Petition — NAT'L. ASS'N. OF BROADCASTERS v. HOME BOX OFFICE, INC. (Nos. 76-1842, 76-1724, 76-1841)

IN THE ie

Supreme Court of the United States

OctToBeR TERM, 1976

No %76§-1842

NATIONAL ASSOCIATION OF BROADCASTERS, Petitioner,

v.

Home Box Orrice, INc., ET AL., Respondents.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR THE

DISTRICT OF COLUMBIA CIRCUIT

Erwin G. Krasnow

JAMES J. PoPHAM

Attorneys for Petitioner

NATIONAL ASSOCIATION OF BROADCASTERS

1771 N Street, N.W.

Washington, D.C. 20036

Press or Brron S. ADAMS PRINTING, INC., WASHINGTON, D. C.

TABLE OF CONTENTS

Page

NN 555 2 ics ck buss 60d de re'es eueeatnen 1

SE kk do cukchcudndsacwedb¥adhas eaeedes ee 2

I ANID °c sb.c nels. cakadend’ adanewebevens 2

I gs, 0b. 0:0 cnn bk ows Chaene hes 6shed an 3

ID ass eh Wes Cb i hedabieeendeccetiabasiavee 3

Reasons For Grantine THe Writ

I. The Lower Court’s Decision Seriously Im-

sw the Ability of the FCC to Fulfill Its

tatutory Responsibilities ................. 11

II. The Lower Court’s Holding That the Commis-

sion Lacked Jurisdiction to Adopt Anti-

Siphoning Rules Applicable to Cabie Televi-

sion Conflicts With Prior Decisions of This

Court and the Lower Court Itself .......... 14

III. The Lower Court Improperly Substituted its

Judgment for That of the Commission and

Applied A Standard of Review which Conflicts

with Prior Supreme Court and Appellate

OR a rr er 19

IV. The Lower Court’s Decision Conflicts with

Various “npellate Court Decisions Regard-

ing the First Amendment Rights of Cable

Television Systems and with This and Other

Court’s Decisions Regarding the Commis-

sion’s Authority to Impose Content Regula-

tion on Cable Origination Programming .... 23

ee neh eh 6 iweea ha bk ore este 27

TABLE OF AUTHORITIES

CasEs: Page

Black Hills Video Corp. v. Federal Communications

Commission, 399 F. 2d 65 (8th Cir. 1968) ...... 25, 26

Buckeye Cablevision, Inc. v. Federal Communications

Commission, 387 F. 2d 220 (D. C. Cir, 1967) ....25, 26

Burlington Truck Lines, Inc. v. United States, 371 US.

TU CEE a deckcdubewes duutcecasoncgneernees 21

Citizens to Preserve Overton Park, Inc. v. Volpe, 401

ee ks) eer tere

City of Chicago v. Federal Power Commission, 458 F.

2d 731 (D. C. Cir. 1971), cert. denied, 405 US.

SE BEE boinc Cond hbaens dc cesececosbaree ss 20

Conley Electronics Corp. v. Federal Communications

Commission, 394 F. 2d 620 (10th Cir. 1968), cert.

denied, 393 U.S. 858 (1968) ............048: 25, 26, 27

Federal Communications Commission v. Pottsville

Broadcasting Co., 309 U.S. 134 (1940) .......... 12

National Association of Regulatory Utility Commis-

_ sioners v. Federal Communications Commission,

SO > ee Gee Cah Ge Ree BED wba dnc cane’ cokscns 13

National Association of Theatre Owners v. Federal

Communications Commission, 420 F. 2d 194 (D. C.

Cir. 1969), cert. denied, 397 U.S. 922 (1970) . .5, 13, 14,

16, 17, 18, 22, 26

National Broadcasting Company v. United States, 319

oe 8 Re re eT Pee 12,18

United States v. Allegheny-Ludlum Steel Corp., 406

os 2 Rr ere Per 20

United States v. Midwest Video Corp., 406 U.S. 649

RS ae rey ts 6, 14, 15, 18, 19, 24

United States v. Southwestern Cable Co., 392 U.S. 157

SEE Kedar dna tedyeeeaees 12, 13, 14, 15, 19, 21, 23, 24

STATUTES:

Administrative Procedure Act, 60 Statute 237, as

amended, 5 U.S.C. § 706 (2) (A) ........... 19

Communications Act of 1934, 48 Stat. 1064, as

amended, 47 U.S.C. § 151, et seq:

Oe PE AIEEE, Kstecnpisavesssuesesess 11, 14, 15

GF RIED ovesctovcdecussecacnsives 12

OP EEE ccccccdsndscovecestbekes 11,15

Oe I ED cb We sos dciseepueestadevs 11

Table of Authorities Continued iii

FCC Orpers: Page

First Report and Order in Docket No. 18397, 20

— § § fi eee re 6, 15

First Report and Order in Docket Nos. 19554 and

18893, 52 F.C.C. 2d 1 (1975) ............ passim

Fourth Report and Order on Subscrivtion Televi-

sion, 15 F.C.C, 2d 466 (1968) .............. 4

Memorandum Opinion and Order in Docket No.

18397, 23 F.C.C. 2d 825 (1976) .......... 6, 17, 22

Notice of Proposed Rulemaking and Notice of

Inquiry in Docket 18397, 15 F.C.C. 2d 417

SED: an thd ocho Chekas Kebb he cans ceeeane<e 5

Notice of Proposed Rulemaking and Memorandum

Opinion and Order in Docket No. 19554, 35

ey ee COPED ob uidy wack cdscOeenecdccs 7

Report and Order in Docket No. 18893, 34 F.C.C.

er ee CE Coc < nk vb Uwed be Ceaweedncas ees 5

Second Report and Order on CATV, 2 F.C.C. 2d

Se ME oth uw eau ewke eve ewes s Fe kec wok 15

FCC Ru es anp Recutations:

hp RE Re pe ener ec: A 26

MISCELLANEOUS:

Television Factbook, Services Volume, No. 46

SE Cah r4 £sde Wey OUR r shes kbavk bakes 4

IN THE

Supreme Court of the United States

OcroBeR TERM, 1976

No.

