Appendix — Office of Communication of the United Church of Christ v. Federal Communications Commission
Supreme Court brief1988
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87-1510°)
87-1551»)
Nos. +
IN THE
Supreme Court of the GAnited States
OCTOBER TERM, 1987
OFFICE OF COMMUNICATION OF
THE UNITED CHURCH OF CHRIST,
Petitioner,
-
FEDERAL COMMUNICATIONS COMMISSION and
UNITED STATES OF AMERICA, et. al.,
Respondents.
NATIONAL ASSOCIATION OF BROADCASTERS,
Petitioner,
Wa -
CENTURY COMMUNICATIONS CorP., et. al.,
pe Respondents.
ASSOCIATION OF INDEPENDENT TELEVISION STATIONS, INC.,
Petitioner,
Vv.
CENTURY COMMUNICATIONS CORPORATION, et. al.,
Respondents.
CORPORATION FoR PUBLIC BROADCASTING,
NATIONAL ASSOCIATION OF PUBLIC TELEVISION STATIONS,
AND PUBLIC BROADCASTING SERVICE,
Petitioners,
v.
FEDERAL COMMUNICATIONS COMMISSION and
- UNITED STATES OF AMERICA, et. al.,
ee Respondents.
On Petitions For Writs Of Certiorari
To The United States Court Of Appeals
For The District Of Columbia Circuit
PETITIONERS’ APPENDIX
{Counsel For Individual Petitioners Listed On Inside Front Cover]
PRESS OF BYRON S. ADAMS, WASHINGTON, D.C. (202) 347-8203
Of Counsel:
ANDREW J. SCHWARTZMAN
Media Access Project
2000 M Street, N.W.
Washington, D.C. 20036
Of Counsel:
HENRY L. BAUMANN
BENJAMIN F.P. Ivins
NATIONAL ASSOCIATION OF
BROADCASTERS
1771 N Street, N.W.
Washington, D.C. 20036
PauLa A. JAMESON
Nancy H. HENpDRY*
PuBLIC BROADCASTING SERVICE
1320 Braddock Place
Alexandria, Virginia 22314
(703) 739-5000
Counsel for Petitioner
Public Broadcasting Service
*Counsel of Record
HENRY GELLER*
DonNA LAMPERT
DANIEL R. OHLBAUM
1776 K Street, N.W.
Washington, D.C. 20006
(202) 429-7360
Counsel for Petitioner Office
of Communication of The United
Church of Christ
MICHAEL S. HORNE*
STEVEN F. REICH
COVINGTON & BURLING
1201 Pennsylvania Ave., N.W.
P.O. Box 7566
Washington, D.C. 20004
(202) 662-6000
Counsel for Petitioner National
Association of Broadcasters
J. LAURENT SCHARFF*
JAMES M. SMITH
ROBERT J. AAMOTH
PIERSON, BALL & Dowp
1200 18th Street, N.W.
Washington, D.C. 20036
(202) 331-8566
Counsel for Petitioner Association of
Independent Television Stations, Inc.
PauL E. SYMCZAK
SusAN DILLON*
CORPORATION FOR PUBLIC
BROADCASTING
1111 - 16th Street, N.W.
Washington, D.C. 20036
(202) 955-5288
Counsel for Petitioner Corporation
for Public Broadcasting
Baryn S. Futa*
MARTHA MALKIN ZORNOW
NATIONAL ASSOCIATION OF
PuBLIC TELEVISION STATIONS
18:15 N Street, N.W.
Washington, D.C. 20036
(202) 887-1700
Counsel for Petitioner National
Association of Public
Television Stations
TABLE OF CONTENTS
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United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
No. 86-1683
CENTURY COMMUNICATIONS CORPORATION, et al.,
PETITIONERS
¥;
FEDERAL COMMUNICATIONS COMMISSION and
UNITED STATES OF AMERICA, RESPONDENTS
INDEPENDENT TELEVISION STATIONS, INC.,
SPANISH INTERNATIONAL COMMUNICATIONS CORP.,
UNIVISION, INC.,
THE NATIONAL ASSOCIATION OF BROADCASTERS,
LINCOLN BROADCASTING Co.,
NATIONAL CABLE TELEVISION ASSOCIATION, et al.,
OFFICE OF COMMUNICATION OF THE
UNITED CHURCH OF CHRIST,
CORPORATION FOR PUBLIC BROADCASTING,
NATIONAL ASSOCIATION OF PUBLIC TELEVISION,
PUBLIC BROADCASTING SERVICE,
NATIONAL BROADCASTING Co., INC.,
SPANISH INTERNATIONAL COMMUNICATIONS CorpP.,
INTERVENORS
2a
No. 87-1280
RICHARD S. LEGHORN, PETITIONER
Vv.
FEDERAL COMMUNICATIONS COMMISSION and
UNITED STATES OF AMERICA, RESPONDENTS
CORPORATION FOR PUBLIC BROADCASTING, et al.,
INTERVENORS
No. 87-1301
HUBBARD BROADCASTING, INC., PETITIONER
Vv.
FEDERAL COMMUNICATIONS COMMISSION and
UNITED STATES OF AMERICA, RESPONDENTS
CORPORATION FOR PUBLIC BROADCASTING, et al.,
INTERVENORS
Petitions for Review of Orders of the
Federal Communications Commission
Argued October 22, 1987
Decided December 11, 1987
John P. Cole, Jr., for joint petitioners, Century Com-
munications Corp., et al. David M. Silverman also en-
i a Cait
3a
tered an appearance for joint petitioners, Century Com-
munications Corp., et al.
David G. Rozzelle, with whom Marvin Rosenberg and
Barry Lambergman were on the brief for petitioner,
Hubbard Broadcasting, Inc.
James L. Quarles, III was on the brief for petitioner,
Richard S. Leghorn.
Daniel M. Armstrong, Associate General Counsel, Fed-
eral Communications Commission, with whom Diane S.
Killroy, General Counsel, Gregory M. Christopher and
C. Grey Pash, Counsel, Federal Communications Com-
mission were on the brief for respondent. Robert B.
Nicholson and Laura Heiser, Attorneys, Department of
Justice also entered appearances for respondent.
Henry Geller, with whom Donna Lampert and An-
drew Schwartzman were on the brief for intervenor,
United Church of Christ.
Michael S. Horne, with whom J. Laurent Scharff,
James M. Smith and Henry L. Baumann were on the
brief for intervenors, National Association of Broadcast-
ers and Independent Television Stations, Inc. Julian L.
Shepard and Molly Pauker also entered appearances for
intervenor, National Association of Broadcasters.
Arthur Pankopf, Susan Dillon, Baryn S. Futa, Martha
M. Zornow, Paula A. Jameson and Nancy H. Hendry
were on the brief for intervenors, The Corporation for
Public Broadcasting, et al.
Norman P. Leventhal, Raul R. Rodriquez, Sally A.
Buckman, and Richard F. Swift were on the joint brief
for intervenors, Spanish International Communications
Corporation, National Independent Television Committee
and Univision, Inc. Judith Whittaker was on the brief
for intervenor, Spanish International Communications
Corporation. Richard E. Wiley and John C. Quale also
iain
4a
entered appearances for intervenor, Spanish Interna-
tional Communications Corporation.
Michael D. Berg entered an appearance for inter-
venor, Lincoln Broadcasting Company.
Jay E. Ricks entered an appearance for intervenor,
National Cable Television Association, Inc., et al.
Before: WALD, Chief Judge, MIKVA, Circuit Judge, and
McGowan, Senior Circuit Judge.
Opinion for the Court filed by Chief Judge WALD.
WALD, Chief Judge: Two years ago, in Quincy Cable
TV, Inc. v. Federal Communications Commission, 768
F.2d 1434 (D.C. Cir. 1985), cert. denied sub. nom. Na-
tional Association of Broadcasters v. Quincy Cable TV,
Inc., 106 S. Ct. 2889 (1986), we struck down as viola-
tive of the first amendment the FCC’s “must-carry”
rules. Those rules required cable television operators,
upon request and within the limits of their channel ca-
pacity, to transmit to their subscribers every over-the-
air television broadcast signal that was “significantly
viewed in the community” or otherwise considered “‘lo-
cal” under the Commission’s rules. See Quincy Cable
TV, 768 F.2d at 1487. Today, we revisit this distinc-
tive corner of first amendment jurisprudence, to evaluate
the constitutional validity of the scaled-down must-carry
rules adopted by the FCC following our decision in
Quincy Cable TV. Although the FCC has eliminated the
more extreme demands of its initial set of regulations,
its arguments in this case leave us unconvinced that the
new must-carry rules are necessary to advance any sub-
stantial governmental interest, so as to justify an in-
cidental infringement of speech under the test set forth
in United States v. O’Brien, 391 U.S. 367 (1968). Ac-
cordingly, we invalidate as incompatible with the first
amendment this latest incarnation of the FCC’s must-
carry rules.
I. FActs
Since the mid-1960’s, when the nascent cable television
industry began to loom as a threat to ordinary broad-
cast television, the Federal Communications Commission
has labored to protect the local broadcast media through
regulation of the cable industry. The Commission’s ob-
jective in these endeavors
was not merely to protect an established industry
from the encroachment of an upstart young competi-
tor, although such a result was clearly the byproduct
of the regulatory posture that developed. Rather, the
Commission took the position that without the power
to regulate cable it could not discharge its statutory
obligation to provide for “fair, efficient, and equita-
ble” distribution of service among “the several States
and communities.” If permitted to grow unfettered,
the Commission feared, cable might well supplant
ordinary broadcast television. A necessary conse-
quence of such displacement would be to undermine
the FCC’s mandate to allocate the broadcast spec-
trum in a ‘nanner that best served the public inter-
est. In particular, if an umregulated, unlicensed
cable industry were to threaten the economic via-
bility of broadcast television, the Commission would
be powerless to effect what it saw ‘and continues to
see! as one of its cardinal objectives: the develop-
ment of a “system of [free] local broadcasting sta-
tions, such that ‘all communities of appreciable size
[will] have at least one television station as an out-
let for local self-expression.’ ”’
Quincy Cable TV, 768 F.2d at 1439 (citations and foot-
note omitted). See also United States v. Southwestern
Cable Co., 392 U.S. 157 (1968) (approving FCC regula-
tion of cable as within the agency’s authority so long as
its actions are “reasonably ancillary” to its regulation
of broadcast television); Amendment of Part 76 of the
Commission's Rules Concerning Carriage of Television
Broadcast Signals by Cable Television Systems, 1 F.C.C.
Red 864 (1986) (hereinafter “Report and Order’’), re-
6a
consid. denied, 2 F.C.C. Red 3593 (hereinafter, “Recon.
Order’), at 1] 1-29 (tracing history of cable regulation) .'
Must-carry rules in various forms have been major
tools in this campaign to protect local broadcasting from
cable. The FCC first introduced such rules in 1962, when
it sought to impose a must-carry requirement as a condi-
tion for granting an application to construct a microwave
system to transmit distant signals to a rural cable sys-
tem. See Carter Mountain Transmission Corp., 32 F.C.C.
459 (1962), aff'd, 321 F.2d 359 (D.C. Cir.), cert. denied,
357 U.S. 951 (1963); see also Quincy Cable TV, 768
F.2d at 1440 n.11. In time, the FCC developed a broader
must-carry regime, generally requiring cable operators,
“upon request, to carry any broadcast signal considered
local under the Commission’s complex formula.” Quincy
Cable TV, 768 F.2d at 1440. The philosophy behind
these rules was
to assure that the advent of cable technology not
undermine the financial viability of free, comrmunity-
oriented television. If cable were to “drive out tele-
vision broadcasting service . . . the public as a whole
would lose far more—in free service, in service to
outlying areas, and in local service to cutlying areas.
and in local service with local control and selection
of programs—than it would gain.” The must-carry
' Rather than retrace the ground covered in Quincy Cable
TV, we refer the reader at this juocture to the detailed and
comprehensive history of early cable regulation provided in
Judge Wright's opinion in that case. See 768 F.2d at 1438-15.
Other useful history appears in Southwestern Cable Co.,
supra, 392 U.S. at 161-67; United States v. Midwest Video
Corp., 406 U.S. 649 (1972) (holding that rule requiring
cable operators to originate local programming fell within
FCC's statutory jurisdiction) ; FCC v. Midwest Video Corp.,
440 U.S. 689 (1979) (striking down as beyond the FCC’s
jurisdiction rules requiring cable operators to make channels
available for local access); and Capital Cities Cable, Inc. v.
Crisp, 467 U.S. 691 (1984) (holding state regulation of alco-
holic beverage advertising on cable television systems to be
preempted by Communications Act of 1934).
rules, together with a comprehensive body of re-
lated regulations, would channel the development of
the nascent cable industry to limit the risks it might
pose to conventional broadcasting, ‘“‘society’s chosen
instrument for the provisions of video services.”
Id. (citations omitted) ; see generally id. at 1440-43 (de
| scribing, in considerably greater detail, the rationale for
the pre-Quincy Cable TV must-carry rules).
In 1985, this circuit faced for the first time the question
whether the broad must-carry rules which had been in
existence for nearly two decades were in harmony with
the first amendment. Judge Wright’s opinion for a
unanimous panel in Quincy Cable TV held that they were
not. As a threshold matter, we observed that our first
amendment review of regulations burdening cable tele-
vision was not governed by those cases, such as Red
Lion Broadcasting Co. v. FCC, 395 U.S. 367 (1969) and
FCC v. League of Women Voters of California, 468 U.S.
364 (1984), upholding regulations on broadcast tele-
vision. In reaching that conclusion, we noted “the Su-
preme Court’s oft-repeated suggestion that the First
Amendment tolerates far more intrusive regulation of
broadcasters than of other media precisely because of the
inescapable physical limitations on the number of voices
that can simultaneously be carried over the electromag-
netic spectrum.”” 768 F.2d at 1448. Wirecarried media
like cable, of course, have no such limitations, and thus
we found the “scarcity rationale’ that the Supreme
Court has used to justify broadcast television regulations
to offer no succor to those seeking to establish the con-
stitutional validity of cable television regulations. Jd. at
1448-50.
Ok A a i Ra
Quincy Cable TV did not, however, establish the pre-
cise degree of first amendment protection enjoyed by
cable operators. Although our opinion noted that some
_
8a
parallels existed between the must-carry regulations and
regulations impinging on editorial discretion that had
been invalidated in the past, see Quincy Cable TV, 768
F.2d at 1452 (citing Miami Herald Co. v. Tornillo, 418
U.S. 241 (1974)), it pointedly declined to ‘definitively
decide” whether cable operators enjoy the heightened pro-
tection accruing to newspapers or whether the must-carry
regulations were more appropriately evaluated under the
test, set forth in United States v. O’Brien, 391 U.S. 367
(1968). See Quincy Cable TV, 768 F.2d at 1454. Rather,
we concluded that the must-carry rules would fail even
the O’Brien test’s requirement of a substantial govern-
mental interest furthered by means no greater than are
essential to the furtherance of that interest.
The reasons for our invalidation of the 1985 must-
carry rules under the O’Brien test were twofold. First,
we concluded that the Commission had not adequately
substantiated its assertion that a substantial govern-
mental interest existed. In Quincy Cable TV we stated
that, even accepting the view that the preservation of
free local television was an important regulatory goal,
our review of the FCC’s reports and regulations sug-
gested that the problem the sweeping must-carry rules
purported to prevent—the destruction of free, local tele-
vision—was merely a “fanciful threat,”’ unsubstantiated
by the record or by two decades of experience with
cable TV. /d. at 1457. In general, we noted, “the mere
abstract assertion of a substantial governmental inter-
est, standing alone, is insufficient to justify the subordi-
nation of First Amendment freedoms.” /d. at 1454.
Second, even if the interest had been deemed substantial,
the broadly-drafted must-carry rules represented a fatally
overinclusive response to the problem. We observed in
this vein that the rules indiscriminately protected every
local broadcaster, regardless of whether it was in fact
threatened, and regardless of the quantity of local service
available in the community and the degree to which the
cable operator in question already carried local outlets.
9a
Id. at 1459-62. We did, however, note that our decision
in no way foreclosed the Commission from adopting new
must-carry rules consonant with the O’Brien test. Id. at
1463.
In the aftermath of Quincy Cable TV, the FCC im-
mediately suspended enforcement of the must-carry rules.
