Amicus Curiae Brief — United States v. Chesapeake & Potomac Telephone Co.

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TABLE OF CONTENTS

TABLE OF AUTHORITIES ........0ccecevvvees ii

INTEREST OF AMICI CURIAE ..........000s0005 l

INTRODUCTION AND SUMMARY OF ARGUMENT .. 2

ES Ss oe ree 3

I. SECTION 533(b) VIOLATES FREE SPEECH RIGHTS

BY BARRING WILLING SPEAKERS FROM

COMMUNICATING WITH WILLING LISTENERS . . 3

Il. FEDERAL TELECOMMUNICATIONS AGENCIES

HAVE DETERMINED THAT SECTION 533(b) IS

ANTICOMPETITIVE AND HARMS CONSUMERS .. 5

Ii]. THE ANTICOMPETITIVE EFFECTS OF

SECTION 533(b) ARE FELT BY MILLIONS

OF POTENTIAL VIEWERS ........ 2c ccevees 14

ST <4 0 nab 6 bWiak 6 065 00.0 0.066000 0% 18

TABLE OF AUTHORITIES

Cases: Pages

Board of Trustees of State University of New York v. Fox,

GB GB. Gp 0 ba hceeeeanensesustan 6

Edenfield v. Fane, 113 S. Ct. 1792 (1993) ......... 5,6

FCC v. National Citizens Committee for Broadcasting,

GO Ga FOP: cosvcveciisésecd testes 4

First National Bank of Boston v. Bellotti,

Ge Ga. TEE. onc 0n.bns bbba8 Bees bee 4

Kleindienst v. Mandel, 408 U.S. 753 (1972) .......... 3

Lamont v. Postmaster General, 381 U.S. 301 (1965) .... 3

Martin v. Struthers, 319 U.S. 141 (1943) ............ 4

Miami Herald Publishing Co. v. Tornillo,

a Rr ee err 6

Mississippi Power & Light Co. v. Mississippi ex rel.

BGsase, Gt Gi. ee Ge 6 cad tbe eeureersdne 7

Rubin v. Coors Brewing Co., 115 S. Ct. 1585 (1995) .... 6

Sable Communications of California, Inc. v. FCC,

GOB UB. UES CURED ccc cccevecvcccesscseeve 6

Schneider v. State, 308 U.S. 147 (1939) .........45. 15

Stanley v. Georgia, 394 U.S. 557 (1969) .........545. 4

Telecommunications Research & Action Center v. FCC,

801 F.2d 501 (D.C. Cir. 1986), cert. denied,

GB UG, SIP GR) cov ctatackusciaeweneus 15

Thomas v. Collins, 323 U.S. 516 (1945) ............ 3-4

Turner Broadcasting Sys., Inc. v. FCC,

Pt: Re 5,6

Virginia State Bd. of Pharmacy v. Virginia

Citizens Consumer Council, Inc. ,

GS UB. FEPGOPED eis cconscécvecssenesun 3

Ward v. Rock Against Racism, Inc.,

Gi U.S. FEE GREP. cnc ceccveccccnnsceswunn 5

Watt v. Alaska, 451 U.S. 259 (1981) 2... 1 ee ees 7

Zauderer v. Office of Disciplinary Counsel,

G71 U.S. GRR GREED cc cccccavctbecsectbuswal 3

Legislative Materials: Pages

Cable Television Consumer Protection and Competition

Act of 1992, 106 Seat. 1460 0. wees 11

H.R. Rep. No. 628, 102d Cong., 2nd Sess. (1992)..... 17

Administrative Decisions and Materials:

