[00:00:01] Speaker 00:
Case number 18-1281, Competitive Enterprise Institute at Appellates vs. Federal Communications Commission, portfolio to the appellates, and stand arisen to the appellate.

[00:00:35] Speaker 02:
All right, Ms.

[00:01:04] Speaker 04:
Holyoke.

[00:01:07] Speaker 04:
Good morning.

[00:01:08] Speaker 04:
May it please the court, Melissa Holyoke from the Hamilton Lincoln Lawns Tutu for repellent.

[00:01:14] Speaker 04:
Your Honor, the current FCC Chairman put it best when he said that the merger order that he dissented from was incoherent.

[00:01:25] Speaker 04:
And Chairman Pai was highlighting the multiple contradictions in the order.

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Among the worst, he described

[00:01:30] Speaker 04:
was the fact that the order gave no explanation why the merger conditions had anything to do with addressing any type of transaction-specific harm.

[00:01:43] Speaker 01:
Before we get to the merits, though, you have to show standing, which is not so easy for you.

[00:01:51] Speaker 04:
I actually believe standing is

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is satisfied here based on this court's precedent.

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We have consumers here that provided substantial evidence regarding their injury that they suffered.

[00:02:07] Speaker 04:
It's very similar to the consumer cases that this court has decided in community nutrition or CEI, where you had consumers complaining that they weren't able to find large vehicles.

[00:02:17] Speaker 04:
Here you had substantial evidence.

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You had the

[00:02:20] Speaker 04:
appellant's individual declarations that said, yes, we suffered this injury.

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We are paying more.

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We believe that our quality of service is going down because the money that they're going to have to spend is not going to our service.

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And then all of that is corroborated by an expert opinion, expert in the industry.

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that explain that yes, when you have to spend significant capital expenditures, billions of dollars, that money is going to be diverted from other resources, like investing in networks and upgrades.

[00:02:56] Speaker 01:
You have to show standing condition by condition, right?

[00:03:01] Speaker 01:
Standing to challenge one is not standing to challenge all.

[00:03:06] Speaker 04:
No, I actually don't believe that's correct, Your Honor, because if you have standing to challenge... Standing is not dispensed in gross.

[00:03:16] Speaker 01:
That's from the Supreme Court.

[00:03:20] Speaker 04:
If one person has standing to challenge the order.

[00:03:24] Speaker 01:
I'm not talking about people.

[00:03:25] Speaker 01:
I'm talking about conditions.

[00:03:26] Speaker 04:
The conditions.

[00:03:27] Speaker 01:
You might have standing.

[00:03:28] Speaker 01:
You've challenged four.

[00:03:30] Speaker 04:
Yes.

[00:03:30] Speaker 01:
You have to show standing independently.

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and there are different problems with each.

[00:03:36] Speaker 04:
Yes, and they are satisfied, each one is satisfied.

[00:03:40] Speaker 01:
So I'll just, I mean let's just go through them one by one.

[00:03:43] Speaker 01:
Okay, perfect.

[00:03:43] Speaker 01:
So usage limits.

[00:03:46] Speaker 04:
Yes.

[00:03:46] Speaker 01:
What reason do we have to think that the companies would have imposed usage limits but for the condition?

[00:04:00] Speaker 01:
We know that they rejected proposals in the past.

[00:04:05] Speaker 01:
None of them uses these limits now.

[00:04:09] Speaker 01:
That's from one of the dissents.

[00:04:11] Speaker 01:
And we have absolutely no information on industry practice with regard to whether that kind of pricing is used or not.

[00:04:21] Speaker 04:
Sure, but as the Commission recognized that depriving them of that type of income

[00:04:28] Speaker 04:
would deprive them of the ability to invest in the infrastructure.

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And that's in the appendix at 103.

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So inability to invest in infrastructure necessarily means that their quality of service is going to decrease.

[00:04:43] Speaker 04:
But they had every incentive to be able to, the company has every incentive to be able to try and use these data usage pricing.

[00:04:52] Speaker 01:
Because it... Except that they apparently hadn't.

