# Turner Broadcasting v. Federal Communications Commission

> District Court, District of Columbia · December 12, 1995 · 910 F. Supp. 734

URL: https://www.frixlaw.com/law-library/cases/1944227

## Case

- **Full name:** TURNER BROADCASTING, Et Al., Plaintiff, v. FEDERAL COMMUNICATIONS COMMISSION, Et Al., Defendant
- **Court:** District Court, District of Columbia
- **Decided:** December 12, 1995
- **Citations:** 910 F. Supp. 734; 2 Communications Reg. (P&F) 1; 1995 U.S. Dist. LEXIS 18611
- **Precedential status:** Published
- **Opinion:** Opinion
- **Judges:** Williams, Jackson, Sporkin
- **Cited by:** 2 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/1944227

## How later opinions describe it (automated extraction)

- finding that declaratory and injunctive relief are “a remedy rarely available for takings claims”

## Opinion text

910 F.Supp. 734 (1995)
TURNER BROADCASTING, et al., Plaintiff,
v.
FEDERAL COMMUNICATIONS COMMISSION, et al., Defendant.
Civ. A. Nos. 92-2247, 92-2494, 92-2495, 92-2292 and 92-2558.
United States District Court, District of Columbia.
December 12, 1995.
*735 *736 *737 Bruce Douglas Sokler, Mintz, Levin, Cohn, Ferris, Washington, DC, James R. Miller, Jr., Miller, Miller & Canby, Rockville, MD, for Turner Broadcasting Systems, Inc., Arts & Entertainment Network, Black Entertainment Television, Inc., E! Entertainment Television, Inc., Hearst/ABE-Viacom Entertainment Services, International Family Entertainment, Inc., National Cable Satellite Corp., QVC Network, Inc., The Travel Channel, Inc., USA Networks in No. 92-2247.
Theodore C. Hirt, Michael Sitcov, John Russell Tyler, U.S. Department of Justice, Civil Division, Washington, DC, for Federal Communications Commission, U.S. in Nos. 92-2247, 92-2558, and 92-2992.
Allan Abbot Tuttle, Patton & Boggs, L.L.P., Washington, DC, Peter Van N. Lockwood, Caplin & Drysdale, Washington, DC, for Discovery Communications, Inc., The Learning Channel, Inc. in No. 92-2558.
H. Bartow Farr, III, Klein, Farr, Smith & Taranto, Washington, DC, for National Cable Television Association, Inc., National Cable Television Association, Inc.
John Russell Tyler, U.S. Department of Justice, Civil Division, Washington, DC, for Federal Communications Commission, U.S. in No. 92-2495.
Theodore Case Whitehouse, Brian Conboy, Willkie, Farr & Gallagher, Washington, DC, Robert D. Joffe, Cravath, Swaine & Moore, New York City, for Time Warner Entertainment Company, L.P. in No. 92-2494.
Theodore C. Hirt, John Russell Tyler, U.S. Department of Justice, Civil Division, Washington, DC, for Federal Communications Commission, U.S. in No. 92-2494.
John Pope Cole, Jr., Cole, Raywid & Braverman, Washington, DC, for Daniels Cablevision, Inc.
MEMORANDUM AND ORDER
SPORKIN, District Judge.
This matter comes before this three-judge District Court [1] on remand from the Supreme Court of the United States. The central question before the Court is whether the "must-carry" provisions of the Cable Television Consumer Protection and Competition Act of 1992 ("1992 Cable Act") violate the First Amendment. [2]
When the case was originally before the three-judge District Court, the District Court, in a divided opinion, granted summary judgment in favor of the Government and the other intervenor-defendants, ruling that the "must-carry" provisions challenged by the Plaintiffs (consisting of both cable operators and cable programmers) survived under the intermediate standard of scrutiny set forth in United States v. O'Brien, 391 U.S. 367 , 88 S.Ct. 1673 , 20 L.Ed.2d 672 (1968) and Ward v. Rock Against Racism, 491 U.S. 781 , 109 S.Ct. 2746 , 105 L.Ed.2d 661 (1989). Turner Broadcasting System, Inc. v. F.C.C., 819 F.Supp. 32 (D.D.C.1993) (Williams, J., dissenting; Sporkin, J., concurring).
The Supreme Court, while upholding the majority's decision that the content-neutral "must-carry" provisions should be subjected to the intermediate level of scrutiny under the First Amendment, remanded the case to the District Court for further development of the factual record. Pursuant to that remand order, the case now comes before the Court on cross-motions for summary judgment.
THE REMAND
Under the intermediate level of scrutiny set forth in O'Brien , a content-neutral regulation will survive a First Amendment challenge if
it furthers an important or substantial governmental interest; if the governmental interest is unrelated to the suppression of free expression; and if the incidental restriction on alleged First Amendment freedoms is no greater than is essential to the furtherance of that interest. *738 Turner Broadcasting System, Inc. v. F.C.C., ___ U.S. ___, ___, 114 S.Ct. 2445, 2469 , 129 L.Ed.2d 497 (1994) (quoting O'Brien at 377, 88 S.Ct. at 1679 ).
In enacting the must-carry provisions, Congress found that the viability of the local broadcast industry would be "seriously jeopardized" without the protections afforded by the provisions. 1992 Cable Act § 2(a)(16). Congress asserted that three important government interests were being served by the rules: 1) preserving the benefits of free, over-the-air local broadcast television; 2) promoting the widespread dissemination of information from a multiplicity of sources; and 3) promoting fair competition in the market for television programming. Turner, at ___, 114 S.Ct. at 2469 , (citing S.Rep.No. 102-92, p. 58, (1991); H.R.Rep. No. 102-628, 63 (1992) U.S.Code Cong. & Admin.News 1992, pp. 1133, 1191; 1992 Cable Act, §§ 2(a)(8), (9), and (10).
The Supreme Court recognized that the government's asserted interests are unrelated to the suppression of free expression and are indeed important. Id. at ___, 114 S.Ct. at 2469 . The Court held that the government must still show that the must-carry provisions designed to protect local over-the-air broadcasters will "in fact advance those interests." Id. at ___, 114 S.Ct. at 2470 . In defending a regulation, the government "must do more than simply `posit the existence of the disease sought to be cured.' It must demonstrate that the recited harms are real, not merely conjectural, and that the regulation will in fact alleviate these harms in a direct and material way." Id. (citations omitted).
The Supreme Court found that in order for the government to meet its burden that the viability of the local broadcast industry would be jeopardized in the absence of "must-carry" rules the government needed to develop the factual record on two points: "1) that unless cable operators are compelled to carry broadcast stations, significant numbers of broadcast stations will be refused carriage on cable systems; and 2) that the broadcast stations denied carriage will either deteriorate to a substantial degree or fail altogether." Id. at ___, 114 S.Ct. at 2471 .
With respect to the narrow tailoring step of the O'Brien test, the Court also found factual gaps in the record. In order to determine whether the must-carry rules "burden substantially more speech than is necessary to further the government's legitimate interests," the Court found that the factual record needed to be supplemented with respect to "the extent to which the must-carry provisions in fact interfere with protected speech". Id. at ___, 114 S.Ct. at 2472 (quoting Ward, 491 U.S. at 799 , 109 S.Ct. at 2758 ). In addition, the Court held that further findings were necessary concerning the availability and efficacy of "constitutionally acceptable less restrictive means of achieving the government's asserted interests." Id. at ___, 114 S.Ct. at 2472 (quoting Sable Communications of California, Inc. v. F.C.C., 492 U.S. 115, 129 , 109 S.Ct. 2829, 2838 , 106 L.Ed.2d 93 (1989)).
The Supreme Court indicated that this Court's inquiry is not limited to the record before Congress at the time that it enacted the 1992 Cable Act. This Court is entitled to consider "additional evidence" that bears on the factual issues presented by this case. Id. at ___, 114 S.Ct. at 2472 ("a more substantial elaboration in the District Court of the predictive or historical evidence upon which Congress relied or the introduction of some additional evidence" on the harm to local broadcasters in the absence of the must-carry provisions is necessary to a determination of the Constitutional challenge).
STANDARD OF REVIEW
The Supreme Court clearly dictated that this Court is to employ a deferential standard of review in analyzing the constitutionality of the "must-carry" provisions. Turner, at ___, 114 S.Ct. at 2471 ("We agree that courts must accord substantial deference to the predictive judgments of Congress.") Congress' judgments "should not be ignored" just because the "`[appellants] cas[t] [their] claims under the umbrella of the First Amendment.'" Id. (quoting Columbia Broadcasting System, Inc. v. Democratic National Committee, 412 U.S. 94, 103 , 93 S.Ct. 2080, 2087 , 36 L.Ed.2d 772 (1973)). *739 This Court is not "to reweigh the evidence de novo, or to replace Congress' factual predictions with [its] own." Id. This Court's role is limited to assuring "that, in formulating its judgments, Congress has drawn reasonable inferences based on substantial evidence." Id. (citing Century Communications Corp. v. FCC, 835 F.2d 292 , 304 (D.C.Cir.1987)). Substantial evidence is "such relevant evidence as a reasonable mind might accept as adequate to support a conclusion." Consolidated Edison Co. v. NLRB, 305 U.S. 197, 229 , 59 S.Ct. 206, 217 , 83 L.Ed. 126 (1938).
Not only does the Constitution's separation of powers doctrine underlying this nation's success dictate that the review be deferential, but practical considerations also necessitate such review. As the Supreme Court recognized, "As an institution ... Congress is far better equipped than the judiciary to `amass and evaluate the vast amounts of data' bearing upon an issue as complex and dynamic as that presented here." Id. (citations omitted). [3] "Sound policymaking often requires legislators to forecast future events and to anticipate the likely impact of these events based on deductions and inferences for which complete empirical support may be unavailable." Id. at ___, 114 S.Ct. at 2471 . [4]
This Court's initial role in considering the cross-motions for summary judgment is to determine whether there are any genuine issues of material fact which would necessitate a trial. Fed.R.Civ.P. 56; Celotex Corp. v. Catrett, 477 U.S. 317 , 106 S.Ct. 2548 , 91 L.Ed.2d 265 (1986). There is no dispute among the parties that there was conflicting testimony and evidence before Congress on the need for and the efficacy of the must-carry provisions.
Given the reams of paper submitted to this Court, there can be no doubt but that the parties' experts disagree about the facts underlying Congress' predictive judgment that the broadcast industry was in jeopardy. For example, experts disagree regarding (1) whether in the absence of must-carry, significant numbers of broadcast stations would be refused carriage, (2) whether broadcast stations denied carriage would either deteriorate to a substantial degree or fail altogether, and (3) the accuracy of Congress' predictive judgments on the actual effects of the must-carry provisions on the cable industry. Moreover, there is disagreement over Congress' judgments on the availability and efficacy of "constitutionally acceptable less restrictive means" of achieving the Government's asserted interest. Turner at ___, 114 S.Ct. at 2472 . One would expect that experts would disagree where predictive judgments are being made regarding the effects of competition among segments of a large industry and regarding the effects of prophylactic measures.
However, given the standard of review this Court is to employ, such a "battle of experts" does not preclude summary judgment. Rather, the battle supports the rendering of summary judgment for the government —it suggests that there was "substantial evidence" before Congress (or substantial "additional evidence") from which it drew a "reasonable inference" that the must-carry provisions are necessary to protect the local broadcast industry and do not burden "substantially more speech ... than necessary." The Court's role is not to determine whether an inference is "correct" or whether a given inference is more reasonable—it is not to substitute its opinion for that of Congress. As long as there is no material dispute that there is substantial evidence from which Congress could have drawn a reasonable inference, then the government is entitled to summary judgment.
In the following pages, the substantial evidence before Congress, as well as additional evidence produced in the remand proceedings, *740 from which they could have drawn reasonable inferences will be discussed pursuant to the Supreme Court's remand order. [5] The Court is convinced that there is substantial evidence in the more than 18,000 page record [6] which Congress compiled over 3 years of hearings from which Congress could draw reasonable inferences that the must-carry rules are necessary to protect the viability of the broadcast industry and do not burden "substantially more speech than ... necessary." Ward, 491 U.S. at 799 , 109 S.Ct. at 2758 . The Court further finds that there is substantial additional evidence which confirms Congress' findings.
