Appellants Brief — Turner Broadcasting System, Inc. v. FCC

IN THE

Supreme Court

of the Gnited States

OCTOBER TERM, 1995

TURNER BROADCASTING SYSTEM, INC., e¢ al.,

Appellants,

V.

FEDERAL COMMUNICATIONS COMMISSION, et al.,

Appellees.

On from the United States District Court

or the District of Columbia Circuit

BRIEF FOR APPELLANTS

DISCOVERY COMMUNICATIONS, INC.

AND THE LEARNING CHANNEL

Of Counsel:

JUDITH A. MCHALE

MARK HOLLINGER

DIANE L. HOFBAUER

DISCOVERY

COMMUNICATIONS, INC.

7700 Wisconsin Avenue

Bethesda, MD 20814

(301) 986-1999

April 26, 1996

ALBERT G. LAUBER, JR. *

PETER VAN N. LOCKWOOD

CAPLIN & DRYSDALE, CHTD.

One Thomas Circle, NW

Suite 1100

Washington, DC 20005

(202) 862-5000

* Counsel of Record

PRESS OF BYRON S. ADAMS

+ WASHINGTON, D.C. # 1-800-347-8208

i

QUESTION PRESENTED

Whether, in the absence of any jeopardy to the health of

the overall system of free, local broadcast television (nationally

or in particular markets), the First Amendment permits

Congress to impose on all cable operators a requirement of

mandatory carriage of local broadcast stations in preference to

all other programmers.

il

PARTIES TO THE PROCEEDINGS

Plaintiffs:

Atlanta Interfaith Broadcasters, Inc.

A&E Television Networks

Black Entertainment Television, Inc.

Daniels Cablevision, Inc.

Discovery Communications, Inc.

E! Entertainment Television, Inc.

Lifetime Entertainment Services

International Family Entertainment, Inc.

The Learning Channel

National Cable Satellite Corporation d/b/a C-Span

National Cable Television Association, Inc.

National Interfaith Cable Coalition, Inc.

QVC, Inc.

Time Warner Entertainment Company, L.P.

The Travel Channel, Inc.

Turner Broadcasting System, Inc.

USA Networks

Defendants:

Association of America’s Public Television Stations

Association of Independent Television Stations, Inc.

Community Broadcasters Association

Consumer Federation of America

The Corporation for Public Broadcasting

Sandra Engle

Federal Communications Commission

The International Association of Machinists and Aerospace

Workers, AFL-CIO

Appellants’ Rule 29.6 disclosure statements are set forth at J.S. App.

144a.

International Television Broadcasting, Inc.

Morningstar Communications

National Association of Broadcasters

National Council of Senior Citizens

National Rural Telecommunications Cooperative

Office of Communication of the United Church of Christ

Paging Associates, Inc.

The Public Broadcasting Service

Sherjan Broadcasting Co., Inc.

Triplett & Associates, Inc.

TV 14, Inc.

TV 58 St. Louis, Inc.

United States of America

Zantech, Inc.

iv

TABLE OF CONTENTS

Page

I i

PARTIES TO THE PROCEEDINGS ................ il

ee SEED wp ccccvectccanpassesenes vi

EE rrr ry |

EEE cnnsnanencacacdsdéneansarbanenel l

CONSTITUTIONAL AND STATUTORY PROVISIONS 2

0, PrerrrTr Ti Tr ree 2

INTRODUCTION AND SUMMARY OF ARGUMENT 2

ARGUMENT:

I. THE MUST-CARRY PROVISIONS HAVE

ADVERSELY AFFECTED PLAINTIFFS’

EXERCISE OF THEIR FIRST AMENDMENT

PEED cccvccoscetcasestoncedncdcckaetned. 5

Il. DEFENDANTS HAVE FAILED TO PROVE A

SUBSTANTIAL GOVERNMENTAL INTEREST .. 8

A. The Government’s Actual Interest, Far From

Being “Substantial,” Is Illegitimate ........... x

The Absence Of Must-Carry ............ 11

2. The Governmental Interest Urged By The

Public Broadcasters Is Illegitimate ...... 14

ee oe OT Rw RE tee

ew

Vv

Ill. “SWITCH-AND-ANTENNA” CAPABILITY IS A

CONSTITUTIONALLY ACCEPTABLE, LESS

RESTRICTIVE ALTERNATIVE TO ANY MUST-

PUTT TT TT TOTTI TTT ee 17

A. The FCC And The D.C. Circuit Have

Previously Approved Switch-And-Antenna

Capability As A Less Restrictive Alternative . .. . . 19

Be BIS ov ce ccccccscccccs 19

2. The FCC's Response To Quincy ........ 20

3. The Century Decision ................. 22

B. Expert Testimony And Practical Experience

Prove The Feasibility Of The Switch-And-

EE sake ncbdsdedsececcces 24

1. Switching To Off-Air Reception ......... 24

2. Reception Of Off-Air Signals Via Antenna. 26

3. Practical Experience With A/B Switches .. 28

C. Congress’s Dismissal Of The Switch-And-

Antenna Alternative Was Not Supported By

“Substantial Evidence” ..............200: 32

1. Evidence Cited By Congress ........... 35

2. Evidence Cited By Judge Sporkin ....... 41

ST codec eed deal casaseesbueskbeseens aa

vi

TABLE OF AUTHORITIES

Page

CASES:

Century Communications Corp. v. FCC, 835

F.2d 292 (1987), cert. denied, 486 U.S.1032

CORED cccssnandtecsctensstenss 4, 22, 23, 24, 31, 37

Quincy Cable TV, Inc. v. FCC, 768 F.2d 1434 (1985),

cert.denied, 476 U.S. 1169 (1986) ..... 4, 7, 10, 19, 20

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

IOS a ae 7

Simon & Schuster, Inc. v. New York State Criminal

Victims Board, 502 U.S. 105 (1991) .......... 10, 11

Turner Broadcasting System, Inc. v. FCC, 114 S. Ct.

Ec cesectesacdnccccdcescocsace 8, 10, 31

CONSTITUTION, STATUTES, & REGULATIONS:

CG, Gee BT Ec ccccccccccvcccccess passim

Cable Television Consumer Protection and

Competition Act of 1992, Pub. L. No. 102-385, 106

Stat. 1500:

SE a, Rea Stee Siveucddduas 15

SE eee ee ee eee s

teil, bata ans abibectiniie 15, 35

ERAN pe aerate 325: 36

iA edaapanaelh = Etat sere t 5,1 15

ar ae eri ad ila 15

iru el Prd Sled Bo Slee 15

ee TO conaenimaiian 1

Ee men ee 17

vii

Table of Authorities continued

Page

SF CPR. GB US.TIS GS USTIT . ww ccc ccc cccces 38

ad chao sekeéen vee 39

MISCELLANEOUS:

H.R. Rep. 102-628, 102d Cong., 2d Sess. (1992) . 37, 39

S. Rep. 102-92, 102d Cong., 2d Sess. (1992) . 37, 38, 39

“Cable TV Consumer Protection Act of 1989,” Hearing

before the Subcomm. on Communications of the Senate

Commerce Comm. (101-702), March 29,1990 ...... 42

“Must Carry,” Hearing before the Subcomm. on

Communications of the Senate Commerce Comm.

i. 2 4 & & eee 38

FCC, First Annual Report to Congress Assessing the

Status of Competition in the Market for Cable

Television and Other Video Programming Services,

59 Fed. Reg. 64657, 64659 (1994) ........... 29, 30

Amendment of Part 76 of the Commission's Rules

Concerning Carriage of Television Broadcast

Signals by Cable Television Systems, 1 FCC Red.

864 (1986), reconsidered in part, 2 FCC Red. 3593

(1987) . .20, 21, 22, 23, 25, 26, 27, 31, 37, 38, 39, 41, 42

Dg. cc ncecccecessecs 29

Paul Kagan & Assoc., Marketing New Media, Feb.

Re ee eee EoD ae een ae 30

Warren's Cable Regulation Monitor, Nov. 29, 1993 .. 29

eg le le AO St

TS lms Pipes a

IN THE

Supreme Court of the Anited States

OCTOBER TERM, 1995

No. 95-992

TURNER BROADCASTING SYSTEM, INC., ef al.,

Appellants,

Vv.

FEDERAL COMMUNICATIONS COMMISSION, ef ai,

Appellees.

On Appeal from the United States District Court

for the District of Columbia

BRIEF FOR APPELLANTS

DISCOVERY COMMUNICATIONS, INC.

AND THE LEARNING CHANNEL

OPINION BELOW

The opinion of the district court (J.S. App. la-112a) is

reported at 910 F. Supp. 734.

JURISDICTION

The district court’s judgment (J.S. App. 153a) was entered

on December 20, 1995. The notice of appeal and the juris-

dictional statement were filed on December 21, 1995 (J.S. App.

149a), and this Court noted probable jurisdiction on February

20, 1996. Jurisdiction rests on 28 U.S.C. § 1253.

2

CONSTITUTIONAL AND STATUTORY PROVISIONS

The First Amendment to the United States Constitution

provides in pertinent part: “Congress shall make no law * * *

abridging the freedom of speech, or of the press.” Relevant

provisions of the Cable Television Consumer Protection and

Competition Act of 1992 (“the 1992 Cable Act” or “the Act”),

are reprinted at J.S. App. 113a-143a.

STATEMENT

Discovery Communications, Inc., and The Learning Channel

concur in the other appellants’ statement of the case.

INTRODUCTION AND SUMMARY OF ARGUMENT

Appellants submit this separate brief to emphasize two

points. First, section 5 of the 1992 Cable Act, which affords a

must-carry preference to public broadcasters, is

unconstitutional under any level of First Amendment scrutiny.

Second, sections 4 and 5 are both unconstitutional under the

“narrow tailoring” prong of the O’Brien test because switch-

and-antenna capacity represents a workable less restrictive

alternative to must-carry.