[00:04:56] Speaker 04:
Correct, but the question on whether it would be redressed is whether it would generate a significant increase in the likelihood of being able to have this ability to use up pricing.

[00:05:10] Speaker 01:
It only makes a difference if they would exercise that option and they hadn't exercised it before.

[00:05:18] Speaker 01:
I mean, if the but for a world is you remove the condition, but for whatever reason,

[00:05:24] Speaker 01:
they charge, they do the all you can eat buffet option rather than the a la carte option, there's no causation.

[00:05:34] Speaker 01:
There's no traceability or redressability.

[00:05:36] Speaker 04:
Then why limit the company's ability to do that for seven years?

[00:05:42] Speaker 01:
For belt and suspenders protection.

[00:05:47] Speaker 01:
I don't know, but it's your burden to show that this matters.

[00:05:53] Speaker 04:
Absolutely, and here we know that the companies have every incentive to explore all types of different pricing.

[00:06:04] Speaker 03:
Whether they have... The only harm you have is the increase in the rates that are being paid by the four individuals, the three of the four individuals.

[00:06:13] Speaker 05:
Yes, correct.

[00:06:15] Speaker 03:
You have to show that's redressable.

[00:06:17] Speaker 03:
Now, your Judge Katz is asking you about redressability and causation.

[00:06:21] Speaker 03:
I'm hearing you on causation, but I'm not hearing your answer as to how we can find that this is redressable in the action for this court.

[00:06:29] Speaker 04:
Community nutrition is actually very instructive on this point, because there you had consumers... No, we're looking at the facts of this case.

[00:06:37] Speaker 03:
Absolutely, and I just... Wait a minute.

[00:06:39] Speaker 03:
Sorry, Your Honor.

[00:06:40] Speaker 03:
Don't talk while I'm interrupting, please.

[00:06:45] Speaker 03:
to show that if we entered anything, we can do anything in order to do anything, that it would cause the companies to roll back at the price increase.

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We'd be perfectly happy with the price increase.

[00:07:02] Speaker 03:
Well, they're not before us.

[00:07:03] Speaker 03:
We can't tell them that.

[00:07:05] Speaker 03:
How do you have redressability?

[00:07:06] Speaker 04:
Absolutely.

[00:07:07] Speaker 04:
And if you require... Absolutely what?

[00:07:09] Speaker 03:
How do we have redressability?

[00:07:11] Speaker 04:
No, but you're correct that you couldn't have the company come in to satisfy redressability and swear we're going to definitely decrease prices.

[00:07:21] Speaker 04:
A consumer would never be able to challenge government conduct if that was required.

[00:07:25] Speaker 04:
Instead, we have... Well, there are a lot of government...

[00:07:29] Speaker 03:
There are a lot of relief.

[00:07:34] Speaker 03:
For here, it wouldn't be the consumer, it would be the company, but the company could challenge this.

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And there is standing for the companies if they wish to challenge it.

[00:07:43] Speaker 03:
That doesn't mean that we can regress the only injury that you'll leave.

[00:07:48] Speaker 04:
As the commission observed, companies, based on sound economic principles, will pass savings through the consumers.

[00:07:57] Speaker 04:
And that's in the appendix at 220.

[00:08:01] Speaker 04:
But this court in community nutrition, the same type of issue, was milk consumers, who said, you have to pay this regulatory payment, so my prices have gone up.

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And the court said,

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You have satisfied your dressability here because the contention that the savings will be passed on to the consumers is reasonable.

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Nothing more is required.

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And the same is true here.

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Obviously, with redressability, there's going to be some predictive element to it.

[00:08:31] Speaker 04:
There can't be complete certainty.

[00:08:34] Speaker 04:
But here, what we've shown is, based on sound economic principles and the Commission's own observation that the company will pass through savings, that if the company is relieved of billions of dollars in payments in capital expenditures, that savings can go to the benefit of the consumers.

[00:08:57] Speaker 01:
Let me ask you about the build-out condition.

[00:09:00] Speaker 01:
Yes.

[00:09:03] Speaker 01:
So that one, your expert's description of what happens seems pretty hedged, to the extent they're doing anything different.

