuart W. Gold entered  appearances.
Andrew Jay Schwartzman, Cheryl A. Leanza and Harold  Feld were on the briefs for petitioner Consumers Union.
James M. Carr, Counsel, Federal Communications Commission, argued the cause for respondents.  With him on the  brief were Christopher J. Wright, General Counsel, Daniel  M. Armstrong, Associate General Counsel, Joel Marcus and  James M. Carr, Counsel, David W. Ogden, Acting Assistant  Attorney General, U.S. Department of Justice, Mark B. Stern  and Jacob M. Lewis, Attorneys, and Wilma A. Lewis, U.S.  Attorney.  William E. Kennard, General Counsel, Federal  Communications Commission, John E. Ingle, Deputy Associate General Counsel, and Catherine G. O'Sullivan, Robert B.  Nicholson and Robert J. Wiggers, Attorneys, U.S. Department of Justice, entered appearances.
Henk J. Brands, Robert D. Joffe, Peter D. Keisler, David  L. Lawson and C. Frederick Beckner III were on the brief for  intervenor Time Warner Entertainment Co., L.P. in No.  99-1522.  Mark C. Rosenblum entered an appearance.
Before:  Williams, Randolph and Tatel, Circuit Judges.
Opinion for the Court filed by Circuit Judge Williams.
STEPHEN F. WILLIAMS, Circuit Judge:

1
Section 11(c) of the Cable Television Consumer Protection and Competition Act of 1992, Pub.  L. No. 102-385, 106 Stat. 1460 ("1992 Cable Act"), amends 47  U.S.C. § 533 to direct the Federal Communications Commission to set two types of limits on cable operators.  The first  type is horizontal, addressing operators' scale:  "limits on the number of cable subscribers a person is authorized to reach  through cable systems owned by such person, or in which  such person has an attributable interest."  47 U.S.C.  § 533(f)(a)(1)(A).  The second type is vertical, addressing  operators' integration with "programmers" (suppliers of programs to be carried over cable systems):  "limits on the  number of channels on a cable system that can be occupied by  a video programmer in which a cable operator has an attributable interest."  47 U.S.C. § 533(f)(a)(1)(B).  The FCC has  duly promulgated regulations.  See 47 C.F.R. § 76.503-04. Petitioners Time Warner and AT&T challenge the horizontal  limit as in excess of statutory authority, as unconstitutional  infringements of their freedom of speech, and as products of  arbitrary and capricious decisionmaking which violate the  Administrative Procedure Act.  Time Warner similarly challenges the vertical limit.  Together with AT&T, Time Warner  also challenges as arbitrary and capricious the rules for  determining what counts as an "attributable interest."  Concluding that the FCC has not met its burden under the First  Amendment and, in part, lacks statutory authority for its  actions, we remand for further consideration of both limits. In addition we vacate specific portions of the attribution rules  as lacking rational justification.

2
Consumers Union also files a petition for review, which  need not detain us long.  It objects to the Commission's  action to the extent that it continued a stay on enforcement of  the horizontal limit.  See Implementation of Section 11(c) of  the Cable Television Consumer Protection and Competition  Act of 1992, 14 F.C.C.R. 19098, 19127-28 p p 71-73 (1999)  ("Third Report").  The Commission issued the stay after a  district court found the statute underlying that limit unconstitutional, see Daniels Cablevision, Inc. v. United States, 835 F. Supp. 1 (D.D.C. 1993), and provided that in the event of  Daniels's reversal the stay would end.  See Implementation  of Sections 11 and 13 of the Cable Television Consumer  Protection and Competition Act of 1992, 8 F.C.C.R. 8565,  8609 p 109 (1993) ("Second Report").  We did reverse Daniels  in Time Warner Entertainment Co. v. United States, 211 F.3d 1313 (D.C. Cir. 2000) ("Time Warner I"), so the stay  ended automatically.1  Thus the stay issue is moot unless the  issue posed is capable of repetition yet evading review.  Even  if we assume that the issue evades review, its recurrence is  not probable enough to qualify it as "capable of repetition." See Spencer v. Kemna, 523 U.S. 1, 17 (1998) (requiring "a  reasonable expectation that the same complaining party [will]  be subject to the same action again") (internal citations  omitted).  Although we find here that the regulations fail  constitutional scrutiny, the specific condition that led to the  stay--a pending challenge to the statute's constitutionality-is highly unlikely to recur.  We therefore find Consumers  Union's claim moot and dismiss the petition.

3
* * *The horizontal rule imposes a 30% limit on the number of  subscribers that may be served by a multiple cable system  operator ("MSO").  See 47 C.F.R. § 76.503;  Third Report 14  F.C.C.R. at 19119 p 55.  Both the numerator and denominator of this fraction include only current subscribers to multichannel video program distributor ("MVPD") services.  See  id. at 19107-10 p p 20-25.  Subscribers include not only users  of traditional cable services but also subscribers to non-cable  MVPD services such as Direct Broadcast Satellite ("DBS"),2 a  rapidly growing segment of the MVPD market.  See id. at  19110-12 p p 26-35.  The Commission pointed out that under  this provision the nominal 30% limit would allow a cable  operator to serve 36.7% of the nation's cable subscribers if it  served none by DBS.  See id. at 19113 p 37 & n.82.3  In an  express effort to encourage competition through new provision of cable, the Commission excluded from any MSO's  numerator all new subscribers signed up by virtue of "overbuilding," the industry's term for cable laid in competition  with a pre-existing cable operator.  See id. at 19112-13 p p 34,  37.  Further, subscribers to a service franchised after the  rule's adoption (October 20, 1999) do not go into an MSO's  numerator, even if not the result of an overbuild.  See id. at  19112 p 33.  As a result, the rule's main bite is on firms  obtaining subscribers through merger or acquisition.

4
The vertical limit is currently set at 40% of channel capacity, reserving 60% for programming by non-affiliated firms. See 47 C.F.R. § 76.504;  Second Report, 8 F.C.C.R. at 859394 p 68;  Implementation of Section 11(c) of the Cable Television Consumer Protection and Competition Act of 1992, 10  F.C.C.R. 7364, 7368 p 14 (1995) ("Reconsideration Order"). Channels assigned to broadcast stations, leased access, and  for public, educational, or governmental uses are included in  the calculation of channel capacity.  See id. at 7371-73 p p 2027.  Capacity over 75 channels is not subject to the limit, so a  cable operator is never required to reserve more than 45  channels for others (.60 x 75 = 45).  See id. at 7374-76  p p 31-35.

5
As cable operators, Time Warner and AT&T "exercise[ ]  editorial discretion in selecting the programming [they] will  make available to [their] subscribers," Time Warner I, 211 F.3d at 1316, and are "entitled to the protection of the speech  and press provisions of the First Amendment," Turner  Broadcasting System, Inc. v. Federal Communications Commission, 512 U.S. 622, 636 (1994) ("Turner I") (quoting  Leathers v. Medlock, 499 U.S. 439, 444 (1991)).  The horizontal limit interferes with petitioners' speech rights by restricting the number of viewers to whom they can speak.  The  vertical limit restricts their ability to exercise their editorial  control over a portion of the content they transmit.

