Respondents Brief — FCC v. Midwest Video Corp.

Supreme Court brief1979

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Text

foOR ARGU”

Beers. Soert. Uv.

eit ]

DEC 15 i978

Nos. 77-1575, 77-1648 and 77-1663 MICHAEL ROBAK, I8_ OLERK

IN THE

Supreme Court of the United States

OctToper Term, 1978

FEDERAL COMMUNICATIONS COMMISSION, ET AL..

PETITIONERS

MIDWEST VIDEO CORPORATION, ET AL.

ON WRIT OF CERTIORARI TO THE UNITED STATES

COURT OF APPEALS FOR THE EIGHTH CIRCUIT

BRIEF FOR RESPONDENT

MIDWEST VIDEO CORPORATION

Harry M. PLOTKIN

GeorGce H. SHAPIRO

ALAN AUCKENTHALER

1815 H St. N.W.

Washington, D.C. 20006

ARENT, Fox, KINTNER, PLOTKIN & KAHN

Of Counsel

TABLE OF CONTENTS

cl slabiianeniens

EES ETI LAT LT

A. Events Leading to this Proceeding.................

A EEE

C. Cable Systems Select From a Multitude of

1. FCC Signal Carriage Rules....................

2. Domestic Satellite Service to the Cable

D. The Eighth Circuit Decision .............000...........

SUMMARY OF ARGUMENT. ..........000.00000000..cccesssceesesee-

TS tetinsdeaildttecisaianidiiadiicieaititaitaniinnietaailainssitnaiiilihin

I THE ACCESS RULES EXCEED THE

FCC’S ANCILLARY JURISDICTION

OVER CABLE TELEVISION |...

A. Midwest I Established the Outer Limits

of FCC Jurisdiction Over Cable

_ in Sn

B. The Access Rules Substantially Impair

the Cable System's Editorial Control

in the Selection and Presentation of

Programming It Delivers to Its Sub-

ee cheteietatsiaiacertttiiinsscnnstivsiensisnnninnseneen

C. The Access Rules Violate a Fundamen-

tal Goal of Broadcast Regu-

lation—The Preservation of the

Values of Private Journalism and

D. Cable Systems Do Not Function as

Common Carriers But Are Com-

pelled to Do So By the Access Rules .

E. The Use of Common Carrier Means to

Achieve Broadcast Objectives is Spe-

cifically Prohibited By the Act............

F. The Question of the FCC’s Authority

to Adopt Access Rules Should Be

Resolved by Congress ........................

G. The ACLU and MPAA Briefs ...............

Il. THE ACCESS RULES ARE UNCON-

RES SEER Ce ere

A. The Access Rules Violate the Free

Speech Clause of the First Amend-

i a

1. The Access Rules Substantially

Restrict the Speech of Cable

EE ee

2. Cable Television Does Not Share

the Characteristics of Broad-

casting Which Have Historical-

ly Justified Limitation of the

First Amendment Rights of

3. The Access Rules Would Violate

the More Limited First Amend-

ment Rights of Broadcasters ......

B. The Access Rules Violate the Fifth

FEE ee a

1. Under the Due Process Clause, a

Person May Not Be Compelled

to Undertake Common Carrier

I ii cckecneiiicsoninninsstnainentes

2. The Access Rules Take the Prop-

erty of Cable Operators With-

out Just Compensation...............

Ill. THE RECORD BEFORE THE FCC WAS

INSUFFICIENT TO SUPPORT THE

ADOPTION OF THE ACCESS RULES ..

STII TIED aniteibssstehsibissigandaianice--snaaenidindtepndbnentapennbgnianen ae

Page

TABLE OF AUTHORITIES

Pace

Court Cases:

A.L.A. Schechter Poultry Corp. v. United States, 295

a ahatiatahiiriacelitnintipiccsataedionsgtecdteanaisionts 31

American Civil Liberties Union v. FCC, 523 F.2d

Re I i ittiercctcnnndincestnmesdiliteinmcnntiineiinte 40

American Civil Liberties Union v. FCC, No. 76-1695

(D.C. Cir., Order filed Aug. 26, 1977) ..0.0000.00ccc.. 8

American Trucking Associations, Inc. v. United

BS | 31

Armstrong v. United States, 364 U.S. 40 (1960).......... 59

Atlantic Coast Line R. Co. v. Public Service Commis-

sion, 77 F. Supp. 675 (E.D.S.C. 1948) 20000... 63

Bigelow v. RKO Radio Pictures, 327 U.S. 251 (1946). 44

Black Hills Video Corp. v. FCC, 399 F.2d 65

II, IIIT insicicsiieciacidainainstnis dni iatiniaaatiaicimnninsisatiilin 38

Brooklyn Eastern District Terminal v. United States,

302 F. Supp. 1095 (E.D.N.Y. 1969) ..00000 ee. 63

Brooks-Scanlon Company v. Railroad Commission of

Louisiana, 251 U.S. 396 (1920) .o...cccccccccccceeeeeees 22, 62-64

Buckley v. Valeo, 424 U.S. 1 (1976) ........cccccccccccccceee 21, 48, 54

Business Executives’ Move For Vietnam Peace v.

FCC, 450 F.2d 642 (D.C. Cir. 1971) ....0.cccceeeeeeeee S54

Capital Broadcasting Company v. Mitchell, 333 F.

Supp. 582 (D.D.C. 1971), aff'd, 405 U.S. 1000

Ut era a cincrischitestieaicctiteatiaieissinitiadasianiiiainnastdinntiidiiaitibambiitiies 51

Columbia Broadcasting System, Inc. v. Democratic

National Committee 412 U.S. 94 (1973) ..00......0....... 21, 32-33,

40-4]

47, 54

Citizens Committee to Save WEFM v.FCC, 506 F.2d

ce NY Se ceisinnitastanintenintanladealadinaeduanbilannvintan 50

City of New York v. United States, 337 F. Supp. 150

SEE 5 SIP UNND niccinacacinnecucensbidlimntnnetiditunihieneiinn 63

FCC vy. National Citizens Committee for Broad-

eo BK | een 23, 66-67

FCC v. Pacifica Foundation, 57 L.Ed.2d 1073 (1978) 51-52

FPC v. Hope Natural Gas Co., 320 U.S. 591 (1944) ... 39

FPC v. Texaco, Inc., 417 U.S. 380 (1974) oo. 39

Frost & Frost Trucking Co. v. Railroad Commission,

UG ee re Seicctaiereiatandasaitdininiiateversesdinesks 22, 56-57

Home Box Office, Inc. v. FCC, 567 F.2d 9 (D.C. Cir.

1977), cert. denied, 434 U.S. 829 (1977) oo. 15, 24,

39, 46,

48, 67

In re Erie Lackawanna Railway Co., 517 F.2d 893

Fy INE seneclbianitiecsichetibineiiindceielipitcdaanatacieneahtatiatt 63

Joseph Burstyn, Inc. v. Wilson, 343 U.S. 495 (1952)... 48

Linmark Associates, Inc. v. Willingboro, 431 U.S. 85

gg ROLES TENS ORR eee et See eee» ee er 47

Miami Herald Publishing Co. v. Tornillo, 418 U.S.

I cee Se oe LT aS 20, 22,

47-54

Midwest Video Corp. v. FCC, No. 75-1671 (8th Cir.,

I RI Cis eR aserithicebsicntiitetaiiestatincsninilictaains 2

Milwaukee Towne Corp. v. Loew’s, Inc., 190 F.2d 561

1 | IPSN RRCE SCE arn ay ee A OE 45

NAACP v. FPC, 425 U.S. 662 (1976) .......ccccccceceeeeeeees 31,35

NAITPD v. FCC, 516 F.2d 526 (2nd Cir. 1975)......... 28

National Association of Regulatory Utility Commis-

sioners v. FCC, 525 F.2d 630 (D.C. Cir. 1976),

cert. denied, 425 U.S 992 (1976). .......cccccccccceeseeceseees 21, 34

National Association of Regulatory Utility Commis-

sioners v. FCC, 533 F.2d 601 (D.C. Cir. 1976)........ 21, 34, 38

National Broadcasting Co. v. United States, 319 US.

gPRSP ean ok Dine AF em ie 50

Panama Refining Co. v. Ryan, 293 U.S. 388 (1935) ... 31

Penn Central Transportation Company v. City of New

York, $7 L.Ed. 26 G31 ( 1978) ........0cc0ccececceccsescccseees 22, 59-62

Pennsylvania Coal Co. v. Mahon, 260 US. 393

URE Piciteaecnisecltesccitenaincan tae accent Ahad 60

Pierce Oil Corp. v. Phoenix Refining Co., 259 US.

125 (1922)

ee ry

Pittsburgh Press Co. v. Pittsburgh Commission on

Human Relations, 413 U.S. 376 (1973) ..00.....0.......-

Polish American Congress v. FCC, 520 F.2d 1248

UIT TIITID TD ec licctaihlinnligetes iiacnesuieaisscislltsiasadiacentithiendts

Red Lion Broadcasting Co. v. FCC, 395 U.S. 367

id SES SRE A Ee A ae

Shapiro v. Thompson, 394 U.S. 618 (1969)...

Sherbert v. Verner, 374 U.S. 398 (1968 ) 00.0000.

Southeast Promotions, Lid. v. Conrad, 420 U.S. 546

(|| conta AES FERS eae ees ee

Speiser v. Randall, 357 U.S. 513 (1958)...

TelePromTer Corp. v. Columbia Broadcasting System,

EY TT IEE sncctinnsnninnsstbiniiensosienignitaiianenes

Tennessee Valley Authority v. Hill, 57 L.Ed. 2d 117

TIT sciaeilitlelaeatn ha taceliad el danasciahaiensentitia

OP cistnesstdliathiisinabeccailintatnioentanliieessernatanioceennseusnceeen

SRST © SE Ur eC rents ee

United States v. O'Brien, 391 U.S. 367 (1968) ............

United States v. Paramount Pictures, Inc., 334 US.

A Minin licdncrdenthvadentuneniviiie Ree me Pree

United States v. Southwestern Cable Co., 392 US.

| SERRE ace e MBN ey ean meee aoe

Virginia Pharmacy Board v. Consumer Council, 425

PN UE iciesitnsstsciinisgtnpminidinnpenncdineinmdlatinneieeds

Washington ex rel. Stimson Lumber Co. v. Kuyken-

he ee OF Rithitsterin ine mteensiecinlltiineiteinene

Watson v. Employers Liability Assurance Corporation,

ee ee ee Se iiiciciiacinsepdlcctirencedttltastaitn cnneiiidgtncecees

Winters v. New York, 333 U.S. 507 (1948) ..00000000.......

FEDERAL COMMUNICATIONS COMMISSION AUTHOR-

ITIES:

Action in Docket Case, Report No. 14610, Dec. 4,

Perea inictuissestthistieaacdindedadliahssnistasnadls detaimahensianindchaacteon

Pace

49, 50

21, 42

passim

23,67

44-45

11, 19,

20, 23,

24, 38

American Broadcasting Companies, Inc., 62 FCC2d

ee Dciiinciiscinieainatcethei sectesepinebidineaeitatiianadibilinteniss

Cable Television Report and Order, 36 FCC2d 143

(1972), recon. generally denied, 36 FCC2d 326

i EE Wincen chin sais tabcahinenetenistanbsiuniebesenesitammiematieamnians

Computer Use of Communications Facilities, 28 FCC

2d 267 (1971), aff'd in pertinent part sub nom.

GTE Service Corp. v. FCC, 474 F.2d 724 (2d. Cir.

Fea cdl duciisiedieheincatirtachlanchistecabaneneebiiteasseaaiieaendsaldiicebdapaeniinn

Federal Political Candidates, 43 Pike & Fincher

Radio Regulation 2d 1029 (1978) ooo...

First Report and Order in Docket No. 15586, | FCC

ee TTI ciel cinaitceacicaetadietaibiee bad iidiatesbaseabibibiaibisiadinenss

First Report and Order in Docket No. 18397, 20 FCC

ER RIA ake ese ae rN

First Report and Order in Docket No. 20553, 58 FCC

2d 442 (1976), recon. denied, 60 FCC2d 661

SF Pra eda dhinssialahnsistigpeseniienttiihasashsatsbiplddatiaiamiiibipadibainethdtinssiaiadenn

Florida Cablevision, 54 FCC2d 881 (1975) ........00.......

Frontier Broadcasting Co. v. Collier, 24 FCC 251

fa SSE Seca ree eee er Se Ee IND

Gerity Broadcasting Company, 63 FCC2d 230 ( 1977).

Letter from Chief, Facilities and Services Division, of

the FCC ’s Common Carrier Bureau to Satellite

Communications Systems, Inc. ( Nov. 22, 1978) .....

Memorandum Opinion and Order in Docket No.

18128, 61 FCC2d 587 (1976), reconsideration, 64

FCC2d 971 (1977), further reconsideration, FCC

78-104 ( released Feb. 24, 1978 jo...

Motion Picture Association of America, Inc., 68 FCC

2d $7 ( “+

hhh eee ee eee eee ee ee ee ee ee

Se ciciccchanecicsoesiistibtaicenarieaidiesisitestudatliidaa aati

Notice of Proposed Rule Making in Docket No. 19988.

LAS ES aa

Notice of Proposed Rule Making in Docket No. 20508,

$3 FCC2d 782 (1975)

ieee eee ee ee ee ee

Pace

Notice of Proposed Rule Making in Docket No. 21472,

ee Bs NE ETDS, ceccncciessninienisctiinscemiomaiiiedate

Report and Order in Docket No. 19859, 57 FCC2d 68

| ERPS ER CDS eS Ms aise aes eaenee me

Report and Order in Docket No. 19988, 49 FCC2d

SPE STE cccciensninsistininbedannistihiitancsaseptlaninnibscatenneesabsesait

Report and Order in Docket No. 20028, 48 FCC2d

699 (1974), as modified upon reconsideration, 54

Pe ee er icc rctietsicissaiidebittettihiceimasilecadlcinhinsnss

Report and Order in Docket No. 20363, 54 FCC2d

207 (1975), petition for review pending sub nom.

National Black Media Coalition v. FCC, No. 75-

ft, fi of . 1) Sree. ee eee

Report and Order in Docket No. 20487, 57 FCC2d

625 (1976), recon. denied, 59 FCC2d 934 (1976)...

Report and Order in Docket No. 20496, 65 FCC2d

218 (1977), recon. denied, 43 Pike & Fischer

Radio Regulation 2d 1553 (1978) .......0.0...0.4.00.....

Report and Order in Docket No. 20508, 59 FCC2d

294 (1976), recon. denied, 62 FCC2d 399 (1976)...

Report and Order in Docket No. 20829, 43 Fed. Reg.

$374) UNE hdccsidilicicdeinetpniapinienbealeuthabedbeniitetniadameierbaseten

Southern Satellite Systems, Inc., 62 FCC2d 153

iF SpE Pae a ceoveiienseetnnehphalidiehiiiaieetiaiiaeickeipetseait lia nteinodkcateens

Suspension of Community Antenna _ Television

Mandatory Origination Rule Pending Further Judi-

cial Review, 36 Fed. Reg. 10876 (1971) ...................

United Video, Incorporated, FCC 78-766 (released

CR Ree ee ena 6

CONSTITUTIONAL AND STATUTORY PROVISIONS:

United States Constitution

fT TR

TTT oe seen ARSENIO ee mR

Communications Act of 1934, as amended

Section 3(h), 47 U.S.C. §153(h) ............ ee

Section 303(f), 47 U.S.C. §303( f)..........

Section 303(h), 47 U.S.C. §303(h) ....... ee.

passim

35-37,47

Vill

Section 307(b), 47 U.S.C. §307(b).... 0.

Section 312(a)(7), 47 U.S.C. §312(a)(7) .........

BE LES dl. Ee

Interstate Commerce Act, as amended

Section 203(a)(14) and (15), 49 U.S.C.

§$303(a)( 14) and (15), recodified in P.L. 95-

473 (Oct. 13, 1978) as 49 U.S.C. § 10102( 11)

8 ESS SEER ete a aoe ae

Rules and Regulations of the Federal Commu-

nicauons Commission

oR od tS) Are

Section 76.99, 47 C.F BR. FG.S9D .....cccccccececscesocecessses.

Eg ot 2 Ey S| Sn ener

Section 76.63, 47 C.F.R. 76.63 .....................cccc000.

Section 76.252, 47 C.F.R. 76.252 ...........cccccceeeeeeeee

Section 76.254, 47 C.F.R. 76.254...

Section 76.256, 47 C.F.R. 76.256 ..............cccccceeeeee

OTHER:

ES ___: SEEN TI

MBrmtematiaas, Witty 1, 8976... -....scccconcecssnonceccosecescecesesss

I sn sradeintennioeniieesieenonh

I, TI Fe, Fr nncescseccccetcscneressctinseventznsncens

I BIE. GING cei seteccevecntobsossscsvecndaccnsescne

I SII, Th, III cite accnensccisnsstnentecenndinassess

SU I, I, I i cceenihaibatis

ND, SI BI TI echesissinsaninsinhcbutseetnincenedtbinniie

“Cable Operators and Programmers Overshadow

Marketing Types at C-TAM Meeting,” TV Com- .

munications (TVC), Oct. 1, 1978.00.00... cece eee

I I OC ls

CATJ (Official Journal of the Community Antenna

Television Association ), September 1978 ................