[00:09:22] Speaker 01:
We don't know whether the build out will turn out to be profitable or not.

[00:09:29] Speaker 01:
And we do know that a lot of these capital costs are already sunk.

[00:09:36] Speaker 01:
The cables are laid and we can't undo that expenditure of money.

[00:09:43] Speaker 01:
So what basis do we have

[00:09:47] Speaker 01:
to find a reasonable probability that if we set aside a requirement to make these huge investments that have already been made, that that would help consumers one bit?

[00:10:04] Speaker 04:
Based on the updates of what has been going on, they're about halfway finished.

[00:10:11] Speaker 04:
And so it's reasonable that there's likely not all the costs have been sunk in here, particularly when you're talking about billions of dollars.

[00:10:22] Speaker 04:
If you could save hundreds of millions to the consumers, that would provide some benefit and redress to the consumers.

[00:10:31] Speaker 04:
But here, what Dr. Crandall did is he also looked at what the company had been doing historically and the amount of capital expenditures that they had engaged in just prior to the merger and noted that that had typically been going to plant upgrades to help the quality of service for the consumers.

[00:10:55] Speaker 04:
And what he said, what he opined was that if that money could then, that was going to be, we had to divert to these new projects, can then go back to the consumers.

[00:11:05] Speaker 04:
That will redress some of these issues.

[00:11:07] Speaker 01:
I suppose it turns out that this build out is a wonderful economic investment for these companies.

[00:11:15] Speaker 04:
That doesn't mean it's good for the consumers, that the existing subscribers, that at this moment are paying more.

[00:11:24] Speaker 04:
The company, if it was going to be a wonderful investment, they would grow organically, like they had previously done, as the commission had observed.

[00:11:37] Speaker 04:
But here, they were required to make these enormous expenditures, rather than taking the decisions out of the boardroom and into the regulatory statutes, regulations regarding

[00:11:50] Speaker 04:
how the company should grow.

[00:11:52] Speaker 04:
The biggest problem is that, yes, every day, the consumers are going to get less and less if these conditions are reversed.

[00:12:00] Speaker 04:
But that is because of the fact that the petition for mandamus was pending for over two years, and just days before this court was going to hear it, the commission issued its consideration order.

[00:12:14] Speaker 04:
And that's why this court should decide now on the merits.

[00:12:18] Speaker 04:
because Section 405 provides judicial review and says that the petition-free consideration is a condition of precedent only if the Commission had not had the opportunity to pass on the issues.

[00:12:35] Speaker 04:
But they have here.

[00:12:36] Speaker 04:
They considered all of these issues before, and the Court can now decide these issues right now.

[00:12:45] Speaker 04:
Any other questions?

[00:12:46] Speaker 04:
I'll reserve for Rubel.

[00:12:48] Speaker 04:
If you want to save your time for rebuttal.

[00:12:53] Speaker 00:
Ms.

[00:12:54] Speaker 00:
Sunda-Resson.

[00:13:03] Speaker 05:
Good morning, Your Honors.

[00:13:03] Speaker 05:
May it please the Court?

[00:13:04] Speaker 05:
My name is Thaila Sunda-Resson, and I represent the Federal Communications Commission.

[00:13:09] Speaker 05:
This appeal should be dismissed because neither the individual appellants nor CEI have article pre-standing before this Court.

[00:13:18] Speaker 05:
The individual appellants cannot establish causation or regressibility, and CEI has no associational standing because the only member it identifies does not allege a concrete injury.

[00:13:28] Speaker 05:
I'd like to turn to the individual appellants first.

[00:13:32] Speaker 05:
Three of the four allege a concrete injury insofar as they claim that their monthly broadband bill has increased after the merger, but they have not demonstrated that this increase is tied to the conditions imposed on New Charter.

[00:13:47] Speaker 05:
Let's look to the evidence that appellants provide here.

[00:13:50] Speaker 05:
This court has been very clear.

[00:13:51] Speaker 05:
The party invoking federal jurisdiction has the burden of establishing standing through evidence.

[00:13:57] Speaker 05:
The evidence they provide here are the individual declarations from the four new charter customers and the declaration from the economist, Dr. Crandall.