6
In Time Warner I we upheld the statutory provisions  against a facial attack, after finding them subject to intermediate rather than, as the cable firms argued, strict scrutiny. Time Warner I, 211 F.3d at 1316-22.  The regulations here  present a related but independent set of questions.  Constitutional authority to impose some limit is not authority to  impose any limit imaginable.

7
In briefs written before the issuance of Time Warner I,  petitioners argued here for strict scrutiny.  At oral argument  they withdrew from this position and said, euphemistically,  that they were "happy to stand on intermediate scrutiny." Because of that concession and, in any event, not seeing any  distinction between the statute and the regulations for levelof-scrutiny purposes, we apply intermediate scrutiny.  Under  the formula set forth in United States v. O'Brien, 391 U.S. 367, 377 (1968), and reaffirmed by Turner Broadcasting  System, Inc. v. Federal Communications Commission, 520 U.S. 180, 189 (1997) ("Turner II"), a governmental regulation  subject to intermediate scrutiny will be upheld if it "advances  important governmental interests unrelated to the suppression of free speech and does not burden substantially more  speech than necessary to further those interests."  Id. (quoting O'Brien, 391 U.S. at 377).

8
The interests asserted in support of the horizontal and  vertical limits are the same interrelated interests that we  found sufficient to support the statutory scheme in Time Warner I:  "the promotion of diversity in ideas and speech"  and "the preservation of competition."  Time Warner I, 211 F.2d at 1319;  see also Turner I, 512 U.S. at 662-64 (concluding that both qualify as important governmental interests). After a review of the legislative history, we concluded that  Congress had drawn "reasonable inferences, based upon substantial evidence, that increases in the concentration of cable  operators threatened diversity and competition in the cable  industry."  Time Warner I, 211 F.3d at 1319-20.  But the  FCC must still justify the limits that it has chosen as not  burdening substantially more speech than necessary.  In  addition, in "demonstrat[ing] that the recited harms are real,  not merely conjectural," Turner I, 512 U.S. at 664, the FCC  must show a record that validates the regulations, not just  the abstract statutory authority.

9
* * *

10
The FCC asserts that a 30% horizontal limit satisfies its  statutory obligation to ensure that no single "cable operator  or group of cable operators can unfairly impede ... the flow  of video programming from the video programmer to the  consumer," 47 U.S.C. § 533(f)(2)(A), while adequately respecting the benefits of clustering4 and the economies of scale  that are thought to come with larger size.  See Third Report,  14 F.C.C.R. at 19123-24 p 61.  It interpreted this statutory  language as a directive to prohibit large MSOs--either by the  action of a single MSO or the coincidental or collusive actions  of several MSOs--from precluding the entry into the market  of a new cable programmer.  See id. at 19116 p 43.  In  setting the limit at 30%, it assumed there was a serious risk  of collusion.  See id., Part VI, at 19113-25 p p 36-65.  But  while collusion is a form of anti-competitive behavior that  implicates an important government interest, the FCC has  not presented the "substantial evidence" required by Turner  I and Turner II that such collusion has in fact occurred or is  likely to occur;  so its assumptions are mere conjecture.  See  Turner II, 520 U.S. at 195 (citing Turner I, 512 U.S. at 666). The FCC alternatively relies on its supposed grant of authority to regulate the non-collusive actions of large MSOs.  Congress may indeed, under certain readingsof Turner I and  Turner II, have the power to regulate the coincidental but  independent actions of cable operators solely in the interest of  diversity, but "[w]here an administrative interpretation of a  statute invokes the outer limits of Congress' power, we expect  a clear indication that Congress intended that result."  Solid  Waste Agency v. United States Army Corps of Eng'rs, __  U.S. __, 121 S. Ct. 675, 683 (2001).  The 1992 Cable Act, as  we shall see, instead expresses the contrary intention.

11
Part VI of the Third Report lays out the calculations that  lead the FCC to the 30% limit.  See Third Report, Part VI,  14 F.C.C.R. at 19113-25 p p 36-65.  First the FCC determines that the average cable network needs to reach 15  million subscribers to be economically viable.  See id. at  19114-16 p p 40-42.  This is 18.56% of the roughly 80 million  MVPD subscribers, and the FCC rounds it up to 20% of such  subscribers.  The FCC then divines that the average cable  programmer will succeed in reaching only about 50% of the  subscribers linked to cable companies that agree to carry its  programming, because of channel capacity, "programming  tastes of particular cable operators," or other factors.  Id. at  19117-18 p 49.  The average programmer therefore requires  an "open field" of 40% of the market to be viable (.20/.50 =  .40).  See id. at 19117-18 p p 46-50.

12
Finally, to support the 30% limit that it says is necessary to  assure this minimum, the Commission reasons as follows: With a 30% limit, a programmer has an "open field" of 40% of  the market even if the two largest cable companies deny  carriage, acting "individually or collusively."  Id. at 19119  p 53.  A 50% rule is inadequate because, if a duopoly were to  result, "[t]he probability of tacit collusion is higher with 2 competitors than 3 competitors."  Id. at 19118-19 p 51.  Even  if collusion were not to occur, independent rejections by two  MSOs could doom a new programmer, thwarting congressional intent as the Commission saw it.  See id.  A 40% limit is  insufficient for the same reason:  "two MSOs, ... representing a total of 80% of the market, might decline to carry the  new network" and leave only 20% "open," which by hypothesis is not enough (because of the 50% success rate).  Id. at  19119 p 52.  Although the Commission doesn't spell out the  intellectual process, it is necessarily defining the requisite  "open field" as the residue of the market after a programmer  is turned down either (1) by one cable company acting alone,  or (2) by a set of companies acting either (a) collusively or (b)  independently but nonetheless in some way that, because of  the combined effect of their choices, threatens fulfillment of  the statutory purposes.  We address the FCC's authority to  regulate each of these scenarios in turn.

13
The Commission is on solid ground in asserting authority to be sure that no single company could be in a position singlehandedly to deal a programmer a death  blow.  Statutory   authority flows plainly from the instruction that the Commission's regulations "ensure that no cable operator or group of cable operators can unfairly impede, either because of the size  of any individual operator or because of joint actions of  operators of sufficient size, the flow of video programming  from the video programmer to the consumer."  47 U.S.C. S 533(f)(2)(A) (emphasis added).  Constitutional authority is equally plain.  As the Supreme Court said in Turner II:  "We  have identified a corresponding 'governmental purpose of the  highest order' in ensuring public access to a multiplicity of  information sources.' " 520 U.S. at 190 (quoting Turner I, 512 U.S. at 663);  see also Time Warner Entertainment Co. v.  Federal Communications Commission, 93 F.3d 957, 969  (D.C. Cir. 1996).  If this interest in diversity is to mean  anything in this context, the government must be able to  ensure that a programmer have at least two conduits through  which it can reach the number of viewers needed for viabilityindependent of concerns over anticompetitive conduct.