Four months later, it announced its intention to un-
dertake rulemaking proceedings, see Notice of Inquiry
and Notice of Proposed Rulemaking, 50 Fed. Reg. 48232
(1985), and eventually, in November 1986, 16 months
after Quincy Cable TV had been handed down, the agency
released a new, more limited set of must-carry rules de-
signed to accommodate Quincy Cable TV’s concerns. See
Report & Order. In the decision to promulgate these
new rules, the Commission took note of the many com-
ments, submitted primarily but not exclusively by broad-
casting interests, arguing that some form of FCC inter-
vention remained necessary to protect local broadcast-
| ing. See Report & Order at 9 36-51; see also id. at
) §% 52-57 (describing comments, primarily from cable op-
| erators, arguing that the reinstitution of must-carry was
unnecessary and undesirable).
late, itn
The most salient feature of the new rules was that the
Commission substantially altered its stated justification
for imposing must-carry rules at all. No longer did the
Commission argue, as it had prior to the Quincy Cable
TV decision, that the rules were needed for the indefinite
future to ensure viewer access to local broadcast stations.
Rather, the Commission now argued that must-carry
rules were needed to guarantee such access during a
shorter-term transition period during which viewers
could become accustomed to an existing and inexpensive
but largely unknown piece of equipment known as the
“‘input-selector device.”
Such devices, if hooked up to a television, allow viewers
at any given time to select. simply by flicking a switch.
between shows offered by their cable system and broad-
10a
cast television shows offered off-the-air. These devices, the
most common of which is known in the cable industry as
an “A/B switch,” are about the size of a standard light-
switch, and work by being hooked up to a roof-top, attic
or television-top antenna. According to a study cited by
the Commission in its report explaining the new must-
carry rules, the cost of buying such a switch is approxi-
mately $7.50, and the cost of buying an outdoor antenna
to go with it is approximately $50. See Joint Appendix
(“J.A.") at 240-42 (cited at Report & Order at § 124).
Outdoor antennas are generally the more expensive of the
three types of antennas.
The Commission estimated that it would take approxi-
mately five years for the public to become acclimated to
the existence of these switches, and accordingly, its in-
terim rules should be in place for that same five vears.
See 47 C.F.R. § 76.64 (stating that rules remain in force
until January 15, 1992) ; see also Report & Order at J 138.
At that point, the need for ongoing must-carry rules to
ensure viewer access to local broadcast stations would be
obviated. See Report & Order at 7 163 (“once cable sub-
scribers become accustomed to using off-the-air reception
on an equal basis with cable service, then cable systems
no longer will have an artificial ability to limit their sub-
scribers’ access to over-the-air broadcast signals’); see
also id. at 1 138 (‘While we have found that short-term
must carry regulations are necessary in order to ensure
that broadcasting remains a competitive alternative
source of programming in the interim period, the record
clearly supports no more extensive regulatory program
than that which we are adopting’”’).
Because the Commission envisioned these switches as
guaranteeing effective viewer choice between local and
cable shows, it ultimately added to the new must-carry
regime the requirement that cable systems offer sub-
scribers, for pay, input-selector devices that could be
hooked up to their TVs. See 47 C.F.R. § 76.66; see also
|
.
lla
Report & Order at 7140; Recon. Order at {{ 80-94
(sketching input-selector requirements and «mending
earlier regulations so as not to require cable operators
to install such devices for free or at cost’. It did so
over the reservations of some broadcasting concerns, who
viewed the input-selector devices as less protective than
must-carry rules. See Report & Order at 1] 45-47 (not-
ing that “broadcasting interests” did not regard the A B
switch as an efficacious way of protecting local broad-
casting). The Commission, observing that relatively few
consumers knew about the switch-and-antenna mechanism
and noting that the long history of must-carry rules had
created a public “misperception” that “broadcast signals
will always be available as part of their basic cable serv-
ice,” see Report & Order at 9 121-22, also promised to
require cable operators to educate the viewing public
about the availability of the switch-and-antenna mecha-
nism. See, ¢.q., Report & Order at 7% 1, 136.
In addition to thus offering a new and more limited
justification for must-carry rules, the Commission also
substantially limited the sweep of the new rules in a
number of respects. It set forth limits on how many
channels a cable carrier must devote to must-carry: car-
riers with 20 channels or less were not required to carry
any must-carry stations; carriers with between 21 and
26 stations could be required to carry up to 7 channels
of must-carry signals; and carriers with 27 or more
channels could be required to devote up to 25% of their
system to must-carry signals. See 47 C.F.R. § 76.56; see
also Report & Order at 7150-52. It also limited the
pool of potential must-cariy channels to those satisfying
a “viewing standard” generally demonstrating a mini-
mum viewership of the channel in question. See 47 C.F.R.
§ 76.5(d)1(ii); 47 C.F.R. § 76.55 (stating that a broad-
cast station qualifies for inclusion in must-carry pool if
it demonstrates that it attains at least an average share
of total viewing hours of at least 2 percent and a net
12a
weekly circulation of 5 percent in noncable households in
the county where the cable system is located); see also
Report & Order at {] 145-46. The Commission also au-
thorized cable operators to refuse to carry more than one
station affiliated with the same commercial network. See
Report & Order at 7153. Finally, the Commission lim-
ited the number of noncommercial stations required to be
carried, stating that when the cable system had fewer
than 54 channels and an eligible noncommercial station
or translater existed, the cable operator must devote at
least one channel to a noncommercial station; and that
when the cable system had 54 or more stations, it must
devote two must-carry channels to such endeavors. See
47 C.F.R. § 76.56.
Constitutional and statutory challenges to these new
must-carry rules were lodged shortly after their promul-
gation by an array of cable operators and public interest
group. Petitioner Century Comumnications Corp., joined
by 13 other cable operators (hereinafter “Joint Petition-
ers’), protests the must-carry rules as violative of the
first amendment of the Constitution, as a taking of prop-
erty without just compensation in violation of the fifth
amendment, and as a measure not authorized by the
FCC’s statutory jurisdiction and hence ultra vires. Peti-
tioner Richard Leghorn, a former cable system operator
and presently an investor in the cable industry, chal-
lenges the rules on first amendment grounds. Petitioner
Hubbard Broadcasting, Inc., a broadcasting concern, as-
sails the failure of the new rules to afford must-carry
rights to commercial broadcast translator stations as
arbitrary and capricious and therefore violative of the
Administrative Procedure Act (“APA”). Intervenor As-
sociation of Independent Television Stations argues that
the must-carry rules are inconsistent with the Cummis-
sion’s statutory charter to protect adequately needy local
stations. Intervenor the United Church of Christ chal-
lenges the regulations as arbitrary and capricious in a
number of respects. Three other intervenors, the Na-
13a
tional Independent Television Committee, Spanish Inter-
national Communications Corp., and Univision, Inc., tar-
get the viewing standard provision of the new must-carry
rules as a content-based regulation giving preference to
“popular” over “unpopular” speech and therefore vio-
lative of the first amendment; these groups also contend
that this requirement is an arbitrary and capricious
measure adopted in violation of the APA.
The FCC, in response, defends the must-carry rules as
based on a satisfactory administrative record and as con-
sonant with the first and fifth amendments. In this en-
deavor it is joined by five intervenors. The Corporation
for Public Broadcasting, the National Association of Pub-
lic Television Stations, and the Public Broadcasting Serv-
ice defend the FCC initiative as consistent with both the
first amendment and the APA. Two other intervenors,
the National Association of Broadcasters and the Asso-
ciation of Independent Television Systems, Inc., similarly
defend the regulations against constitutional and statu-
tory attack.
We, however, need look no further than petitioners’
first amendment claims to decide this case. Because we
invalidate the entire new must-carry regime as unjusti-
fied and as unduly sweeping, we do not reach—and there-
fore express no opinion on—the subsidiary first amend-
ment challenges to particular facets of the rules, or the
arguments based on the APA that the rules are too nar-
i row in scope.
; II. OPINION
A. The Appropriate Level of First Amendment Scrutiny
A threshold question for our first amendment analysis
is what standard of review to apply. As in Quincy Cable
TV, the parties dwell heavily on this issue, offering clever
and flavorful analogies to other corners of first amend-
ment law on which more light has been shed.
ee ee ee ens
5
l4a
Petitioners characterize the must-carry rules as posing
more than an incidental burden on speech, likening the
rules to the newspaper right-of-reply statute invalidated
in Miami Herald Publishing Co. v. Tornillo, 418 U.S. 241
(1974), where the Supreme Court held that the enact-
ment impermissibly interfered with the newspaper’s con-
stitutionally protected “editorial discretion.” Toward this
end, petitioners also offer the recent case of City of Los
Angeles v. Preferred Communications, Inc., 106 S. Ct.
2034 (1986), where the Court noted that the selection
and organization of programs on cable television does
involve some degree of editorial discretion. Jd. at 2037."
See Brief for Joint Petitioners at 10-21.
The FCC counters by characterizing the must-carry
rules as a commercial regulation that burdens speech in
a far more attenuated fashion. Accordingly, the FCC
argues, the must-carry rules are more appropriately
analyzed under the standards set forth in United States
v. O’Brien, 391 U.S. 367 (1968), where the Supreme
Court stated that to be valid, a regulation incidentally
burdening speech and not aimed at the suppression of
free expression must advance a substantial governmental
interest and must be no more restrictive than necessary
to accomplish that end. O’Brien, 391 U.S. at 377. See
Brief for FCC at 30-42.
The precise level of first amendment protection due a
cable television operator is clearly an issue of much
moment to the industry and ultimately to viewers. How-
ever, having closely analyzed the rationale for and work-
ings of the new must-carry rules, we conclude that we
2 Preferred Communications did not involve restrictions on
the contours of a particular cable operator’s offerings, as in
Quincy Cable TV and the present case, but rather the issue
of whether municipal restrictions on cable television fran-
chising implicated first amendment interests. The Supreme
Court held that they did, and accordingly remanded for a
fuller development of the factual issues in the case.
l5a
again need not resolve this vexing question. Like the
:- original must-carry regime invalidated in Quincy Cable
| TV, the new, scaled-back edition fails to satisfy even the
less-demanding first amendment test of United States v.
O’Brien whose use here is advocated by the FCC. See,
e.g., Brief for FCC at 30 (describing O’Brien as “the
correct test”). We now proceed to offer our application
of that test. 7
B. An O’Brien-Test Analysis of the New Regulations
In United States v. O’Brien, the Supreme Court
stated:
[Wle think it clear that a government regulation
is sufficiently justified if it is within the constitu-
tional power of the Government; if it furthers an
; important or substantial governmental interest; if
the governmental interest is unrelated to the suppres-
sion of free expression; and if the incidental restric-
tion on alleged First Amendment freedoms is no
greater than is essential to the furtherance of that
interest.
391 U.S. at 377. Typically, analysis under United States
v. O’Brien begins with an appraisal of whether the in-
terest said to be served by a governmental measure is
substantial. If it is, we proceed to the more delicate
fact-bound issue of whether the means chosen are con-
gruent with the desired end, or whether they are too
broadly tailored to pass muster. See O’Brien, 391 U:S.
3In addition to claiming enhanced first amendment pro-
tection on Tornillo grounds, petitioners also contend that the
must-carry rules constitute content-discrimination requiring
more substantial governmental justification. See, e.g., Brief
for Joint Petitioners at 4-5, 13-21 (stating that the rules
favor the speech of certain popular local broadcast licensees
with various characteristics). The FCC denies this charac-
terization. See, e.g., Brief for FCC at 32-36. Because we con-
clude that these rules are invalid even under the O’Brien test,
we need not resolve this additional claim for stronger first
| amendment protection.
ee
16a
at 377; see also Members of City Council of Los Angeles
v. Taxpayers for Vincent, 466 U.S. 789, 804-05 (1984)
(applying O’Brien test to uphold city ordinance prohibit-
ing posting of signs on public property) ; Quincy Cable
TV, 768 F.2d at 1454-62 (using the two-step O’Brien
framework employed here).
In this endeavor we are mindful of the fact that it is
a first amendment test we are applying. Althovgh at
times an O’Brien inquiry into an agency regulation may
appear to resemble an exercise in administrative law
analysis, the Supreme Court has often noted that the
substantial deference due in the administrative context
has little relevance when first amendment freedoms are
even incidentally at stake. See, e.g., Members of City
Council v. Taxpayers for Vincent, 466 U.S. at 803 n.22
(courts ‘“‘may not simply assume that [an] ordinance will
always advance the asserted state interests sufficiently to
justify its abridgment of expressive activity”) ; Schad v.
Borough of Mount Ephraim, 452 U.S. 61 (1981) (hold-
ing that no governmental justification existed to support
application of a zoning ordinance to bar nude dancing) ;
Heffron v. International Society for Krishna Conscious-
ness, Inc., 452 U.S. 640, 658 (1981) (Brennan, J., con-
curring in part and dissenting in part) (‘As our cases
have long noted, once a governmental regulation is shown
to impinge upon basic First Amendment rights, the
burden falls on the government to show the validity of
its asserted interest and the absence of less intrusive
alternatives.”’).
We stress at the outset that both the justification of-
fered by the FCC for its new regulations and the scope
of those new initiatives differ rather markedly from the
justification for and scope of the initial must-carry rules
struck down in Quincy Cable TV.* We therefore do not
‘The FCC’s primary justification for the new must-carry
rules, as noted previously, is no longer that they are per-
17a
by any means accept petitioners’ characterization, see
Brief for Joint Petitioners at 1, of the new must-carry
rules as mere imitations of those invalidated in Quincy
Cable TV and thus deserving of a hasty execution. Al-
though Quincy Cable TV supplies the structural frame-
work for our analysis, the new must-carry rules are to
be evaluated on their own terms: they should not suffer
manently needed to safeguard the diverse programming gen-
erated by protecting local broadcasts. That argument was
foreclosed by Quincy Cahle TV, and the FCC now concedes
as well that the spread of A’B switches and antennas to house-
holds will ultimately ensure such diversity. See Report &
Order at © 119 (noting that agency has conceded inadequacy
of earlier rationale for must-carry rules). Rather, the FCC
makes a more limited argument on behalf of its new rules:
that they are needed as an interim measure, to tide the broad-
cast industry and viewers through the period, estimated by
the FCC as five years, during which the American public is
introduced to such new technology. Compare Report & Order
at © 119 (noting that justification for original must-carry
rules was to “protect[] one segment of the television industry
by substantially limiting the ability of others to offer service
to consumers”) with Report & Order at {1 (“[t]he new
regulatory program is designed to maximize consumers’ pro-
gram choices by developing cable subscribers’ awareness of
the need for the capability to receive off-the-air broadcast
signals independent of their cable service’) and with Recon.
Order at © 47 (“our objective [now is] ensuring viewer access
to the maximum number of program choices availiable throuch
cable and off-the-air broadcast television facilities”).
Similarly, the scope of the new must-carry rules is far
less sweeping than the regulations we branded as overinclusive
in Quincy Cahle TV. The must-carry rules at issue here re-
quire cable operators to set aside no more than one-third
of their channels—a far cry from the previous rules, under
which must-carry stations could in theory have dominated a
cable operator’s roster of channels. Additionally, the viewing
standard requirement, other first amendment objections aside,
does mitigate the possibility of a cable operator being saddled
with unpopular and hence unprofitable channels. Finally, the
five-year span of the rules necessarily softens their cumulative
impact.
18a
by dint of their association with the previous must-carry
regime.
Our reservations about the new must-carry rules do,
however, implicate both the substantiality of the govern-
mental interest advanced and the narrowness of their
design.
1. The Substantiality of the Governmental Interest
It may well be that upon a suitable record showing.
the justification offered by the FCC, that interim regula-
tions are needed to keep local broadcasts accessible to
viewers while the new switch-and-antenna technology
takes hold, would satisfy the O’Brien standard. See, e.g.,
FCC v. WNCN Listeners Guild, 450 U.S. 582, 594 (1981)
(deeming “the policy of promoting the widest possible
dissemination of information from diverse sources to be
consistent with both the [Commission’s] public interest
standard and the First Amendment’); cf. FCC v. Na-
tional Citizens Committee for Broadcasting, 436 U.S. 775,
795 (1978) (noting first amendment value of achieving
‘widest possible dissemination of information from di-
verse and antagonistic sources’’’) (citations omitted).