“CATV to Cover Congress Fully,” The New York

Times, May 2, 1978

eee eee eee eee eee ee ee eee ee eee eee ee eee

3,11

passim

Bs)

meme

H.R. 13015, 95th Cong., 2nd Sess. ( introduced

Py RE PR De SY LE GA CSO

HUTCHINSON ON CARRIERS § 47a (2d ed.

SI Bi v-Aueeiniinsiasiorntosieesblijaeiplediaensciedealiiasedaniiainil'iantthiinsacinebeien

Johnson, Leland L. and Botein, Michael, Cable Tele-

vision: the Process of Franchising (Rand Corpo-

ration ), March 1973, No. R-11 35-NSF

Note, 73 HARV. L. REV. 1595 (1960)

Note, 117 U. PA. L. REV. 144 (1968) ..00000 oo .

Pay TV Newsletter, Sep. 6, 1976............0...00..0.se0esesesee0s

“RCA Corp. to Launch Third U.S. Satellite in

December 1979 at a Cost of $40 Million,” Wall

Street Journal, Dec. $, 1978 ............cc.cccceccccosese...--.s.

Robinson, “The FCC and the First Amendment,” 52

& & « / |) , Sarees

Television Digest’s 1977 CATV and Station Coverage

Se aciiteciininstalcasissseeinibimesiiecribantnthiamabttenanibininlinsisdeaibeciipenes

Television Digest’s 1/978 CATV and Station Coverage

Atlas ........... ielseteuidlapscinAdailidsedpipehiteasiiadatsoalidineupsaiieeisaiiies

“What's All This on TV?,” New York Times Maga-

Fe es ee eiliniednenictedineetrnciatinnsignldninsitarnatennsiias

“Warner Cable Now Offering Star Channel Feed to

Others,” Pay TV Newsletter, Dec. 4, 1978 ......0.0.......

“Warner Cable Slates Children’s Channel with Qual-

ity Fare,” Wall Street Journal, Dec. 5, 1978 ............

eee eee ee eee ee

IN THE

Supreme Court of the United States

OcTOBER Term, 1978

Nos. 77-1575, 77-1648 and 77-1662

FEDERAL COMMUNICATIONS COMMISSION, ET AL.,

Petitioners

Vv.

MIDWEST VIDEO CORPORATION, ET AL.

ON WRIT OF CERTIORARI TO THE UNITED STATES

COURT OF APPEALS FOR THE EIGHTH CIRCUIT

BRIEF FOR RESPONDENT

MIDWEST VIDEO CORPORATION

COUNTERSTATEMENT

A. Events Leading to This Proceeding

The mandatory origination rule which was before this

Court in 1972 in United States v. Midwest Video Corp., 406 U.S.

649 (1972) (hereinafter “Midwest I’’) had been stayed by the

Federal Communications Commission (hereinafter “FCC’’)

while that case was pending before this Court.' After Midwest /,

which upheld the mandatory origination rule, the stay con-

tinued in effect, and in early 1974, the FCC launched a

proceeding reevaluating that rule.2 In December 1974, the FCC

repealed the mandatory origination rule? for the following

reasons:

Quality, effective, local programming demands creati-

vity and interest. These factors cannot be mandated by

law or contract. The net effect of attempting to require

origination has been expenditure of large amounts of

money for programming that was, in many instances,

neither wanted by subscribers nor beneficial to the

system's total operation. In those cases in which the

operator showed an interest or the cable community

showed a desire for local programming, an outlet for

local expression began to develop regardless of specific

legal requirements. During the suspension of the

mandatory rule, cable operators have used business

judgment and discretion in their origination decisions.

For example, some operators have felt compelled to

originate programming to attract and retain subscribers.

These decisions have been made in light of local

circumstances. This, we think, is as it should be. Report

and Order in Docket No. 19988, 49 FCC 2d 1090, 1105-

06 (1974).

' Suspension of Community Antenna Television Mandatory Orig:-

nation Rule Pending Further Judicial Review, 36 Fed. Reg. 10876

(1971).

2 Notice of Proposed Rule Making In Docket No. 19988, 46 FCC

2d 139 (1974).

3 The FCC adopted an alternative rule (the equipment avail-

ability rule) in that proceeding. requiring cable systems with 3.500 or

more subscribers, regardless of the size of the markets in which they

operated. to purchase equipment for the production of local program-

ming. to make this equipment available to the public. and to make

cable channel ume available for the presentation of programs thus

produced. Midwest Video Corporation petitioned the United States

Court of Appeals for the Eighth Circuit for review of the FCC's order

adopting that rule, but the adoption of superseding rules in this

proceeding largely mooted the issues in that case. and it was

voluntarily dismissed. Midwest Video Corp. v. FCC, No. 75-1671 (8th

Cir., dismissed Apr. 12, 1976)

In the meantime, while Midwest / was pending before this

Court, the FCC in early 1972 issued the Cable Television Report

and Order, 36 FCC 2d 143, recon. generully denied, 36 FCC 2d

326 (1972), in which it adopted exteuisive rules governing cable

television carriage of broadcast signals, providing for public

access to and use of nonbroadcast channels, establishing cable

television technical standards, and allocating regulatory author-

ity between federal and state or local governments. Under these

rules, cable systems operating in the 100 largest television

markets (the “top 100 markets”) were permitted to carry

greater numbers of distant television signals than systems in

smaller markets. The FCC recognized that carriage of addi-

tional distant signals would increase the attractiveness of the

service package offered by the cable system, and as a quid pro

quo for the benefits of increased signal carriage the FCC

imposed channel capacity and access obligations on top 100

market cable systems. Under the rules adopted in 1972, top 100

market cable systems were required to have two-way trans-

mission capability, to provide equipment for production of

public access programming, and to provide at least 20 channels

for cable television operations. Three of these channels would

be reserved for use as access channels, to be made available at

no charge® to public, educational, and governmental users

Cable systems were also required to adopt operating rules

providing for access channel use on a first come, nondiscrimina-

tory basis, with no control by the cable operator over program

‘In the top 100 markets, cable systems were authorized to carry

a minimum of two distant non-network signals. In the smaller

markets, cable systems were authorized to carry only one distant non-

network signal, and then only if there was not a local non-network

station. Compare Section 76.59 with Section 76.61 and 76.63 of the

Rules as published in Cable Television Report and Order, supra, 36

FCC 2d at 230-233.

5 While no charge was to be made fo. use of these channels,

reasonabie charges could be made for the «si of production, except

that no productioa charge could be made for live presentations of less

than five minutes’ duration on the public access chanacl. The no-

charge provision was to be Permanent in the case of the public access

channel and for a five-year minimum period following construction of

the cable system for the educational and governmental channels.

content. All cable system channels not used for the carnage of

broadcast signals or for public, educational or governmental

access were to be available for leased access use, again on a first

come, nondiscriminatory basis. No such requirements were

imposed on systems located outside of the top 100 markets.®

Midwest Video Corporation ( Sereinafter “Midwest” ) operates

no cable systems in the top 100 markets, so the access and

channel! capacity obligations adopted in the 1972 Cable Tele-

vision Report and Order were not applicable to it.

in 1975, shortly after repealing the mandatory orgination

rule, the FCC initiated the proceeding here under review to

consider possible revision of the channel capacity. access and

and other requirements of its cable television rules.’ The

proceeding culminated in the adoption in May 1976 of the

Report and Order in Docket No. 20508 (hereinafter “the /976

Order” )® and the rules which are the subject of the present

proceedings.

B. The 1976 Order

In the /976 Order adopting the rules here under review, the

FCC modified the access rules adopted in 1972 and extended

6 Top 100 market cable systems which had been in operation

prior to March 31, 1972, were given until March 31, 1977 to come into

compliance with the access and channel capacity rules.

? At approximately the same time, the FCC initiated a proceed-

ing to suspend the March 31, 1977 compliance date specified in the

Cable Television Report and Order for top 100 market cable systems to

come into compliance with the channel capacity and certain other

requirements of the rules adopted therein. The compliance date was

suspended in the FCC's Report and Order in Docket No. 20363, 54

FCC 2d 207 (1975), petition for review pending sub nom. National

Black Media Coalition v. FCC, No. 75-1792 (D.C. Cir.).

859 FCC 2d 294 (1976). The /976 Order is also set forth in

Appendix B of the Petitioner's Appendix at 93-181. ( The Petitioner's

Appendix will subsequently be referred to as “App.”). Petitions for

Reconsideration of that action were denied in December 1976.

Memorandum Opinion and Order in Docket No. 20508, 62 FCC 2d 399

(1976) (hereinafter “Reconsideration”), Appendix C of App. at 182-

206.

their applicability to all cable systems having 3,500 or more

subscribers. Although the FCC found that “in the vast majority

of communities presently providing multiple channels for access

use, these channels are at best sporadically programmed”

(App. 138) and even though in its Reconsideration the FCC

recognized that “even larger systems typically have difficulty

finding access channel users” ( App. 191), the FCC nevertheless

adopted rules which require all cable systems with 3,500 or

more subscribers, wherever located, to provide channel! tme,

production equipment and studio facilities at little or no cost,

lease channels for commercial use, and rebuild their facilities to

have channel capacity sufficient to provide channels for these

purposes. Notwithstanding the FCC's willingness to leave

program origination decisions formerly required under the

mandatory origination rule to marketplace forces and local

circumstances, the FCC refused to follow a similar course of

action with respect to access requirements:

Were we at this stage of cable’s evolution to leave the

provision of channel capacity and access services entire-

ly to the marketplace, such action could have the

practical effect of providing a barrier to the growth of

new services which we expect of cable. /976 Order

(App. 156).

The rules adopted in the /976 Order contain the following

requirements applicable to ali cable systems having 3,500 or

more subscribers:

(a) When constructing new cable systems, a min-

imum channel capacity of twenty channels® and the techni-

cal capability for two-way, non-voice communication must

be installed. '°

9 As set forth in note | 1, p. 6, infra, there is a difference between

channel capacity and activated channel capacity, and typically even

cable systems with a twenty channel capacity cannot deliver more

than twelve channels to subscribers unless they also install converters.

and other systems in operation by March 31, 1977 have until June 21,

1986 to comply with this requirement. Section 76.252 ( App. 168-69).

(b) To the extent of their activated channel capabi-

lity,"' cable systems must make four separate access chan-

nels available, with public, educational, local government

and leased access users each assigned a separate channel. '2

If there is not sufficient demand for each channel full-time

for its designated use, the four types of access can be

combined on one or more channels,"? but if demand on

any access channel exceeds specified usage criteria, the

cable system must, to the extent of its activated channel

capability, within six months make yet another access

channel available.** A limited grandfathering provision

permits cable systems which were in operation on June 21,

1976, the effective date of the rules, to continue operating

without a dedicated access channel if at that time the

‘1 A cable television system’s activated channel capability is the

number of usable channels which it actually provides to the sub-

scriber’s home, or which it could provide by making comparatively

inexpensive ($800 to $1,200) modifications to its facilities. /976

Order (App. 141-142). Typically, cable systems are limited to an

activated capacity of twelve channels unless converters are installed at

the television set of each subscriber. (In some cases electrical

interference rendering some channels unusable reduces activated

channel capacity even further.) Through the use of converters,

programming transmitted on cable channels which television sets are

not equipped to receive can be converted to channels which can be

received by home sets. In the Notice of Proposed Rule Making

instituting this proceeding, 53 FCC 2d 782, 785 (1975), the FCC

estimated the cost of converters at $25 to $40 per subscriber, exclusive

of labor; the FCC recognized in the /976 Order that the cost of

installing converters in a 3,500 subscriber system, at $40 per con-

verter, would be at least $140,000 (App. 136-37). In view of these

costs, the FCC provided that cable operators need not install con-

verters to meet their obligations under the new rules, except where

systems commencing operation after June 21, 1976 or any systems

adding a new non-local signal do not have at least one specially

designated channel available on a full-time basis for access use.

Sections 76.254(c), (d) amd (e) (App. 171); /976 Order ( App.

139-41 ).

12 Section 76.254(a) (App. 169-70).

'3 Section 76.254(b) (App. 202).

4 Section 76.254(d) (App. 171)

;

system had :msufficient activated channel capability to

dedicate one full channel for access programming, but new

systems commencing operation after that date and existing

systems seeking to add a broadcast signal after that date

must have at least one fully dedicated access channel even

if they must install converters in order to do so.'5

equipment for the local production and presentation of

programs and permit use of the studio and equipment for

the presentation of public access programs.”

(d) The rules prohibit the cable operator from asses-

sing any charge for the use of one public access channel’

and from assessing any charge for the use of educational

and governmental access until five years after the cable

system first offers channel time for those purposes.'® The

rates which may be charged for leased access channels

must be “appropriate”. '9

(e) With respect to the equipment, personnel and

production costs for public access programming, the

charges “shall be reasonable and consistent with the goal

of affording users a low-cost means of television access

No charge shall be made for live public access programs

not exceeding five minutes in length.”20 Even when charges

for equipment, personnel, or production may be imposed.

the cable system may not charge for the use of its playback

equipment or its personnel required to operate such equip-

ment in order to present tapes or film provided by public

access channel users when no use of the cable system’s

production equipment is involved and the tape or film can

be played without further technical alteration to the cable

§ Section 76.254(c) (App. 171) and /976 Order ( App. 140-41 ).

% Section 76.256( a) (App. 172).

7? Section 76.256(¢)(2) (App. 173)

8 Section 76.256(c)(1) (App. 173)

9 Section 76.256(d)(3) (App. 174-75).

20 Section 76.256(¢)(3) (App. 173)

system's equipment.2* The rules also require that cable

systems not limit the use of access channels to normal

business hours.22 The combined effect of these require-

ments is that cable operators may not impose charges

designed to amortize the cost of tape or film playback

equipment needed to present public access programming

and must have personnel available or on call, at theit own

expense, for an unspecified but substantial number of

hours beyond the normal! work day, te operate the play-

back equipment.

(f) Each cable system must promulgate rules provid-

ing for first-come, nondiscriminatory access on public and

leased channels.23 Cable systems may not exercise any

control over programming content on any of the access

channels except that operators must adopt rules prohibit-

ing the transmission of lottery information and, for all but

leased access channels, commercial matter.24

20 Section 76.256(c)(3) (App. 173).

2) Reconsideration ( App. 199-200).

22 Reconsideration ( App. 198-199).

23 Section 76.256(d)(1) and (3) (App. 173-175).

24 Sections 76.256(b) and (d) (App. 172-75). The rules also

require cable systems to include in their operating rules a prohibition

against the transmission of obscene and indecent matter on their

access channels. This aspect of the access rules has been stayed by the

U.S. Court of Appeals for the District of Columbia Circuit in an Order

filed on August 26, 1977 in American Civil Liberties Union v. FCC,

No. 76-1695 (D.C. Cir.). The Eighth Circuit also concluded that this

requirement imposed impermissible censorship obligations on cable

systems (App. 75-77). The FCC did not seek review of that

conclusion and has instituted a review of the provision of the rules

dealing with obscene and indecent matter on access channels. While

this aspect of the access rules is therefore no longer at issue in this

proceeding (G. Br. 15, n. 15). the result is that the combined effect of

the stay of the rule requiring cable systems to censor obscene and

indecent programming and the rule forbidding cable systems to

exercise program content control leaves cable systems without any

basis for declining to present obscene or indecent programming on

access channels, thus risking loss of subscribers and alienation of

franchising authorities. Moreover, the transmission of such program-

ming could subject the cable operator to criminal liability under state

and local ordinances — a consideration which led the Eighth Circuit to

conclude that the access rules violate the due process clause of the

Fifth Amendment ( App. at 79-82 }

(g) Despite the burdensome nature of the access

requirements, which in 1972 the FCC recognized as the

quid pro quo for permitting top 100 market cable systems

to carry two distant non-network signals at the time it first

imposed access obligations on cable systems,25 the signal

carriage rules were not amended to permit cable operators

such as Midwest, who first became subject to the access

rules as a result of the /976 Order, to carry any additional

non-network signals.

The access rules first adopted in the Cable Television

Report and Order, supra, and modified and extended to cable

operators outside the top 100 markets by the /976 Order,

impose obligations vastly different in both scope and kind from

those before this Court in Midwest I. The mandatory origina-

tion rule did not require dedication of any channels solely for

origination and left to the cable operator’s discretion when and

where on his channels he would provide program originations

and the content of those originations. It imposed no channel

capacity or building requirements and no limitations on how

the cable operator might recoup the costs he incurred for the

use of his channels (e.g., through advertising or charges to

programmers). The access rules, on the other hand. remove

from the cable operator control over who may use the cable

system’s channels and how, require the cable Operator to forego

the opportunity to earn any revenue from the service provided

on most access channels, require the cable operator to have

equipment or personnel available or on call, in many instances

without charge, at the whim of access users, and require most

cable systems to provide a less attractive total service package

to subscribers than they would otherwise be able to provide

because of the unavailability of one or more channels which are

reserved or used for access.