Cable Services Bureau, FCC Cable Regulation Impact

Survey, Changes in Cable Television Rates Between

Apr. 5, 1993-Sept. 1, 1993 (Feb. 22,1994) ....... 11

Implementation of Sections of the Cable Television

Consumer Protection and Competition Act

of 1992: Rate Regulation, Second Order on Recon.,

cc cccbeeesccccecccc. 11

Letter from James H. Quello, FCC Chairman

to Hon. Edward J. Markey (Mar. 1, 1993) ........ 10

Letter from James F. Rill, Assistant Attorney General,

Antitrust Division and Robert A. Mosbacher,

Secretary of Commerce to Hon. John C. Danforth

CCR ce gadeestesecccce. 12

Reply Comments of the United States Department of Justice

before the Federal Communications Commission, Telephone

Company-Cable Television Cross-Ownership Rules,

CC Dkt 87-266 (Mar. 13, 1992)............5.. 11

Reply of the National Telecommunications and Information

Administration, In Re Teleport Communications —

New York, File No. 13135-CF-TC(3)-92

DMCS ph deeesceeececosccec. 12, 17

Report of the Federal Communications Commission

Regarding the President's Regulatory Reform

Program (Apr. 28, 1991) ..... 6.62 6c cece eens 9

Telephone Company-Cable Television Cross-Ownership

Rules, 3 FCC Red 5849 (1988) ............055.. 8

Telephone Company-Cable Television Cross-Ownership

Rules, 7 FCC Red 5781 (1992) ..... 2... 00 ceee 8

Miscellaneous: Pages

Hong, Cable Rates Drop in Alexandria, Washington Post,

SS F reer eee 11

Donna N. Lampert, Cable Television: Does Leased Access

Mean Least Access?, 44 FED. COMM. L.J. 245

Ss MD oo ob O ee bs oe Ve CSU CO CEOS 17

NTIA, TELECOMMUNICATIONS IN THE AGE OF

DEED So wees oo te ee eedic 12-13, 16

INTEREST OF AMICI CURIAE

With the consent of the parties, amici curiae METS Fans

United/Virginia Consumers for Cable Choice, ef al., hereby

submit this brief in support of respondents. Amici are a coalition

of consumer groups which support elimination of § 533(b) to

promote diversity in media voices, competition in the cable

television market, and access to video programming for people

with disabilities. Amici represent a wide range of organizations

and consumer interests:

METS Fans United/Virginia Consumers for Cable Choice is

an association of cable television consumers who believe that

lifting § 533(b) and permitting Bell Atlantic to provide video

programming in the Alexandria market will open up competition

with the incumbent cable operator and provide viewers with access

to alternative programming sources.

The Alexandria Federation of Civic Associations, Inc. is a not-

for-profit organization whose membership includes 75 civic,

condominium and apartment associations in the City of

Alexandria. The Federation believes that eliminating § 533(b) will

promote cable competition in the City of Alexandria and increase

the public’s access to alternative programming sources and

government and public access channels.

Television Viewers of America is a grassroots consumer

organization actively pursuing legal and regulatory initiatives to

bring nationwide competition to multi-channel video programming

and lower rates and better service to consumers.

Virginia Association of the Deaf, Inc., is a non-profit

association whose goals are io serve the deaf and promote their

unique needs in legislation, education, communication, health

care, research, rehabilitation and individual family counseling.

The Association believes that a favorable decision in this case will

provide greater access to telecommunications and programming

services that meet the needs of the deaf.

Northern Virginia Resource Center for Deaf and Hard of

Hearing Persons is a not-for-profit social service agency serving

' Letters reflecting wnitien consent of the parties to the submission of this bnef

have been filed with the Clerk of the Court

deaf persons and those with hearing difficulties, their families,

friends and other professionals. The Center believes that the

increased competition offered by local telephone companies can

increase access to video programming for deaf and hard of hearing

persons.

United Homeowners Association is a non-profit association

whose goal is to inform and represent homeowners across the

country. UHA believes that the competition from telephone

companies in the provision of cable television programming

Virginia Public Interest Coalition is an informal group of

and telecommunications in Virginia. The coalition works to

ensure that a consumer voice representing the interest of

is heard during the public debate on telecommunications issues.

The Coalition believes that lifting § 533(b) will result in increased

competition in the provision of cable television services, lower

prices and greater access to programming services.

INTRODUCTION AND SUMMARY OF ARGUMENT

This Court has frequently stressed that the First Amendment

protects not simply the right of a speaker to speak, but also the

right of the audience and the public to hear. Yet § 533(b), by

listeners, runs roughshod over this fundamental principle of free

speech.

The First Amendment issue presented here is not some

academic nicety. It is the very real question of whether millions

of potential viewers will be prevented from fully participating in

the most important medium of communication today. During both

the Bush and Clinton Administrations, every federal agency with

responsibility for fashioning telecommunications policy has

recommended that § 533(b) be eliminated. In particular, the

allowing competition by telephone companies in video

2

programming would expand subscribership by 11.2 million

households nationwide and produce annual consumer benefits of

some $5.36 billion.