ANALYSIS
Although this case pits expert against expert, there is no dispute about several fundamental facts. Cable systems and "over-the-air broadcasters" are "in direct competition" as an "independent source of television programming." Turner at ___, 114 S.Ct. at 2451 . And cable systems are winning the competition, with over 60% of the "television households" currently subscribing to cable systems. [7] The market power of cable systems is expected to increase. [8] Once a television household has subscribed to cable, then the cable operator has "monopoly power" — the "physical connection between the television set and the cable network gives the cable operator ... gatekeeper [] control over most (if not all) of the television programming that is channeled into the subscriber's home." Turner at ___, ___, 114 S.Ct. at 2466, 2468 . This gatekeeper control, which has been conferred upon the cable medium by local and federal regulation, [9] allows the cable operator to "silence the voice of competing speakers." Id. at ___, 114 S.Ct. at 2466 .
There is also no dispute that these monopolists face virtually no competition from other monopolists because the vast majority of television communities are served by only one cable system. [10] Accordingly, local broadcasters cannot look to other cable systems for recourse when they are denied carriage on the one cable system in their area.
Finally, the cable industry has become increasingly horizontally concentrated and vertically integrated. Power has been concentrated in the hands of fewer and fewer operators (horizontal concentration), which has led to increased vertical integration as the largest operators have begun to demand ownership interests in cable programming networks.
A. The Need for Must-Carry
Given the cable industry's undisputed market power, the question becomes whether Congress made reasonable inferences based on substantial evidence that its market power would be wielded to harm local broadcasting and that the must-carry provisions are necessary *741 to protect the economic health of local broadcasting. [11]
i. Evidence regarding Adverse Carriage Decisions
There was substantial evidence from which Congress could reasonably conclude that cable systems had significant and increasing incentives to deny carriage or reposition local broadcasting stations in order to: 1) increase their advertising revenues, the "cable industry's hottest and brightest area of growth;" [12] and 2) favor cable programming in which they had an equity interest.
As to advertising revenues, there was substantial testimony before Congress that advances in technology were making it easier for cable companies to insert advertising into their networks [13] and that the cable industry was increasingly looking to advertising as a source of revenue. [14] Common sense dictates, and the evidence before Congress substantiated, that cable systems would have every incentive to drop or reposition their advertising competitors in the absence of regulations.
For example, testimony before Congress indicated that "as cable advertising spot sales grow, local cable operators will have an increased incentive to block out or severely burden local broadcast stations which represent competition for advertising revenues", and that it is "economic reality" that "[c]able operators, if allowed total control over their competitors' [broadcast] signals, can be expected to utilize it to their own advantage." [15] Moreover, the FCC reported to Congress that "`[c]able operators' incentive' to deny carriage or provide disadvantageous carriage" was "particularly great as against local broadcasters," because of competition for local advertising. [16]
Similarly, cable operators with equity interests in cable programmers would have every reason to discriminate against broadcast stations competing with their own programmers. Preston Padden, President of the Association of Independent Television Stations, Inc., so testified before Congress:
You don't need a Ph.D. in Economics to figure out that the guy who controls a monopoly conduit is in a unique position to control the flow of programming traffic to the advantage of the program services in which he has an equity investment and/or in which he is selling advertising availabilities, and to the disadvantage of those services, including local independent broadcasting *742 stations, in which he does not have an equity position.
S.Rep. No. 102-92 at 26 (1992) U.S.Code Cong. & Admin.News 1992, pp. 1133, 1159.
Besides the cable operators' incentives to wield their market power to the detriment of the broadcast industry, Congress also had evidence that cable operators had already dropped, refused to carry, or adversely repositioned significant numbers of local broadcasters. In 1988, the FCC conducted a study which reported that by 1988 two hundred and eighty out of the 912 responding broadcasting stations had indicated that they had been denied carriage in some 1,533 instances. [17] Three hundred and thirteen of the responding stations reported that by 1988 they had been repositioned in 1,274 instances. [18]
Moreover, the Association of America's Public Television Stations' 1987 study indicated that public television stations had been dropped in 74 instances, with only 16 being restored at a later time. Of the 128 reported channel repositionings in the 1987 study, only 30 public television stations were later restored to their prior position. [19] In addition to various studies, Congress received voluminous evidence of adverse carriage decisions by the cable industry directly from the harmed broadcast stations. See Defendants' Joint Statement of Evidence Before Congress (JSCR) ¶¶ 291-467 and Pub. Br.Supp.St. ¶¶ 89-116. Commissioner Quello of the FCC reported to Congress that "[t]he record before the Commission in its must carry proceeding demonstrated that cable won't hesitate to drop local broadcast signals." [20]
And there was reason to believe that cable systems were on "good behavior" while Congress conducted its investigation as to whether must-carry rules were necessary. It would certainly have been against the cable industry's self-interest to behave "abusively" towards the broadcast industry while it was in the "spotlight." Commissioner Quello of the FCC informed Congress that
the abuses occurring today are just the `tip of the iceberg.' These activities come at a time when the cable industry is just beginning to recognize the importance of local advertising. In addition, the leaders of the industry have been statesmen in attempting to keep the industry from abusing its new found power. Experience tells me that the natural competitive incentives will not be restrained forever. As soon as the political spotlight shifts from the cable industry, its unbridled power will be brought to bear. [21]
Based on the record before it, Congress drew reasonable inferences that in the absence of must-carry rules, "significant" numbers of broadcast stations would be refused carriage. The reasonableness of Congress' judgment that significant numbers of broadcast stations would be harmed is also underscored by the "small" burden to the cable industry caused by the must-carry provisions, as discussed infra. The question of the "significance" of the harm to the broadcast industry cannot be completely separated *743 from the question of the burden to the cable industry. [22]
Additional evidence outside the Congressional record supports the reasonableness of Congress' predictive judgment. Obviously, this case itself confirms that the cable industry would drop broadcast stations if the must-carry rules were not in place. And it would be logical to conclude that the cable industry has exercised self-restraint due to this litigation. It would not be in the cable industry's best interests to force broadcast stations to opt for their must-carry rights in order to obtain carriage.
The cable industry itself recognizes that for the time being it should be careful not to engage in behavior that would be self-defeating. Viacom's CEO stated that no broadcast station should be dropped or repositioned without his approval "so that we do not become an example of demonstrated abuse and thereby the justification for reregulation." [23] In addition, Storer Communications issued a memorandum admonishing its operators not to "rock the boat," because "we do not wish to be involved in a wholesale dislocation of broadcast signals until such time as our legal position is clarified." [24]
The government has also provided a slew of notable experts who testified to the reasonableness of Congress' conclusion that cable operators had and have substantial and increasing incentives to act adversely to local broadcast stations (Dr. Roger Noll [25] , Dr. John Haring [26] , Dr. James Dertouzos [27] ) and that the operators had acted and would act in accordance with those incentives in the absence of must-carry rules (Dr. John Haring, Tom Meek [28] , Richard Feldman [29] ).
ii. Evidence Regarding Harm if Denied Carriage
That a broadcast station that was denied access to the cable system in its local market would suffer financial harm and possible ruin seems to be an obvious conclusion. See Turner, ___ U.S. at ___, 114 S.Ct. at 2474 (Stevens, J., concurring) ("Because 60% of American households have cable, and because most cable subscribers rely solely on that medium to receive video signals, it is a practical certainty that a broadcaster dropped from the local cable system would suffer substantial economic harm.") Not *744 surprisingly, this conclusion is supported by substantial evidence before Congress. If a station is denied access to a cable network or is adversely repositioned, the size of the audience it can reach will be restricted. A reduced audience decreases a commercial station's attractiveness to advertisers, which causes advertising revenues to decline. [30] Similarly, a reduced audience decreases a public station's ability to get viewer contributions. When the revenue declines, the station's ability to provide quality programming is hampered, further decreasing the viewing audience and creating a vicious cycle of declining financial stability and health. [31]
One indication of the necessity of carriage to the financial stability of broadcast stations is the difficulty stations encounter in obtaining financing if unable to secure carriage. [32] In addition, Congress had evidence that the growth of the broadcast industry had been negatively impacted by the demise of the FCC's 1986 must-carry rules (referred to as the Century must-carry rules) [33] in 1987. [34]
The Defendants' experts have submitted additional evidence which supports the importance of cable carriage to insure the viability and health of the broadcast industry. See Declarations of David Schutz [35] , Dr. Roger Noll, Dr. John Haring, Dr. Jeffrey *745 Rohlfs [36] , Jonathan Abbott [37] , Dr. James Dertouzos. The cable industry recognizes that "[w]ith cable penetration now exceeding 70% in many markets, the ability of a broadcast television station to reach its audience through cable television is crucial.... The loss of cable carriage could cause a significant decrease in a station's ratings and a resulting loss in advertising revenues." [38]
Based on the foregoing, the Court finds that the government has met its burden of showing that there was substantial evidence that "the economic health of local broadcasting is in genuine jeopardy and in need of the protections afforded by must-carry." Turner at ___, 114 S.Ct. at 2470 .
B. Narrow Tailoring
The government also bears the burden of showing that the must-carry provisions do not "burden substantially more speech than is necessary to further the government's legitimate interests." Turner at ___, 114 S.Ct. at 2470 , citing Ward, 491 U.S. at 799 , 109 S.Ct. at 2758 . The intermediate scrutiny analysis must begin with the "actual effects" of the law on the cable industry. Turner at ___, 114 S.Ct. at 2472 . The Supreme Court stated that a determination on the tailoring question cannot be made "unless we know the extent to which the must-carry provisions in fact interfere with protected speech." Id. The answers to the following questions are critical—"the extent to which cable operators will, in fact be forced to make changes in their current or anticipated programming selections; the degree to which cable programmers will be dropped from cable systems to make room for local broadcasters; and the extent to which cable operators can satisfy their must-carry obligations by devoting previously unused channel capacity to the carriage of local broadcasters." Id.
i. Actual Effects
There was substantial evidence before Congress from which it could have drawn a reasonable inference that the burden to the cable industry as a consequence of the must-carry provisions would not be substantial. There is no doubt that the evidence before Congress indicated that in 1992 the cable industry was healthy and expanding. The cable industry itself provided evidence that technological developments would soon vastly increase the channel capacity of cable systems. The National Cable Television Association ("NCTA") reported that the development of fiber optic cable meant that "[t]he existing coaxial cable to every home is theoretically capable of carrying 100-200 channels." [39] The Association further reported that "all of the twenty largest multiple system operators (MSOs) already ha[d] begun installation of fiber within their systems, with the amount of fiber installed by these companies increasing 400 percent since 1988." [40] The Association predicted that "consumers who today can choose from dozens of cable channels soon will have a video menu of well over 100 options." [41]
Additional evidence from Plaintiffs' own expert further confirms Congress' prediction. According to Dr. Peter Shapiro, there are approximately 11,628 cable systems nationwide. *746 The average cable system has a capacity of 43 channels, which means that the cable industry's total channel capacity is over 500,000 channels. Five thousand eight hundred and eighty local broadcast stations were added to cable systems as a result of the must-carry rules. Based on these numbers, it becomes apparent that only 1.2 percent of the cable channel capacity is occupied by broadcast stations added to cable systems as a result of the must-carry rules. [42] At least 69% of the cable systems have not been required to add any broadcast station since the rules were adopted. Accordingly, cable operators have not been "forced to make" substantial "changes in their current or anticipated programming selections" as a result of the must-carry rules. Turner at ___, 114 S.Ct. at 2472 .