14
Assuming the validity of the premises supporting the  FCC's conclusion that a 40% "open field" is necessary (a  question that we need not answer here), the statute's express  concern for the act of "any individual operator" would justify  a horizontal limit of 60%.  To reach the 30% limit, the FCC's  action necessarily involves one or the other of two additional  propositions:  Either there is a material risk of collusive  denial of carriage by two or more companies, or the statute  authorizes the Commission to protect programmers against  the risk of completely independent rejections by two or more  companies leaving less than 40% of the MVPD audience  potentially accessible.  Neither proposition is sound.

15
First, we consider whether there is record support for  inferring a non-conjectural risk of collusive rejection.  Either  Congress or the Commission could supply that record, and we  take them in that order.  We give deference to the predictive  judgments of Congress, see Turner II, 520 U.S. at 195-96  (citing Turner I, 512 U.S. at 665), but Congress appears to  have made no judgment regarding collusion.  The statute  plainly alludes to the possibility of collusion when it authorizes regulations to protect against "joint actions by a group  of operators of sufficient size." 47 U.S.C. S 533(f)(2)(A) (emphasis added).  But this phrase, while granting the Commission authority to take action in the event that it finds collusion extant or likely, is not itself a congressional finding of  actual or probable collusion.  Such findings have not been  made.  No reference to collusion appears in the Act's findings  or policy, see 1992 Cable Act S 2, 106 Stat. at 1460-63, nor in  the legislative history discussing the horizontal or vertical  limits.  See H.R. Rep. No. 102-628, at 40-43 (1992) ("House  Report");  S. Rep. No. 102-92, at 24-29, 32-34, reprinted in  1991 U.S.C.C.A.N. 1133, at 1156-62, 1165-67 ("Senate Report").  It was thus appropriate for the FCC to describe  Congress's reference to "joint" action as merely a "legislative  assumption."  Third Report, 14 F.C.C.R. at 19116 p 43 (emphasis added).

16
The Commission's own findings amount to precious little. It says only:

17
The legislative assumption [about joint action] is not unreasonable given an environment in which all the larger operators in the industry are vertically integrated so that all are both buyers and sellers of programming and have mutual incentives to reach carriage decisions beneficial to each other.  Operators have incentives to agree to buy their programming from one another. Moreover, they have incentives to encourage one another to carry the same non-vertically integrated programming in order to share the costs of such programming.

18
Id.  None of these assertions is supported in the record.  The  Commission never explains why the vertical integration of  MSOs gives them "mutual incentive to reach carriage decisions beneficial to each other," what may be the firms'  "incentives to buy ... from one another," or what the probabilities are that firms would engage in reciprocal buying  (presumably to reduce each other's average programming  costs).  After all, the economy is filled with firms that, like  MSOs, display partial upstream vertical integration.  If that  phenomenon implies the sort of collusion the Commission  infers, one would expect the Commission to be able to point to  examples.  Yet it names none.  Further, even if one accepts  the proposition that an MSO could benefit from sharing the  services of specific programmers, programming is not more  attractive for this purpose merely because it originates with  another MSO's affiliate rather than with an independent.

19
The only justification that the FCC offers in support of its  collusion hypothesis is the economic commonplace that, all  other things being equal, collusion is less likely when there  are more firms.  See Third Report 14 F.C.C.R. at 19118-19  p 51. This observation will always be true, although marginally less so for each additional firm;  but by itself it lends no  insight into the question of what the appropriate horizontal  limit is.  Turner I demands that the FCC do more than  "simply 'posit the existence of the disease sought to be  cured.' "  Turner I, 512 U.S. at 664 (quoting Quincy Cable  TV, Inc. v. Federal Communications Commission, 768 F.2d 1434, 1455 (D.C. Cir. 1985).  It requires that the FCC draw  "reasonable inferences based on substantial evidence."  Turner I, 512 U.S. at 666.  Substantial 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.  See Turner II 520 U.S. at 196, citing Federal Communications Commission v.  National Citizens Comm. For Broadcasting, 436 U.S. 775,  814 (1978).  But the FCC has put forth no evidence at all that  indicates the prospects for collusion.

20
That having been said, we do not foreclose the possibility  that there are theories of anti-competitive behavior other  than collusion that may be relevant to the horizontal limit and  on which the FCC may be able to rely on remand.  See 47  U.S.C. S 533(f)(1).  Indeed, Congress considered, among other things, the ability of MSOs dominant in specific cable  markets to extort equity from programmers or force exclusive contracts on them.  See 1992 Cable Act S 2(a)(4)-(5), 106  Stat. at 1460-61;  Senate Report at 3, 14, 23-29, 32-34,  reprinted in 1991 U.S.C.C.A.N. at 1135, 1146-47, 1156-62,  1165-67;  House Report at 40-43.  A single MSO, acting  alone rather than "jointly," might perhaps be able to do so  while serving somewhat less than the 60% of the market (i.e.,  less than the fraction that would allow it unilaterally to lock  out a new cable programmer) despite the existence of antitrust laws and specific behavioral prohibitions enacted as part  of the 1992 Cable Act, see 47 U.S.C. S 536, and the risk might  justify a prophylactic limit under the statute.  See Time  Warner I, 211 F.3d at 1322-23.  So the absence of any  showing of a serious risk of collusion does not necessarily  preclude a finding of a sufficient governmental interest in  preventing unfair competition.  (We express no opinion on  whether exploitation of a monopoly position in a specific cable  market to extract rents that would otherwise flow to programmers alone gives rise to an "important governmental  interest" justifying a burden on speech.)  But the FCC made  no attempt to justify its regulation on these grounds.

21
We pause here to address an aspect of petitioners' statutory challenge that is relevant to a showing of non-conjectural  harm.  Congress required that in setting the horizontal limit,  the FCC "take particular account of the market structure ...

22
including the nature and market power of the local franchise." 47 U.S.C. S 533(f)(2)(C).  Petitioners assert that the Commission's failure to take adequate account of the competitive  pressures brought by the availability and increasing success  of DBS make the horizontal limit arbitrary and capricious. Although DBS accounts for only 15.4% of current MVPD  households, the annual increase in its total subscribership is  almost three times that of cable (nearly three million additional subscribers over the period June 1999 to June 2000, as  against one million for cable).  See Seventh Annual Report  p p 6-8.  To the extent petitioners argue that the horizontal  limit must fail because market share does not equal market  power, they misconstrue the statutory command.  The Commission is not required to design a limit that falls solely on  firms possessing market power.5  The provision is directed to  the Commission's intellectual process, and requires it, in  evaluating the harms posedby concentration and in setting  the subscriber limit, to assess the determinants of market  power in the cable industry and to draw a connection between  market power and the limit set.

23
It follows naturally from our earlier discussion that we do  not believe the Commission has satisfied this obligation. Having failed to identify a non-conjectural harm, the Commission could not possibly have addressed the connection between the harm and market power.  But the assessment of a  real risk of anti-competitive behavior--collusive or not--is  itself dependent on an understanding of market power, and  the Commission's statements in the Third Report seem to  ignore the true relevance of competition.  In changing the  calculation of the horizontal limit to reflect subscribers instead of homes at which a service is available, for instance,  the Commission wrote:

24
[W]hether subscribership or homes passed data is used is largely a mechanical issue in terms of the market power issue....  As the market develops in terms of competition we believe ... that an operator's actual number of subscribers more uniformly and accurately reflects power in the programming marketplace.