25 Cable Television and (Qrder, supra, 36 FCC 2d at 190.

‘ ‘

‘

C. Cable Systems Select From a Multitude of Program

Sources

The Government, in its Brief,26 has described the operation

of the access rules as follows:

[A] cable system must allow four groups (the public,

educational authorities, local governments and paying

lessors ) to use available channels of the system that the

cable operator is not using for broadcast retransmission

or pay programming services. The rules do not require

the system to displace those services in favor of provi-

ding access. (G. Br. I1) (citation and footnote

omitted ).

This description implies that the number of broadcast and pay

programming services available to cable systems are not usually

sufficient to require cable systems to make a choice between

available broadcast signals and pay services, that there are no

other types of programming services from which cable systems

can select to fill their channels, and that the access requirements

therefore do not seriously impair the choice of programming

that cable systems can offer. But this is simply not the case. The

FCC’s signal carriage rules adopted in 1972, shortly before this

Court’s decision in Midwest I, accorded cabie systems some

choice in selecting the number of broadcast signals they could

carry, and amendments to those rules since 1972 have substan-

tially increased the number of available signals and program-

ming choices. Of even more importance, the development of

satellite communications has produced a revolution in the

technological means utilized for delivering both broadcast and

non-broadcast programming to cable systems, and numerous

26 The Brief for the United States and the Federal Commu-

nications Commission will be refeired to herein as the Government

Brief and cited as “G. Br.” The Brief for the American Civil Liberties

Union (hereinafter “ACLU” ) will be cited as “ACLU Br.” The Brief

for the National Black Media Coalition et al. (hereinafter “NBMC”)

will be cited as “ NBMC Br.” The Brief Amicus Curiae for the Motion

Picture Association of America (hereinafter “MPAA"’) will be cited

as “MPAA Br.”

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programmers have commenced utilizing this new distribution

technology. These developments have resulted in the avail-

ability of an abundance of programming to cable systems.

1. FCC Signal Carriage Rules

In Cable Television Television Report and Order, supra, the

FCC in 1972 overhauled its rules regulating the carriage of

television signals.2”? These rules and subsequent developments

are briefly summarized below.

(a) Under the rules adopted in 1972, cable systems in

and near the top 100 markets were authorized to carry at

least two distant non-network signals, but those signals had

to come from one of the two closest top 100 markets. In

smaller markets, one distant non-network signal could be

carried but only if there was no local non-network station.

Cable systems located outside of all television markets

were not subject to any restriction on the number of distant

signals they might carry. In addition, all cable systems

could carry the signal of any noncommercial educational

Station operated by an agency of the state in which the

system is located, any other noncommercial educational

signals in the absence of objection by local noncommercial

educational interests, and any television station broad-

casting predominantly in a non-English language.2@ The

1972 rules also contain provisions permitting top 100

market cable systems to substitute programs from distant

stations when protecting the contractual exclusivity rights

of local stations in non-network programs or when the

distant station is carrying a program primarily of local

interest to the community in which the station operates.29

27 The new rules carried forward the requirements in the rules

before this Court in U.S. v. Southwestern Cable Co., 392 U.S. 157

(1968), for carriage of local television stations.

28See Sections 76.57-76.63 as originally promulgated, Cable

Television Report and Order, supra, 36 FCC 2d at 230-233.

29 See Section 76.61(b)(2)(ii). This rule as originally adopted is

set forth in Cable Television Report and Order, supra, 36 FCC 2d at

232, and the rule has not been changed since its adoption but has

been recodified as Section 76.61(b)(2), 47 CFR 76.61(b)(2).

(b) In 1974, the FCC amended its rules to permit

most cable systems to carry unlimited amounts of late-

night programming. As amended on reconsideration, this

rule permits carriage of late-night programming from any

television station beginning at !:00 A.M. (12:00 midnight

in the Central and Mountain Time Zones) until sign-on of

the first local station unless there is a local station that

broadcasts continuously from midnight to 6:00 A.M.%

described in (a) above which limited the choice of distant

non-network signals cable systems could carry to those

from the closest markets.5' This change was significant

because, with the advent of satellite distribution of tele-

vision signals, it greatly increased the ability of cable

systems to choose non-network signals, consistent with the

signal carriage limitations, whose programming would

provide the most diversity to their subscribers.%2

(d) Also in 1976, the FCC amended and expanded its

rule authorizing carriage of non-English language stations

to permit carriage of any speciality station (/.e., a station

that generally carries foreign-language, religious and/or

automated programming for one-third of the hours in an

average broadcast week and one-third of weekly prime

time hours) and the signal of any station when it ts

broadcasting a foreign language, religious or automated

program.33 At the time the FCC ruled on the petitions for

reconsideration in that proceeding, it released a list of 26

stations throughout the country which met its definition of

30 Report and Order in Docket No. 20028, 48 FCC 2d 699 (1974),

as modified upon reconsideration, 54 FCC 2d 1182 (1975).

31 Report and Order in Docket No. 20487, 57 FCC2d 625 (1976),

recon. denied, 59 FCC2d 934 (1976).

32 Infra, pp. 17-18.

33 First Report and Order in Docket No. 20553, 58 FCC2d 442

(1976), recon. denied, 60 FCC2d 661 (1976).

34 Appendix B to its Memorandum Opinion and Order denying

reconsideration, 60 FCC2d at 670.

specialty station, and since that time the FCC has added an

additional eleven stations to the list.35 The FCC has also

authorized the carriage of English-language programs di-

rected to specific ethnic groups as specialty programming

upon the individual request of cable operators.%¢

Thus, the FCC’s rules,3? despite the still extensive restric-

tions on the signals cable systems can provide to their sub-

scribers, permit the carriage of a large number of broadcast

signals and accord cable operators a considerable measure of

discretion in signal and program selection, especially in the

selection of the most desirable non-network signals whose

carriage is consistent with the limits on the number of such

signals which can be carried, in the availability of late-night

programming, in the unlimited choice of educational and

specialty stations and specialty programming, and in program

substitutions when distant non-network stations are carrying

programs primarily of local interest or programs to which local

stations hold exclusive rights.

2. Domestic Satellite Service to the Cable Industry

Although the first domestic satellite service in the United

States commenced in December 1973, domestic satellites were

not used to provide service to czdle systems until August |,

1975, when the FCC granted the first authorization to a cable

35 The signal of at least one specialty station is distributed by

satellite and available to cable systems throughout the country. See

the discussion of KTBN, infra, p. 16.

36 See, e.g., Gerity Broadcasting Company, 63 FCC 2d 230

(1977).

37 Other less significant changes were also made in the FCC's

signal carriage rules, such as permitting cable systems to carry any

network program not broadcast by stations normally carried,

Reconsideration of Cable Television Report and Order, supra, 36

FCC2d at 333-334; permitting cable systems to carry the second feed

of early evening network news programs in some circumstances,

Report and Order in Docket No. 19859, 57 FCC2d 68 (1976); and

permitting cable systems to carry the signals of any UHF station

within whose Grade B contour the system operates, Report and Order

in Docket No. 20496, 65 FCC2d 218 (1977), recon. denied, 43 Pike &

Fischer Radio Regulation 2d 1553 (1978).

system for its own receive-only earth station.3¢ Between that

date and December 15, 1976, when the FCC, in its Declaratory

Ruling and Order in American Broadcasting Companies, Inc.,

62 FCC 2d 901 (1977), authorized cable systems to utilize less

expensive small diameter antennas on their earth stations, over

100 earth stations were installed by cable operators.3® By April

15, 1977, 136 earth stations had been licensed or authorized to

cable systems,40 and by April-May 1978, this number had

increased to 422.4! In its Brief, MPAA estimates the current

number of earth station authorizations at 600, with this number

increasing at a rate of about 25 per week (MPAA Br. 5, n. 4),

and the FCC, in a news release issued December 4, 1978,42

stated that over 1,300 earth stations serving cable systems,

broadcast stations and others who distribute video program-

ming are currently licensed.

At the time the first cable television earth station was

authorized, the only programming regularly available to cable

systems was the pay programming* of Home Box Office, Inc.“ In

38 Florida Cablevision, 54 FCC2d 881 (1975).

39 American Broadcasting Companies, Inc., supra, 62 FCC2d

at 911.

40 Television Digest’s 1/977 CATV and Station Coverage Atlas,

pp. 196a-200a.

41 Television Digest’s /978 Cable Station Coverage Atlas,

pp. 20Sa-217a.

42 Action in Docket Case, Report No. 14610, Dec. 4, 1978.

43“Pay programming,” as that term is used in this Brief, is

programming for which a customer pays a specific charge either for

individual programs or for a separate channel of programming not

available to nonsubscribers. Pay programming usually consists

primarily of recent motion pictures, though some pay program

distributors also provide sports events and other programming origi-

nated by or purchased by the distributor. Pay programming is offered

to members of the public not only by cable systems but also by

broadcast stations which have received subscription television author-

izations from the FCC and by the lessees of common carrier facilities

licensed by the FCC in the Multipoint Distribution Service, as well as

by tape or film in some apartment houses and hotels. When cable

systems offer pay programming, they make a charge for the service in

addition to the normal subscription fee charged for delivery of

television signals and other originated programming.

44 This is the programming Florida Cablevision was authorized

to receive. Florida Cablevision, supra note 38, 54 FCC2d at 882.

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the short span of three and one-half years since then, as the

number of earth stations has increased, so too has the amount

of satellite distributed programming available to cable systems.

Since the FCC restricts cable systems only in the carriage of

broadcast signals, most of the satellite distributed programming

can be added by cable systems without obtaining any author-

izauon from the FCC other than an earth station license. The

types of programming currently available or expected to be

available by satellite in the near future are as follows:

(a) Three companies currently offer pay program-

ming by satellite.46 Home Box Office, Inc. and Showtime

Entertainment Inc. offer primarily movies and occasional

special programming. Fanfare Television provides both

movies and sports events, with the sports consisting prima-

rily of home games of professional sports teams in Hous-

ton, Texas.4¢ Two of these companies, Home Box Office,

Inc. and Showtime Entertainment Inc. have plans to offer a

second pay program package providing a smaller number

of programs each month at a lower price.47

(b) Three companies, Christian Broadcasting Net-

work, PTL (People That Love), and Trinity Broadcasting

Network, each offer a channel of religious programming by

satellite. The Christian Broadcasting Network and PTL

45 Several other parties offer pay programming to cable systems

through tapes, cassettes, or terrestrial microwave facilities. One of

these parties, Warner Cable Corp., has announced that it will convert

its Cassette pay cable operation to satellite and will offer that service to

other companies. “Warner Cable Now Offering Star Channel Feed to

Others,” Pay TV Newsletter, Dec. 4, 1978, p, 5. The increase in the

number of parties offering pay programming by satellite may be in

part attributable to the decision of the U.S. Court of Appeals for the

District of Columbia Circuit in Home Box Office, Inc. v. FCC, 567

F.2d 9 (D.C. Cir. 1977), cert. denied, 434 U.S. 829 (1977), which

invalidated restrictive FCC rules limiting the pay programming that

could be provided by cable systems.

46 Broadcasting, May |, 1978, p. 63, and May 22, 1978, p. 75.

4? Broadcasting, Aug. 7, 1978, p. 58 (Showtime); and Pay TV

Newsletter, Sep. 6, 1978, p. | (HBO).

programming consist of originated programming rather

than transmission of a sroadcast signal, while the Trinity

Broadcasting Network programming consists of the satel-

lite distributed signal of Station KTBN, a specialty station

licensed to Fontana, California (a community in the Los

Angeles television market).

program package consisting primarily of sports events

from Madison Square Garden and offers cable systems the

option of providing this programming to their subscribers

as pay programming or as part of the basic service pack-

age.49 This year U.A. Columbia Cablevision, Inc. also

offered, as an additional option to its service, movies for

children.5°

(d) In December 1978, Warner Cable Corp.

announced plans to commence distribution in February

1979 of a full channel of children’s programs thirteen to

fourteen hours per day, seven days per week, to cable

systems via satellite.5'

(e) The licensee of a number of Spanish-language

television stations distributes Spanish-language program-

ming to its stations and affiliates by satellite, and it also

makes its Spanish-language programming available to

cable systems which are not within the service areas of

television stations receiving the programming.*2

(f) Satellite programming in the news and public

affairs areas has also commenced. The initial effort

48 Cablevision, Nov. 6, 1978, p. 45; CATJ ( Official Journal of the

Community Antenna Television Association), September 1978,

pp. 24-32.

49 Broadcasting, Apr. 11, 1977, p. 62.

50 Broadcasting, Aug. 21, 1978, p. 48.

5'**Warner Cable Slates Children’s Channel with Quality Fare,”

Wall Street Journal, Dec. 5, 1978, p. 20.

52“Cable Operators and Programmers Overshadow Marketing

Types at C-TAM Meeting,” TV Communications (TVC), Oct. 1,

1978, pp. 58-60.

involves the distribution of sull news pictures which change

approximately every fifteen seconds and with a voice

providing the news information related to the pictures.

Both the pictures and the voice-over are supplied by

United Press International and they are updated through-

out the day with the most recent nev’s developments. A

more expansive effort in this area is expected to commence

in early 1979 when the Cable Satelite Public Affairs

Network is scheduled to begin distributing live coverage of

proceedings in the House of Representatives and other

public affairs programming.® And the party who owns the

licensee of WTCG, currently the broadc«si signal with the

widest satellite distribution, has under consideration a

twenty-four hour, live, satellite-fed news service for the

cable industry.55

(g) On December 15, 1976, the FCC authorized a

common carrier lessee of domestic satellite facilities to

distribute by satellite the television signal of Station

WTCG, a non-network station in Atlanta, Georgia, to

cable systems throughout the country.%* On October 25,

1978, the FCC authorized four common carriers to dis-

tribute by satellite the signal of WGN-TV, a non-network

station in Chicago,5”? and on November 22, 1978, the FCC

authorized a common carrier to distribute by satellite the

53 Broadcasting, Jul. 10, 1978, p. 36

54 Broadcasting, May 8, 1978, p. 49; “CATV to Cover Congress

Fully,” The New York Times, May 2, 1978.

55 Broadcasting, Nov. 20, 1978, pp. 70-71

56 Southern Satellite Systems, Inc.. 62 FCC 2d 153 (1976)

Carriage of this signal by cable systems is widespread. MPAA, in a

proceeding in which it sought unsuccessfully to restrict the distribution

of television signals by satellite, estimated that by June 1977, only six

months after satellite distribution of WTCG was authorized, requests

to carry WTCG from 672 cable systems serving |.2 million subscribers

had either been granted or were pending. Motior Picture Associaiton

of America, Inc., 68 FCC 2d 57 (1978).

5? United Video, Incorporated, FCC 78-766 (released Nov. 9.

1978).

signal of KTVU, a non-network station in Oakiand.%* A

number of other applications by common carriers to

deliver by satellite the signals of non-network television

stations are pending before the FCC, and in order to

facilitate the processing of those applications, the FCC has

delegated authority to its staff to act on these appli-

cauons.

Thus, in the short period of time since the commencement

of satellite transmission to cable systems, a wide variety of

program offerings, many of them consisting of non-broadcast

materials whose carriage is not limited by the FCC’s distant

signal rules, has become available, and more can be expected®

as even more cable systems install earth stauons.®'

58 Letter dated November 22, 1978 from the Chief, Facilities and

Services Division of the FCC’s Common Carrier Bureau to Satellite

Communications Systems, Inc.

59 United Video, Inc., supra note 57, at 924, n. 19. Other

television signals for which applications are pending for delivery by

satellite include the signals of KTTV, Los Angeles, California ( Appli-

cation of Satellite Communications Systems, Inc., File No. W-P-C-

2131 and Application of ASN, Inc., File No. W-P-C-2332), WPIX,

New York, New York (Application of Southern Satellite Systems,

Inc., File No. W-P-C-2168), WSBK-TV, Boston, Massachusetts

( Application of Eastern Microwave, Inc., File No. W-P-C-2291), and

WOR-TV, New York, New York ( Application of United Video, Inc.,

File No. W-P-C-2265, Application of Eastern Microwave, Inc., File

No. W-P-C-2291, and Application of ASN, Inc., File No. W-P-C-

2332).

6 RCA American Communications, Inc. (RCA), whose domes-

tc satellite provides most of the satellite originated programming to

the cable television industry, has announced that it plans to launch a

third satellite next year. RCA currently provides eighteen channels of

programming to cable systems and expects to be able to provide

twenty-four channels after launch of its new satellite. “RCA Corp. to

Launch Third U.S. Satellite in December '979 at a Cost of $40

Million,” Wall Street Journal, Dec. 5, 1978, p. 8.