The difficulty is that here, as in Quincy Cable TV, the
FCC’s judgment that transitional rules are needed is
predicated not upen substantial evidence but rather upon
several highly dubious assertions of the FCC, from which
we conclude that the need for a new saga of must-carry
rules is more speculative than real. See, e.g., Home Bor
Office, Inc. v. FCC, 567 F.2d 9, 50 (D.C. Cir.), cert.
denied, 434 U.S. 829 (1977) (requiring agencies to pre-
sent “‘a record that convincingly shows a problem to ex-
ist” in order to satisfy the “substantial interest” prong
of the O’Brien test); see also Quincy Cable TV, 768 F.2d
at 1455 n.44 (noting Supreme Court cases requiring
“more than an unsubstantiated assertion of the impor-
tance of the governmental interest”). Such speculative
19a
fears alone have never been held sufficient to justify
trenching on first amendment liberties.
The agency’s first questionable contention is that con-
sumers are not now aware and cannot be expected to
become aware in fewer than five years that the installa-
tion of an A/B switch could preserve their choice of
programs:
“(T]he perception [exists] that cable systems may
be able to preclude access by their subscribers to off-
the-air broadcast signals. This perception derives not
from any inherent characteristic of cable service, but
rather from cable subscribers’ current expectation
that broadcast signals wi!! always be available as
part of their basic cable service. This expectation is
a direct result of the former must-carry rules, which,
in fact, required cable systems to carry all available
off-the-air broadcast television signals. The expecta-
tion that local broadcast signals will be carried by
their cable system has caused many subscribers to
perceive that there is no need to install or maintain
the capability to receive broadcast signals off-the-air.
“If we did not adopt interim must-carry rules now,
until our long-term regulatory plan to educate con-
sumers on the need for independent access to off-the-
air signals and to make input selector switches avail-
able takes hold, harm to the public interest would
ensue.
See Report & Order at 7 121, 126.
The FCC, however, adduces scant evidence for its judg-
ment of a widespread “misperception” among cable sub-
scribers that the only means of access to off-the-air sig-
nals is through cable service. It puts forth no attitudinal
surveys, or polls, suggesting the likely pace of consumer
adaptation to the A’B switch technology. Nor does it
offer analogies illustrating how swiftly consumers have
incorporated previous electronic innovations. Such evi-
dence might have shown what the FCC simply assumes
20a
here: that upon the disappearance of must-carry regula-
tions, consumers would collectively fail to install with any
dispatch the switches and antennas necessary to gain ac-
cess to loca! broadcast stations, conceivably imperiling
the survival of these stations and thereby depriving view-
ers of diverse broadcasting offerings.
The lone item of “hard” record evidence on which the
FCC relies in support of its need for a five-year interim
must-carry period is a study entitled, “Outdoor Antennas,
Reception of Loca! Television Signals and Cable Tele-
vision,” prepared by the ELRA Group, Inc., for the
National Association of Broadcasters (“NAB”), see J.A.
at 205 (cited at Report & Order at 1124). NAB’s mem-
bers have long benefited from the existence of must-
carry rules, and the organization, during rulemaking,
strongly criticized alternative proposed regulations that
it perceived as inadequately protective of broadcasters,
such as reliance on the A’B switch. See Report & Order
at 1 47 (summarizing NAB’s statement to FCC).
This NAB study is essentially a statistical compilation
of survey results gleaned from a poll of 610 heads of
cable households. The FCC cites this survey generally
without pinpointing any specific parts of it that would
strongly support the new must-carry regime, see Report
and Order at { 124. We probe its findings in greater de-
tail here, seeking to uncover and evaluate the particular
material in it that may reinforce the agency’s rationale.
Among its melange of disparate facts and findings,
the study includes four items of information that argu-
ably could be said to point to a need for interim must-
carry rules: (1) only about 1% of cable subscribers pres-
ently have both the outdoor antenna and A’B switch
needed to gain access to noncarried local programming in
the absence of must-carry rules; (2) many cable viewers
originally owning antennas have taken them down, be-
cause they were unsightly, and only about 10% of cable
2la -
subscribers presently switch back and forth between cable
and antennas; (3) a third of cable homes have video cas-
sette recorders and thus may face some increased diffi-
culty attaching the A B switch; and finally, (4) about
half of cable subscribers doubted that if local broadcast
stations were dropped from cable they would buy what
the survey termed a “special switch” enabling them to go
back and forth between cable and their antennas. Pri-
marily on the basis of these findings, and particularly
the finding that relatively few homes are presently
equipped with both antennas and switches, the report
concludes that the transition to a world without must-
carry could force consumers as a whole to expend mil-
lions of dollars. It does not, however, suggest that the
new technology would be especially costly to consumers
on an individual basis. Nor does it estimate how long it
would take for most households to acquire and install the
required switch and antenna.
Even accepting the NAB’s findings as accurate, it re-
quires an inferential leap of some distance to arrive at
a need for five more years of must-carry. Only through
the rosiest of broadcasters’ lenses can the NAB study’s
first salient finding—that there is a dearth of antenna-
and-switch setups in American households—be seen as
pointing to the difficulty of installing such gear or to the
inability of consumers to learn of their availability. More
likely, the absence of such equipment from most homes
reflects the obvious reality that, so long as the govern-
ment requires cable companies to offer local broadcasting
through the must-carry regime, such supplemental equip-
ment is unnecessary. The FCC’s own determination that
the consumer misperception upon which it so heavily re-
lies “is a direct result of the former must carry rules,”
see Report & Order at 121, seriously undercuts the
NAB's implication that the unavailability of switch-and-
antenna gear is an endemic or long-term problem.
22a
The NAB study’s second finding, that few of those
with switch-and-antenna capability currently switch back
and forth between cable and broadcast with any regular-
ity, can most reasonably be accounted for by the fact
that, in a must-carry world, the need to do so is slight.
Like the fact that few households have installed switches
and antennas, this finding merely describes present real-
ity without offering any glimpse into how the change of
one key variable—the lapse of must-carry regulations—
would affect that reality. As petitioner Leghorn, who
appeared before the FCC during rulemaking proceedings,
observes, see Brief for Petitioner Leghorn at 12: ‘“Com-
mon sense suggests that consumers who want to receive
an off-the-air channel will quickly ubserve that they may
need to purchase ‘or reconnect) antennas should their
cable system cease offering their favorite broadcast sta-
tions.”
The NAB study’s third potentially relevant finding,
that many cable subscribers own VCRs and thus would
face somewhat complicated problems hooking up the
switch-and-antenna, is readily dismissed as a grounds
on which to justify the need for new must-carry regula-
tions: the FCC itself, in its report explicating the new
regulations, specifically discounts reliance on the VCR-
interference theory. The Commission concluded:
We believe that any equipment compatibility problems
can be overcome through relatively minor modifica-
tions to switching devices and that cable operators
and other equipment suppliers can provide the infor-
mation and/or assistance consumers need to install
the switches for use with VCRs.
See Report & Order at 167 (observing as well that
“many of these concerns may become moot if television
receivers begin to be manufactured with switching or
interface devices built in’) ; see also Recon. Order at § 51
(noting that “[fe]vidence that subscribers can make com-
plex cable connections correctly is provided by the: fact
i ae
23a
that there have been no widespread problems or difficul-
ties encountered by consumers in installation of cable-
ready VCRs and receivers . . . many cable subscribers
now are acquiring and successfully installing their own
cable terminal/converter equipment’’).
The NAB study’s final pertinent observation is that
about half of the survey’s respondents are unwilling to
predict that they would ultimately purchase what the
survey question termed a “special switch.” Initially, we
note that this characterization obscures somewhat the low
price and easy installation of the A’B switch. Survey
imperfections aside, however, this finding seems to us
unpersuasive, for it almost certainly reflects merely the
present consumer unfamiliarity with the switch and an-
tenna mechanism. To the extent it does not, it may also
reflect consumer disinterest in having access to off-the-
air signals. Either way, this finding hardly explains why
the five-year transitional period chosen by the FCC is
necessary. The NAB’s study thus provides only the
spongiest of foundations for the FCC’s asserted justifi-
cation for its regulations.
In appraising the FCC’s argument that the indelibility
of consumer ignorance justifies the reimposition of must-
carry rules, we are thus left to ask whether the FCC’s
eentention is so obvious or commonsensical that it needs
no empirical support to stand up. We conclude that it is
not. For one thing, the FCC’s own report elsewhere
belies the agency’s fears of viewer lethargy. The Com-
mission notes:
There is evidence that video consumers are now
becoming accustomed to switching between alternate
program input sources. We observe that many cable
systems now offer services through dual cables in
order to provide greater channel capacity. Such
systems employ switching devices to select between
the two cables and often mark the switch positions
with “A” and “B” designations. Cable subscribers
24a
apparently have accepted this switching arrange-
ment and do not find it inconvenient.
See Report & Order at 164 (emphasis added).
More generally, we simply cannot accept, without evi-
dence to the contrary, the sluggish profile of the Ameri-
can consumer that the Commission’s argument neces-
sarily presupposes. In a culture in which even costly
items like the video-cassette recorder, the cordless tele-
phone, the compact disc-player and the home computer
have spread like wildfire, it begs incredulity to simply
assume that consumers are so unresponsive that within
the 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.°
Even were we to accept, however, the Commission’s
view that consumer ignorance cannot be readily eradi-
5 The Commission’s report on the new must-carry regula-
tions also rules out several alternative conceivable justifica-
tions for the new regulations raised by broadcasting interests
during rulemaking. Contrary to broadcasters’ assertions, the
FCC specifically found concerns about the adequacy of input
selector switches to be “overstated” and discounted reliance
on this argument as a basis for its regulations. See Report &
Order at { 165. Likewise, the Commission dismisses the argu-
ment that indoor antennas are difficult or expensive to install.
See Report & Order at { 166 (‘‘[t]he relatively low cost and
simple installation of indoor antennas can be expected to make
it easy for cable subscribers to acquire the capability to re-
ceive broadcast stations not carried on cable’) ; see also Quincy
Cable TV, 768 F.2d at 1457 n.48 (noting that Commission
had conceded that switching devices do not pose a significant
barrier to receiving off-the-air signals). Finally, the Commis-
sion notes, “[t]he argument that outdoor antennas are some-
times prohibited ignores the fact that in many of these situ-
ations it is possible to receive signals of acceptable quality
using an inexpensive indoor, set-top antenna... . Attic an-
tennas which can give additional off-the-air reception capa-
bility are also available.” Report & Order at { 166.
=_
25a
cated, we have a second fundamental problem with the
Commission’s judgment that its interim must-carry rules
are needed to advance a substantial governmental inter-
est sufficient to support burdening cable operators’ first
amendment rights. The Commission relies heavily on its
assumption that in the absence of must-carry rules, cable
companies would drop local broadcasts. Experience be-
lies that assertion. As cable operators reported to the
Commission during rulemaking proceedings, see Report
& Order at 1 53, during the 16 months that elapsed be-
tween Quincy Cable TV and the reimposition of the
modified must-carry rules, cable companies generally did
not drop the local broadcast signals that they had been
carrying prior to Quincy Cable TV.
The FCC responds that this constitutes “only limited
direct evidence,” and that in any event some cable com-
panies did drop individual broadcast stations, see Report
& Order at 1131. One might also speculate on behalf
of the FCC that the inaction of cable companies after
Quincy Cable TV may have partially resulted from their
expectation that some new must-carry rules would in-
evitably emerge. Nevertheless, given Quincy Cable TV’s
vigorous denunciation of the breadth of the old must-
carry rules, one can hardly assume that cable companies
expected the FCC to reintroduce anything like the old
sweeping must-carry requirements. Also undercutting
the FCC’s fearful assumption is the fact that both the
Federal Trade Commission and the Department of Jus-
tice have concluded, in separate reports, that the absence
of must-carry would not harm local broadcasting. See
Report & Order at 1 54 (noting Federal Trade Commis-
sion study, submitted in FCC rulemaking, that an anal-
ysis of 24 satellite television stations showed that ‘absent
must-carry rules, cable systems can be expected to carry
many or most local broadcast stations’); id. at 955
(noting that Department of Justice also concludes that
must-carry rules are not needed to foster localism) ; id.
26a
at —114 (FCC acknowledges during post-Quincy Cable
TV hiatus that “many cable systerns are now providing
locally originated programming services’’).
For these reasons, we conclude that the FCC has not
demonstrated that the new must-carry rules further a
substantial governmental interest, as the rules must to
outweigh the incidental burden on first amendment inter-
ests conceded by all parties here. As we stated in Quincy
Cable TV, ‘“‘[a]t least in those instances in which both
the existence of the problem and the beneficial effects
of the agency’s response to that problem are concededly
susceptible of some empirical demonstration, the agency
must do something more than merely posit the existence
of the disease sought to be cured.” 768 F.2d at 1455.
The FCC error in this case was its failure to go that
extra step here.
2. The Congruence Between Means and Ends
The second prong of the O’Brien test focuses on the
congruence between the means chosen by the agency and
the end it seeks to achieve. In this case, even were we
convinced that the interest in whose name the FCC pur-
ports to act was more than a “fanciful threat,” see Home
Box Office, Inc. v. FCC, 567 F.2d 9, 50 (D.C. Cir.), cert.
denied, 434 U.S. 829 (1977), the new must-carry regula-
tions, because of their lengthy duration, are too broad to
pass muster even under the O’Brien test.
If any interim period of must-carry rules is, in fact,
necessary, the FCC adduces literally no evidence that this
period must last for fully five years. Such a period is
strikingly long in an industry that the FCC itself charac-
terizes as “rapidly evolving.” See Report & Order at
7133. In the absence of any empirical support for the
new must-carry rules, the FCC falls back on what it
terms a “sound predictive judgment,” see Recon. Order
at © 62, that it will take about five years for consumers
27a
to learn about the switch-and-antenna mechanism, and
thus that a five-year transition period is needed during
which the agency will provide consumer education.
We are, however, unpersuaded. In large part our re-
luctance to countenance reimposing must-carry rules for
five years based on a “sound predictive judgment” that is
never explained reflects our perceptions about consumer
aptitude stated earlier. Such a guess about consumer
instincts hardly presents the sort of issue where, “if com-
plete factual support . . . for the Commission’s judgment
or prediction is not possible,” we should defer to the
Commission’s expert judgment. See FCC v. National
Citizens Committee for Broadcasting, 436 U.S. at 814. It
is wholly unclear to us 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. The FCC report does nothing to shed light on
this matter.
Additionally, we are skeptical—and the FCC’s report
says nothing to relieve this skepticism—that any con-
sumer education campaign will have much impact so long
as viewers can continue to rely on must-carry to get their
fix of local broadcasts. It is entirely likely that not until
the waning few months of the five-year must-carry re-
gime would the FCC’s admonitions about the need for
switches and antennas begin to sink in, much as the ex-
istence of switches and antennas has largely gone un-
noticed in a consumer population | lready accessed to
local television as a result of must-carry in recent years.
Optinz for a five-year interim period therefore merely
delays the inevitable, but almost certainly brief, period
during which TV owners will learn of, purchase, and
install the requisite equipment.* We therefore find it diffi-
®*In addition to our concerns about the unnecessary dura-
tion of these “interim” rules, we are unconvinced, based on
our reading of the agency record, that the Commission was
correct to dismiss peremptorily the less restrictive alterna-
28a
cult to defer blindly to the Commission’s unproven beliet
that half a decade is necessary.
III. CONCLUSION
Our decision today is a narrow one. We hold simply
that, in the absence of record evidence in support of its
policy, the FCC’s reimposition of must-carry rules on a
five-year basis neither clearly furthers a substantial gov-
ernmental interest nor is of brief enough duration to be
considered narrowly tailored so as to satisfy the O’Brien
test for incidental restrictions on speech. We do not
suggest that must-carry rules are per se unconstitutional,
and we certainly do not mean to intimate that the FCC
may not regulate the cable industry so as to advance
substantial governmental interests. But when trenching
on first amendment interests, even incidentally, the gov-
ernment must be able to adduce either empirical sup-
port or at least sound reasoning on behalf of its meas-
ures. As in Quincy Cable TV, we reluctantly conclude
that the FCC has not done so in this case, but instead
has failed to “ ‘put itself in a position to know’ ” whether
the problem that its regulations seek to solve “ ‘is a real
or fanciful threat.’”’ Quincy Cable TV, 768 F.2d at 1457-
59 (quoting Home Box Office, Inc. v. FCC, 567 F.2d 9,
50 (D.C. Cir.}, cert. denied, 484 U.S. 829 (1977)). Ac-
cordingly, we have no choice but to strike down this latest
embodiment of must-carry.
tives to must-carry rules proposed during rulemaking and
during the Commission’s reconsideration of the new rules by
petitioners and intervenors, and particularly by petitioner
Richard Leghorn. See Report & Order at ©{ 174-75 (reject-
ing Leghorn proposal that would, among other things, require
that all new televisions be built with switches); see also
Recon. Order at © 56 (same). Nevertheless, because we in-
validate the new must-carry rules on the grounds already
stated, we do not decide this issue and do not hase our decision
on any judgment as to the relative desirability of these alter-
native proposals.