A. In enacting must-carry, Congress has mandated that

cable operators prefer one set of speakers (television

broadcasters) over another set of speakers (cable programmers),

without regard to the viewing preferences of cable subscribers

or the editorial decisions of the operators themselves. In the

parties’ initial appearance before this Court, defendants sought

to justify this discrimination on a ground that was, at least in

theory, substantial: preserving the existing system of free over-

the-air television for the 40% of TV viewers who do not

subscribe to cable.

On remand, defendants conceded that the local broadcast-

ing system is in no jeopardy from cable and that the public’s

access to “free TV” is not at risk. Defendants accordingly

3

urged, and Judge Sporkin adopted, a new rationale for must-

carry: enhancing the financial well-being of the relatively small

subset of broadcasters — generally, little-watched UHF and

third-tier public stations in heavily-saturated markets — that

actually elect must-carry. As Judge Williams has shown, this

new rationale is not the objective Congress posited, and it is

both circular and fundamentally illegitimate.

The public broadcasters made the same strategic retreat as

the Government and the commercial broadcasters, although

their new rationale has a slightly different spin. The evidence

on remand indisputably established that (1) the public

broadcasting system is in excellent financial health and grew at

a strong rate in the absence of must-carry; and (2) the vast

majority of public stations would be carried by cable operators

without government intervention. Indeed, the public

broadcasters could not identify a single station that has failed,

gone dark, or suffered cognizable harm from an adverse

Carriage decision.

Faced with this evidence, the public broadcasters

abandoned any pretense of proving systemic harm, asserting

instead a congressional objective to promote “universal access”

to public television. By “universal access,” they mean carriage

of each and every, present or future, public station on all cable

systems, at the expense of competing cable networks (like

Discovery and TLC) that offer similar documentary and

educational programming. This theory is a more candid

version of the “more is better” rationale that infects defendants’

submission generally. But as articulated by the public

broadcasters, it is essentially content-based, for it rests on the

assertion that public programming is “different” or “better” and

thus worthy of maximum public support.

At the end of the day, the public broadcasters have not

shown, and do not contend, that must-carry is necessary to

preserve the health of the public broadcast system — that is, the

4

ability of public stations to present a diverse mix of

programming to over-the-air viewers nationwide. Rather, they

seek mandatory carriage on cable systems in order to expand

their reach to viewers who are unable to receive their signals,

or who receive them poorly, thus realizing more fully their goal

of “universal access.” In demanding “universal access” to

cable viewers at the expense of competing cable programmers,

the public broadcasters are seeking a subsidy that Congress

cannot grant consistently with the First Amendment.

B. Even if the defendants could identify a legitimate and

substantial governmental interest, a means of achieving it

without discriminating against cable programmers is readily

available — education of cable subscribers in the acquisition

and use of an inexpensive input-selector (“A/B”) switch.

Together with a receiving antenna, this switch enables cable

subscribers to receive broadcast stations not carried on their

cable system to the same extent such stations are available to

their neighbors who do not subscribe to cable.

The availability of switch-and-antenna capability as a

preferable alternative to must-carry rules was recognized by the

D.C. Circuit in Quincy Cable TV, Inc. v. FCC, 768 F.2d 1434

(1985), cert. denied, 476 U.S. 1169 (1986), adopted by the FCC

in its 1986 and 1987 Reports reinstating a more limited set of

“interim” must-carry rules, and embraced again by the D.C.

Circuit when rejecting those interim rules in Century

Communications Corp. v. FCC, 835 F.2d 292 (1987), cert.

denied, 486 U.S. 1032 (1988). Prior approval of switch-and-

antenna capability by the FCC and a unanimous D.C. Circuit

surely creates a prima facie case that it is an acceptable

alternative to any must-carry scheme.

As Judge Williams explains, the evidence on remand over-

whelmingly confirms this conclusion. Switching from cable to

off-air reception is a simple exercise entailing no significant

cost, in time or money, for the viewer. Thousands of cable

ee ee

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5

subscribers successfully used A/B switches in 1993 to watch

broadcasters dropped from cable during a “retransmission

consent” dispute. And A/B switches are used effortlessly by

millions of subscribers to DBS and other distribution services.

Defendants oppose switch-and-antenna capacity as an

alternative to must-carry for two main reasons. They contend

that some cable subscribers may be too lazy or disinterested to

acquire A/B switches; and they urge that, even with an A/B

switch, some subscribers may be unable to receive a broadcast

signal because of distance or terrain obstacles. However, as

Judge Williams points out, possible consumer lethargy cannot

be a legitimate basis for impairing cable programmers’ First

Amendment rights. And while broadcasters may have a fair

claim to Government assistance to ensure their access to

viewers they can reach over-the-air (which is all that their

broadcast license entitles them to), commandeering cable

channels to extend broadcast signals to viewers they could not

otherwise reach stands on a wholly different footing. This

latter objective, which underlies all the defendants’ submis-

sions below, is a fundamentally illegitimate preference for the

financial interests of broadcasters over the First Amendment

rights of competing cable speakers.

ARGUMENT

I. THE MUST-CARRY PROVISIONS HAVE

ADVERSELY AFFECTED PLAINTIFFS’

EXERCISE OF THEIR FIRST AMENDMENT

RIGHTS

Discovery Communications, Inc. (“DCT”) is a cable pro-

grammer: it creates video programming and distributes that

material through cable systems nationwide. It currently

operates two major programming networks: The Discovery

Channel and The Learning Channel. Both are dedicated to the

provision of high-quality documentary and educational

6

programming aimed at people who watch television to broaden

their understanding of the world.

The Discovery Channel (“Discovery”) was founded in

1985 and is now a well-established basic cable network with

more than 63 million subscribers. In a November 1994 survey,

Discovery ranked first among basic cable networks in terms of

perceived value and importance to viewers. J.A. 984. DCI

acquired The Learning Channel (“TLC”) in early 1991,

invested more than $40 million to upgrade its programming,

and relaunched it in October 1991. J.A. 984-985. In a Novem-

ber 1994 survey, TLC ranked first among mid-sized cable

networks in terms of perceived value and importance to

viewers. Similarly, in a December 1994 survey of cable

executives, TLC ranked first among emerging cable networks

in terms of the overall appeal of its programming. J.A. 985.

TLC incurred operating losses in 1991, 1992, 1993, and

1994. It is now carried on about 20% of U.S. cable systems

and has about 32.4 million paying subscribers. As a start-up

network, TLC usually competes for one of the last available

channels (if any) on a cable system. In order to achieve

financial viability, it is essential that TLC increase its

subscribership by obtaining carriage on additional cable

systems. J.A. 985.

The must-carry provisions have harmed TLC, and to a

lesser extent Discovery, in a variety of ways. TLC and

Discovery suffer First Amendment injury whenever a cable

system not now carrying them is forced to add a must-carry

broadcaster. Whether or not Discovery and TLC would enjoy

a certainty of carriage absent the must-carry law, the addition

of each marginal broadcaster reduces the number of slots for

which Discovery and TLC may compete. This discriminatory

impairment of cable programmers’ ability to reach an audience

constitutes First Amendment injury per se.

i ee oh at OD ee ae ee eet one =a

te ee ee

7

Apart from this generic harm, TLC can trace harmful

effects on at least 31 specific cable systems directly to the

must-carry law. These are systems that, because of the must-

Carry provisions: (a) have been unable to launch TLC; (b) have

been forced to drop TLC; (c) have been unable to extend TLC

full-time carriage from current part-time carriage; (d) have been

forced to demote TLC from full-time to part-time carriage; or

(e) have been forced to delay launching TLC for significant

periods of time. Executives of these 31 cable systems have

confirmed that they had no available channel capacity at the

relevant time, and that, but for obligations imposed by must-

carry, TLC would have enjoyed full-time carriage on each

system for the past several years. J.A. 985-986, 989-997.

As a result of these adverse actions, TLC has lost, or failed

to secure, approximately 1,800,000 full-time subscribers since

October 1992. J.A. 987. The loss of these subscribers has

compromised TLC’s ability to reach its desired audience and

exercise its First Amendment rights. No less impaired are the

First Amendment rights of TLC’s prospective viewers. By

forcing cable systems to discriminate against TLC’s

programming — which is uniformly highly valued by viewers

— in favor of marginal and little-watched broadcasters,

Congress has treated cable subscribers’ viewing preferences as

irrelevant. “This conscious disregard of subscribers’ viewing

preferences is difficult, if not impossible, to reconcile with

[this] Court’s repeated admonition that the interests of viewers

should be considered ‘paramount’ in the First Amendment

calculus.” Quincy Cable TV, Inc. v. FCC, 768 F.2d 1434, 1453

(D.C. Cir. 1985), cert. denied, 476 U.S. 1169 (1986), quoting

Red Lion Broadcasting Co. v. FCC, 395 U.S. 367, 390 (1969).

By causing TLC to lose subscribers, the must-carry law has

also inflicted economic harm. As a result of non-carriage or

reduced carriage on the 31 cable systems described above, TLC

has forfeited up to $1.75 million annually in gross revenues

8

since 1992. This revenue loss stems from a combination of

reduced advertising income and foregone license fees. J.A.

986-988.

Il. DEFENDANTS HAVE FAILED TO PROVE A

SUBSTANTIAL GOVERNMENTAL INTEREST

A. The Government’s Actual Interest, Far From

Being “Substantial,” Is Illegitimate

When initially before this Court, the Government’s defense

of must-carry rested on the submission that, absent the statute,

“the economic viability of free local broadcast television * * *

will be seriously jeopardized” (Act § 2(a)(16)). This Court

took defendants at their word. “[I]n applying O’Brien

scrutiny,” Justice Kennedy stated, “we must first ask whether

the Government has adequately shown that the economic health

of local broadcasting is in genuine jeopardy and in need of the

protections afforded by must-carry.” Turner Broadcasting

System, Inc. v. FCC, 114 S.Ct. 2445, 2470 (1994).

Put to the proof, defendants on remand completely

changed their characterization of the “governmental interest”

alleged to support must-carry. They explicitly abandoned any

contention that the system of local broadcasting is at risk, or

that must-carry is needed to ensure the existence of “free TV”

for viewers who do not subscribe to cable. Instead, defendants

posited a more modest objective, newly coined to match their

evidentiary showing: “protection of financially weak stations”

with a view to ensuring “the widest possible dissemination of

information from diverse and antagonistic sources.” Govt.