61 ACLU questions whether Midwest has standing to challenge

some aspects of the FCC’s access rules since, according to ACLU, the

public record indicates that Midwest does not currently operate at its

current 12-channel capacity (ACLU Br. 14), and ACLU has sub-

mitted a chart purporting to show the number of channels actually

een ek Co

D. The Eighth Circuit Decision

In a decision entered February 21, 1978, the United States

Court of Appeals for the Eighth Circuit (“the Eighth Circuit”)

filed its decision setting aside the FCC’s /976 Order and the

rules adopted therein. The Eighth Circuit held that the /976

Order had exceeded the FCC’S jurisdiction as established by

this Court in United States v. Southwestern Cable Co., 392 US.

157 (1968) (hereinafter “Southwestern”) and Midwest J. Rec-

ognizing that the Act does not specifically provide for the

regulation of cable television and that the types of regulation

which this Court has affirmed are only those reasonably

ancillary to the FCC’s authority to regulate broadcasting, ( App.

20-31), the Eighth Circuit concluded that the access rules were

invalid because they were not consistent with either the statu-

tory objectives of broadcast regulation (App. 32-50) or the

Statutory means of regulation applicable to broadcasters ( App.

50-64 ).

The Eighth Circuit also discussed First and Fifth Amend-

ment constitutional considerations present in the /976 Report

which reinforced its conclusion on the jurisdictional issue.62 In

transmitted on Midwest's cable systems (ACLU Br. 12, n. 19). The

first system listed by ACLU serves Bloomfield and Dexter, Missouri,

and has fewer than 3,500 subscribers. It is therefore not subject to the

FCC rules here at issue. As to the other systems, ACLU has failed to

note that each of them has earth station authorizations, one of which

has been in operation for several years, and the remaining of which

have recently been authorized and have either just commenced

operation or will commence operation in the near future. Thus, as a

result of the grant of these earth station authorizations, Midwest is in

the process of making selections from the satellite-distributed

programming specified above which will in most instances exhaust its

remaining activated channel capacity and which will be limited by the

requirement in the access rules that one channel be set aside for access

purposes. There can therefore be no question about Midwest's

standing to challenge the FCC’s requirement that cable systems

dedicate one channel to access. Moreover, while ACLU was also a

party to these proceedings in the Eighth Circuit, it has not explained

why it has waited until this late date to challenge Midwest's standing.

62 The concurring judge did not join in the Eighth Circuit's

discussion of constitutional considerations.

concluding that the access rules would be impermissible under

the First Amendment, the Eighth Circuit relied on two factors:

first, that there was nothing in this case to indicate a con-

stitutional difference between cable systems and newspapers in

the context of the government's power to compel access and

that an access requirement for newspapers had _ been

invalidated in this Court’s decision in Miami Herald Publishing

Co. v. Tornillo, 418 U.S. 241 (1974) (App. 72-74); and second,

that the access rules strip cable operators on their access

channels of “all rights of material selection, editorial judgment,

and discretion enjoyed by other private communications media,

and even by the ‘semi-public’ broadcast media” (App. 73).

With respect to the Fifth Amendment, the Eighth Circuit

suggested that the access rules constitute an uncompenstated

taking of property ( App. 77-79), exposed cable operators to the

risk of civil and criminal liability (App. 79-82), and were an

unwarranted intrusion into the conduct of a cable enterprise

(App. 62).

Finally, the Eighth Circuit indicated that there was 4

serious question whether the access rules could be sustained on

the basis of the administrative record then before it (App. 82-

91).

SUMMARY OF ARGUMENT

This Court’s decisions in United States v. Southwestern

Cable Co., 392 U.S. 157 (1968) and United States v. Midwest

Video Corporation, 406 U.S. 649 (1972) define the outer limits

of the FCC’s jurisdiction over cable television. These cases

establish the principle that the parameters of the FCC’s dele-

gated authority are derived from the broadcasting sections of

the Act and the regulatory goals prescribed by those sections.

The access rules exceed these outer limits for two reasons. First,

the access rules substantially impair the judgment and editorial

control of cable systems in selecting among the multtude of

available programming, consisting of broadcast signals, locally

originated programming, and satellite-delivered programming,

in filling their channels. This impairment is contrary to a

fundamental goa! of broadcast regulation—the preservation of

the values of private journalism and editorial control. Colum-

bia Broadcasting System, Inc. v. Democratic National Com-

mittee, 412 U.S. 94 (1973). Second, the access rules compel

cable systems to operate as common carriers on their access.

channels. National Association of Regulatory Utility Commis- |

sioners v. FCC, 525 F.2d 630, 641 (D.C. Cir. 1976), cert.

denied, 425 U.S. 992 (1976); National Association of Regu-

latory Utility Commissioners v. FCC, 533 F.2d 601, 609 (D.C.

Cir. 1976). But the effectuation of broadcast related goals by

common carrer means is specifically prohibited by Section

3(h) of the Act, 47 U.S.C. §3(h). Since the limits on the FCC’s

authority over cable systems are derived from the broadcasting

sections of the Act, this prohibition is applicable not only to the

FCC’s regulation of broadcasters pursuant to its direct author-

ity, but also to the FCC’s ancillary authority to regulate cable

television. In any event, the access rules impose obligations on

cabie systems so totally different from those heretofore recog-

nized that the decision about whether the FCC has jurisdiction

to impose them should be made by Congress, see, e.g., Tele-

PrompTer Corp. v. Columbia Broadcasting System, Inc., 415

U.S. 394 (1974), which considered a “rewrite” of the Commu-

nications Act during the last Session of Congress, H.R. 13015,

95 Cong., 2nd Sess., and will in all likelihood consider the

matter further during the current Session.

Cable systems have important First Amendment rights in

the selection and origination of programming from the abun-

dance of program material available, and contrary to this

Court’s decision in Buckley v. Valeo, 424 U.S. 1, 48-49 (1976),

the access rules restrict these rights in order to enhance the

voices of access users. The principal grounds relied upon to

restrict the First Amendment rights of broadcasters—spectrum

scarcity and pervasiveness (and the related consideration of

accessibility to children )—are not applicable to cable systems,

and this Court has rejected economic scarcity and other consid-

erations as a basis for imposing access obligations on news-

papers. Miami Herald Publishing Co. v. Tornillo, 418 U.S. 241

(1974). For First Amendment purposes, therefore. cable

systems function like newspapers in offering a variety of services

in order to increase subscriptions and should be treated the

same under the First Amendment. Moreover, even if the more

limited First Amendment rights of broadcasters are deemed

applicable to cable systems, this Court’s decision in Columbia

Broadcasting System, Inc. v. Democratic National Committee,

supra, establishes the importance of editorial control and

discretion in the regulation of broadcasting, and Miami Herald

Publishing Co. v. Tornillo, supra, establishes the primacy of

editorial control and discretion over whatever values may exist

in promoting the self-expression of access users. Thus, whether

cable systems are analogized to broadcasters or newspapers or

something in between, the access rules violate their First

Amendment rights.

The access rules also violate the due process and taking

clauses of the Fifth Amendment. Under the due process clause,

the government may not compel cable operators to change the

fundamental nature of their business and become common

carriers, even as a condition to their right to retransmit broad-

cast signals. Frost & Frost Trucking Co. v. Railroad Commis-

sion, 271 U.S. 583 (1926). With respect to the taking clause,

the effect of the access rules is to take channels from cable

systems for the benefit of access users and to compel cable

operators to subsidize a noncompensatory common carrier

service, for the presumed benefit of the public, with revenues

derived from their private business of retransmittuing broadcast

signals and other programming. This is a taking under

standards recently clarified by this Court in Penn Central

Transportation Company v. City of New York, 57 L.Ed.2d 631

(1978). Nor can the compensation requirement be satisfied by

the presumed ability of cable operators to subsidize access

facilities and services with revenues derived from their other

business. Brooks-Scanlon Company v. Railroad Commission of

Louisiana, 251 U.S. 396 (1920).

Finally, the access rules are unsupported by record evi-

dence of a public demand for access services. This is not a case

like FCC v. National Citizens Committee for Broadcasting, 56

L.Ed.2d 697 (1978), where the FCC should be allowed

discretion to forecast the direction in which the public interest

lies under circumstances where the benetits the FCC is seeking

to achieve are not easily quanufied. The evidence before the

FCC was clearly that there is no significant demand from access

users or cable subscribers for access services, even where

facilities existed (App. 89-90, n. 87), and the FCC indicated

that it was relying on a mere “hope” that demand would

develop if more facilities were built (App. 156). A more

convincing record of need should be required where the rules

impair constitutional rights. United States v. O’Brien, 391 US.

367 (1968).

ARGUMENT

I. THE ACCESS RULES EXCEED THE FCC’S ANCIL-

LARY JURISDICTION OVER CABLE TELEVISION

A. Midwest I Established the Outer .Limits of FCC

Jurisdiction Over Cable Television

When the Communications Act was enacted in 1934, cable

television technology did not exist and was not foreseen. In

Southwestern, this Court held that the FCC had jurisdiction to

regulate cable television to the extent necessary to prevent it

from harming broadcasters and undermining “the effective

performance of the FCC’s various responsibilities for the

regulation of television broadcasting.” 392 U.S. at 178. In

Midwest I, this Court made a quantum jump and affirmed

mandatory origination rules which were designed not to protect

the scheme of broadcast regulation from the impact of cable

television operations but, instead, to make cable operators

perform functions analogous to those imposed on broadcasters

and originate local programming in order to affirmatively

——

promote broadcast regulatory goals. These origination rules

were upheld by a mere plurality of this Court. The Chief

Justice concurred only in the result, stating:

Candor requires acknowledgment, for me at least, that

the Commission’s position strains the outer limits of

even the open-ended and pervasive jurisdiction that has

evolved by decisions of the Commission and the courts.

The almost explosive development of CATV suggests

the need of a comprehensive re-examination of the

statutory scheme as it relates to this new development,

so that the basic policies are considered by Congress

and not left entirely to the Commission and the courts.

406 US. at 676.

It is clear from this language by the Chief Justice, whose vote

was necessary to provide the plurality in Midwest J, that the

mandatory origination rules represent the outer limits beyond

which the FCC may not go in regulating cable television

without further legislation. Both the Eighth Circuit below

(App. 26) and the D.C. Circuit in Home Box Office, Inc. v.

FCC, 567 F.2d 9, 28 (1977), cert. denied, 54 L. Ed. 2d 484

(1977), have interpreted Midwest J as establishing the outer

limits of Commission jurisdiction over cable television.

As will be shown below, the access rules go far beyond

these limits. They strip cable operators of editorial control and

discretion over their channels for reasons unrelated to the

effectuation of the broadcast licensing sections of the Act, and

they impose common carrier obligations on cable systems.

Because these results are contrary to a fundamental goal of

broadcast regulation and contrary to a specific limitation on the

methods which the FCC may use to achieve broadcast objec-

tives, the access rules exceed the FCC’s ancillary jurisdiction

over cable television recognized by this Court in Southwestern

and Midwest 1.

— ee Oe

B. The Access Rules Substantially Impair the Cable

System’s Editorial Control In the Selection and Pre-

sentation of Programming It Delivers to Its Sub-

scribers

The Government alleges (G. Br. 11) that the access rules

do not require cable systems to displace broadcast retransmis-

sion and pay programming services in favor of providing

access, though in a footnote (G. Br. 38-39, n. 33) it does

recognize two examples (the only two it can envision) of

potential conflicts between cable operator’s needs and the

demands of access users which might require resolution in favor

of the access user. The Government suggests that these

conflicts may nevertheless be resolved in favor of the access

user. While the Government’s examples involve cable systems

having a twelve channel capacity, it should be noted that the

problems raised in those examples are typical of the kinds of

problems that even cable systems with twenty or more channels

face under the access rules. Many cable systems are already

required by the FCC’s mandatory signal carriage rules to carry

more than twelve local broadcast signals,6 and even where

there are fewer local broadcast signals available, the program-

ming choices described in the Counterstatement®™ are sufficient

now to exhaust the capacity of many cable systems having

twenty or more channels. As cable systems and the numbers of

persons subscribing to them continue to grow and as new

means of program distribution develop, even more program-

ming is likely to be produced. And while these developments

are likely to result in cable systems increasing their channel

capacity to provide greater programming diversity to sub-

scribers, channel capacity will never be sufficient to present all

of the available programming. But whether twelve or twenty or

63 Problems raised by the abundance of local broadcast signals

having mandatory carriage rights on cable systems in some sections of

the country are under consideration by the FCC in its Notice of

Proposed Rule Making in Docket No. 21472, 42 Fed. Reg. 60180

(1977).

84 Supra, pp. 10-18.

more channels are involved, the Government in its examples

totally fails to recognize the effect of the access rules on the

programming judgment of cable systems, and the Govern-

ment’s discussion of the resolution of even the potential con-

flicts it recognizes between cable operator’s needs and the

demands of access users is contrary to plain statements the FCC

made in adopting the /976 Order and fails to recognize

significant problems with its own suggested resolution of those

issues.

, One of the Government’s examples of a potential conflict

between the cable operator’s needs and the demands of access

users involves the cable operator who carries broadcast signals

on eleven of his twelve activated channels and who desires to

add a twelfth broadcast signal (G. Br. 38-39, n. 33). The

Government says that the /976 Order “suggests” that the last

activated channel would have to be reserved for access and

then points out that Section 76.254(c) does not “expressly”

provide that the channel reserved for access must be one of the

twelve activated channels that can be received without con-

verters. But the FCC has stated explicitly:

[W]e do not envision certificating new systems or the

addition of new signals whose carriage is not mandatory

to existing systems, if the activated channel capability

available for the provision of access services is

insufficient to provide at least one full channel for access

programming. /976 Order (App. 141) (emphasis

added ).

Thus, it is clear that a system with twelve activated channels

carrying eleven broadcast signals could not add one of the

broadcast signals now or soon to be available by satellite

without installing converters to increase its activated channel

capacity.

The Government’s other example involves the situation

where the cable operator uses eleven channels for broadcast

retransmission and pay programming and desires to use the last

a ee ———_

wae

ee ee ae

te.

TS ee ee ee ee ee eee

activated channel for his own origination services (G. Br. 38. n.

33). According to the Government, the rules “indicate” that

the cable operator would have to install converters to activate a

thirteenth channel rather than relegate access users to that

course. But rather than accepting this result as what the rules

require, the Government points to a footnote in the /976 Order

Stating as follows:

It is our intention that every reasonable effort be made

io accommodate the various competing channel uses. It

is not our intention that established cablecast services

provided by system operators be automatically dis-

placed. While we generally believe that automated

services such as time and weather should give way to

access uses, if other irreconcilable conflicts between

channel uses develop, we are prepared to consider each

such situation individually on its merits. We recognize

that many of the services provided on these channels,

such as community information, consumer price lists,

etc., clearly provide a substantial benefit to subscribers.

1976 Order ( App. 143, n. 19).

There are several problems with the Government’s approach to

this example. For instance, the footnote the Government relies

on only refers to “established” cable services, and the Govern-

ment’s example does not involve an established service. More

over, if the FCC does seek to resolve a conflict between the

programming choice of cable operators and the demands of

access users, it will be in the position of a national program

director, trying to decide whether a particular origination

Proposal by a cable operator, such as a channel of religious

programming, or a channel of sports events from Madison

Square Garden, or a channel presenting live debates from the

House of Representatives, or a channel of children’s program-

ming, should take priority over existing or incipient access

efforts. In rejecting the concept of similar ad hoc program

judgments under the prime time access rule applicable to

television stations, the Second Circuit stated that “ad hoc

decisions are not desirable because they suggest a system of

censorship. .. .”” NAITPD v. FCC, 516 F.2d 526, 540 (2nd Cir.

1975). In any event, the FCC has signaled how it would rule

on the Government's example:

| W]e believe access programming should continue to

have priority status over operator-originated program-

ming when they compete for the final available channel

on a cable system. Reconsideration (App. 195).

This subordination of operator-originated programming to

access programming is remarkable because origination

programming, including everything from coverage of city coun-

ci! meetings, to consumer information, to local high school

sports events, to entertainment programming, ts the very kind

of programming which the FCC required cable operators to

present under the mandatory origination rule upheld by this

Court in Midwest 1. ,

Moreover, if these are the only two potential conflicts the

Government has been able to discern between the cable

operator’s needs and the demands of access, the Government

has simply not tried to apply the access rules in the context of

programming abundance described in the Counterstatement.®

There are at least four categories of programming which the

FCC has clearly indicated that cable operators may not add if

such programming would occupy the last available channel and

leave no channel for access uses. The first two, additional

distant broadcast signals and non-automated operator-

originated programming, have already been discussed. The

third is pay programming. Although pay programming being

presented on June 21, 1976, the effective date of the access

rules, will not be displaced, pay programming may not be

added after that date if no channel would be left for access uses:

We have sought to encourage the presentation of [ pay]

programming for it provides diversity of viewing

65 Supra. pp. 10-18.

66 Supra, pp. 26-28.

ee ee nee ee eee nn ae ere

choices to the public. We do not, however, believe that

the public interest will be served if this programming is

provided at the expense of local access efforts which are

displaced. Should a system operator for example have

only one complete channel available to provide access

services we shall consider it as clear evidence of bad

faith in complying with his access obligations if such

operator decides to use that channel to provide pay

programming. /976 Order ( App. 145).

