# Petition for Writ of Certiorari — National Ass'n of Theatre Owners v. Federal Communications Commission > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385604_1254%3A1 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition for Writ of Certiorari - **Published:** January 1, 1970 - **Citation:** 397 U.S. 922 ## Text 78, PSSA URS a 7 Se ee ea PEE te eS LIBRARY ater SUPREME COURT, U. 5S. ym Fn, | Supreme Court of the Hated Staten October Term, 1969 | ee No. 932 NATIONAL ASSOCIATION OF THEATRE OWNERS and JOINT COMMITTEE AGAINST TOLL TV,. Petitioners, : a Vv. FEDERAL COMMUNICATIONS COMMISSION and UNITED STATES OF AMERICA and ZENITH RADIO CORPORATION > and TECO, INC., Respondants. ~ PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT | MARCUS COHN 5 I sty OPINION BELOW. : JURISDICTION . °. QUESTIONS PRESENTED - . THE CONSTITUTIONAL AND STATUTORY PROVISIONS INVOLVED STATEMENT . REASONS FOR GRANTING THE WRIT. CONCLUSION é APPENDIX. .. CITATIONS Cases: ¥ ~Banzhaff v. United States, 405 F.2d 1082, cert. denied, sub. nom. _ °° Tobacco Institute v. Federal Communica- tions Commission. 395 U.S. 973 . Eastern R. R. Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S.127 . _ Federal Communications Commission v. Sanders Bros. Radio Station, 309 U.S. 470 . Greene v. McElroy, 360 U.S. 474 . 25 Al << ae 22 ; 13,19 22 Eee eee A TA IRENE DAL Naira 4 (ii) ° Griffin v. Mlinois, ro) BP 8 > SUR ds Sra . Grosjean v. American Press Co., 297 US. 233 . Hannegan v. Esquire, ' 327 U.S. 146 . Harper v. Virginia Board of scsi ' 383 U.S. 663 . ; Interstate Commerce Commission v. United States ex rel. Los Angeles, 280 U.S. 52 ule Joseph Burstyn, Inc. v. Wilson, 343 US.495 . .° Kent v. Dulles, 357 US. 116 . McIn tire v. William Penn Selatan Co., ‘ 151 F.2d 597, cert. denied, 327 U.S. 779.. ' Mills v. Alabama, 384 U.S. 214 . ; National Broadcasting Co. v. United States, Re ee 2 Near v. Minnesota, 283 U.S. 697 . Pulitzer Publishing Co. v. Federal Com- munications Commission, 94 F.2d 249. Red Lion Broadcasting Co. v. Federal Com- munications Commission, 395 U.S. 367 Superior Films, Inc. v. Department of Education, 346 U.S. 587. . Thomas v. Collins, 323 U.S. 516 . 3,12 20 . 13,19 21, 22, 24 20 20 PA 7 ¥ A (iii) 7 Page United States v. Southwestern Cable Co., : ee ee Winters v. New York, | SURI i ee os eae a ee Be a, e Proceedings,of the Federal Communications: Matter of Subscription Television Service; - FCC 55-165 © 1 eee we ee 4 Matter of Subscription Television Service, First Report, 23 FCC 532, 16 Fike & ; PU FP ee a ew Oe Matter of Subscription Television Service, Second Report, 16 Pike & Fischer, RR 1539. . . . . - 5 Matter of Subscription Television Service, - ‘ Third Report, 26 FCC 265, 16 Pike & Fischer, RR 1540a .... . . Vie arom Meee es 8, a oe Matter of Subscription Television ‘Service, Fourth Report, {5 FCC 2d 466, 5,6, 7, 8,9 Soa tote. 6 ee ee ee Se AEBS Report on Programming Policy, . - 20 Pike & Fischer,RR1901 . ~ .@ .. ... . 19 United States Constitution and Statutes: Radio Act of 1927... 6 ck ce os 3,14, Communications Act of 1934, as amended, : WE oe le ee Sections : BE ee Se as DET Oe eee eee I ae Soe ages Oa ee oh gn alee ares 10 WN he Sot ne ge aoe Gea et ae ee ee 14 Seren Wires Oe neem eee ak tra e , OAT TOE NSN RS AP ey _ 23S ile RUT PONS TR AE a (iv) Page Interstate Commerce Act, REN MM ae ee ee a Motor Carrier Act, Sy eee Ee ae ee eee 15 Aviation Act, ; : f shi a in SO RE SOR ERE ROM rs ea eee _ Shipping Act, , 21 Ae DED og ee eet nn ee , United States Constitution: First Amendment. -. . 2 2. 7)... . . 9£20,21,22 Equal Protection Clause ee oa, Miscellaneous: ; oe Discrimination Against The Poor and the 14th Amendment, 81 Harv.L.Rev.435. . 2... 1.95. 24 Barron, Access To The Press—A New First Amend-~* ment Right, 80 Harv. L.Rev.1641. . 2. 2°... , 24 a (ec Supreme Court of the Huited States October Term, ° — _No. “ - NATIONAL ASSOCIATION OF THEATRE OWNERS and JOINT COMMITTEE nial TOLL TV, Petitioners, ie, 2 FEDERAL COMMUNICATIONS COMMISSION and - . UNITED SFATES OF AMERICA | ‘and ZENITH RADIO CORPORATION e and TECO, INC., “ae _ Respondants. . PETITION FOR A WRIT OF CERTIORARI.TO THE |: UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT v4 The_National Association “of Theatre Owners: and Joint’ Committee Against Toll TV (“Petitioners”) pray that a writ of certiorari issue to review the judgment of the United States Court of Appeals, for the District of Dalle > * ’ \“ ~ groups. aM Columbia Circuit entered in this case on September 30, 1969.! OPINION BELOW ‘The opinion of the Court of Appeals (Appendix A) has not yet been.reported. JURISDICTION The judgment of the Court of Appeals was entered September 30, 1969. The jurisdiction of this Court is invoked under 5 U.S.C. 1034 and 28 U.S.C. 1254(1). QUESTIONS PRESENTED 1. Whether ,the Federal Communications — Commission (‘‘Commission’’) possesses the statutory authority to authorize a permanent nation-wide television broadcast service which requires the direct payment of fees by members of the public to broadcast licensees in order to receive the pay broadcast service; and 2. Whether, assuming the requisite statutory author- ity, the Commission’s recent action establishing a nation— wide pay television. service, and promulgating rules to regulate that service, improperly; arbitrarily and un- constitutionally discriminates against lower income -_ — I The National Association of Theatre Owners is a nation-wide organizftion «consisting of owners of motion picture theatres throughout the United States. The Joint Committee Against Pay _ TV is a voluntary association organized for the purpose of oppos- ing Federal Communications Commission authorization of pay television. The Petitioners participated in the rule making proceed- ing before the Federal Communications Commission, which culmi- nated in the Commission’s authorization of a nation-wide pay television ‘system, and were the petitioners who obtained review of the Commission Order in the United States Court of Appeals for the District of Columbia Circuit. 2 3 °e THE CONSTITUTIONAL AND STATUTORY PROVISIONS INVOLVED \The pertinént sections of the Constitution (Amend- ments I and XIV) and the Communications Act of 1934, as amended, 48°Stat. 1064, 50 Stat. 191, 66 Stat. 715, 47 U.S.C. 151,"et seg. (Sections 153(0), 301, 303, 326) are set out in Appendix-B. STATEMENT This Petition seeks review of a decision by the United States Court of Appeals for the District of ‘Columbia Circuit in a matter which the Court below termed ‘a: question of national importance, id est, whether the Federal Communications Commission possesses the requisite power to authorize nationwide over-the-air subscription television (commonly referred to as pay ‘TV’) on a permanent basis” (Slip Opinion, p. 2, footnote omitted). This issue vitally affects literally tens of millions of viewers in their economic and social lives. Because of the drastic change in the nature of American broadcasting which pay television may well cause, the issue here, presented is perhaps the most far-reaching and important question of statutory ifiterpretation of the Communications Act which has come before this Court since its landmark 1943 decision in National Broadcast- ing Co. v. United States, 319 U.S. 190 (1943). American radio and television have traditionally been free in that the listening and viewing audiences, after purchasing their sets, pay. no direct charges to the originating stations for receiving programs which those stations broadcast. The distinction between American broadcasting and that of-foreign countries, where such charges often exist in the form of taxes or listening fees, was specifically and repeatedly recognized in the early congressional debates on the Radio Act of 1927 (see 67 Cong. Rec. 5490-1, 12335). It was in this framework that government regulation of broadcasting began. ti ‘ - it 4 In 1955, the Commission, in response to petitions by a number of pay television proponents, instituted a Notice of Proposed Rule Making,” inviting Comments to determine whether pay television would be in the public interest, and requesting Comments on whether the Com- mission had the statutory power to authorize such opera-- tions.? Thereafter, in a 1957 Notice of Further Proceed- ings,4 the Commission announced that the Comments did not provide an adequate basis for arriving at a final decision, and that trial demonstrations would be neces- sary before a final decision could be made. Subsequently, the Commission issued its First Report on Pay Televi- sion> which concluded that the Commmission had power to authorize over-the-air pay television under the present © Act, and which listed the conditiOns under which appli- cations for trial operations would be accepted. The issuance of the First Report stirred critical « congressional comment. The House Committee on Inter- state and Foreign Commerce, after hearings, adopted a resolution stating that the Commission should not act to authorize pay television operations until the Communica- tions Act was specifically amended to grant such power to the Commission.® In response, the Commission issued 2 Matter of Subscription Television Service, F.C.C. 55-165, released ee 1955, 20 F.R. 988. ™ + 3 Pay television was described by the Commission as the trans- mission of programming paid for by the public on a subscription basis. ; 4 22 F.R. 3758 (1957). 5 Matter of Subscription Television Service, First Report, 23 FCC 532, 16 Pike and Fischer, RR 1509 (October 1957). © The basis of congressional concern was that trial operations, inevitably requiring large investments, would establish pay televi- sion as a fait accompli before Congress could consider appropriate legislation. See remarks of Congressman Oren Harris, Chairman of the House Interstate and Foreign Commerce Committee, 105 Cong.Rec. 4812. its Second Report’? which withheld the processing of applications under the First Report until the expiration of the 85th Congress, a policy which was voluntarily ‘continued by the Commission until the end of the 86th Congress. Upon the expiration of the 86th Congress, the Com- mission issued its Third Report. The Third Report re- adopted and reaffirmed virtually all the conditions for trial operation set out in the First Report,? and. in- dicated that when “sufficient and meaningful data” became available, the Commission would hold public (3 hearings to decide whether pay television should ec permanently authorized (Third Report, supra, at Par. 27; First Report, supra at Par. 92). Only three applications were ever filed for trial operations pursuant to the Third Report, and of these only one ever went into operation, Station WHCT, Hartford, Connecticut.!