Echostar Satellite L.L.C. v. Federal Communications Commission

Citations: 372 U.S. App. D.C. 385; 457 F.3d 31; 38 Communications Reg. (P&F) 1336; 2006 U.S. App. LEXIS 18562Docket: No. 04-1304

Court: Court of Appeals for the D.C. Circuit; July 25, 2006; Federal Appellate Court

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EchoStar Satellite L.L.C. petitions for review of two Federal Communications Commission (FCC) orders that revised the Individual Location Longley-Rice (ILLR) model for forecasting broadcast television signal strength. These changes were mandated by the Satellite Home Viewer Improvement Act of 1999, which required the model to reliably account for signal degradation due to terrain, buildings, and land cover variations. While the FCC updated the model for UHF stations, EchoStar contends that the failure to adjust it similarly for VHF stations breaches the statutory requirements. Six broadcaster associations and Fox Broadcasting Company support the FCC’s actions. 

The legal framework includes the Copyright Act, which grants network broadcasters exclusive rights to authorize public displays of their content. The Satellite Home Viewer Act of 1998 (SHVA) provided satellite carriers with a statutory license to retransmit signals from distant network stations to "unserved households," defined as those unable to receive a Grade B signal via rooftop antennas. The FCC adopted the ILLR model to predict signal reception likelihood and reduce the need for on-site signal tests. Initially, EchoStar criticized the model for excluding factors related to land cover that affect signal strength, known as "clutter loss." The FCC initially refrained from modifying the model due to a lack of accepted standards for incorporating such factors. 

In response to these concerns, the SHVIA mandated the FCC to develop a predictive model that accurately assesses individual locations' signal reception capability, including terrain and land cover effects. The Act also instructed the Commission to refine the model as new data becomes available and amended the Copyright Act to create a presumption favoring the ILLR model in legal disputes regarding unserved households. Consequently, the court must rely on the revised ILLR model in such disputes. The court ultimately denies EchoStar's petitions.

The Commission, under the SHVIA, proposed modifications to the ILLR model to account for the impact of vegetation and buildings on broadcast signal strength. This was to be achieved by introducing a 'clutter loss value' based on ten land cover categories derived from the LULC database. The clutter loss calculations would utilize data from Professor Thomas N. Rubinstein's research. However, the Commission acknowledged limitations in Rubinstein's figures and sought comments on alternative data or scientifically supported methods to enhance the ILLR model.

Feedback from broadcasters and engineers included criticisms of Rubinstein's methodology, with Richard L. Biby providing an alternative clutter loss dataset. A significant empirical study by the NAB and AMST compared signal measurements across five regions against predictions from both the existing ILLR model and the revised models. This study indicated that the proposed models were less accurate than the original, prompting the NAB and AMST to argue that the Commission should retain the existing model unless a validated improvement was demonstrated.

Ultimately, the Commission decided that the unmodified ILLR model outperformed the alternatives for both VHF and UHF channels. For VHF channels, adjustments for clutter loss were deemed unnecessary, maintaining the model’s predictions. Conversely, for UHF channels, the Commission applied a reduced clutter loss value to improve the balance of predictions without compromising accuracy.

EchoStar filed a petition for reconsideration, asserting that the Commission failed to consider clutter loss values in its predictive model for VHF channels, thereby neglecting its responsibilities under the Satellite Home Viewer Improvement Act (SHVIA). EchoStar criticized the Commission for relying on the NAB/AMST study, claiming the supporting data was not available for public comment until shortly before EchoStar's reply was due. Additionally, EchoStar contended that the Commission unlawfully denied its request to conduct on-site signal strength tests for customers incorrectly identified as served, instead requiring those customers to follow the waiver and testing procedures in 47 U.S.C. 339(c)(2)(4).