Fourth, the FCC indicated that “automated services such as

time and weather channels should give way to access uses”

(App. 143).

Other conflicts between the needs of the cable operator

and the demands of the access user abound. Consider for

example, a twelve channel cable system, which as required by

the rules has reserved a channel for access, and carrier Spanish

language programming on one channel, religious programming

on one channel, and broadcast signals on nine channels. The

cable system then learns that access programming on the

reserved channel exceeds the usage criteria in Section

76.254(d). Must the cable system take off the Spanish language

or religious programming to make room for an additional

access channel? Or suppose a cable system is confronted with a

demand to lease its vacant channel to a party desiring to

present pay programming consisting of movies which largely

duplicate a pay programming service offered by the cable

operator, and the cable operator desires to present a new and

non-duplicative service such as the Madison Square Garden

sports events or a channel of news and public affairs program-

ming.6? Or suppose that a system with a twenty channel

capacity has, in accordance with the usage criteria in Section

87 The FCC has already indicated that it would have trouble

deciding in favor of the cable operator in this situation:

We shall scrutinize the actions of operators who, while

providing their own programming, assert that their activated

capacity is insufficient to permit the leasing of a channei to

potential competitors. /976 Order (App. 144-45).

76.254(d),. provided four or more access channels, the balance

of its channel capacity is utilized for broadcast signals and

originated program carriage, and then a new program service

(such as the children’s program channel described in the

Counterstatement®) becomes available. Suppose further that

marketing and audience surveys show that very few subscribers

watch one or more of the access channels but there is a strong

subscriber interest in the newly available programming. May

the cable operator reclaim one of the access channels for the

newly available programming?®® The rules would seem to

resolve most of these questions in favor of the access users, but

presumably the Government would argue that those questions

also could be brought to the FCC pursuant to the language

quoted above in footnote 19 of the /9/6 Order (App. 143, n.

19). But to do so would enmesh the FCC even further in

making value judgments between different types of program-

ming. Moreover, if the FCC did decide that a cable operator

could reduce the number of access channels in order to present

other available and desirable programming, the FCC would be

creating a further serious difficulty for itself. With access

programming then presented on a smaller number of channels,

there would inevitably be disputes about how the cable oper-

ator was administering the first come, non-discriminatory

aspects of the rules, and the FCC would become enmeshed in

resolving these disputes.7° This would even further cast the FCC

in the role of a national program director, choosing between the

scheduling requests of competing access users.

68 Supra, p. 16.

69 The FCC appears to have already answered this question:

We do not consider as acting in good faith an operator with a

system of limited activated channel capacity who attempts to

displace existing access uses with his own origination efforts.

1976 Order ( App. 144).

70 Similar FCC involvement in the administrauon of access

channels will develop on systems having only one access channel and

no additional activated channel capacity if usage of the single access

channels grows to such an extent that all of the parties desiring to use

the channel cannot be accommodated.

C. The Access Rules Violate a Fundamental Goal of

Broadcast Regulation—The Preservation of the

Values of Private Journalism and Editorial Control

No delegation of power to a regulatory agency is absolute.

There must be standards against which it can be determined

whether the agency has exceeded the powers conferred by

Congress. Panama Refining Co. v. Ryan, 293 U.S. 388 (1935):

A.L.A. Schechter Poultry Corp. v. United States, 295 US. 495

(1935). Where Congress gives an agency broad power to adopt

such rules and regulations as the public interest requires, the

delegation is at least limited by the objectives of the statute.

American Trucking Associations, Inc. v. United States, 344 US.

298, 313 (1953); NAACP v. FPC, 425 U.S. 662, 669 (1976).

This Court upheld the mandatory origination rule in

Midwest I because it would

... “further the achievement of long-established regu-

latory goals in the field of television broadcasting by

increasing the number of outlets for community self-

expression and augmenting the public’s choice of pro-

grams and types of services... .” 406 U.S. at 667-668

(quoting from the FCC's opinion adopting the rule ).

The Government argues (G. Br. 26-27) that Midwest J controls

the jurisdictional issue here because the access rules are de-

signed to serve the very same objectives. However, the Govern-

ment fails to acknowledge an equally important objective of

broadcast regulation—the preservation of values of private

journalism and editorial control. Because the access rules

compel cable operators to function as common carriers and to

abandon editorial control over message content on one or more

dedicated access channels, the access rules are antithetical to

the statutory goal of preserving these values. And because this

goal of preserving values of private journalism and editorial

control is at least as important a limitation on the FCC as is the

goal of increasing local outlets, the access rules exceed the

FCC’s delegated power. The origination rule in Midwest J was

found to serve the goals of increasing outlets for local

expression and diversity of program choices, and it was not

inconsistent with the equally important goal of preserving

values of private journalism and editorial control. But, it is not

enough that the access rules might promote some broadcast

objectives if they also contravene other equally important

statutory objectives which limit the FCC’s power. Therefore.

Midwest I cannot be dispositive of the jurisdictional issue here.

That preservation of values of private journalism and

editorial contro! is a fundamental feature and objective of the

broadcast provisions of the Act, to which the FCC’s jurisdiction

over cable television is ancillary, is clear from Section 3(h) of

the Act’! and its legislative history, as explained by this Court in

Columbia Broadcasting System, Inc. v. Democratic National

Committee, 412 U.S. 94 (1973) (hereinafter “Columbia Broad-

casting System”). Section 3(h) provides that

. . a person engaged in radio broadcasting | including

television by subsequent construction} shall not, insofar

as such person is so engaged, be deemed a common

carrier.

In Columbia Broadcasting System, this Court held that neither

the Communications Act nor the First Amendment required

broadcasters to accept paid editorial advertisements. The Court

discussed the origin of the Communications Act and the specific

history of Section 3(h), including rejected proposals to impose

access obligations on broadcasters. The Court concluded that

Congress had intended to preserve values of private journalism

and editorial control:

Congress pointedly refrained from divesting broad-

casters of their control over the selection of voices;

§3(h) of the Act stands as a firm congressional state-

ment that broadcast licensees are not to be treated as

common carriers, obliged to accept whatever is ten-

dered by members of the public. 412 U.S. at 116.

747 USC. § 1S3(h).

a At A A PIED 5 ms

po Court quoted Professor Alexander Meiklejohn to the effect

that

... "| what is essential is not that everyone shall speak,

but that everything worth saying shall be said... .” 412

U.S. at ¥22.

And the Court rejected the view that

-.. every potential speaker is “the best judge” of what

the listening public ought to hear or indeed the best

judge of the merits of his or her views. All journalistic

tradition and experience is to the contrary. For better or

worse, editing is what editors are for; and editing is

selection and choice of material. 412 U.S. at 124.

Thus, as this Court recognized, values of private journalism and

editorial control are at the core of the scheme of broadcast

regulation established by Congress. The preservation of these

values is an explicit and paramount objective of broadcast

regulation. The access rules exceed the FCC’s ancillary jurisdic-

tion because they are antithetical to this objective.

It is no answer \o argue, as have the petitioners herein, that

cable operators have sufficient channel capacity to accom-

modate access uses without foreclosing other programming

options. As shown in the Counterstatement,’2 there are numer-

Ous sources of entertainment and informational programming,

including news services, from which cable operators can choose

if they are not required by the FCC to reserve channels for

access uses. If the FCC’s purpose in adopting the access rules

was to give everyone a chance to be on television, then, of

course, the editorial function is irrelevant. But that would be a

goal having no basis in the Act. On the other hand, if the FCC’s

goal is to assure that the important things are said, then

selection of voices by the cable operator as editor is essential.

The access rules are contrary to that goal and thus exceed the

FCC’s jurisdiction over cable systems.

72 Supra, pp. 10-18.

D. Cable Systems Do Not Function as Common Carriers

But Are Compelled to Do So By the Access Rules

Common carrier status has been defined in the commu-

nications context according to two tests.7? First, a person must

hold himself out to carry for all customers indifferently. Nation-

al Association of Regulatory Utility Commissioners v. FCC, 525

F.2d 630, 641 (D.C. Cir. 1976), cert. denied, 425 U.S. 992

(1976). This “holding out” test for common carriage has been

adopted by the FCC in First Report and Order in Docket No.

15586, | FCC2d 897, 900 (1965). The second test is that the

customer must decide what is to be transmitted. National

Association of Regulatory Utility Commissioners v. FCC, 533

F.2d 601, 609 (D.C. Cir. 1976). Thus, the FCC has recognized

that a common carrier functions as a “pipeline... without

affecting or influencing the content of the information commu-

nicated.”” Multipoint Distribution Service, 45 FCC2d 616, 618

(1974).

The access rules compel cable operators to provide a

common carrier service. Sections 76.254(a) (App. 169-170)

and 76.256(d) (App. 173-175) require cable operators to hold

their facilities out for public use, and Section 76.256(b) ( App.

172-73) prohibits cable systems from exercising program con-

tent control on their access channels. Moreover, just as

common carrier rates are regulated, the FCC has regulated the

rates cable operators may charge for access services. As

provided in Sections 76.256(c) and (d) of its rules (App. 173-

175), the FCC has provided that one public access channel

“shall always be made available without charge”; that the

educational and local government access channels must be

made available free of charge for five years; and that “an

appropriate rate schedule” must be specified for the leased

access channel.

73For a similar definition in the transportation context, see

Washington ex rel. Stimson Lumber Co. v. Kuykendall, 275 U.S. 207,

211 ¢1927); and HUTCHINSON ON CARRIERS §47a (2d ed.

1891)

he ot

The Petitioners begrudgingly accept the fact that the access

rules impose common carrier obligations on cable systems” but

seek to make a virtue of necessity. For example, the Govern-

ment argues (G. Br. 27) that the access rules “fall more

clearly” within the jurisdictional limits established in Midwest /

because cable television’s traditional retransmission function is

in the nature of common carriage and the carriage of access

programming is closer in nature than local origination to this

traditional function. Similarly, NBMC argues that the FCC’s

rules requiring cable systems to carry local television signals

already require cable systems to perform a common carrier

function ( NBMC Br. 35).

Remarkably, at virtually the same time the FCC was

participating with the Solicitor General in the preparation of

the Government’s argument that the traditional function of

cable systems is in the nature of common carriage, the FCC

released a Report and Order in Docket No. 20829, 43 Fed. Reg.

53742 (1978). purporting to justify its regulation of the equal

employment opportunity practices of cable operators on the

rationale that cable operators were nof merely common carriers

with no control over message content. In NAACP v. FPC,

supra, this Court held that the FPC had no authority to regulate

the employment practices of the common carriers otherwise

subject to its jurisdiction because employment practices were

unrelated to the statutory purposes and functions of the FPC.

The Court distinguished FCC regulation of the employment

practices of broadcasters because of the relationship between

the employment profile of a station and the manner in which

broadcasters ascertain community needs, which affects the

exercise of their programming discretion. In order to demon-

strate that cable operators are comparable to broadcasters fo:

the purpose of employment regulation so that it could support

its jurisdiction to adopt equal employment opportunity rules

applicable to cable systems, the FCC discussed the program-

74 The Government states that the access rules “can be viewed as

a limited form of common carriage-type obligation” (G. Br. 39).

ming discretion of cable operators in detail. It summarized this

discussion at 916 of its Report and Order in Docket No. 20829 as

follows:

In sum, both in their signal carriage decisions and

in connection with their origination function, cable

television systems are afforded considerable control

over the content of the programming they provide.

And, while this control may vary in kind and degree

from the discretion exercised by broadcasters, it is

nonetheless extensive and fully adequaie to justify our

regulatory efforts to ensure that it is exerted in a

nondiscriminatory fashion. ( Footnote omitted. )75

75 The detailed basis for this conclusion by the FCC in Docket

No. 20829 is similar to Midwest’s Counterstatement in this Brief. For

the Court’s benefit, 7914-15 of the FCC’s Report and Order in Docket

No. 20829 are quoted below:

We are not persuaded that the program discretion

exercised by cable television operators is so narrowly circum-

scribed. The Commission’s rules, for example, afford every

system located outside of ali television markets unlimited

discretion in choosing its permissive signal complement. This

same freedom also applies to all small systems (less than

1,000 subscribers ), regardless of market location. Further, in

the first 100 markets it is virtually impossible for cable

systems to have their entire carriage selection dictated by the

rules, and all systems are unrestricted in their carriage of

specialty stations. A similarly unfettered choice is available to

operators in their carriage of educational stations, as well as

in their selection of alternative program sources under the

late-night programming provisions of the rules. The sugges-

tion, moreover, that the limited technical availability of

signals seriously restricts the scope of these cai rage optons Is

difficult to credit. The increasing use of common carrier,

CARS and earth station signal importation methods, as well

as the regulatory need to limit distant signal carriage in the

first place, certainly argue to the contrary. We conclude that

cable operators exercise substantial program discretion in the

context of their carriage determinations and that such dis-

cretion clearly affords the opportunity for discriminatory

choices which our EEO rules are properly intended to avoid.

The latter point is exemplified with particular force in the

case of specialty stations, whose wide availability is especially

ee rr er.

It is clear from this discussion that even the . ~ has come to

realize that because of their “extensive” program discretion,

cable systems do not function like common carriers.

Even the requirement in the FCC’s rules that cable systems

carry the signals of local broadcast stations does not impose a

common carrier function. This Court affirmed the FCC's

authority to regulate cable television because such regulation

was necessary in order to perform its statutory responsibilities

for the “orderly development of an appropriate system of local

conducive to achieving our goal of program diversity and is

positively encouraged by Commission policy. It seems most

unlikely, however, that cable systems engaged in employment

discrimination based on ethnic background or religion, for

example, would undertake carriage of stations that direct

their programming to individuals characterized by the very

ethnic or religious traits which the operator has discriminated

against in employment.

Origination programming, of course, provides an even

more direct and pervasive form of program discretion than

signal selection. And, while it is true that cable systems are

no longer required to produce such material, this fact is not

jurisdictionally dispositive. The relevant point is that every

system may, ard contrary to CZR’s contention a substantial

number of systems do, originate programming. As of

September |, 1977, for example, data compiled by Television

Digest, Inc., indicated that out of 3,911 operating systems,

1,097, or 28.04%, offered non-automated origination

programming. It is apparent, moreover, that even those

systems whose originations consist exclusively of “pre-

packaged” premium programming (i.e., “pay-cable”) are

capable of exerting a form of content control over the

material supplied to them by such sources as Home Box

Office, Inc. Beyond the fact that systems can initially select

pay programming from several alternative sources, they may,

and in our experience do, decline to carry particular programs

provided by these sources at various times and for various

reasons, in much the same manner that television broadcast

stations may fail to “clear” programming supplied to them by

a national television network. In such circumstances, of

course, systems may also select replacement programs and

thus engage directly in a programming function. ( Footnotes

omitted. )

television broadcasting.” Southwestern, 392 U.S. at 177. In so

concluding, this Court relied in particular on Section 307(b) of

the Act,76 mandating the FCC to distribute broadcast licenses so

as to provide a “fair, efficient and, equitable radio service” to

each of the States; Section 303(f),7? authorizing the FCC to

adopt regulations preventing “interference between stations

and to carry out the provisions” of the Act; and Section

303(h),78 authorizing the FCC to “establish areas or zones to

be served by any station.” In affirming the rules requiring

carriage of local stations, the Eighth Circuit, relying on this

Court’s decision in Southwestern, stated that “[t]}he crucial

consideration is that they [cable systems] do use radio signals

and that they have a unique impact upon, and relaiionship

with, the television broadcast service.” Black Hills Video Corp.

v. FCC, 399 F.2d 65, 69 (1968). The FCC requirement that

cable systems carry local broadcast signals thus effectuates the

broadcast licensing sections of the Act and is completely

different in both scope and kind from regulations requiring

cable systems to hold out their facilities for indiscriminate use

by members of the public.’9

E. The Use of Common Carrier Means to Achieve

Broadcast Objectives Is Specifically Prohibited By

the Act

As shown above, the access rules impose common carrier

obligations on cable systems. These means are utilized to

promote the broadcast objectives of increasing local outlets and

7647 US.C. §307(b).

7747 U.S.C. §303(f).

7847 U.S.C. §303(h).

79 The FCC has long held that the “unction of retransmittng

broadcast signals by cable systems is not common carnage. Frontier

Broadcasting Co. v. Collier, 24 FCC 251 (1958). This view has been

approved by the courts. National Association of Regulatory Utility

Commissioners v. FCC, supra, 533 F.2d at 608, n. 26. In South-

western, 392 U.S. at 169, n. 29, this Court stated:

The Commission and the respondents are agreed, we think

properly, that these CATV systems are not common carriers

within the meaning of the Act.

augmenting program diversity. The Government defends this

choice of means as follows:

[T]he reasonableness of the means chosen to further

those statutory policies clearly depends on the particular

characteristics of the communications medium to which

they are applied. (G. Br. 30)

To the same effect, NBMC states:

Thus, cable access is well within traditional Commission

actions, but in a mode and manner unique to cable

television. ( NBMC Br. 21)

Both of these parties approach this case as if the objectives of

broadcast regulation were the only limits on the FCC’s jurisdic-

tion over cable television.