® 7 Matter of Subscription Television Service, Second Report, 16 Pike and Fischer, RR 1539 (February 1958). 8 Matter of Subscription Television Service, Third Report, 26 FCC 265, 16 Pike and Fischer, RR 1540a (March 1959). ? Operational limitations were set out to protect the public and to limit the scope of the trial. See Third Report, Pars. 6, 19, 20-22, 26-27, 26 FCC at 266, 269-71,.16 Pike and Fischer, RR at 1540b, 1540e through g. 10 The application by Station KVUE for Channel 40, Sacra- mento, California, was denied for failing to comply with the conditions of the Third Report. A second applicant, Station KTVR, Channel 2, Denver, Colorado, obtained authorization, but did not engage in pay television operations and later relinquished its authorization. See Fourth Report, Par. 4, 15 FCC 2d at 467. The Hartford experiment began in the summer of 1962. At its height, it involved no more than approximately 5,000 sub- scribers, and during much of its lifetime the number of subscribers was considerably less. In 1965, pay television proponents filed a Petition for Further Rule Making requesting the establishment of a nation-wide permanent pay television system, which, in -1967 culminated in the Commission’s Subscription Tele- vision Committee (which consisted of 3 Commissioners), submitting for Commission consideration a Proposed Fourth Report which proposed the establishment of a permanent pay television service. Oral argument on the Fourth Report was held before the Commission en banc in 1967. z= As was the case with the First Report, the proposed Fourth Report stirred critical congressional comment. The Communications and Power Subcommittee of the House Interstate and Foreign Commerce Committee, after hearings, recommended, and on November 16, 1967, the full Committee on Interstate and Foreign Commerce adopted, a resolution stating the sense of the full Committee that. the Commission should refrain from taking any action on its Proposed Fourth Report for one year, or until the Communications Act of 1934 was amended to authorize pay television.!4 On September 3, 1968, the Commission, by Chair- man Hyde, sent a letter to the Chairman of the Com- mittee on Interstate and Foreign Commerce indicating that in view of the lengthy consideration which had already been given the matter, the Commission did not 11 The reasons fod the Committee’s resolution were the Com- mittee’s views that: (1) the systems, thus far tested, were “incon- clusive” as to whether the public interest would be served, (2) the systems had been unable to demonstrate the ability of pay televi- sion to offer new, different, or “higher quality” viewing, (3) the development of public television might adequately fill the need fo additional cultural programming, and (4) it had not been estab- lished to the satisfaction of the Committee that authority to license pay television operation came within the power of the Commission under the Communications Act. See Fourth Report, Par. 15, 15 FCC 2d at 470. believe it could delay resolution of the question. On September 11, the Commerce Committee, in response, adopted a resolution indicating the sense of the Com- mittee to be that the Commission should further refrain from acting until the end of the first session of the 91st Congress, or until the completion of action upon legisla- tion if by the end of the first session legislation pertain- ‘ing to the question was under consideration.! 2 . Thereafter, on December 13, 1968, the Commission issued its Fourth Report, which is the subject of. the opinion of the Court of Appeals here sought to be reviewed. In the Fourth Report the Commission reaf- firmed its prior holding that it possessed the requisite statutory power to permanently authorize pay TV,!3 stated its belief that pay TV would provide “a beneficial supplement” to the program choices now available,!4 and established the regulatory framework for a perma- nent nation-wide pay television system, indicating the . 12 The September 11 resolution was passed by a vote of 16 to 13. A minority of the Committee sent a letter to the Cominission indjcating their belief that the Commission should act on the matter. Fourth Report, Par. 18, 15 FCC 2d at 471472. 13 Fourth Report, Par. 12, 15 FCC 2d at 468-69. 14 See Fourth Report, Pars. 27-69, particularly Pars. 59-69, 15 . FCC 2d at 474-488. By “beneficial supplement” the Commission meant only that pay television programming would not be “dupli- cative” of free television, and that the Commission believed it was desired and needed by at least a portion of the viewing public. The term was not meant to connote lack of impact upon free television, which the Commission treated as a separate question (Fourth Report, footnote 20, 15 FCC 2d at 473). requirements which must be met by applicants seeking pay television authorizations.!5 While establishing a permanent pay television system, the Commission, nevertheless, recognized that Pay TV will not, in fact, present minority-type: program- ming to any significant degree, and will, instead, aim: at ' the mass market to maximize profits (Fourth Report, Par. 68, 15 FCC 2d at 487-88). The Commission em- phasized its belief that ‘“‘the preservation af conventional television service and the continued availability of good program material to the free service ... [were] extreme- ly important considerations” (Fourth Report, Par. 90, 15 FCC 2d at 495). The Commission also emphasized that it “would not consider [it] to be in the public interest” for certain types of program material now presented on ' the free service to be lost to the pay television operation (Fourth Report, Par. 130, 15 FCC 2d at 508). In order to- prevent this possibility, the Commission adopted 15 See Fourth Report, passim. Among the conditions governing pay television were provisions concerning the technical perform- ance of the systém, requirements that all systems broadcast at least 28 hours ba week of free programming, that no pay televi- sion station enter into a contract which would deprive it of complete freedom over the programs to be broadcast, or the terms of payment, that pay television decoders could only be leased, not sold, and that service would have to be rendered to all persons desiring it within the Grade A contour of the station unless a ‘ satisfactory signal is not available. (See Pars. 154-276, 339-348, 15 FCC 2d 515-54, 573-77). ; 9 certhin detailed restrictions on the type and content of pay television material which-may be broadcast.!® The Commission specifically refused to adopt any rules govering the rates to be charged to the public, and refused even to decide whether it had the power to do | _ $0. It held that its power to authorize pay television permanently was not “dependent” upon the power to regulate rates (Fourth Report, Par. 259, 15 FCC 2d ai 547). Although the Commission rejected the argument that its programming restrictions violated the anti- censorship provisions of the Communications Act (47 U.S.C. 326), and similarly rejected the argument that such restrictions were a violation of the First Amend- ment of the Constitution, nevertheless, the Commission 16 These restrictions included: (i) - No motion picture (with a number of exceptions) can appear on pay television if the picture is more than 2 years old; (ii) Sports programs “regularly televised in the community via free TV during the previous 2 years” cannot be presented over pay television (Fourth Report, Pars. 289, 305, 15 FCC 2d at 558, 564). (iii) Pay television stations are prohibited from presenting any “series type program with inter-connected plot or substantially the same cast of principal characters.” (iv) The Commission recognized that movies and sports would probably be the overwhelming program fare to be presented on pay television. In order to insure that at least some pay television programming would be other than feature films and sports events, the Com- mission provided that no more than 90% of the total programming hours could be composed of programs falling into these two categories. These program restrictions are rather complex, and the Commis- sion devoted numerous pages of its opinion to explicating them. Fourth Report, Pars. 284-310, 15 FCC 2d at 556-565. 10 made it quite clear‘that it would not have approved the establishment of a pay television system in the absence of the authority to lay down such restrictions (see Fourth Report, Pars. 130, 284, 311-313, 15 FCC at 507, 556, 565-66). At Petitioners’ request, the Court of Appeals for the District of Columbia Circuit reviewed the Commission’s determinations pursuant to the judicial review provisions of Section 402(a) of the Communications Act (47 U.S.C. 402(a)). The Court affirmed, in all respects, the Fourth Report. In brief, the Court held that the Commission possessed the statutory power to authorize a permanent pay television system, basing its holding on the grounds that the statute did not explicitly forbid the authoriza- tion of such a system, that the courts have traditionally interpreted the Communications Act expansively in view of the dynamic characteristics of the radio industry, and that the courts have traditionally followed an agency’s interpretation of its organic statute, rather than substi- tute its own interpretation.!7 The Court rejected the argument that congressional failure to include the power to regulate the rates charged by pay television demon- strated the Commission’s lack of power to authorize the system,!8 and similarly rejected the argument that authorizing a pay television system improperly and un- constitutionally discriminated against low income groups in. the United States!'