In determining whether § 533(b) could survive intermediate

scrutiny, the Court should pay particular attention to the historical

record compiled by the federal agencies involved in enforcing this

Audiences have a right under the First Amendment to receive

programming by local telephone companies, and this right is

independent of the right of telephone companies to speak. This

Court has frequently recognized that First Amendment rights

belong to recipients — or potential recipients — of speech as well

as to the speakers themselves. In Virginia State Bd. of Pharmacy

v. Virginia Citizens Consumer Council, Inc., 425 U.S. 748

(1976), for example, this Court determined that the First

Amendment rights of the public to receive information provided

an independent legal basis for consumers to challenge government

regulation of speech. This Court observed that it “is clear from

the decided cases” that the First Amendment protects the “right to

‘receive information and ideas.” Jd. at 756-57 (quoting

Kleindienst v. Mandel, 408 U.S. 753, 762-63 (1972)). The Court

has since reiterated that “the extension of First Amendment

protection” may be justified by the value to consumers and the

public “of the information that such speech provides.” Zauderer

v. Office of Disciplinary Counsel, 471 U.S. 626, 651 (1985).’

2 See also Lamont v. Postmaster General, 381 US. 301 (1965) (upholding

First Amendment nghts of citizens to receive political publications from abroad,

from foreign speakers whose ability to invoke the First Amendment was open to

question), Thomas v. Collins, 323 U.S. 516, 534 (1945) (sustaining worker's

3

Even where a would-be speaker, rather than a listener or

viewer, is the actual party challenging a law

the

vindication. The First Amendment, in particular, serves

significant societal interests." First National Bank of Boston v.

Bellotti, 435 U.S. 765, 776 (1978). In First National Bank, this

Court permitted a business corporation to challenge a prohibition

on speech not because of the First Amendment's role “in fostering

individual self-expression,” but rather because of “its role in

affording the public access to discussion, debate, and the

dissemination of information and ideas." /d. at 783. This Court

added that “the First Amendment goes beyond protection of the

press and the self-expression of individuals to prohibit the

government from limiting the stock of information from which

members of the public may draw.” /d.’

“At the heart of the First Amendment lies the principle that

each person should decide for him or herself the ideas and beliefs

deserving of expression, consideration, and adherence. Our

political system and cultural life rest upon this ideal.” Turner

Broadcasting Sys., Inc. v. FCC, 114 S. Ct. 2445, 2458 (1994);

right to meet, discuss, and be informed of impending election for collective

bargaining agent), Martin v. Struthers, 319 U.S. 141, 143 (1943) (“this freedom

embraces the right to distribute literature. . and necessarily protects the nght

to receive it”), Stanley v. Georgia, 394 U.S. 557, 564 (1969) (“This right to

receive information and ideas, regardless of their social worth ___ is fundamental

to our free society.”).

* In this case, the diversity principle does not support the constitutionality of

§ 533(b). In fact, that principle undermines the statute. In the Court of Appeals,

amici addressed the question of whether the principle of diversity in FCC v.

National Citizens Committee for Broadcasting, 436 U.S. 775 (1978)

(“NCCB”), supported § 533(b). See Br. of METS Fans, et al. in Ct. App. 17-

22. Amici noted that the restriction in NCCB prevented broadcasters from

purchasing a newspaper and thus eliminating an additional voice. Section

533(b), by contrast, prohibits a telephone company from adding its voice by

becoming a cable provider. This is not a cross-ownership case.

4

see also Edenfield v. Fane, 113 S. Ct. 1792, 1798 (1993) (“the

general rule is that the speaker and the audience, not the

government, assess the value of the information presented”).

Il. FEDERAL TELECOMMUNICATIONS AGENCIES

HAVE DETERMINED THAT SECTION 533(b) IS

ANTICOMPETITIVE AND HARMS CONSUMERS

The First Amendment right to receive information is

particularly salient here, for every federal telecommunications

agency has urged elimination of § 533(b) on the ground that it is

anticompetitive and harms consumer interests.

The court below evaluated the constitutionality of § 533(b)

under “the intermediate level of scrutiny applicable to content-

neutral restrictions that impose an incidental burden on speech.”

Turner Broadcasting, 114 S. Ct. at 2469. This standard of review

requires the Government to establish that the measure challenged

on free speech grounds: (1) is narrowly tailored to achieve

substantial government interests; and (2) leaves open ample

alternative channels for communication. See, e.g., Ward v. Rock

Against Racism, Inc., 491 U.S. 781, 789, 799 (1989). Both of

these inquiries rest in part on an assessment of the purported

justifications for the challenged measure, and thus can be

advanced by an examination of legitimate, reliable information that

bears upon these independent prongs of the “intermediate scrutiny”

standard.