[00:14:06] Speaker 01:
And they can also point to the administrative record and they can make arguments based on what we've called basic economic logic, right?

[00:14:18] Speaker 05:
Your Honor, certainly they can look to the administrative record, of course, but the economic, the sound economic principles that appellants are talking about come from

[00:14:27] Speaker 05:
Dr. Crandall's declaration.

[00:14:29] Speaker 05:
And that's what they keep proffering as their chief piece of evidence in support of causation.

[00:14:34] Speaker 01:
And Dr. Crandall's declaration... Well, let's talk about the commission's view and let's focus on the edge providers for a second.

[00:14:45] Speaker 00:
Sure.

[00:14:45] Speaker 01:
So is it the commission's current position, as I understand it,

[00:14:50] Speaker 01:
is that increased prices from edge providers are, to a potentially significant extent, passed through to end users in the form of lower prices for broadband.

[00:15:01] Speaker 01:
That's from your 2018 net neutrality order.

[00:15:06] Speaker 01:
That's the commission's position.

[00:15:09] Speaker 05:
Your Honor, in this instance, though, charter had already committed not to engage in paid prioritization well before the adoption of this merger order.

[00:15:19] Speaker 05:
We speak about that on page 23 of our brief.

[00:15:21] Speaker 05:
In fact, each of these conditions, Charter had already committed of their own accord.

[00:15:26] Speaker 05:
And in fact, in the joint appendix on page 52, there's a link to Charter's own merger application.

[00:15:32] Speaker 05:
Even in their initial merger application, they had committed not to engage in paid prioritization.

[00:15:38] Speaker 01:
But the difference between this condition and the one I was pressing your opponent on is we do

[00:15:46] Speaker 01:
We do know that this is a common industry practice to charge the edge providers, right?

[00:15:55] Speaker 05:
Yes, it is.

[00:15:55] Speaker 01:
Okay.

[00:15:57] Speaker 01:
And so they don't have this problem for that condition.

[00:16:03] Speaker 01:
And we have your own commission explaining the economic logic

[00:16:11] Speaker 01:
linking the revenue from the edge providers to lower prices for the subscribers.

[00:16:19] Speaker 05:
But with respect to edge providers, Your Honor, again, going back to their evidence, which is Dr. Crandall's declaration, Dr. Crandall says that as a result of this condition, existing customers will be charged more, will be harmed because they'll be charged more

[00:16:35] Speaker 05:
relative to new subscribers, that Charter will have an incentive to charge new subscribers less.

[00:16:39] Speaker 05:
But Dr. Crandall presents no data, no numbers, no quantitative analysis.

[00:16:44] Speaker 05:
This is a declaration from an economist.

[00:16:47] Speaker 05:
One would expect some data supporting his speculative assertions.

[00:16:52] Speaker 01:
That in summary form echoes the point that the commission made

[00:17:01] Speaker 01:
in the net neutrality order and echoes a point that the Supreme Court made in Ohio versus AMEX about these two-sided markets.

[00:17:17] Speaker 05:
Your Honor, as you had said earlier to opposing counsel, they have the burden of establishing standing for each one of these conditions.

[00:17:25] Speaker 05:
Right.

[00:17:27] Speaker 05:
the declaration from their economists that they're chiefly relying on does not prevent any evidence to back up their assertion.

[00:17:35] Speaker 01:
Is there anything that prevents them from establishing standing by pointing to the Commission's own assessment of economic effects in this other very prominent important order?

[00:17:52] Speaker 05:
No, there's nothing that prevents them, Your Honor, but

[00:17:54] Speaker 05:
Again, this is not an argument in their own brief.

[00:17:58] Speaker 05:
They did not cite to the commission's order or the net neutrality order, my recollection.

[00:18:03] Speaker 05:
And moreover, going back to the other three conditions, if I may, so that the chief concrete injury that they allege here is the increase in price.

[00:18:14] Speaker 05:
Dr. Crandall's declaration provides no support whatsoever for how two of those conditions

[00:18:20] Speaker 05:
the build out and the low income broadband program can be linked to price.