29a
United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
No. 86-1683
CENTURY COMMUNICATIONS CORPORATION, et al.,
PETITIONERS
Vv.
FEDERAL COMMUNICATIONS COMMISSION and
UNITED STATES OF AMERICA, RESPONDENTS
ASSOCIATION OF INDEPENDENT TELEVISION STATIONS, INC.,
SPANISH INTERNATIONAL COMMUNICATIONS CorpP.,
UNIVISION, INC.,
THE NATIONAL ASSOCIATION OF BROADCASTERS,
LINCOLN BROADCASTING Co.,
NATIONAL CABLE TELEVISION ASSOCIATION, et al.,
OFFICE OF COMMUNICATION OF THE
UNITED CHURCH OF CHRIST,
CORPORATION FOR PUBLIC BROADCASTING,
NATIONAL ASSOCIATION OF PUBLIC TELEVISION,
PUBLIC BROADCASTING SERVICE,
NATIONAL BROADCASTING Co., INC.,
SPANISH INTERNATIONAL COMMUNICATIONS CorpP.,
INTERVENORS
30a
No. 87-1280
RICHARD S. LEGHORN, PETITIONER
¥.
FEDERAL COMMUNICATIONS COMMISSION and
UNITED STATES OF AMERICA, RESPONDENTS
CORPORATION FOR PUR™IC BROADCASTING, et _
INTERVENORS
No. 87-1301
HUBBARD BROADCASTING, INC., PETITIONER
Vv.
FEDERAL COMMUNICATIONS COMMISSION and
UNITED STATES OF AMERICA, RESPONDENTS
CORPORATION FOR PUBLIC BROADCASTING, et al.,
INTERVENORS
Petitions for Review of Orders of the
Federal Communications Commission
On Motion For Clarification of Opinion Issued
December 11, 1987
Filed January 29, 1988
Before: WALD, Chief Judge, and MIKVA, Circuit Judge.
ORDER
Upon consideration of Respondent Federal Communica-
tions Commission’s motion for clarification of the Court’s
we)
tel
opinion of December 11, 1987, and of Petitioner Century
Communications Corporation’s opposition thereto, the mo-
tion is granted.
The Court’s opinion in Century Communications Corp.
v. Federal Communications Commission, No. 86-1683,
slip op. (D.C. Cir. Dee. 11, 1987) is hereby clarified as
follows:
(1) The Court has invalidated the interim ‘must
carry” rules of the Federal Communications Commission
that became effective on June 10, 1987. Those rules
required cable systems to carry certain broadcast signals.
See 47 C.F.R. § 76.56 (mandatory carriage of television
stations) ; § 76.58 (disputes concerning carriage) ; § 76.60
(carriage of other television signals) ; $ 76.62 (manner of
carriage) ; see also 47 C.F.R. § 76.5 (as amended August
7, 1986 and/or March 26, 1987); § 76.53 (same); § 76.55
(same) ; § 76.64 (same).
(2) The Court has not struck down the requirements
concerning input selector switches and consumer educa-
tion due to take effect February 29, 1988. See, e.9.,
: 76.66 (input selector switches and consumer educa-
tion). Those separate requirements were not included in
petitioners’ first amendment and statutory challenge to
the must-carry regulations, which impermissibly infringed
on the first amendment rights of cable operators. Nor
are the input selector and consumer education require-
ments so inextricably bound up with the must-carry
requirements as to constitute an inseparable package.
Rather, they are independent measures designed toward
the same end as the invalidated must-carry rules: easing
a transition to a world without must-carry channels.
(3) Insofar as portions of the rules regarding consumer
education and input selector switches do make references
to the now-invalidated must-carry provisions, we instruct
the Commission on remand to make appropriate adjust-
ments in light of the invalidation of the interim must-
carry rules.
Before the
FEDERAL COMMUNICATIONS COMMISSION
Washington, D.C. 20554
MM Docket No. 85-349'
In the Matter of
Amendment of Part 76 of the
Commission's Rules Concerning
Carriage of Television Broadcast
Signals by Cable Television Systems
REPORT AND ORDER
Proceeding Terminated
Adopted: August 7, 1986; Released: November 28, 1986
By the Commission: Commissioners Quello and Dawson
issuing separate statements.
‘The issues left open in Docket Nos. 21323, 81-741, and 84-168 re-
Jating to cable carriage of multi-channel television sound, program-
related teletext, and program-related communications on the vertical
blanking interval also will be addressed herein. See Memorandum Opin-
ion and Order in Docket Nos. 21323, 81-741, and 84-168, adopted
February 8, 1985, 50 FR 11000.
33a
TABLE OF CONTENTS
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3. SUMMARY OF THE RECORD .........................
A. Comments Concerning the Federal Interest .....
B. Comments Concerning the Need for
Regulation ...... susnscsldiasaaaldiaeiabeathaanaiiababiiatilenaalandladait
Eis. SeeInIIIEY sunscteseissaticticninnstncsansiicbhdeugimidddebsunmaseneduadaiad
IIIT cccsnencnsenstinicincinciseccsinninstasedtuneiminiiin
is Te I PIO sictrcensncsntesdcnnceecniessalininintens
B. The Need for Regulation. .....................cscsecesseees
C. Policy Decision ....... iaabiailialeteiedataniclaesddbumeniddeiueaanitaaes
D. Description of the New Rules .........................4.
E. The New Rules Meet the Need for
EERE SEE Ste eae ao a
F. Alternative Proposals Considered and
I iii tenth entelinbe thar ani eniatilat
9. CONSTITUTIONAL AND STATUTORY
EEE IID ccccnntssonsecnsssnenscensnecscensesases
A. First Amendment Issues ......................cccseeeee000s
B. Other Constitutional and Statutory Concerns ...
. OTHER REGULATORY FACTORS AFFECT-
ING TELEVISION MARKETS ......................
. PROCEDURAL MATTERS. .................ccccccccccesees
160a
162a
34a
INTRODUCTION
1. By this action, the Commission is adopting a two-
part regulatory program that eventually will eliminate the
need for cable television mandatory signal carriage regu-
lation. The previous “must carry” rules were held consti-
tutionally invalid by the United States Court of Appeals
for the District of Columbia Circuit in Quincy Cable TV,
Inc. v. FCC (Quincy). The first part of the new regulatory
program will require cable systems to offer subscribers
input selector switches for use with antennas and to con-
duct a consumer education program concerning the pur-
pose of, and need for, maintaining off-the-air reception
capability.* The second part of this plan consists of interim
must carry rules that are intended to provide an orderly
transition to a new environment. Thus, the new must carry
rules will expire at the end of a five year transition period.
These interim must carry rules are a modified version of
the proposed industry agreement that was filed jointly by
several of the major broadcast and cable trade associa-
tions.‘ The modifications to the industry agreement include
specific protections for noncommercial educational and new
commercial broadcast stations. The new regulatory pro-
gram is designed to maximize consumers’ program choices
-768 F.2d 1434 (D.C. Cir. 1985), cert. denied sub nom. National
Association of Broadcasters r. Quincy Cable TV, Inc., 54 U.S.L.W. 3806
(U.S. decided June 9, 1986) (No. 85-502).
* An input selector switch is any device that enables the viewer to
select between cable service and off-the-air reception of broadcast sig-
nals. Although such devices are often referred to as ““A/B” switches,
they may, in fact, be more sophisticated than a mere two-sided switch,
may utilize other cable interface equipment, and may be built into
consumer television receivers.
‘The parties endorsing this agreement are the National Association
of Broadcasters (NAB). The Association of Independent Television Sta-
tions (INTV), the Television Operations Caucus (TOC), the National
Cable Television Association (NCTA), and the Community Antenna Tel-
evision Association (CATA).
eo
int
LO A i gt Rn. le hy li, ¥
we. ee
at.
35a
by developing cable subscribers’ awareness of the need for
the capability to receive off-the-air broadcast signals in-
dependent of their cable service. We believe that this pro-
gram provides a constitutionally acceptale balance
between the need to protect this federal and the First
Amendment rights of cable operators.
BACKGROUND
2. The Commission’s former must carry requirements
for cable television systems are set forth in Sections 76.57-
76.61 of its rules.° Under these rules, a cable system was
required, upon request and within the limits of its channel
capacity, to carry the signals of all local broadcast tele-
vision stations. In general, a station is considered local if
the station or its market encompasses, or is in close prox-
imity to, the cable system’s community, or if the station’s
signal otherwise is “significantly viewed’ by off-the-air
viewers in the cable system’s community. The specific pro-
visions of the must carry rules vary depending on the size
of the market in which the cable system is located.’ In
accordance with the Quincy decision, the Commission sus-
pended enforcement of the must carry rules, effective July
19, 1985.’
3. Development of the Rules. Broadcast television sta-
tions and cable television systems provide services and
operate in manners that in some respects are complemen-
tary and in others highly competitive. Broadcast television
stations offer advertiser-supported or public-supported
‘free’ over-the-air service to their local communities. In
See 47 CFR §§76.57-76.61.
* There are separate versions of the must carry rules for cable sys-
tems operating: 1) outside all television markets: 2) in smaller television
markets; and 3) in major television markets. See 47 CFR §§76.57, 76.59,
and 76.61.
See “Suspended Enforcement of Certain Sections of 47 CFR Part
76," Public Notice, released September 10, 1985, 50 FR 38003.
36a
contrast, cable systems offer multiple video services to fee-
paying subscribers through the facilities of a coaxial cable.
In addition to local television stations, cable systems may
carry program services from other sources such as distant
television stations, special satellite-delivered cable net-
works and premium services and local origination channels.
4. Because of their ability to bring additional competing
program services into local television markets and their
perceived potential to operate as ‘‘gatekeepers’’ who con-
trol the off-the-air program services available to their sub-
scribers, cable systems were viewed early in_ their
development as potentially harmful to local broadcast tel-
evision service. The Commission was initially reluctant to
assert jurisdiction over the cable industry and to regulate
its activities.’ However, in the early 1960’s the Commission
observed increases in the number of cable systems and
undertook to begin developing a comprehensive program
for regulating the growth of the cable industry and its
impact on the existing broadcast television service. The
must carry rules were the cornerstone of this program.
5. The Commission first acted to require cable carriage
of local television service in 1962, in Carter Mountain
Transmission Corp.’ In that decision, the Commission
specified a requirement for carriage of a local television
station as a condition for grant of a construction permit
for a microwave system to feed distant signais to a rural
cable system. This requirement was extended to all mi-
crowave-fed cable systems in 1965, in the First Report
* See Frontier Broadcasting Company v. Collier, 24 FCC 251 (1985);
recon. denied in conjunction with Report and Order in Docket No.
12443, 26 FCC 403, 428 (1959).
* See Carter Mountain Transmisson Corp., Docket No. 12931, 32 FCC
459 (1962), aff'd 321 F.2d 359 (D. C. Cir.), cert. denied, 375 U.S. 951
(1963).
1 Ai een eri Bat aaa i anon co ld
37a
and Order in Docket Nos. 14895 and 15233.'° A year later,
in the Second Report and Order in Docket Nos. 14895 and
15233, the Commission applied must carry requirements
to all cable systems, regardless of whether or how they
imported distant signals.'! In the 1972 Cable Television
Report and Order, the Commission “‘fine-tuned”’ the must
carry rules in accordance with the implementation of com-
prehensive rules for regulation of the cable industry.’
6. In adopting must carry requirements, the Commission
held that oversight of cable television was necessary to
fulfill its statutory obligations under the Communications
Act of 1934, as amended.'’ In this respect, the Commission
stated that the Communications Act charges it with the
duty ‘‘to make available, so far as possible, to all people
of the United States, a rapid, efficient, nationwide and
worldwide wire and radio communications service’ (47
U.S.C. §151) and ‘generally to encourage the larger and
more effective use of radio in the public interest’? (47
U.S.C. §303(g)). It also stated that it is required ‘‘to make
” See First Report and Order in Docket Nos. 14895 And 15233, 38
FCC 683 (1965).
‘1 See Second Report and Order in Docket Nos. 14895 and 15233, 2
FCC 2d 725 (1966).
‘2 See Cable Television Report and Order, Docket Nos. 18397, et al.,
36 FCC 2d 143 (1972). Many of the provisions of the Cable Television
Report and Order, particularly those pertaining to carriage of distant
signals, have now been eliminated. See e.g., Report and Order in Docket
No. 19859, 57 FCC 2d 68 (1976) [permitting additional carriage of
network news programs]; Report and Order in Docket No. 20681, 60
FCC 2d 672 (1976), and Report and Order in Docket No. 21002, 66
FCC 2d 380 (1977) [modifying and deleting requirements for local cable
franchises]; Report and Order in CT Docket No. 78-206, 69 FCC 2d
697 (1978) [eliminating certificate of compliance procedures]; Report and
Order in Docket Nos. 20988 and 21284, 79 FCC 2d 663 (1980), affd
sub nom. Malrite TV of New York v. FCC, 652 F.2d 1140 (2d Cir.),
cert. denied, 454 U.S. 1143 (1981) [eliminating distant signal and syn-
dicated exclusivity rules].
13 See First Report and Order, supra at 697.
38a
such distribution of licenses, frequencies, hours of opera-
tion, and of power among the several States and com-
munities as to provide a fair, efficient, and equitable
distribution of radio service to each of the same”’ (47 U.S.C.
§307(b)). The Commission indicated that under these sta-
tutory provisions, its duty was ‘‘to make television service
available, so far as possible, to all people of the United
States on a fair, efficient, and equitable basis.’’* If further
explained that it sought to fulfill this responsibility through
the table of television channel assignments in Section
73.603 of the rules.
7. The Commission’s decision to regulate cable systems
grew out of its concern that the ‘‘explosive”’ nationwide
growth of cable service threatened to harm the existing
local television service as provided under the channel as-
signment plan.’ After examining the nature and operation
of cable systems, the Commission determined that it could
not rely on cable as a primary means to achieve its tel-
evision service allocation objectives. The Commission ob-
served that because of the prohibitive cost of extending
cable service beyond built-up areas, cable systems could
not serve many persons reached by broadcast signals. The
Commission noted that households unable to obtain cable
service, and those who cannot afford or are unwilling to
pay for it, are entirely dependent on local or nearby sta-
tions for their television service.'"* The Commission also
considered that local television stations afford a means for
community self-expression, whereas very few cable sys-
tems originate local programming. Finally, the Commission
indicated that it intended for the commercial television
system to distribute programs to the public through a mul-
tiplicity of local outlets.
‘Id. at 699.
Td. at 685-699.
‘Td. at 699.
39a
8. On this basis, the Commission concluded that cable
was a “‘supplementary” service and that it was necessary
to protect local broadcast television service from any ad-
verse effects from competition with cable services, partic-
ularly the importation of distant signals. However, the
Commission also recognized that cable facilities could pro-
vide significant public interest benefits by assisting in ex-
pansion of television service in undeserved areas. Thus,
the Commission felt that it was of the utmost importance
to the public interest that extensions of television service
by the auxiliary facilities of cable be accomplished in a
fair and equitable manner and that cable and broadcast
facilities have complementary, rather than conflicting
roles.'?
9. In developing policy to regulate cable growth, the
Commission devoted substantial attention to the economic
relationship between broadcast stations and cable systems
and the conditions under which competitive impact occurs.
The basic analysis of this relationship as relied upon by
the Commission was as follows.'* Cable systems bring to
areas already served by one or more television stations
the signals of other stations that are well beyond the nor-
mal range of reception. These additional signals compete
with the local stations for a share of the available audience.
If subscribers view distant signals to the exclusion of local
stations, the audience will become fragmented and the lo-
cal stations will lose viewers. As the audience a station
can deliver decreases, advertisers will demand lower prices
per unit of air time, and station revenues and profits will
decline. Decreased revenues and profit will cause the local
station to reduce its program efforts, and thereby to re-
duce its service to the public. Most importantly, it was
assumed that in cases where a cable system did not carry
a particular local station, each gain of a subscriber by the
7 Id.
'* Id. at 702-703; see also Second Report and Order, supra at 737.