Opp. Br. 6, 13; NAB Opp. Br. 61, 63-64, 69; Pub. Opp. Br. 7,

24.

Defendants on remand offered varied formulations of this

new theme. The public broadcasters said that Congress aimed

to promote “universal access” to all public stations. Pub. Opp.

Br. 24. At times, NAB contended that Congress legislated “to

9

prevent a material reduction in the diversity of [broadcast]

programming” or in “the quality of broadcast service.” NAB

Opp. Br. 18-19, 69. At other times, NAB asserted that

Congress could permissibly legislate “to maintain, or even

enhance, the quantity and quality of local broadcasting

— Id. at 61, 64 (emphasis add-

Missing from all these formulations was any contention

that the system of local broadcasting is at risk. Indeed,

defendants could concede the system’s perpetual health and

still advance the argument they made below — that must-carry

encourages entry of more stations, helps those stations offer

more programming, enables that programming to be of higher

quality, and thus promotes “the widest possible dissemination

of information.” Govt. Opp. Br. 13 (emphasis original).

Reduced to its essentials, defendants’ justification for must-

carry was simply that “more is better.”

Judge Sporkin largely accepted defendants’ eleventh-hour

submissions concerning this supposed “governmental interest.”

He deemed it irrelevant that “the economic health of the broad-

casting industry as a whole is not in genuine jeopardy.” J.S.

App. 8a-9a n.11 (emphasis added). “The relevant inquiry,” he

said, concerns the health “of those broadcasters protected by

the must-carry provisions,” that is, the relatively small number

of stations that actually elect must-carry instead of demanding

payment for retransmission consent.

Defendants have retreated to an indefensible position, and

Judge Sporkin followed them there. The governmental interest

that defendants now assert is not the interest that Congress

identified, and it is certainly not the interest whose genuineness

and substantiality this Court required the Government to

demonstrate on remand. Under defendants’ revisionist view,

must-carry seeks merely to enhance the prosperity of some

individual broadcasters — existing stations with minimal

10

viewership, and potential new entrants that find guaranteed

cable carriage advantageous in securing investment financing.

But it cannot plausibly be contended that maximizing the

fortunes of every would-be broadcaster is necessary to preserve

the health of the /ocal broadcast system. By many measures,

this country’s economic “system” is now in good health. But

the system’s strength does not hinge on the permanent financial

viability »* every single entrepreneur.

As compared with the interest that the Government

advance is trivial or worse. The Government theoretically has

a substantial interest in preserving the system of free, over-the-

air broadcasting from destructive, anticompetitive action. But

that interest is not implicated here because the systemic risk

that Congress hypothesized is “merely conjectural,” not real.

Turner, 114 S.Ct. at 2470. In effect, must-carry is a mere form

of wealth redistribution — a subsidy for marginal individual

broadcasters, funded by a tax on cable speakers and their

subscribers. The desire to effect such a wealth transfer does not

constitute a “substantial government interest” justifying

infringement of First Amendment rights. “Indeed,” as the D.C.

Circuit has previously held, “were the individual broadcasters

themselves the object of [must-carry’s] favors, the objective

itself would be fundamentally illegitimate.” Quincy Cable TV,

supra, 768 F.2d at 1460.

In any event, this Court should hold the Government to the

standard that Congress enunciated. The must-carry law is

unconstitutional because the system of local broadcasting is not

in jeopardy. Defendants’ new-found “governmental interest”

is a transparent attempt to turn the effect of must-carry into its

purpose. This Court has previously refused to allow parties to

evade their burden under First Amendment scrutiny by equating

the effects of the statute with the governmental interest at stake.

Simon & Schuster, Inc. v. New York State Criminal Victims Bd.,

ll

502 U.S. 105, 120 (1991) (disapproving attempt to “take[] the

effect of the statute and posit{] that effect as the State’s

interest”).

B. The Public Broadcasters Have Not Shown A

Substantial Governmental Interest

In this brief, we rely largely on our co-plaintiffs’ submis-

sions to show the error of defendants’ assertions concerning the

health of broadcasting generally. We will, however, address

certain allegations of harm advanced by the public broad-

casters. Discovery and TLC produce educational and

documentary programming that is highly valued by viewers.

Public stations pride themselves on offering similar fare, and

they compete directly with Discovery and TLC for viewers.

1. The Public Broadcasting System Thrived

In The Absence Of Must-Carry

Public broadcasting has enjoyed continuous growth since

its inception, with the number of public stations increasing

every year since 1953. J.A. 834-835, 851-853. From 1985 to

1992 — a period without must-carry rules — the number of

public TV stations increased from 316 to 368. J.A. 329, 852-

853. Public broadcasters’ member revenues during these years

grew faster than rate of inflation.’ Thus, the public

broadcasting industry was generally healthy and growing. See

also Public Television Service and Structure Analysis (prepared

for APTS) (May 1991), J.A. 2112-2113.

' See, e.g., Public Television in the Information Age (prepared for the

Association of America’s Public Television Stations (“APTS”)) (July, 1994)

(J.A. 2129-2130, 2133-2134); Viewer and Listener Membership Income for

Public Television and Radio Grantees - Fiscal Year 199], CPB Research

Notes (Sept. 1992) (J.A. 199); Public Broadcasting Income - Fiscal Year

1993 (Dec. 1994) (J.A. 313-314); APTS, Critical System Objectives for

Public Television - 1992 Status Report (Oct. 1992) (J.A. 2115-2116).

12

The public broadcasters concede that there was no evi-

dence before Congress that a single public station has ever gone

bankrupt, ceased operations, or turned in its license. Pub. Br.

39 n.53. The president of APTS in deposition testimony stated

that no public station has ever gone dark. J.A. 328-329.

Defendants in their briefs below identified no public station

that is now, or has ever been, in serious financial difficulty.

And they offer no theory explaining why public stations should

be a target of future anticompetitive conduct: noncommercial

broadcasters do not sell advertising and thus do not compete

with cable operators for advertising dollars. The bottom line is

that the public broadcasting system, as of 1992, was perfectly

healthy and in no jeopardy from cable. Any jeopardy it

currently faces arises, not from cable, but from an increasingly

cost-conscious Congress.

On remand, APTS compiled a “master list” showing that

a total of 63 public stations had been dropped by cable systems

on 130 occasions between 1985 and 1992. J.A. 1184-1185,

1199-1212. This compilation disclosed markedly fewer drops

than APTS had alleged in earlier submissions to Congress,

which Judge Sporkin credited. See J.S. App. 12a (citing 1987

APTS study).’ In any event, defendants did not contend that

these editorial decisions of cable operators had harmed the

public broadcast system in any way. Defendants’ own lead

expert testified that only the least watched 15% of

noncommercial stations experienced carriage problems in the

2 Dr. Bernadette McGuire, APTS’s Director of Planning and Research,

reexamined the data that APTS submitted to Congress and concluded that

“quite a few” of the stations claimed to have been dropped “hadn't been

dropped at all”. See J.A. 360-361. A 1991 APTS survey, finding only 12

public stations dropped by cable systems within a 50-mile radius, concluded

that “drops and shifts of public television stations * * * are not occurring

with great frequency.” APTS, Harm to PTV Stations from Cable System

Shifts and Drops (Aug. 1991), J.A. 121-125.

13

absence of must-carry, and those stations were usually the third

noncommercial station in markets with more than two such

stations. J.A. 450-452, 453, 458. Public TV stations occupy

approximately 16,500 cable channels nationwide, and the 130

drops set out in the APTS master list comprise less than 1% of

this total.’

The public broadcasters presented no factual evidence to

quantify the financial harm they allegedly experienced from

cable drops. In a half-hearted effort to estimate such harm, they

presented a “hypothetical model” constructed by one of their

employees. J.A. 1038-1042. Using a variety of assumptions,

this model argued that a station’s loss of cable carriage may

result in lower viewership, which in turn may result in lost

viewer contributions, which taken cumulatively with other sta-

tions’ losses may damage the entire public television system.

J.A. 1043-1047. This argument is precisely the sort of

conjecture that this Court has deemed insufficient to meet

defendants’ burden of proof. Turner, 114 S.Ct. at 2470

(“recited harms [must be] real, not merely conjectural”). And

the public broadcasters’ hypothetical model is undermined by

> A broadcast station will typically be carried by numerous cable

systems within the geographical reach of its signal; a “drop” refers to its

removal from any one of those systems. The harm occasioned by a drop

must be assessed in light of this fact. For example, if a station carried by 25

cable systems reaching 250,000 subscribers is dropped by one system

having only 5,000 subscribers, the harm experienced by that broadcaster will

be minuscule, especially since the station will continue to reach 100% of its

over-the-air audience. Overall, there are about 355,000 cable channels

occupied by programming in the United States. J.A. 694. Approximately

20%, or 71,000, of those channels are occupied by broadcast stations. J.A.

1152-1154. Since there are approximately 1,550 broadcast stations, on

average each broadcast station is carried by about 45 cable systems. In

rough terms, therefore, the Nation’s 368 public TV stations occupy about

16,500 channels. See J.A. 853.

14

the facts: as explained above, public stations’ viewership and

revenue during 1985-1992 steadily increased each year without

must-carry.

2. The Governmental Interest Urged By The

Public Broadcasters Is Illegitimate

Confronted with the evidence below and the concessions

of their own experts, the public broadcasters ultimately dis-

avowed any obligation to show that their economic health is

“seriously jeopardized.” Pub. Br. 15 n.10, 40-41; see Pub.

Reply Br. 37 (“Congress did not assume that the entire public

television system was in jeopardy without must-carry”). This

new stance marked a sharp contrast with their earlier

submissions to this Court, in which they urged the necessity of

must-carry to “preserve the institution of local public

broadcasting.” Brief of Public Broadcasters in No. 93-44, at i

(stating question presented).