In providing guidance to the courts about the legitimate sources

that they should consult and consider in undertaking these

evaluations, this Court has begun with an important cautionary

reminder: any court exercising the power of judicial review of the

constitutionality of a statute has an “obligation to exercise

independent judgment when First Amendment rights are

implicated.” Turner Broadcasting, 114 S. Ct. at 2471. The

exercise of independent judgment is critical in determining

whether the Government has carried its burden of demonstrating

“that the recited harms are real, not merely conjectural, and that

the regulation will in fact alleviate these harms in a direct and

material way.” /d. at 2470.

With this fundamental point established, however, the next step

is to decide what sources provide legitimate material that will aid

in exploring the two basic prongs of intermediate scrutiny. Here,

this Court has stressed the importance of identifying sound

information for the purpose of conducting these twin inquiries,

observing that the Government cannot carry its burden under the

First Amendment by offering “mere speculation and conjecture.”

Rubin v. Coors Brewing Co., 115 S. Ct. 1585, 1592 (1995).

“[R]ather, a governmental body seeking to sustain a restriction”

against a First Amendment challenge “must demonstrate that the

harms it recites are real and that its restriction will in fact alleviate

them to a material degree.” Edenfield, 113 S. Ct. at 1800. Casual

submissions based on “anecdotal evidence and educated guesses”

are insufficient bases on which to restrict free speech rights, and

“litigating positions,” such as those belatedly put forward by the

Government in this case, cannot be used as reliable “proof that the

Government’s regulation is necessary.” Rubin, 115 S. Ct. at

1593.

When the Government agencies charged with enforcing a given

prohibition on speech have all concluded it is not essential to

further any substantial government interest — and, indeed, that it

positively disserves any such interests — it is difficult to imagine

that the law could survive any form of First Amendment scrutiny.

This Court has often attached weight to factual findings by

responsible policymakers that undercut the validity of a restriction

on speech. E.g., Sable Communications of California, Inc. v.

FCC, 492 U.S. 115, 130 (1989); Miami Herald Publishing Co. v.

Tornillo, 418 U.S. 241, 247 n.7 (1974). The situation here is

much starker than anything this Court has encountered before:

every agency participating in the formation of telecommunications

policy that has examined § 533(b) has concluded that it retards

competition and injures consumers. By their own statements, the

relevant Government agencies have already established that they

cannot meet their burden under the First Amendment of justifying

§ 533(b). To take those agencies at their word entails no “second-

guess[ing] [of] the Government's judgment.” Board of Trustees

of State University of New York v. Fox, 492 U.S. 469, 478 (1989).

6

To be sure, purported administrative “findings” would be

suspect if they were unaccompanied by objective indicia of

reliability, such as internal consistency and factual completeness.

Similarly, they would be entitled to little or no weight if they were

made for the purposes of litigation or reflected inconsistencies in

approach or a self-interested concern in extending and protecting

the scope of the agency’s own authority in a particular sphere.

See, e.g., Watt v. Alaska, 451 U.S. 259, 273 (1981) (agency

position inconsistent over time is “entitled to considerably less

deference” than a consistently held agency view); Mississippi

Power & Light Co. v. Mississippi ex rel. Moore, 487 U.S. 354,

386 (1988) (Brennan, J., dissenting) (deference to agency position

must take into account consideration of the agency’s “institutional

interests in expanding its own power”).

But those caveats are not applicable here. Federal

telecommunications policymakers have unanimously condemned

§ 533(b) as anticompetitive and anti-consumer. They have done

so on the basis of a comprehensive historical record that reflects

the modern development and growth of the American

telecommunications industry. This striking conclusion about the

counterproductive consequences of § 533(b) has been consistent

across the different federal agencies involved in this area even

though, from the perspective of the agencies’ narrow self-interest

in expanding their own enforcement authority, invalidation of this

measure likely would restrict that authority. This broad consensus

that § 533(b) is entirely disconnected to any significant

government interest is thus entitled to special weight in this

Court's constitutional examination of whether this statute can

satisfy the two distinct prongs of intermediate scrutiny. And the

following examination clearly shows that § 533(b) is not “narrowly

tailored” to accomplish any legitimate government interest.

1. For years, the FCC has explained that its position on the

inefficacy of § 533(b) is based on its considered judgment that

“competition provided by telephone companies can be expected to

provide . . . lower costs and greater choices for consumers and

greater responsiveness to consumer demand by service providers.”