Moreover, evidence from Dr. Shapiro, Plaintiffs' expert, indicates that the degree to which cable programmers have been dropped from or repositioned by cable systems to make room for local broadcasters has been limited. Dr. Shapiro reports that only 640 out of 11,628 cable systems have had to drop even a single programmer from their line-ups due to the addition of broadcast stations as a result of the must-carry provisions. He estimated that the total number of drops occasioned by the must-carry rules is 780 and that only 530 of these drops have been drops of cable programmers. The President of Telecommunications, Inc. (TCI), the largest multiple-cable system operator (MSO) in the country, testified that TCI has been able to add programming which was dropped as a result of the must-carry rules as the channel capacity of its cable systems has increased. DAE Vol. VI.A, Exh. 2, Clouston Dep. at 63-64. As to repositioning, Dr. Shapiro reported that only 1,350 cable systems reported that they had repositioned any programming as a result of must-carry. These systems indicated that they had repositioned a total of 1,740 programmers, 1,385 of which were cable programmers. [43]
The statistics cited by Dr. Shapiro indicate that cable operators have been able to satisfy their must-carry obligations 87% of the time by devoting previously unused channel capacity to the carriage of local broadcasters. Dr. Shapiro indicated that in order to carry the 5,880 broadcast stations added as a result of the must-carry rules, 640 cable systems had to drop only 780 programming services. DAE II.A., Exh. 5, Shooshan Decl. ¶ 14. [44]
Not only does the Plaintiffs' evidence indicate that the burden due to the must-carry rules has been small, but also the evidence demonstrates that this burden is likely to diminish as the channel capacity increases. The Supreme Court itself recognized that "given the rapid advances in fiber optics and digital compression technology, soon there may be no practical limitation on the number of speakers who may use the cable medium." Turner at ___, 114 S.Ct. at 2457 . Paul Kagan Associates, Inc., which the parties have stipulated is "a widely respected source of data and information concerning the cable and television industries," made the following predictions regarding the increasing number of cable channels which would become available to the average television household:
1996: 59
1997: 69
1998: 80
1999: 93
2000: 111
2001: 135
2002: 157
*747
2003: 180
DAE Vol. II.A., Exh. 5, Shooshan Aff., Exh. T (The Kagan Media Index, Sept. 30, 1994). The introduction of digital compression technology is expected to fuel the expansion of channel capacity. See generally The Cable Television Industry: New Technologies, New Opportunities and New Competition, March 8, 1993 (DAE Vol., VII.R., Exh. 426) at 42-43. As this Court noted in its last opinion, "At some point, technological innovation will enable cable systems to accommodate all broadcasters requesting carriage, thereby rendering `must-carry' a problem of the past." 819 F.Supp. at 54, n. 5 .
ii. Tailoring
Having determined that the burden to the cable industry is quite small and is expected to diminish, the question becomes whether the burden on protected speech is "substantially more .. than is necessary to achieve the government's legitimate interests." Turner at ___, 114 S.Ct. at 2469 (citing Ward, 491 U.S. at 799 , 109 S.Ct. at 2758 ). Under intermediate scrutiny, there need not be a perfect fit between the means and the ends as with strict scrutiny analysis.
While the "[g]overnment may not regulate expression in such a manner that a substantial portion of the burden on speech does not serve to advance its goals," a regulation under the intermediate standard of scrutiny "will not be invalid simply because a court concludes that the government's interest could be adequately served by some less-speech-restrictive alternative." Ward at 799-800 , 109 S.Ct. at 2758. The narrow tailoring standard is satisfied "`so long as the ... regulation promotes a substantial government interest that would be achieved less effectively absent the regulation.'" Id. (citing United States v. Albertini, 472 U.S. 675, 689 , 105 S.Ct. 2897, 2906 , 86 L.Ed.2d 536 (1985)). Under this standard, "the government is not required to settle for means that serve its interests less effectively merely because an alternative might be less burdensome." Turner, 819 F.Supp. at 47 .
Plaintiffs assert that the must-carry rules fail the narrow tailoring test because there are less-restrictive means of achieving the government's purpose. Specifically, the Plaintiffs contend that there were some five less restrictive alternatives. These are: 1) adoption of the Century Rules; [45] 2) use of A/B switches which allow viewers to switch from receiving cable reception to receiving over-the-air broadcast reception; 3) direct governmental subsidies to local disadvantaged, over-the-air broadcasters; 4) imposition of charges for carriage; and 5) policing of cable operators' alleged abuses of power through antitrust and FCC enforcement. But even assuming that they would be less burdensome, it is clear they are not in any respect as effective in achieving the government's important objectives — 1) promoting fair competition in the market for television programming; 2) preserving the benefits of free, over-the-air local broadcast television; and 3) promoting the widespread dissemination of information from a multiplicity of sources.
i. Century Rules
The Century cable rules, which were imposed by the FCC, clearly would not come close to providing the same coverage as that provided by the 1992 Cable Act rules. Plaintiff Turner readily admitted that "86% of the must carry broadcast stations that were added under the Cable Act rules would not have been required to be added under the Century rules." Turner Memo. at 55 (emphasis in original). The stations opting for carriage under the must-carry provisions of the Cable Act are the very stations that would in all likelihood be dropped in the absence of such rules.
ii. A/B Switches
With respect to "A/B" switches, there was substantial evidence before Congress from which it could reasonably conclude that these switches do not represent an equally effective alternative. The then President and Chief Executive Officer of Plaintiff National *748 Cable Television Association ("NCTA"), James P. Mooney, testified before Congress that by using the A/B switch
"the subscriber would lose the picture-improvement feature of the cable antenna service. In addition, all but a handful of hand-held remote control units now in use would be rendered partially or altogether ineffective. Predictably, consumers would be puzzled, and many angered, by the `switched signals.'" [46]
The "risk of signal degradation and signal leakage" were also problems of which Congress was apprised by Adelphia Communications, a multiple system operator ("MSO"). [47]
The NCTA's Committee on Engineering concluded that the costs entailed by A/B switches "far outweigh the benefits" because "of the inconvenience that they will cause the subscriber" and "because the subscriber will not have a VHF antenna capable of receiving off-air [broadcast] signals." [48] Congress also had before it the results of a 1991 consumer survey which found that
consumers are not willing to use A/B switches. Four years after the FCC began a mandatory consumer education program about A/B switches, of all sets connected to a cable system, less than 12 percent also were connected to an antenna and an A/B switch. Only half of those households could recall ever using the A/B switch. Consumers appear unwilling to bear the expense of subscribing to cable and of maintaining an adequate antenna for off-the-air reception ...
Cable Television Consumer Protection and Competition Act of 1992, H.R.Rep. No. 628, 102d Cong., 2d Sess. (June 29, 1992) at 54, CR 00433.
The evidence produced subsequent to the remand also confirms that A/B switches would not be effective. Defendants' expert, Mr. Eldon Haakinson, stated that switching between broadcast and cable reception "by using an A/B switch may involve substantial equipment complexity, viewer inconvenience, and a compromised ability to use many features of the home entertainment system." [49] A 1993 survey conducted by TCI found that 68% of consumers find A/B switches "fairly or very inconvenient." [50]
iii. Subsidies
It is extremely difficult to analyze whether direct government subsidies represent a viable alternative, let alone an equally viable alternative to the must-carry provisions of the Cable Act, given that the structure of the subsidies has not yet been set forth by either the Plaintiffs or Congress. Several problems come to mind with respect to a subsidy program.
First, fiscal realities could render the alternative a nullity. Present and future budget restraints might reduce the enactment of subsidy legislation. See Time Warner Entertainment Co., L.P. v. F.C.C., 56 F.3d 151, 186 (D.C.Cir.1995) (Randolph, J.) (under intermediate standard of scrutiny analysis of FCC's rate regulation of cable television operators, D.C. Circuit found that alternative remedy would be "unworkable"). Second, Congress would have to make the complex determinations as to who to subsidize, how much the subsidy would be and when the subsidy would end. In deciding who to subsidize, Congress would have to steer away *749 from content decisions because of First Amendment concerns. If the subsidy were too large, Congress would be guaranteeing the continued existence of a broadcast station which would not otherwise have been able to survive. The must-carry rules simply ensure that a broadcast station will have equal access to the viewers—they do not guarantee the financial viability of the broadcast industry or any of its members.
The Court is simply unable to make an informed analysis of this proposed alternative to which the Plaintiffs have attached no significant details. Certainly, it is not this Court's role to engage experts to develop a proposed subsidy alternative which might be equally viable but less burdensome to protected speech. Plaintiffs have not suggested an alternative which this Court can test.
iv. Leased Access
The expansion of leased access carriage also does not represent an equally effective alternative. Congress specifically prohibited cable operators from charging stations for carriage under the must-carry provisions. Many of the stations invoking the must-carry protections are economically vulnerable and would not be able to pay a carriage charge or would have to reduce the expenditures on their programming in order to pay the fee. As such, the quantity and quality of programming available to non-cable households would be diminished.
v. Antitrust Remedies/ Ad Hoc Complaint Procedures
Antitrust remedies and ad hoc complaint procedures also fail the equally effective test. The problems to be cured by the must-carry provisions are not susceptible to regulation by the antitrust laws. What is more, even if it could accomplish Congress' objective, antitrust litigation is very time-consuming, cumbersome and expensive. As Robert Schmidt of the Wireless Cable Association testified, "it is not a very satisfactory solution to expect individual, entrepreneurial, start-up companies, who are relatively less well funded, to take on some of the country's largest [cable] companies on a case-by-case, market-by-market basis in antitrust litigation." [51]
Plaintiffs suggest that a complaint procedure could be established before the FCC in which the "FCC ... would resolve in individual cases, whether noncarriage of a local broadcast station[] reflects a reasonable business decision of the cable operator or one tainted by anti-competitive incentives." TW Memo. at 81. Such a procedure—regulation by exception—would necessarily create an enormous administrative burden. See Time Warner Entertainment Co., L.P. v. F.C.C., 56 F.3d 151 (D.C.Cir.1995) (Randolph, J.) (rejected holding a cost-of-service proceeding for each regulated cable system as a viable alternative because the alternative "would also cause operators to incur expenses and would in any event be unworkable in light of administrative burdens.")
C. Other Matters
There are three remaining ancillary claims raised by the Plaintiffs, namely: (1) that the must-carry provisions constitute an unlawful taking of private property; (2) that the must-carry provisions are invalid as applied to "predominantly religious television stations;" and (3) that provisions regarding low power stations are not content neutral and are violative of the First Amendment.
With respect to the takings issue, the Court does not believe the issue is one to be decided on summary judgment at this stage of the proceedings. The parties did not argue this issue on appeal and have given it only limited treatment on remand. Indeed, there is some question whether the Plaintiffs' failure to raise their Fifth Amendment takings claim before the Supreme Court results in a waiver of that claim.
Even if not waived, a takings claim seems out of place in this litigation which seeks declaratory and injunctive relief, a remedy rarely available for takings claims. See, e.g., Ruckelshaus v. Monsanto Co., 467 U.S. 986 , 104 S.Ct. 2862 , 81 L.Ed.2d 815 (1984); First *750 English Evangelical Lutheran Church v. County of Los Angeles, 482 U.S. 304 , 107 S.Ct. 2378 , 96 L.Ed.2d 250 (1987). Obviously, if it is determined that sections 4 and 5 do effect a taking—an issue the Court is not here deciding—a payment of just compensation would cure any constitutional infirmity. Although a takings claim invokes the Fifth Amendment, such a claim if sustained would not necessarily invalidate the 1992 Cable Act in its totality. As such, a takings claim does not appear to be the type of challenge which 47 U.S.C. § 555 (c)(1) requires be litigated before a three judge panel. These claims, because they pertain to specific property interests, are best dealt with on a case-by-case basis. An appropriate forum for such determinations would be the United States Court of Federal Claims. 28 U.S.C. § 1491 (a)(1). Perhaps more important, we do not want to dilute the issues the Supreme Court has asked us to address with consideration of ancillary matters not expressly remanded to us.
Accordingly, we will dismiss the takings claim without prejudice. After the constitutionality of sections 4 and 5 are definitively resolved, Plaintiffs may reassert their takings claim before the appropriate forum. All parties will preserve all procedural and substantive rights.
The Court also has been presented with a religious challenge to the must-carry provisions. Specifically, Plaintiff-intervenor Atlanta Interfaith Broadcasting ("AIB") moves for partial summary judgment and a declaration that sections 4 and 5 of the 1992 Cable Act violate the Establishment and Free Exercise Clauses of the First Amendment.
We believe this issue was properly dealt with by this Court's earlier majority opinion, which held that the must-carry provisions were consistent with both the Establishment and the Free Exercise Clauses of the First Amendment. Turner, 819 F.Supp. at 49 . Since the Supreme Court did not disturb this holding, the Court will treat this issue as having been decided.