NATIONAL ASSOCIATION OF BroapcastEers, Petitioner,

v.

Home Box Orrice, INc., Et AL., Respondents.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR THE

DISTRICT OF COLUMBIA CIRCUIT

The National Association of Broadcasters (NAB)

respectfully petitions for a writ of certiorari to review

the opinion and judgment of the United States Court

of Appeals for the District of Columbia Circuit en-

tered in this case on March 25, 1977.’

OPINIONS BELOW

The opinion of the Court of Appeals has not yet been

officially reported. The full text of the court’s opinion

is printed in Appendix A to the Petition for Writ of

1The case below consisted of fifteen consolidated petitions for

review of orders of the Federal Communications Commission. Peti-

tioner brought the petition for review in No. 75-1785.

2

Certiorari filed by the Federal Communications Com-

mission (FCC or Commission) in these cases on June

3, 1977, sub. nom. Federal Communications Commis-

sion Vv. Home Box Office, Inc., et al. (No. 76-1724). The

orders of the FCC are reported at 52 F.C.C. 2d 1 (1975)

and 54 F.C.C. 2d 797 (1975) (FCC App. C and D).

For convenience, references herein will be to the Com-

mission’s Appendices (‘‘FCC App.’’).

JURISDICTION

The judgment of the Court of Appeals was entered

on March 25, 1977 (FCC App. G at 243-246). A partial

stay of mandate was granted by the Court of Appeals

on May 4, 1977 (FCC App. H at 247-249). This peti-

tion for certiorari is being filed within the time allowed

by this Court. The jurisdiction of this Court is invoked

under 28 U.S.C. § 1254(1).

QUESTIONS PRESENTED

1. Whether the court below erred in holding that the

Commission lacked jurisdiction to regulate pay cable

origination programming voluntarily undertaken by

cable systems which also retransmit broadcast signals.

2. Whether the court below erred in holding that

regulations applicable to pay cable origination pro-

gramming were violative of the First Amendment.

3. Whether the Court of Appeals improperly

usurped the Commission’s role as an expert agency, im-

properly substituted its judgment for that of the Com-

mission, and applied an incorrect standard of review in

demanding a clear showing of existing harm rather

_

3

than permitting the Commission to plan in advance of

foreseeable events.’

STATUTES INVOLVED

Pertinent provisions of the Communications Act of

1934, as amended, are set forth in FCC App. I at 251-

252.

STATEMENT

This petition seeks review of an opinion (FCC App.

App. A at 1-116) and judgment (FCC App. G at 243-

246) setting aside regulations of the Federal Communi-

cations Commission applicable to pay cable television.

The rules were adopted for the purposes of maintain-

ing “‘the publie’s ability to receive the informational

and entertainment programming now provided by con-

ventional television at no direct cost’’ and encouraging

**development cf alternative media which will increase

the number of program choices available to the public”

(FCC App. C at 165). Specifically, the rules were de-

signed to prevent program ‘‘siphoning’’. Siphoning

occurs when a pay cable television system or network

purchases exclusive exhibition rights to a popular pro-

gram, thereby preventing its showing on conventional

2 The court below also ruled that the FCC followed improper

procedures by allowing ex parte contacts with the Commissioners

and the Commission staff during the pendency of the informal

rulemaking procedure. The court ordered the Commission to con-

duet a hearing to determine the nature and source of all er parte

contacts and conditioned its affirmation of the STV rules pending

resolution of that proceeding (FCC App. A at 92-108). Petitioner

considers the ecourt’s ruling erroneous and believes that it should

be reviewed by this Court. However, Petitioner defers to the

Commission’s presentation on this point in its Petition for Writ

of Certiorari, filed June 3, 1977 (at 28-43).

4

broadcast television. A program which his been si-

phoned can be viewed only by those persons who sub-

scribe to cable television and pay an additional per-

program or per-channel fee for reception of the pay

programming in addition to the broadcast stations re-

transmitted by cable systems.’ Additional rules were

designed to insure that pay cable programming en-

hanced program diversity for those viewers who sub-

seribed to pay cable. Although rules applicable to pay

eable television were set aside, identical rules applica-

ble to broadcast or over-the-air pay television were up-

held by the court.

The Commission has long recognized pay television’s

‘important role ...in our national telecommunications

structure’ (FCC App. C at 165). The Commission first

determined to authorize permanent broadcast pay tele-

vision (STV) in 1968. Fourth Report and Order on

Subscription Television, 15 F.C.C. 2d 466 (1968). At

the same time, the Commission adopted rules to prevent

siphoning of popular types of programs from free

broadcast television to pay television. Adoption of the

‘‘anti-siphoning’’ rules reflected the Commission’s

concern that siphoning would deprive those who could

not afford to subseribe to pay television of the oppor-

tunity to view popular programs which they expected

to see when they purchased a television receiver. Be-

cause the Commission’s extensive inquiries into STV

had revealed that feature films and sports, already

° Cable television systems also may originate non-broadeast pro-

grams as part of their basic cable service. As of September 1, 1976.

727 of the 3,715 operating cable systems were originating non-

automated programs other than those for which a per-program or

per-channel is made. Television Factbook, Services Volume, No, 46

(1977) at 75a.