The Commission denied the petition, clarifying that it had not overlooked clutter loss but had determined that setting these values to zero yielded the most accurate predictions under certain groundcover conditions. The Commission stated that the data from the NAB/AMST study had been publicly accessible prior to issuing the ILLR Notice, and EchoStar had already utilized this data in its arguments. Furthermore, the Commission rejected EchoStar's claim that it could conduct independent on-site testing instead of adhering to the established waiver procedures.

In seeking review of the ILLR Report and Reconsideration Order, EchoStar articulated three main arguments: (1) the Commission’s zeroing of the clutter loss term violated 47 U.S.C. 339(c)(3); (2) reliance on unrecorded data breached the notice and comment requirements of the Administrative Procedure Act (APA); and (3) refusal to allow bypassing the waiver process contravened principles in the SHVIA regarding on-site testing. The review process involves determining whether Congress's intent is clear under the Chevron framework, assessing if the agency's interpretation is a permissible construction of the statute if ambiguity exists.

EchoStar argued that the Commission failed to ensure its model accounted for variations in terrain and building structures as mandated by 47 U.S.C. 339(c)(3), asserting that Congress intended for the model to reflect land cover differences. The Commission has discretion in how to integrate these variations but not in whether to acknowledge their effects, making EchoStar's claim that the Commission erred in setting the clutter loss factor to zero for VHF channels significant. The Commission provided two counterarguments to EchoStar's position, with only one rooted in the decisions under review.

The ILLR model, derived from empirical observations of signal intensity, already accounts for land cover variation, as indicated by the Commission's assertion that the model's under-prediction bias reflects this factor. The statute only requires the Commission to ensure the model considers land cover variations, not to explicitly incorporate a variable for it. Thus, the Commission claims compliance with the statute by stating that the existing bias accounts for land cover. However, this argument was not formally adopted by the Commission and cannot be relied upon for upholding its orders.

The Commission emphasizes that any modifications to the model must comply with its statutory obligation to create a reliable predictive model, as mandated by 47 U.S.C. 339(c)(3). EchoStar's interpretation would undermine this reliability by necessitating adjustments that could decrease the model's accuracy. The Commission conducted a thorough analysis and determined that setting clutter loss values to zero yields the most accurate ILLR predictions for VHF stations under certain conditions.

Congress's intent is deemed clear, with the Commission's interpretation of the statute correctly prioritizing the creation of a reliable predictive model. The directives to account for land cover and refine the model are secondary to the primary requirement of reliability. Additionally, the provisions of the SHVIA should be read together, establishing that any revisions to the ILLR model must enhance its accuracy. Consequently, the Commission's decision to set the clutter loss value to zero, as it concluded that the proposed changes would reduce the model's accuracy, is legally justified.

EchoStar contends that Congress, rather than the Commission, determined the appropriate time to integrate land cover variations into the ILLR model, asserting that the Commission lacked authority to challenge this decision. In Colorado v. United States Department of the Interior, the court deemed unlawful a DOI model for assessing damages under CERCLA due to its exclusive reliance on lost use value, despite statutory requirements to consider a range of factors. The court ruled that data limitations could not excuse the DOI's failure to follow Congress's clear mandate for incorporating restoration costs. EchoStar parallels this case to Colorado, arguing that the Commission similarly ignored Congressional directives based on perceived data inadequacies. However, the court differentiates this case, noting that the insistence on including restoration costs in Colorado was based on explicit Congressional preference, which is not present in the current matter. Congress’s expressed preference here is for a reliable model, and adopting EchoStar's proposed values would undermine that aim. Furthermore, the court clarifies that the mandate in 339(c)(3) is ongoing, allowing for future model refinements if improvements are identified. 

In addition, EchoStar claims the Commission violated the Administrative Procedure Act by failing to timely provide the NAB/AMST study’s raw data for public comment, as the data were only submitted after the final rule was established and close to the deadline for EchoStar's response. The Commission countered that the data were publicly available through other sources at the time of rulemaking, but EchoStar argues that it should not have been expected to locate the data independently.