25
Third Report, 14 F.C.C.R. at 19108 p 22.

26
But normally a company's ability to exercise market power  depends not only on its share of the market, but also on the  elasticities of supply and demand, which in turn are determined by the availability of competition.  See AT&T Corp. v.  Federal Communications Commission, 236 F.3d 729, 736  (D.C. Cir. 2001).  If an MVPD refuses to offer new programming, customers with access to an alternative MVPD may  switch.  The FCC shows no reason why this logic does not  apply to the cable industry.  Indeed, its most recent competition report suggests that it does.  According to the Commission, "several very small and rural cable systems have used a  variety of schemes to add digital channels, expand their  program offerings, and take preemptive action against aggressive DBS marketing."  Seventh Annual Report p 67.

27
Given the substantial changes in the cable industry since  publication of the Third Report in 1999 and our reversal on  other grounds, there is little point in our reviewing the  Commission's assessment of then-existing market power of  cable MVPDs.  But whatever conclusions are to be drawn  from the new data, it seems clear that in revisiting the  horizontal rules the Commission will have to take account of  the impact of DBS on that market power.  Already when the  Third Report was written, DBS could be considered to "pass  every home in the country."  Third Report, 14 F.C.C.R. at  19107-08 p 20.  The technological and regulatory changes  since then appear only to strengthen petitioners' contention. See Seventh Annual Report p p 60-82, 140.

28
With the risk of collusion inadequately substantiated to  support the 30% limit and no attempt to find other anticompetitive behavior, there remains the Commission's alternative ground--that programming choices made "unilaterally" by multiple cable companies, Third Report, 14 F.C.C.R. at  19118-19 p 51;  see also id. at 19119 p 53 ("individually"),  might reduce a programmer's "open field" below the 40% benchmark.  The only support the Commission offered for  regulation based on this possibility was the idea that every  additional chance for a programmer to secure access would  enhance diversity:

29
[T]he 30% limit serves the salutary purpose of ensuring that there will be at least 4 MSOs in the marketplace. The rule thus maximizes the potential number of MSOs that will purchase programming.  With more MSOs making purchasing decisions, this increases the likelihood that the MSOs will make different programming choices and a greater variety of media voices will therefore be available to the public.

30
Id. p 54.  Petitioners challenge the FCC's authority to regulate for this purpose on both constitutional and statutory  grounds.

31
We have some concern how far such a theory may be  pressed against First Amendment norms.  Everything else  being equal, each additional "voice" may be said to enhance  diversity.  And in this special context, every additional splintering of the cable industry increases the number of combinations of companies whose acceptance would in the aggregate  lay the foundations for a programmer's viability.  But at  some point, surely, the marginal value of such an increment in  "diversity" would not qualify as an "important" governmental  interest.  Is moving from 100 possible combinations to 101  "important"?  It is not clear to us how a court could determine the point where gaining such an increment is no longer  important.  And it would be odd to discover that although a  newspaper that is the only general daily in a metropolitan  area cannot be subjected to a right of reply, see Miami  Herald Publishing Co. v. Tornillo, 418 U.S. 241 (1974), it  could in the name of diversity be forced to self-divide.  Certainly the Supreme Court has not gone so far.

32
We need not face that issue, however, because we conclude  that Congress has not given the Commission authority to  impose, solely on the basis of the "diversity" precept, a limit  that does more than guarantee a programmer two possible  outlets (each of them a market adequate for viability).  We analyze the agency action under the familiar framework of  Chevron USA, Inc. v. National Resources Defense Council,  Inc., 467 U.S. 837 (1984).  If we find (using traditional tools of  statutory interpretation) that Congress has resolved the question, that is the end of the matter.  FDA v. Brown &  Williamson Tobacco Corp., 529 U.S. 120, 132 (2000);  National Resources Defense Council, Inc. v. Browner, 57 F.3d 1122,  1125 (D.C. Cir. 1995).  We must place the statutory language  in context and "interpret the statute 'as a symmetrical and  coherent regulatory scheme.' "  Brown & Williamson, 529 U.S. at 133.

33
We begin with the statutory language.  The relevant section requires the FCC to

34
ensure that no cable operator or group of cable operators can unfairly impede, either because of the size of any individual operator or because of joint actions by a group of operators of sufficient size, the flow of video programming from the video programmer to the consumer.

35
47 U.S.C. S 533(f)(2)(A).

36
The language addresses only "unfair[ ]" impediments to the  flow of programming.  The word "unfair" is of course extremely vague.  Certainly, the action of several firms that is  "joint," in the sense of collusive, may often entail unfairness  of a conventional sort.  The statute goes further, plainly  treating exercise of editorial discretion by a single cable  operator as "unfair" simply because that operator is the only  game in town.  (And Time Warner I authoritatively determines that the government is constitutionally entitled to  impose limits solely on that ground.)  But we cannot see how  the word unfair could plausibly apply to the legitimate, independent editorial choices of multiple MSOs.  A broad interpretation is plausible only for actions that impinge at least to  some degree on the interest in competition that lay at the  heart of Congress's concern.6  The Commission's reading of the clause effectively deletes the word "joint" and opens the  door to illimitable restrictions in the name of diversity.

37
Looking at the statute as a whole does little to support the  FCC's position.  The "interrelated interests" of promoting  diversity and fair competition run throughout the 1992 Cable  Act's various provisions.  Turner II, 520 U.S. at 189.7  But  despite the duality of interests at work in this section, see  Time Warner I, 211 F.3d at 1319, it is clear from the  structure of the statute that Congress's primary concern in  authorizing ownership limits is "fair" competition.  The statute specifies, after all, that these regulations are to be promulgated "[i]n order to enhance effective competition."  47  U.S.C. S 533 (f)(1).  In only two of the other sections of the  1992 Cable Act does Congress specify a dominant purpose.8 This statement of purpose supports a reading that sharply  confines the authority to regulate solely in the interest of  diversity.

38
The FCC points to the statutory findings that the "cable  industry has become highly concentrated" and that "the  potential effects of such concentration are barriers to entry  for new programmers and a reduction in the number of media  voices available to consumers."  Third Report, 14 F.C.C.R. at  19118-19 p 51, 1992 Cable Act S 2(a)(4), 106 Stat. at 1460. But reference to a congressional finding cannot overcome the  clear language and purpose of the actual provision.  The  quoted finding stands as little more than support for the  proposition that Congress was concerned with the possibilities  for market failure and the possible impact on new programmers.  The legislative history also offers little.  Again, the  fact that Congress's interest in anti-competitive behavior may  have been animated by an interest in preserving diversity  doesn't give the FCC carte blanche to cobble cable operators  in the name of the latter value alone.  After all, Congress also  sought to "ensure that cable operators continue to expand,  where economically justified, their capacity," 1992 Cable Act  S 2(b)(3), 106 Stat. at 1463, and it specifically directed the  FCC, in setting the ownership limit, to take into account the  "efficiencies and other benefits that might be gained through  increased ownership or control."  47 U.S.C. S 533(f)(2)(D).