40a
cable system would mean the full loss of a potential viewer
for the station. The Commission recognized the possibility
that the viewer access problem could be solved through
the use of A/B switches that would permit cable subscri-
bers to alternate as needed between an off-the-air antenna
and the cable.'® However, it rejected this as a solution on
the grounds that then existing switches were ultimately
inconvenient and would not be used by subscribers.
10. In view of these considerations, the Commission
drew two broad conclusions with respect to cable signal
carriage:
1) As a competitive practice, the failure or re-
fusal by a cable system to carry the signal of a
local station is inconsistent with the principle that
cable should supplement, but not replace, over-
the-air television service, and;
2) Because it is inconsistent with the concept of
cable as a supplementary service, an unreason-
able restriction on the local station’s ability to
compete, and patently destructive of the Com-
mission’s goals in allocating television channels
to different areas and communities, a cable sys-
tem’s failure to carry the signal of a local station
is inherently contrary to the public interest.”
11. The Commission stated that in light of the basic
conditions under which competition occurs between cable
systems and broadcast television stations, its decision to
adopt must carry rules did not depend on a showing that
cable competition is demonstrably certain to cause wide-
spread and serious damage to the public interest in tele-
vision service. It asserted that it would be contrary to the
public interest to defer action until a serious loss of ex-
'* See First Report and Order, supra at 702.
Td. at 705.
4la
isting and potential service had occurred, or until existing
service had been significantly impaired—i.e., to wait “until
the bodies pile up’ before conceding that a problem ex-
iste.*
12. Nonetheless, the Commission considered the numer-
ous empirical studies and analyses that were available con-
cerning the impact of cable television. It concluded that
it was “impossible, from The data at hand, to isolate re-
liably the effects of [cable] competition from all of the
other factors which operate to produce particular financial
results in different settings.’’*? However, it also found that
the available empirical data and studies demonstrated that
cable could have a substantial negative effect upon station
revenues and audiences.** The Commission further con-
cluded that because of cable’s rapid growth, the problem
was likely to be more serious in the future than it had
been in the past.*4
13. A year later the Commission extended the must
carry rules to all cable systems. In its decision, the Com-
mission stated that its analysis with respect to the need
for regulatory action in the First Report and Order applied
equally to nonmicrowave served cable systems.” It noted
that the economic studies considered in its initial adoption
of mandatory signal carriage requirements concerned mi-
crowave as well as nonmicrowave cable systems. The Com-
mission declined to conduct a further fact-finding inquiry
on nonmicrowave cable systems because such studies were
proving to be out-of-date almost before there was time to
consider them.
21 Td. at 701.
221d. at 710.
*2Td. at 710-711. -
247d. at 711.
5 See Second Report and Order, supra at 744.
42a
14. The Commission has not readdressed the basic ra-
tionale or underlying predicates for the must carry rules
in the time Since their initial adoption. The rules currently
suspended are essentially the version that was adopted in
the 1972 Cable Television Report and Order.
15. Over the years, the cable industry has continued to
grow and develop. Cable systems are no longer simply
auxiliary facilities for retransmitting the signals of broad-
cast television stations. Rather, they have evolved as prov-
iders of a multiplicity of video services from a broad range
of program sources, some of which are original to cable.
These changes have not gone unnoticed by the Commis-
sion. In the Economic Inquiry Report, the Commission
recognized that the growth of cable and other program
delivery systems such as videocassette recorders (VCRs)
was changing the video services market and that cable in
particular was no longer an auxiliary or secondary distri-
bution service.2° The Commission observed that video ser-
vices were being provided by a more diverse set of media
and that this trend was likely to grow and develop to a
greater extent in the future. The Commission further
stated that it has become clear that the supply of home
entertainment and information services could be increased
through this greater variety of delivery alternatives. It
concluded that with the advent of these new services, the
justifications for attempting to control cable had declined
accordingly.2” This change in the nature of cable and the
video industry resulted in the Commission’s decision to
eliminate most of the rules other than must carry that
were adopted as part of the comprehensive cable regula-
tory plan.”
2° See Economic Inquiry Report, Docket No. 21284, 71 FCC 2d 645-
646 (1979); see also Report and Order in Docket No. 20988, supra at
686.
°° See Economic Inquiry Report, supra at 646.
** See Cable Television Report and Order, supra.
43a
16. Moreover, Congress recognized the emergence of the
cable industry as a major participant in the market for
television services in the Cable Communications Policy Act
of 1984 (Cable Act).2° This legislation, which was signed
into law on October 30, 1984, amended the Communica-
tions Act by adding a new Title VI, entitled “‘Cable Com-
munications.’’*° The intent of the Cable Act is to establish
a national policy that encourages the growth and devel-
opment of cable television services and assures that cable
systems are responsive to the needs and interests of the
local communities they serve.
17. The Quincy Decision. On July 19, 1985, the United
States Court of Appeals for the District of Columbia Cir-
cuit ruled in the Quincy case that the Commission’s must
carry rules were unconstitutional.” In Quincy, the court
considered whether the must carry rules violate the First
Amendment rights of cable operators, cable programmers
and the viewing public. It found that the rules unconsti-
tutionally infringe upon cable operators’ rights to freely
exercise editorial discretion in selecting the content of pro-
gram services provided by their cable systems.* It further
found that the must carry rules could also affect the First
Amendment rights of cable programmers and subscribers.
In this respect, it indicated that if a cable system’s channel
capacity is substantially or completely occupied by man-
** Cable Communications Policy Act of 1984, Pub.L. No. 98-549, § et
seq., 98 Stat. 2779 (1984).
w 47 U.S.C. §521 et seg.
* Quincy, supra. The Quincy decision arose from the ccurt’s con-
solidation of two separate cases, Quincy Cable TV, Inc. v. FCC and
Turner Broadcasting System, Inc. v. FCC. In the former, a cable system
challenged a Commission order requiring it to carry certain stations
under the must carry rules. In the latter, TBS appealed the Commis-
sion’s dismissal of its petition for rule making to eliminate the must
carry rules.
Td. at 1452.
44a
datory carriage signals, cable programmers may be pre-
vented from reaching their intended audiences and
subscribers’ viewing preferences may be disregarded.**
18. The court used a two step procedure to determine
the appropriate standard of review for assessing the con-
stitutionality of the must carry rules. It first evaluated the
propriety of applying the lenient First Amendment stand-
ard traditionally utilized in assessing the constitutionality
of broadcast regulation.** Cognizant of the ‘([S]upreme
Court’s repeated admonitions to be sensitive to the unique
features of each medium of expression,”*> the court de-
termined that the “scarcity rationale’’ sustaining much of
the regulation of broadcasting “‘has no place in evaluating
government regulation of cable television.’’** The court was
unable to discern any attributes of cable that would justify
use of the standard traditionally applied to the broadcast
media, and concluded that it ‘‘must look elsewhere to de-
termine the appropriate yardstick against which to meas-
ure the constitutionality of the must-carry rules.’’*
19. The court next considered, but did not decide,
whether to apply the balancing test established for ‘‘in-
cidental’’ burdens on speech set forth in United States v.
O’ Brien (O’ Brien), or the more stringent standard for
content-based regulations enunciated in Miami Herald
Publishing Co. v. Tornillo (Miami Herald).** It examined
8 Td. at 1453.
% See e.g., Red Lion Broadcasting Co. v. FCC, 395 U.S. 367 (1969).
% Quincy, supra at 1444.
* Id. at 1449.
* Td. at 1450. .
* 391 U.S. 367 (1968).
%* 418 U.S. 241 (1974). Miami Herald involved a newspaper, and the
First Amendment standards explicated therein are generally applied to
the print media. The Quincy court explained that ‘‘for cable, no less
than for other media, the First Amendment draws a distinction between
45a
the purposes underlying the must carry rules and the na-
ture and degree of the intrusions they effect, and was
unable to conclude that they burden First Amendment
rights only incidentally. In this regard, the court deter-
mined that the must carry rules favor one group of speak-
ers, broadcasters, over another, cable programmers; they
coerce speech by significantly compromising cable opera-
tors’ otherwise broad editorial discretion; and, where chan-
nel capacity is at least substantially occupied by mandatory
signals, they are a barrier between cable programmers and
their audience and may cause viewers’ preferences to be
disregarded. In light of these intrusions on rights and ac-
tivities protected by the First Amendment, the court had
“serious doubts about the propriety of applying the stand-
ard of review reserved for incidental burdens on speech.’’*°
20. However, assuming for purposes of analysis that the
rules impose only an incidental burden, the court concluded
that, as written, the must carry regulations are ‘clearly
impermissible” under the O’ Brien standard.*! It did not
hold that mandatory carriage regulations are constitution-
ally infirm per se, or that the O’ Brien formula is the
appropriate standard for reviewing the constitutionality of
cable regulations generally, or must carry regulations spe-
cifically. To the contrary, the court explicitly stated that
since the rules are unconstitutional under the incidental
burdens formula it did not need to “definitively decide”’
whether a “more exacting’’ standard is The correct test,
and left unresolved whether any form of mandatory car-
‘incidental’ burdens on speech—regulations that evince a governmental
interest unrelated to the suppression or protection of a particular set
of ideas—and restrictions that are intended to curtail expression.”
Quincy, supra at 1450, quoting Home Bor Office, Inc. v. FCC, 567 F.
2d 9 (D.C. Cir.) (percuriam), cert denied, 434 U.S. 829 (1977).
* Quincy, supra at 1453.
“Td. at 1454.
46a
riage requirement could comply with the strictures of the
First Amendment.
21. The court stated that under an O’Brien analysis, a
content-neutral regulation ‘will be sustained if it furthers
an important or substantial governmental interest ... and
if the incidental restriction of an alleged First Amendment
freedoms is no greater than is essential to the furtherance
of that interest.’’* In applying the first part of the O’Brien
test, the court assumed that the preservation of free, lo-
cally-oriented television is an important regulatory goal. It
Stated, however, that “the mere abstract assertion of a
substantial governmental interest, standing alone, is in-
sufficient to justify the subordination of First Amendment
freedoms,’’* and determined that the Commission had not
met its heavy burden of demonstrating that the must carry
regulation would vindicate the articulated governmental
interest.
22. Part two of the O’Brien standard as applied by the
Quincy court balances the governmental interest articu-
lated in part one against the degree of intrusion on pro-
tected First Amendment activity caused by the regulation.
According to the court, in order to pass constitutional
muster, the regulation must be the least restrictive means
for protecting a valid federal interest, that is, the restric-
tion on First Amendment rights may be no greater than
essential to the furtherance of the governmental interest.*
* Id. The court stated that if Miami Herald is the appropriate stand-
ard for constitutional scrutiny of the must carry rules, it would be
unnecessary to test them against any other standard. The court also
stated that ‘‘once one has cleared the conceptual hurdle of recognizing
that all forms of television need not be treated as a generic unity for
purposes of the First Amendment, the analogy to more traditional
media is compelling.”” Id. at 1450.
“Id. at 1451, quoting United States v. O'Brien, supra at 377. (ellipses
in original.)
“ Quincy, supra at 1454.
* Id.
47a
23. As part of its determination as to the constitutional
sufficiency of the fit between the federal interest in pre-
serving free local television service and the must carry
rules, the court emphasized that the distinction between
protecting local broadcasting and local broadcasters is crit-
ical. It stated that the rules are intended to protect local
broadcasting, but, as written, they are overinclusive and
indiscriminately protect every broadcaster. In this regard?
the court stated that the rules do not take into consid-
eration whether or to what degree the affected cable sys-
tem poses a threat to the local broadcast station’s economic
well-being, the quantity of local service available in the
cable community, or the number of local outlets already
carried by the cable operator.*
24. In closing, the court stated that it did not find it
necessary to decide whether any version of the mandatory
carriage rules would contravene the First Amendment.*’
The court also stated that “‘[s]hould the Commission wish
to redraft the rules in a manner that is more sensitive to
the First Amendment concerns ... it is, of course, free
to do so.”’*
25. The Notice of Proposed Rule Making. Subsequent to
the Quincy decision, the Commission received Petitions for
Rule Making from the Association of Independent Tele-
vision Stations, the National Association of Broadcasters,
et al., and the Corporation for Public Broadcasters, et al.
(CPB), concerning cable carriage of broadcast television
* Id. at 1460. Additionally, the court noted that the rules apply with
equal force to all cable systems and do not distinguish among cable
systems based on their channel capacity or the extent to which they
are saturated with must carry signals. Id. at 1462, n. 55.
“Id. at 1434.
“Id. at 1463.
48a
signals.** These petitions asked the Commission to adopt
new must carry rules that would meet the constitutional
concerns raised by the court.
26. In response to these petitions, the Commission
adopted a combined Notice of Inquiry and Notice of Pro-
posed Rule Making (Notice) on November 14, 1985, 50 FR
48232, to consider the matter of signal carriage rules for
cable systems. Eighty-five parties filed comments and
twenty-eight parties filed replies in response to the No-
tice. In addition, many members of Congress submitted
letters concerning this matter and many other parties filed
informal comments.
27. On March 21, 1986, several of the major broadcast
and cable industry associations submitted an “industry
agreement” to the Commission for consideration as a plan
for new must carry rules.*' In response to the filing of
the industry agreement, the Commission issued an Order
on March 25, 1986, 51 FR 11073, requesting additional
comment on the must carry matter and the industry pro-
posals in particular. Sixty-four parties filed formal com-
ments addressing the industry agreement.
28. Overview of the Decision. In the time since the
Quincy decision, the Commission has been without a com-
*“ NAB was joined in its petition by the Association of Maximum
Service Telecasters, the Station Representatives Association, the Amer-
ican Broadcasting Companies, Inc., CBS Inc., the National Broadcasting
Company, Inc., the ABC Affiliates Association, the Spanish Interna-
tional Communications Corporation, Bahia de San Francisco Television
Company, The Seven Hills Television Company, and the National Re-
ligious Broadcasters. CPB was joined in its petition by the National
Association of Public Television Stations and the Public Broadcasting
Service.
” A list of parties filing comments in response to the Notice is pro-
vided in Appendix A.
" See footnote 4, supra.
“ A list of the parties filing responses to the industry agreement is
provided in Appendix A.
49a
prehensive system of rules for regulating cable subscribers’
access to broadcast signals. We recognize that this situ-
ation has been the subject of -onsiderable concern on the
part of broadcast interests and, more recently, many mem-
bers of Congress and their staffs.** In this respect, it has
been expressed that there is need for new must carry rules
and that we should act expeditiously to complete this pro-
ceeding. In view of these concerns, we believe it is ap-
propriate and desirable that we not delay our decision in
this matter.
29. In considering the matter of signal carriage regu-
lation for cable television systems, we will begin with an
examination of the federal interests that may be affected
by issues pertaining to cable carriage of broadcast stations.
We next will examine the need for regulation to protect
our federal interests. In this context, we will consider the
various proposals for addressing the need for regulation
and then will discuss our decision to adopt a two part
regulatory program that will eventually eliminate the need
for cable mandatory signal carriage regulation.
SUMMARY OF THE RECORD
Comments Concerning the Federal Interest
30. Broadcast interests argue that the Commission’s
fundamental statutory obligation to promote the widest
possible dissemination of local television service will be
jeopardized if cable television systems are not subject to
some form of mandatory carriage requirements. In par-
ticular, broadcasters cite the Commission’s adoption of the
TV Table of Allotments which is designed to assure that
* Specific plans and proposals for resolving the must carry matter
were submitted to the Commission by Senator John C. Danforth, Chair-
man of the Senate Committee on Commerce, Science, and Transpor-
tation and Congressman Timothy Wirth, Chairman of the House
Subcommittee on Telecommunications, Consumer Protection, and Fi-
nance.
50a
aS many communities as possible have the opportunity for
at least one station. They remind the Commission that
under its localism policy, broadcasters have a responsibility
to provide public s2rvice programming that is responsive
to the needs and issues in their local communities. Broad-
casters generally submit that although recent deregulation
decisions have allowed licensees more flexibility as to how
these requirements are met, the basic statutory obligations
underlying them have not changed. In this respect, NAB
quotes the Commission’s statement in the Report and Or-
der in the TV deregulation proceeding that each commer-
cial television station continues to be ‘“‘subject to an
obligation to provide programming that is responsive to
the issues confronting its community.’