5

among the most popular fare on free broadeast tele-

vision, were the most attractive types of pay television

programming, the Commission adopted rules to pre-

vent siphoning of sports and feature film program-

ming from free television to STV. To insure STV

programs offered some diversity vis-a-vis free broad-

cast television programming, the Commission also pro-

hibited exhibition of series programs and advertising

curing STV programs and limited to ninety percent

the amount of STV program time that could consist of

sports and feature films. In National Association of

Theatre Owners v. FCC, 420 F.2d 194 (D.C. Cir. 1969),

cert. denied, 397 U.S. 922 (1970) [hereinafter cited as

NATO], the court affirmed the Commission’s authority

to authorize STV, the specifie ‘‘anti-siphoning’’ rules

and other program restrictions.

In 1972, the sports anti-siphoning rule applicable

to STV was slightly modified. Report and Order in

Docket 18893, 34 F.C.C. 2d 271 (1972). The STV “‘anti-

siphoning’’ rules were modified further so as to accord

with the pay cabie anti-siphoning rules in the same

order in which the Commission adopted the pay cable

program restrictions vacated by the court below.

The Commission’s initial concern with cable televi-

sion as other than a broadcast signal retransmission

service was evidenced in 1968 with the commencement

of a broad ranging inquiry. Notice of Proposed Rule

Making and Notice of Inquiry in Docket 18397, 15

F.C.C, 2d 417 (1968). The Commission’s first action

in that proceeding was the adoption of a rule requiring

certain cable systems to originate programming. How-

ever, the commencement of mandated origination pro-

gramming was not thought to produce any threat of

siphoning, and the Commission decided against adopt-

6

ing anti-siphoning rules or other program restrictions

similar to those applicable to STV. First Report and

Order in Docket No. 18397, 20 F.C.C. 2d 201 (1969).

Upon reconsideration of the First Report and Order

in Docket No. 18397, the FCC did adopt anti-siphoning

rules applicable to pay cable television. The rules did

not apply to all cable origination programming, but

only to programming which could be viewed upon pay-

ment of a per-program or per-channel charge. The

Commission found that pay eable presented the same

threat as STV, namely the siphoning of programs away

from free television in favor of a service limited to

those who could pay. Furthermore, the Commission de-

termined that siphoning from free television to pay

cable would be even more detrimental to the publiec’s

ability to continue to view popular program types with-

out direct charge on free broadcast television. Exelu-

sive pay cable exhibition would deprive not only those

unable to afford to pay direct charges for program-

ming, but also those living in areas not served by cable

of the opportunity to view siphoned programs. Conse-

quently, the Commission applied rules identical to

those applicable to STV to pay cable. Memorandum

Opinion and Order in Docket No. 18397, 23 F.C.C, 2d

825 (1970).

The rules adopted in the First Report and Order in :

Docket 18397 requiring certain cable systems which

retransmitted broadeast signals to originate program-

ming were upheld by this Court in United States v.

Midwest Video Corp., 406 U.S. 649 (1972). The Court

did not consider the anti-siphoning rules. 406 U.S. at

657, n. 14.

7

The FCC subsequently denied reconsideration of its

order adopting the pay cable and anti-siphoning rules.

At the same time, however, the Commission initiated

a proceeding to consider possible amendments of the

STV and pay cable rules. Notice of Proposed Rule-

making [sic] and Memorandum Opinion and Order

in Docket 19554, 35 F.C.C. 893 (1972). The Commis-

sion expressed concern as to “Show pay cablecasting

ean best be regulated to provide a beneficial supple-

ment to over-the-air broadcasting without at the same

time undermining the continued operation of that free

television service.’’ Id. at 898. The Commission amassed

a substantial record, which was updated and augmented

by a second round of comments and two oral argu-

ments. (See FCC App. C at 130).

In the Commission’s First Report and Order, 52

F.C.C. 2d 1 (1975) (FCC App. C at 123-204), anti-

siphoning rules and other program restrictions appli-

eable to pay cable were retained, but ameuded. The

STV rules were amended so as to make uniform the

STV and pay cable anti-siphoning rules.

The Commission relaxed the feature film anti-siphon-

ing rules in several respects. The rule permitting pay

eable exhibition of feature films during the first two

years following general theatrical release was amended

to provide a three year rather than a two year exhibi-

tion period. The rule permitting pay cable exhibition

of a limited number of feature films over ten years old

anmually was amended to permit unlimited pay cuble

exhibition of such older feature films provided they had

not been shown on broadcast television in the cable

system’s market for three years prior to the proposed

pay cable exhibition. A new category of films available

8

for pay exhibition was created. Any feature film con-

tractually available for showing on free broadcast

television also was available for pay cable exhibition.

All restrictions on pay cable exhibition of foreign

language films were deleted. The Commission also in-

dicated that it would waive the remaining restrictions

for feature films which would not in any case be shown

on free broadcast television (FCC App. at 171-179).

The sports anti-siphoning rules applicable to pay

cable also were emended, but they continued to distin:

guish hetween specific (e.g., Super Bowl) and non-

specific (e.g., regular season NFL games) events. The

existing STV rule governing exhibition of specific

events was retained and applied to pay eable. The rule

prohibits pay cable exhibition of a specifie sports event

which had been broadeast on free television in any one

of the preceding five years. The previous rule had pro-

hibited pay cable exhibition only if the events had been

broadeast on free television during each of the two pre-

ceeding years. Non-specific events were categorized (pre-

season verstis regular season [including play-offs] and

home versus away) and formulae were established per-

mitting pay cable exhibition of a certain number of

events in each category depending on the number of

games broadeast on free television during each of the

preceding five seasons (FCC App. C at 179-187).

The series anti-siphoning rule was relaxed (FCC

App. C at 187-188) and, subsequently, deleted (FCC

App. E at 219-234). Finally, the FCC retained rules

prohibiting advertising during pay cable program-

ming and limiting to ninety percent the percentage of

pay cablecast hours which could consist of sports and

feature film programming (FCC App. C at 188).