? which the Commission itself re- cognized would not be able to take advantage of the 3 17 Slip Opinion,'pp. 7-15. 187g at pp. 15-18. 19 1g. at pp. 19-24. a 1 service, and at whose expense the service would be. estab- lished. The instant Petition followed.?°. REASONS FOR GRANTING ‘THE WRIT 1. As the Court below indicated, this case involves an issue “of ‘national importance” (Slip Opinion, p. 2) and ore “of first impression” (Slip Opinion, p. 11) concerning what is clearly one of the most -important questions of interpretation of the Communications Act of 1934, as amended, that has ever been brought before the courts. Whether the Federal Communications Com- ‘mission has- the statutory authority under the present Act to create a nation-wide pay television system, is a question the resolution of which vitally affects every citizen. It affects the nature and the amount of informa- tion, knowledge and entertainment which the population of the entire country will receive. In affirming the Commission’s authorizktion of a _ permanent pay television system, the Court below recog- nized the novelty of the issue,’and the fact that, primari-. ly because of this novelty, the legislative history of the Act shed little light on the scope of the Commission’s power (see Slip Opinion,-pp. 13-15).2! The Court did not base its holding upon this legislative history, but y » 20 Upon Pétitioners’ request, the Court of Appeals for the District of Columbia Circuit has stayed the issuance of its mandate pending the filing of the instant Petition for certiorari. The Com- . mission itself had previously announced that it would not grant any application for pay television authorization until 60 days after the opinion of the Court of Appeals in this matter. Petitioners have requested that this policy be continued by the Commission until thie conclusion of the litigation before this Court. 21 The Court also pointed to proceedings in the Congress which have been pending for many years, and particularly to Congress’ inability to ‘agree on the scope of the Commission’s power in this area (Slip Opinion, pp. 14-15, footnote 25). 4 rz - upon (a) the la€k of a specific prohibition in the statute forbidding the Commission to authorize pay television, (b) the general judicial doctrine of. “expansively”’ inter- preting the Communications Act in such a way as to “enable the Commission to cope with new problems while avoiding “the necessity, of repetitive legislation” (Slip Opinion,.p. 9), and (c) by applying the traditional theory of judicial deference to jan administrative agency’s inter- bee gee ‘ pretation of its organic statute. Petitioners do not quarrel with the general validity of these judicial axioms. ‘But Petitioners respectfully submit that these legal general- ities do not, and cannot suffice to settle the important specific issues here raised. ‘ There is no question that the Communications Act sets out a broad regulatory scheme which has enabled the Commission to license diverse uses of the radio spectrum, and indeed has enabled the Commission to proceed in areas of developing technology in order to protect the integrity and efficacy of the Commission’s ability to exercise its statutory responsibilities.2? But it is also true that the Commission’s powers are not all-— encompassing. This Court pointed out in National Broad- casting Co. v. United States, 319,U.S):190, 219 (1943) that Congress did not give the Commission ‘ ‘unfettered discretion to regulate all phases of the radio industry.” Many matters regarding the manner in which broadcast stations derive their revenues and programming were 22 ee, e.g., National Broadcasting Co. v. United States, 319 US. 190 (1943). See also United States v. Southwestern Cable'Co., 392 U.S. 157 (1968): in which this Court held that the Commission had power to regulate aspects of the newly ia a. vision” industry because failure to regulate would render the Commission less able to carry out the functions entrusted to it by Congress, a result which could not have been intended by Congress when it enacted the organic statute. 13 v never considered as being within the Commission’ S regu-_ latory jurisdiction. 23 Other limitations upon the Com- mission’s power appear despite the broad - regulatory: scheme. Pulitzer Publishing Co. v. Federal Commuinica- tions Commission, 68 App. D.C. 124, 126, 94 F.2d 249, 251 (1937) and Sanders Bros. Radio Station, supra, strongly suggest that rate regulation vis-a-vis broadcast licensees and the public was not encompassed by the Commission’s regulatory scheme. Congress itself has in- dicated (House Report No. 1559, 87th Cong. 2d Session) that it was not Congress’ intention “that the Commission should have authority to prescribe [manufacturing] standards {of television equipment] on the basis of any ~ of its existing powers under the Communications Act” (Pike and Fischer, Current Service, p. 10:485). These limitations exist despite: the lack of any specific statutory prohibition. Petitioners respectfully urge that the Court below applied an inappropriate legal standard by, in effect, requiring that the Act specifically prohibit the creation’ of a pay television system before it would hold that ‘the Commission did not. have such power. It may well be that congressional failure to enact a specific prohibition’ would be dispositive of an issue concerning circumstances of which Congress was well aware when it enacted legis- lation. But it is unpersuasive to assert that Congress would have enacted a specific prohibition against pay television when, at the time of the enactment of the Act; the ‘hallmark of the American broadcasting industry was the absence of a direct charge to the viewer. 23 This Court stated in Federal Communications Commission v. Sanders Bros. Radio Station, 309 U.S. 470,|475 (1940) that “the Act does not essay ‘to regulate the business of the licensee. The Commission is given no supervisory control of the programs, of business management or of policy.” 14 The inauguration of .a permanent pay television system is more than a mere variation in the broadcasting ‘art. It introduces the most fundamental change in broad- casting that has occurred since the adoption of the original Radio Act in 1927. It erects a system ,whéreby “the use of a scarce and valuable public broadcasting _ Frequency which, by Section 3(0) of the Act (47 U.S.C. | 153(0)), was intended for the “dissemination of radio communications intended to be received by the public” will now be available not to all the public, but only to those who can afford to pay a fee for its use, thus, effectively depriving many persons, particularly those in the lower income groups of the United Spies of the use of a broadcast frequency. It creates, in egsence,.a second class citizenry with respect to access to broadcast fre- quencies. Matters of such fundamental importance should not be left to régulation by administrative agencies through inference, assumptions and deductions. As this Court noted in Interstate Commerce Commission y. United States ex rel. Los Angeles, 280 U.S. 52, 69 (1929), “{a] proper statute would seem to require de- tailed directions, and we should @xpect the intention -to be manifested in plain terms and not to be left to be - implied from varied ,regulatory provisions of uncertain scope.” ‘ | But the Commission’s lack of authority is indicated not only by failure of the Act to explicitly allow the | authorization of pay television. It is most effectively demonstrated by the omission from the Act of authority ‘for rate regulation by the Commission of the prices to be ‘charged the public. Indeed, the proponents of pay televi- sion have consistently and vigorously asserted that the Act does not give the Commission the authority to regulate rates. The Commission has compounded the paradox by refusing to decide whether it has the power to regulate’ pay television tates under the present Act. And the Commission’s refusal to decide this issue has 15 now been upheld by the Court below, so that the Com- mission may very well be launching a system over which it has no effective regulatory power to protect the public. Although the Commission and the court below have refused to decide the maiter, the question of whether the present Act allows for rate regulation is critical to the interpretation of the Commission’s authority under thes Act to authorize pay television. The reason is simply that, viewing congressional precedents in such matters, it is inconceivable that Congress would have allowed broadcast licensees to charge for the use of what are conceded to be public facilities without either explicitly authorizing such rate regulation or, at the very least, establishing a regulatory scheme to oversee it. This is demonstrated by the conceded fact that in the Com- munications Act, and indeed in every other Act of which petitioner is aware in which the public was to be charged direct fees for the use of public or quasi-public facilities, ‘Congress specifically enacted detailed provisions govern- ing Commission regulation of such charges.24 The absence of such specific authorization in the Communica- tions Act with respect to broadcast frequencies per- suasively indicates that Congress did not intend that the general public be directly charged for the use of its own airways. gt: ¢ The Court rejected Petitioners’ contentions on two somewhat contradictory grounds. The Court first asserted (Slip Opinion, pp. 16-17) that the difference in treat- ment between broadcast licensees and “common carriers” 24 This was not only true in the Communications Act itself (see, e.g., 47 U.S.C. Secs. 201-211), but also in the Interstate Com- merce Act (49 U.S.C. Secs. 1-23), the Motor Carrier Act (49 U.S.C. Sec. 316), ttie Aviation Act (49 