31. Broadcasters view must carry rules as a means by
which the Commission acted to preserve and to foster the
localism concept and its associated local public service ob-
jectives. According to the NAB, in the early days of the
cable industry, the Commission recognized the potential of
cable systems to interfere with its television allocations
scheme, and to advance or hinder the implementation of
its localism policy. NAB submits that the Commission rec-
ognized the technical capability of cable systems to provide
service to areas that had no off-the-air reception due to
terrain problems and the fact that cable would be available
only to those willing or able to pay for it. It states that
the Commission asserted jurisdiction over cable to preserve
and continue the growth of the local television system.
The United States Catholic Conference (Catholic Confer-
ence) also points out that Congress assumed the continued
existence of the must carry rules and reaffirmed the prin-
ciple that local communities should be able to receive lo-
cally-oriented broadcast programming when it enacted the
Cable Act. Finally, numerous broadcasting interests com-
ment that the Quincy decision in no way altered the Com-
4 See Report and Order in MM Docket No. 83-670, 49 FR 33588.
5la
mission’s statutory obligation to establish, foster, and
maintain a locally-oriented broadcast system.
32. Senator John C. Danforth, in a letter to the Com-
mission dated July 22, 1986, submits that cable’s ability
to perform gatekeeper functions conflicts with three long-
standing substantial government interests. He states that
these interests are the public’s First Amendment right of
access to diverse sources of information, the preservation
of vigorous competition among communications services,
and the Commission’s statutory obligation to promote a
nationwide broadcasting service built upon local outlets.
33. Most commenters opposed to new must carry rules
do not dispute the government’s interest in localism, al-
though some point out that the Quincy court assumed,
without deciding, that the goal of encouraging localism
qualifies as important or substantial under the standard
enunciated in United States v. O' Brien (O'Brien).** How-
ever, parties representing cable interests argue that the
factors underlying the federal interest in must carry reg-
ulation have changed and that to continue policies that
further localism through signal carriage regulation will not
necessarily further the public interest. In statements gen-
erally representative of these parties, NCTA argues that
the Commission's responsibility under the Communications
Act is not simply to foster localism, but rather is to pro-
mote the efficient distribution of service. It, therefore,
submits that the Commission -should base its decision in
the must carry matter on the impact of that action on the
development of a television system that maximizes access
to the marketplace of ideas. NCTA asserts that must carry
regulation is not warranted under this standard. In ar-
guing this point, NCTA contends that the nature of cable
television has changed significantly in recent years. It
states that virtually all cable systems now offer their sub-
*® 391 U.S. 367 (1968).
52a
scribers a multitude of video programming options in ad-
dition to retransmitting broadcast signals and that as a
result, cable television is no longer regarded as merely
ancillary to broadcasting. On this basis, NCTA states that
cable provides an independent voice and that this has been
recognized by The court in Quincy. It further submits that
in the Cable Act, Congress recognized the importance of
the cable industry as a participant in the national com-
munications system.
34. Several commenters submit that many cable systems
now provide their own independent local programming. In
particular, the Connecticut Cable TV Association (Con-
necticut Cable) indicates that The cable systems in its state
often provide more local programming Than broadcast sta-
tions, Connecticut Cable further contends that nearby out-
of-state stations that have must carry status generally do
not provide programming directed to the local Connecticut
population it serves.
35. A number of cable parties contend that the Com-
mission’s interest in protecting local television is no longer
relevant in view of its decision to eliminate the television
programming guidelines in the Report and Order in the
TV deregulation proceeding.*© NCTA, nineteen cable op-
erators filing joint comments (Nineteen Cable Operators),
and others observe that although the Commission has not
completely abandoned its policy that all broadcasters should
be responsive to local needs and interests, it has eliminated
virtually all of the specific programming guidelines for
broadcasters on the ground that market forces, including
competition from cable, provide an adequate incentive for
broadcasters to meet the needs of their audiences. The
Nineteen Cable Operators observe that a commercial
broadcaster, exercising its good faith judgment, is now
free to present no local news or public affairs program-
* See Report and Order in MM Docket No. 83-670, supra.
53a
ming.®” It states that under these circumstances it seems
incongruous for broadcasters to claim a federally-mandated
right to displace the local programming which is being
provided by cable systems. The Nineteen Cable Operators
argue that the fact that local news, public affairs, or any
other form of local programming is now totally discre-
tionary with a television licensee undercuts the localism
rationale for the must carry rules. Similarly, the Com-
munity Antenna Television Association (CATA) argues that
the concept of localism is suspect absent a newly articu-
lated definition of what it is, what it is intended to ac-
complish, and what a broadcast station must do To qualify
under the new definition. Tele-Communications, Inc. (TCI)
states that ensuring that the maximum diversity of infor-
mation is available to the public by cable is more important
than the substantiality of the government’s interest in local
broadcasting.
Comments Concerning the Need for Regulation
36. Commenting broadcasters generally believe that the
Commission's localism policy will be threatened in the ab-
sence of must carry rules. They generally submit that they
would lose audience without cable carriage and that the
resulting lower revenues would pose a threat to the via-
bility and existence of many stations. Broadcasters submit
that must carry rules are needed to protect the free, over-
the-air television system from this impact. The City of
Boston stresses that it is important to protect local broad-
cast televisior stations because they are still the primary
source of local news, public affairs, and other information
* See Report and Order in MM Docket No. 19142, 96 FCC 2d 634
(1984), aff'd sub nom, Action for Children’s Television v. FCC, 756 F.2d
899 (D.C. Cir. 1985).
54a
programming.** Broadcasters also contend that the poten-
tial for harm is great now because nearly half of the na-
tion’s TV households are dependent on cable for delivery
of their television service.
37. Press Broadcasting Company and several others
question the value of the requirement for local stations to
present issue-responsive programming if the audiences
those programs are intended for will not be readily able
to receive them. In this respect, Cape Video Network con-
tends that cable operators should shoulder part of the bur-
den to foster localism through a requirement to carry local
signals.
38. Several broadcasting interests contend that cable op-
erators will be able to exert extensive power over the local
broadcasters if they are not subject to must carry rules.
Broadcasters assert that cable operators are typically mo-
nopolists within their service areas and can act as “ga-
tekeepers,’’ deciding which broadcast stations, if any, are
carried by their systems. They argue that cable operators,
by using this advantage, can prevent local stations from
reaching the audiences they are licensed to serve, Tribune
Broadcasting (Tribune) argues that without must carry re-
quirements a local broadcaster’s access to its service area
will be subject to the whim of the cable operator, who is
a competitor, Senator Danforth, in his July 22, 1986, letter
states that there are two characteristics of cable that jus-
tify mandatory carriage requirements: first, that viewers
may need cable service to receive local broadcast signals
and; second, that most cable systems have a monopoly in
their franchise area.
39. A number of broadcast interests express concern
that cable operators consider local independent stations to
* The City of Boston comments that cable carriage of the eleven
local stations in the Boston area would provide in excess of 100 hours
of local news and public affairs programming each week to cable sub-
scribers.
55a
be undesirable inputs to cable service even if the stations’
signals are popular with subscribers and the cable systems
have channel space available. These parties, particularly
INTV, allege that this attitude arises because cable op-
erators consider independent stations to be competitors in
the loca] advertising market. They contend that a cable
operator will desire to keep the signals of local independ-
ent stations off its cable system so that local advertisers
will be induced to buy time on the cable system’s own
channels. Broadcasters also argue that some cable oper-
ators hope to drive the local independent stations off the
air in an attempt both to raise local advertising rates and
to force local advertisers to buy time on their cable sys-
tems’ program services.
40. Numerous parties, representing several classes of
broadcast stations, fear that their stations would not be
carried by cable systems without mandatory carriage rules.
These commenters principally include licensees of: 1) new
UHF independents; 2) UHF network affiliates in markets
where more than one station is affiliated with the same
network; 3) smaller market UHF stations; 4) minority
owned and operated stations; and, 5) public broadcasting
stations. In general, these broadcaster claim that without
cable carriage they will be unable to reach the audiences
they are licensed to serve and will be competitively dis-
advantaged against other local broadcasters. UHF broad-
casters state that they are more dependent than VHF
stations on cable carriage due to the reception problems
that are inherent to UHF signals. Several new stations
that anticipated cable carriage when they began operation
claim that they are already experieucing difficulty in ob-
taining cable carriage, are being carried on tiers other than
basic service, or are being required to pay for cable car-
riage. Some of these commenters believe that cable op-
erators have an incentive to keep new stations off the air.
In this respect, they point out that cable penetration and
demand for pay services are highest where there are few
56a
local stations and that cable operators now compete with
broadcasters for local advertising.
41. According to the NAB, absent assured cable car-
riage, new stations in particular are caught in a “‘vicious
financial vise.’ NAB and other commenters state that
without mandatory carriage rights, new stations will not
have access to cable households that represent a substan-
tial portion of their potential audiences. They claim that
this loss of audience will impair the ability of new stations
to generate revenues that are needed to purchase and
produce quality programming. These parties state that
without such programming, new stations cannot attract
the audiences that would indicate subscriber demand for
their services and earn them the cable carriage afforded
more established stations.
42. Minority and public broadcasters comment that non-
carriage of their stations will deny their audiences access
to the diverse programming they offer. Howard Univer-
sity, et al., asserts that cable subscribers will not have the
opportunity to be exposed to minority programming if mi-
nority-oriented stations are denied carriage. In its view,
this would be an infringement on the First Amendment
rights of minority broadcasters. Spanish International Net-
work (SIN), et al., licensees of Spanish language stations,
state that a cable operator’s decision not to carry one of
their stations would deprive Spanish-speaking viewers of
the unique ethnic-oriented programming that reflects their
nondominant cultural identity and is in many cases the
only programming these viewers can understand.
43. Public broadcasting commenters note that congress
and the Commission historically have established policies
that encourage the development of independent, local pub-
lic television stations to provide alternatives to mass appeal
programming, to serve neglected and undeserved audi-
ences, and to respond to community needs. CPB and the
other commenting public broadcasting interests believe that
57a
in the absence of must carry rules their stations will not
be carried by cable operators, especially in areas where
there is more than one such station.** They contend that
the resulting loss of audience will lead to a loss of financial
support that will weaken the public broadcasting system
as a whole and thwart their mandate to provide diverse
programming.
44. Sixteen parties,® representing UHF stations gen-
erally of the classes claiming they are at greatest risk,
describe instances Wherein they have been disadvantaged
by the invalidation of the must carry rules. Specific sit-
uations described by these parties include requests for pay-
ment for signal carriage, refusals to carry a station’s signal,
and discontinuances of signal carriage. In general, these
commenters believe that absent any must carry rules, they
will not continue to receive the same quality cable carriage
that they have had in the past and will thereby be dis-
advantaged in the competitive media environment.
45. Broadcasting interests argue that there is no sat-
isfactory means of preserving localism if cable operators
are not required to carry all local broadcast stations. They
state that the often suggested option that cable subscribers
could use an A/B switch and an antenna to obtain access
to local signals that are not available on their cable sys-
_tems is not a viable alternative. In this respect, they
state that subscribers are not likely to go to the trouble
and expense necessary to receive those local signals that
**In its reply comments, CPB explains that multiple public stations
in a market are not like duplicating commercial network affiliates. CPB
states that public stations do not provide duplicated programming, but
offer unique and distinct services to discrete audiences or offer viewers
programs at different times.
* Nine television stations filed comments claiming that they are es-
pecially at risk in the absence of must carry rules. In its comments,
INTV reports seven additional stations that claim to be threatened.
*! See footnote 18, supra.
58a
7
are not carried on cable. Broadcasters further contend that
in many locations there is not acceptable over-the-air re-
ception, especially for UHF stations, and that cable deliv-
ery is the only practical means for receiving local broadcast
signals in such areas. In addition to the concerns about
A/B switches reported in the comments, INTV elsewhere
argues that these devices are not a solution to the must
carry matter. In particular, INTV adds that cable com-
panies routinely volunteer to remove antennas from new
subscribers’ homes and that to deny carriage to local sta-
tions that are most competitive with cable services where
cable operators sell local advertising will tend to perpet-
uate network domination of the television industry.
46. The NAB submitted a study, prepared under its
auspices by the ELRA Group, Inc., that examined the
extent to which cable subscribers can view local, off-the-
air signals without benefit of cable carriage. Based on a
sample of 610 cable households, This nationwide study of
cable households found that: 1) very few cable subscribers
currently have an outdoor antenna and an A/B switch; 2)
most cable homes do not have roof top antennas connected
to their cable sets: and, 3) a significant number of sub-
scribers may not be able to have an outdoor antenna be-
cause of restrictive local regulations prohibiting antennas.®
*=*The A/B Switch: A Non-solution to Must Carry’, INTV, cited in
‘Broadcasting’, June 23, 1986, at 75-76.
* The ELRA study’s principal findings include:
1) One percent of cable subscribers now have an outdoor antenna and
an A/B switch;
2) Two percent of cable homes use rooftop antennas in connection with
their cabled television receivers;
3) Over half of cable households have never had an outdoor antenna:
4) About half of the cable subscribers who ever had a rooftop antenna
59a
The ELRA study estimates that the cost to cable sub-
scribers to obtain off-the-air reception capability could
range from $458 million to $863 million. NAB states that
these findings indicate that in the absence of must carry
rules, cable subscribers could be forced to spend hundreds
of millions of dollars on outdoor antennas, A/B switches,
and switch installations and still would not have full as-
surance of being able to view local television signals, NAB
also believes that ELRA’s cost estimates are conservative
and that the actual cost to cable subscribers could be as
high as $1.6 billion.
47. NAB also submitted a statement describing technical
problems associated with the use of A/B switches to enable
viewers to switch from cable to off-the-air reception. Its
analysis determines that this approach appears costly, com-
plicated, and inconvenient to viewers. In particular, NAB
concludes that: 1) an A/B switch must be connected to a
properly maintained antenna to be effective; 2) installation
of The Switch and/or antenna may require professional
help; 3) installation becomes more complicated and may
require additional equipment if a VCR is involved.™ 4) the
currently available A/B switches do not have a remote
control feature; 5) cable-ready television sets will not re-
ceive UHF signals off-the-air in the cable mode; and, 6)
some A/B switches can increase signal leakage.
have taken it down;
5) Over forty percent of those who removed their antennas took them
down because of their belief that cable service made ther unnecessary;
6) Almost one-third of cable subscribers were told by their cable system
that they would no longer need a rooftop antenna; and,
7) Almost two-thirds of all cable subscribers said that better reception
was a principal reason for subscribing to cable service.
** The ELRA study indicated that one-third of cable homes now have
VCRs.
*> Cable service generally connects to the VHF antenna terminals of
60a
48. The broadcast interests commenting on the com-
pulsory copyright license state that it is a government
intrusion into private negotiations for the use of copy-
righted material. They state that the compulsory license
is unfair because local television stations have always been
required to bargain in the market for every television pro-
gram they seek to exhibit, while cable television operators
have been free to carry television broadcast programming
at no charge for local retransmissions and at lower than
market rates for distant signals. Furthermore, they State
that since 1980, cable operators have been able to disre-
gard the copyright exclusivity paid for by the local broad-
cast station purchaser of a syndicated television program
by importing a distant station’s transmission of the same
program. They note that before Quincy, these was the
countervailing consideration that the local station could at
least be assured that its programming would be available
to all television viewers in its home market, both over the
air and on cable. Commenting broadcasters argue that the
Quincy court was incorrect in determining that the must
carry rules were simply a referential aid in the determi-
nation of the royalty fee and that, in fact, the must carry
rules were intended, in part, to balance the benefit pro-
vided to cable systems by the compulsory license.
49. The government parties commenting on the com-
pulsory license are in full agreement that it is an over-
regulatory mechanism that grossly distorts the efficient
development of a truly competitive video market. The Na-
tional Telecommunications and Information Administration
(NTIA) states, and the Department of Justice (DOJ) con-
curs, that the compulsory license tends to discourage the
production of additional, innovative programming. They be-
TV receivers and, therefore? does not affect the use of the receivers’
separate UHF antenna terminals. Thus, reception of UHF signals gen-
erally does not require use of an A/B switch, except in those cases
where the receiver's cable ready feature operates in a manner such
that its use disables the UHF antenna input terminal.
6la
lieve that by artificially depressing the price paid by the
cable industry for television broadcast signals, the com-
pulsory licensing system encourages cable systems to re-
transmit more signals than they otherwise would. Thus,
they argue that the compulsory license system serves to
limit the realization of the full potential of cable television
as a program distribution medium and as an alternative
source of independently produced programming. The gov-
ernment parties state that the compulsory licensing scheme
constitutes an irrational government-granted subsidy for
one segment of the mass media industry. They further
submit that compulsory licensing is manifestly unfair be-
cause it denies program producers the right to control the
distribution and price of their product. Thus, they are con-
cerned That the flow of investment into the programming
industry may be affected. The Federal Trade Commission
(FTC) argues that it is most likely that the government
determined rates are incorrect and, thus, the rate-setting
and royalty distribution mechanisms of the compulsory li-
cense may have led to a tendency toward reduction in the
variety of programming available to consumers.