9

Broadeast and pay cable television parties petitioned

the court below to review the Commission’s orders re-

taining and amending the rules and deleting the series

anti-siphoning rule. On March 25, 1977, the Court of

Appeals entered a judgment vacating the anti-siphon-

ing rules and other program restrictions applicable to

pay cable television. The court held that (1) the Com-

mission lacked authority to adopt the rules and that

even if it had the authority, the rules were highly ca-

pricious because the record evidence failed to support

the need for regulation; (2) the rules were inconsistent

with the First Amendment; and (3) the Commission

and its staff had made ex parte contacts with parties

to the rulemaking violating fundamental notions of

judicial review and due process. The court upheld the

rules applicable to STV, pending completion of a hear-

ing it ordered the Commission to conduct within 120

days regarding the effects of the ex parte contacts on

the rulemaking process. Lastly, the court ordered the

Commission to terminate its proceeding regarding pro-

gram exclusivity within 180 days.

On April 18, 1977, the FCC filed a motion for partial

stay of mandate. The Commission sought no stay of the

mandate insofar as it vacated the feature film anti-si-

phoning rules and asked the court to remand the STV

feature film rule to enable the Commission to revoke

it. The Commission also sought a stay of the mandate

insofar as it required it to conduct a hearing into ex

parte contacts. The NAB and American Broadeasting

Companies, Inc. (ABC) moved for a complete stay

of the mandate. National Subscription Television

(NSTV) moved for leave to intervene and file a pe-

tition for rehearing and suggestion for rehearing en

bane.

10

On May 4, 1977, the court issued its order staying

its mandate for 30 days insofar as it vacated the sports

anti-siphoning rules and other program restrictions

applicable to pay cable television and required the

Commission to conduct a hearing into the ex parte

contacts. The court remanded the STV rule to the

Commission to permit repeal of the rule. Except to the

extent granted by its previous actions, the court denied

all other motions, including those of NAB, ABC, and

NSTV.

The FCC filed a petition for a writ of certiorari with

this Court on June 3, 1977.

REASONS FOR GRANTING THE WRIT

The decision of the lower court seriously impairs

the ability of the FCC to fulfill its statutory responsi-

bilities in preserving the present nationwide, adver-

tiser-supported system of free television and raises

questions of far-reaching legal and practical impor-

tance. The lower court’s holding that the FCC lacked

jurisdiction to adopt anti-siphoning rules applicable

to cable television is contrary to other decisions of the

same court and to the decisions of other cireuits and

this Court. Certiorari is also needed for this Court to

consider the lower court’s ruling that the pay cable

rules violate the First Amendment, a ruling which is

in conflict with decisions of other circuit courts, in-

cluding the District of Columbia Cireuit. The decision

is of significance to the manner in ‘vhich informal rule-

making proceedings are to be conducted by adminis-

trative agencies because of the improper standard of

review applied by the lower court which deprives the

Commission of discretion to plan in advance of fore-

seeable events. In sum, the potential impact of the de-

cision below upon the administration of the Communi-

cations Act and the preservation of the public’s ability

to receive popular programming now provided by con-

ventional television at no direct cost, merit further re-

view of the lower court’s decision by this Court.

I.

The Lower Court's Decision Seriously Impuirs the Ability of the

FCC to Fulfill Iis Statutory Responsibilities

The Communications Act of 1934, as amended, 47

U.S.C. §§ 151, et seq., establishes the various responsi-

bilities of the Federal Communications Commission.

The underlying purpose of all Commission regulation,

as set out in Section 1 of the Act, 47 U.S.C. § 151, is

‘to make available, so far as possible, to all the people

of the United State a rapid, efficient, Nation-wide, and

world-wide wire and radio communications service with

adequate facilities at reasonable charges . . .’ Among

the Commission’s specific statutory responsibilities is

‘‘the distribution of licenses, frequencies, hours of op-

eration, and of power among the several States and

communities as to provide a fair, efficient, and equita-

ble distribution of radio service to each of the same.”

47 U.S.C. § 307(b). The Act also directs the Commis-

sion to ‘‘[s]tudy new uses for radio, provide for experi-

mental uses of frequencies, and generally encourage the

larger and more efficient use of radio in the public in-

terest.” 47 U.S.C. § 303(g).

Fullfillment of the FCC’s statutory mandate de-

mands “the creation of a system of local broadeasting

12

stations, such that all communities of appreciable size

[will] have at least one television station as an out-

let for local self-expression,” and Congress has “charged

[the Commission] with broad responsibilities for the

orderly development of an appropriate svstem of local

television broadcasting.” United States v. Southwest-

ern Cable Co., 392 U.S. 157, 174, 177 (1968). This Court

has recognized that ‘‘[t]he significance of the Commis-

sion’s efforts can scarcely be exaggerated, for broad-

casting is demonstrably a principal source of informa-

tion and entertainment for a great part of the Nation’s

population.” Id., 392 U.S. at 177.

Congress also has mandated that the FCC ‘maintain,

through appropriate administrative control, a grip on

the dynamic aspects of radio transmission,’’ FCC v.

Pottsville Broadcasting Company, 309 U.S. 134 (1940),

and, thus, conferred on the Commission ‘‘unified juris-

diction”’ and ‘‘broad authority.’’ Southwestern Cable

Co., supra, 392 U.S. at 172. The Commission’s powers

are ‘“‘not niggardly, but expansive’’ and its mandate is

‘‘comprehensive’’. National Broadcasting Co. v. United

States, 319 U.S. 190, 219 (1943).