If the Communications Act did not contain any specific

guidance from Congress about the means which the FCC may

use to attain broadcast objectives, then it might follow that the

objectives themselves were the only standards against which to

determine whether the FCC had exceeded its delegated power.

FPC v. Texaco, Inc., 417 U.S. 380. 387 (1974): FPC vy. Hope

Natural Gas Co., 320 U.S. 591, 602 (1944). However, Section

3(h) of the Act does represent a clear and specific congressio-

nal prohibition against using common carrier means to attain

broadcast objectives. Therefore, the FCC’s delegated power is

limited not only by the objectives of the broadcast provisions of

the Act but also by congressional specificity as to regulatory

methods.

It was not necessary to reach this issue in Midwest /

because the origination rules did not impose common carrier

obligations on cable operators. This explains the Court’s focus

there on broadcast objectives as the principal consideration

limiting the FCC’s ancillary jurisdiction over cable television

and the Court’s failure to discuss broadcast regulatory methods

as another limiting factor. Both the Eighth Circuit below ( App.

50-53) and the D.C. Circuit in Home Box Office, Inc. v. FCC.

supra, 567 F.2d at 31, have indicated their views that the

Commission may not regulate cable television with methods not

available for broadcast regulation. Section 3(h) reflects a

clear congressional intent to limit the power delegated to the

FCC. Other regulatory methods not suitable but not prohibited

for broadcasting might be deemed valid with respect to cable

television if Section 3(h) or other specific provisions of the Act

were not violated, because, in the absence of congressional

specificity as to means, the FCC has considerably more flexibil-

ity in fashioning regulatory means appropriate for achieving

broadcast-related objectives. But here the FCC has chosen a

regulatory method which is specifically prohibited in Section

3(h).

It would be anomalous if, in determining the appropriate

goals of cable television regulation, the FCC was referred to the

broadcast provisions of the Act, while the means specified in the

Act as inappropriate for broadcast regulation could then be

ignored. And while it should be clear, in light of the language

quoted above from the Columbia Broadcasting System case,

that an access requirement of the kind here involved could not

be imposed on broadcasters, the Government seeks to find an

opening for access obligations on broadcasters from language

in that case and from other sources. Thus, the Government

quotes (G. Br. 29, n. 24) the following language from this

Court’s opinion in the Columbia Broadcasting System case:

Conceivably at some future date Congress or the Com-

mission —or the broadcasters— may devise some kind of

80 There is dictum in American Civil Liberties Union v. FCC, 523

F.2d 1344, 1351 (9th Cir. 1975), which would appear to support the

Government’s views on jurisdiction in this proceeding. Midwest does

not take issue with the specific holding in that case, i.e., that the FCC

was not required to impose full Title I] common carrier regulation on

cable systems. However, the dictum indicating that the access rules as

then in effect were within the FCC’s statutory authority to adopt

should not be consiJered persuasive in view of the fact that no party

before the court was asserting that the access rules already imposed

common carrier requirements on cable systems or was challenging the

FCC’s authority to do so.

2 ere a ei ae Ee bist +

Si ADS ees mtn

limited might of access that is both practicable and

desirable. 412 U.S. at 131.

The Government also refers (id.) to certain instances where it

alleges that a kind of limited right of access has been imposed

on broadcasters, including the personal attack rule and the

requirement in Section 312(a)(7) of the Act that broadcasters

provide time for candidates for federal office. But in the two

instances cited, the broadcaster is only required to make

reasonable t ~e available. With respect to the personal attack

rule, the broadcaster can avoid the obligation entirely by simply

not broadcasting personal attacks, and under both require-

ments, the broadcaster retains substantial discretion with

respect to both scheduling and the amount of time offered.

Moreover, as to both the personal attack rule, Polish American

Congress v. FCC, 520 F.2d 1248 (7th Cir. 1975), and Section

312(a)(7), Federal Political Candidates, 43 Pike & Fischer

Radio Regulation 2d 1029 (1978), the FCC relies upon the

good faith judgment of the licensee as to what constitutes

reasonable time under the particular circumstances involved.

Thus, broadcasters do not function like common carriers with

no editorial control over their facilities when complying with

the personal attack rule and Section 312(4a)(7). These very

limited obligations therefore do not substantially impair the

values underlying Section 3(h) and involve obligations entirely

different in both scope and kind from the common carrier

obligations imposed by the access rules here involved.®'

81 Some of the parties to these proceedings seck to separate the

channel capacity, two-way, and equipment availability aspects of

these rules from the other provisions of the rules relating directly to

the provision and operation of access channels and to analyze each of

those aspects separately. But the Government has recognized that the

channel capacity rules “were adopted in part to provide the capacity

to meet access obligations” (G. Br. 35) and has recognized that the

equipment availability provisions of the rules “are more closely tied to

the access rules [than are the channel capacity requirements], since

they require the availability of equipment for access purposes” (G. Br.

36, n. 32). All of these aspects are interrelated and are discussed

jointly in this Brief. The jurisdictional and constitutional consid-

erations in support of channel capacity or equipment availability

F. The Question of the FCC’s Authority to Adopt

Access Rules Should Be Resolved By Congress

In TelePrompTer Corp. v. Columbia Broadcasting System,

Inc.. 415 U.S. 394 (1974), the Court was faced with a situation

concerning the status of cable television under the Copyright

Law of 1909. The Court stated:

These shifts in current business and commercial

relationships, while of significance with respect to the

organization and growth of the communications

industry, simply cannot be controlled by means of

litigation based on copyright legislation enacted more

than half a century ago, when neither broadcast tele-

vision nor CATV was yet conceived. Detailed regulation

of these relationships, and any ultimate resolution of the

many sensitive and important problems in this field,

must be left to Congress. 415 US. at 414.

And Congress ultimately responded with new copyright legisla-

tion. The situation is similar here. Congress has left this Court

in the position of having to define the FCC’s jurisdiction over

the emerging and developing cable television industry on the

basis of a law, the Communications Act of 1934, which was

enacted at a time when cable television technology did not exist

and was not foreseen.82 Moreover, the FCC's jurisdiction over

cable television was before the last Session of Congress in a

“rewrite” of the Communications Act, which was introduced on

June 7, 1978.83 and it would have excluded cable television

requirements, when not tied to access requirements and when sup-

ported by a record showing the need for such requirements, their

relevance to broadcast regulatory goals, and their consistency with

broadcast regulatory means, would present different questions from

those that are before the Court on this record. Here, all three aspects

of the FCC’s rules are so closely interrelated that they all should be set

aside as exceeding the FCC's jurisdiction.

82 A similar situation was before this Court recently in Tennessee

Valley Authority v. Hill, 57 L.Ed. 2d 117 (1978). the snail darter case,

where the Court again deferred to Congress

83 H.R. 13015, 95th Cong., 2nd Sess.

HO. ee. ete

an ee rm mew ne

from federal regulation altogether. While th

_altog , ere was no final

action on H.R. 13015, it is likely that a rewrite will again be

introduced during the coming session of Congress.

In an effort to show congressional acquiescence to FCC

regulation of cable television, the Government refers (G. Br

33-34, n. 31) to a few statutes in which C ongress has treated

cable operators like broadcasters, including the equal Opportu-

nities and fairness obligations in Section 315 of the Act, the ban

on cigarette advertising, and forfeitures. The Government

States:

These actions confirm Congress’ understanding that the

Commission is to regulate cable television systems, and

certainly do nex reflect any congressional objection to

the principle of imposing access, equipment availability

and channel capacity requirements on such systems

(G. Br. 34, n. 31) )

The Government makes too much of these laws. At most they

indicate that Congress has accepted Midwest J and recognizes

that cable operators may be regulated in the same way as

broadcasters. But the access rules go beyond these limits. As to

such regulations, Congress has been silent. And by that silence

Just as it did by its silence about copyright, Congress has failed

to deal with a situation requiring cong.essional guidance.

G. The ACLU and MPAA Briefs

ACLU argues that Midwest cannot even raise questions

relating to multiple access channel requirements because “the

demand for public access to the Midwest Video System has not

been shown to exceed the capacity of a single otherwise unused

channel” (ACLU Br. 15).8 ACLU’s position is untenable for at

least two reasons. First, ACLU is in effect arguing that the

government can adopt the most absurd rules imaginable so

long as, based upon current conditions, the rules would not

*% Midwest has already responded to ACLU’s related assertion

that Midwest's cable system do not currently operate at their current

twelve channel capacity. Supra, pp. 18-19, n. 61.

immediately be applicable to anyone. But what of the chilling

effect of such requirements on the program diversity and

programming judgments of cable systems? For example, a

cable operator may not purchase and install an earth station to

add a channel of satellite-delivered programming if that chan-

nel will be subject to displacement by access users. Or a cable

system may decide not to invest in converters or new cable to

increase activated channel capacity in order to take advantage

of satellite-delivered programming if many of the new channels

might be preempted for non-compensatory access uses. Second,

the FCC itself recognized that “even larger systems typically

have difficulty finding access channel users,” Reconsidera-

tion( App. at 191), so it is not surprising that Midwest has not

yet been faced with use of multiple access channels. However, if

the FCC can adopt rules based on its intuition that usage of

access channels will increase,85 Midwest should also be able to

assume that the FCC’s intuition will prove correct and be able

to show the effect of multiple access channel requirements on

cable systems.

Brief note should also be taken of the perplexing Brief filed

by Amicus Curiae MPAA. MPAA states that the Eighth

Circuit’s invalidation of the access rules “eliminates com-

petition, restricts programming choices available to cable view-

ers and proffers an open and continuing invitation to anti-

competitive conduct by the operators of cable systems” (MPAA

Br. 3-4). Concern about anti-competitive conduct comes with ill

grace from the trade association of the motion picture industry,

the antitrust violations of whose members have been chronicled

in some detail over literally hundreds of pages of the United

States and Federal Reports.66 MPAA has not alleged even one

85 The question whether the record in this proceeding supported

the FCC’s action is discussed infra, pp. 64-67.

86 See, e.g., Bigelow v. RKO Radio Pictures, 327 U.S. 251 (1946)

(unlawful conspiracy under Sherman and Clayton Acts involving

Twentieth Century-Fox Film Corporation and Paramount Pictures,

Inc., both of whom are parties to the MPAA Brief); United States v.

Paramount Pictures, Inc., 334 U.S. 131 (1948) (unlawful price fixing

conspiracy, conspiracy to restrain trade, block booking, blind selling,

instance of anti-competitive conduct on the part of a cable

company which has resulted in any of its members not being

able to show its products in the marketplace or why, if any

cable company engaged in such conduct in the future, the

antitrust laws would not provide a fully adequate remedy.

Moreover, while allegedly seeking to insure an opportunity

to offer its products in the marketplace, MPAA does not even

attempt to deal with the difficulties raised by its position. It

extols the virtues of program diversity (MPAA Br. 12), but

what happens if each of the six MPAA members joining in its

Brief leases a channel on a multi-channel cable system? Such a

cable system, which may have increased its channel capacity

from twelve to twenty channels to be able to carry sports,

religious, or informational programming, would find virtually

all of its channels used to show movies. What would be the

rights of public, educational or government access users in that

situtauion? Certainly the MPAA members, with their vast

financial resources, could stake claims to these channels before

the other access uses envisioned by the FCC developed. Would

the FCC again have to make judgments about whether a sixth

or fifth or fourth movie channel was more valuable than

another public access channel, or religious programming, or the

signal of a non-network or speciality or educational station?

What of property rights? How, for example, would MCA, one

of the parties to the MPAA Brief, react if a Federal Entertain-

ment Commission, operating under a broad statute like the

unreasonable discrimination, etc., involving Columbia Pictures Corpo-

ration, Universal Corporation (a subsidiary of MCA, Inc. ), Twentieth

Century-Fox Film Corporation and United Artists Corporation, all of

whom through their parent or successor corporations are parties to the

MPAA Brief); United States v. Loew's Incorporated, 371 US. 38

(1962) (block booking of films to television stations involving Screen

Gems, Inc., a subsidiary of Columbia Pictures Industries, Inc., a party

to the MPAA Brief); and Milwaukee Towne Corp. v. Loew's, Inc., 190

F.2d 561 (1951) (conspiracy to monopolize and attempt to monopo-

lize, involving Columbia Pictures Corporation, Paramount Pictures,

Inc., and Twentieth Century-Fox Film Corporation, all of whom are

partes to the MPAA Brief).

Communications Act, ordered movie companies to make their

studios and production facilities available for use by the public,

either on a compensated or uncompensated basis, one-twelfth

or even one-twentieth of the time with a proviso that if the

public wanted more use of those facilities, MCA would have to

build additional facilities? And what about the First Amend-

ment? How would MCA or any of the other companies joining

in the MPAA Brief respond if a Federal Entertainment Com-

mission ordered them to give up editorial discretion or control

over a significant portion of the product they sell to the

public?®? If MPAA members would oppose the imposition of

any of these requirements on their businesses, why are they

supporting the imposition of similar requirements on cable

systems and how would they justify their being treated differ-

ently from cable systems?

These are the types of questions raised by the FCC’s access

rules. MPAA has not even attempted to deal with them but has

instead simply asserted that it, too, wants to be able to use cable

television facilities. But by its failure to even attempt to deal

with the types of problems that would be raised in implement-

ing its desire, MPAA has failed to serve the traditional role of

an amicus curiae and has burdened this Court with nothing

more than a pale paraphrase of the Government’s jurisdictional

argument.

87 In its Brief (p. 8) in Home Box Office, Inc. v. FCC, supra note

45, MPAA stated:

The FCC may not prohibit speech by one medium of

expression (pay-cable) in order to “reserve programming”

for use by another medium (conventional television ).

Then why may the FCC prohibit speech by cable operators in order to

“reserve programming” for MPAA’s members? MPAA does not even

try to answer this question.

il. THE ACCESS RULES ARE UNCONSTITUTIONAL

A. The Access Rules Violate the Free Speech Clause of

the First Amendment

1. The Access Rules Substantially Restrict the

Speech of Cable Operators

As discussed in detail above® and as recognized by the

FCC in the language quoted above from its Report and Order

on regulation of cable television equal employment opportunity

practices,®® cable operators have “extensive” discretion in

selecting program material to distribute to their subscribers.

Contrary to the arguments of Petitioners (G. Br. 45; NBMC Br.

45-46 and 49-50; ACLU Br. 22, 28), cable systems are not mere

selecting program material is an editorial function which lies at

the very heart of the First Amendment. Miami Herald

Publishing Co. v. Tornillo, supra, 418 U.S. at 258 (hereinafter

“Miami Herald”); Columbia Broadcasting System, supra. Nor

can any meaningful line be drawn for First Amendment

88 Supra, pp. 10-18.

89 Supra, pp. 36-37.

9 ACLU cites Pittsburgh Press Coa. v. Pittsburgh Commission on

Human Relations, 413 U.S. 376 (1973), for the proposition that

conduits have no First Amendment rights. In Pittsburgh Press, this

Court upheld a prohibition against publication by newspapers of

employment advertisements in sex-designated columns. However, the

Court’s rationale was not that the newspapers served a conduit

function in publishing such advertisements. Rather, the Court's

decision was based on the commercial speech doctrine, which has

subsequently been severely limited in Virginia Pharmacy Board v.

Consumer Council, 425 U.S. 748 (1976); and Linmark Associates,

Inc. v. Willingboro, 431 U.S. 85 (1977). To the extent Pittsburgh

Press has any continuing vitality, such vitality is limited to two factors

not involved here. First, it involved prohibition of speech character-

ized by this Court as “illegal” because discriminatory. 413 U.S. at

388. Second, as distinguished in the Virginia Pharmacy Board case,

425 U.S. at 771-772, n. 24, it involved proposals to enter into

commercial transactions rather than dissemination of commercial

information.

purposes between entertainment and informational program-

ming. Winters v. New York, 333 U.S. 507, 510 (1948), Joseph

Burstyn, Inc. v. Wilson, 343 U.S. 495 (1952). Whether cable

operators choose to distribute broadcast signals, pay movies,

news and information services or other types of satellite-

delivered programming, the editorial process by which they

make those choices is protected by the First Amendment. Of

- course, cable systems may also produce their own locally

originated programming and, in that way, function as speakers

as well as editors. This function is protected by the First

Amendment as well.