U.S.C. Sec. 1374), and the Shipping Act (46 U.S.C. Sec. 817). geet reflected Congressional belief that broadcasting is not a “natural monopoly,” and that the dangers of monopolies would, be handled by the “‘competition among those providing broadcasting services in a given area.” The Court appeared to believe that the absence of rate regula- tion was not related to any cost relationship to the public vis-a-vis the licensee, but rather to the existence of limited competition among licensed radio stations. But there are two difficulties with this analysis. First, the Court failed to recognize the significance of the fact that under the Commission’s proposed licensing scheme there will be a natural monopoly for the pay television licensee in a given community. The Commis- sion has created a regulatory framework whereby there will be only one pay television station in each com- munity, so that there will be in pay television precisely the “‘natural monopoly” that the Court held not to exist in the case of conventional broadcasting systems (Fourth Report, Pars. 125, 165, 200, 15 F.C.C. 2d at 505, 518, 528). Perhaps more important, the ‘Court’s analysis is logi- cally deficieht because it is at least as likely (if not more likely) that Congress drew a distinction between common carriers, on the one hand, and broadcasting, on the other, precisely because there was to be no direct charge levied by the broadcast licensee upon the general public. The question is whether Congress would have eschewed rate regulation with respect to broadcast frequencies if it intended that those frequencies could. only be reached by that segment of the public willing to pay a fee. Petition- ers believe the answer to be ‘clearly in the negative, particularly since such a course would be singularly un- precedented in Congressional annals. It is difficult to believe that Congress would have allowed the imposition of a direct fee system without at the same time giving the Commission the power to regulate the heart of that system, i.e., the direct fees to be charged to the public. J + 17 The Court itself appeared to be concerned with the anomaly of Congress allowing a direct fee system to be instituted without giving the Commission the proper regulatory tools to prevent abuse. Thus, as its second ground for affirmance the Court suggests, as did the Commission, that the Commission possesses appropriate regulatory tools “through the licening process.’’ (Slip Opinion, p. 17). But this analysis, it is submitted, begs the question. If, as pay TV’s proponents vigorously assert (and the Commission has not denied the validity of the assertion), the Commission is without power to regulate the rates charged-directly, it is difficult to see how these rates could be regulated indirectly through the licensing function. If regulation of rates is not within the Commis- sion’s province, how could the Commission condition its licensing functions upon factors such as the reasonable- ness of the rates charged? What the Commission cannot do directly, cannot be done indirectly merely by the assertion that it is neene done in the furtherance of its “licensing” authority.” : The question to be decided is not (as the Court | below appears to believe) whether the Commission should at this time institute rate regulation.2® The real issue is what light the absence of the power to regulate rates sheds upon Congressional intent with respect to Commission authority to authorize a permanent pay tele- vision system. Petitioners submit that the absence of 25 For example, Section 326 of the Communications Act (the anti-censorship provisions) prohibits the Commission from requir- ing a broadcast station to take a particular editorial stance. But it © is inconceivable that the Commission would, nonetheless, be allowed (or indeed would even attempt) to condition the grant of a license upon the taking of an editorial position by an individual station. 26 it very well may be, as the Court suggested, that the question of whether the Commission should now institute rate regulation need not be settled, and may await future developments. ~~ Sf A 18 such power is indicative of Congressional intent not to allow the Commission to authorize a permanent pay television system. _ There is yet a third indicia of absence of authority: the fact that interpreting the Act in the manner claimed by the Commission results in_ introducing concepts which are directly inconsistent with the specific anti-censorship provisions of Section 326 of the Act,:(47 U.S.C. 326) and .which would raise the most serious Constitutional & questions. “The courts have traditionally been loath to _ interpret statutes in such a manner. Section 326 provides that the Commission cannot ,enact, any regulation or condition ‘“‘which shall interfere, with the right of free speech by means of radio commu ication.” Yet the Commission has enacted pre- »cisely such restrictions on ‘free speech by forbidding pay television from presenting particular types and/or per- centages of programming material.27 Thus, the: Commis- _ sion has’ proposed to issue a broadcast license for a ae broadcast service upon the specific condition that the licensee not present certain types or exceed fixed per- centages of program material, the proscription being in terms of the form of the media, the program content, and the program structure. And the Commission made it absolutely clear that the imposition of these conditions "was an essential element of its decision to authorize a permanent pay television system. The Commission stated fhat unless these conditions were established, it would - not have authorized a permanent pay television system.2® It must be emphasized that these restraints 27 Thus, the Commission has forbade the broadcast over pay television systems of certain motion pictures, sports events, and other specific tvpes of programming material. See Fourth Report, Pars. 284-309, 15 F.C.C. 2d at 556-565. 28 See Fourth Report, Pars. 130, 284, 15 F.C.C. 2d 507, 556. / ve \9 and restrictions f a licensee’s right to broadcast types of programming are singular and unprecedented. The Commission has never before attempted to impose such restraints upon the types ‘of. programs which may be pfesented by broadcast licensees; indeed, as recently as 1960, the Commission itself specifically rejected the notion that it could condition a grant, denial or revoca- tion of a license upon the eect egtee “own subjective determination” as to programming.” The Commissidn’s imposition of these restrictions is not only contrary to its own prior interpretations. of its powers over programming under the Act; it is contrary to repeated judicial interpretations. In Federal Communi- cations Commission v. Sanders Bros. Radio Station, 309 U.S. 470, 475 (1940), this Court stated: “The Commission [was] given no supervisory control over the programs . . . [to be presented by broadcast facilities] .” To the same effect, see McIntire v. William Penn Broadcasting Co., 151 F.2d 597, 599 (3d Cir.), cert. denied, 327 U.S. 779 (1945): [It] is clear from history and the interpreta- tion of the Federal Communications Act that the choice of programs rests with the broad- casting stations licensed by the F.C.C. And see Pulitzer Publishing Co. v. Federal Communica- tions Commission, 68° App. D.C. 124, 126, 94 F.2d 249, 251 (1937): The licensee of a radio station chooses its own advertisers and its own programs . 29 See 1960 Report on Programming Policy, 20 Pike & Fischer, RR 1901, 1907, 1909. 20 The restraint is even more repugnant where, as here, it is a prior restraint, a form of restraint particularly repugnant to our institutions: This Court recognized many years ago that...a previous restraint is a form of in- fdinkement upon freedom of expression to be especially condemned. 30 In the satant case, the Court below upheld. the Commission’s ‘restrictions, but did so on the basis of contentions which, it is submitted, cannot withstand critical analysis. The Court placed reliance on the fact that the Commission, acting in good faith, adopted restraints for the purpose of gaining more rather than less programming, and “sought only to insure the con- tinuing economic vitality of free television” (Slip Opinion, p. 25). But the courts have long recognized that a direct prior restraint upon the content of protected speech cannot be sustained on the grounds that the legislature or administrative agency acted “reasonably,” or with the purest of intentions. This Court made clear in Thomas yv. Collins, 323 U.S. 516, 530 (1945) and Mills v. Alabama, 384 U.S. 214 (1966) that the validity of a free speech restriction cannot be tested by such criteria as the sincerity of purpose of the enacting body, or whether the enactment is reasonably calculated to achieve an otherwise vdlid result. The Court of Appeals itself recognized in a recent decision Banzhaff v. United States, U.S. App. D.C. , 405 F. 2d 1082, 1096 - 30 Joseph Burstyn, Inc. v. Wilson, 343 U.S. 495, 503 (1952). There can be no doubt that if such a direct, prior restraint as is here present were placed on matter in newspapers or motion picture films, the restraint would be struck down as unconstitu- tional, even if specifically authorized by the appropriate legislative body. Grosjean v. American Press Co., 297 U.S. 233 (1986); Near v. Minnesota, 283 U.S. 697 (1931); Superior Films, Inc. v. Depart- ment of Education, 346 U.S. 587 (1954). 