Consequently, this Court has held that regulation of

cable television falls within the Commission’s jurisdic-

tion over ‘‘all interstate ... communication by wire or

radio.’’ 47 U.S.C. §152(a). Southwestern Cable Co.,

supra, 392 U.S. at 177. Regulation of distant signal im-

portation was considered necessary to insure that the

public was not deprived of “the various benefits of

a system of local broadcasting stations.’’ Id. at 176.

For similar reasons, restrictions on STV programming

also have been accorded judicial affirmation. NATO,

a eer MAPA rte inte Sy crea bine

—s

A Ngee etelGawer. 6

13

supra. Again recognizing that the ‘‘critical question”’

was ‘‘adverse impact on free television,”’’ the court un

held restrictions designed to protect the interests of the

‘millions of viewers’’ who expect free television serv-

ice and rely on that service for entertainment. /d. at

197.

The decision of the court below severly cireum-

scribes the FCC’s authority, thereby impairing the

Commission’s ability to protect and promote valid

public interests in the continuation of free broadcast

service pursuant to its statutory mandate. First, the

eourt’s holding that the Commission lacked jurisdic-

tion to regulate pay cable television in a manner iden-

tical to its reeulation of STV when pay cable presents

the same threat of adverse effects on free broadcast

television prevents the Commission from achieving the

significant objectives recognized in Southwestern Cable

Co., supra, and NATO, supra, Second, the court’s in-

sistence that regulation is necessary only when existing

harm is clear prevents the Commission from anticipat-

ing foreseeable future developments in the dynamic

rapidly evolving area of electronic communications.

Finally, in erecting more substantial First Amendment

obstacles to regulation of cable television, the court

ereates an illogical disparity in the Commission’s reg-

ulatory treatment of cable and broadcast television."

The court’s decision thus prevents the Commission

‘In National Association of Regulatory Utility Commissioners V.

Federal Communications Commission, 533 F.2d 601, 616 (D.C, Cir.

1976), the lower court stated: ‘‘It was logical for the FCC to regu-

late the new business, i.c., the programming to be originated by

cable companies, because that business was directly competitive

with services which it already regulated.”’

14

from exercising its ‘‘broad authority’’ and ‘‘unified

jurisdiction” to fulfill its mandate to insure that the

‘fall the people of the United States,’’ 47 U.S.C. § 151,

are not deprived of the benefits of local broadeast serv-

ice, including the free entertainment programming

they expect and rely on nationwide broadcast television

to provide.

This Court has considered establishment of the scope

and nature of the Commission’s jurisdiction over cable

television a matter of considerable importance. The

present case involves questions that are as crucial to

the Commission’s basic statutory responsibilities as

those considered by this Court in Southwestern Cable

Co. aud Midwest Video Corp. Therefore, certiorari

should be granted.

Il.

The Lower Court’s Holding That the Commission Lacked Juris-

diction to Adopt Anti-Siphoning Rules Applicable to Cable

Television Conflicts With Prior Decsions of This Court and the

Lower Ccurt Itself.

The court’s holding that the Commission lacked

jurisdiction to adopt rules to prevent siphoning clashes

with the decisions of this Court in United States v.

Southwestern Cable Co., supra, and United States v.

Midwest Video Corp., supra, as well as with its own

decision in NATO, supra. The decisions of this Court

in Southwestern and Midwest firmly establish that the

FCC’s authority to regulate cable television extends to

that ‘‘reasonably ancillary to the effective performance

of the Commission’s various respors‘bili‘‘es for the

regulation of television broadeastine ’’ Se « .western

Cable Co., supra, 392 U.S. at 172

Ae te te

15

That grant of authority empowers the Commission

to adopt rules and regulations applicable to cable sys-

tems, provided such rules or regulations protect or pro-

mote ‘‘the objectives for which the Commission had

been assigned jurisdiction over broadcasting.”’ Mid-

west Video Corp., supra, 406 U.S. at 667. Thus, in

Southwestern, this Court affirmed rules designed to

‘integrate the CATV service into the national televis-

ion structure in such a way as to promote maximum

television service to all the people of the United States

... both those who are eable viewers and those depend-

ent on off-the-air service’? Second Report and Order,

2 F.C.C. 2d 725, 745-746 (1966) cited in Midwest Video

Corp., supra, 406 U.S. at 666. The rules promoted the

Commission’s statutory directive to ‘‘make available,

so far as possible, to all the neople of the United States

a rapid, efficient, Nation-wide and world-wide wire and

radio communications service with adequate facilities

at reasonable charges,’’ 47 U.S.C. § 151, and ‘‘to en-

courage the larger and more effective use of radio in

the public interest.’’ 47 U.S.C. § 303(¢). The origina-

tion rule in Midwest was affirmed, albeit by the nar-

rowest margin, because it ‘“[furthered] the achieve-

ment of long established regulatory goals in the field

of television broadcasting by increasing the number

of outlets for community self-expression and augment-

ing the public’s choice of programs and types of

services .. .” First Report and Order, 20 F.C.C, 2d

201, 202 (1969), cited in Midwest Video Corporation,

supra, 406 U.S. at 668.

The eourt below held that the FCC lacked jurisdie-

tion to adopt the pay cable anti-siphoning rules be-

cause ‘*the Commission failed to demonstrate that the

16

objectives to be achieved by regulating cable television

are also objectives for which the Commission ¢éould

legitimately regulate the broadcast media’’ (FCC App.

at 56). In so holding, however, the court below failed

to recognize that the Commission adopted the pay

cable rules to achieve the same objectives the STV

rules were designed to achieve. Indeed, the lower court

itself approved regulation of STV in furtherance of

those objectives in NATO, supra. Having ‘‘concluded

that subscription television would provide a ‘beneficial

supplement’ to conventional ‘free’ broadcasts” and havy-

ing considered “the critical question of whether STV

would have substantial adverse impact on free televis-

ion,’’ the Commission was found to have ‘“‘acted rea-

sonably and within the scope of its authority, both in

making its initial decision to authorize permanent na-

tion-wide STV and in imposing specific regulations

governing subscription television.’’ NATO, supra, 420

F., 2c at 197-198. The Commission’s specific restrictions

on STV programming reflected primarily its concern

that ‘‘the programs, audiences, and talent would be di-

verted (‘siphoned’) from free television to STV,”

thereby frustrating ‘‘the expectation of free service”

held ‘‘by millions of viewers who rely on that free

service for free entertainment.”’ Id., 420 F.2d at 197.