The public broadcasters’ new theory on remand started

with the premise that Congress, having appropriated taxpayer

funds to support public television, wished to encourage

“universal access” to it. Pub. Br. 11, 14, 19-20. From that

premise, they reasoned that the Government may act to prevent

public stations from losing any viewers, since the goal of

“universal access” will then be realized more completely. In

order to “promot[e] the widespread dissemination of multiple

sources of information,” the public broadcasters posited a

substantial governmental interest in “[e)nsuring that ail

Americans * * * have access to all of their local public

television stations and that all of these stations remain

financially viable.” Jd. at 58-59 (emphasis added).

This rationale is a more candid version of the

fundamentally illegitimate “more is better” rationale that infects

must-carry generally. As articulated by the public broadcasters,

moreover, this rationale is essentially content-based. Despite

15

their mantra of “universal access,” they have never explained

why some communities must have five public stations when

others have two, or wy that fifth station should have priority

over any cable programming seeking access to the same

channel, regardless of viewer interest.‘ After all, it is the

interests of the viewers, not the broadcast stations, that

Congress said it was protecting. See Act § 2(a)(1), (17) & (19).

_The closest the public broadcasters came to a rationale for

“universal access” was the suggestion that public broadcasting

is “different” and uniquely deserving of public support. See

Pub. Br. 16-19; Pub. Reply Br. 44, 45 n.64. As producers of

high-quality educational and documentary programming,

Discovery and TLC strongly dispute the notion that noncom-

mercial programming is “better” in any sense of the word. But

the conclusion the public broadcasters seek to draw from this

premise — preferential access to cable, justified by the

allegedly superior content of their speech — in any event is

incompatible with the First Amendment.

Equally problematic is the public broadcasters’ invocation

of “diversity.” Unlike the governmental interest that Congress

identified and the Government previously advanced, the

“diversity” goal proffered by the public broadcasters has no

principled limits. “Diversity” is a highly subjective and an

infinitely expandable concept. However “diverse” public

programming is now, it is presumably capable of becoming

“more diverse” if existing stations expand or improve their

programming and new public stations enter thé market. Taken

to its logical extreme, the public broadcasters’ argument would

justify any infringement of speech under the O’Brien test, so

* For cable systems with more than 36 channels, the Act requires carriage

Ca eins lead ells tersteusmn, cxsey Gam whem prgemmning

substantially duplicates that of another public station already being carried.

Act §§ 5(b\(1) & 5(e) ”

16

long as the ultimate effect was to enhance public television's

well-being. |

The public broadcasters’ “diversity” argument Is

essentially a euphemism for “discrimination. . Public broad-

casters have an alternative medium, wholly distinct from cable,

for distributing their speech. Unlike Discovery and TLC, they

enjoy a license to transmit their signals over the air 7 granted

to them for free — and they also receive sbstantial public

financing. The public broadcasters have not explained how

“diversity” is enhanced by enforced cable carriage of every

public station at the expense of cable programmers like

Discovery and TLC, which likewise offer high-quality

documentary and educational programming.

“[A]part from content-based paeans to the quality of its

programming,” the only argument the public broadcasters make

to support their claim to preferential carriage is that “the public

is already subsidizing public television and is entitled to protect

its investment.” J.S. App. 102a (Williams, J., dissenting), see

Pub. Br. 20. Judge Williams showed the error of this

contention. The public broadcasters have cited no precedent,

and we know of none, for the proposition that Congress can

discriminate against one group of speakers in order “to enhance

the value of a previously granted subsidy” to a competing group

of speakers (J.S. App. 102a). This argument plainly proves too

much: if such bootstrapping were sufficient, the ome =

could always satisfy the “substantial interest” prong o

O’Brien at as to any action that advantaged a favored

speaker, simply by subsidizing that speaker, then using the

subsidy to justify discriminatory treatment of the speaker’s

competitors.

In sum, the public broadcasters have not shown, and do not

contend, that must-carry is necessary to preserve the health of

the public broadcast system — that is, the ability of public

stations to present a diverse mix of programming to over-the-

oo. ee se

17

air viewers nationwide. Rather, they seek mandatory carriage

on cable systems in order to expand their reach to viewers who

are unable to receive their signals, or who receive them poorly,

thus realizing more fully their goal of “universal access.” This

objective is plain on the face of the statute: if a cable system

operates in an area where no public signal is available over-the-

air, it must import and carry the signal of at least one public

station from another community. 47 U.S.C. § 535(b\(3)(B). In

demanding “universal access” to cable viewers at the expense

of competing cable programmers, the public broadcasters are

seeking a preference that Congress cannot grant consistently

with the First Amendment.

II. “SWITCH-AND-ANTENNA” CAPABILITY IS A

CONSTITUTIONALLY ACCEPTABLE, LESS

RESTRICTIVE ALTERNATIVE TO ANY

MUST-CARRY REGIME

Broadcast television, by its nature, requires that viewers

install antennas to receive signals over-the-air. Americans for

decades have used receiving antennas to watch television

without the benefit of cable service, and approximately 38% of

the public today does not subscribe to cable. J.A. 763-764: see

H.R. Rep. 102-628, 102d Cong., 2d Sess. 30 (1992) (noting that

cable passed 95% of households in 1992, while only 60% sub-

scribed). At least 36 million U.S. households are currently

using antennas to view television off-the-air. J.A. 764.

The advent of cable created the potential for impairing

subscribers’ off-air reception capacity, since antennas were

often disconnected from the back of the TV set when cable was

installed. It has always been recognized, however, that a

simple switch — called an “input selector” or “A/B switch” —

permits the antenna to remain in place and thus enables a cable

subscriber to alternate at will between cable and off-air

reception of broadcast signals. By use of this switch, a cable

subscriber is free to choose “between cable’s offerings and all

18

the television programming that would have been available to

the viewer if cable had never been installed.” J.S. App. 103a

(Williams, J., dissenting).

We submit that switch-and-antenna capability — and any

measures that Congress reasonably believes would encourage

consumers’ convenient use of it — represents a constitutionally

permissible, less restrictive alternative to any must-carry

regime. There is no justification for impairing cable speakers’

First Amendment rights if subscribers can readily view off-air

any broadcasters that cable systems decline to carry.

In the pages that follow, we will first show that the FCC

and the D.C. Circuit have previously approved switch-and-

antenna capability as a constitutionally-preferable alternative to

must-carry. Second, we will show that the evidence on remand

— including expert testimony, practical experience in the cable

industry, and successful use of A/B switches in such alternative

distribution technologies as DBS and MMDS — confirms that

the Commission and the D.C. Circuit were correct in embracing

this option. Third, we will show that Judge Sporkin erred in

discerning “substantial evidence” to support Congress’s rejec-

tion of A/B switches in the 1992 Act. As Judge Williams

correctly concluded in his dissent (J.S. App. 41a), the evidence

overwhelmingly demonstrates that

Every cable household can secure as good access to

over-the-air television as it had before adopting cable

simply by (1) retaining or acquiring the sort of

antennae that the uncabled 40% of households

necessarily use, and (2) operating either an input

selector switch on their “remote” or an “A/B” switch

that can be acquired at a local hardware store for a

trivial sum.

ee eee ee eS

19

A. The FCC And The D.C. Circuit Have

Previously Approved Switch-And-Antenna

Capability As A Less Restrictive Alternative

1. The Quincy Decision. In an opinion written by Judge

Wright and joined by Judge (now Justice) Ginsburg and Judge

Bork, the court of appeals unanimously held the FCC’s original

must-carry rules unconstitutional. Quincy Cable TV, supra,

768 F.2d 1434. The FCC’s defense of those rules rested on the

assumption that “cable subscribers would cease to view local

television signals unless such signals were carried by the cable

system” (768 F.2d at 1441). But “connection of the cable,” the

court noted, “typically has no direct effect at all on receipt of

UHF signals.” And while the cable was usually attached to the

receiver's VHF input terminal, the FCC acknowledged that “an

inexpensive switch (the ‘A/B switch’) would enable a viewer

to alternate between cable and off-air VHF signals.” The court

thus observed that, “in principle, a cable subscriber with little

or no effort could still view local broadcasts even without the

benefit of the must-carry rules” (ibid.).

When first issuing must-carry rules in 1965, the FCC had

cited possible impediments to successful use of A/B switches.

See 768 F.2d at 1441 (citations omitted). But “[ijn the two

decades since the rules’ original promulgation,” the FCC had

never reexamined what the court described as “the admittedly

speculative links in [its] chain of reasoning” (id. at 1457). The

court thus held that must-carry could survive First Amendment

scrutiny only if the FCC provided support for the two assump-

tions that were “the linchpins of its analysis” (ibid.):

(1) that without protective regulations cable

subscribers would cease to view locally available

over-the-air television either because they would

disconnect their antennas or because the inconve-

nience of switching would deter them; and (2) that

even if some cable subscribers did abandon local

20

television, they would do so in sufficient numbers to

affect the economic vitality of local broadcasting.

2. The FCC’s Response To Quincy. Following notice-

and-comment rulemaking, the FCC reconsidered its earlier

pronouncements and adopted a “two-part regulatory program

that eventually will eliminate the need for cable television

mandatory signal carriage regulation.” See Amendment of Part

76 of the Commission's Rules Concerning Carriage of

Television Broadcast Signals by Cable Television Systems, |

FCC Red. 864 (1986), ¥ 1 (“1986 Report”), reconsidered in

part, 2 FCC Red. 3593 (1987) (“1987 Report”). The first part

of this program “require[d] cable systems to offer subscribers

input selector switches for use with antennas and to conduct a

consumer education program concerning * * * the need for

maintaining off-the-air reception capability.” The second part

consisted of interim must-carry rules designed to “provide an

orderly transition to a new environment.” 1986 Report { 1.