The final matter before this Court is the issue of the content-neutrality of the 1992 Cable Act provisions relating to low power stations. Under certain circumstances, the must-carry provisions require carriage of one or more qualified low power stations. 47 U.S.C. § 534 (c). A low power station is qualified for carriage if the FCC determines, among other things, that the station's programming "would address local news and informational needs which are not being adequately served by full power television broadcast stations because of the geographic distance of such full power stations from the low power station's community of license." § 534(h)(2)(B). In addition, the FCC may qualify for must-carry privileges an otherwise ineligible low power station, depending in part on whether the requesting station provides coverage of news, sports or other items "of interest to the community." § 534(h)(1)(C)(ii)(III). [52]
Noting that this Court in its earlier opinion did not address whether these particular provisions are content-based, the Supreme Court remanded the issue for us to consider the "content-neutral or content-based character" of the provisions. Turner, ___ U.S. at ___, n. 6, 114 S.Ct. at 2460, n. 6 .
Although the provisions at issue here are very close to content-based legislation triggering strict scrutiny, we do not believe that they cross the line. As noted in this Court's earlier opinion, the low power stations provisions are viewpoint-neutral. Moreover, nothing in the record suggests in any manner that the provisions were motivated by a desire to promote or discourage broadcast of certain messages. See Ward v. Rock Against Racism, 491 U.S. 781, 791 , 109 S.Ct. 2746, 2754 , 105 L.Ed.2d 661 (1989) (noting that the "principal inquiry in determining content-neutrality ... is whether the government has adopted a regulation of speech because of [agreement or] disagreement with the message it conveys"). Indeed, we note that the government's interest in ensuring the viability of "over-the-air broadcasting" seems to be especially on point here, as the low power stations are the ones that are particularly economically sensitive to cable's increasing market power. Applying the *751 standard of intermediate scrutiny, we do not believe these provisions run afoul of the Supreme Court's admonitions regarding First Amendment protections.
It is far from clear that the Plaintiffs have asserted a potential injury sufficient to grant them standing with respect to this claim. Were the statute to make all low power stations qualified for must-carry, the provisions would withstand First Amendment scrutiny for the reasons stated with respect to their full power counterparts. To the extent the provisions, as passed, exclude certain low power stations from must-carry eligibility, the challenged provisions limit the number of stations for which the Plaintiffs could be required to provide carriage. In doing so, the provisions potentially ameliorate the impact of the must-carry provisions on the Plaintiffs. Even if Plaintiffs could articulate a basis for vindicating the rights of those low power stations excluded from the protections of the must-carry provisions, there is nothing in the statute which precludes the cable companies from voluntarily granting carriage to any low power station, whether or not it is entitled to qualified status.
Finally, it must be remembered that this is an action essentially for declaratory relief. Nothing in this opinion would prevent any cable company, or indeed any low power station, from seeking relief or raising a First Amendment argument should a specific application of these provisions cause a clear injury.
CONCLUSION
After three long years of hearings and investigation, Congress made the judgment that the broadcast industry was in need of the protections afforded by the must-carry provisions in order to promote fair competition, preserve free, over-the-air local broadcast television and promote the widespread dissemination of information from a multiplicity of sources. Congress enacted comprehensive, prophylactic measures to avert a storm that it saw gathering on the horizon. By its actions, Congress sought to "neutraliz[e] the adverse effects of cable companies' monopolistic behavior." Id. at 54.
As stated by the Supreme Court in its opinion, courts are compelled to accord substantial deference to Congress' predictive judgments. In the extensive record compiled by Congress, there is substantial evidence from which Congress could have drawn reasonable inferences that the must-carry regulations were necessary to protect the economic health of the broadcast industry and that the burden to cable industry imposed by the regulations would not be substantial. Additional evidence produced during the remand proceedings confirms Congress' judgments. [53]
The means which Congress chose to avert the evil which it had identified satisfy the narrow tailoring test. Intermediate scrutiny does not require a perfect fit, and none of the alternatives suggested would be as equally effective in promoting Congress' goals. In this case, Congress conducted a comprehensive investigation and engaged in thoughtful analysis. The laws which it enacted are appropriate and do not offend the Constitution.
Based on the foregoing analysis, the Court finds that sections 4 and 5 of the Cable Television Consumer Protection and Competition Act of 1992 survive the "intermediate level of scrutiny applicable to content-neutral restrictions that impose only an incidental burden on speech" as set forth in O'Brien. Turner at ___, 114 S.Ct. at 2469 . Accordingly, the Court grants the Defendants' motions for summary judgment and denies the Plaintiffs' motions for summary judgment.
For the foregoing reasons, it is, this 1 day of December, 1995,
ORDERED that plaintiffs' claim that the must-carry provisions constitute an unconstitutional taking without just compensation is *752 DISMISSED WITHOUT PREJUDICE; and it is,
FURTHER ORDERED, that, with respect to all remaining issues, Plaintiffs' motions for summary judgment are DENIED, and Defendants' motions for summary judgment are GRANTED.
JACKSON, District Judge, concurring.
Left to my own inclination, for the reasons set forth below I would deny both cross-motions for summary judgment and set this case for trial. My colleagues, however, are persuaded to opposite conclusions on the merits on the record presently before us. Were I to follow my own predisposition as a minority of one I would nevertheless prevail by stalemate, which should not be. Thus, obliged to choose between two forcefully argued but contradictory analyses of what I find to be a most ambiguous record—eloquent testimony, I believe, as to why a trial is necessary—in order that the case be decided I elect to concur with District Judge Sporkin: I am satisfied that, taken at face value, the evidence before Congress in 1992 of an impending demise of local broadcasting was at least "substantial" enough to warrant its prediction (a prediction, I note, to which we are instructed to accord a similar measure of deference whether we are convinced or not) in the absence of must-carry. Turner Broadcasting System, Inc. v. F.C.C., ___ U.S. ___, ___, 114 S.Ct. 2445, 2471 , 129 L.Ed.2d 497 (1994) (" Turner "). I am also prepared to accept as minimal the burden must-carry imposes on the cable industry's First Amendment rights of free speech in default of a genuine Fifth Amendment Takings Clause challenge based upon the fact that must-carry is for free.
In Turner, the Supreme Court vacated our judgment upholding the 1992 Cable Act, [1] which we had also granted on cross-motions for summary judgment, and remanded the case to us for further proceedings consistent with its opinion. Finding genuine issues of material fact still to be resolved, ___ U.S. at ___, 114 S.Ct. at 2472 , the Supreme Court directed us to develop a more thorough factual record and to resolve any factual disputes remaining before passing upon the constitutional validity of the must-carry provisions of the 1992 Cable Act. Id. The ultimate issue, viz., whether the must-carry provisions of the 1992 Cable Act impermissibly infringe upon the First Amendment rights of free speech of cable TV operators and programmers, remains unchanged.
Specifically, we were directed to determine the factual validity of the Congressional premise upon which the Act was based, namely, that without the must-carry provisions, "the economic health of local broad-casting is in genuine jeopardy." Id. at ___, 114 S.Ct. at 2470 . Then, if the evidence offered reasonable support for the premise, we were to consider the impact of must-carry on the cable operators and programmers affected. Id. at ___, 114 S.Ct. at 2472 .
Although both sides insist that the case is still susceptible of disposition on their cross-motions for summary judgment, the record they have assembled after extensive post-remand discovery belies it. They have been unable to agree on a common statement of the case after several attempts to do so, and most of the data I can extract from their separate submissions, when cabined by the response from the other side, I find to be intractably ambiguous.
We have previously found, as did Congress, that by 1990 over 50 percent of American households received video signals via cable, having increased from less than half that figure a decade earlier, and the rate at which cable service is expanding allows a prediction of still more, perhaps as much as 70 percent, by the turn of the century. Virtually all localities are served by a single cable operator of whom nearly a half are controlled by four or five conglomerates, known as "multiple systems operators" ("MSO's").
Defendants' central premise, apparently accepted by Congress, is that the typical local cable operator is or will soon be one monopolist in the control of another, a component of an elite oligopoly of MSO's who *753 guard the electronic "gate" to most of America's TV screens.
Of the market forces at work, we know that the lifeblood of broadcasting is advertising. Advertisers place their accounts with the medium offering the greatest dissemination. Cable companies compete with local broadcasters for advertising. It is therefore to the cable industry's advantage to carry programming from which it will likely derive advertising revenue as well as subscription income. Interlocking ownership of cable operation and programming interests compounds the problem. Other factors being neutral, cable operators prefer to carry the programming of affiliated programmers in whose advertising revenue they share than that of competing broadcasters who pay them nothing.
How significant are these forces, operating in the economic universe premised by defendants and Congress? Here, the ambiguity of the truly uncontroverted facts I am able to quarry from the record precludes any definite conclusions in which I am sufficiently confident to submit to the Supreme Court as a basis for constitutional judgment.
For example, the defenders of the Act tell us that even in the first two post-Act years cable operators' local advertising revenues increased by almost half and will more than double by the year 2001 to nearly $3.0 billion. Plaintiffs respond that virtually all of the cable industry's income has been, is now, and always will be derived from subscriptions. Advertising accounted for less than five percent of the industry's income in 1992 and is not likely to exceed 10 percent until well into the next century.
Be that as it may, defendants rejoin, in the five or so years antedating the Cable Act of 1992 over half of the nation's local broadcast stations, particularly in the smaller markets, went from being profitable to otherwise. More than a dozen had ceased operations altogether, and nearly twice as many were in bankruptcy.
Profitable or not, the plaintiffs reply, in absolute numbers broadcasters increased from about 1200 to over 1500 in roughly the same period. Those in bankruptcy represent less than two percent of the total.
Plaintiffs reject the causal connection postulated by the defendants between cable carriage, or lack of it, and the prosperity vel non of local broadcasters as mostly conjectural, or no better than post hoc ergo propter hoc. There are many reasons why particular stations succeed or fail. As a general proposition, they say, local broadcasters with network affiliations particularly in the larger markets, were not only profitable but increasingly so from 1987 through 1992.
How important nevertheless do local broadcasters themselves regard must-carry to be? So important, defendants tell us, that more than a third of them immediately demanded it on one or more cable systems, foregoing the option to negotiate a fee for retransmission rights to their signals. Plaintiffs dismiss that assertion as standing the significance of the statistic on its head: the other two-thirds of all broadcast signals are now being retransmitted by cable operators who are paying the broadcasters for the right to do so, and some broadcasters who demanded must-carry on one cable system are being paid for retransmission rights on another. In any event, with or without must-carry, most cable operators have generally transmitted the signals of local broadcasters in their service areas as a matter of "viewer preference" because their subscribers want the service.
Turning to a consideration of the burden imposed by must-carry on the cable industry, how intrusive has it been on the cable operators' autonomy to carry their programming of choice? We are told by defendants that somewhat less than 6000 cable channels nationwide have been conscripted by broadcasters invoking must-carry, whereas the cable industry's total channel capacity has increased since 1992 by nearly 90,000 channels; for every channel pre-empted by a broadcaster 14 more have come on line. The cable industry responds that its technological advances have occurred unevenly across the country; more than two-thirds of the nation's households today are served by cable operators who possess no excess channel capacity whatsoever.
*754 Moreover, replete as this record is with equivocal data as it relates to competition between conventional broadcasting and conventional cable, it is also conspicuously barren of information about still other market forces that may have vastly more significance in the immediate future, and will bear directly upon such issues as how long must-carry should constitutionally be allowed to last. We are told little, for example, about the effects to be anticipated from direct broadcast satellite and telephone company competition, or impending legislation. Nor are we able to discern much about the attitudes of the public itself, assuming consumer preferences were of concern to Congress at the time of the 1992 Cable Act and remain so today. [2]
The Supreme Court has reminded us that in addition to our obligation to "accord substantial deference to the predictive judgments of Congress," ___ U.S. at ___, 114 S.Ct. at 2471 , we do not have a "license to reweigh the evidence de novo, or to replace Congress' factual predictions with our own." Id. We are to ask only if Congress has drawn reasonable inferences based upon substantial evidence. I am also aware that neither side believes a trial is necessary. Nevertheless, the totality of the evidence of record here, with the myriad inferences that can be drawn from it, convinces me that a reasonable trier-of-fact could return a verdict for either party, depending upon whose evidence best survived the adversarial process. In such circumstances, to my understanding, a trial becomes inevitable. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242 , 106 S.Ct. 2505 , 91 L.Ed.2d 202 (1986).
