# Appendix — Office of Communication of the United Church of Christ v. Federal Communications Commission > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385019_1508%3A2 ## Record - **Collection:** Supreme Court brief - **Document type:** Appendix - **Published:** January 1, 1988 - **Citation:** 486 U.S. 1032 ## Text 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 ) Page RIPE sais ncniisaliiauasinceansiivicuies la Opinion of the United States Court of Appeals for the District of Columbia Circuit ..........0...0.. la Supplemental Order of the Court of Appeals of Jan- Bee Beecarkcensinacpinaceauelabaannsds Veamukawswaanss 29a Report and Order of the Federal Communications EE Losi. 5 ea calacatdbaadas ul biataskicineebeniersaiats 32a Memorandum Opinion and Order of the Federal Communications Commission denying PIII pin casicncsanDietissateeiiceinsscrielascheraadins 205a Judgment of the Court of Appeals .......... ee 331la la 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 Re IRIE cinen.cdeuisgucknndicheendciesppisasadidimainiiean a 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 rul [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385019_1508%3A2. Public record. Not legal advice.