Comcast Corporation v. Federal Communications Commission and United States of America

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued April 8, 2008 Decided May 16, 2008
No. 07-1445
COMCAST CORPORATION ,
PETITIONER
v.
FEDERAL COMMUNICATIONS COMMISSION AND UNITED
STATES OF AMERICA ,
RESPONDENTS
______
NATIONAL CABLE & TELECOMMUNICATIONS ASSOCIATION
AND CONSUMER ELECTRONICS ASSOCIATION ,
I NTERVENORS
______
On Petition for Review of an Order
of the Federal Communications Commission
David P. Murray argued the cause and filed the briefs for
petitioner.
Raymond L. Gifford and Adam M. Peters were on the brief
for amici curiae Americans for Prosperity, et al. in support of
petitioner.

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Matthew B. Berry, General Counsel, Federal
Communications Commission, argued the cause for respondents.
With him on the brief were Thomas O. Barnett, Assistant
Attorney General, U.S. Department of Justice, Robert B.
Nicholson and Robert J. Wiggers, Attorneys, Joseph R. Palmore,
Deputy General Counsel, Federal Communications
Commission, Richard K. Welch, Acting Deputy Associate
General Counsel, and Laurence N. Bourne, Counsel. James J.
Fredricks, Attorney, U.S. Department of Justice, Daniel M.
Armstrong, Associate General Counsel, Federal
Communications Commission, and Joel Marcus, Counsel,
entered appearances.
Robert S. Schwartz argued the cause for intervenor
Consumer Electronics Association in support of respondents.
With him on the brief were Julie M. Kearney and Mitchell L.
Stoltz.
Daniel L. Brenner and Neal M. Goldberg were on the brief
for intervenor National Cable & Telecommunications
Association in support of respondents.
Before: GINSBURG and GRIFFITH , Circuit Judges, and
SILBERMAN, Senior Circuit Judge.
Opinion for the Court filed by Senior Circuit Judge
SILBERMAN .
SILBERMAN , Senior Circuit Judge: Petitioners, for the third
time, challenge the FCC’s policy regarding set-top converter
boxes. We again deny their petition for review.

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I.
We have explained the origins of this dispute between
Comcast and the Commission in General Instrument Corp. v.
FCC, 213 F.3d 724, 727-30 (D.C. Cir. 2000) and Charter
Communications, Inc. v. FCC, 460 F.3d 31, 34-37 (D.C. Cir.
2006). Briefly put, in order to access subscription video
programming – such as cable service or direct broadcast satellite
service – over their television sets, consumers generally require
a set-top converter box. The converter box performs security
functions – ensuring that only subscribers may access the
programming – and may include other features such as channel
tuners, program menus, pay-per-view, video-on-demand, video
recording, and high-definition. Until recently, most consumers
leased their converter boxes directly from the video provider;
there was no competitive retail market for such devices.
Congress sought to force “unbundling” of the security and
programming functions to create a competitive market for
navigation (programming) devices in the Telecommunications
Act of 1996. Section 629(a) of the Act instructed the FCC to
“adopt regulations to assure the commercial availability . . . of
converter boxes, interactive communications equipment, and
other equipment used by consumers to access multichannel
video programming . . . from manufacturers, retailers, and other
vendors not affiliated with any [video provider].” 47 U.S.C. §
549(a). Pursuant to this statutory directive, in 1998 the
Commission adopted rules requiring that the “security element”
be made available separately from the basic navigation device.
Commercial Availability of Navigation Devices, 13 F.C.C.R.
14,775, 14,793-94 (1998) (“1998 Order”). Video providers
have complied with the Commission’s rules by introducing the
“CableCARD,” which is a credit card-sized device that contains
the video provider’s security information. When this card is
plugged into a set-top box, it enables the customer to access the

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video programming and services to which he has subscribed.
See Charter, 460 F.3d at 35.
The FCC further required that video providers stop selling
or leasing integrated converter boxes (containing both security
and navigation features) by January 1, 2005. 1998 Order, 13
F.C.C.R. at 14,803. In other words, converter boxes supplied by
video providers must rely upon the same security technology as
the independently-produced boxes. We rejected various
statutory challenges to this “integration ban” in General
Instrument, 213 F.3d at 730-32.
In 2003, the FCC postponed the implementation date for the
integration ban until July 1, 2006 and sought additional
comments about the state of the market for navigation devices.
The cable industry filed comments arguing that the integration
ban was unnecessary and should be repealed. In 2005, the
Commission denied the requests to repeal the ban, concluding
that “common reliance by cable operators on the same security
technology . . . that consumer electronics manufacturers must
employ in developing competitive navigation devices will help
attain the goals of Section 629 of the [Telecommunications]
Act.” Commercial Availability of Navigation Devices, 20
F.C.C.R. 6794 (2005) (“2005 Order”). Although it chose to
retain the integration ban, the FCC again postponed the
compliance date to July 1, 2007. The Commission also stated
that it would be willing to entertain waiver requests for “low-
cost, limited capability boxes” that do not include “personal
video recording, high-definition, broadband Internet access,
multiple tuner, or other similar advanced capabilities.” Id. at
6813-14. The FCC determined that “provision of [limited-
capability] devices by cable operators will not endanger the
development of the competitive marketplace envisioned in
Section 629, particularly because the more advanced devices
offered by cable operators . . . will be required to rely on the