The FCC concluded that use of antennas, coupled where

necessary with A/B switches, did indeed offer the best long-

term method of ensuring viewers’ access to local broadcasters

that cable systems do not voluntarily carry. It found that an

AJB switch is a “low-cost item” whose “installation costs will

be minimal” (1986 Report § 215). It also noted the “relatively

low cost and simple installation of indoor antennas,” available

in set-top and more sensitive attic designs; such antennas

permit consumers “to receive signals of acceptable quality”

even in locations where outdoor antennas are too costly or

prohibited (J 166). The FCC considered a variety of technical

objections to A/B switches, such as possible signal leakage or

“ghosting” caused by improper switch installation or by

inadequate isolation between components. But the

Commission found these objections “overstated” and conclud-

ed that such problems could easily be solved by equipment

redesigns pursuant to FCC-mandated standards (f¥J 142, 165).

Pe a Te oe

ed

a

21

While judging switch-and-antenna capability the best long-

term solution, the Commission believed that most cable

subscribers in 1986 were “unaware of the need to receive

broadcast signals off-the-air and [were] unprepared to do so”

(1986 Report § 135). The FCC found this state of affairs to be

“a direct result of the former must-carry rules,” which had

created a “misperception” on consumers’ part that “broadcast

signals will always be available as part of their basic cable

service” (fj 46, 121-122). Because the must-carry rules

“required cable systems to carry all available off-the-air

broadcast television signals,” cable subscribers previously “had

no reason to be familiar with an input selector device for

choosing between cable and off-the-air” reception. [bid

To correct this consumer misapprehension, the

Commission required cable systems to supply their customers

with “input selector switches that will enable reception of

broadcast signals by means of an antenna,” thereby “leaving the

subscriber in the same position to receive off-the-air signals as

before cable installation” (1986 Report 4] 136, 140). The

Commission noted that consumers had already “become

familiar with switching between alternative program sources

through the use of VCRs,” and it concluded that they “will

accept cable/broadcast input switching as simply another

program source option” ({ 164). The FCC also required cable

operators to “implement a consumer education program to

inform their subscribers of the purpose of, and need for,

maintaining off-the-air reception capability” (J 136).°

. Under the consumer education rules, cable systems were required to

provide subscribers annually: (1) a list of any local broadcasters not carried

by the system; (2) notice that subscribers could obtain access to such

broadcasters by use of an antenna and A/B switch; and (3) a description of

the function of an A/B switch (1986 Report { 141). Cable systems were also

forbidden to suggest that subscribers dismantle their antennas (J 140).

22

To provide an “orderly transition” during a five-year period

of consumer acclimatization, the FCC promulgated interim

must-carry rules. The Commission found “no need or

justification * * * for imposing must carry requirements for [a

longer] period,” concluding that they “are neither desirable nor

sustainable as long-term solutions to the problem of cable

subscribers’ access to broadcast signals” (1986 Report 4 138).

In response to petitions for reconsideration filed by

broadcast and cable parties, the FCC in 1987 reaffirmed its

policy of encouraging widespread installation of A/B switches.

1987 Report ¥ 1. It concluded that “the information currently

before us with respect to switch costs, technical performance,

consumer convenience, switch compatibility with other equip-

ment, and use of antennas for off-the-air reception is more than

sufficient to support” the practicality of A/B switches ( 54).

3. The Century Decision. \n an opinion written by

Judge Wald and joined by Judges Mikva and McGowan, the

court of appeals held that the Commission’s revised must-carry

rules were likewise unconstitutional. Century Communications

Corp. v. FCC, 835 F.2d 292 (1987), clarified, 837 F.2d 517,

cert. denied, 486 U.S. 1032 (1988). The court agreed with the

FCC that switch-and-antenna capability represents a feasible,

constitutionally-preferable solution to the carriage issue. But

the court discerned no justification even for interim must-carry

rules, notwithstanding the FCC’s assertion that they were

needed “to keep local broadcasts accessible to viewers while

the new switch-and-antenna technology takes hold” (835 F.2d

at 300).

According to the court, “[t]he lone item of ‘hard’ record

evidence” that the FCC cited to support an interim must-carry

regime was a 1986 study commissioned by NAB from the

ELRA Group (835 F.2d at 300-301). The court found various

methodological flaws in the study and questioned the FCC’s

wisdom in placing sole reliance on data supplied by NAB, an

23

interested party (id. at 301-302). But even if the study were

taken at face value, the court held that it “provide[d] only the

spongiest of foundations” for interim must-carry rules (id. at

302).

The court also rejected the FCC’s submission that “viewer

lethargy” and “consumer ignorance” about A/B switches

justified an interim must-carry regime. The court observed that

many cable systems, desiring to increase channel capacity, offer

service on dual cables, which requires subscribers to “‘employ

switching devices to select between the two cables.” 835 F.2d

at 302, quoting 1986 Report 4 164. The FCC acknowledged

that consumers have “accepted this switching arrangement and

do not find it inconvenient.” /bid.

More generally, the court refused to “accept, without

evidence to the contrary, the sluggish profile of the American

consumer that the Commission’s argument necessarily

presupposes” (835 F.2d at 302):

In a culture in which even costly items like the video-

cassette recorder, the cordless telephone, the compact-

disc player, and the home computer have spread like

wildfire, it begs incredulity to simply assume that con-

sumers are so unresponsive that within a span of five

years they would not manage to purchase an

inexpensive hardware-store switch upon learning that

it could provide access to a considerable storehouse of

new television stations and shows.

Finally, the court held that the FCC’s interim must-carry

regime would be invalid in any event because of its “lengthy

duration” (835 F.2d at 303-304). “It is wholly unclear to us,”

the court stated, “why it should take five years to inform

consumers that with the installation of a $7.50 switch and a

television antenna they can view more local channels” (id. at

304). The court also expressed skepticism that “eny consumer

24

education campaign will have much impact so long as viewers

can continue to rely on must-carry to get their fix of local

broadcasts” (ibid.). “Opting for a five-year interim period,” in

the court’s view, “merely delays the inevitable, but almost

certainly brief, period during which TV owners will learn of,

purchase, and install the necessary equipment” (ibid.).

B. Expert Testimony And Practical Experience

Prove The Feasibility Of The Switch-And-

Antenna Alternative

Prior approval of switch-and-antenna capability by both the

FCC and a unanimous D.C. Circuit surely creates a prima facie

case that it is a constitutionally acceptable, less restrictive alter-

native to a must-carry scheme. The evidence introduced on

remand overwhelmingly confirms that conclusion. The

evidence shows that switching from cable to off-air reception

of TV signals is a simple exercise that entails no significant

cost, in time or money, for the viewer. With a minimum of

effort, cable subscribers can watch — in precisely the same

manner as they did before cable existed — any broadcast sta-

tions that their cable system chooses not to carry.

1. Switching To Off-Air Reception. Although a cable

subscriber can switch to antenna reception by manually

reconnecting wires on the back of the TV set, the most

convenient way to do so is by activating an “input selector” or

“A/B” switch. “The record shows that most cable-ready TV

receivers now on the market have built-in input selector

switches operable by remote control.” J.S. App. 104a

(Williams, J., dissenting). As a rule, therefore, cable

subscribers would have to acquire stand-alone A/B switches for

use only with older or less-expensive TV sets.

When needed, stand-alone A/B switches are readily

available at modest cost from a wide variety of electronics and

hardware stores, including such national retail chains as Radio

25

Shack and Circuit City. J.A. 1221. All A/B switches currently

marketed are high-isolation switches intended specifically for

use with cable television. The packaging usually bears the

following label: “This device is verified to comply with FCC

rule Part 15 for use with cable television service.” J.A. 1221.

Stand-alone A/B switches come in various shapes and

sizes and offer a variety of features. The simplest A/B switch

is a mechanical device, operated manually by pushing a button

on the switch. J.A. 1222-1223. High-quality switches of this

sort (including gold-plated models) are available from Radio

Shack for $6.99 and $7.99. J.A. 772, 1222. “[I}t would seem

that anyone who could afford cable could also afford the $10

for an A/B switch for use with an old television set.” J.S. App.

104a (Williams, J., dissenting).

For slightly more money, consumers can purchase

sophisticated A/B switches that offer greater convenience and

performance options. See 1987 Report {] 82 & 89 (noting

availability of “switch options with premium features,”

including “multiple source input switches” and “remote control

switches”). Stand-alone A/B switches operable by remote

control are available for about $40. J.A. 1774. Radio Shack

offers a high-isolation three-position A/B switch, operable by

remote control, that allows switching between cable, off-air,

and a third reception source (such as a video-disc player or

VCR). J.A. 1224. One manufacturer offers a “VCR Interface

Switch,” listed at $25, that accommodates signal inputs from

cable, antenna, and a VCR and allows full flexibility among

viewing, taping, and play-back of previously taped video

material. J.A. 1230.

Stand-alone A/B switches are easy to install. Normal

installation takes a few minutes and can readily be done by the

consumer, without tools, using instructions enclosed in the

package. J.A. 1222-1225. The FCC concluded in 1987 that

“those who contend that consumers cannot properly install

26

switches present no credible evidence to support their claim.”

1987 Report § 51. Plaintiffs’ expert on remand confirmed the

correctness of that conclusion today, testifying that improper

switch installation is a “statistically meaningless” problem.

J.A. 508, 1779-1780.

Switching from cable to off-air reception is convenient

and easy to do. In the vast majority of cases, it involves

pushing one button on an A/B switch or remote control pad.

J.A. 1225. In some cases, the viewer may need to push a

second button, referred to as the “tuning mode” or “ca-

ble/normal” switch. Use of the tuning-mode switch is neces-

sary when a viewer wishes to receive off-air UHF signals and

does not use a set-top converter (descrambling device) in

usually required for non-cable-ready sets, are now used in about

70% of cable homes. That percentage will likely rise in the

future, so that few cable subscribers would ever need to operate

a tuning-mode switch. J.A. 1226-1229, 1242-1244. In any

event, use of this switch, when necessary, is convenient;

roughly 80% of cable-ready receivers permit switching of the

tuning mode by remote control. J.A. 1228.

A/B switches now on the market are reliable and free of

technological defects. J.A. 1234. Historically, some concern

was expressed about possible “signal leakage” from A/B

switches, which could cause unacceptable radiation of cable

signals or picture-quality degradation. However, as a result of

stringent technical standards issued by the FCC in November

1987, as well as manufacturers’ improvements in switch and

receiver design, A/B switches now on the market will not cause

picture-quality problems. J.A. 1234, 1236-1240, 1780.