21 (1968) cert. denied, sub. nom. Tobacco Institute v. Federal Communications Commission, 395 U.S. 973 1969), that restraints upon a licensee’s discretion cannot be upheld “merely upon the ground that it may reason- ably be thought to serve the public interest.” In defending the Commission’s restriction, the Court below appeared to draw a distinction between protection accorded to general programming material, on the one hand, and that accorded to “ideas” and “debate on- public issues” on the other (Slip Opinion, pp. 25-26), the latter, according to the Court, being more “central con- cerns of the First Amendment” than the former. But this analysis is one which creates distinctions flatly rejected | by this Court in numerous cases, principally Winters -v. New York, 333 U.S. 507 (1948). In Winters the Court made clear that there are no degrees of protection ac- corded to various categories of speech depending upon whether they fall within the realm of “entertainment” or doctrinal polemic (333 U.S. at 510): The line between the informing and the enter- taining is too elusive for the protection of that basic right (a free press). Everyone is familiar with instances of propaganda through fiction. What is one man’s amusement, teaches another’s doctrine. This Court recognized in Red Lion Broadcasting Co. -v. Federal Communications Commission, 395 U.S. 367, 396 (1969) that “the Commission’s refusal to permit the broadcaster to carry a particular program ... . . would raise . . . . serious first amendment issues.”” The Commis- sion has now enacted precisely such a refusal in its Pay ee TV restrictions and has presented the issue which was not present in Red Lion.?! But the principal error of the Court below lies not so much in allowing the imposition of prior restraints, but in failing to recognize that the Commission’s position does, in fact raise a serious question of prior restraints. The primary issue before the Court is the interpretation of the Commission’s authority under the Communica- tions Act. In order to sustain its interpretation, the Commission has forced an interpretation of the Act in a manner which appears not only prima facie inconsistent with the explicit anti-censorship provisions of Section 326, but which raises grave First Amendment questions. | As this Court held in Hannegan v. Esquire, 327 U.S. 146, 156 (1946), a statute will not be gratuitously interpreted in such a manner as to clothe an agency with authority which, if exercised, ‘would raise the gravest constitutional % objections: . The provisions of the [governing statute] would have to be far more explicit for us to assume that Congress made such a radical departure from our traditions .... See also Greene v. McElroy, 360 ‘U.S. 474 (1959); be Eastern R.R. Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127 (1961); Kent v. Dulles, 357 US. 416, 13001958). 31 The instant case is unlike Red Lion in other respects. In Red Lion the Court affirmed the Commission’s power to enforce the: “fairness doctrine,’ whereby each licensee is required to fairly present all sides of a particular issue. As the Court pointed out, the fairness doctrine acts not to restrict speech, but to enlarge the scope of material broadcast by licensees. In the instant case, the Commission is not enlarging the scope of material which will be - presented, but, instead, is deliberately fated it. Yy 23 Finally, Petitioners believe that the establishment of pay television represents an unconstitutional discrimina- tion against low income groups. The evidence before the Commission indicated that a pay television service is one which benefits the upper and middle income brackets at the expense of the lower income groups.>* The Commis- sion also indicated that only a small fraction of potential listeners will utilize the pay ‘television frequency, so that the Commission has taken an over-the-air broadcast fre- quency, capable of reaching hundreds of thousands of persons, and has limited its use to a relatively few per- sons in the upper income brackets.33 Petitioners urged below that free television has now become such an essential service to the nation that it cannot legitimately be granted to one economic class and denied to another. Access to free television is of such fundamental importance that its denial, based upon economic circumstances, is a discrimination against the poor of constitutional dimensions. The Court below refused to accept this argument, holding that “[s] uch a result would cléarly be a constitu- tional innovation that we are unwilling to make... .” (Slip Opinion, p.”22). In view of the novelty of the question, it is perhaps understandable that the Court of Appeals was reluctant to go forward in this area. But 32 4 breakdown of the Hartford trial subscribers demonstrated that virtually no persons in the income level $0-3,999, an income level which represents almost one-third of the families in the United States, were able to subscribe to the test (see Fourth Report, Pars. 86-87, 15 FCC 2d at 493). pay television frequency was not only recognized by the Commis- sion,.but was the basis of the Commission’s holding that institu- tion of the service would not adversely affect the audiencé for free service (See Fourth Report, Par. 125, 15 FCC 2d at 505). 33 The fact that only a small minority of persons would en the / / y | / 24 Petitioners believe that this Court should squarely face the issue, and declare that access to free television is a constitutionally protected right. This Court has recog- — nized in other contexts that certain rights are so basic and fundamental that their deprivation to the poor is unconstitutional. In Harper v. Virginia Board of Elections, 383 U.S. 663, 668 (1966), the Court declared a state poll tax unconstitutional because it necessarily excluded ° from voting those “‘unable to pay a fee.” In Griffin vy. - Illinois, 351 U.S. 12 (1956), the Court held constitution- ally impermissible the refusal to give transcripts to in- digents who. were unable to pay a fee. There is growing recognition that because poverty often interferes with the ability of the poor to exercise their legal rights, it may be necessary to supply counsel in civil cases involv- ing such matters as eviction proceedings, divorces and child custody suits. etc. See Discrimination Against The Poor and the 14th Amendment, 81 Harv. L. Rev. 435 (1967). Similarly, there is a recognition that, in order to fulfill their citizenship responsibilities, or, indeed, to ef- fectively achieve their rights, the poor must have access to the mass media. See Barron, Access To The Press — A New First Amendment -Right, 80 Harv. L. Rev. 1641 (1967); see also Red Lion Broadcasting Co. v. Federal . Communications Commission 395 U.S. 367 (1969), in. which the Court stressed the importance”of access. by the public to radio and television frequencies. At the very least, Petitioners urge that this Court recognize that ac- _ cess to broadcast frequencies (both as participants and as ‘ viewers) cannot legally, or indeed constitutionally, be based upon a pocket book test any more than can the right to vote. In sum, the Court below has upheld an interpreta- tion of the Communications Act which would | perhaps the most drastic change in the structure 01 American broadcasting since the passage of the original Radio Act of 1927 in the face of the facts that: 1. The Commission’s organic statute does not provide either explicitly or implicitly for. such a change. The Act does contain none of the normal regulatory powers which would have been included if Congress had intended to insti- tute a diréct fee system for the use of the public airway. 3. ‘The Commission’s interpretation creates the gravest constitutional questions and flies direct- . ly in the face of the specific anti-censorship provisions of Section 326 of the Act. 4. The Commission’s interpretation of the Act has been challenged by important segments of the Congress as going far beyond the powers which Congress originally intended tq grant. 5. The establishment of pay television rep- resents a direct and unconstitutional discrim- ination against low income groups. : * to CONCLUSION ~* All of the above considerations indicate that the question here is, as the Court below correctly recognized, ‘““one of national importance.” Petitioners submit that it should be passed.upon by this Court. Respectfully submitted, MARCUS COHN 1920 L Street, N. W. Washington, D. C. 20036 MARTIN J. GAYNES 1920 L Street, N. W. Washington, D. C. 20036 Attorneys for Petitioners December _, 1969 APPENDIX A © Mnited States Court of Appeals FOR THE DISTRICT OF COLUMBIA CIRCUIT No. 22,623 NATIQNAL ASSOCIATION OF THEATRE OWNERS and JOINT COMMITTEE AGAINST TOLL TV, Petitioners, a V. FEDERAL COMMUNICATIONS COMMISSION and UNITED STATES OF AMERICA, Respondents, ZENITH RADIO CORPORATION and TECO, INC.., Intervenors. Petition for Review of an Order of the Federal Communications Commission Decided September 30, 1969 Mr. Marcus Cohn, with whom Mr. Martin J. Gaynes was on the brief, for petitioners. Mr. Daniel R. Ohlbaum, Deputy General Counsel. with whom Mr. Henry Geller, General Counsel, and Miss Katrina Renouf, Counsel, Federal Communications Com- . mission, were on the brief, for respondent Federal Com- munications Commission. Mr. John H. Conlin, Associate ~ General Counsel, and Mrs. Lenore G. Ehrig, Counsel. \ _ Federal Communications Commission, also entered ap- pearances for respondent Federal Communications Com- mission. _ Mr. Howard E. Shapiro was on the brief, for re- spondent United States of America. Mr. Harold David Cohen, with whom Messrs. W. Theodore Pierson and Vernon C. Kohlhaas were on the brief, for intervenors. | Before TAMM, LEVENTHAL and ROBB, Circuit Judges. TAMM, Circuit Judge: Today we are faced with a question of national importance, id est, whether the Federal Communications Commission possesses the re- quisite power to authorize nationwide over-the-air subs- cription television! (commonly referred to as “pay TV”) on a permanent basis. For the reasons hereinafter stated, we hold that the Commission .can authorize such a service under the authority conferred upon it by the Communications Act of 1934, 48 Stat. 1064, as amended, 47 U.S.C. 8 301-397 (1964), and that the Commission acted properly in prescribing rules for the development of this new service. 