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same [security] technology as devices offered at retail by
consumer electronics manufacturers.” Id.
In Charter, we rejected various challenges to the FCC’s
decision to retain the integration ban. 460 F.3d at 39-45. We
held that the Commission reasonably concluded that “[i]f cable
operators must take steps to support their own compliant
equipment, it seems far more likely that they will continue to
support and take into account the need to support services that
will work with independently supplied and purchased
equipment.” Id. at 41 (citation and internal quotation marks
omitted). We observed that even though the integration ban
may impose short-term costs (i.e., higher prices for non-
integrated set-top boxes), the Commission reasonably explained
why those costs were likely to be outweighed by the long-run
benefits of a competitive equipment market, such as increased
consumer choice and the spurring of technological innovation.
Id. at 42.
* * *
Pursuing what it thought was a regulatory opening under
both section 629 and the Commission’s “low-cost waiver”
invitation in the 2005 Order, Comcast sought a waiver of the
integration ban for three models of set-top boxes. These are the
lowest-cost boxes supplied by Comcast, but they still contain
electronic programming guides, video-on-demand, pay-per-
view, and interactive television capabilities. The FCC’s Media
Bureau denied the waiver request, holding that Comcast failed
to meet the requirements for a waiver under the
Telecommunications Act, the Commission’s “low-cost, limited-
capability” policy, or the Commission’s general waiver
authority. The full Commission affirmed the Media Bureau’s
denial of the waiver. Comcast Corp., 22 F.C.C.R. 17,113 (2007)
(“2007 Order”). Comcast has petitioned for review, arguing
that the FCC’s order was contrary to the Telecommunications

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Act, and arbitrary and capricious as inconsistent with the
Commission’s prior actions and policies.
II.
Comcast’s primary argument is that it is entitled to a waiver
under section 629(c) of the Telecommunications Act, which
states in relevant part:
The Commission shall waive a regulation adopted under
subsection (a) of this section for a limited time upon an
appropriate showing by a provider of multichannel video
programming . . . that such waiver is necessary to assist the
development or introduction of a new or improved
multichannel video programming or other service offered
over multichannel video programming systems, technology,
or products.
47 U.S.C. § 549(c). Comcast argues that a waiver is “necessary
to assist” the development of new digital services. Digital video
services are more spectrum-efficient than analog services. Thus,
when customers migrate from analog to digital, Comcast can
reclaim the excess spectrum and use it for new or improved
services. The converter boxes at issue here are the cheapest
boxes that contain digital-to-analog converters, which enable
viewers with analog TVs to view digital programming. It is
contended that without a waiver for low-cost integrated boxes,
the price of converter boxes will rise, fewer customers will make
the transition to digital cable, and Comcast will not be able to
roll out new digital services as quickly as it would be with a
waiver.
The Commission concluded, however, that a waiver was not
“necessary to assist the development or introduction” of new

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services because Comcast already offered digital service in all
of its markets and was likely to continue deploying new services
even in the absence of a waiver. 2007 Order, 22 F.C.C.R. at
17,119. The FCC also determined that granting the waiver
would undermine common reliance, by reducing video
providers’ incentive to ensure that security elements are properly
designed and supported for competitive equipment
manufacturers. Id. at 17,118-19. Essentially, the Commission
has concluded, or rather predicted, that to allow Comcast to
introduce an integrated box that contains security, navigation,
and programming features would inhibit the development of
competitive navigation and programming devices. The
Commission wishes to force Comcast to rely on the same
security element as its competitors.
We think the FCC’s explanation of why a waiver was not
“necessary to assist the development or introduction” of new or
improved video services was quite reasonable. Comcast
currently offers digital video programming in all of its markets,
and 45% of its customers are already digital subscribers. Id. at
17,119. The FCC relied in part upon Comcast’s own press
releases, which showed significant growth in revenue from
digital services such as pay-per-view and video-on-demand. Id.
Cable companies do not give away their services for free; as
every cable customer knows, the more services and features you
purchase, the higher your monthly bill will be. Thus, with or
without a waiver, Comcast has a strong incentive to make as
many services available as possible, and to continue introducing
new high-value (and high-cost) features.
Comcast’s argument in support of a waiver under section
629(c) primarily turns on cost concerns – the company argues
that if non-integrated digital conversion boxes become more
expensive, then fewer customers will migrate to digital cable.
But from the start, the FCC has conceded that the integration