39
On the record before us, we conclude that the 30% horizontal limit is in excess of statutory authority.  While a 60% limit  might be appropriate as necessary to ensure that programmers had an adequate "open field" even in the face of  rejection by the largest company, the present record supports  no more.  In addition, the statute allows the Commission to  act prophylactically against the risk of "unfair" conduct by  cable operators that might unduly impede the flow of programming, either by the "joint" actions of two or more  companies or the independent action of a single company of  sufficient size.  But the Commission has pointed to nothing in  the record supporting a non-conjectural risk of anticompetitive behavior, either by collusion or other means. Accordingly, we reverse and remand with respect to the 30%  rule.

40
* * *The FCC presents its 40% vertical limit as advancing the  same interests invoked in support of its statutory authority to  adopt the rule:  diversity in programming and fair competition.  As with the horizontal rules the FCC must defend the  rules themselves under intermediate scrutiny and justify its  chosen limit as not burdening substantially more speech than  necessary.  Far from satisfying this test, the FCC seems to  have plucked the 40% limit out of thin air.

41
The FCC relies almost exclusively on the congressional  findings that vertical integration in the cable industry could  "make it difficult for non-cable affiliated ... programmers to  secure carriage on vertically integrated cables systems" and  that "vertically integrated program suppliers have the incentive and the ability to favor their affiliated cable operators  ... and program distributors."  Second Report, 8 F.C.C.R. at  8583 p 41 (citing 1992 Cable Act S 2(a)(5), 106 Stat. at 1460). Regulatory limits in response to these consequences would  "increase the diversity of voices available to the public." Second Report, 8 F.C.C.R. at 8583-84 p 42 (citing Senate  Report at 80, reprinted in 1991 U.S.C.C.A.N. at 1213).  In  Time Warner I we thought these findings strong enough to  overcome the First Amendment challenge to the relevant  provision of the 1992 Cable Act.  In doing so, we held that  such a prophylactic rule was not "rendered unnecessary  merely because preexisting statutes [such as the antitrust  laws and the antidiscrimination provisions of the 1992 Cable  Act] impose behavioral norms."  Time Warner I, 211 F.3d at  1322-23.  Beyond that we did not assess the appropriateness  of the burden on speech.  We upheld no specific vertical  limit--none was before us.

42
We recognize that in drawing a numerical line an agency  will ultimately indulge in some inescapable residue of arbitrariness;  even if 40% is a highly justifiable pick, no one  could expect the Commission to show why it was materially better than 39% or 41%.  See Missouri Public Service  Comm'n v. FERC, 215 F.3d 1, 5 (D.C. Cir. 2000).  But to pass  even the arbitrary and capricious standard, the agency must  at least reveal " 'a rational connection between the facts found  and the choice made.' "  Dickson v. Secretary of Defense, 68 F.3d 1396, 1404-05 (D.C. Cir. 1995) (quoting Motor Vehicle  Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29,  43 (1983).  Here the FCC must also meet First Amendment  intermediate scrutiny.  Yet it appears to provide nothing but  the conclusion that "we believe that a 40% limit is appropriate  to balance the goals."  See Second Report, 8 F.C.C.R. at  8593-95 p 68.  What are the conditions that make 50% too  high and 30% too low?  How great is the risk presented by  current market conditions?  These questions are left unanswered by the Commission's discussion.

43
The FCC argued before us that no MSO has yet complained that the 40% vertical limit has required it to alter  programming.  This is no answer at all, as it says nothing  about plans that the rule may have scuttled.  Petitioners  responded that their subsidiaries frequently must juggle their  channel lineups to stay within the cap.  Furthermore, it  appears uncontested that AT&T's merger with MediaOne  brings the vertical limits into play.  See In the Matter of  Applications for Consent to the Transfer of Control of Licenses and Section 214 Authorizations from MediaOne Group,  Inc. to AT&T Corporation, 15 F.C.C.R. 9816 (2000).

44
In fairness, the FCC does make an attempt to review some  relevant conditions.  See Second Report, 8 F.C.C.R. at 858385 p p 41-45.  The FCC cites the House Report's conclusion  that "some" vertically integrated MSOs favor their affiliates  and "may" discriminate against others.  Id. at 8583-84 p 42  (citing House Report at 43).  But it also notes a report that  none of the top five MSOs "showed a pattern" of favoring  their affiliates.  Id. at 8584 p 43. Indeed, the FCC concludes  that "vertical relationships had increased both the quality and  quantity of cable programming services."  Id. p 44.  But still  it settled on a limit of 40%.  There is no effort to link the  numerical limits to the benefits and detriments depicted. Further, given the pursuit of diversity, one might expect some inquiry into whether innovative independent originators  of programming find greater success selling to affiliated or to  unaffiliated programming firms, but there is none.

45
Quite apart from the numerical limit vel non, petitioners  attack the Commission's refusal to exclude from the vertical  limit cable operators that are subject to effective competition. The FCC had proposed exempting cable operators who met  the definition of effective competition provided by S 623 of  the Communications Act of 1934.  See Implementation of  Sections 11 and 13 of the Cable Television Consumer Protection and Competition Act of 1992, 8 F.C.C.R. 6828, 6862 p 231  (1993) ("First Report");  see also 47 U.S.C. S 543(l )(1) (defining the categories of cable operators that are not subject to  rate regulation under that section).9  Of course our decision  in Time Warner I acknowledged the existence of incentives  to use affiliated programming. 211 F.3d at 1322.  For example, even where an unaffiliated supplier offered a better costquality trade-off, a company might be reluctant to ditch or  curtail an inefficient in-house operation because of the impact  on firm executives or other employees, or the resulting  spotlight on management's earlier judgment.  But petitioners  argue, quite plausibly, that exposure to competition will have  an impact on a cable company's ability to indulge in favoritism for in-house productions.  After all, while reliance on in house suppliers offering an inferior price-quality trade-off will  reduce a monopolist's profits, it may threaten a competitive  firm's very survival.  This analysis is not foreign to the  Commission, which endorsed it when proposing the exemption:

46
We believe that this proposal is appropriate since effective competition will preclude cable operators from exercising the market power which originally justified channel occupancy limits.  Where systems face effective competition, their incentive to favor an affiliated programmer will be replaced by the incentive to provide programming that is most valued by subscribers.

47
First Report, 8 F.C.C.R. at 6862 p 231.

48
The FCC makes two arguments to justify its refusal to  exempt MVPDs that are subject to effective competition. First, it says that the definition of competition provided by 47  U.S.C. S 543 was "not adopted for this specific purpose" but  rather for relief from rate regulation.  See Reconsideration  Order 10 F.C.C.R. at 7379 p 47.  Indeed, we have recognized  that one of the ways in which the statutory standard is met  may be surprisingly defective as a mark of real competition. See Time Warner Entertainment Co., L.P. v. Federal Communications Commission, 56 F.3d 151, 166 (D.C. Cir. 1995)  (MVPDs satisfying subsection (A) of 47 U.S.C. S 543(l )(1)  (low penetration) may do so more as a result of geography  than competition).  But the Commission is free to carve out subsections that are truly pertinent to competition, as it had  proposed.  See First Report, 8 F.C.C.R. at 8662-63 p 232; Second Report, 8 F.C.C.R. at 8602 p 85.