Telephone Company-Cable Television Cross-Ownership Rules, 3

7

FCC Red 5849, 5857 (1988) (quoted at J.A. 341). The evidence

compiled by the Commission almost a decade ago demonstrated

“that the prohibition against telephone companies providing cable

television service within their telephone service areas no longer

serves the public interest. . . . The ban directly deprives

consumers of video programming services telephone companies

could provide [and] prevents market incentives and achievement

of efficiencies that could bring additional services to the public.”

Id. at 5866 (quoted in J.A. 341).

As the evidence has accumulated, the FCC has become

increasingly emphatic in stating its position that § 533(b) does not

serve the public interest and does not advance any legitimate

government interest. In 1992, it issued a further report and order,

in which it determined that removing § 533(b) would “increas[e]

competition in the video marketplace, spur[{] the investment

necessary to deploy an advanced infrastructure, and increas[e] the

diversity of services made available to the public.” Telephone

Company-Cable Television Cross-Ownership Rules, 7 FCC Rcd

5781, 5847 (1992) (quoted at J.A. 337). After reviewing the

evidence that had been amassed in the formal administrative

record, the Commission recommended that Congress abolish the

prohibition on telephone companies providing video programming

“directly to subscribers in their telephone service areas.” /d. As

the Commission explained: “permitting local telephone companies

to directly provide video programming will further increase

diversity, as they will add another programming voice to those

which now exist. . . . Most importantly, we find that the public

will benefit greatly from the resulting increased competition in the

video marketplace.” /d. at 5849-50 (quoted at J.A. 338).

In May 1995, in its most recent report and order on the

subject, the FCC formally reiterated its position that “authorizing

telephone companies to provide video programming” would

“promote competition in the multi-channel video programming

market.” Govt. Supp. Br. App. 5a. “Since 1970, . . . the cable

industry has grown from a fledgling service to a more mature

industry that now serves a majority of households and ‘has

replaced over-the-air broadcast teleision the primary provider of

video programming."” /d. at |la. “These developments have . .

. Mitigated to a fair degree the competitive concerns that led the

Commission and Congress to adopt the cross-ownership ban.” /d.

at 12a.

The Commission has even gone so far as to quantify the

tremendous benefits that would be attained by lifting the statutory

ban on video programming by telephone companies. According

to the FCC’s own statistics, eliminating § 533(b) “would result in

significant price savings for consumers and stimulate provision of

a range of new information services,” with rates falling about 20

percent and subscribership increasing by 11.2 million households

nationwide. Report of the Federal Communications Commission

Regarding the President’s Regulatory Reform Program 16 (Apr.

28, 1991) (quoted at J.A. 339-40). The Commission has

predicted that competition would produce annual consumer gains

of $5.36 billion, not counting “the significant gains in innovative

uses of broadband communications in non-entertainment markets,

such as health care, education, and telecommuting, all of which

are very likely to follow from enhanced capacity and

competitiveness in the supply of cable television services.” /d.

(quoted at J.A. 340).

The current Chairman of the FCC, Reed E. Hundt,

summarized the Commission’s official position on the

counterproductive nature of § 533(b) in congressional testimony

delivered on January 27, 1994:

Direct, facilities-based competition between cable and

telephone companies will produce substantial benefits for

the American public. Competition in this market will spur

the deployment of advanced technologies that are capable

of delivering the full range of services that customers

demand. These services include not only entertainment

services, but also the growing number of educational,

health, and social services that are accessible over

broadband technologies.

In addition, competition in this market can be expected

to produce the same positive results for consumers that we

9

have in other markets for telecommunications services that

have undergone the transformation from monopoly to

competition: technological and service innovation, lower

prices, and responsiveness to consumer tastes. Telephone

company entry also will expand the electronic marketplace

of ideas by creating new outlets for video service

providers.

Elimination of the existing cross-ownership restriction

should stimulate new telephone company investment in

facilities that are capable of delivering video and advanced

telecommunications services. Consumers should be the

beneficiaries of the expanded choices that facilities-based

competition in this market will foster.

J.A. 376-77 (emphases added). He thus maintains the same

position as the former Chairman of the FCC, James H. Quello,

who also agreed that the removal of § 533(b) would “bring

consumers lower rates, more responsive customer service, and

greater choice of video programming sources.” Letter from James

H. Quello, FCC Chairman to Hon. Edward J. Markey (Mar. |,

1993) (quoted at J.A. 338-39).