Before WILLIAMS, Circuit Judge, and JACKSON and SPORKIN, District Judges.
STEPHEN F. WILLIAMS, Circuit Judge, dissenting.
Table of Contents
I. Introduction
A. Procedural History ...................................................... 755
B. Overview ................................................................ 755
II. The Supreme Court's Mandate ................................................ 756
III. The Posited Interests ...................................................... 758
A. The Economic Health of Local Broadcasting ............................... 758
1. The continued viability of broadcast as a whole ...................... 759
(a) Total advertising revenue ........................................ 760
(b) Number of broadcast stations ..................................... 763
(c) Profits .......................................................... 766
2. Maximum possible expansion of broadcast .............................. 767
3. The health of stations electing must-carry ........................... 768
4. Survival of broadcast across all geographic markets .................. 771
B. Unfair Competition ...................................................... 772
1. Anticompetitive behavior due to vertical integration ................. 772
2. Anticompetitive behavior due to local monopoly regardless of vertical
integration ......................................................... 776
(a) Independent programmers might outcompete broadcasters for
access ......................................................... 776
(b) Broadcasters as conduit competitors with cable ................... 778
IV. Narrow Tailoring ........................................................... 779
A. Must-carry's Burden to Operators' and Non-Broadcast Programmers'
Speech ................................................................. 780
B. Less Restrictive Alternatives ........................................... 782
*755
1. Leased, non-discriminatory access .....................................782
2. A/B or "input selector" switches ......................................785
3. The Century Rules ......................................................788
V. Conclusion...................................................................789
I. Introduction
A. Procedural History
This case is on remand from the Supreme Court in Turner Broadcasting System v. FCC, ___ U.S. ___, 114 S.Ct. 2445 , 129 L.Ed.2d 497 (1994), with instructions to resolve a variety of factual issues that the Court held were pertinent to the plaintiffs' contention that sections 4 and 5 of the Cable Television Consumer Protection and Competition Act of 1992 ("Cable Act" or "Act"), 47 U.S.C. §§ 534-35 , violate their rights under the First Amendment. After extensive discovery yielding a record of tens of thousands of pages, the parties have cross-moved for summary judgment. For the reasons stated below, I would grant the plaintiffs' motion and deny the defendants'.
The contested sections, together with the other provisions of the Act, permit a commercial television broadcast station to either (1) refuse to allow a cable system to carry its broadcast signal unless payment to the station is negotiated ("retransmission consent"), 47 U.S.C. § 325 (b), or (2) force an area cable system to carry its signal even if the system does not want to ("must-carry"). 47 U.S.C. § 534 . Non-commercial stations cannot elect retransmission consent, 47 U.S.C. § 325 (b)(2)(A), but may demand carriage. 47 U.S.C. § 535 . In any case of forced carriage, the station to be carried may demand one of several specific channel positions on the cable system in question. 47 U.S.C. § 534 (b)(6) (commercial stations); 47 U.S.C. § 535 (g)(5) (noncommercial stations).
We originally applied the "intermediate" standard of First Amendment scrutiny set forth in United States v. O'Brien, 391 U.S. 367 , 88 S.Ct. 1673 , 20 L.Ed.2d 672 (1968), and a majority of this court found the must-carry provisions valid under that standard. Turner Broadcasting System v. FCC, 819 F.Supp. 32 (D.D.C.1993). The Supreme Court affirmed that the must-carry rules were content-neutral and thus properly to be tested under O'Brien 's standard, but remanded the case to this court for further factfinding because of a "paucity of evidence" necessary to discern whether must-carry met that standard. Turner, ___ U.S. at ___, 114 S.Ct. at 2472 . The Court noted that there was a lack of evidence "indicating that broadcast television is in jeopardy," as well as a lack of "any findings concerning the actual effects of must-carry on the speech of cable operators and programmers" and "findings concerning the availability and efficacy of constitutionally acceptable less restrictive means of achieving the Government's asserted interests." Id. After extensive further development of the record it is clear that must-carry is not narrowly tailored to address any government interests that are actually at stake. The must-carry provisions burden substantially more speech than necessary to advance the government's interests, and therefore cannot meet the standard expressed in O'Brien and in Turner's specific mandate to this court.
B. Overview
This opinion works through a large number of claims and variations on claims, as well as detailed facts about the broadcast and cable industries. There is obviously a risk in such an enterprise that the trees will obscure the forest. Accordingly, I here give an aerial view of the forest, confining myself to my central conclusions.
1. The parties agree that there is no threat to the continued viability of broadcast television, either now in existence or looming on the horizon. Section III.A.1.
2. The defendants have offered several concepts by which to measure whether must-carry might advance some supposed governmental interest—such as maximizing the number and prosperity of broadcast stations. All but one of these (discussed in ¶ 3 immediately below) are circular, in that, once it is posited that must-carry would enhance the *756 profits of the stations electing must-carry (a point that seems never to have been disputed), it is so obvious that must-carry will advance the interest in question that we do not believe the Court would have remanded for fact-finding if it had concluded that such interests were adequate to sustain must-carry. Sections III.A.2, III.A.3.
3. While the government has pointed to conclusory assertions that a significant number of stations have been materially injured by the absence of must-carry, (1) I believe that such evidence would be relevant only as evidence that there is some threat to the viability of broadcast television, a claim defendants emphatically do not make, and, in any event, (2) plaintiffs have met these conclusion assertions with substantial contradictory evidence. While I would not rule that summary judgment can necessarily be granted in favor of plaintiffs on the issue, it is absolutely clear, based on the detailed character of plaintiffs' evidence, that summary judgment cannot be granted in favor of defendants. Section III.A.3.
4. The proposition that persons in cable households have no access to broadcast stations except as the cable operator may carry their signals is completely unfounded. Nothing about attachment to cable ipso facto cuts a person off from broadcast. Every cable household can secure as good access to over-the-air television as it had before adopting cable simply by (1) retaining or acquiring the sort of antennae that the uncabled 40% of households necessarily use, and (2) operating either an input selector switch on their "remote" or an "A/B" switch that can be acquired at a local hardware store for a trivial sum. Section IV.B.2.
5. To the extent that "fair competition" is threatened by cable operators' characteristic monopoly over provision of cable services (and in some cases their vertical integration with cable program suppliers), the problem is readily cured by regulation under which all suppliers of programming not affiliated with an operator (i.e., independent cable programmers and broadcast stations alike) are given an entitlement to access at a price compensating the cable operator for the costs of carriage. Such systems are in place for industries with equivalent structural problems, such as gas, electricity, and wire telecommunications. Such a system involves far less intrusion on speech than must-carry while better serving the interests of fairness and signal diversity: As non-broadcast programmers competing for access over a cable system are not arbitrarily excluded by a fiat entitlement in favor of broadcast, but compete for access on an equal footing, the system enables consumers to choose between programs on the basis of the usual price/quality factors that they use to make other consumer choices. Section IV.B.1.
Accordingly, I now address the Court's mandate to us to assess the reality of the harms to be cured and the fitness of the chosen remedy.
II. The Supreme Court's Mandate
Congress's overriding goal in enacting must-carry was to "preserve access to free television programming for the 40% of Americans without cable." Turner, ___ U.S. at ___, 114 S.Ct. at 2461 . The goal is an important one, the Court said, because over-the-air television is a principal source of information and entertainment for a great part of the nation's population. Id. at ___, 114 S.Ct. at 2469 . In fact, the goal touches upon a government purpose of the "highest order," because "the widest possible dissemination of information from diverse and antagonistic sources is essential to the welfare of the public." Id. at ___, 114 S.Ct. at 2470 (internal quotations and citations omitted). This goal, as the Court saw it, might be jeopardized simply by the prosperity of the cable industry: to the extent that viewers were lured by cable away from broadcast (and to the extent that they abandoned the antennae and other paraphernalia necessary to watch TV over-the-air), the potential audience for over-the-air TV would shrink. Indeed, on these assumptions the potential viewership of any station refused carriage by all of the local cable systems serving the broadcast station's area [1] would, on average, shrink to *757 40% of what it would have been. This in turn might shrink or at least seriously impair the broadcast industry, leaving non-cable viewers with materially reduced options. Thus, Congress was dealing with a special case of the general problem that competition from a new industry may reduce the economies of scale enjoyed by an established one, and thereby disadvantage consumers who use the goods or services of the established industry.
I also understand the Court to find the congressional action grounded in a related but distinct concern, focused more on the "unfairness" or anticompetitive characteristics of the cable industry's competition with broadcast than on the deprivations that might be suffered by non-cable households. Id. The unfair or anticompetitive aspects of cable are said to flow from a combination of the cablecasters' exploitation of their market power as the sole providers of cable service in their respective communities (as they are in the overwhelming proportion of cases [2] ) and from their significant degree of affiliation with cable programmers, which create and market programs for release over cable. (Plaintiff Time Warner, for example, is a programmer, producing channels such as Home Box Office, and also a cable operator. Its pending merger with plaintiff Turner Broadcasting will broaden its tie to cable programming.) Here the contention is that cable companies might deny broadcast stations carriage on their systems simply to protect or enhance the advertising revenue the cablecasters enjoy from cable programming and to realize the cost advantages of using affiliates' programming. To the extent that must-carry is addressed to this problem, as a kind of specialized antitrust regime designed for a possible anticompetitive injury, lesser impairments to viewer welfare might suffice to warrant government action—compared to the more fundamental threat to non-cable households' access to over-the-air TV discussed above.
While these interests are important in the abstract, when the government seeks to legislate in the area of free speech "it must do more than simply posit the existence of the disease sought to be cured. It must demonstrate that the recited harms are real, not merely conjectural, and that the regulation will in fact alleviate these harms in a direct and material way." Id. (internal quotations and citations omitted).
Thus, the Supreme Court found in Turner that pursuit of the goal of saving non-cable households' access to free TV by means that impinge on free speech would be permissible only if that access were truly threatened—if "the economic health of local broadcasting is in genuine jeopardy"—and then only so long as the government's remedy "does not burden substantially more speech than is necessary to further the government's legitimate interests." Id. (internal quotations and citations omitted). Similarly, the goal of correcting anti-competitive behavior can justify an infringement on free speech only if cable companies are in fact engaging in anti-competitive behavior (or if Congress could infer a serious risk of such behavior from circumstances such as industry structure) and then only if the scope of the proposed infringement — in this case, the must-carry regime— reasonably fits the evil at hand.
This court's first task in applying O'Brien scrutiny, then, is to ensure that Congress has drawn "reasonable inferences based on substantial evidence" in finding that there is a real threat to the survival of free broadcast television. (Section III.A.) In doing so we must accord substantial deference to the predictive judgments of Congress, making an independent judgment of the facts but not reweighing the evidence de novo. Id. at ___, 114 S.Ct. at 2471 . The court must also evaluate the presence or threat of anticompetitive behavior against broadcasting by the cable industry. (Section III.B.) Finally, it must consider whether must-carry is narrowly tailored to address the risk or risks—if any—found to be real. (Section IV.)
*758 Defendants have asked us first to consider only the information before Congress as it passed the Cable Act. If that evidence were substantial enough to satisfy the defendants' burden, then, they argue, we need look no further. Memorandum of the United States and the Federal Communications Commission in Support of Their Motion for Summary Judgment ("Government Brief") at 4. Only if that evidence were insufficient might we look beyond. Id. at 5-6. I would reject this contention. The Supreme Court has frequently considered evidence outside the legislative record in constitutional review of statutes, see generally Kenneth Karst, Legislative Facts in Constitutional Litigation, 1960 Supreme Ct. Rev. 75, never, so far as appears, suggesting that the statute would be invulnerable to such evidence if it were supported by the legislative record—a record, one suspects, typically put together under the aegis of the statute's proponents. In any event, defendants have deliberately chosen not even to present the record that was before Congress in the usual sense of the term. The materials they have assembled and labelled the "Congressional Record" are neither the Congressional Record as such nor the documents and testimony actually presented to Congress itself. Rather, they have included voluminous materials submitted to the Federal Communications Commission during the extended period that must-carry was before Congress. See, generally, Defendants' Joint Statement of Evidence Before Congress. But if anything before the FCC was "before" Congress, it is hard to see in what sense anything in the world was not equally before Congress; all members of Congress have been continuously free to consider any fact extant in the world. As defendants have made no effort to isolate data that was peculiarly before Congress, they have made it difficult or impossible for us to apply the principle they invoke.