49
Of course competition that is adequate to justify dispensing  with rate regulation could still leave an undue likelihood of  improper favoritism for affiliated programmers.  But the  possible failure of readily available criteria does not itself  justify the use of so blunt a blade.  Congress expressly  directed the Commission to take "particular account of the  market structure..., including the nature and market power  of the local franchise."  47 U.S.C. S 533(f)(2)(C) (emphasis  added).  Because competition raises the stakes for a firm that  sacrifices the optimal price-quality trade-off in its acquisition  of programming, the issue seems to trigger the legislative  directive.  Yet the Commission seems to ignore its own  conclusions about cable companies' incentives and constraints,  and the dynamics of the programming industry.  See First  Report, 8 F.C.C.R. at 6862 p 231.  If the criteria of  S 543(l )(1) are unsuitable, the Commission can consider concepts of effective competition that it finds more apt for these  purposes.

50
Second, the FCC comments that if a competing MVPD  favored its own affiliated programmers, the presence of competition would have no tendency to create room for independent programmers.  See Reconsideration Order 10 F.C.C.R  at 7379 p 47.  But this theory seems contradicted by the  Commission's own observation, mentioned earlier, that no  vertically integrated MPVD has complained of reaching the  40% limit.  Vertically integrated MVPDs evidently use loads  of independent programming.  Further, although cable operators continue to expand their interests in programmers,  "[t]he proportion of vertically integrated channels ... continue[d] to decline" for each of the last two years.  Sixth  Annual Report, 15 F.C.C.R. at 1058-59 p 181, Seventh Annual Report p 173 (emphasis added).  Even if competing MSOs  filled all of their channels with affiliates' products (as unlikely  as that seems), the Commission nowhere explains why, in the  pursuit of diversity, the independence of competing vertically  integrated MVPDs is inferior to the independence of unaffiliated programmers.  In any event, the Commission's point  here does not respond to the intuition that competition spurs  a firm's search for the best price-quality trade-off.

51
In its brief the Commission adds the argument that truly  effective competition under S  543(l )(1) existed only for a tiny  fraction of cable systems.  Indeed, it said in its Sixth Annual  Report that of the nation's 33,000 cable community units, only  157 satisfy the definition through being in a market offering  more than one wireline MVPD.  Sixth Annual Report, 15  F.C.C.R. at 1045-46 p 142.  (In the Seventh Annual Report  we learn that now 330, or 1% of the total, meet the competition standard through exposure to another MVPD;  in this  report the qualifier "wireline" is absent.  See Seventh Annual  Report p 138.)  But in determining whether or not the regulations burden substantially more speech than necessary, it is a  weak move to point to the paucity of MVPDs facing competition if, as seems the case, it is easy to exempt them from the  limit.

52
We find that the FCC has failed to justify its vertical limit  as not burdening substantially more speech than necessary. Accordingly, we reverse and remand to the FCC for further  consideration.

53
* * *

54
We turn, finally, to several aspects of the rules for attributing ownership for purposes of the horizontal and vertical limits, recently revised by the FCC and challenged by petitioners.  See Implementation of the Cable Television Consumer Protection and Competition Act of 1992, 14 F.C.C.R.  19014 (1999) ("Attribution Order").  Petitioners suggest that  these rules affect their ability to "speak" to subscribers  because of their connection to the horizontal and vertical  limits.  But petitioners' speech rights are implicated only  where their interest allows them to exercise editorial control,  in which case attribution would be proper and it is the  horizontal or vertical limit that constrains speech.  The only  effect of the attribution rules where no control is exercised is  to limit the extent of petitioners' investments in a particular class of companies.  We therefore review the agency actions  under the APA standards, to determine whether they are  "arbitrary, capricious, an abuse of discretion, or otherwise not  in accordance with law."  See 5 U.S.C. S 706(2)(A).

55
The FCC adopted as its starting point the pre-existing  rules for attributing ownership of broadcast television stations, finding that the purposes of the rules are the same. See Attribution Order, 14 F.C.C.R. at 19030 p 35;  Second  Report 8 F.C.C.R. at 8577-79, 8593-96 p p 30-35, 56-63.  Under that standard, attribution is triggered by ownership of 5%  of the voting shares of a company, with various exceptions. See Attribution of Ownership Interests, 97 FCC 2d 997  (1984).  Because the decisions in the Attribution Order  tracked, to a large degree, similar decisions related to the  broadcast attribution rules, the FCC incorporated by reference much of the reasoning from the broadcast orders.  See  Attribution Order, 14 F.C.C.R. at 19015-16 p 1.

56
Petitioners challenge the sufficiency and relevance of the  Commission's evidence in support of the 5% attribution rule  and its failure to adopt an alternative proposed by cable  industry interests.  They begin by asserting that the FCC  improperly relied on two studies that were mentioned neither  in the FCC's notice nor in any party's submission.  See  Notice of Proposed Rulemaking, 13 F.C.C.R. 12990 (1998). Although it is true that an agency cannot rest a rule on data  " 'that, [in] critical degree, is known only to the agency,' "  Community Nutrition Institute v. Block, 749 F.2d 50, 57  (D.C. Cir. 1984) (quoting Portland Cement Ass'n v. Ruckelshaus, 486 F.2d 375, 393 (D.C. Cir. 1973);  see also International Union, UAW v. OSHA, 938 F.2d 1310, 1324-35 (D.C.  Cir. 1991) (approving reliance on documents not exposed to  comment if not "vital" to agency's support for rule), obviously  not every cited document is "critical."

57
Here, although petitioners assert that the studies were the  sole evidence cited by the FCC, the Commission also relied  on a survey, used to support the 1984 broadcast attribution  rules, showing that in widely held corporations, an owner of  5% or more would ordinarily be one of the two or three largest shareholders.  See Attribution Order, 14 F.C.C.R. at  19034 p 46;  Block, 749 F.2d at 58 (1984) (new information  "expanded on and confirmed information").  The earlier rulemaking had inferred that with such ownership a holder of 5%  or more would be able "to potentially affect the outcome of  elective or discretionary decisions and to command the attention of management."  Attribution of Ownership Interests, 97  FCC 2d at 1005-06 p 14.  This hardly seems implausible. Presumably an owner of 5% or more typically has enough of  an interest to justify the burden of informing himself about  the company's activities and trying to influence (or supplant)  management, a fact that management would bear in mind in  deciding to whose exhortations it should pay attention.  Petitioners have not pointed to any evidence suggesting that the  FCC's survey is no longer accurate, or that the conclusion  they draw from it has been undermined.

58
Furthermore, in attacking the relevance of the new studies,  the petitioners fail to acknowledge that the FCC sought a  rule that would capture "influence or control," not just control.  Attribution Order, 14 F.C.C.R. at 19015-16 p 1 (emphasis added).  The Commission specifically noted that a "firm  does not need actual operational control over ... a company  in order to exert influence."  Id. at 19030-31 p 36.  This  distinction also tends to rebut petitioners' critique of the  Commission's reliance on the Securities and Exchange Commission's requirement that investors report to the SEC when  their holdings exceed 5% of any class of a firm's shares.  See  15 U.S.C. S 78m(d)(1).  The FCC noted that the purpose of  the SEC's requirement was to alert investors to potential  changes in control, and reasoned that this was similar to its  own purpose in the attribution rules, encompassing not merely control but influence.  See Attribution Order, 14 F.C.C.R.  at 19035 p 49 (citing Securities and Exchange Comm'n v.  Savoy Indus., Inc., 587 F.2d 1149 (D.C. Cir. 1978)).