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ban may impose short-term costs on cable companies and
consumers. 2005 Order, 20 F.C.C.R. at 6809. It reasoned,
however, that those costs “should be counterbalanced to a
significant extent by the benefits likely to flow from a more
competitive and open supply market,” such as lower prices,
more choices, and the spurring of technological innovation. Id.
We affirmed that determination in Charter, 460 F.3d at 42, and
we may not revisit that conclusion here even if we wished to –
which we do not.
In Charter, we also affirmed the FCC’s decision to retain
the integration ban, holding that:
[T]his court is bound to defer to the FCC’s predictive
judgment that “[a]bsent common reliance on an identical
security function, we do not foresee the market developing
in a manner consistent with our statutory obligation.” . . .
If cable operators “must take steps to support their own
compliant equipment, it seems far more likely that they will
continue to support and take into account the need to
support services that will work with independently supplied
and purchased equipment.”
Id. at 41 (citations omitted). Therefore, the Commission’s
continued emphasis on common reliance is hardly open to
challenge.
III.
Comcast alternatively argues that it is entitled to a waiver
under the 2005 Order, which the Commission now tells us
(although it was not specific in 2005) was based on the
Commission’s general waiver authority, 47 C.F.R. § 1.3, rather

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1 Petitioners dispute this point, arguing that the 2005 Order
was based on section 629(c). We would normally defer to an agency’s
interpretation of ambiguity in its own decisions, but it is unnecessary
to decide this point since it really doesn’t matter whether the
Commission’s 2005 Order was based in whole or in part on section
629. We have already rejected Comcast’s arguments that it is entitled
to a waiver under section 629. Comcast also contends that, apart from
the 2005 Order, it is entitled to a waiver under the Commission’s
general authority to waive any of its rules “for good cause shown.” 47
C.F.R. § 1.3. But their contentions track those the Commission
rejected under section 629(c).
than on section 629(c). 1 22 F.C.C.R. at 17,121, n.66.
The 2005 Order, it will be recalled, stated that the
Commission would “entertain” waiver requests for low-cost,
limited-capability converter boxes that do not contain “personal
video recording, high-definition, broadband Internet access,
multiple tuner, or other similar advanced capabilities.” 20
F.C.C.R. at 6813-14. Comcast argues that the converter boxes
at issue in this case are the lowest-cost, most-limited-capability
digital boxes deployed by the cable industry, and thus they
should be eligible for a waiver under the 2005 Order. In other
words, Comcast wishes to fill a market niche for low-cost
integrated boxes.
The FCC agreed with Comcast that the boxes in question
are “low-cost,” but it held that these boxes contain too many
advanced features to be deemed “limited-capability.” 2007
Order, 22 F.C.C.R. at 17,121-22. For example, these boxes
include electronic programming guides, pay-per-view, video-on-
demand, and switched-digital capabilities. The Commission
determined that these features are “advanced capabilities,” and
thus held that Comcast was not eligible for a waiver under the
low-cost, limited-capability waiver policy.

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The Commission’s limited interpretation of its 2005 Order
was not unreasonable. The phrase “other similar advanced
capabilities” is ambiguous, and the FCC’s construction of this
term is entitled to “substantial deference.” Thomas Jefferson
Univ. v. Shalala, 512 U.S. 504, 512 (1994). In common
parlance, “advanced” means “beyond the elementary or
introductory” or “greatly developed beyond the initial stage.”
WEBSTER ’ S THIRD NEW I NT ’ L DICTIONARY 30 (1964). Nor do
we see any grounds to dispute the Commission’s conclusion that
interactive programming guides, pay-per-view, and video-on-
demand are “advanced” services. These services are certainly
close relatives of the functionalities that are specifically listed in
the 2005 Order, such as video recording, high-definition, and
multiple tuners.
Moreover, the 2005 Order did not reflect a binding
commitment by the Commission to grant waivers to all low-cost
devices. Rather, the Commission said only that it would
“consider” such waiver requests based upon its “inclin[ation] to
believe that provision of such devices . . . will not endanger the
development of [a] competitive marketplace.” 20 F.C.C.R. at
6813. In the order under review, the Commission pointed out
that it “did not commit to automatically grant every waiver
requested that purports to satisfy that objective.” 22 F.C.C.R. at
17,121. It then concluded the waiver would harm competition,
incorporating facts that were not before it in 2005. For instance,
the boxes at issue make up a significant portion of the market
and two-way integrated devices are not yet available at retail.
In this sense, the denial of the waiver is easily reconcilable with
the 2005 Order.
Comcast asserts that during the Charter litigation, the
Commission’s counsel made representations to this Court that
the FCC would grant Comcast’s waiver request. That is not
quite true. The Commission’s counsel merely stated that the