Having given ‘‘full and fair consideration to the po-

tential impact of STV on poor people and free tele-

vision,’’® the Commission adopted reasonable rules to

‘“‘prevent the more popular kinds of free programs

from migrating to subscription television.” °

* NATO, supra, 420 F.2d at 207.

° Id., 420 F.2d at 206.

17

The FCC took the same overall approach to pay

cable regulation and adopted regulations designed to

prevent the same harm to the public interest. The Com-

mission pointed out that the ‘‘fundamental issue’’ in

both cases ‘fis whether subscription television would

provide a beneficial supplement to the program choices

now available to the public ... or whether it would

impair [free television’s] capacity ... to provide ad-

vertiser financed programming of the present or fore-

seeable quantity and quality, free of direct charge to

the public”? (FCC App. C at 164-165). In terms of

the specific pay-cable anti-siphoning rules which are

identical to the amended STV anti-siphoning rules, the

Commission acted in response to ‘‘the same threat of

siphoning’’’ and to prevent the same adverse effects

on ‘‘poor people’’* and those who ‘“‘cannot afford to

pay for television.’’ ° The Commission acted in the ‘‘in-

terests of the entire public’ to ‘“‘maintain the public’s

ability to receive the informational and entertainment

programming now provided by conventional television

at no direct cost’? (FCC App. C. at 165). In short, the

Commission recognized that pay cable posed the same

threat of impairment to free broadeast television serv-

ice as STV and acted in a virtually identical manner

to achieve the identical statutory objectives approved

by the court in NATO.

Regarding the advertising prohibition and ninety

percent limitation on feature films and sports, this

Court has recognized that the Commission’s ‘‘various

™ Memorandum Opinion and Order, 23 F.C.C. 2d 825, 828 (1970).

8 NATO, supra, 420 F.2d at 207.

® Memorandum Opinion and Order, 23 F.C.C. 2d 825, 828 (1970).

18

responsibilities for the regulation of television broad-

casting . . . are considerably more numerous than

simply assuring that broadcast stations operating in

the public interest do not go out of business.’’ Midwest

Video Corp., supra, 406 U.S. at 664. “Augmenting the

public choice of programs and types of services” are

“plainly within the Commission’s mandate for the reg-

ulation of television broadcasting.” Id., 406 U.S. at

668; National Broadcasting Co. v. United States, 319

U.S. 190 (1943). The rules further this latter goal by

requiring development of pay cable’s ‘‘potential to

expand the public’s program choices to supplement

the programming now provided by conventional tele-

vision” (FCC App. at 165). Like the mandatory

origination requirement upheld in Midwest, the ninety

percent and advertising rules ‘‘assure that in the re-

transmission of broadcast signals, viewers are provided

suitably diversified programming.’’ 406 U.S. at 669.

Therefore, the anti-siphoning rules, the ninety percent

limitation on pay cable sports and feature films and

the prohibition against advertising on pay cable fur-

ther objectives for which the Commission properly

can and has regulated broadcasting.

The Commission has sought to regulate pay cable to

achieve the same objectives for which it has regulated

STV—objectives recognized and approved by the

lower court in NATO and by this Court in Midwest.

Thus, in holding that the anti-siphoning rules and

other program restrictions applicable to pay cable did

not further objectives for which the Commission could

regulate broadeasting, the court below squarely con-

tradicted its prior decision in NATO. Furthermore, be-

cause the pay cable rules were designed to further ob-

jectives for which the Commission properly could and

19

did adopt regulations applicable to broadcasting, the

lower court’s holding that the Commission lacked juris-

diction to adopt the rules conflicts with the decisions

of this Court in Southwestern and Midwest.

Il.

The Lower Court Improperly Substituted Its Judgment for That

of the Commission and Applied a Standard of Review Which

Conflicts With Prior Supreme Court and Appellate Court

Decisions.

The court below usurped the Commission’s policy-

making role in informal rulemaking proceedings in a

manner inconsistent with its proper review function

and applicable decisions of this Court. The lower court

conducted its own review of the record, analyzing and

evaluating every minute detail and reached its own

conclusions as to the probity of the record evidence.

After applying a standard of review far more strin-

gent and demanding than considered necessary or even

desirable by this Court, it concluded that the Commis-

sion’s actions were arbitrary and capricious.

Although the court paid lip service to the proper

scope of judicial review of informal rulemaking pro-

ceedings, pursuant to the arbitrary and capricious

standard of 5 U.S.C. § 706(2)(A) (FCC App. A at 56-

60), it, nonetheless, plunged headlong into its ‘‘own re-

view” of the record (FCC App. A at 62) and deter-

mined that evidence offered by proponents of the rule

had not ‘‘proved their case’’ (id. at 64), and overall

that the record failed to provide a ‘‘clear picture as to

the effects of subscription television upon conventional

broadeasting.”’ (Jd. at 61). The court then concluded

that the pay cable anti-siphoning rules were highly ea-

pricious because ‘‘a regulation perfectly reasonable

20

and appropriate in the face of a given problem may be

highly capricious if that problem does not exist.’’ City

of Chicago v. Federal Power Commission, 458 F. 2d

731 (D.C. Cir. 1971), cert. denied, 405 U.S. 1074

(1972) (FCC App. A at 60).