59
Finally, petitioners contend that it was arbitrary for the  FCC to reject a "control certification" approach, such as it  adopted for partnerships, under which a partner can avoid  attribution if (but only if) it certifies to the absence of certain  relationships that might betoken control.  In this argument, petitioners make a classic apples-and-oranges mix, since the  bases that they proposed for self-certification, see Attribution  Order at 19024 p 22, are quite different from those adopted by  the Commission for partnerships, see id. at 19038 p 57 n.163. Even if corporations and partnerships were virtually identical, the Commission would hardly be guilty of self contradiction if it rejected certification scheme A for corporations and accepted certification scheme B for partnerships. In any event, for corporations the Commission rejected a  case-by-case approach on conventional grounds, observing  that a bright-line rule was to be preferred because it "reduces  regulatory costs, provides regulatory certainty, and permits  planning of financial transactions."  Id. at 19035 p 48;  see  also id. at 19031 p 38.  Given an agency's very broad discretion whether to proceed by way of adjudication or rulemaking, see N.L.R.B. v. Bell Aerospace Co., 416 U.S. 267, 294  (1974), and the reasonableness of the 5% criterion, we doubt  there was need to explain further.  The Commission did,  however, observe that the certification proposals offered did  "not take into account the variety of ways that an investor  may exert influence or control over a company."  Id. at  19030-31 p 36.  And it implicitly distinguished its treatment  of partnerships when it said that a limited partner's influence  may not be proportional to equity interest "because the  extent of its power may be modified by contract."  Id. at  19039 p 61.  Indeed, the Commission's certification rules for  partnerships require voting restrictions that would not normally, and perhaps could not, be paralleled in the corporate  world (such as abnegation of any power to remove the general  partner except under extremely limited circumstances, see id.  at 19038 p 57 n.163).  We find the Commission's discussion  adequate.

60
We also uphold the FCC's adoption of an "equity-and-debt"  rule to capture "nonattributable investments that could carry  the potential for influence."  Id. at 19047 p 83.  The rule  triggers attribution "to an investor that holds an interest that  exceeds 33% of the total asset value (equity plus debt) of the applicable entity."  Id. at 19046-47 p 82.10  Petitioners attack  the sufficiency of evidence to support both the rule itself and  the selection of 33% as limit.  They observe in particular that  the Commission's own claims seem to depend on combinations of debt and equity with contractual rights.  See, e.g., id.  at 19047 p 83.  But the Commission explicitly relied on an  earlier rulemaking, see, e.g., id. at 19047 p 83, citing Review  of the Commission's Regulations Governing Attribution of  Broadcast and Cable/MDS Interests, 14 F.C.C.R. 12559  (1999) ("Broadcast Attribution Order"), which in turn relied  on academic literature, see id. at 12589 p 62 nn.132, 134. Petitioners offer no critique of that literature's relevance, and  it is not our role to launch one on our own.  So we must  accept the Commission's basic finding.

61
Although petitioners independently attack the Commission's selection of 33% as the debt-and-equity limit, we are  constrained in our review by the sketchy character of their  attack on the basic theory.  The Commission's choice of 33%  certainly has modest support.  It recited the numbers offered  by various parties, which ranged from 10% to 50%, in some  cases with variations dependent on the presence of special  contract provisions.  Attribution Order, 14 F.C.C.R. at  19048-49 p p 85-86.  Obviously 33% is not far off the median,  but, as the Commission says nothing to evaluate the numbers  recited, that tells us little.

62
The Commission also cited its own past decisions, saying  that it had used the same percentage for the parallel rule in  its broadcast cross-interest policy, and that there it "does not  appear to have had a disruptive effect," id. at 19048-49 p 86,  though without indicating what (if any) assessment it had  made.  And it referred to two prior adjudications.  Id. (citing  Cleveland Television Corp., 91 FCC 2d 1129 (Rev. Bd. 1982),  aff'd, Cleveland Television Corp. v. Federal Communications  Commission, 732 F.2d 962 (D.C. Cir. 1984), and Roy M.  Speer, 11 F.C.C.R. 18393 (1996)).  In Cleveland Television it  had simply held that a one-third preferred stock interest  conferred " 'insufficient incidents of contingent control' " under various policies, Attribution Order, 14 F.C.C.R. at 1904849 p 86 (emphasis added).  In Roy M. Spear, it relied on  Cleveland Television to impose a 33% ownership on a creditor's purchase option, but deferred establishment of any  general rule.  See 11 F.C.C.R. 18393 p 126 n.26.  These prior  adjudications provide thin affirmative support for the choice  of 33%, though they at least suggest that the Commission has  not indulged in self-contradiction.  But given the absence of a  real probe of the Commission's underlying reasoning for  having the restriction at all, the inevitable difficulty in picking  such a number, and the deference due the Commission, we  cannot find the choice of 33% arbitrary.  See Cassell v.  Federal Communications Commission, 154 F.3d 478, 485  (D.C. Cir. 1998).

63
Petitioners also challenge the Commission's elimination of  an exemption that prevailed in the broadcast attribution rules  at the time the cable attribution rules were promulgated.  In  the broadcast context, an otherwise covered minority shareholder in a company with a single majority shareholder was  exempted, on the principle that in such a case the minority  shareholder would ordinarily not be able to direct the activities of the company.11  See Attribution of Ownership Interests, 97 FCC 2d at 1008-09 p 21;  Attribution Order, 14  F.C.C.R. at 19044-46 p p 74-81.  There were contentions in  the Broadcast Attribution Order proceeding that the majority  shareholder exemption was being used evasively.  See 14  F.C.C.R. at 12574-75 p 29.  The Commission neither rejected nor accepted these claims, but retained the exemption.  See  id. at p 36.  In dispatching the exemption here, the Commission cited only its concern that a minority shareholder might  be able to exercise influence even in these circumstances, the  "lack of a record ... that the exemption should be retained,"  and the fact that no one claimed to be using the exemption. Attribution Order, 14 F.C.C.R. at 19046 p 81.

64
The Commission argues here that petitioners lack standing  because they have not shown that they are using the exemption.  Again, the FCC disregards the impact the rule can  have on investment plans.  Petitioners say that they are  continually reviewing investment opportunities and that they  are constrained by the absence of the single majority exemption.  See supra p. 1137.  This is an actual "injury in fact" that  is "fairly traceable" to the administrative action.  See Lujan  v. Defenders of Wildlife, 504 U.S. 555, 561 (1992);  see also  Committee for Effective Cellular Rules v. Federal Communications Commission, 53 F.3d 1309, 1315-16 (D.C. Cir. 1995). And of course the absence of current use is no reason to  delete an exemption.  Removal of the exemption is a tightening of the regulatory screws, if perhaps a minor one.  It  requires some affirmative justification, cf. State Farm, 463 U.S. at 41-42 (requiring justification for removal of a restriction), yet the Commission effectively offers none.  Its "concern" about the possibility of influence would be a basis, if  supported by some finding grounded in experience or reason,  but the Commission made no finding at all.  Accordingly,  deletion of the exemption cannot stand.