Defendants’ expert admitted that he had no reason to believe

that signal leakage is a real problem today. J.A. 440.

2. Reception Of Off-Air Signals Via Antenna. A

receiving antenna is always needed to receive television signals

27

off-the-air, whether or not the viewer subscribes to cable. J.A.

763, 773. Approximately 36 million households — almost

one-third of all U.S. television households — rely solely on

antennas to watch television. Many cable households also rely

on antennas for second or third TV sets not connected to cable.

J.A. 763-764, 773.

There are three main types of antenna: “master” antennas,

“indoor” antennas, and “outdoor” antennas. J.A. 764. “Mas-

ter” antennas are mounted on apartment buildings and

condominium complexes to feed broadcast signals to individual

dwelling units. They are used where, for convenience or

aesthetic reasons, it is impractical for residents to install their

own outdoor antennas. J.A. 764.

“Indoor” antennas typically consist of a wire loop for the

UHF band and familiar “rabbit ears” for the VHF band. J.A.

764. These set-top antennas enable most households within a

station’s Grade A contour — typically, within 30-45 miles of

the transmitter — to receive high-quality broadcast signals.

J.A. 762-764; 1986 Report § 166. NAB itself recently noted

that “more than 50% of all TV sets in the U.S. depend on set-

top antennas to receive TV programming.” See J.A. 767-768.

“Outdoor” antennas may be mounted within an attic, for

convenience or aesthetic reasons, or attached to a mast beside

a dwelling. J.A. 765; 1986 Report 4 166 (attic antennas “give

additional off-the-air reception capability”). “Outdoor”

antennas enable most households within a station’s Grade B

contour — typically, within 55-60 miles of the transmitter —

to receive high-quality broadcast signals. J.A. 762-763, 765.

Antenna reception provides much better picture quality

now than it did 30 years ago, owing to improvements in TV

receivers and antenna design. Because of increased tuner

sensitivity, modern receivers can present high-quality pictures

— both in the UHF and VHF ranges — despite relatively low

28

signal inputs from the antenna. J.A. 766. Amplifiers are now

available to boost the antenna signal, permitting use of indoor

antennas where outdoor antennas would once have been

required. J.A. 766. The efficiency or “gain” of outdoor

antennas has been enhanced by design improvements and the

use of better transformers. J.A. 765. And further improve-

ments in antenna design can be expected in the future. Noting

that “there is a large installed base of TV sets that rely on over-

the-air reception,” the NAB recently awarded a contract for

development of an “Improved Set-Top Antenna.” J.A. 767-

768.

Television receiving antennas are readily available from

department stores, discount appliance stores, and electronics or

hardware stores throughout the United States, including such

national chains as Sears, Circuit City, Home Depot, and The

Wiz. J.A. 768. Good-quality indoor antennas are priced under

$20; high-quality amplified indoor antennas cost about $50;

attic antennas cost about $40; outdoor antennas range in price

from $15 (for a UHF-only antenna) to $100 (for a “multi-use

amplified omni-directional” antenna); and separate amplifiers

for use with indoor or outdoor antennas cost $20 to $30. J.A.

766, 770-772. Outdoor antennas can be selected and installed

by the consumer with little difficulty. J.A. 768-770. Retailers

that sell outdoor antennas often offer installation also, with

charges commonly ranging between $50 and $150. J.A. 768,

770.

3. Practical Experience With A/B Switches. Actual

experience since enactment of the must-carry law shows that

antenna selector switches provide a workable of

ensuring cable subscribers’ access to local broadcast stations.

As Judge Williams noted below, “[t]he 1992 Cable Act in fact

precipitated a controlled experiment in consumer

resourcefulness.” J.S. App. 105a. The statute gave broad-

casters a choice between mandatory carriage on cable systems

29

(“must-carry”) and negotiating with cable systems for payment

in exchange for carriage (“retransmission consent”). Most

stations that did not elect must-carry successfully negotiated

retransmission-consent payments. However, “[i}n late 1993 the

three major television network local affiliates were unable to

reach agreement on retransmission consent with a TCI cable

system in Corpus Christi, Texas, resulting in a three-month

span in which ABC, CBS, and NBC were all absent from

cable.” J.S. App. 105a (Williams, J., dissenting). To assist

subscribers in obtaining off-air access to network programming

during this period, TCI distributed 40,000 A/B switches to

subscribers in early October 1993. J.A. 1240.

It is obvious that the switches so distributed were correctly

installed by subscribers who needed them, and that the switches

functioned properly. “Before the dispute the networks collec-

tively captured a 70% share of the total cable audience; after a

month off cable (and with distribution of A/B switches), they

had a share of 67%-69% of the total cable audience.” J.S. App

105a (Williams, J., dissenting). “I think we surprised a lot of

young people,” said one station owner. “They didn’t know

there were other ways to watch TV than through the cable.”

Warren's Cable Regulation Monitor, Nov. 29, 1993, at 7;

Cable World, Nov. 8, 1993, at 12. The Corpus Christi experi-

ence shows that substantial numbers of A/B switches can be

installed properly in a short period of time, without meaningful

damage to broadcast stations’ viewership.

The fact that other media outlets depend heavily on

antenna-selector switches to provide access to local broadcast

programming provides further evidence of the switches’

practical utility. One such industry is the direct broadcast

satellite (“DBS”) industry, which currently has three major

providers: Primestar, DirecTV and USSB. See FCC, First

Annual Report to Congress Assessing the Status of Competition

30

in the Market for Cable Television and Other Video

Programming Services, 59 Fed. Reg. 64657, 64659 (1994).

Subscribers to DBS service “must use an A/B switch to

retain access to any local broadcast stations, because the DBS

feed does not include them.” J.S. App. 106a (Williams, J.,

dissenting). DBS providers send programming directly to

customers’ earth-station antennas; because they offer a single,

nationwide programming line-up, they cannot carry broadcast

stations in each local market. For that reason, many DBS

subscribers maintain antennas and switch as desired between

satellite and local broadcast reception. Depending on the

service provider, this switching capacity may be furnished as

part of the satellite receiver or through a stand-alone A/B

switch. J.A. 1241. The three DBS services had 1.53 million

customers in 1994, and there were projected to be 2.26 million

DBS customers in 1995. Paul Kagan & Associates, Marketing

New Media, Feb. 20, 1995, at 4.

Another industry that relies heavily on A/B switches is

terrestrial point-to-multi-point microwave (“MMDS” or

“wireless cable”). Because MMDS service has limited channel

capacity — 24 to 33 channels are typical — operators usually

carry few, if any, local broadcast stations. As is true for DBS

customers, MMDS subscribers commonly maintain their own

local off-air reception capability and use A/B switches to select

microwave or off-air reception as they wish. J.A. 1241-1242.

MMDS providers served 430,000 subscribers in 1994 and were

projected to serve 620,000 subscribers in 1995. Paul Kagan &

Associates, Marketing New Media, Feb. 20, 1995, at 4.

In short, about two million of the nation’s television house-

holds were served in 1994 — and about three million of those

households were expected to be served in 1995 — by distri-

bution services that carry few, if any, local broadcast TV

stations. Some form of A/B switch is required in each of these

homes to obtain access to local broadcasts, and each of these

31

homes must maintain or install an adequate receiving antenna.

The rapid growth of these alternative distribution services

shows that consumers are ready, willing and able to achieve

switch-and-antenna capacity. And if the need for switches and

antennas can readily be accommodated by these emerging

technologies, there is no reason to believe it cannot be

accommodated by the broadcasting industry as well.°

Recent experience with A/B switches and antennas

“indicates that consumers themselves are quite capable of

adopting these measures when they think the extra [broadcast]

programs are worthwhile.” J.S. App. 108a n.30 (Williams, J.,

dissenting). This suggests that market forces alone would

suffice to ensure the continued health of local broadcasting.

However, “[iJf Congress feared that consumers were

insufficiently aware of such switches,” it could, without violat-

ing anyone’s First Amendment rights, “devise a promotional

solution tailored to that end” (ibid.). See Turner, 114 S.Ct. at

2480 (O’Connor, J.) (“Congress can encourage the creation of

new media, * * * or even simple devices that would let people

easily switch from cable to over-the-air broadcasting”). One

example would be a consumer-education program of the sort

the FCC successfully implemented in 1987. Another example

would be equipment standards for television manufacturers

designed to make switching as effortless as possible — é.g.,a

requirement that most receivers contain built-in A/B switches

operable by remote control. The Century court saw merit in

such a proposal. See 835 F.2d at 304 n.6, citing 1986 Report

{7 174-175 & 1987 Report ¥ 56. Indeed, Congress adopted

similar requirements in the 1992 Act, which requires the FCC

. Indeed, the growth of these new distribution services partially accounts

for consumers’ recent propensity to purchase antennas. “[F]rom 1993 to

1994 there was a 51% increase in the sales of indoor antennas (from 3.5

million units to 5.3 million units).” J.S. App. 107a (Williams, J., dissent-

ing).

32

to issue rules concerning “consumer electronics equipment

compatibility.” 47 U.S.C. § 544a(c).

In sum, the evidence establishes that switch-and-antenna

capability — and any measures that Congress reasonably

believes would encourage consumers’ convenient use of it —

represents a constitutionally permissible, less-restrictive

alternative to a must-carry regime. And as Judge Williams

noted, the availability of A/B switches points up a more basic

defect in the Government’s proof. By enabling cable

subscribers to watch any broadcaster their cable system does

not carry, switch-and-antenna capacity “undermine[s] the claim

that the continuation of over-the-air television is in any way in

jeopardy or that cable operators have a ‘bottleneck’ over provi-

sion of video services to cable subscribers (a foundation of any

claim of anticompetitive behavior).” J.S. App. 103a.

C. Congress’s Dismissal Of The Switch-And-

Antenna Alternative Was Not Supported By

“Substantial Evidence”

Judge Sporkin’s discussion of A/B switches, occupying

two pages in his opinion (J.S. App. 23a-25a), is cursory at best.