The court below usurped the Commission’s role as an

expert agency and substituted its judgment for the

Commission’s. The function of a reviewing court, how-

ever, is not to conduct its own review of the record and

reach its own judgment. This Court has stated that a

reviewing court must not ‘‘weigh the evidence intro-

duced before the Commission”’ or ‘‘inquire into the

wisdom of the regulations that the Commission pro-

mulgates.’’ United States v. Allegheny-Ludlum Steel

Corp., 406 U.S. 742, 749 (1972). The reviewing court

should not place itself in the Commission’s position,

reach its own judgment and ‘‘substitute its own judg-

ment for that of the agency.’’ Citizens to Preserve

Overton Park, Inc. v. Volpe, 401 U.S. 402, 416 (1971).

The necessity of reserving complex policy judgments

to expert agencies rather than the courts is amply illus-

trated by the lower court’s decision. For example, the

court’s difficulties with the Commission’s assumption

‘‘that siphoning would lead to a loss of film and sports

programming for audiences not served by cable sys-

tems or too poor to subseribe to pay eable,’’ (FCC

App. A at 66) rests on a total misconception of the

facts. The court considered it ‘‘more consistent with

economic theory’’ to assume that cable operators would

sell broadeast rights to broadeasters ‘‘in areas that

cable firms do not reach” (FCC App. A at 66). The

court’s analysis, however, fails to consider that the vast

21

majority of cable systems are located within the cover-

age areas of conventional broadcast television stations

and, consequently, that cable and broadcast television

serve the same, rather than separate and distinct geo-

graphical areas. Programs will not be sold for broad-

east showing in markets in which cable systems also

operate. As the court itself recognized, a program sold

for pay cable exhibition would not be marketable if it

also were available without charge on a broadeast tele-

vision station which pay cable subscribers could re-

ceive. Because cable systems are operating in nearly

all broadcast markets, programs sold for pay cable ex-

hibition will not be sold for broadcast showing. Conse-

quently, viewers in those markets who have no access

to cable service or who are unable to afford to subscribe

to basic cable or pay cable will be deprived of the abil-

ity to see the shows. Obviously, the court should have

left analysis and evaluation to the expert agency and

simply satisfied itself that there existed a “rational

connection between the facts found and the choice

made.’’ Burlington Truck Lines, Inc. v. United States,

371 U.S. 156, 168 (1962).

Furthermore, in determining whether a need for

regulation existed, the court below applied a standard

of review wholly inconsistent with the views of this

Court regarding the Commission’s responsibility to

take regulatory measures to prevent harm to the public

before it occurs. This Court has not demanded proof

of existing harm or a clear picture that a problem ex-

isted. In Southwestern, supra, this Court reviewed

Commission rules governing broadcast signal carriage

by cable television systems. In adopting those rules

‘‘[t]he Commission acknowledged that it could not

‘measure precisely the degree of .. . impact,” but found

22

that ‘CATV competition can have a substantial nega-

tive effect upon station audience and revenues... ”’

[citation omitted]. 392 U.S. at 165. This Court affirmed

the Commission’s regulations, noting the ‘‘uncer-

tainty’’ surrounding predictions of the actual impact

of CATV, but emphasizing the Commission’s ‘‘statu-

tory responsibilities demand that it ‘plan in advance

of foreseeable events instead of waiting to react to

them.’ ’’ 392 U.S. at 177. The Commission adopted the

pay cable anti-siphoning rules with the same recogni-

tion that ‘‘[r]Jemedial action in this area should not

wait upon the threat becoming actuality.’’ Memoran-

dum Opinion and Order, 23 F.C.C. 2d 825, 828 (1970).

The lower court’s decision also is at odds with its

prior decision in NATO. There, after noting the Com-

mission’s ‘‘primary emphasis on the possibility that

programs, audiences and talent could be diverted (‘si-

phoned’) from free television to STV,” the court held

“that the Commission had acted reasonably ... in im-

posing specific regulations governing subscription tele-

vision.’’ 420 F. 2d at 197-198. Notably, in NATO, the

court required ‘‘full and fair consideration to the po-

tential impact of STV on poor people and free tele-

vision,” id., 420 F. 2d at 207, not a clear showing of

existing harm. Moreover, the rules affirmed in NATO

were more restrictive than the ones considered by the

lower court in its Home Box Office opinion and were

reviewed at a time when no STV stations were in op-

eration.

The lower court’s demands for proof of harm would

have restrained an attempt to move Mrs. O’Leary’s

lantern a safe distance from her cow. The court would

have the agency wait until Chicago was ablaze before

pera PyPare® £

23

acting to ‘‘prevent’’ harm. This is not the approach

found necessary and appropriate by this Court in

Southwestern; nor is it the proper approach for any

agency upon which Congress has confirmed ‘‘unified

jurisdiction”? and ‘‘broad authority’’ to ‘‘maintain,

through appropriate administrative control, a grip on

the dynamic aspects of radio transmission.’’ South-

western Cable Co., supra, 392 U.S. at 172-3.

IV.

The Lower Court's Decision Conflicts With Various Appellate

Court Decisions Regarding the First Amendment Rights of Cable

Television Systems and With This and Other Courts’ Decisions

Regarding the Commission’s Authority to Impose Content

Regulation on Cable Origination Programming.

The lower court’s ruling that the pay cable program

restrictions were inconsistent with the First Amend-

ment is premised on its holding that ‘‘differences be-

tween cable and broadeast television’’ require applica-

tion of different First Amendment standards (FCC

App. A at 75). The court distinguished broadcast tele-

vision and eable television which uses broadcast signals

on the ground that ‘‘physical interference and scar-

city’’ resulting from broadeasting’s use of spectrum

were absent in the ease of cable television (FCC App.