1 Over-the-air subscription television differs from convertional broadcasting in the nature of the signal that is transmitted; a subscription station broadcasts a “scrambled” signal that can be converted to intelligible form by special equipment which also assesses charges for the subscription programs viewed. CATV systems with direct cable links to subscribers’ television sets are also technically capable of using similar devices to offer subscription services. The Federal Communications Commission investigated the possibility of authorizing subscription services on CATV networks, and concluded that the most efficient means of establishing pay television at present was through broadcasting stations. See Fourth Report and Order on Subscription Television, 15 F.C.C, 2d 466, 579-87 (1968). [hereinafter Fourth Report]. A-3 I. PROCEDURAL HISTORY The history of the Commission’s involvement with subscription television (hereinafter STV) is indeed lengthy. Nearly two decades ago, on February 25, 1952, the Zenith Radio Corporation filed a petition with the Federal Communications Commission requesting author- ity to institute a subscription television service. 2 On February 10, 1955, the Commission issued a Notice of Proposed Rulemaking, 20 Fed. Reg. 988, in which it requested comments from interested parties on the ques- tion of whethet the Commission had the statutory power to authorize such operations. After voluminous responses to this inquiry were filed, the Commission released a Notice of Further Proceedings, 22 Fed. Reg. 3758 (1957), in which it announced that trial demonstrations of STV would be necessary before a final decision could be made. Shortly thereafter, on October 17, 1957, the Commission issued its First Report on subscription televi- sion, 23 F.C.C. 532, which concluded that the Commis- sion could authorize pay television, but that trial opera- tions should be conducted first. At this point Congress began to take notice of the problem, and the House Committee on Interstate and Foreign Commerce con- ducted hearings on the subject. Upon conclusion of these hearings, the Committee passed a resolution requesting the Commission to defer authorization of any STV operations. See 16 P&F RADIO REG. 1539-40 (1958). The Commission then issued its Second Report? on pay television which suspended the processing of all STV applications until the expiration of the 85th Congress; this delay was subsequently extended through the 86th Congress. . 2 20 Fed. Reg. 988 n.1 (1955). 3 16 P&F Radio Reg. 1539 (1958). oe A-4 In 1959 the Commission issued its Third Report on subscription television, 26 F.C.C. 265, 16 P&F RADIO REG. 1540a, in which it reasserted the conditions for trial operations set out in the First Report. In addition, the Third Report stated that as soon as the trial operations provided sufficient data, public hearings would be held to determine whether STV should be authorized on a permanent basis. Pursuant to the Third Report, three applications were filed for trial STV operations; only one such station ever commenced operations, however.* This station, which was operated by Zenith Radio Corporation and its licensee Teco, Inc.,> intervenors in this action, began broadcasting over UHF station WHCT in Hartford, Connecticut during 1962. This operation was initially licensed for three years, but the license was subsequently extended for an additional three years in 1965; in 1968 it was again extended for three years, or -until such time as the Commission authorized STV on a permanent basis. The Commission’s authority to license the trial operation was | approved. by this court in Connecticut Committee Against Pay TV v, FCC, 112 U.S. App. D.C. 248, 301 F.2d 835, cert. denied, 371 U.S. 816 (1962). In 1965 Zenith and Teco jointly filed a petition for further rulemaking to establish permanent nationwide STV on the basis of the data derived from their trial operation in Hartford. The Commission then issued, .in 1966, a Further Notice of Proposed Rulemaking and Notice of Inquiry, 31 Fed. Reg. 5136, 7 P&F RADIO REG. 2d 1501, which, in essence, requested further > 4 One of the three applications ‘vas denied; of the two which were granted, one station relinquished its license before commencing operations. Fourth Report, 15 F.C.C..2d at 467. > Zenith has patented “Phonevision,” a ‘system for over-the-air subscription television, and has licensed Teco to enfranchise local Phonevision operations. Brief for the Intervenors at 2 n. 1. . A-5 . comments on the feasibility of nationwide STV. Subsequently, in 1967, the FCC’s Subscription ‘Television Committee submitted to the Commission a Proposed Fourth Report, 10 P&F RADIO REG. 2d 1617 (1967); the FCC, en banc, invited comments and held oral argument on the proposed report. After the issuance of the Proposed Fourth Report, which concluded that the Federal Communications Commission did have statutory power to authorize permanent nationwide STV, the Communications and Power Subcommittee, of, the House Interstate and Foreign Commerce Committee conducted hearings on the subject of STV ‘sguring the week of October 9, 1967. Upon. conclusion/of these! hearings the full Committee recommended that the Commission refrain from taking any action for one year or until the Communications Act of 1934 was amended to authorize subscription television. See 15 F.C.C.2d at 466, 470. On September 3, 1968, the Commission, through Chairman Hyde, sent a letter to Chairman Staggers of the House Committee on Interstate and Foreign Commerce indicating that the Commission could not delay any further in resolving‘ the important question of STV authorization.® The Commerce Committee ‘responded on September 11, 1968, by adopting a resolution announcing that it was “the sense of the Committee” that the Commission should delay action on STV “until the end of the first session of the 91st Congress” or until “‘completion of action on legislation if by the end of said first session legislation pertaining- to . . . [STV] is under consideration.’ The resolution went on to state that “‘it is the further sense of this committee that to avoid any further delay . .. hearings . . should be scheduled by the end of May 1969.” 15 F.C.C. 2d at 471. 6 Fourth Report, 15 F.C.C. 2d at 470-71. A-6 * | Finaily, on December 12, 1968, the Commission < . | igsued its Fourth Report on subscription television,. 15 .C.C.2d 466, in which it reaffirmed its earlier onclusion that it possessed the power to authorize a D nationwide system of STV and established | rules governing the operation of that system. The /.\ National Association of Theatre Owners and the Joint | ‘Committee Against Toll TV, participants in the Commission proceedings, filed a petition for review in this court pursuant to, section 402 of the Communications Act, 47 U.S.C. 8402 (1964), alleging statutory and constitutional errors in the Commission’s determinations. Il. THE FOURTH REPORT The’ Commission’s Fourth Report and Order is a lengthy (144 pages) and carefully reasoned document which surveys the potential advantages and disadvantages of subscription television in light of the Hartford experiment and the contentions of various parties interested in pay television. On the basis of its seventeen-year inquiry’ into STV, the Commission concluded that subscription television would provide a ‘“‘beneficial supplement” to conventional ‘“‘free” broadcasts’ in the sense that STV broadcasting “is not duplicative of the programming of free TV and that [it] 7 There is some question whether the term “free TV” is a misnomer; in the Fourth Report, for example, the Commission stated: “[F]ree TV is not really free. The advertising costs which support free TV. are eventually passed on to the public, and a profit is made by the licensee or others from the use of the public’s channels.” 15 F.C.C. 2d at 548; but cf. id. at 548 n. 51; Brief for Petitioners at 39: “[E]conomists have contended that free television is indeed ‘free’ because, as more and more units of a particular commodity are sold, the purchase price goes down and the advertising costs are borne not by the panic, but by the: results of mass production.” as A-7 is desired or needed by at least a portion of the viewing ~ public.” 15 F.C.C.2d at 473'n. 20; see also id. at 483-88. In considering the critical question of whether STV would have substantial adverse impact on free television, the Commission placed primary emphasis on the possibility that programs, audiences, and talent would be diverted (“siphoned”) from free television to STV. Because the Commission recognized that the public’s “tremendous investment . . . in television receivers based on the expe¢tation of free service ought to be protected and the millions of viewers who rely on that service for free entertainment should be permitted to do so,” it imposed a number of restrictions on STV operations. In brief, the Commission provided that STV stations could be established only in communities located entirely within the Grade A contours of five or more commercial broadcast stations, and that only one STV» station could be located in each such community; that each STV station must broadcast at least twenty-eight hours per week of free programming; and that STV stations must observe detailed ‘restrictions on the kind and quantity of subscription programs broadcast, in order to prevent “siphoning.” See 15 F.C.C.2d at 494-95, 515-23, 595, 597, 598; see also pt. IVB, infra. _ Rules were also established governing the technical specifications and ° modus operandi of STV stations; see 15 F.C.C.2d at 544-48, 595-98. .In promulgating these restrictions, the Commission attempted to strike a balance between the - danger of allowing STV operations to acquire enough economic power to destroy free broadcasting, and the risk of hedging the new service with so many restrictions that it would “smother” before it ever got started. Thus, ’ the Commission rejected the suggestion, urged by petitioners and others, that direct regulation of the rates charged by STV stations was necessary in order to prevent “gouging” of the public; instead, it concluded that the available evidence rendered this possibility remote, and that free market forces would be a sufficient A-8 “check on the prices charged for STV services. (Jd. at 526, 548.)