In short, the FCC has built an overwhelming administrative

record that § 533(b)’s direct ban on video programming by

telephone companies within their service areas is entirely

counterproductive and thus does not serve any government

interest.‘

* Experience tends to support the FCC’s conclusions. For example, many

cable operators raised rates, re-ticred channels, or otherwise altered their service

just as congressionally mandated rate regulation took effect, in the form of the

Cable Television Consumer Protection and Competition Act of 1992, 106 Stat.

1460. See Implementation of Sections of the Cable Television Consumer

Protection and Competition Act of 1992: Rate Regulation, Second Order on

Recon., 9 FCC Red 4119, 4166 (1994). Subsequently, the FCC found that about

30 percent of the cable systems had raised regulated rates, even under the 1992

Cable Act. Cable Services Bureau, FCC Cable Regulation Impact Survey,

10

2. The Department of Justice has similarly concluded that

removing § 533(b) “will allow another competitor to enter the

video programming market, . . . increase the [telephone

companies’) willingness to take the financial risk of developing

broadband integrated networks, [and] make them more effective

competitors.”* It has also determined that telephone companies’

“provision of video programming will have procompetitive

benefits that outweigh any anticompetitive risks involved,” and

thus they “should be allowed to own and directly provide video

programming.”

The Department thus has consistently urged Congress to do

away with § 533(b), which is counterproductive of its actual

objectives. In 1991, the Assistant Attorney General for the

Antitrust Division, together with the Secretary of Commerce,

stated their position in these words: “We think that Congress can

best serve television viewers by removing barriers to entry by new

firms into the video services marketplace. The Administration

therefore supports removal of current legislative prohibitions

against telephone company provision of video programming.”

Letter from James F. Rill, Assistant Attorney General, Antitrust

Division and Robert A. Mosbacher, Secretary of Commerce to

Hon. John C. Danforth (Mar. 13, 1991) (quoted at J.A. 343). In

congressional testimony presented on January 27, 1994, Anne K.

Bingaman, Assistant Attorney General for the Antitrust Division

in the new Administration, reaffirmed the Department’s views:

Changes in Cable Television Rates Between Apr. 5, 1993-Sept. 1, 1993, at 3

(Feb. 22, 1994). A notable exception was the City of Alexandria, Virginia, in

which the incumbent cable operator — facing the prospect of head-to-head

competition from Bell Atlantic — actually decreased its rates by more than 10

percent. See Hong, Cable Rates Drop in Alexandria, Washington Post, Sept.

9, 1993, at V-1.

* Reply Comments of the United States Department of Justice before the

Federal Communications Commission, Telephone Company-Cable Television

Cross-Ownership Rules, CC Dkt 87-266 at 44-45 (Mar. 13, 1992) (quoted at

J.A. 342).

* Jd. (quoted at J.A. 342).

“The Administration . . . strongly endorses the provisions of H.R.

3636 that would permit existing cable and telephone companies to

offer both video and telephonic services in the same geographic

areas. . . . It is crucial that public policy promote competition

between methods for delivering telecommunication services.”

J.A. 381.

3. These conclusions have also been independently confirmed

by the National Telecommunications and Information Administra-

tion (NTIA), a unit of the Department of Commerce that is

responsible for telecommunications policy. The NTIA has

determined that:

In general, government restrictions that have the effect of

limiting the uses to which new technology can be put tend

to be inefficient and anticompetitive, and retard investment

in that new technology. In particular, we believe that the

current cable/telco crossownership rules are having such an

effect wth respect to investment in broadband public

network technology.

NTIA, TELECOMMUNICATIONS IN THE AGE OF INFORMATION 235

(1991) (quoted at J.A. 344). The NTIA has also stated that “the

likely benefits of LEC [local exchange carrier] entry into the video

programming business outweigh the potential costs of LEC

provision of video programming,” and that “[t}he opportunity to

provide programming should increase LECs’ incentives to

construct integrated broadband network facilities to carry that

programming to the home. This, in turn, could lead to

introduction of a wide range of innovative voice, data, and video

services for subscribers.” /d.

In 1992, the NTIA reiterated its documented concerns “about

the continuing wisdom of this restriction” on video programming

contained in § 533(b), and noted that “we have repeatedly

advocated its elimination.”’ As the NTIA explained again in more

” Reply of the National Telecommunications and Information Administration,

In Re Teleport Communications — New York, File No. 13135-CF-TC(3)-92,

at 3 (May 27, 1992) (quoted at J.A. 346)

12

detail: “Allowing telephone companies to provide video

programming in their local service areas would significantly

increase competition in the video services market, which would,

in turn, yield lower prices to viewers, better service quality, and

better programming diversity.” /d. In January 1994, this view

was reaffirmed in congressional testimony by Larry Irving,

Assistant Secretary of the Department of Commerce for

Communications and Information. J.A. 382, 383.