Moreover, as also discussed in detail above,®' the access

rules restrict the speech of cable systems in a significant and not

in a minimal way. The speech of cable operators is restricted

because they are deprived of the right to select the program-

ming to be distributed on the access channels or to use those

channels for operator-originated programming. In Buckley v.

Valeo, 424 U.S. 1, 48-49 (1976), this Court stated:

| T]he concept that government may restrict the speech

of some elements of our society in order to enhance the

relative voice of others is wholly foreign to the First

Amendment... .

Thus, only if there is some other permissible basis for restricting

the speech of cable systems can the access rules be found

consistent with the First Amendment.

2. Cable Television Does Not Share the Character-

istics of Broadcasting Which Have Historically

Justified Limitation of the First Amendment

Rights of Broadcasters

Both the Eighth Circuit in this proceeding (App. 72-74)

and the D.C. Circuit in Home Box Office, Inc. v. FCC, supra,

567 F.2d at 46, have held that cable television systems are

indistinguishable from newspapers for First Amendment pur-

91 Supra, pp. 25-30.

poses, and this Court has already held in Miami Herald case

that public access requirements may not be imposed upon

newspapers. % The Government argues (G. Br. 46, n. 37) that

this Court has recognized a distinction for First Amendment

purposes between the print media and electronic media gener-

ally. The Government’s suggestion is that all electronic media

including both broadcasting and cable television, have limited

First Amendment protection. However, this Court’s references

to the electronic media are all based on the historic treatment of

broadcasting. The Court has not heretofore determined the

proper treatment of cable television for First Amendment

purposes.

There are two principal characteristics which have histori-

cally been asserted as justification for regulating broadcasting

in ways which limit the First Amendment rights of broad-

casters: (1) spectrum scarcity and (2) pervasiveness and the

related characteristic of accessibility to children.%3 But neither of

% The Government argues (G. Br. 40) that the Miami Herald

case Is distinguishable because it involved a right of reply statute

which was content-related whereas the cable television access rules

here at issue are content-neutral. In Miami Herald, this Court did

discuss one content-related factor, i.e., that newspapers might avoid

discussion of controversial issues if such discussion might oblige them

to provide access space for replies. But the Court indicated that even

if this factor were absent, the access requirement could not “clear the

barriers of the First Amendment because of its intrusion into the

function of editors.” 418 U.S. at 258.

93 See, generally, Robinson, “The FCC and the First Amend

ment,” 52 MINN. L. REV. 67, 150-63 (1967). Professor Robinson

mentions two other characteristics, the unique power and influence of

broadcasting and public ownership of the airwaves. But public

ownership is closely related to scarcity, and they have been discussed

together in this Court’s discussion of the First Amendment rights of

broadcasters. See, e.g., Red Lion Broadcasting Co. v. FCC, 395 US.

367 (1969). Moreover, public ownership is not alone a basis for

denying users of a public facility their First Amendment rights.

Southeast Promotions, Ltd. v. Conrad, 420 U.S. 546 (1975). With

respect to the influence and power of broadcasting, it is difficult

analytically to separate this factor from pervasiveness, and in any

event, it could only logically justify regulations designed to restrict

specific types of speech where such restriction is consistent with the

First Amendment and not to justify regulations which limit the

editorial discretion of the speaker.

these characteristics can be relied upon as carte blanche for

limiting First Amendment rights.

Rather each regulatory action must be measured

against the nature of the telecommunications to ensure

that the action in the particular case is justified by that

nature. Citizens Committee to Save WEFM v. FCC, 506

F.2d 246, 275, n. 32 (D.C. Cir. 1974) ( Bazelon con-

curring ).

The Government argues (G. Br. 45-48) that economic

barriers to entry make cable television a natural monopoly and

limit the ability of other persons to engage in cablecasting in a

way which is analogous to the technological scarcity of broad-

cast frequencies. However, broadcast regulation has historical-

ly been based not on economic scarcity, but on technological

scarcity. In Red Lion Broadcasting Co. v. FCC, 395 US. 367,

401, n. 28 (1969) this Court declined to reach the question

whether economic scarcity alone could justify regulation limit-

ing First Amendment rights, but that question was definitively

decided in the Miami Herald case. Advocates of the access

concept in Miami Herald emphasized that economic factors

“have made entry into the marketplace of ideas served by the

print media almost impossible,” 418 U.S. at 251; that these

same economic factors have made the print media a natural

monopoly with “one-newspaper towns” a dominant feature,

418 US. at 249; that in the newspaper industry there is

“effective competition operating in only 4 percent of our large

cities,” id. at n. 13, quoting from a task force report; and that

affirmative government action was necessary to create access to

the print media, 418 U.S. at 251. These arguments were

rejected by the Court and Miami Herald is therefore determina-

tive that economic scarcity® is not a rationale for limiting the

First Amendment rights of cable systems.

94 See, e.g., National Broadcasting Co. v. United States, 319 U.S.

190, 210-214 (1943).

95 The cable television franchise by which local municipalities

grant rights-of-way for cable facilities is not comparable to the

With respect to the pervasiveness of broadcasting and its

accessibility to children, FCC v. Pacifica Foundation, §7 L.Ed

2d 1073 (1978), involving the FCC’s authority to regulate

indecent programming on broadcast stations, is the primary

example of the kind of regulation justified on this basis. See

also, Capital Broadcasting Company v. Mitchell, 333 F Supp

582, 585-586 (D.D.C. 1971), aff'd, 405 U.S. 1000 (1972),

where the cigarette advertising ban applicable to electronic but

not print media was upheld against an invidious discrimination

charge under the Fifth Amendment because of accessibility to

children. Cable television does not have the pervasiveness of

broadcasting, since it serves, only 17.6 percent of the nation’s

television households,% but even if it did, that characteristic is

unrelated to the objectives of the access rules. Pervasiveness

and accessibility to children have no logical relation to and

have never been relied upon to justify regulation which limits

the exercise of editorial discretion rather than the prohibition of

specific and limited types of speech. Indeed, affirmance of the

access rules on the basis of pervasiveness would undercut one of

the principal purposes sought to be achieved by the Court in

broadcast license because it is not based on scarcity or any other

rationale which would justify limitations on First Amendment rights

of cable systems. Most cable television franchises are non-exclusive,

Johnson, Leland L. and Botein, Michael, Cable Television: the Process

of Franchising (Rand Corporation), March 1973, No. R-1135-NSF.

While in most instances there is only one cable system in a commu-

nity, this results from economic rather than legal or technical consid-

erations, and there are instances where more than one cable operator

serves the same community. For example, in Bryan and College

Station, Texas, where Midwest operates a cable system, there is a

second cable system. Even if the scarcity rationale were applicable to

the issuance of cable television franchises, for the reasons set forth

infra, pp. 53-55, it would not save the access rules from First

Amendment challenge. In any event, /oca/ ownership of rights-of-way

cannot justify federal regulations.

% G. Br. 4, n. 3. Even in communities where cable systems are in

operation, there are many households which do not subscribe. The

need to have cable extended to the home and pay a monthly

subscription fee is a further indication that cable television does not

have the pervasiveness of broadcasting.

Pacifica—the protection of children from indecent material.

Absent the editorial discretion removed from cable systems by

the access rules, they have no way of preventing the dis-

semination of indecent or otherwise objectionable program-

ming to children.9

Thus, the principal characteristics of the broadcast media

which have been relied upon to limit the First Amendment

rights of broadcasters are not applicable to cable television. The

conclusion flowing from this fact—that cable systems should be

accorded the same First Amendment rights as newspapers—is

supported by a number of relevant similarities between cable

systems and newspapers. As noted above, though there is only

one newspaper or cable system in most communities, this results

in both cases from economic rather than technological consid-

erations. Though the pages of a newspaper can be increased to

make room for the additional material a mght of access might

produce, this ourt has recognized the economic constraints

involved in increasing the number of newspaper pages and the

impairment of editorial discretion that would result from an

access regulation that might require an increase in the number

of pages. The Court has therefore not accorded First Amend-

ment significance to the ability of a newspaper to increase the

number of pages it prints.*%* The economic constraints on

97 In a few instances, access programme:s have presented

programming most cable operators would consider objectionable for

viewing by children. See, e.g., “What's All This on TV?”, New York

Times Magazine, May 27, 1973, p. 9. Without the access rules, the

cable system is accountable to its subscribers for the way in which it

has exercised its editorial discretion.

9% In Miami Herald, 418 U.S. at 256-257, this Court stated:

The first phase of the penalty resulung from the compelled

printing of a reply is exacted in terms of the cost in printing

and composing tume and materials and in taking up space

that could be devoted to other material the newspaper may

have preferred to print. It is correct, as appellee contends,

that a newspaper is not subject to the finite technological

limitations of ume that confront a broadcaster but it is not

correct to say that, as an economic reality, a newspaper can

proceed to infinite expansion of its column space to accom-

modate the replies that a government agency determines or a

Statute commands the readers should have available. ( Foot-

note omitted. )

cable systems increasing the number of channels they

offer and the resulting impairment of their editorial dis-

cretion from access obligations are at least as great as

those affecting newspapers. Newspapers offer a number of

pages or sections appealing to different types of au-

diences—e.g., comics, sports, society, local news, national

and international news, editorial comment and ana-

lysis—in an effort to increase their readership. Similarly

cable systems offer a number of channels appealing to

different types of audiences—e.g., religion, sports, infor-

mation services, entertainment—in an effort to increase

the number of subscribers to their services. Both the

newspaper editor and the cable system owner make

editorial judgments in selecting these materials and

presenting them to their subscribers. Thus, aside from

cable television’s dissimilarity to those aspects of broad-

casting which justify limits on the First Amendment rights

of broadcasters, cable systems operate in a manner similar

to newspapers for First Amendment purposes, and argu-

ments for limiting the First Amendment rights of cable

systems have already been rejected with respect to news-

papers. Since there is no basis for treating cable systems

differently from newspapers for First Amendment pur-

poses, based upon the Miami Herald precedent this Court

should affirm the Eighth Circuit’s conclusion that the

access rules violate the First Amendment rights of cable

systems.

3. The Access Rules Would Violate the More

Limited First Amendment Rights of Broad-

casters

Even if this Court should conclude that the more limited

First Amendment protection accorded broadcasters applies to

cable television as well, however, the access rules are not

consistent with the First Amendment.

As shown above with reference to this Court’s opinion in

Buckley v. Valeo,% the effect of the access rules is to exalt the

First Amendment interest in promoting individual self-

expression by access users above the First Amendment

interest in editorial controls by cable operators. The

Government has argued:

[T]he access rules do not present a question of

subordinating First Amendment interests to other, unre-

lated, governmental! interests. Rather, to the extent they

can be regarded as affecting the First Amendment

interests of cable operators, they present a question of

competing First Amendment interests. (G. Br. 40)

It should be noted that the D.C. Circuit in Business Executives’

Move for Vietman Peace v. FCC, 450 F.2d 642, 655 (1971),

held that the First Amendment value of individual self-

expression affirmatively required broadcasters to provide a right

of access to their facilities, and this holding was reversed by this

Court in the Columbia Broadcasting System case. Although this

Court in Columbia Broadcasting System explicitly declined to

reach the question whether the First Amendment would pre-

clude the FCC from imposing an access obligation on broad-

casters, 412 U.S. at 119, it emphasized the paramount import-

ance of editorial control. The Court clearly indicated that it is

less important that everyone have an opportunity to speak than

that “everything worth saying shal! be said.” 412 U.S. at 122,

quoting Professor Meiklejohn. And the Court clearly indicated

that the editorial function of selecting voices is essential in this

regard. The paramount importance of the editorial function was

reaffirmed in Miami Herald. Thus, the conflict between the

competing First Amendment values of promoting individual

self-expression and preserving editorial control has already

been resolved in favor of preserving editorial control.

For this reason, the access rules could not have been

imposed even on broadcasters with their more limited First

99 Supra, p. 48.

Amendment rights. By the same token, they may not be

imposed on cable operators, whose First Amendment rights are

at least as great as those of broadcasters.

B. The Access Rules Violate the Fifth Amendment

1. Under the Due Process Clause, a Person May

Not Be Compelled to Undertake Common Car-

rier Obligations

A person voluntarily undertaking a business which has the

attributes of common carriage may be required to submit to

regulation of that business as a common carrier. But may one

who has not voluntarily entered the common carrier business be

compelled to do so, just because he owns or can build facilities

suitable for that purpose? This question was not raised in this

form in Midwest I. There it had been argued that, just as the

FCC could not compel the provision of broadcast services, the

FCC similarly could not compel cable operators to engage

unwillingly in cablecasting. The Court responded:

[T]he analogy respondent thus draws between entry

into broadcasting and entry into cablecasting is mis-

conceived. The Commission is not attempting to compel

wire service where there has been no commitment to

undertake it. CATV operators to whom the cablecasting

rule applies have voluntarily engaged themselves in

providing that service, and the Commission seeks only

to ensure that it satisfactorily meets community needs

within the context of their undertaking. 406 U.S. 670.

Thus, the Court found that the mandatory origination rule was

not fundamentally different from the nature of the business

cable systems undertook in providing broadcast signals to their

subscribers. The access rules, however, do fundamentally

change the nature of a cable system’s business by requiring

cable systems to function as common carriers.

At the outset, it should be made clear that Midwest’s

arguments that the acess rules violate the First Amendment and

the due process and taking clauses of the Fifth Amendment

cannot be avoided merely by the FCC conditioning the right of

cable operators to retransmit broadcast signals upon the

requirement that cable operators also provide access services. It

is well established that the government may not extend a

governmental benefit only to those who are willing to accept the

imposition of an otherwise unconstitutional condition. As this

Court stated in Frost & Frost Trucking Co. v. Railroad Commis-

sion, 271 U.S. 583, 594 (1926) (hereinafter “Frost” ):

If the state may compel the surrender of one con-

stitutional right as a condition of its favor, it may, in like

manner, compel a surrender of all. It is inconceivable

that guaranties embedded in the Constitution of the

United States may thus be manipulated out of existence.

Accord: Shapiro v. Thompson, 394 U.S. 618 (1969); Sherbert v.

Verner, 374 U.S. 398 (1963); Speiser v. Randall, 357 U.S. 513

(1958). See Note , 117 U.PA.L.REV. 144 (1968); and Note,

73 HARV. L. REV. 1595 (1960).

In Frost, this Court also decided that the state could not

condition use of its highways by motor carriers on the require-

ment that they serve all members of the public indescriminately

on a common carrier basis rather than choosing to contract with

particular shippers.’ The Court stated:

[C Jonsistently with the due process clause of the 14th

Amendment, a private [contract] carrier cannot be

100 Even the motor carrier provisions added to the Interstate

Commerce Act in 1935 allow motor carriers to choose between

serving particular shippers on a contract carrier basis or holding

themselves out to serve the general public on a common carrier basis.

See Sections 203(a)(14) and (15) of the Interstate Commerce Act,

49 U.S.C. §303(a)( 14) and (15), recodified in P.L. 95-473 (Oct. 13,

1978) as 49 U.S.C. § 10102( 11) and (12).

converted against his will into a common carrier by

mere legislative command... . 271 U.S. at 592.101

While the mandatory origination rule in Midwest J was

affirmed by this Court over a due process challenge, this Court

first determined that the rule there before it was consistent with

broadcast regulatory goals and was therefore within the context

of the cable system’s initial undertaking. But Frost continues to

stand for the proposition that the imposition of common carrier

obligations is a fundamental change in the nature of a non-

carrier business which violates the due process clause. The

access rules impose common carrier obligations on cable sys-

tems,'°2 and therefore this case falls squarely within even the

narrowest reading of Frost. 1°

101 In Watson v. Employers Liability Assurance Corporation, 348

U.S. 66, 82 n. 3 (1954) (Frankfurter concurring), an apparent

inconsistency was noted between the 1926 Frost case and Pierce Oil

Corp. v. Phoenix Refining Co., 259 U.S. 125 (1922). In Pierce, this

Court upheld an Oklahoma statute requiring oil pipelines to operate

as common carriers, as that statute applied to pipeline companies

which had entered the state after the statute was enacted, on the

ground that the pipeline companies had voluntarily waived their due

process rights when they entered the business aware of the statute.

The same acquiescence rationale cannot apply to Midwest or other

parties which entered the cable television business before the FCC

adopted the access rules. Moreover, this voluntary acquiescence

rationale stated by the Court in Pierce in 1922 must be deemed

superseded by the unconstitutional condition concept which was

established in Frost in 1926 and has been repeatedly affirmed since

then. See cases cited supra, p. 56.

102 Supra, p. 34.

103 The Eighth Circuit also concluded that the due process rights

of cable systems were violated by the exposure of cable systems to

criminal and civil suits for programming presented on access channels

because cable systems have no authority under the rules to prevent the

presentation of programming that might result in such liability ( App.

79-82). Midwest agrees with the Eighth Circuit’s analysis, which the

Government has not ever tried to rebut.