° We hold that the ‘Commission acted reasonably and within the scope of its authority, both in making its initial decision to authorize permanent nationwide STV and in imposing specific regulations governing subscription television. iil. THE COMMISSION'S POWER TO AUTHORIZE SUBSCRIPTION TELEVISION ' The petitioners advance three arguments, in support: of their contention that the Commission exceeded the proper bounds of its power in authorizing nationwide subscription — television. First, they assert that the unications Act contains no _ explicit grant “can be infdrred from the januunce or history of the Act (Brief for Petitioners at 17-21). Second, petitioners contend that the Commission lacks authority to regulate the rates charged for broadcast services; and that the absence of such authority is persuasive evidence of Congress’ intent to preclude establishment of direct-charge broadcast, operations such as STV (Brief for Petitioners at 21-24). Finally, petitioners claim that even if the Commission did have the necessary authority to establish pay television,:its failure to regulate rates or to decide the question of whether it possessed rate-making - power constituted an arbitrary and capricious exercise of this authority (Brief for Petitioners at 35-43). We shall consider each of these contentions separately. A. The Language and History of the Communications Act Our inquiry into the scope of the Commission’s authority begins with section 303 of the A-9 Communications Act of 1934, 48 Stat. 1082, as amended, 47 U.S.C. 8303 (1964), which sets forth the Commission’s general powers and duties in regulating © ' radio broadcasting. In pertinent part, this, section directs the Commission, “as [the] public convenience, interest, or necessity requires,” to: (a) Classify radio stations; (b) Prescribe the nature of the service to be rendered by each class of_licensed stations. . .: (e) Regulate the kind of apparatus to be used with -respect to its external effects and the purity and sharpness of the emissions from each station. . .; St (g) Study new. uses. for radio, provide for _ experimental uses of frequencies, and generally encourage the larger and more effective use of radio. in the public interest. . In addition, section 307 of the Act, 47 U.S.C. § 307(a) (1964), provides that “[t]he Commission, if ‘public convenience, interest, or necessity will be served thereby, subject to the limitations of this chapter, shall grant to any applicant therefor a station license... .” We find it unnecessary to determine the precise significance as precedent of our ruling in Connecticut Committee Against Pay TV vy. FCC, 112 U.S.App.D.C. 248, 301 F.2d 835, cert. denied, 371 U.S. 816 (1962). Connecticut Committee, which arose out of the same series of proceedings as this litigation,® dealt with the propriety of Commission authorization for a trial STV operation, and our opinion placed considerable emphasis 8 See part I, supra. A-10 upon the experimental nature of the undertaking.? Thus, although Connecticut Committee can provide, assistance in our present inquiry, we feel it appropriate to give fresh consideration to the question of whether the Federal Communications Commission has authority to license STV for an idefinite period. The basic structure. of title III of the Communications Act, from which the foregoing sections are quoted, is a broad grant of general licensing authority to the Commission, subject to a number of specific exceptions and limitations. (See, e.g., 47 U.S.C. 8 310, 312, 313(b) (1964).) This plan is consistent with the dynamic and rapidly-changing nature of the statute’s subject matter, radio broadcasting, and the courts have consistently recognized that Congress intended to vest expansive powers in the Commission in order to avoid the necessity of repetitive legislation.!® The classic 9 In his opinion for the court, Judge (now Chief Justice) Burger ‘ pointed out that “Congress. specifically commanded the Commission by Sec. 303(g) of the Communications Act, to ‘study new uses for radio, provide for experimental uses of frequencies, and generally encourage the larger and more effective use of radio in the public interest.’ ” (Emphasis in original.) In addition, he concluded that “[t] he distinguishing characteristic of the Federal Communications Commission’s authorization of subscription television in this case is the experimental or trial basis upon which the system is to operate for the duration of its thrée years authority.” 112 U.S. App. D.C. at 250, 301 F.2d at 837. 10 See General Telephone Company of California v. FCC, No. 22,106 (D.C. Cir. April 30, 1969) (slip op. at 15): Over the years, the Commission has been required to meet new problems . . . and as cases have reached the courts the scope of the Act has been defined, as Congress contemplated would be done, so as to avoid a continuing process of statutory revision. To do otherwise in regulating a dynamic public service function such as broadcasting would place an intolerable regulatory burden on the Congress—one.which it sought to escape by delegating administrative functions to the Commission. qe PIR PGE SMB PS cL SER ES ial A-11 affirmation of the broad scope of the Commission’s authority was enunciated nearly thirty years ago by the Supreme Court in National Broadcasting Company _v. United States: - In the context of the chine problems to which it was directed, the Act gave the Commission not niggardly but expansive powets. It was given a comprehensive mandate to “enkourage. the larger and more effective use of radio in the public interest”’. While Congress did not give the Commission unfettered discretion to regulate all phases of the radio industry; it did not frustrate the purposes for which the Communications Act of 1934 was brought into being by attempting an itemized catalogue of the specific manifestations of the general problems for the’ solution of which it was establishing a regulatory agency. That would have stereotyped the powers of the Commission to ‘specific details in regulating a field of enterprise the dominant characteristic of which was the rapid pace of its unfolding.!! This continuing imperative need for an expansive’ interpretation of: the Commission’s jurisdiction was — recently reaffirmed -by the, Supreme Court in United _ States v. Southwestern Cable Co., 392 U.S.°157, 167-78 (1968§, and has been observed repeatedly by this 11 319 US. 190, 219 (1943); see also FCC-v. Pottsville Broadcasting Co., 309 U.S. 134, 137-38 (1940). A-12 court.!?. Morevoer, the Commission has devoted long and careful scrutiny to the question of whether it possesses authoritygto license STV operations, and has reached the conclusion that its jurisdiction under the Act is sufficient.'3~in this situation, we are bound to observe the ‘“vefierable ‘principle that the construction of:a statute by those charged with its execution should be followed unless there are compelling indications that it is wrong.” Red Lion Broadcasting Co. v. FCC, 395 U.S. 367, 381 (1969); see also General Telephone Company of- California v. FCC, No. 22,106 (D.C. Cir. April 30; 1969) (slip. op. at 20). Nothwithstanding this impressive body of authority, the petitioners contend that STV is clearly beyond the contemplation of the Communications Act. In essence, they assert that “over-the-air pay television represents a fundamental change in the nature of American Broadcasting” (Brief for the Petitioners at 13) and that therefore the power to license pay television cannot be inferred from the Act. Direct charges for broadcasting ‘services are. not wholly unprecedented in this country, however; testimony to this. fact may be found in Functional Music, Inc. v. FCC,+107 U.S.App. D.C. 34, .274 F.2d 543 (1958), cert. denied, 361 U.S. 813 (1959), and Muzak Corp., 8 F.C.C. 581 (1941). Indeed, we _feferred to these .cases ‘in Connecticut Committee as _ instances.in which subscription sérvi¢es “have been found - ' perfectly. acceptabl¢é by both [the] Commission and the courts.”” J12 U.S.App.D.C. at 250 n.2, 301 F.2d at 837 n.2. Since. the matter now before us is basically a 12 See, eg.) Paducah Newspapers, Inc. v. FCC, No. 22,007 (D. c. Cir. June 1969); General Telephone Company of California v. FCC, No. 22,106 (D.C. Cir. April 30, 1969); Buckeye: Cablevision, Inc. v. FCC, 128 U.S. App. D.C. 262, 387 F. 2d 220 (1967). 13 See Fourth Report, 15 F.C.C, 2d at 469-73; First Report on Subscription Television, 23 F.C.C. 532, 535-42 (1957). A-13 question of first impression,'4 however, we. ‘have examined the legislative history of the Communications Act in order to evaluate petitioners’ claim. that subscription television is “the most fundamental change - : in broadcasting that has occurred since the adoption. of the original Communications Act in 1927” (Brief for the - Petitioners at 20). ‘ The present statute governing the Commission’s authority over broadcasting services is derived in large part from the Radio Act-of 1927, 44 Stat. 1162.'> Five . years before the Radio Act was adopted, the problem of how radio broadcasts would be financed was still very much an open question. Proposals included endowment of stations by public-spirited citizens, municipal or state financing, donations from the listening public, and taxes on -the sale of radio receivers; some variants of .tHese schemes were attempted with limited success in the years preceding’ the Radio Act’s passage. 16 The concept of advertiser-financed programs. apparently was first "14 Aside from Connecticut Committee, the Functional Music case parallels the facts of the instant controversy more closely than any other: case which we have been able to discover.. In Functional Music, however, we did not deal with the specific . question of the FCC’s authority to license direct-charge — broadcasting services. The major issues in that case were whether this court possessed jurisdiction to review the Commission’s action, and’ whether the Commission had erred in determining that functional broadcasting was point-to-point communication rather than broadcasting under the Act. 1) For a brief description of the early federal statutes governing broadcasting, see National Broadcasting Co. v. United ‘States, 319 U.S. 190, 210-14 (1943). -- 16 See E. Barnouw, A Tower in Babel: A_ History of Broadcasting in the United States 154-57 (1966) {hereinafter Barnouw] ; G. Archer, History of Radio to 1926, at 252-54 (1938) [hereinafter Archer] . :, A-14 developed on a systematic basis'? by the American . Telephone and Telegraph Company in 1922, as part of a plan which the company called “toll broadcasting”:!