## Facts

- Congress amended 47 U.S.C. § 533 through the 1992 Cable Act and directed the FCC to set “reasonable” horizontal subscriber ownership limits and vertical channel-occupancy limits to enhance competition and prevent unfair impediments to the flow of video programming.
- The FCC adopted a horizontal rule limiting any cable operator to reaching no more than 30% of U.S. multichannel video programming distributor (MVPD) subscribers.
- The FCC adopted a vertical rule limiting affiliated programming to no more than 40% of a cable system’s activated channels.
- Cable operators (including Time Warner) petitioned for review, arguing the FCC’s numerical caps exceeded statutory authority and violated the First Amendment by restricting operators’ ability to reach viewers and carry affiliated programming.
- The FCC defended the rules as content-neutral structural regulation aimed at preventing foreclosure of unaffiliated programmers, limiting market power, and supporting competition and source diversity.

## Issues

1. Whether the FCC reasonably exercised its statutory authority under 47 U.S.C. § 533 by adopting a 30% national horizontal subscriber cap.
2. Whether the FCC reasonably exercised its statutory authority by adopting a 40% vertical channel-occupancy cap for affiliated programming.
3. Whether the FCC’s chosen numerical caps satisfied intermediate First Amendment scrutiny applicable to content-neutral regulations burdening cable operators’ speech interests.

## Decision

- The court reversed and remanded the FCC’s 30% horizontal subscriber cap.
- The court reversed and remanded the FCC’s 40% vertical channel-occupancy cap.
- The court accepted that Congress authorized ownership limits in principle, but held the FCC failed to support these specific percentages with adequate record evidence and reasoned analysis.
- Applying intermediate scrutiny, the court accepted competition and diversity as substantial interests but held the FCC did not show the caps were properly tailored to those interests.

## Legal Principles

- Statutory “reasonableness” limits require an agency to connect numeric thresholds to statutory objectives with record evidence and reasoned explanation, not conclusory assertions.
- Content-neutral structural rules affecting cable operators’ expressive capacity are evaluated under intermediate scrutiny: the regulation must further a substantial interest unrelated to suppressing expression, and the burden on speech must not be greater than necessary.
- Preventing foreclosure of unaffiliated programmers and preserving competition and programming diversity may be substantial interests, but an agency must justify why a particular percentage cap (rather than alternative levels) is warranted on the facts of the market.
- Courts may vacate and remand agency rules where the agency’s economic assumptions (e.g., collusion risks at certain concentration levels) are insufficiently supported or where the chosen numeric line appears arbitrary.

## Conclusion

The D.C. Circuit vacated and remanded the FCC’s 30% horizontal subscriber cap and 40% vertical channel-occupancy cap because the FCC did not adequately justify the specific numeric limits with evidence and analysis required by the statute and by intermediate First Amendment scrutiny.


Time Warner Ent. Co. v. FCC (Time Warner II), 240 F.3d 1126 (D.C. Cir. 2001)