2. The Access Rules Take the Property of Cable

Operators Without Just Compensation

The access rules take the property of cable operators

because of investments required by 1986 in order to meet the

minimum channel capacity requirement; because of investments

required immediately for program production equipment which

must be maintained locally for access users; because existing

cable plant must be used or held available for the distribution

of access programming even if the cable operator has other uses

for it; and because cable operators are precluded from using

their property for their private purposes.

The only aspect of the mandatory origination rule before

this Court in Midwest I that was remotely comparable to the

access rules presented here was the requirement that cable

operators invest in program production equipment, since such

equipment would have been necessary to comply with the

mandatory origination rule. The Court did not find a taking

issue in Midwest J, but there is a substantial difference between

the impact of the equipment requirement under the mandatory

origination rule and the access rules. Under the mandatory

origination rule, the FCC gave consideration to the problem of

compensation for this investment. There was no prohibition

against making charges to others who might be permitted to use

the equipment. Even if the cable operator used the equipment

himself, the FCC permitted the sale of advertising to meet

origination costs. In its First Report and Order in Docket No.

18397, 20 FCC 2d 201, 215 (1969), adopting the mandatory

origination rule, the FCC stated:

After consideration of the comments, we have con-

cluded that advertising should be permitted at natural

breaks in originations with no interruption of program

continuity. It appears that advertising support (or some

other revenue besides regular subscriber fees) may be

necessary to contribute to the financing of local origina-

tion in some communities, in view of what the record

reveals as to the cost of origination equipment and

Operating expenses.

Here, in contrast, no charges can be made for use of program

production equipment for “live public access programs not

exceeding five-minutes in length” (App. 173), and the cable

operator will obviously have no opportunity to sell advertising

during the programming of such access users. Moreover, other

costs associated with the access rules, such as the cost of

increasing channel capacity, the use of existing channel capacity

for public, educational and government access, and the use of

the cable system's playback facilities and personnel to present

public access programming, will be uncompensated.

The Government argues (G. Br. 49-51) that the access

rules do not constitute a taking under standards recently

clarified by this Court in Penn Central Transportation Compan,

v. City of New York, §7 L.Ed.2d 631 (1978) (hereinafter “Penn

Central”). In Penn Central, 87 L.Ed.2d at 648, the Court

quoted its earlier statement in Armstrong v. United States, 364

U.S. 40, 49 (1960), that the purpose of the taki ig clause is to

... bar Government from forcing some people alone to

bear public burdens which in all fairness and justice,

should be borne by the public as a whole.

The Court also recognized in Penn Central, §7 L.Ed.2d at 651.

that

... Government actions that may be characterized as

acquisitions of resources to permit or facilitate uniquely

public functions have often been held to constitute

“takings.”

This is precisely what the access rules do. The FCC believes

that it is in the public interest to have available a medium for

use by members of the public for self-expression. Cable oper-

ators have facilities suitable for this purpose. The FCC, by its

access rules, has taken these facilities for public use but has

required the cable operators alone to bear the costs.

The Government's argument is essentially that no taking

has occurred because the economic-impact of the access rules

on cable operators is minimal.’ This argument is based on at

least two considerations. First. the FCC deferred the deadline

for compliance with minimum channel capacity requirements

until 1986 because it was anticipated that most systems would

naturally be rebuilt by that time in any event as a result of

equipment obsolescence or a desire to expand channel capacity

to accommodate new services (App. 153-161). Second, the

FCC made the access rules applicable only to systems of 3,500

or more subscribers so that the cable operator could pass

through the costs to subscribers and the incremental cost to

each subscriber would be relatively small (App. 113-115).

With respect to the “natural rebuild” concept, if cable

operators do increase their channel capacity by 1986 because of

equipment obsolescence or a desire to accommodate the new

programming services, the same taking problem will exist when

the rebuild is completed because cable operators will sull be

required to provide uncompensated service, to forego the

commencement of services which presently exist or may devel-

op between now and the completion of a rebuild, and to

displace programming which they have selected for their

channels to accommodate access uses. Delaying the taking unul

1986 does not eliminate it. and in any event at least one channel

is taken immediately.

104 The Government appears to argue that since there has been

no physical invasion of a cable system's property by the government,

there can be no taking (G. Br. 50-51). The Court in Penn Central.

however, recognized that physical invasion was not necessary for

there to be a taking and that “a use restriction on real property may

constitute a ‘taking’ if not reasonably necessary to the effectuation of a

substantial public purpose .... or perhaps if it has an unduly harsh

impact on the owner's use of the property.” 57 L. Ed. at 650. It also

considered in that case “whether the interference with appellant's

property is of such a magnitude that ‘there must be an exercise of

eminent domain to sustain [it].”" 57 L. Ed. at 656, citing Pennsyiva-

nia Coal Co. \. Mahon, 260 U.S. 393 (1922). Moreover. there was no

physical invasion in Penn Central, znd there is a physical invasion

here in that pursuant to government command cable systems must

permit an intrusion of their property by access users.

With respect to the possibility of spreading the costs of

compliance over a larger number of subscribers to reduce the

per subscriber impact, the FCC is in effect recognizing that

there are substantial economic burdens associated with the

rules, and that these burdens can only be borne by larger

systems. But the Government has cited no authority for the

proposition that a burden on a business can be ignored because

the business can pass the burden on to its customers. This

argument also ignores the fact that there may be price resis-

tance to passing on the burden" and the fact that the ability of

the cable system to pass on the burden may be impaired by the

cabie system's inability, because of the access rules, to assemble

the most desirable program package and thus attract a greater

number of subscribers.

The Court’s decision in Penn Central was based on treating

the landmark preservation law there involved like a zoning

ordinance because “the New York City law embodies a com-

prehensive plan to preserve structures of historic or aesthetic

interest wherever they might be found in the city, and as noted,

over 400 landmarks and 31 historic districts have been desig-

nated pursuant to this plan.” 57 L.Ed.2d at 653 (footnote

omitted). Thus, the owners of the Grand Central Terminal

were not “solely burdened”, and indeed they were benefitted.

like “all New York citizens and all structures, both economic-

ally and by improving the quality of life in the city as a

whole. .. .” 57 L.Ed.2d 655.

Clearly the access rules do not involve the application of a

comprehensive plan analogous to zoning cases. The landmark

preservation law in Penn Central applied to over 400 structures

in the City. The access rules on the other hand, single out the

property of the cable operator in the community to benefit

108 From ume to time there may be other constraints, such as the

President's current voluntary Wage-Price Guidelines, that inhibit a

Price increase to pass on the burden of providing access channels. In

addition, many cable systems need the approval of their local

franchising authorities to increase their rates.

those members of the general public who desire an opportunity

to use the cable facilities for access program presentation.

Moreover, whereas the majority opinion in Penn Central found

that landmark owners reciprocally benefitted from the law,

cable operators ¢c.ive no reciprocal benefit from the access

rules, and in fact they suffer an actual detriment because they

cannot offer what they believe to be the most desirable

combination of programming on their channels in order to

attract the largest number of subscribers. In short, the access

rules are not within any recognized exception to the taking

clause and therefore do constitute a compensable taking.

It is also clear that the access rules do not provide

compensation for the taking. With the exception of leased

access channels, the FCC has not allowed cable operators to

even attempt to recover their expenses through rates to be paid

by access users. On the contrary, the FCC expects cable

operators to fund noncompensatory access services with reve-

nues received from subscribers to other cable services. /976

Order (App. 113-115). In other words, the FCC expects cable

operators to subsidize a noncompensatory common carrier

service with revenues derived from their private non-common

carrier business.

In Brooks-Scanlon Company v. Railroad Commission of

Louisiana, 251 US. 396 (1920) hereinafter (** Brooks-

Scanlon”), a company operated a small business as a common

carrier by railroad as an incident to its sawmill and lumber

business. Although the railroad business showed a loss, the net

result of the whole enterprise, including the sawmill and lumber

business, was profitable. On this basis, the state commission

decided that Brooks-Scanlon could not discontinue its railroad

service. This Court reversed, stating:

The plainuff may be making money from its sawmill

and lumber business, but it no more can be compelled

to spend that than it can be compelled to spend any

other money to maintain a railroad for the benefit of

others who do not care to pay for it. 251 U.S. at 399.

Brocks-Scanion continues to be cited for the principle that a

compa:ly may not be required to subsidize a noncompensatory

common carrier service with revenues from its non-carrier

business. City of New York v. United States, 337 F.Supp. 150,

156 (E.D.N.Y. 1972); Brooklyn Eastern District Terminal v.

United States, 302 F.Supp. 1095, 1100 (E.D.N.Y. 1969);

Atlantic Coast Line R. Co. v. Public Service Commission, 77 F

Supp. 675, 683 (E.D.S.C. 1948 ).1°6 In analogous situations, the

FCC has held that communications common carriers may not

subsidize even One common carrier service with revenues from

another. In its Memorandum Opinion and Order in Docket No.

18128, 61 FCC2d 587, 589 (1976), reconsideration, 64 FCC2d

971 (1977), further reconsideration, FCC 78-104 (released

Feb. 24, 1978), the FCC established basic rate-making prin-

ciples for communications common carriers and stated that “the

public interest is not generally served by interservice cross

subsidization.” See also Computer Use of Communications

Facilities, 28 FCC2d 267 (1971), affirmed in pertinent part sub

nom. GTE Service Corp. v. FCC, 474 F.2d 724 (2d Cir. 1973),

where the FCC adopted rules requiring communicauons com-

mon carriers wishing to provide data processing services to do

so through a separate corporate entity with separate books of

account, personnel, and equipment, so that the data processing

service would not be cross-subsidized from revenues from

106 In one respect, Brooks-Scanlon has been superseded by later

cases. The opinion in Brooks-Scanion indicated that a railroad

common carrier could not be compelled to continue a segment of its

overall common carrier business at a loss even though other segments

were profitable. 251 U.S. at 399. It has since been established that

each segmeni of an integrated railroad common carrier business need

not show a profit. Jn re Erie Lackawanna Railway Co., 517 F.2d. 893,

898-899 (6th Cir. 1975). For example, when a railroad common

carrier seeks authority to abandon an unprofitable segment of its

operation, the Interstate Commerce Commission can look to the

overall profitability of the carrier's railroad business in deciding

whether the carrier can be compelled to continue the segment of

service. But nothing in the Eric Lackawanna case can be interpreted

as holding that the ICC can look to the railroad’s ability to subsidize

the service with unrelated revenues derived from a non-carrier

business.

communications common carrier services. Thus the Brooks-

Scanion doctrine and related FCC actions make it clear that

revenues derived from the non-carrier aspects of a business

cannot constitute compensation for the provision of a compelled

non-compensatory common carrier service rendered for the

presumed benefit of the public.

There is an additional aspect of the access rules which, as

applied to Midwest, further highlights the confiscatory nature of

the access rules. When the FCC first imposed access obliga-

tions on cable operators, it limited their applicability to systems

in the top 100 markets. As a quid pro quo, such systems were

permitted to import more distant signals (App. 106) than cable

systems in smaller markets where Midwest operates. Midwest

contends that this guid pro quo is also invalid under Brooks-

Scanlon because it requires cable operators to subsidize

noncompensatory common carrier services with revenues from

a private business expected to be enhanced by the carriage of

additional distant signals. But even if the quid pro quo for top

100 systems would have been deemed sufficient compensation

under the taking clause, that approach was abandoned when

the FCC made the access rules applicable to all cable systems

with 3,500 subscribers regardless of market location. Midwest’s

systems are not located in top 100 markets and Midwest does

not receive the benefit of any “bonus” distant signals.

il. THE RECORD BEFORE THE FCC WAS

INSUFFICIENT TO SUPPORT THE ADOPTION

OF THE ACCESS RULES

The Government has argued (G. Br. 31-32 na. 29) that

there was record evidence of “significant demand” for access

channels, referring to comments in the rulemaking proceeding

which showed that the city and county schools in San Diego,

California, were using educational access channels and also

referring to a survey by the National Cable Television Associ-

ation which showed that 36 of 145 cable systems surveyed

indicated that their access channels were used regularly for an

average of 18 hours weekly. the other hand, the Eighth

Circuit summarized the record before the FCC as follows:

The record of the /976 Reporttis replete with comments

that, though there was Serge gan! of access programs,

few people with something tojsay were interested in

producing them; that almost nd one wants to watch in

many segments of our vast couytry; that when access

had been tendered it had not been used and had been

rejected by subscribers; that offers of access had been

declined by schools which owned television equipment

for its use; that a survey of 149 cable systems showed

their access channels, offered under the Cable Report

rules, went unused an average of 92% of the time; that

another survey of 10,000 subscribers showed 97% dis-

interested in viewing access programs if they cost $1.75-

$2.00 per month; that access programs had been volun-

tarily provided when subscriber interest warranted

them. There was no evidence that ordinary market

demand could never result in access programs, or that a

solemn silence would descend in the absence of manda-

tory access rules. There was no evidence that programs

of so little interest or value that no one and no group is

willing to purchase time to present them would garner

viewers. (App. 89-90 n. 87)

Indeed, as the Eighth Circuit noted (App. 86-88), the FCC

itself explicitly and implicitly recognized that there was

insufficient evidence of demand. The FCC explicitly found that

access channels “are at best sporadically programmed,” /976

Order ( App. 138), and that “even larger systems typically have

difficulty finding access channel users,” Reconsideration ( App.

191). Furthermore, by choosing to mandate the construction

and dedication of channels rather than relying on a voluntary

response to marketplace forces, the FCC implicitly recognized

that there was no meaningful evidence of demand for access

services. Thus, rather than being based on any showing of

demand or need for access channels, the FCC relied on its

“hope” that its requirements for rebuilding cable systems and

reserving One or more channels for access would “foster the

provision of such services. ...” 1/976 Report ( App. 156).

This hope is belied by experience. In abandoning the

mandatory origination rule approved in Midwest /, the FCC

confessed the futility of seeking to mandate local programming

when economic considerations did not justify it. Report and

Order in Docket No. 19988, quoted supra, p. 2. The access rules

suffer the same deficiency. As indicated in the Eighth Circuit's

summary of the rulemaking comments, quoted above,

experience shows that available access channels go unused 92%

of the ume. A demand for access services cannot be created by

law. If there is demand, cable systems will respond to the call

of the marketplace.

The Government argues on the basis of this Court's

opinion in FCC v. National Citizens Committee for Broad-

casting, 56 L.Ed.2d 697, 726 (1978), that the FCC should be

allowed discretion to forecast the direction in which the future

public interest lies. In National Citizens Committee, this Court

upheld newspaper-broadcast cross-ownership restrictions de-

Signed to promote competition and diversity of voices. The

Court stated that the FCC was entitled to cely on its judgment

about the probability of diverse viewpoints from commonly-

owned communications media without requiring evidence of

specific abuses because the benefits of competition are by

nature not easily quantified. 56 L.Ed.2d at 715. In contrast, the

demand for cable television access services is quantifiable and

even the FCC recognized that the clear weight of the evidence

before it was that there is no significant demand for such

services. In this critical aspect, the FCC’s access rules are

distinguishable from the newspaper-broadcast cross-ownership

rule at issue in National Citizens Committee.

There is a second basis for distinction as well. The

newspaper-broadcast cross-ownership rule did not raise a tak-

ing issue because even in cases where divestiture was required,

the divestiture would be by sale and the purchase price would

satisfy the compensation requirement. In contrast, it has been

shown above?’ that the access rules do raise a taking issue.

Where a possible unconstitutional taking is involved, the Court

should be less inclined to uphold rules on the basis of mere

hope and intuition.

Finally, the FCC’s reliance here on hope and intuition

unsupported by any record evidence raises a serious problem in

connection with the First Amendment issue. As discussed

above,'* by requiring cable operators to reserve channels for

access uses, the FCC has violated the operators’ First Amend-

ment right to use the channels for programming they selected or

produced. In United States v. O’Brien, 391 U.S. 367, 377

(1968), this Court held that a government regulation which

affects First Amendment rights cannot be sustained unless it

furthers an imnortant or substantial government interest and

the incidental restriction on First Amendment rights is no

greater than .3 essential to achieve the government interest. In

the rulemaking context, these requirements translate into a need

for a convincing record. Home Box Office, Inc. v. FCC, supra,

567 F.2d at 50. While Midwest has in its First Amendment

argument shown that the access rules involve more than an

incidentai restriction on its First Amendment rights, there is in

any event no convincing record of need or demand for access

services sufficient to outweigh the restriction on the First

Amendment rights of cable operators.

107 Supra, pp. 58-64.

108 Supra, pp. 47-48.

CONCLUSION

For the foregoing reasons, the decision of the Eighth

Circuit setting aside the access rules and the related channel

capacity and equipment availability requirements should be

affirmed.

Respectfully submitted,

Harry M. PLOTKIN

Georce H. SHAPIRO

ALAN AUCKENTHALER

1815S H St. N.W.

Wasnington, D.C. 20006

Attorneys for Respondent

Midwest Video Corporation

ARENT, Fox KINTNER, PLOTKIN & KAHN

Of Counsel

December 1978

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.