50. The government parties also agree that there appear
to be few, if any, public interest benefits accruing from
the compulsory license. The government parties state that
a free market environment would not mean the end of the
distant signal carriage market. They note that a number
of satellite program distributors have come into existence
in the unregulated market and act as intermediaries be-
tween copyright holders and cable operators. The govern-
ment parties state that cable operators do not deal with
the copyright holders of each program appearing on the
satellite service, but rather deal with the program distrib-
utor who serves as an intermediary. Thus, they believe
that an unregulated market in distant signal programming
would quickly spawn the development of private institu-
tions to broker the sale of distant signal programming to
cable operators.
62a
51. Finally, NTIA agrees with the broadcast parties that
the vacated must carry rules and the compulsory license
statute are necessarily linked together. They state that
“(with the court’s elimination of the FCC’s ‘must carry’
rules, the right of zero-cost access previously enjoyed by
local broadcasters to local cable systems dissipates.”” NTIA
argues that if cabie systems are now to enjoy the right
to pick and choose among local broadcast signals, any ra-
tionale for granting the cable industry, in effect, an ex-
emption from the ordinary workings of the copyright laws
also is vitiated.
52. Cable interests generally refute the contention that
signal carriage regulation is necessary to preserve the
Commission's localism policy. Cable commenters contend
that even if it is determined that broadcast programming
deserves special treatment because of its local nature, there
is no evidence that audiences will be deprived of access
to broadcast stations in the absence of mandatory carriage
rules. In statements representative of these interests.
NCTA states that cable operators have an economic in-
centive to provide locally-oriented programming because
they operate in a highly competitive market and can ill
afford to be insensitive to the requirements of their sub-
scribers. NCTA observes that according to recent audience
surveys, local broadcast signals still attract a major share
of cable audiences. It argues that cable operators, there-
fore, have an economic incentive to continue to carry these
local broadcast signals because they are popular with sub-
scribers. Cable parties claim that the loss of guaranteed
cable carriage is likely to have only a slight effect on local
broadcasters. They contend that if the service broadcasters
“For example, in its comments, NCTA cites a recent survey that
indicates that broadcast stations, “excluding superstations,”” received
more than 70 percent of the audience in cable households during the
first nine months of 1985. Cable Television Advertising Bureau, Cuble
Market Update, 1985.
63a
provide is truly local and desired by cable subscribers, then
viewers who wish to receive that service will be able to
do so by using off-the-air reception capability. The National
Telephone Cooperative Association comments that the must
carry rules tended to protect local broadcasters and not
local broadcasting.
53. Cable interests generally argue that there is no evi-
dence of need for regulation to protect local broadcasting.
The cable and citizens’ groups submitting comments op-
posing new must carry rules state that the performance
of the cable industry post- Quincy provides convincing evi-
dence that cable companies generally have not dropped
the local broadcast signals that they had been carrying
before the Quincy decision. They point out that there are
no ‘‘dead bodies’’ on the landscape. These commenters also
state that most broadcast stations will continue to be car-
ried in the future because cable must satisfy subscriber
preferences, which include broadcast television.
54. The staff of the FTC submitted an empirical study
which indicates that, absent must carry rules, cable sys-
tems can be expected to carry many or most local broad-
cast stations. The FTC study evaluates the local broadcast
signals carried by satellite master antenna television
(SMATV) systems, SMATVs differ from conventional cable
systems only in that they tend to serve buildings with
multiple dwelling units and are not subject to the must
carry rules. Thus, the FTC staff believes that an analysis
of the behavior of SMATVs with respect to local broadcast
signals should provide the Commission with a strong in-
dication of the likely behavior of cable systems in the
absence of must carry regulations. Their study of 24
SMATV systems reveals that carriage of local stations
appears to be profitable and that local stations occupy on
average almost half of the available channels on the sys-
tems. The FTC staff also examines how the proportion of
local stations carried by SMATVs varies with the number
of local broadcast stations and the number of available
64a
satellite programming services. This analysis indicates that:
1) an increase in the number of local stations is associated
with an increase in the number of local stations carried
by a SMATV, but the increase in local stations carried is
lower than the increase in local stations—i.e., not all ad-
ditional local stations are carried; and, 2) an increase in
the availability of satellite services tends to reduce carriage
of local stations. Based on this study, the FTC staff pre-
dicts that, absent a must carry rule, more than half of
the local broadcast stations will be carried on cable sys-
tems and, in most cases, the proportion could be expected
to exceed one-half by a large margin.
55. DOJ also does to believe that must carry rules are
necessary to preserve and foster localism. In DOJ’s view,
the Commission cannot justify a need for must carry rules
to further localism without demonstrating that the com-
petitive marketplace will not ensure a desirable level of
local television service. DOJ further states that the Com-
mission has never maintained that the protection of all
local broadcasters is necessary to foster the goal of a
national broadcasting system. It submits that the possi-
bility that some marginal individual broadcast stations may
not survive without mandatory carriage rules is not a suf-
ficient reason to reimpose such rules to preserve localism.
DOJ further states that under Quincy the Commission may
not reimpose must carry rules without first defining, in
objective terms, the minimum amount of local broadcasting
necessary to serve the public interest, and then demon-
strating that absent regulation, local broadcasting would
be reduced below that minimum.
56. Parties representing cable interests generally con-
tend that the adoption of new must carry rules would limit
rather than promote program diversity. In this respect,
the Nineteen Cable Operators state that must carry rules
displace cable programmers’ only means to reach their
audience, in favor of television broadcasters who have an
alternative delivery mechanism to reach the public. They
¢
:
65a
also submit that mandatory carriage rules do not prevent
unfair competition because cable carriage alters the over-
the-air competitive situation between broadcasters in a
given market. Cable operators argue that must carry rules
give broadcasters an unfair advantage over cable pro-
grammers who are not provided a similar guaranteed
means of reaching their audience. Finally, Nineteen Cable
Operators state that must carry regulations unfairly ham-
per cable operators who must compete with alternative
video entertainment delivery systems which have no sim-
ilar mandatory carriage requirements.
57. Several operators of cable programming services
state that any must carry rules will preclude them from
providing valuable and unique non-broadcast programming
to their subscribers. TBS, the Eternal Word Television
Network (EWTN), and others contend that cable channel
capacity is generally limited, and that must carry require-
ments further limit the number of channels available for
cable programming services.*’ EWTN contends that the
proliferation of new UHF stations burdens cable systems
and forecloses entry for new cable networks. Tele-Com-
munications, Inc. (TCI) asserts That mandatory carriage
rules impede the Cable Act’s stated purpose of ensuring
diversity on cable.
58. Proponents of the compulsory license contend that
a ‘‘free market” in the distribution of distant signal pro-
gramming would ensure the virtual elimination of a distant
signal market. This argument is based upon the assump-
tion that the costs to cable operators of negotiating, mon-
itoring, and enforcing contracts with each and every
program producer regarding each and every program ex-
hibited on a distant signal would be prohibitively high.
*' For example, TBS notes that despite the publicity given to a few
new cable systems with 50-100 channels, over 38.7 percent of all sys-
tems have 20 or fewer channels and 12.4 percent of all systems have
12 or fewer channels.
66a
Cable operators claim that by eliminating the need for
costly individual contracts, the compulsory license statute
renders the existence of a distant signal market possible.
NCTA, in its comments on the compulsory license, states
that Congress did not see any connection between the
compulsory license and mandatory local carriage. NCTA
further states that the compulsory license reflects its
agreement with the Motion Picture Association of America
(MPAA), in which broadcasters played no part of record.
Proposals
59. In the Notice, we requested comment on the pro-
posals filed by INTV and the public broadcasters and the
concerns raised by the NAB. Interested parties were also
invited to submit other specific proposals that would meet
the constitutional concerns raised by the court in Quincy.
In addition, we requested comment on the impact of these
issues on the compulsory licensing scheme and our au-
thority in this area. In the subsequent Order, we invited
comment on the industry agreement and the more general
question of whether local broadcast service and the concept
of localism as a communications policy are sufficiently im-
portant to warrant an intrusion on cable operators’ First
Amendment rights.
60. The INTV Permissible Signal Carriage Rule Pro-
posal. In the Notice we indicated our intention to examine
the communications policy implications of cable’s compul-
sory copyright license in light of the Quincy decision. In
this regard, we requested comments on the permissible
signal carriage rule proposed by INTV. Under this pro-
posal, the cable operator would choose either to invoke
the compulsory copyright license by carrying all signals
considered “‘local’’ under the rule, or to negotiate sepa-
rately with copyright holders for use of their work. The
proposed rule is based on Section 111 of the Copyright
67a
Revision Act of 1976 (Copyright Act).® It provides:
Cable Television carriage of television broadcast signals is
permissible, for purposes of Section 111 (c) of the United
States Code, if the cable system carries, as part of the
basic tier of cable service regularly provided to all sub-
scribers at the minimum charge, the entire signals of all
local television broadcast stations without discrimination
or charge. A television broadcast station is “local” as to
a cable system if the cable system lies within the ‘“‘local
service area’ of the television station, as defined in 17
U.S.C. Section 111(f).*
We solicited comments on the Commission’s authority
to adopt INTV’s proposed rule and whether this proposal
meets the constitutional concerns raised by the Quincy
court.
61. Fifty-five of the commenting parties address INTV’s
proposal. About half of these commenters are broadcasters
who support the proposal as a viable means to restore
balance to the cable-copyright market. Some of these
broadcasters would prefer new must carry rules, but con-
sider this proposal an acceptable alternative. Some com-
menters suggest modifications to the rule proposed by
INTV. -
62. In its comments, INTV states that the proposed rule
is a pragmatic solution to the market imbalance created
by Quincy between cable’s retransmission of broadcast tel-
evision signals and the compulsory copyright license. INTV
contends that the proposal is not for a must carry rule,
but rather a ‘‘may carry” rule that would affect only a
* Copyright Revision Act of 1976, 17 U.S.C. §111.
* Section 111(f) states in pertinent part: ‘‘The local service area of
a primary transmitter in the case of a television broadcast station,
comprises the area in which such station is entitled to insist upon its
signal being retransmitted by a cable system pursuant to the rules,
regulations, and authorizations of the Federal Communications Com-
mission in effect on April 15, 1976.”
68a
cable operator’s method of payment for the right to re-
transmit broadcast television programming. If further sub-
mits that the proposed ‘‘may carry’ rule is constitutional
and the Commission has the authority to adopt it.
63. INTV states that the Commission’s authority to
adopt the proposed rule is derived from the “plain mean-
ing’’ of Section 111(cX1) of the Copyright Act, which makes
cable systems eligible for compulsory licensing ‘‘where the
carriage of the signals comprising the secondary trans-
mission is permissible’? under the Commission’s rules.
INTV states that the legislative history of the Copyright
Act demonstrates an inherent and inextricable legal tie
between the must carry rules and the compulsory license.
INTV states that in their 1971 ‘‘Consensus Agreement,”
broadcasters, cable operators and program copyright own-
ers agreed to support both local carriage rules and the
compulsory licensing scheme. Many commenters support-
ing the proposal endorse INTV’s rationale or proffer sim-
ilar arguments regarding the Commission’s authority.
Other supporters assume the Commission’s jurisdiction
without discussion.
64. INTV states that its proposal is constitutional be-
cause it is a “may carry’’ rule that would not require or
prohibit carriage of any or all television signals. Therefore,
it states that the proposed rule would not infringe cable
operators’ First Amendment rights and, thus, would not
even be subject to constitutional scrutiny. INTV also con-
tends that it is constitutional to condition a cable opera-
tor’s eligibility for compulsory licensing on its carriage of
all local television signals. In this regard, INTV states that
copyright is a constitutionally authorized protection, but
that the compulsory license is a statutory benefit to which
there is no constitutional right. INTV and some commen-
ters argue that the proposed rule would not infringe on
a cable operator’s First Amendment rights and that the
Commission’s authority under Section 111(cX1) of the Co-
pyright Act includes the power to condition eligibility for
69a
the statutory benefit of the compulsory license. Overall,
the proponents generally agree with INTV that the pro-
posed rule is constitutional under Quincy.
65. Cable interests, DOJ, NTIA and the FTC oppose
INTV’s proposal. These parties state that it would effec-
tively force cable systems to carry all local television sig-
nals and, therefore, it is a form of reimposition of the
must carry rules. Similarly, in DOJ’s view ‘“‘the proposal
represents an effort to coax cable systems into carrying
all local broadcast stations by threatening to withhold a
privilege accorded by Congress.’’ Cable interests favor
maintaining the compulsory license in its current form.
The FTC and NTIA state that the compulsory license
should be repealed in favor of free markgtplace negotia-
tions.
66. Opposing parties also state that the Commission does
not have the authority to adopt INTV’s proposal. They
generally concur with DOJ, which states “‘[w]e do not be-
lieve that the Commission may avoid the limits on its
ability to determine copyright policy by defining as im-
permissible, for purposes of Section 111, carriage that is
permissible for communications purposes.’’ Many commen-
ters cite Quincy to support the position that the compul-
sory license is linked only to carriage of distant signals,
for which the must carry rules in effect as of April 15,
1976, were ‘‘frozen’”’ as a definitional reference to distin-
guish local from distant signals.” These commenters claim
that invalidation of the must carry rules is irrelevant for
copyright purposes and that new rules affecting local sig-
nals would not affect the compulsory license.
67. Opponents generally believe that INTV’s proposal is
an attempt to circumvent the O’Brien test. They contend
that this proposal, therefore, raises substantial First
Amendment concerns. For example, many of the oppo-
See Quincy, supra at 1454 n. 42.
70a
nents state that the commercial impracticability of sepa-
rate copyright negotiations will force cable operators to
carry all local television signals in order to avail them-
selves of the compulsory license. As a result, they argue,
INTV’s proposal relates to program content and, thus, is
subject to constitutional scrutiny. Opponents also contend
that this proposal is unconstitutional because only Con-
gress, and not the Commission, may legitimately attach
conditions to the government bestowed benefit of the com-
pulsory license. Others argue that INTV’s proposed rule
would abridge cable operators’ Fist Amendment rights by
conditioning eligibility for compulsory licensing on the re-
linquishing of their editorial discretion.
68. Proposals for Requiring Carriage of New Stations.
Several commenters express concern about the viability of
new stations entering local television markets without the
competitive equalizer of cable carriage. These parties be-
lieve that new stations which as of the Quincy decision
either had not begun operations or captured the attention
of their local television market audience or advertisers,
will suffer the greatest competitive harm absent rules as-
suring them cable carriage. These commenters contend that
unless new stations are protected, the nation’s system of
over-the-air broadcast television will be jeopardized. A few
of these parties propose rules or suggestions designed To
aid new stations. The consensus among these parties is
that new stations should be carried by cable systems for
a specified period of time. The time periods proposed for
carriage of new stations vary from 18 months to five years.
69. Grace Cathedral, Incorporated (Grace) proposes to
protect new stations using a copyright-based signal car-
riage rule. The proposed rule would condition availability
of the compulsory license on the carriage of all “‘eligible”’
television stations, i.e., those licensed for fewer than five
years and within whose specified zone the cable system
lies in whole or in part. It would require carriage of the
entire signals of all eligible new stations without discrim-
0 ae ee
Tla
ination or charge on the cable system’s basic tier of service
until their period of eligibility has expired. The proposed
rule would allow cable operators to elect not to use the
compulsory copyright license and to ‘“‘opt out’’ of the car-
riage requirements by complying with the requirements
for providing written notice of the same to the Commis-
sion.
70. Grace argues that there is need for this form of
regulation because cable poses an especially acute threat
to new broadcast stations that have difficulty obtaining
advertising revenue during their first few years of oper-
ation and cannot afford to pay for cable carriage. It asserts
that the critical nature of cable access is heightened for
new independents that have to compete with local network
affiliates that are generally carried by cable systems.