4. Finally, in January 1994, the Clinton Administration

released its “White Paper on Communications Act Reforms,”

which outlined the Administration's proposal to remove § 533(b)

on the ground that the statute is merely an undesirable obstruction

to the important goal of securing and promoting competition in the

telecommunications industry. As the White Paper states the

matter: “Although the existing cable-telephone company cross-

ownership restriction of the 1984 Cable Act may have been

appropriate when enacted, today it is an unnecessary and artificial

barrier to competition in the delivery of video programming to

American consumers and to investment in advanced local

infrastructure.” J.A. 370.

Taken together, these statements represent an impressive and

extremely thorough historical record, which establishes that

§ 533(b) does not advance any legitimate government interest.

Instead, the administrative record compiled by these federal

officials establishes that § 533(b) runs counter to the most

important objectives of established governmental policy toward

this industry, even as it imposes direct and substantial restrictions

on free speech. This conclusion, moreover, has been reached by

all of the officials who are charged with exercising responsibility

across the entire spectrum of federal authority to set national

telecommunications policy. The sound expertise reflected in the

historical record compiled by these officials, which plainly shows

that the very statute they are authorized to administer and enforce

is Counterproductive and affirmatively hinders the government’ s

asserted interest, warrants very close examination by this Court in

assessing the validity of § 533(b). On the basis of this record, it

13

is simply impossible to conclude that § 533(b) is “narrowly

tailored” to serve that interest.

11. THE ANTICOMPETITIVE EFFECTS OF

SECTION 533(b) ARE FELT BY MILLIONS

OF POTENTIAL VIEWERS

A law that shuts out millions of consumers from the Nation's

most important medium of expression cannot be deemed to leave

adequate alternative channels of communication open to the public.

Section 533(b) relegates a telephone company to three “alternative”

means of expression, which are completely unsatisfactory from the

standpoint of the consumer interests of the public: (1) video

programming outside its telephone service area; (2) non-video

programming forms of speech; and (3) the creation of video

programs distributed in-region by local broadcasters, cable

operators, or video stores, outside the telephone company’s

editorial control.

Whether or not these alternatives are “ample” as to the

telephone company speaker (and we believe that they are not),

they plainly are inadequate from the perspective of the public.

The first option, programming outside the region, is no alternative

at all for consumers who are located within the telephone

company’s service area. Out-of-region programming involves an

entirely different audience. Members of the public are not

fungible, and the protected rights of one audience cannot be denied

on the ground that the speaker can address a different audience

instead. See Schneider v. State, 308 U.S. 147, 163 (1939).

Nor do the in-region “alternatives” offer consumers any

meaningful substitute. To be sure, § 533(b) allows telephone

companies to publish newspapers or distribute handbills, but in the

modern age of telecommunications, video programming has

become the public’s primary source of news and information.

Millions more people have televisions than subscribe to

newspapers, and the average television household watches

television seven hours per day, and the average resident spends

almost ten times as many hours watching television as reading the

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newspaper. See J.A. 196-97 (Stipulated Facts 10-14). Moreover,

the “power to communicate ideas through sound and visual images

- . « iS significantly different from traditional avenues of

communication because of the immediacy of the medium.”

Telecommunications Research & Action Center v. FCC, 801 F.2d

501, 508 (D.C. Cir. 1986) (quoting FCC Report and Order), cert.

denied, 482 U.S. 919 (1987).

Similarly, the in-region distribution of telephone company

speech by cable operators and broadcasters, at the discretion of

these existing owners, is certainly no adequate substitute from the

perspective of consumers. The fact is that there is already far

more video programming than these incumbent cable operators

can possibly carry. Cable operators currently have an average

capacity of about 40 channels. J.A. 198 (Stipulated Fact 20). Yet

there are already available many more sources of ing:

local broadcast stations, more than 75 basic cable networks, 42

regional networks, 7 pay networ .s, 7 pay-per-view networks, and

other text and audio services. j.A. 144-45 (Affidavit of William

E. Lee 4 6(a), 6(b)). Accordingly, the Government has

stipulated in this case that “[cJurrently, the supply of available

video programming exceeds the available channel capacity of

almost all cable systems.” J.A. 198 (Stipulated Fact 19).