65
Finally, petitioners object to one of the seven criteria that a  cable operator must satisfy in order to be exempt from  attribution of limited partnership.  The general rule is that  any partnership interest, no matter how small, leads to  attribution, Attribution Order, 14 F.C.C.R. at 19039-40 p 61,  but a limited partner can secure exemption if it certifies  compliance with certain criteria intended to ensure that the  partner "will not be materially involved in the media management and operations of the partnership."  Id.  The Commission interprets one of these criteria to bar exemption when a  limited partner that is a vertically integrated MSO also sells programming to the partnership.  See id. at 19055 p 106. This criterion applies even though the limited partner, to  achieve exemption, must have certified that it does not "communicate with the licensee or general partners on matters  pertaining to the day-to-day operations of its video programming business."  Id. at 19040-41 p 64.

66
We agree with petitioners that the no-sale criterion bears  no rational relation to the goal, as the Commission has drawn  no connection between the sale of programming and the  ability of a limited partner to control programming choices. Of course a programmer might secure contract terms giving  it some control over a partnership's programming choices,  but, given the independent criterion barring even communications on the video-programming business, see Attribution  Order, 14 F.C.C.R. at 19040-41 p 64, exercise of that power  would seem to be barred.  Even if it weren't, the bargaining  opportunity would depend on the desirability of the partner's  programming, not on its status as a partner.  The FCC does  not even offer a hypothetical to the contrary.

67
* * *

68
To summarize, we reverse and remand the horizontal and  vertical limits, including the refusal to exempt cable operators  subject to effective competition from the vertical limits, for  further proceedings.  We also reverse and remand the elimination of the majority shareholder exception and the prohibition on sale of programming by an insulated limited partner. We uphold thebasic 5% attribution rule and the creation of a  33% equity-and-debt rule.

69
So ordered.

Notes:

1
 The cross-appeals of the government and the cable firms from  the district court's decision in Daniels were originally consolidated  with the cable firms' petitions for review of earlier iterations of the  implementing regulations.  See Time Warner I, 211 F.3d at 131516.  After a date for oral argument was set, the FCC initiated a  new rulemaking as part of its planned quinquennial review of the  horizontal regulations.  We therefore severed the Daniels appeals  from the challenges to the regulations, holding the latter in abeyance until the completion of the new rulemaking.  See id.  The  challenge to the new horizontal rules has supplanted that portion of  the earlier challenges.

2
 DBS "is a nationally distributed subscription video service that  delivers programming via satellite to a small parabolic 'dish' antenna located at the viewer's home."  Annual Assessment of the Status  of Competition in the Market for the Delivery of Video Programming, Seventh Annual Report, CS Docket No. 00-132, FCC 01-01  (rel. Jan. 8, 2001) p 71 (2000) ("Seventh Annual Report").

3
 30% of roughly 80 million MVPD subscribers would be about 24  million subscribers, which in turn would be 36.69% of roughly 66  million cable subscribers.  Under the Commissions most recent  subscriber estimates, this provision would allow an MSO to serve  37.4% of cable subscribers, or approximately 1.1 million more  customers than when the Third Report was written.  See Seventh  Annual Report at p p 6-7.

4
 "Clustering" refers to the strategy under which MSOs concentrate their operations within a particular geographic region, giving  up scattered holdings around the country.  The benefits are  thought to be in achieving economies of both scale and scope,  allowing MSOs to spread fixed investment costs over a larger  customer base and to better compete with telephone companies  owning local loops that are actual or potential substitutes.  See  Seventh Report p p 152-53.

5
 Contrast Congress's requirement that the FCC "make such  rules and regulations reflect the dynamic nature of the communications marketplace."  47 U.S.C. S 533(f)(2)(E) (emphasis added).

6
 The Commission's economic theory--that cable operators have  an incentive to contract with the same programmers in order to  lower the programmers' average costs (see discussion in the collusion context, supra p. 1132)--would seem to apply regardless of any  horizontal limit.  Putting various special cases aside, any profitmaximizing firm will have an incentive to lower its costs.  In a  market where a cable operator is a monopolist, the resulting benefit  to the firm would be classified as monopoly rents.  In a market  where an operator is in competition, it can be expected to pass the  benefits on to its customers.  But the FCC has not shown why such  pursuit of lower costs, by the monopolist or the competitive firm, is  by itself "unfair," and the statute allows for regulation only if  unfairness can be shown.

7
 The 1992 Cable Act is a wide-ranging statute that includes,  besides the ownership limits, must-carry and leased-access requirements, rate regulation, behavioral prohibitions, and privacy protections.  See 1992 Cable Act, 106 Stat. 1460.

8
 The leased access provision was amended to add the words "to  promote competition in the delivery of diverse sources of video  programming" to the section's previously stated purpose of assuring  "that the widest possible diversity of information sources are made  available."  1992 Cable Act S 9(a), 106 Stat. at 1484;  47 U.S.C.  532(a).  The various behavioral rules designed to prevent cable  operators from abusing their market power were passed for the  stated purpose of promoting "the public interest, convenience, and  necessity by increasing competition and diversity in the multichannel video programming market."  1992 Cable Act S 19, 106 Stat. at  1494;  47 U.S.C S 547.

9
 The term "effective competition" means that-
(A) fewer than 30 percent of the households in the franchise area subscribe to the cable system;
(B) the franchise area is-(i) served by at least two unaffiliated multichannel video programming distributors each of which offers comparable video programming to at least 50 percent of the households in the franchise area;  and (ii) the number of households subscribing to programming services offered by multichannel video programming distributors other than the largest multichannel video programming distributor exceeds 15 percent of the households in the franchise area;  or
(C) a multichannel video programming distributor operated by the franchising authority for that franchise area offers video programming to at least 50 percent of the households in that franchise area;  or (D) a local exchange carrier or its affiliate (or any multichannel video programming distributor using the facilities of such carrier or its affiliate) offers video programming services ... in the franchise area of an unaffiliated cable operator which is providing cable service in that franchise area, but only if the video programming services so offered in that area are comparable to the video programming services provided by the unaffiliated cable operator in that area. 47 U.S.C. S 543(l )(1).

10
 The Commission often writes as if investors owned the assets  of the companies in which they hold stock or bonds.  See, e.g.,  Attribution Order, 14 F.C.C.R. at 19047-48 p 84 n.230.  No issue is  made here of how its calculations are to be made, e.g., percentage of  book value, percentage of market capitalization, or some other  method, although the Commission has attempted "clarification" in  the broadcast context by allowing applicants to choose their valuation method.  See Review of the Commission's Regulations Governing Attribution of Broadcast and Cable/MDS Interest, MM Docket  No. 94-150, FCC 00-438 (rel. Jan. 19, 2001) p p 26-28 (2001) ("Attribution Clarification Order").

11
 The FCC has since eliminated the single majority owner exemption in the broadcast rules to bring it into conformity with the  cable rules.  See Attribution Clarification Order at p p 41-44.