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2 The briefs filed by Comcast, the intervenors, and the amici
make assertions bordering on accusations of the Commission’s bad
faith. We must presume an agency acts in good faith, Thomas v.
Baker, 925 F.2d 1523, 1525 (D.C. Cir. 1991), but in any event we see
no substance to these assertions.
FCC would be “favorably inclined” to grant waivers for “no-
frills, simple digital set-top boxes.” Charter Communications
v. FCC, No 05-1237, Tr. of Oral Arg. at 21. Counsel mentioned
that Comcast had applied for a waiver, but he did not suggest
that the Commission was planning to grant that request.
* * *
Finally, Comcast contends that the Commission’s
application of its waiver policy has been inconsistent.2 Of
course, an agency’s unexplained departure from precedent must
be overturned as arbitrary and capricious. Pontchartrain Broad.
Co., Inc. v. FCC, 15 F.3d 183, 185 (D.C. Cir. 1994). Similarly,
an agency must provide an adequate explanation to justify
treating similarly situated parties differently. Burlington N. &
Santa Fe Ry. v. STB, 403 F.3d 771, 776-77 (D.C. Cir. 2005).
Comcast asserts that the Commission has acted inconsistently by
denying its waiver request even though the FCC has granted
waivers to several other video providers (some of which
involved the exact same boxes at issue in this case).
If the earlier waivers had been granted by the Commission,
Comcast would have a plausible argument. But the allegedly
inconsistent waivers were all granted by the FCC’s Media
Bureau and were not appealed to the Commission. We have
recently “reaffirmed our well-established view that an agency is
not bound by the actions of its staff if the agency has not
endorsed those actions.” Vernal Enters., Inc. v. FCC, 355 F.3d
650, 660 (D.C. Cir. 2004). Comcast relies heavily upon

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Northampton Media Associates v. FCC, in which we suggested
that decisions by a subordinate unit within an agency may
constitute “agency policy.” 941 F.2d 1214, 1216 (D.C. Cir.
1991). We have not overruled Northampton expressly, but a
long line of cases in this circuit – both prior to and subsequent
to Northampton – unambiguously holds that an agency is not
bound by unchallenged staff decisions. As we stated in a recent
case, “[t]here is no authority for the proposition that a lower
component of a government agency may bind the decision
making of the highest level.” Cmty. Care Foundation v.
Thompson, 318 F.3d 219, 227 (D.C. Cir. 2003); see also Vernal
Enters., 355 F.3d at 660; Jelks v. FCC, 146 F.3d 878, 881 (D.C.
Cir. 1998) (per curiam); Amor Family Broad. Group v. FCC,
918 F.2d 960, 962 (D.C. Cir. 1991).
Comcast asserts that it had no incentive to challenge the
waivers previously granted by the Media Bureau because it
agreed with the Bureau’s actions in those cases. But this is
irrelevant. Without an appeal from the Media Bureau’s
decisions, we simply do not know how the Commission would
have ruled on the earlier waiver requests. In the challenged
order, the Commission emphasized that the previous Media
Bureau orders “are not before us for review in this proceeding,
and we accordingly express no opinion on the ultimate
conclusions reached in those staff decisions.” 2007 Order, 22
F.C.C.R. at 17,127, n.99. If Comcast believes it will be at a
competitive disadvantage against video providers who have
received waivers, then it may petition the Commission to revoke
the waivers that have been granted by the Media Bureau. See
Respondent’s Br. at 42, n.45; Tr. of Oral Arg. at 15-16. At that
time, the FCC must either revoke the other waivers or offer a
reasoned explanation for why it rejected Comcast’s waiver but
granted the others.
To be sure, Comcast is correct that in the absence of

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3 Even if inconsistency at the staff level were actionable, the
Commission also argues that the waivers granted by the Media Bureau
were consistent with the denial of Comcast’s waiver request. 2007
Order, 22 F.C.C.R. at 17,127, n.99. Comcast obviously disagrees. It
is unnecessary to resolve this issue, because – as explained above –
staff-level inconsistency does not render an agency action arbitrary
and capricious.
Commission action to the contrary, the Media Bureau decisions
have the force of law. 47 U.S.C. § 155(c)(3). But this simply
means that those rulings are binding on the parties to the
proceeding. As explained above, unchallenged staff decisions
are not Commission precedent, and agency actions contrary to
those decisions cannot be deemed arbitrary and capricious.
Prior to Comcast’s application for a waiver, the full Commission
had not granted a waiver to any similarly situated entity. Thus,
we reject Comcast’s argument that the Commission’s denial of
its waiver request was discriminatory or inconsistent with prior
FCC policies. 3
IV.
For the aforementioned reasons, the petition for review is
denied.
So ordered.

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