Defendants cite the Court's statement that without "a more substantial elaboration ... of the predictive or historical evidence upon which Congress relied or the introduction of some additional evidence," Turner, ___ U.S. at ___, 114 S.Ct. at 2472 (emphasis added), it was impossible to ascertain whether the alleged threat to broadcast television was real enough, and read it as saying that must-carry must be upheld if either source satisfied the constitutional standard. I think that a strained reading, especially in light of the Court's prior reference to the absence of any need for Congress to "make a record of the type that an administrative agency or court does to accommodate judicial review." Id. at ___, 114 S.Ct. at 2471 . In any case, the data supplied by defendants, taken all together, fail to sustain the burden explicitly placed on them by the Court of "demonstrat[ing]" the reality of the harms and their "direct and material" alleviation by the remedy selected. Id. at ___, 114 S.Ct. at 2470 .
III. The Posited Interests
A. The Economic Health of Local Broadcasting
The parties strongly disagree over exactly what proposition concerning broadcasting's health and viability this court was to test upon remand. The congressional finding at issue is whether, "absent mandatory carriage rules, the continued viability of local broadcast television would be ` seriously jeopardized.'" Turner, ___ U.S. at ___, 114 S.Ct. at 2470 , citing § 2(a)(16) of the 1992 Cable Act, 106 Stat. 1460 (emphasis added). See also § 2(a)(10) ("A primary objective and benefit of our Nation's system of regulation of television broadcasting is the local origination of programming. There is a substantial government interest in ensuring its continuation. ") (emphasis added); § 2(a)(12) ("There is a substantial government interest in promoting the continued availability of such free television programming, especially for viewers who are unable to afford other means of receiving programming.") (emphasis added); Turner, ___ U.S. at ___, 114 S.Ct. at 2461 ("the provisions are designed to guarantee the survival of a medium that has become a vital part of the Nation's communication system, and to ensure that every individual with a television set can obtain access to free television programming") (emphasis added).
At first glance these congressional assertions and Supreme Court reformulations of the government interest seem rather straightforward: Congress believed that the *759 continued availability of free local broadcast television, a fixture of the American cultural landscape for over fifty years, was in serious jeopardy. The defendants have urged several other interpretations upon us, however, each entailing a contention that is far more modest—and therefore more readily proven. One is that the governmental interest identified as substantial in Turner is the interest in ensuring that persons without cable have access "to the greatest possible multiplicity of broadcast outlets." Reply Memorandum of the United States and the Federal Communications Commission in Support of Their Motion for Summary Judgment ("Government Reply") at 5 (emphasis added). That is, Congress intended broadcast to be as successful as possible. Such an interest is self-evidently in jeopardy without must-carry, since must-carry will financially benefit the stations that adopt it; their resulting gains will enhance the survivability of marginal stations and will enable them all to invest more in programming. Defendants also offer another analysis that is equally self-validating. In this variant they contend that Congress's concerns about "continuation" and "survival" of local broadcast applied only to those stations electing must-carry; the health of those broadcast stations not invoking must-carry is claimed to be irrelevant to an evaluation of the health of local broadcast. [3] A final possible interpretation holds that Congress might have intended to ensure that viewing areas across the country all enjoyed at least a substantial number of broadcast signals; it is small solace to a viewer in a location with few or no broadcast signals that viewers elsewhere have plenty. I evaluate each of these interpretations in turn, both for the likelihood that each is in fact what the Court embraced as an objective substantial enough to justify must-carry, and for the possibility that each is really, rather than merely conjecturally, at stake.
1. The continued viability of broadcast as a whole
Sections 2(a)(10), 2(a)(12), and 2(a)(16) of the Cable Act, quoted above, seem to assert on their face that the survival of local over-the-air broadcast programming is in question. These legislative findings emphasize the importance of a continuation of broadcasting and the fear that without must-carry "the economic viability of free local broadcast television and its ability to originate quality local programming will be seriously jeopardized." § 2(a)(16).
In fact the defendants unequivocally concede, in the briefs and in the depositions of their experts, that the evidence they have introduced on remand does not show that the health of the broadcast industry as a whole is in danger. [4] For example, the defendants' distinguished chief expert, the economist *760 Roger Noll, observed that he did not think that must-carry "in the current environment is properly characterized as something that has to do with the viability of the entire industry." Deposition of Roger G. Noll ("Noll Deposition") at 156. See also id. at 79 ("I do not believe that over-the-air broadcasting is going to disappear because of the absence of `must-carry'. If that's what the sentence ["health of the industry"] is meant to imply, then indeed the health of the industry isn't threatened."); Deposition of Harry Shooshan, III at 79 ("So do you need must-carry to support the health of the broadcasting industry as [a] whole today, no."); Deposition of Jack N. Goodman at 7 and 129 (agreeing that broadcasting was "fairly healthy overall" and as of 1989, "the TV industry as a whole looking at gross numbers was not in an economic decline").
The parties offer several means of empirically assessing broadcast's health, all tending to vindicate the above statements. First, since the mainstay of free commercial television's diet is the sale of airtime to advertisers, changes in advertising revenue over time can reveal whether broadcast is thriving. Second, changes in the overall number of stations can be a rough proxy for whether the national broadcast system is in ascendance, plateau, or decline. If the number of stations has been holding steady or increasing, even in the period without must-carry, then it is difficult to see how the industry can be said to be in danger. Third, the government suggests that profits for a particular segment of the industry—UHF independents —are so abysmal as to put the health of at least that segment in substantial doubt. Although this latter data set relating to a special industry sector does not directly speak to the health of the industry as a whole, and does not appear to be offered as a bellwether for other segments' futures, I treat it here to consider whether it calls for any important qualification of defendants' concession about the robust health of the industry overall.
(a) Total advertising revenue
Plaintiffs submitted sets of data from 1981 to 1991 from which gross advertising revenues for broadcast, cable, and other industries can be analyzed, see Time Warner Entertainment Company, L.P.'s Corrected Appendix to Brief in Support of Its Motion for Summary Judgment Exhibit ("Time Warner Ex.") 12, and defendants submitted the same data, together with the consumer price index for the relevant years, see Defendants' Joint Submission of Additional Evidence in Support of Motion for Summary Judgment ("Defendants' Additional Evidence") Vol. VII.W Exhibits 668 & 672. I have derived from them a table of broadcast's total advertising volume in constant dollars during that period, see App. # 1, and a graph, Graph # 1. In that ten-year period taken as a whole, broadcast's overall gain in gross ad revenue was $3.7 billion in constant dollars.
*761
After a rise in the early '80s, gross revenues were more or less flat from 1986 to 1990, and fell off by about $2 billion from 1990 to 1991. [5] In this pattern there are no extended declines, from which one could draw a reasonable inference that the broadcast industry was in jeopardy of losing its lifeblood. The only sharp decline is that of 1990-91, congruent with the 1990-91 recession beginning in the second half of 1990, cf. National Economic Trends, Federal Reserve Bank of St. Louis, Oct. 1995 at 4; early in 1991 an official of the INTV (the defendant trade association representing independent broadcasters) attributed the nascent drop to the recession and concluded that "the basic fundamentals of independent television are stronger than they have ever been." Time Warner Ex. 5 (from TV Digest, Jan. 7, 1991).
The inference that broadcast is healthy, and not materially harmed by cable, is further enhanced when the focus is expanded to look at advertisers' expenditures on broadcast's competitors. The graph below, Graph # 2, shows expenditures on cable, broadcast, and broadcast's two largest competitors throughout the period (newspapers and direct mail), and all other modes put together.
*762
First, it is apparent that in 1988-91, the period of broadcast's modest decline of $2.9 billion (in constant dollars), the newspaper industry, broadcast's twin heavy in the advertising world, suffered a similar drop (actually $4.4 billion). And the total amount spent on advertising across all industries dropped by $7.6 billion. In 1990-91, the year of broadcast's adversity, newspaper also suffered a distinct drop while direct mail and cable were only marginally higher. See App. # 1.
Second, defendants have not even hinted at some theory as to how the woes of newspapers, direct mail and "other advertising venues" could be due to cable, and cable's diminutive status makes any such claim implausible. For 1981-91 as a whole, broadcast gained $3.7 billion over 1981's revenue to total $19 billion in 1991, while cable showed a gain of $1.4 billion, taking its 1981 revenue of $150 million up to total $1.55 billion in 1991. While cable's percentage gain was sharp, it started from such a low base that its total impact was necessarily modest. And if one looks to 1990-91, the year of broadcast's $2,000 million drop, there is only a $61 million gain for cable—obviously not a serious explanation.
Interestingly, trends in cable advertising suggest that must-carry has little influence on the competition between the two industries for ad revenue. One can usefully divide the period into two phases, 1981-85, during which the FCC's must-carry regulations prevailed, and 1985-91, the period after they *763 were invalidated. [6] In the first period the cable industry's annual ad growth averaged $149 million per year; in the second—when according to defendants cable was exploiting must-carry's absence to leverage ad revenue from broadcast—cable's average growth was lower in constant dollars, $137 million per year. This picture is confirmed when one puts the matter in terms of market share and thus abstracts away the effect of overall changes in advertising volume. Cable's market share increased at the rate of 0.14% per year with must-carry ('81-'85) and 0.13% per year without it ('86-'91). App. # 1. Alternatively, as the Commission's so-called Century must-carry rules were in effect from June 10, 1987 to December 11, 1987, see Defendants' Additional Evidence Vol. VII.N Ex. 338, [7] one might divide the period into 1981-87 and 1988-91. Cable's average annual gains in those periods were, respectively, $131 million and $158 million, the latter reflecting 1989's unusually high increase of $241 million.
I note at this point the defendants' argument that cable pulled its punches in the must-carry gap period, strategically refraining from drops or refusals to carry in order to defuse the political pressure for must-carry. Indeed, some officials in the cable industry trade association actually exhorted cable companies to refrain from changes. See, e.g., Defendants' Additional Evidence Vol. VII.N. Ex. 321 (letter from NCTA president urging cable operators to minimize channel repositioning; "... a sensitivity to the political climate needs to be shown ... if we are to come through all this without unnecessary criticism."); id. Ex. 330 ("By minding our social and political P's and Q's, we will be better equipped to deal with the touchy situation that will result with all of these deregulatory events happening at the same time."); id. Ex. 333 (after D.C. Circuit struck down FCC's must-carry rules in Century, NCTA president states that "[i]n the interim, and having in mind that this decision may well be appealed, we will advise our members generally to behave as if the carriage rules just struck down were still in effect."); id. Ex. 344 (Viacom cable executive insists that local systems seek central approval before dropping a broadcast station "[s]o that we do not become an example of demonstrated abuse and thereby the justification for reregulation").