Furthermore, if independent video programmers are to reach

their audiences and expand the diversity of information available

to the public, they need the very editorial support and coordination

that § 533(b) forbids telephone companies from providing. Thus,

it was undisputed in the courts below that, as a prominent

independent video producer explained, “[iJndependent video

producers and media artists are producing much more video

programming than is currently being distributed on existing

systems. As long as show producers and distributors stand as

‘gatekeepers’ for the viewing audience, voices that do not conform

to the video carriers’ needs will not be heard." J.A. 324

(Affidavit of Robin Smith q 6). Telephone companies’ “ability to

package, market, and distribute video programming for access on

media artists to reach a much larger audience." /d. (at { 7).

1S

Lifting § 533(b) would thus permit a wide range of new voices to

be heard:

A new genre of programming will emerge, utilizing the

new interactive technologies in ways that are more

responsive to the needs of individuals. . . . With more

distribution outlets, small independent and non-profit

producers will gain a precious commodity — a platform for

diverse voices and visions that can be shared with the

Id. (at { 8) (emphasis added).

This effect of removing § 533(b) is also borne out by the

historical record compiled by the federal agencies, as described in

more detail above. The NTIA, for example, has urged that “the

availability of broadband facilities will likely spawn new

applications — video and non-video alike — as entrepreneurs and

carriers devise new service offerings that will benefit the

American public.” NTIA, TELECOMMUNICATIONS IN THE AGE OF

INFORMATION 234 (1991) (quoted at J.A. 344-45). “This, in turn,

could lead to introductions of a wide range of innovative voice,

data, and video services for subscribers.” Jd. at 235 (quoted at

J.A. 344). The White Paper similarly notes that the removal of

§ 533(b) “will allow telephone companies and cable operators to

compete in providing a full range of video, voice, and data

services to the public. Such competition can promote investment

that expands consumer choices and services.” J.A. 370.

The key element in achieving these benefits for the public is

the ability of the telephone companies to exercise editorial control

as they would undertake to compete in providing such

programming, which is nonetheless banned by § 533(b):

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[MJere provision of transmission facilities is not

sufficient. [Telephone companies} would still be forbidden

to perform the kind of packaging, marketing and publicity

functions that are crucial to the success of smaller

producers. ... [H]aving such services available to all

producers can make the differeace between a film that

passes unnoticed and a professional production that serves

to challenge people by adding to the diversity of opinion in

the public forum.

J.A. 326 (at { 12) (emphases added).

Providing consumers and independent video producers with

“leased access” cable channels in no way compensates for their lost

Opportunity to access the extensive programming package that

telephone companies could offer in the absence of § 533(b). The

FCC's “leased access” requirements make available only one or

two channels (at most) of a cable operator's capacity. J.A. 284-85

(Affidavit of Jean Pool ¢ 4). Accordingly, Congress has

concluded that “leased access has not been an effective mechanism

for securing access for programmers to the cable infrastructure or

cable subscribers.” H.R. Rep. No. 628, 102d Cong., 2nd Sess.

39 (1992).* Even if one or two cable channels were made

available to the telephone company or to another video

programmer, the bottom line would be that viewers would end up

with one (limited) voice simply replacing another, whereas what

consumers want — and what they are constitutionally entitled to

receive — are additional programming voices.

For all of these reasons, § 533(b) leaves consumers with no

adequate alternative means of communication. It is vital that

telephone companies be permitted to provide video programming

directly to their in-region subscribers. By directly prohibiting this

important means of providing “lower prices to viewers, better

* See also Donna N. Lampert, Cable Television: Does Leased Access Mean

Least Access?, 44 Fep. Comm. LJ. 245, 248 (Mar. 1992) (“the access

provisions of the Cable Act have wholly failed to serve their intended purpose

of reducing the bottleneck control of cable operators”).

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service quality, and better programming diversity,” § 533(b)

deprives “all users, residential and business alike,” of these

important benefits. NTIA Reply at 3 (quoted in J.A. 346). It

therefore cannot pass muster under the “intermediate scrutiny”

standard of constitutional review.

CONCLUSION

The judgment of the Court of Appeals should be affirmed.

Respectfully submitted,

SAMUEL A. SIMON

901 15th Street, N.W.

Suite 230

Washington, D.C. 20005

(202) 408-1400

Counsel for Amici Curiae

October 18, 1995