71. In support of its proposed rule, Grace first states
that it concurs with INTV’s position that the Commission
has authority to adopt a copyright-based signal carriage
rule under Section 111(c) of the Copyright Act. Grace also
asserts that its proposed rule is constitutional. In reply
comments, it argues that its proposed rule is a content-
neutral measure designed to promote the diversity of voices
in the electronic media without unconstitutionally infring-
ing on cable operators’ First Amendment rights. In this
regard, Grace contends that its proposed rule would not
favor a particular point of view and would not discourage
cable operators from carrying stations or from originating
programming. Grace argues that its proposed rule meets
the Quincy court’s concerns respecting the overinclusive-
ness of local cable carriage rules. It states that the pro-
posed rule would cure the problem under the previous inust
carry rules whereby protection was afforded indiscrimi-
nately to all broadcasters because it would apply only to
new station licensees and only for as long as they rea-
sonably need protection. Grace asserts that the five-year
limitation would be a self-regulating device that would be
responsive to local conditions since most stations have been
72a
licensed for a longer period of time. It concludes that
under its rule, if a station is able to fend for itself after
five years, the local market would have an additional view-
point, and if the station fails, the rule would have func-
tioned properly by having given the new station a chance
to succeed.
72. NCTA opposes Grace’s proposed rule in part on the
ground that the Commission does not have the authority
to affect cable’s compulsory copyright license. In this re-
gard, it argues that Section 111(c) of the Copyright Act
does not authorize the Commission to impose copyright-
related conditions on the permissibility of cable carriage
of broadcast signals. NCTA contends that if a signal may
be retransmitted pursuant to the Commission’s rules with
respect to communications policy, then it is subject to com-
pulsory licensing. NCTA also asserts that Grace’s proposal
ignores the Quincy court’s concerns regarding cable op-
erators’ editorial discretion, viewer preferences and inter-
ests of non-broadcast cable programmers. It states that
this proposal seeks only to protect the interests of indi-
vidual broadcasters without regard to the economic via-
bility of broadcasting in the particular market.
73. Proposals for Requiring Carriage of Public Broad-
casting Stations. In the Notice, we requested comment on
a proposal submitted by CPB and other public broadcasting
interests that the Commission adopt a rule requiring car-
riage? except in limited circumstances, of the entire signal
of all public television stations providing Grace B service
to all or part of a cable system’s community. The public
broadcasters’ proposal would not require carriage of public
television stations that simultaneously broadcast the same
programming carried by another public television station.
In addition, cable systems with twelve or fewer channels
would not be required to carry more than three local public
television stations if the systems need channel capacity to
carry programming from nonlocal sources. Finally, CPB’s
proposal requires carriage of the entire signal transmitted
73a
by the station, including services carried on the vertical
blanking interval (VBI) or on aural subcarriers.
74. In support of this proposal, CPB alleges that the
loss of cable carriage would undermine the financial sta-
bility of individual public broadcasting stations as well as
the entire national public television system. CPB argues
that without cable carriage, local public television stations
would find it more difficult, if not impossible, to reach
significant portions of the audience on which they rely for
support, CPB claims that virtually all public television sta-
tions are dependent for support upon viewer contributions
and that such funds are the fastest growing source of
public televisions’ total revenues. CPB also states that
viewer contributions are key to fundraising because they
are subject to ‘‘matching’’ funds from other sources such
as corporate foundations and legislative bodies. Thus, CPB
asserts that without cable carriage public television station
access to viewers would be restricted and viewer contri-
butions would be reduced, thereby affecting the amount
of revenue received from available ‘“‘matching’’ funds. CPB
further contends that the loss of local viewer support would
jeopardize the. entire public television system. In this re-
gard, CPB points to the cooperative arrangement among
public television stations for financing program production.
CPB concludes that if individual public broadcasting sta-
tions are financially weakened or forced off the air, the
quality and diversity of the programming offered by the
system as a whole would be adversely affected. ;
75. CPB also claims that this proposal complies with
the First Amendment requirements established by the court
in Quincy by stating that mandatory carriage of public
television stations furthers a substantial governmental in-
terest and is narrowly tailored to protect that interest. It
states that Congress and the Commission have longstand-
ing public interest policies regarding the fostering of a
nationwide public television service built on local stations
and that public television stations, especially those in the
74a
UHF band, rely on cable carriage to reach their audiences,
CPB asserts that its proposal is the least restrictive means
of furthering that governmental interest. It submits that
this proposal would not require carriage of duplicative pro-
gram services, but would foster diversity even in the rel-
atively few situations where multiple public television
stations must be carried. It states that this diversity in
programming is the essence of public television’s mission.
CPB also claims that its proposal accommodates the First
Amendment interest of cable operators by assuring that
even the smallest systems have the opportunity to present
programming from sources other than local public televi-
sion stations. It further asserts that required carriage of
VBI and aural subcarrier signals is necessary because these
technologies permit public television to offer services de-
signed to implement Congress’ mandate that public tele-
vision stations use their facilities to the extent feasible to
generate added revenue. In its reply comments, CPB points
out that with the exception of public broadcasters, none
of the other commenters recognize public televisions’
unique role or advance proposals that adequately protect
the unique governmental interest in supporting the public
television service. Thus, it argues that any of the proposals
that would allow the market to determine which stations
cable systems would carry are not appropriate.
76. Other commenters who support mandatory carriage
of public television stations offer alternative proposals. The
Catholic Conference suggests that in order to promote the
important governmental interest in the public receipt of
locally oriented programming, must carry rules should fa-
vor public television stations operating within the cable
community. The Office of Communication, United Church
of Christ, et al, (UCC) jointly propose mandatory carriage
for at least one noncommercial station for cable systems
within the top 100 markets. UCC’s proposal would provide
that if there is more than one noncommercial station, the
one with the highest local audience would be carried. The
75a
City of New York Municipal Broadcasting System (WYNC)
opposes any rule that would limit carriage of public tel-
evision stations on the ground that such stations provide
duplicative programming. WYNC claims that such a ground
would not be based upon fact and that any resulting rule
would be contrary to the public interest.
77. In opposing the CPB proposal, the Financial News
Network (FNN) indicates that prior to Quincy, cable sys-
tems in major metropolitan areas were required to carry
two or more public television stations, many of which du-
plicated programming of other public stations. FNN claims
that the effect of the CPB proposal is nothing more than
the reimposition of the former must carry rules found
constitutionally invalid in Quincy. NCTA echoes this po-
sition and points out that, in many instances, the carriage
of duplicating noncommercial stations would actually injure
the noncommercial station that is most local by diverting
local audience contributions. The Nineteen Cable Operators
state that the CPB proposal must be rejected since it does
not even address the concerns in Quincy that must carry
rules should be sensitive to factors such as channel ca-
pacity, duplicate programming, and the preferences of ca-
ble subscribers. The Nineteen Cable Operators also contend
that CPB’s general allegations of financial harm are totally
unsupported and that CPB has, therefore, failed to prove
that its proposal is necessary to further a substantial gov-
ernmental interest and that no less restrictive alternatives
are available. They further argue that CPB’s claims of
harm to public television stations notwithstanding, other
alternatives to mandatory carriage exist to protect public
broadcasters such as the construction of TV translator and
low-power stations, which do not infringe upon The First
Amendment right of cable operators. Accordingly, the
Nineteen Cable Operators assert that CPB’s proposal could
not withstand constitutional scrutiny.
78. NAB would treat public television stations in the
same manner as commercial stations. That is, cable sys-
76a
tems would not be required to carry duplicate network
affiliates (i.e., PBS) and the affiliate in closer proximity
to the cable system would have preference. Several other
commenters propose a minimum carriage rule that would
require retransmission of at least one noncommercial ed-
ucational station.
79. NTIA’s proposal recommends that the Commission
adopt a rule mandating that cable systems carry, without
charge, the signals of all local nonduplicated noncommer-
cial educational television stations, including translators.
These signals would be carried in their entirety on the
system’s lowest priced tier. NTIA states that noncom-
mercial stations play a unique and important role in pro-
viding instructional, educational and cultural programming
generally not available on commercial stations.
80. Beyond mandating carriage for public television sta-
tions, NTIA believes that the Commission has an obligation
to ensure a smooth transition from pervasive regulation
to less intrusive market competition. NTIA recommends
that the Commission institute a formal, continuing inquiry
and fact-gathering process so that the Commission can
accurately monitor and assess developments in the less
regulated cable-broadcast environment. The Commission
should issue interim reports of its findings on a yearly
basis. At the end of three years, the Commission should
make a formal determination of whether additional must
carry rules are needed. In this regard, NTIA states that
the Commission is not currently in the position-to know
whether mandatory carriage rules are needed to protect
local broadcasting.
81. Finaliy, NTIA suggests that the Commission make
clear that it would permit affected parties, including local
franchising authorities, to demonstrate that a significant
governmental interest would be adversely affected absent
local must carry protection. It states that if such a showing
is made, the Commission can adopt mandatory carriage
Oe ee a ee ee eee
77a
rules tailored to that individual marketplace. NTIA further
states that a case-by-case review of the need for mandated
carriage in an individual television market would enure
that the public interest is protected.
82. Input Selector Switch Proposal. Richard S. Leghorn
proposes two rules that he claims would protect viewers’
capabilities to receive over-the-air television in homes that
subscribe to cable.*! The first rule would provide require-
ments respecting A/B switches and the second rule would
establish “‘may carry’’ conditions for cable carriage of
broadcast signals. Mr. Leghorn contends that these pro-
posals would further the Commission’s objectives and be
less intrusive into protected First Amendment rights than
any mandatory carriage rule.
83. In regard to A/B switches, Mr. Leghorn proposes
requiring television set manufacturers to build input se-
lector devices into the sets’ channel control systems to
permit easy selection between cable and off-the-air pro-
gramming. In the absence of a manufacturer-provided
switch, he would require cable operators to install A/B
switches the subscriber homes at cost and would prohibit
them from disconnecting UHF antennas. As a corollary to
the first proposal, he suggests that cable operators be
exempt from the requirement to provide A/B switches if
their system carries all local unscrambled VHF signals. A
signal would be “‘local”’ if its Grade B contour overlaps
any part of the cable system’s community unit. The second
rule proposed by Mr. Leghorn would authorize able re-
transmission of broadcast signals if carriage is without
charge to the licensee, except for reimbursement for costs
incurred by the cable system for facilities used to receive
the broadcast signal or copyright fees. Additionally, he
proposes to require cable systems to carry authorized sig-
"’ Mr. Leghorn is a cable system owner and a former member of the
board of directors of the National Cable Television Association.
78a
nals in their entirety, without alteration or degradation
and, if technically feasible, on the same channel number.
84. Mr. Leghorn contends that his proposed rules would
ensure that subscribers have the opportunity to view off-
the-air or cable programming. Thus, he believes that his
proposal would meet the constitutional requirement that
incidental governmental regulation of speech be narrowly
tailored to meet the interests claimed to require that reg-
ulation. :
85. NAB opposes the A/B switch proposal on the ground
that such devices would not solve the problem of ensuring
the availability of broadcast signals to television viewers.
In this regard, it claims that in many instances off-the-air
reception of broadcast signals is either nonexistent or,
where existent, often cannot be received using an A/B
switch without the use of substantial additional equipment
that is owned by very few cable subscribers. NAB also
raises several additional points to support its position that
mandatory carriage rules are a solution preferable to A/
B switches, including widespread local restrictions on out-
door antenna installation, receiver/switch incompatibility
problems, radiation interference and pre-wiring of new
homes for cable.
86. Other Proposals. CBS Inc. proposes a rebroadcast
consent rule. The rule would permit secondary transmis-
sion of local or distant television signals by cable systems
only upon written consent of the originating station. How-
ever, such authority would not be necessary with respect
to local signals if the cable system carries all such signals
in their entirety on the station’s transmission channel,
without charge or alteration. CBS states that inasmuch as
teletext and multichannel sound are valuable enhancements
to, and form an integral part of, main channel program-
ming, the proposed secondary transmission rule would re-
quire transmission of these signals as part of the entire
broadcast signal. CBS also proposes a conjunctive rule that
79a
would allow cable systems to exclude the teletext, closed
captioning and/or multichannel sound portions of the sig-
nal, if such retransmission would interfere with main chan-
nel programming, unless such interference can be remedied
without a significant capital expenditure by the system.
CBS asserts that the secondary transmission consent rule
would promote competition and diversity in local and na-
tional markets and would effectuate the Commission’s sta-
tutory responsibilities.
87. The Catholic Conference proposes a rule to protect
stations which it asserts are at risk and which it believes
merit carriage. This proposal Would require cable systems
to carry stations that meet any of the following criteria:
1) the station devotes five percent or more of its pro-
gramming for local interest or is locally originated; 2) the
station is a public television station whose signal covers
the community served by the cable system; 3) the station
is a UHF station whose signal covers the community served
by the cable system; or 4) the station is an independent
commercial station whose signal covers the community
served by the cable system. The Catholic Conference be-
lieves that these stations should be favored because they
are likely to provide programming designed to meet the
needs of the local community served by them and the cable
system.
88. The Catholic Conference further espouses a point
system for stations by which cable systems would be
obliged to fill available channels. Points would be allocated
as follows: 1) one point for every five percent of total
programming that is locally oriented; 2) one point for a
local public television station: 3) one point for a local UHF
station; or, 4) one point for a local independent commercial
station. The Catholic Conference would have stations an-
nually submit their qualification point accumulations and
appropriate documentation to the cable systems upon which
they request carriage. The Catholic Conference would al-
low the cable operator to use its business judgment to
80a
determine which station would be carried in the event two
or more stations had the same point total and if the num-
ber of qualified stations exceed the number of must carry
channels.
89. UCC proposes that cable systems in markets below
the top 100 be required to carry all local stations, re-
gardless of channel capacity. Under this proposal, local
stations would be defined as those stations whose Grade
A contour covered at least one-half the cable system’s basic
subscribers. UCC asserts that there are usually only a few,
perhaps only one, such stations serving a cable community
and that their carriage is crucial to people in the rural
areas not served by the cable system. UCC believes that
cable systems with limited channel capacity in the top 100
markets should be required to carry, in addition to at least
one noncommercial station as discussed above:
1) any ethnic or minority-owned station serving a signif-
icant portion of the population reached by the cable sys-
tem; 2) stations with more than 40 percent local
programming directed to serving the needs and interests
of the community; and 3) all UHF independent stations.
It further argues that cable systems with larger capacity
in the top 100 markets have incentive to carry all the
programming they can obtain and that it is doubtful that
there is any regulatory program that needs to be ad-
dressed. However, UCC states that the Commission would
have full authority to intervene if problems arose with such
systems.
90. Many commenters propose a geographic standard
for defining ‘‘local’’ signals that cable systems would be
required to carry. Most of these parties suggest a 50-mile
zone using the city of license or transmitter location as a
reference point. Other parties would require carriage of
broadcast signals on all cable systems within their area of
dominant influence (ADI). Some commenters propose re-
quiring cable systems to carry any station whose Grade
B contour overlaps the cable community. UCC suggests
8la
that in markets below the top 100, cable systems must
carry any signal whose Grade A contour encompasses at
least one-half of the cable households. Lincoln Broadcast-
ing, licensee of KSTF, would require carriage of all foreign
language stations within 50 miles. Howard University and
several others would require carriage of all local minority-
owned stations.
91. Most of the commenters who support some sort of
must carry rules would exempt those systems with twelve
or fewer channels. Some parties would extend this ex-
emption to systems with more than 12 channels if they
have less than 1500 subscribers.
92. The Industry Agreement. The industry agreement
requires cable systems with more than twenty usable ac-
tivated channels to carry all qualified local stations, in their
entirety, on the lowest priced tier.*? However, this must
carry obligation is subject to stated limitations based upon
the number of usable activated channels carried by the
cable system. Specifically, the proposal provides that sys-
tems with 21 to 26 usable activated channels are required
to carry no more than seven qualified local stations. For
systems with more than 26 usable activated channels, the
proposal specifies that the number of channels subject to
the mandatory carriage requirement shall not exceed 25
peicent of the channels of the cable system. In situations
where the number of qualified local stations is greater than
the prescribed cap, the cable operator is given discretion
to select among the stations qualified for mandatory car-
riage.
93. Under the industry proposal, a qualified local station
is defined as a broadcast television station that is located
~ The agreement defines ‘‘useable activated channels’ as ‘‘those en-
gineered at the headend of the cable system for the provision of services
generally available to residential subscribers of the cable system, less
channels reserved against interference with aeronautical frequencies.”’
82a
within 50 miles of the cable system™ and that attracts an
off-the-air audience that meets or exceeds a minimum
viewing standard. To meet the viewing standard a station
must receive at least a two percent share and fi
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