A at 78). Thus, the court erected a higher First

Amnedment hurdle to confront regulations applicable

to cable television systems which retransmit broadcast

signals.

The court’s distinction between broadeast and cable

television conflicts with this Court’s view that cable

systems which retransmit broadcast signals may be

subjected to FCC regulation—including regulation of

cablecast or cable origination programming. Although

24

the regulations upheld in Southwestern applied only

to carriage of broadcast television signals by eahle tele-

vision systems, this Court’s decision in Midwest leaves

no doubt that regulation of cable origination (or eable-

east) programming, which requires no use of the

broadcast spectrum, is “not the less, for that reason,

reasonably ancillary to the Commission’s jurisdiction

over broadeast services.’ 406 U.S. at 669. Despite the

narrow margin by which the mandatory origination

requirement was upheld in Midwest, the Court ap-

peared unanimous in recognizing that the Commission

could regulate cable origination programming once a

cable system retransmitting broadcast signals decided

to hegin originating its own programming. In his eon-

curring opinion, the Chief Justice stated that:

Those who exploit the existing broadcast signals

for private commercial surface transmission by

CATV—to which they make no contribution—are

not exactly strangers to the stream of broadenst-

ing. The essence of the matter is that when they

interrupt the signal and put it to their own use for

profit, they take on burdens, one of which is regu-

lation by the Commission.

406 U.S. at 676. Nor did the four dissenting Justices

question the Commission’s authority to regulate cable

origination programming :

The fact that the Commission has authority to

regulate origination of programs if CATV decides

to enter the field does not mean that it ean comnel

CATY to originate programs.

406 U.S. at 680, [Emphasis supplied. ]

The plurality opinion in Midwest also recognizes the

Commission’s authority to regulate the ‘content of the

25

programming offered’’ by cable television systems. 406

U.S. at 669-670. Thus, this Court appears to accord

comparable regulatory treatment to broadcasters and

cable operators who intermix carriage of broadcast

signals and cablecast programming. The court below

has taken the conflicting position that cablecast pro-

gramming should not be regulated on the same basis

as broadeast programming.

The court’s application of a more stringent First

Amendment standard to eable television regulation

directly conflicts with decisions in other circuits. Le-

cisions of other circuits have recognized that Commis-

sion regulation of cable television systems which re-

transmit broadeast signals ‘‘have the same constitu-

tional status under the First Amendment as regula-

tion of the transmission of signals by the originating

television station.” Black Hills Video Corp. v. FCC,

399 F.2d 65, 69 (8th Cir. 1968). Although cable tele-

vision systems ‘‘do not themselves use the airways in

their distribution system,’’ the court found the ‘‘eru-

cial’’ consideration to be cable’s use of broadeast sig-

nals and its ‘‘unique impact upon, and relationship

with television broadcast service.’’ Id. In Buckeye

Cablevision, Inc. v. FCC, 387 F. 2d 220, 225 (D.C. Cir.

1967), the court concluded that although “CATV sys-

tems disseminate programs carrying a wide range of

information,”’ restraints designed to ‘‘effectuate the

public interest requirements of the Act’’ did not con-

stitute an ‘‘illegal restraint on First Amendment

rights.”” In Conley Electronics Corporation v. FCC,

394 F. 2d 620, 624 (10th Cir.), cert. denied, 383 U.S.

858 (1968), the court ruled arguments asserting

abridgement of cable systems’ First Amendment rights

26

were ‘‘without merit’’ where ‘‘reasonable regulation in

the public interest is involved.”’

The court’s ruling in Conley Electronics Corpora-

tion, supra, is especially significant because it under-

mines the lower court’s attempt to explain away the

conflict between its holding and those in Black Jills

Video Corporation, Buckeye Television, Inc. and their

kin. The court gave little weight to the Black Hills and

Buckeye Cablevision, Inc. decisions in the belief they

“incorrectly” neglected the distinction between licens-

ing of microwave facilities utilized by cable systems

and direct regulation of the cable systems themselves

(FCC App. A at 78-79, n. 80). In Conley Electronics

Corporation, the court responded directly to areuments

seeking to distinguish earlier cases ‘‘on the ground

that they were concerned with licensing rather than

with the direct regulation of CATV systems,’’ holding

the eases ‘‘indistinguishable.’’ 394 F.2d at 624.

The pay cable rules would have passed First Amend-

ment muster had the court below properly ascribed to

cable operators utilizing broadcast signals ‘‘the same

constitutional status [as broadcasters] under the First

Amendment.”’ Black Hills Video Corporation, supra,

399 F.2d at 69.°° As the lower court pointed out, it

previously had upheld ‘‘more stringent but substan-

tially similar rules’’ applicable to STV against First

Amendment objection in NATO, supra (FCC App. A

at 75). The pay cable restrictions were adopted for the

same purpose of preventing loss of free, popular pro-

* The rules applied only to cable systems which retransmitted

broadeast signals. The Commission, in fact, defines a cable system

as ‘‘a nonbroadeast facility . .. that distributes or is desigued to

distribute ... the signals of television broadeast stations .. .”’

47 C.F.R, § 76.5(a).

27

gramming to the public and enhancing program (i-

versity for pay television subscribers and, thus, con-

stitute ‘‘reasonable regulation in the public interest.’

Conley Electronics Corporation, supra, 394 F.2d at

624.

CONCLUSION

For the reasons stated above, the petition for a writ

of certiorari should be granted.

Respectfully submitted,

Erwin G. Krasnow

JAMES J. PoPHAM

Attorneys for Petitioner

NATIONAL ASSOCIATION OF BROADCASTERS

1771 N Street, N.W.

Washington, D.C. 20036