But I find these statements an inadequate reason to distrust the record before us. First, defendants offer not a clue as to how the cable industry as an aggregate would overcome obvious collective-action problems. While the industry as a whole might benefit from such strategic self-restraint, one individual cable system out of more than 10,000 could hardly expect that its snipping off a broadcast station or two would be likely to incur congressional wrath in the form of legislated must-carry. Second, to the extent that the constitutionally fatal aspect of must-carry is the absence of evidence of any visible threat to broadcast, then the rules would become constitutional the minute the industry was visibly threatened. Thus, under Turner, and assuming no other constitutional infirmities, the cable industry will have exactly the same incentive to hold back as it had in the 1985-91 period. Assuming the industry has the capacity to coordinate its self-restraint (as defendants must), it will have to do so into the indefinite future in order to avert enactment of a valid must-carry. [8]
(b) Number of broadcast stations
Another way to measure the health of the broadcast industry is through the number of stations. More stations presumably translate to more choices for viewers of over-the-air television. The Supreme Court found it significant that at the time it reviewed the case there was no evidence to show that "local broadcast stations have fallen into bankruptcy, turned in their broadcast licenses, curtailed their broadcast operations, or suffered a serious reduction in operating revenues as a result of their being dropped from, or otherwise disadvantaged by, cable *764 systems." Turner, ___ U.S. at ___, 114 S.Ct. at 2472 . The first two inquiries (bankruptcies, abandonments of licenses) address the total amount of broadcasting available throughout the nation, and an analysis of the number of broadcast stations over time suggests why the government on remand has not offered an overall count of the number of stations that have fallen into bankruptcy through noncarriage (relying instead on "evidence before Congress" pertaining to twenty-three independent stations, Plaintiffs' Joint Response to Defendants' Proposed Undisputed Facts ("Plaintiffs' Fact Response") ¶ 65). Indeed, defendants have conceded their inability to show that any station, commercial or public, turned in its license in the period without must-carry. See Defendants' Response to Plaintiffs' Joint Statement of Undisputed Facts Established by the Record ("Defendants' Fact Response") ¶¶ 57, 59. I have generated the following graphs, Graph #3 and Graph #4, depicting the change in the number of broadcast stations from 1981 to 1991 and more broadly from 1953 to 1994. They are based on data provided in the Declaration of Stanley M. Besen ("Besen Decl."), Ex. 5, which defendants have not contested in this respect.
These data show that the number of stations grew from 1,065 in 1981 to 1,532 in 1994, with a net growth in stations every year. In fact, the average net growth of 41 stations per year during must-carry's absence from 1986-91 more than kept pace with the average growth of 39.4 stations per year from 1981-85, with must-carry in effect. If one takes 1981-87 vs. 1988-91 as the appropriate periods, the net annual additions of stations are 46 and 30, respectively. Although this suggests a lesser growth rate in the must-carry gap, annual growth of 2-3% in number of supplying firms is hardly anemic for a mature *765 industry. [9] Over the whole period 1981-91, the broadcast industry witnessed a 39% expansion of its total number of stations. Congress could not have reasonably inferred from this that the industry was in decline or even in jeopardy of any material decline.
Although the data on station increase comes from the Television and Cable Fact-book by way of plaintiffs, defendants do not dispute the increase. Rather, they turn to the weakest subset of stations—UHFs—and point to a decline in the growth rate in the period without must-carry. Graph # 4 presents the UHF stations broken out from total stations.
Besen Decl. Exs. 5-6. In the four-year period 1981-85, with must-carry, there was an average of 39 new UHF stations per year, as against an average of 35 new UHF stations per year in the five-year-period 1986-91, without must-carry. From this the defendants conclude that "this stunted growth of broadcast stations takes on greater significance when contrasted with the vast potential for broadcast television to expand." Memorandum of the United States and the Federal Communications Commission in Support of Their Motion for Summary Judgment ("Government Brief") at 36-37 (emphasis added). [10] *766 But the decline in growth rate is so modest, and the persisting actual growth so robust, that there can be no real claim that the numbers prefigure an eventual leveling off of the actual number of stations on the air-waves, much less a decline.
(c) Profits
The parties sharply dispute the relevance of different data sets that arguably relate to the prosperity of broadcast stations. The plaintiffs call cash flow margins the "predominant industry yardstick" and point to near-universal positive cash flow margin figures for stations both with and without must-carry. See Plaintiffs' Fact Response ¶ 51. Defendants object that since many stations can have low (but still positive) absolute cash flows but high cash flow (percentage) margins, absolute cash flow data may be deceptive. [11] See Defendants' Fact Response ¶ 67.
The defendants, by contrast, direct us to median profits—a number that plaintiffs question, because, as they observe, it is subject to manipulation as station owners may deplete profits by payments to themselves in the name of salaries or perks. It is, moreover, a function of accounting conventions that may not capture essential characteristics. But one need not select among the parties' respective analyses, because even the defendants' favorite metric seems to afford them little support. They point to the dismal 1991 figures for UHF independent stations, which as a class are the least prosperous of TV stations. See Opposition of NAB and INTV to Plaintiffs' Motions for Summary Judgment ("NAB Opposition") at 70-74. They show pre-tax profits in dollars by percentile as follows:
Percentile
25% 50% (median) 75%
__________________________________
1991 (1,748,130) (401,090) 419,613
Defendants' Additional Evidence VII.W, Ex. 669. In other words, the median station was showing a pre-tax loss of over $400,000 in 1991. Although the defendants do not offer similar figures for a succession of years, which might enable one to discern patterns with some clarity, they do supply comparable numbers for 1987, for half of which there was no must-carry and the other half must-carry under the "Century rules," i.e., those in effect in the last half of 1987 and invalidated by the D.C. Circuit in late 1987. See Century Communications Corp. v. FCC, 835 F.2d 292 (D.C.Cir.1987), clarified, 837 F.2d 517 (D.C.Cir.1988). Putting both figures together one gets:
Percentile
25% 50% (median) 75%
-----------------------------------
1987 (2,542,540) (1,207,525) 74,802
1991 (1,748,130) (401,090) 419,613
Defendants' Additional Evidence Vol. VII.W, Exs. 669, 670. In other words, in the period from the end of the Commission's must-carry rules to the year before the onset of congressional must-carry, the profit picture of broadcast's poorest relations improved markedly. Average pre-tax profit of the strongest 25% more than quintupled, losses of the median station fell by more than two thirds, and losses of the very weakest 25% fell by about a third. This improvement in the profit picture occurred, it should be recalled, in a period when the overall number of stations grew by over 8%, and the number of UHF stations grew by over 14%. One might expect per-station profit to fall in an era of such expansion—at least where, as was the case, aggregate advertising revenues were stable or declining. (See Graph # 1.) Indeed, the chairman of the INTV observed that part of the problem of a softened advertising market for these stations was that there are "too many hogs at the trough." Time Warner Ex. 5 (from TV Digest, Jan. 7, 1991). See also id. (investment analyst observes that some *767 individual independent stations may not have done as well because of the increase in the total number of stations); Defendants' Additional Evidence Vol. VII.M, Ex. 288 at 38 (FCC explains that from 1986 to 1988 aggregate viewership of independent stations increased but revenues dropped, finding an explanation in "the increasing number of independent stations, which kept viewership per independent station low.").
While the parties have offered no explanations of the low profitability of independent UHF stations as a general matter, the defendants' offerings on profitability do nothing to sustain their burden of identifying the absence of must-carry as a threat to broadcast's overall health.
If, then, the question squarely put before us by the Supreme Court—"whether the Government has adequately shown that the economic health of local broadcasting is in genuine jeopardy and in need of the protections afforded by must-carry," Turner, ___ U.S. at ___, 114 S.Ct. at 2470—is, at it appears on its face, a question about whether the broadcast industry is in danger of failing or in peril of a downward spiral, the answer from both parties, and that indicated by the evidence, is No.
2. Maximum possible expansion of broadcast
The government claims that the Act's retransmission consent provisions, 47 U.S.C. § 325 (b), through which a broadcast station can opt to forego must-carry and instead withhold its carriage from a cable company until some form of payment is negotiated, "alone evidence Congress's understanding that the broadcast industry as a whole would not perish absent the must-carry rules." Government Reply Brief at 3. The government accordingly offers a different interpretation of promoting the "continued availability" of broadcast programming: that the substantial interest to be tested is whether, without must-carry, broadcast can expand as much as with it.
Thus, extrapolating from the Court's remark, "Likewise, assuring that the public has access to a multiplicity of information sources is a governmental purpose of the highest order," Turner, at ___, 114 S.Ct. at 2470 , defendants assert that must-carry can be upheld if appropriate to ensure that those without cable have access "to the greatest possible multiplicity of broadcast outlets." Government Reply at 5 (emphasis added). I would reject this analysis. I do not read the Court's statement as meaning that we are to find that lack of must-carry impairs the industry's health merely on the basis of evidence that its presence would bring about a larger industry, measured by number of stations, or a more prosperous one, by any metric. If the Court meant that Congress had a substantial interest simply in increasing the prosperity of a significant number of TV stations (and thus, depending on FCC licensing policy, possibly increasing the overall number), it surely would have declared in Turner that Congress could reasonably infer such an effect; it would not have thought a remand necessary.
Nor do I accept defendants' alternative formulation—that the Court meant us to examine whether must-carry would, at the margin, tend to produce a "higher quality" broadcast industry. The argument that must-carry would do so is simple. Increased potential audience implies an increased audience, and an increased audience implies both a greater ability to spend on programming (because of larger revenues) and a greater willingness to do so (because each dollar invested in program quality will, with a larger audience, yield a larger return). See Government Brief at 38-39; Declaration of Roger G. Noll ("Noll Declaration") ¶ 36 ("[C]able carriage is positively associated with station revenues and with improvements in programming"). Again, the intuitive obviousness of these results precludes the possibility that the Court remanded the case to us to discover them.
Defendants alternatively invite us to look to the total number of stations allotted to broadcast by FCC fiat, arguing that Congress might have been concerned by a growth in the number of vacant channels; indeed, the number of vacant UHF channels increased from 157 to 198 between June 30, 1989 and June 30, 1991. Government Brief at 37 n. 81. But, as detailed above, the number of operating UHF stations increased substantially in that period, so that the claim *768 based on vacant channels rests solely on the government's own decisions to increase the number of theoretically available channels. [12]
Even if the spectrum were filled with broadcast stations, however, the government hypothesizes further possible growth of the broadcast industry, since total broadcast viewership could grow even if the number of stations remained constant. Here the baseline against which the government measures the need for must-carry is not (1) broadcast in the absence of anticompetitive behavior by cable, nor even (2) broadcast in the complete absence of the cable industry, but rather is (3) the maximum broadcast audience growth, including the component that cable has affirmatively made possible by enabling broadcast signals to be carried farther and more clearly than they could over the air:
The extensive cabling of the nation extended the reach of UHF stations because it overcame a substantial part of the "UHF handicap." UHF stations had difficulty accessing all of their potential audience over the air because of the inferior signal propagation characteristics of the UHF band.... When viewers subscribed to cable, the UHF stations were received with greater clarity, and sometimes on a valued lower channel number. As a result, they reached a wider audience, inducing more stations to enter the industry....
Noll Declaration ¶ 40. See also Declaration of James N. Dertouzos ("Dertouzos Declaration") ¶ 31 (local broadcasters are likely to benefit from an expanded audience due to enhanced signal reception and access to wider geographic markets). Thus, because cable enables its subscribers to receive "broadcast" signals of higher quality than they could otherwise obtain, the government argues that "cable carriage expands the reach of local broadcasters and contributes to the health of local broadcasting." Corrected Memorandum of the United States and the Federal Communications Commission in Opposition to Plaintiffs' Motions for Summary Judgment ("Government Opposition") at 91 (emphasis added). The government employs parallel reasoning to defend the must-carry provision that forces many cable operators to carry UHF stations on a lower-numbered, and thus apparently more prominent, channel position than the UHF station's own on-air position. See 47 U.S.C. § 534 (b)(6); Defendants' Joint Submission of Congressional Record in Support of Motion for Summary Judgment ("Defendants' Record") Vol. I.R., Ex. 85, CR 11503 (UHF station chafed at having to negotiate with a cable system for a valuable lower channel, absent must-carry's forced positioning provision). These theories claim, then, that it is not enough for broadcast to be a net gainer from the presence of cable (though, to be sure, defendants offer no econometric evidence indicating the net effect); the harm to be cured is simply loss of the benefits that must-carry would afford when added to the other benefits afforded by cable in its absence. [13] This "harm" of course is real by definition, and thus, again, cannot be what the Supreme Court intended for us to assess on remand.