He catalogs six items of evidence introduced by defendants,

wholly ignoring contrary findings by the FCC and the D.C.

- Circuit, as well as voluminous evidence introduced by plaintiffs

which showed defendants’ submissions to be misleading,

outdated, and unreliable. With no analysis whatever, Judge

Sporkin asserts that there was “substantial evidence” from

which Congress “could reasonably conclude that these switches

do not represent an equally effective alternative.” J.S. App.

23a.

As our co-plaintiffs explain in greater detail, Judge

Sporkin’s “equally effective” test is legally erroneous. Judge

Sporkin was able to find switch-and-antenna capacity “less

effective” only because he had already posited, as the

33

governmental interest underlying must-carry, the conferral of

maximum economic benefits on the particular broadcasters

electing it. Judge Sporkin’s approach, moreover, looks only to

one side of the equation — the effectiveness of the means

chosen by the Government — ignoring the fact that the option

deemed “more effective” imposes dramatically more severe

restraints on protected speech.

_ Apart from legal error, Judge Sporkin’s discussion of A/B

switches fails on its own terms. The evidence on remand over-

whelmingly demonstrates that A/B switches “work” in a

technical sense and that switch-and-antenna capability is easily

within the means of viewers who can afford cable. As Judge

Williams explains (J.S. App. 104a-109a), defendants’ argument

on remand — reduced to its essentials — consisted of two

propositions. First, defendants contended that some unquan-

tified number of cable subscribers would be too ignorant or too

lazy to acquire and use A/B switches and antennas to view

broadcast stations not carried on their cable system. Second,

defendants urged that an additional unquantified number of

cable subscribers may either lose access to, or receive a poorer

quality picture from, dropped broadcasters because of terrain or

man-made obstacles that affect cable subscribers in the same

manner that these obstacles affect their neighbors who do not

subscribe to cable.

These arguments cannot possibly satisfy defendants’

burden of proof, for three main reasons. First, the

constitutional rights of cable speakers cannot legitimately be

impaired because of the possibility that some cable subscribers

may be unwilling to make the modest effort needed to view

broadcast programming off-the-air. By use of A/B switches,

cable subscribers have the ability to receive such programming

at a cost not significantly greater than the cost non-cable

viewers must incur to see the same programming. If cable

subscribers demur to this modest effort, it can only be because

34

they have no desire to watch the broadcasters that their cable

systems decline to carry. If that is so, it is hard to understand

how noncarriage of such stations could jeopardize the health of

the local broadcast system. And in any event, “government-

mandated carriage seems a rather astonishing solution to a

problem now redefined as consumers’ occasional need to ‘get

up”” from their chairs to flick a switch. J.S. App. 106a

(Williams, J., dissenting).

Second, protecting the public’s interest in “free TV” — by

definition — means preserving the ability of TV households to

view broadcasts they can receive over-the-air. It is undeniably

true, as Congress found and defendants urged below, that

mountains, skyscrapers, and other obstacles impair off-air

reception in certain locations by blocking transmission of

broadcast signals. But possible obstruction of over-the-air

signals by natural and man-made impediments is an immutable

characteristic of the broadcast medium; it has been a fact of life

for broadcasting since its birth. The existence of these

obstacles does not constitute a “harm” to broadcasting that

Congress could legitimately seek to cure by impairing First

Amendment rights: the health of the broadcast industry, as a

matter of law, is simply not affected by viewers’ inability to

view inherently non-viewable signals. Commandeering cable

channels to extend broadcast stations’ reach to viewers who

cannot otherwise receive their signals, or who receive them

poorly, is a fundamentally illegitimate preference for the

financial interests of broadcasters over the First Amendment

rights of cable speakers.

Third, even if one were to assume the legitimacy of the

preceding two propositions, defendants below made absolutely

no showing about the magnitude of these problems.

Defendants bear the burden of proving that switch-and-antenna

capability — which does not impair anyone’s First Amendment

rights — fails adequately to serve the interests Congress

35

legitimately seeks to protect. Defendants below made no effort

to show that substantial numbers of consumers would be af-

flicted by supposed technological inertia, especially if Congress

and the FCC took active steps to encourage use of A/B Switch-

es. Nor did defendants quantify the proportion of cable house-

holds that would suffer from reception problems despite use of

an appropriate antenna; “from all that appears, [weak-signal

areas] may represent a very small fraction of the country.” J.S.

App. 109a (Williams, J., dissenting). In short, while it may be

assumed that broadcasters would lose some viewers after being

dropped from cable, defendants have not proven that they

would lose a sufficient number of viewers to endanger their

own survival, much less to jeopardize the health of the entire

broadcast system.

In the pages that follow, we will first show the insubstant-

iality of the evidence that Congress itself cited in rejecting the

switch-and-antenna option. We will then show that the

evidence cataloged by Judge Sporkin, to the extent it differs,

does nothing to redeem this poor legislative showing.

1. Evidence Cited By Congress. Section 2(a) of the Act

sets forth legislative “findings” designed to cure the flaws

discerned by the D.C. Circuit in the government’s prior justifi-

cations for must-carry. Two of these “findings” concern the

a alternative specifically. Section 2(a)(17)

States

Consumers who subscribe to cable television often do

so to obtain local broadcast signals which they

otherwise would not be able to receive, or to receive

improved signals. Most subscribers to cable

television systems do not or cannot maintain antennas

to receive broadcast television services, do not have

input selector switches to convert from a cable to

antenna reception system, or cannot otherwise receive

broadcast television services.

36

Section 2(a)(18) states that

Cable television systems are often the single most

efficient distribution system for television

programming. A government mandate for a substan-

tial societal investment in alternative distribution

systems for cable subscribers, such as the ‘A/B’ input

selector antenna system, is not an enduring or feasible

method of distribution and is not in the public interest.

As Judge Williams explains, the italicized portions of these

findings — which reject switch-and-antenna capacity “on the

ground that cable in many cases enhances broadcast stations’

signals or even brings them into areas they could not otherwise

reach” — are illegitimate as a matter of law. “[N]either the en-

hancement of television options for cable subscribers, nor

extending broadcast’s reach to cable subscribers in otherwise

signal-deprived areas, was embraced by [this] Court in Turner

as an interest substantial enough to justify must-carry.” J.S.

App. 108a (Williams, J., dissenting). Congress’s stated (and

only permissible) purpose was to preserve the health of local

broadcasting, not to improve upon its physical limitations at

cable’s expense.

The remainder of Congress’s “findings” are conclusory

assertions about the supposedly insuperable barriers posed by

the need for switches and antennas. As Judge Williams

explains, the undisputed evidence on remand belies these asser-

tions. “Neither switch nor antenna is so mysterious, costly or

unworkable as to be beyond the means of a private citizen who

values access to a program at the price of a diminutive capital

investment and the ongoing cost of pushing the switch when

necessary.” J.S. App. 108a.

In the 1992 Committee Reports, Congress cited four items

of evidence to support its rejection of the switch-and-antenna

alternative. First, it relied on the 1986 study, commissioned by

37

NAB from the ELRA Group, which concluded that cable sub-

scribers rarely used A/B switches while prior must-carry rules

were in effect. See S. Rep. 102-92, 102d Cong., 2d Sess. 45 &

n.116 (1992), citing ELRA Group, Inc., “Outdoor Antennas,

Reception of Local Television Signals and Cable Television”

(Jan. 28, 1986), J.A. 20-22. This is the same study that the

Century court in 1987 termed “the spongiest of foundations”

for must-carry, describing it as “a melange of disparate facts

and findings” tainted by “survey imperfections.” 835 F.2d at

301-302; see pages 22-23, supra. The ELRA study’s core

finding was that in 1985 “only about 10% of subscribers pres-

ently switch back and forth between cable and antennas” (835

F.2d at 301). But this finding provided no logical support for

expensive, or difficult to install. “More likely,” the court

explained, “the absence of such equipment from most homes

reflects the obvious reality that, so long as the government

requires cable companies to offer local broadcasting through

the must-carry regime, such supplemental equipment is unnec-

essary” (ibid.). Absent must-carry, said the court, “[c]ommon

sense suggests that consumers who want to receive an off-the-

air channel will quickly observe that they need to purchase (or

reconnect) antennas should their cable system cease offering

their favorite broadcast stations” (ibid).

The second item of evidence cited by Congress consisted

of comments that NAB submitted to the FCC in December

1986, seeking reconsideration of the Commission’s 1986

Report. See S. Rep. 102-92, at 45 & n.115 (citing NAB

comments); H.R. Rep. 102-628, at 54 & n.60 (same). These

comments alleged a variety of technical problems with A/B

switches and raised convenience and cost objections to them.

See 1987 Report ff 10-12 (summarizing NAB objections). In

its opinion on reconsideration, the FCC exhaustively analyzed

these objections and found most of them to have no factual

38

support (1987 Report #9 50-57). However, the FCC did find

merit in concerns that poor isolation between the “A” and “B”

sides of the switch could cause signal leakage or “ghosting”

(F952 & 92-93). The Commission accordingly announced its

intention to convene a separate rulemaking to consider

technical standards for A/B switches (§ 94). In that later

rulemaking, completed in November 1987, the FCC pro-

pounded more stringent performance standards for antenna-

by a factor of 100 (from 60dB to 80dB). See 47 CFR §§ 15.115

& 15.117; J.A. 1232, 1234-1235. In short, of all the technical

problems that NAB alleged in 1986, the FCC had already

remedied the sole problem that it found to have any factual

basis — potential signal leakage — a full five years before the

Cable Act was passed. See page 26, supra. Congress’s

reliance in 1992 on NAB’s stale charges was thus entirely mis-

placed.

The third item of evidence on which Congress relied in

rejecting the switch-and-antenna option was testimony

delivered by Edward Fritts, president of NAB, and Preston

Padden, then president of INTV, at a 1989 committee hearing.