[00:18:24] Speaker 05:
And that's because if you look at paragraphs seven and nine of Dr. Crandall's declaration, he links those two conditions, build out and the low income broadband program, to a decrease in service quality, not to price.

[00:18:40] Speaker 05:
Opposing counsel is talking about how capital expenditures are very pricey, that's gonna increase prices.

[00:18:45] Speaker 05:
Their own expert declarant does not say anything about

[00:18:49] Speaker 05:
how those two conditions are linked to price.

[00:18:53] Speaker 05:
And the individual appellants claim that their service quality is going to go down basically at some unspecified time in the future.

[00:19:01] Speaker 05:
But their affidavits were filed over two years ago.

[00:19:05] Speaker 05:
They had every opportunity to file supplemental affidavits.

[00:19:09] Speaker 05:
In fact, they experienced a decrease in service quality.

[00:19:12] Speaker 05:
And clearly they didn't.

[00:19:14] Speaker 05:
So the only concrete injury is a price increase.

[00:19:17] Speaker 05:
And Dr. Crandall doesn't even link two of the four conditions to a price increase.

[00:19:22] Speaker 05:
With respect to the other condition, the ban on data caps or usage-based pricing, Dr. Crandall alleges that this will lead to increased prices.

[00:19:32] Speaker 05:
He says that, quote, a subset of existing customers will be harmed by this condition, while he doesn't say whether the subset of existing customers includes the four individual appellants here.

[00:19:46] Speaker 05:
Without that requisite link, there's no causation support.

[00:19:49] Speaker 05:
Moreover,

[00:19:50] Speaker 05:
Charter had already agreed a year before that they had no interest in imposing data caps and they had an aversion to data caps.

[00:19:58] Speaker 05:
We mentioned that in the merger order at the Joint Appendix at page 420.

[00:20:02] Speaker 05:
So for all four of these conditions, their injuries are not fairly traceable to the conditions imposed.

[00:20:10] Speaker 05:
And moreover, there certainly is no redressability here, Your Honors.

[00:20:14] Speaker 05:
Their only evidence in support of redressability that they submit is a single sentence in Dr. Crandall's declaration, which essentially says, if the conditions are revoked, the harms will be reduced.

[00:20:26] Speaker 05:
That's plainly a conclusory assertion that this Court should soundly reject.

[00:20:30] Speaker 05:
And there's no dispute that the Commission does not regulate the prices that New Charter charges its customers.

[00:20:39] Speaker 05:
Under this Court's precedent in Klamath Water, when the government entity being sued does not regulate the rates, there can be no redressability, because it's entirely speculative what New Charter is going to do if these conditions are lifted.

[00:20:53] Speaker 05:
I'm sorry?

[00:20:53] Speaker 03:
What was the decision you just made?

[00:20:56] Speaker 05:
Klamath Water, Your Honor, from this Court,

[00:20:58] Speaker 05:
There, the court held that FERC, who was the government agency being sued there, because they did not regulate the rates, there could be no redressability.

[00:21:10] Speaker 05:
And sister circuits have also agreed with that reasoning, the 10th Circuit and the Northern Laramie case, the 8th Circuit and the Burton case.

[00:21:16] Speaker 01:
The point is that we can't predict... Warrant, aren't those cases where the rates were fixed by a state regulatory agency?

[00:21:25] Speaker 05:
Not in the Burton case, Your Honor.

[00:21:27] Speaker 05:
That was a case where the utility was also controlling the rates.

[00:21:31] Speaker 01:
I mean, if you abstract out that aspect of the cases, the proposition you cited has to be over-broad because it would imply that a consumer never has standing to challenge a regulation imposed on the regulated entity.

[00:21:49] Speaker 01:
And we have at least some cases which recognize that standing.

[00:21:54] Speaker 05:
Sure, Your Honor.

[00:21:54] Speaker 05:
We're not saying that consumers would never have standing, but we're saying that in this particular case, given that Charter had already committed to modified versions of each of these conditions, we simply have no idea what Charter would do if these conditions were lifted.

[00:22:12] Speaker 01:
They could just as well... Are you saying all of these conditions reflect the voluntary choice of Charter?