3. The health of stations electing must-carry
Defendants appear to propose another concept of the interest to be advanced by must-carry, namely, the economic health of those stations that elect must-carry. They argue that the assessment of harm from must-carry's absence must be confined to broadcast *769 stations that would presumably be denied carriage or dropped absent must-carry since they currently rely upon it. [14] For example, to counter plaintiffs' evidence concerning gross broadcast advertising revenue across all stations from 1985 to 1991, defendants respond that these numbers include the revenue of network affiliates, which "are likely to be unaffected by the must-carry regime." Defendants' Fact Response ¶ 62. See also id. ¶ 73 ("[A] general statistic referring to the entire industry is irrelevant, given the marginal financial condition of UHF independents (the stations most often denied carriage absent must-carry)." Indeed, first the defendants reject statistics indicating the health of network affiliates because they "generally opted for retransmission consent, and the stations most at-risk absent must-carry are UHF independents and public stations," id. ¶ 65 . They then reject statistics regarding the health of UHF independents in general: "[I]t is not the health of the average independent station that is at issue here, it is the ability of stations that have been denied carriage or repositioned to provide the same quality and quantity of programming...."). Id. ¶ 66 .
By narrowing the field of stations to the most vulnerable, the defendants attempt to identify stations whose financial health is truly hanging in the balance—those for which the added subsidy of free cable carriage could arguably make a critical difference. Again, the unremitting growth in the number of even UHF independent stations both with and without must-carry, see section III. A.1.(b) above, and the improved profit picture for them on defendants' own data from 1987-91, see section III.A.1.(c) above, belie the notion that significant numbers of stations are in jeopardy or that must-carry could greatly affect their fate on the margin one way or the other. All defendants have demonstrated is that, all else being equal, forced cable carriage is at least of some benefit to the broadcast stations so carried. But this alone can vindicate Congress's interest only if we take the valid interest to be, circularly, maximum possible expansion for broadcast. See section III.A.2. above.
Defendants attach great importance to the Court's observation in Turner that the government's claim that must-carry was
necessary to protect the viability of broadcast television rests on two propositions: (1) that unless cable operators are compelled to carry broadcast stations, significant numbers of broadcast stations will be refused carriage on cable systems; and (2) that the broadcast stations denied carriage will either deteriorate to a substantial degree or fail altogether.
___ U.S. at ___, 114 S.Ct. at 2471 .
A natural reading of this passage is that the Court reasoned that must-carry would be justified if its absence would cause the deterioration or failure of so many stations that one might infer a risk to the viability of broadcast television. Defendants reject any such reading, disdaining (as we have seen) any burden to show that broadcast television was in any jeopardy at all. Rather, they argue that evidence showing that the absence of must-carry materially injured a lot of stations would in itself show the requisite need for must-carry. Accordingly they point to statements "before" Congress (i.e., either made to a congressional committee or made to the FCC and deemed before Congress), in which individuals associated with the broadcast industry or with particular stations made statements asserting harm to a station from the absence of must-carry. See, generally, Defendants' Joint Statement of Evidence Before Congress.
Plaintiffs have sought to respond as to each station identified by defendants in briefs or evidence as having suffered—142 commercial television stations (out of a total of 1138 in 1992) and 141 public stations (out of 368). See Appendices to Time Warner *770 Reply Memorandum in Support of Motion for Summary Judgment. The number 283 is surely not insignificant, so that, if (1) defendants are right that the Court used "significant" in a sense completely disembodied from the "viability" of broadcast, and (2) the assertions "before Congress" were valid, defendants would prevail on this point. I have already explained why I believe the first necessary condition is not satisfied; I now comment briefly on the implausibility of the second.
In its Broadcast Station Rebuttal Time Warner meticulously recites evidence relating to the nearly 300 stations that at one point or another defendants claimed were victims of the absence of must-carry. For example, one station said to have "gone dark" because of being denied carriage appears actually to have gone dark for the very understandable reason that its transmitter was hit by a tornado. See Time Warner Broadcast Station Rebuttal at 134-35. Moreover, despite the station's travails with cable, its owners found a buyer at the price of $1.5 million (licenses, of course, are issued free) in May 1990—the depths of must-carry's absence. Id.
If defendants' station-by-station rebuttal is accurate, see Time Warner Reply Memorandum in Support of Motion for Summary Judgment, Appendices A & B, for a summary, scarcely any of the 283 alleged victims has been seriously jeopardized by the absence of must-carry. Defendants make some attempt at a station-by-station refutation, see Response of the United States and the Federal Communications Commission to Time Warner Entertainment Company, L.P.'s Broadcast Station Rebuttal, while continuing to point to the assertions "before Congress." See Government Reply at 12 n. 17. I have not examined the station-by-station data in enough detail to say whether, under the standards of Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-52 , 106 S.Ct. 2505, 2509-12 , 91 L.Ed.2d 202 (1986), summary judgment in favor of plaintiffs would be proper on this issue. I can, however, unequivocally say that plaintiffs have at a minimum put the individualized victimization accounts into material dispute, so that if defendants' reading of the Court's "significant numbers" passage is correct, a trial would be necessary to apply that reading.
In considering whether the data on drops and carriage refusals tend to demonstrate a threat to "the continued viability of local broadcast television," Turner, ___ U.S. at ___, 114 S.Ct. at 2470 , I note that the defendants repeatedly characterize the stations under threat of drop—i.e., those likely to elect must-carry—as marginal. See, e.g., Noll Deposition at 17-18; id. at 60 (absence of must-carry would lead to dropping of stations of "relatively low audience rating"); id. at 221-22 (the less popular a station the more important is must-carry to its welfare); id. at 307-08 (nothing in his declaration or testimony says cable systems will drop the "more popular or popular over-the-air televisions stations"); Government Reply at 10 ("these same stations are particularly weak financially"); Government Brief at 35 (discussing "marginal financial position of these stations"). Indeed, they stress their experts' observations that the audience appeal of the stations' programs (whether measured in number of listeners or intensity of preference) will not be enough to seriously enhance a cable operator's subscriber revenue (via more subscribers or higher fees). See, e.g., Noll Deposition at 60-63; id. at 142 (drop of third noncommercial outlet or weak UHF station will not affect decisions to subscribe); id. at 166 (similar); Second Declaration of Tom Meek ¶ 34. Plaintiffs have offered evidence that the average cable subscriber was served by a cable system carrying local broadcast stations accounting for about 97% of television ratings in non-cable households. Besen Decl. at 41; Plaintiffs' Joint Statement of Undisputed Facts Established by the Record ("Plaintiffs' Facts") ¶ 9. While defendants bristle at this statistic, and suggest that there are defects in the type of Nielson data that support it, Defendants' Fact Response ¶¶ 7-9, they offer no alternative figure. And their own contentions—as to the marginality of electing stations and as to the improbability that they would beef up subscriber revenues—implicitly recognize that what is at stake without must-carry is a diminutive share of total television viewing.
*771 I also note that defendants had claimed that without must-carry cable operators often substituted even more poorly-rated cable networks for broadcast stations that admittedly were already-poorly-rated. Their first attempt at demonstrating such a trend (presumably to show an anticompetitive motive in such a substitution) neglected to account for the fact, all else being equal, a cable network carried by a given system will have lower ratings than a parallel broadcast station on that system because the broadcast station is additionally available to the 40% of viewers in the area who do not subscribe to cable. See Plaintiffs' Facts ¶ 176, 177. In endeavoring to correct for this, defendants' expert Tom Meek tried to compare (as we read his declaration) the ratings on cable of the least popular cable programs with the ratings on cable of broadcast stations added pursuant to must-carry, and found that the must-carry stations had ratings higher than many of the low-ranked cable programs. See Reply Decl. of Tom Meek at 11-12. But this comparison ignored the issue of what fraction of cable systems carried the cable programs being compared with must-carry broadcasting. Government counsel acknowledged at oral argument that the comparison still suffered apples/oranges problems, saying in defense that they had used the data they had. See Tr. 167; Defendants' Fact Response ¶ 177. Defendants now assert only that there is no evidence that the must-carry programs "are less popular" than the marginal cable programs that they replace. Id.
Ultimately the parties seem to agree that, for both marginal cable and broadcast stations, operators' decisions on what to air will often not rest on either's meager ratings. The First Amendment right at stake is the operators' freedom to air what they choose— broadcast or cable—having to answer only to their subscribers, not the government. The risk that cable operators may exercise that right for anticompetitive purposes may well permit government intervention, see section III.B below, but in the absence of a threat to broadcast's general viability there is no other ground permitting government veto power over a cable operator's selection of services.
4. Survival of broadcast across all geographic markets
A congressional interest in preserving access to free television programming for the 40% of Americans without cable, see Turner, ___ U.S. at ___, 114 S.Ct. at 2461 , might be thought in jeopardy if areas with only a handful of stations were threatened with the loss of just one. In such a situation, the harm to a diversity of viewpoints—at least for the people in those areas—would be far graver, and therefore worthy of remedial intervention, than if carriage drops and refusals, and their adverse effects, were concentrated in busy television markets. [15] Or, to look at the other side of the coin, it would be hard to call the local broadcast unhealthy, or to find its health at risk, if one found that all localities were enjoying the benefits of a significant number of stations.
As it turns out, though, if there is any pattern to carriage refusal, it is concentrated in the most crowded broadcast markets. See Defendants' Fact Response ¶ 11. For example, the government cites an FTC study which found that the proportion of local broadcast stations carried fell as the number of available local signals increased. Government Opposition at 15. The study found that when three local signals were available, all were carried; when nine local stations were available, about six were carried. Id. Thus, those areas with the fewest broadcast stations have the greatest proportion of voluntary carriage and the least need for forced carriage. It is only those areas in which the airwaves are relatively busy—areas in which concern about the health of local broadcasting would be at a minimum—that cable carriage becomes an issue. Where stations are few and the loss of only one theoretically significant, the defendants' figures indicate that cable carries the signals voluntarily. Further, from 1981 to 1992 not one local *772 television market out of the 209 geographic ADIs experienced a decline in the number of broadcast stations available. Besen Decl. Ex. 11. From 1987-92, the years of falling advertising revenues and the absence of must-carry, the Boston ADI dropped from 15 to 13 stations (it had 9 in 1981) and four other ADIs lost a single station. The other 204 ADIs had either the same or more stations. Id. The continued overall broadcast station growth during what has been claimed to be the industry's darkest hour, then, cannot be said to conceal failures in certain geographic areas that are offset by growth in others.
Summary
I conclude that there is insufficient evidence from which Congress could conclude that "broadcast television is in jeopardy," Turner, ___ U.S. at ___, 114 S.Ct. at 2472 , under any interpretation of that phrase consistent with the Court's analysis. Only if the government's interest is taken to be the maximum growth of broadcast, or enhancement of precisely the stations that would elect must-carry against the will of cable operators —interpretations of Turner 's mandate that are manifestly implausible—can the posited harms be viewed as real rather than conjectural.
B. Unfair Competition
The defendants assert two related bases for inferring that cable operators will make "unfair" or anticompetitive carriage decisions at the expense of broadcasters. Both depend on the characteristic monopoly of cable franchisees over provision of cable in their areas. The first theory looks at the combination of that market power with the vertical integration between operators and cable programmers, and argues that vertical integration will lead operators to unduly favor their affiliates' programming over that of broadcasters. The second theory relies solely on the typical cable operator's monopoly over cable, and argues that various features —ranging from cable operator hopes of predation to artificial distortions in the treatment of advertising—will thwart competition and deny broadcast consumers the access to broadcast that they would enjoy in a perfectly competitive market. I here address these claims one by one. I conclude that—at least without trial—it is impossible to preclude the possibility of a risk of anticompetitive behavior, the correction of which would constitute a substantial interest. This would not prevent me from granting summary judgment for plaintiffs, however, for I find in section IV that must-carry is plainly not a remedy narrowly tailored to any such risk.
1. Anticompetitive behavior due to vertical integration
Defendants argue that a vertically integrated firm controlling a monopoly bottleneck may not make efficient decisions about what to let through the bottleneck, unduly favoring the products of its own affiliates. Thus, they say, unaffiliated suppliers (here creators of programming, including broadcasters) will be disadvantaged in trying to reach the market on the other side of the bottleneck. For purposes of this analysis I accept not only the undisputed point that cable operators characteristically have a monopoly over provision of cable services in their areas, but also the more questionable proposition that cable operators have a monopoly over the provision of video signals to households subscribing to cable. As a person who subscribes to cable does not, in fact, ipso facto lose access to over-the-air television, but can continue to reach it merely by operating a so-called "A/B" (or input selector) switch and by maintaining whatever antenna may be necessary (

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/1944227. Public record. Not legal advice.