EchoStar contends that there has been no effective means for parties to verify data and identify errors, which could prevent the Commission from relying on unreliable information in its final rule. In contrast, the Commission asserts that EchoStar was not entitled to the data since it did not rely on it during the issuance of the final rule, basing its decision instead on public comments from the Associations. The Commission cites a precedent indicating that critical factual material supporting an agency's position must be made available for review. 

The timeline of events in 2000 illustrates a lack of engagement from EchoStar regarding the NAB/AMST study: (1) On February 22, the Associations presented their comments summarizing their study's findings; (2) On March 14, EchoStar replied without mentioning the NAB/AMST study; (3) The Commission issued the final rule on May 26; (4) EchoStar petitioned for reconsideration on July 10, objecting to the study's reliance without opportunity for comment; (5) The Associations submitted the underlying data on July 24; (6) On August 30, EchoStar reviewed the data in its reply.

In 2004, the Commission rejected EchoStar's procedural objections and arguments regarding the NAB/AMST study. EchoStar claimed significant discussion of the study occurred in the March 14 reply comments, which included a chart comparing model accuracies. However, the Commission notes that EchoStar did not criticize the study or request the raw data during the comment period and could have raised objections at any time before the final decision, as per the Commission's ex parte rules, which allow for late submissions. This suggests that EchoStar's current objection to the unavailability of the raw data is an afterthought rather than a genuine concern raised during the appropriate timeframe.

The Commission rejects EchoStar's claim that it developed its own data and analysis requiring comment, clarifying that references in the ILLR Report and Order pertain only to agency staff's interpretations of existing record evidence. The Commission notes that allowing comments on every staff observation would prolong rulemaking unnecessarily, contrary to the Administrative Procedure Act (APA). 

Regarding waivers and testing, if a household is predicted to be served but denied retransmission, the subscriber can request a waiver from the network station. If denied, the subscriber may seek an independent field test to demonstrate unserved status, with testing conducted by a mutually agreed-upon or designated independent tester, as outlined in 47 U.S.C. 339. The cost of the test is borne by the party that does not prevail.

EchoStar argues that subscribers should be able to bypass the waiver process if they provide results from an independent field test showing unserved status, suggesting that actual signal strength measurement is the most reliable indicator. EchoStar contends this aligns with the Satellite Home Viewer Act (SHVA) provisions, which define an "unserved household" based on the inability to receive signals of a certain intensity. EchoStar views the waiver process outlined in 339 as an additional, more cumbersome method for proving unserved status, which allows for cost-shifting under the 'loser pays' rule.

EchoStar contends that the waiver process outlined in 17 U.S.C. 339 is exclusive and replaces a previous, less detailed procedure. It asserts that the statutory license under 17 U.S.C. 119 for satellite providers to retransmit distant network signals to 'unserved households' does not change the necessity of measurement to determine unserved status. The Commission acknowledges EchoStar's valid public interest concerns regarding the efficiency of SHVIA eligibility determinations but maintains that the statutory sequence—waiver request, denial, subscriber on-site test request, tester selection, and testing—must be followed. The Commission interprets the statute as mandating this sequence exclusively, rejecting EchoStar's argument for a streamlined process. 

The analysis emphasizes that prior to the SHVIA, individual testing was essential to determine unserved households, but the current statute clarifies that predictions from the ILLR model establish unserved status, with 339 providing a detailed waiver and testing procedure. Additionally, EchoStar's assertion that it can bypass these procedures by paying for independent testing contradicts 17 U.S.C. 119(a)(2)(B)(ii)(II), which mandates reliance on 47 U.S.C. 339(c)(4) for site measurements, reinforcing the Commission's prescribed process. The Commission's interpretation of the SHVIA is deemed reasonable and consistent with statutory intent, leading to the denial of EchoStar's petitions. The Commission's prior acknowledgment regarding the ILLR model's signal loss values does not support EchoStar's current argument as it did not assert compliance with the requirement to consider land cover at that time.