[00:22:22] Speaker 05:
Modified versions of each of these conditions.

[00:22:25] Speaker 05:
So two of the conditions, the commitment not to engage in paid prioritization and the commitment not to engage and not to impose data caps were put forth by charter in their initial merger application from 2015.

[00:22:42] Speaker 05:
They had also, of their own volition, agreed to adopt a low income broadband program.

[00:22:48] Speaker 05:
One of the pre-merger companies, Bright House, had already

[00:22:50] Speaker 05:
implemented a low-income broadband program, and they had committed to a significant build-out.

[00:22:55] Speaker 05:
So, yes, they had committed to these conditions of their own accord voluntarily.

[00:23:00] Speaker 05:
I mean, if these conditions were so onerous, they surely didn't have to comply with them and move forward with the merger.

[00:23:05] Speaker 03:
That addresses the possibility, but would be your position that so far as redressability is involved, the decision to reduce prices would totally be a volitional act by the third party, would it not?

[00:23:19] Speaker 03:
Yes, they have both causation and regressibility.

[00:23:23] Speaker 05:
Absolutely.

[00:23:23] Speaker 03:
Now, the regressibility that they're asserting would be that if we told the Commission to roll back these conditions, that would reduce the cost of the third-party regulated industry would then roll back its price.

[00:23:41] Speaker 03:
That would be a totally volitional act of the third party, right?

[00:23:45] Speaker 05:
That's what they're alleging, but Your Honor, that's pure speculation on their part.

[00:23:48] Speaker 05:
We have no idea.

[00:23:49] Speaker 05:
New Charter could just as well pocket the cost savings.

[00:23:52] Speaker 03:
In other words, it doesn't look like what I'm asking you.

[00:23:54] Speaker 03:
The volitional act of the third party is necessary for their regressibility.

[00:23:58] Speaker 05:
Absolutely, Your Honor.

[00:23:59] Speaker 05:
And we have an independent third party.

[00:24:01] Speaker 05:
We simply don't know what New Charter would do in this instance.

[00:24:05] Speaker 05:
If there are no further questions, we ask that this appeal be dismissed.

[00:24:08] Speaker 05:
Thank you.

[00:24:11] Speaker 04:
Your Honor, to your question regarding the data usage and whether there's evidence, I would also like to cite you to in the record of page 102 where the Commission said that it was imposing that seven-year requirement on the data usage pricing because they had noted in the market that there was increased shifting away from flat rates.

[00:24:41] Speaker 04:
So there was evidence that they would be incentivized to explore these other pricing to compete with these other providers.

[00:24:50] Speaker 01:
What do you do with the argument that all of these conditions were voluntarily proposed on the front end?

[00:25:02] Speaker 04:
On the front end?

[00:25:02] Speaker 01:
By the companies rather than

[00:25:06] Speaker 01:
coercively extracted in the course of the negotiation with the FCC?

[00:25:10] Speaker 04:
Sure, and I think the PICE dissent explains how voluntary these are when they come in with the applications and they are basically a result of these negotiations.

[00:25:22] Speaker 04:
But if they were so voluntary, then why require a reporting and the conditions at all?

[00:25:31] Speaker 04:
If they were able to, if this is just something that was part of their business plan, then they wouldn't need to have any type of compliance.

[00:25:41] Speaker 04:
Or the Bureau would need to actually double check and make sure that they're meeting all these different conditions.

[00:25:51] Speaker 04:
And as the counselor said, if these conditions were so onerous, then they didn't have to go through with the merger.

[00:26:00] Speaker 04:
You're talking about a billion dollar, several billion dollar merger.

[00:26:06] Speaker 04:
And they come in with their hat, as Commissioner Pai says, with their hat in hand, what can we do?

[00:26:12] Speaker 04:
What's the cost of doing business with the FCC?

[00:26:15] Speaker 04:
And this is the cost of doing business.

[00:26:17] Speaker 04:
This is what you need to do.

[00:26:18] Speaker 04:
They negotiate these voluntary commitments.

[00:26:23] Speaker 04:
Any other questions, Your Honors?