See S. Rep. 102-92, at 45 & n.114, citing “Must Carry,”

Hearing before the Subcomm. on Communications of the

Senate Commerce Comm. (101-427), Oct. 25, 1989 (“Must-

Carry Hearing”), at 39, 80. But this testimony adds nothing to

the “evidence” discussed above. Fritts relied on the 1986

ELRA study. See Must-Carry Hearing, at 39. And Fritts and

Padden both relied on NAB’s petition for reconsideration of the

FCC’s 1986 Report. See Must-Carry Hearing, at 39, 80. Both

witnesses, in short, were simply regurgitating arguments that

the NAB had made back in 1986 — arguments that the FCC

39

and the Century court had exhaustively considered and reject-

ed.’

The final piece of evidence on which Congress relied in

rejecting the switch-and-antenna alternative was a 1991 survey

by Mark Fratrick, NAB’s in-house economist, which purported

to update the ELRA study’s results. See H.R. Rep. 102-628, at

54 & nn. 62, 63, citing Fratrick, “A/B Switch Availability and

Use,” Sept. 23, 1991, J.A. 128-133. Having been drafted by

NAB's in-house economist, the Fratrick survey is unlikely to

have been biased in cable systems’ favor. Yet far from

supporting Congress’s conclusion that “consumers are not

willing to use A/B switches” (H.R. Rep. )02-628, at 54), the

Fratrick survey supports the opposite conclusion.

The Fratrick survey estimated that, as of 1991, 33% of

cable households had one or more TV sets connected to cable

and an antenna; that 48% of such households had A/B

switches; and that 38% of households with A/B switches had

used them. J.A. 131. While Congress viewed these results as

actually show a substantial increase in consumers’ switch-and-

antenna capability between 1986 and 1991. The ELRA study,

for example, estimated that only 1% of cable households had an

outdoor antenna and an A/B switch. J.A. 21, 22. This

improvement in consumers’ switch-and-antenna capability

between 1986 and 1991 is quite remarkable: the evidence on

; Congress in 1992 also noted the FCC’s finding that some cable systems

had encouraged subscribers to take down their antennas, thus preventing

reception of off-air signals. S. Rep. 102-92, at 45; H.R. Rep. 102-628, at

54. This too is ancient history. The FCC did observe this behavior by cable

systems in ]986 (1986 Report #¥ 121, 168). Since 1987, however, cable

coed w mahusivo&bGioelr vecepen capably. dos 1500 Raper ee

i } . See 1986 140;

47 CFR § 76.66 (1991). —

40

tarily carried more than 95% of broadcast signals, so that

subscribers’ need to acquire switches and antennas was not

very urgent. This improvement is a clear tribute to the efficacy

of the FCC’s consumer-education program."

In sum, the evidence on which Congress relied in 1992 to

support rejection of the switch-and-antenna alternative cannot,

by any stretch of the imagination, be termed “substantial

evidence.” This is not a case in which Congress sought out

independent experts to provide objective and dispassionate

testimony on a technical subject. Rather, Congress relied

almost exclusively on data submitted by NAB and INTV —

interested parties and consistent opponents of A/B switches as

an alternative to must-carry. Most of this “evidence” dated

back to 1986; had previously been considered by the FCC and

the D.C. Circuit; and had been found by both to have no factual

basis. The NAB’s objections were neither timely nor fresh: to

the extent they had merit in 1986, they had been mooted by

1992 as a result of technological improvements or subsequent

FCC action. The one bit of new “evidence” — the 1991

Fratrick survey — was tainted by survey imperfections that

cause it to understate consumers’ sw.ich-and-antenna

* Because of the way the Fratrick survey was conducted, it understates the

extent to which cable subscribers actually switch between cable and off-air

reception. The ELRA study revealed that only 15% of subscribers who

alternated between cable and off-air reception in 1985 used A/B switches to

do so; the other 85% manually reconnected wires on the back of the TV set

or used some other method. J.A. 21. The Fratrick survey, however,

neglected to ask subscribers about reconnecting wires or other methods of

switching to off-air reception. Rather, it asked simply, “On how many sets

do you have a switch that allows you to switch back and forth between the

cable and an outside or set-top antenna?” and “Have you ever used that

switch?” J.A. 133. This obvious survey imperfection — the ELRA survey,

which Fratrick was purporting to update, specifically asked (in question 21)

about reconnecting wires and other methods of switching — seriously im-

pugns the reliability of the Fratrick survey’s results.

4]

capability. Yet even those biased results show that switch-and-

antenna capacity was much more widespread in 1992 than it

was in 1987, when the Commission and the Century court ap-

proved it as a constitutionally-preferable alternative to must-

carry.

2. Evidence Cited By Judge Sporkin. We have already

discussed one piece of evidence cataloged by Judge Sporkin

(J.S. App. 24a-25a) — the 1991 consumer survey by Mark

Fratrick, NAB’s in-house economist, which Congress also

cited. Judge Sporkin also lists a 1987 petition for

reconsideration filed with the FCC alleging a “risk of signal

degradation and signal leakage” from A/B switches (J.S. App.

24a & n.47). As we have explained previously, to the extent

signal leakage was a risk in 1987, the problem has been cured

by subsequent FCC rulemaking; defendants’ expert admitted

that signal leakage is not a problem in the real world today. See

pages 26 & 38, supra. In citing these 1987 objections,

therefore, Judge Sporkin was making a mere debater’s point.

As is true elsewhere, he made no effort to find out whether the

objections on which he relied had any current validity.

Judge Sporkin next cites a 1986 NCTA study contending

that “the costs entailed by A/B switches ‘far outweigh the

benefits.” J.S. App. 24a & n.48. This study accompanied

NCTA’s petition for reconsideration of the FCC’s 1986 Report,

which the cable industry did oppose on financial grounds. That

was because the 1986 Report would have mandated universal

installation of A/B switches — regardless of subscribers’ need

or desire for them — with all material and labor costs borne by

the cable operator (1986 Report 4 140). Cable operators

objected that a “universal installation” requirement would

impose capital costs in excess of $1 billion, with much of this

money simply being wasted. See id. § 10.

The FCC agreed with these submissions. It accordingly

revised its rules to require that cable operators simply offer A/B

42

switches to their customers, then install switches for those who

wanted them. The final rules also permitted operators to charge

for the labor and material costs of installation (except where

switches were added as part of a new customer hook-up). See

1987 Report ¥¥ 80-84. These revisions relieved cable opera-

tors’ concerns that A/B switch rules would impose

unreasonably large capital costs. See J.A. 1781-1782."

Judge Sporkin also cites two items of evidence introduced

by defendants on remand. The first is the report of Eldon

Haakinson, who testified that use of A/B switches may entail

“complexity” and “viewer inconvenience.” J.S. App. 25a &

n.49. Mr. Haakinson’s qualifications as an expert on this

subject are suspect,’ and his discussion of A/B switches

derives almost entirely from material prepared by others. See

J.A. 601-602, 605, 607-611. In any event, his hearsay

assertions do not represent “substantial evidence.” They are

* — Judge Sporkin attempts to create the impression that the cable industry

after 1987 continued to oppose A/B switches by quoting out of context a

statement by James Mooney, then-president of NCTA, in a 1990 committee

hearing. J.S. App. 23a-24a & n.46. In fact, Mr. Mooney testified that

“NCTA does not have major substantive problems with mandating

electronic switches in television sets.” He further testified that “the cable

industry would probably welcome electronic A/B/C switches if the broadcast

industry pursues its [retransmission consent] proposal.” “Cable TV

Consumer Protection Act of 1989,” Hearing before the Subcomm. on

Communications of the Senate Commerce Comm. (101-702), Mar. 29,

1990, at 108.

‘© Mr. Haakinson is an expert in the physics of television and radio signal

transmission, i.¢., the propagation characteristics of radio waves emitted

from broadcast transmitter towers. As he states in his declaration (J.A. 581),

his expertise is limited to “the field of telecommunications propagation.”

His curriculum vitae reveals no experience in the field of consumer elec-

tronics. See J.A. 386-392, 580-581. Of the 32 publications he has authored,

not a single one deals with A/B switches, television receivers, or other

consumer-electronics issues. See J.A. 581.

43

controverted by the prior findings of the FCC and the D.C.

Circuit, as well as by the testimony of David Large, an undisputed

expert on the subject of A/B switches and cable electronics.

Finally, Judge Sporkin relies on a 1993 survey finding that

“68% of consumers find A/B switches ‘fairly or very inconve-

nient.”” J.S. App. 25a & n.50. In his dissent (J.S. App. 104a-

106a), Judge Williams shows the error of this reliance. The

survey canvassed subscriber reactions to the Corpus Christi

retransmission consent dispute (discussed at pages 28-29

above). About 80% of the subscribers who found A/B switches

“inconvenient” did so on the ground that they “[h]ad to get up”

to operate the switch (J.S. App. 106a). However, if the

networks had remained off cable for an extended period — all

three were in fact restored to carriage after just six weeks —

any subscriber could have purchased a remote-controlled A/B

switch at modest cost to obviate such “inconvenience.” See

J.A. 1774. In any event, the key point is that, despite the sup-

posed “inconvenience,” TCI’s subscribers in fact installed and

used their switches successfully, with the result that the broad-

casters experienced no meaningful ratings decline while off

cable. The Corpus Christi experience thus confirms the

correctness of the FCC’s and the D.C. Circuit’s conclusions

that cable subscribers can and will use A/B switches to watch

non-carried broadcast stations they desire to view.

44

CONCLUSION oC

For these reasons, the judgment of the three-judge district

court should be reversed, and sections 4 and 5 of the 1992

Cable Act should be declared unconstitutional.

Respectfully submitted,

ALBERT G. LAUBER, JR. *

Of Counsel: PETER VAN N. LOCKWOOD

CAPLIN & DRYSDALE, CHTD.

JUDITH A. MCHALE One Thomas Circle, NW

MARK HOLLINGER Suite 1100

DIANE L. HOFBAUER Washington, DC 20005

DISCOVERY (202) 862-5000

COMMUNICATIONS, INC.

7700 Wisconsin Avenue

Bethesda, MD 20814 Hast

(301) 986-1999 * Counsel of Record

Dated: April 26, 1996