® initial public reaction to this system has been described as “lukewarm, and in some cases indignant.”!9 Various forms of advertising soon became a. commonplace adjunct of radio programs,?° however, and in spite of occasional public and official attacks on the practice?! it had become a well-established—but hardly universal—?2 method of financing radio programs by 1927 when congested air waves led Congress to establish detailed federal regulation of broadcasting. 17 Apparently some sporadic efforts at radio advertising were made in the early 1920’s when individual phonograph record , merchants who supplied complimentary phonograph records for broadcasts began insisting on radio acknowledgment. See Archer 199. v: 18 See Barnouw 106-107; Archer 275-77. ; 19 Barnouw 106-07. Cf C. Siepmann, Radio, Television, and Society 7 (1950) [hereinafter Siepmann]: “We are today so accustomed to the dominant role of the advertiser in broadcasting that we tend to forget that, initially, the idea of advertising on the . air was. not -even- contemplated and met. with widespread : ‘ indignation when it was first tried.” 20 See generally Barnouw 131-34, 157-60. 2I" archer 285-86, 361, 363; Barnouw 177-78; Siepmann 10-11. 22 At the time the Radio Act was passed, “time-selling stations were still a minotiry; the climax of:a struggle between commercial. and noncommercial interests lay ahead.”’ Barnouw 200; see also id. at 202-03; Siepmann 10 (“[I]n 1929 the National Association of Broadcasters -adopted ‘Standards of Commercial Practice,’ which specifically barred commercial announcements from the air between the Bours of seven and eleven in the evening.”’). ¢ 4 A-15 Given this rather chaotic background, it is not _ surprising that the legislative history of the Radio Act casts little light on the precise question presented by this case. An early version of the Act, which was passed by the Senate, gave the regulatory body power to “regulate radio stations where a charge is made to listeners,”?? but this provision was subsequently deleted in conference without explanation.24 The problem of authority to license direct-charge broadcasting was mentioned only briefly on several occasions during the floor debates on the Radio Act. The most extensive discussion of the question was offered by Senator Dill, sponsor of the Senate bill and Chairman of the Conference Committee: Mr. WALSH of .Massachusetts. A Representative from:New York has introduced in * the House a bill to prevent a radio-braodcaster from charging the public for listening in. it is claimed that the possible result of this, legislation may be the charging of a fee to listeners. . . . Is there any provision in this bill that permits that to be done? 23 § Rep. No. 772, 69th Cong., Ist Sess. 3 (1926). 24 The portion of the Conference Report which deals with the » relevant section of the bill states: The jurisdiction conferred in this paragraph is substantially the same as the jurisdiction conferred upon the- commission - by section’ 1(c) of the Senate amendment. The important change from the provision of the Senate amendment is that while under the Senate’ bill this original jurisdiction was vested permanently in the commission, the jurisdiction is by this compromise . . . limited to one year in time. H. Rep. No. 1886, 69th Cong., 2d Sess. 17 (1927); S. Doc. 200, 69th Cong., 2d Sess. 17 (1927). A-16 Mr. DILL. ... . [T]he commission would have: ’ the power to permit or prohibit the use of such apparatus if it so desired, but. . .in my judgment, Congress.should not pass a law that would prevent a broadcasting station from so equipping itself that people could not listen to its programs unless’ they had a certain kind of receiving set. | . . .[H]ere in the United States we have built up a free system of broadcasting and reception, and it has thrived. . . . I do not believe, with the condition[s]- existing, that any broadcasting station can hope to prosper if it attempts to set up a method by which it would charge the listener in; but I know of no reason why the Congress should interfere with that kind of private business any more than it should interfere with any other kind of private business. (68 CONG. REC. 2880-81 (1927).) The bill prohibiting direct charges was never passed, and further references to pay broadcasting during the debates were sparse and inconclusive; in most of these discussions, the principal concern seems to be the possibility that“large chain broadcasting organizations would obtain monopoly power, through patent licensing agreements or other devices, and use pay broadcasting schemes to extract monopoly profits from the public. See generally 68 CONG. REC. 2576-77, 2580, 3033-34, 4149 (1927). In the years intervening between the passage of the Radio Act of 1927 and the issuance of the Commission’s Fourth Report on subscription television, Congress has; On occasion, been confronted with the suggestion that the present Act authorizes the Commission to license A-17 direct-charge broadcasting services,2> but no legislation restricting the broad mandate of the original Act has been forthcoming. Thus, we are unable to agree that the Communications Act absolutely precludes the Commission from approving a system of direct charges to the’ public as a means of financing broadcasting services. Rather, the Act seems designed to foster diversity in the financial organization and modus operandi. of broadcasting stations as well as in the content of ' programs, and we feel that the Commission did not exceed its authority in concluding that subscription television is entirely consistent with these goals. B. Rate Regulation and Licensing Power Petitioners seek to negate the broad sweep of the Communications Act by asserting that the Commission ~ lacks the authority to regulate the rates charged by STV | operators, and that the absence of such authority reflects - Congress’ intent to prevent the Federal, Communications * . 25 See, e.g. Fourth Report, 15 F.C.C. 2d at 598-99; Second Report on Subscription Television, 16 P&F Radio Reg. 1539 (1957); 98 Cong. Rec. 9032-33 (1952). The proceedings leading up to the instant case reflect Congress’ inability to agree on limitations of the Commission’s power in this area. On, September 12, 1968, the day ‘after the House Committee on Interstate and Foreign Commerce passed its resolution urging the Commission to defer action on STV (see part I, supra), nine members of the Commerce Committee sent a letter to the Commission which stated, in part, that the resolution “represents the thinking of the barest majority of those present at the Commerce Committee hearing” and “does not represent a mandate to the Commission.” The letter concluded: “In our opinion, the failure of the FCC to act promptly to decide the 13-year-old ‘rulemaking proceeding on subscription television would be inconsistent with your responsibilities imposed by the Administrative Procedure Act and contrary to the public interest... . .” Fourth Report, 15 F.C.C. 2d at 471-72. ten, A-18 \ Commission from authorizing direct-charge broadcasting. The contention that the Commission lacks rate-making authority for over-the-air STV is predicated on the structure of the statute: the Communications Act distinguishes between communications “common carriers” and “broadcasting” operators,. providing the Commission with explicit authority to establish tariffs for the former but not for the latter. See 47 U.S.C. 8 201, 203 (1964). However, we need not reach the difficult question of whether Commission power to establish rates for broadcasting services is implicit in some provisions of title III, since we are unable to agree with petitioners’ interpretation of the role ~ which rate-making authority plays in the Communications Act. ‘Federal control over telephone and_ telegraph evolved earlier than did regulation of radio broadcasting, and, in its early forms, it encompassed supervision of the rates charged by companies providing service.2® Yet, with this model of common carrier treatment for a communications service available in 1927, Congress elected to establish a less rigorous system of federal control for broadcasting. The significance of this differential treatment was noted by this court in Pulitzer Publishing Co. v. FCC, 68 U.S. App. D.C. 124, 126, 94 F.2d 249, 251 (1937): [WJe have never said that a radio broadcasting . station is a public utility in the sense in which a railroad is a public utility. Generally speaking, that term comprehends any facility employed in rendering quasi public service such as waterworks, gas works, railroads, telephones, telegraphs, etc. The - use and enjoyment of such facilities the public has the legal right to demand; but its right to the use and enjoyment of the facilities of a privately owned radio station is of a much more limited character. 26’See 36 Stat. 539, 544-46 (1910). - A-19 [T]he power of Congress has not yet been extended to the point of fixing and regulating the - rates to be charged by the licensee or the establishment of rules requiring it to serve alike the entire public in the use of its facilities. See also FCC v. Sanders Brothers Radio Station, 309 U.S. 470, 474 (1940). In short, we think that it is fair to infer that the differential treatment accorded to communications common carriers and radio broadcasters ~ in the Communications Act reflects Congress” belief that commercial broadcasting is not a natural monopoly ~ which creates the same kinds of risks that a telephone system does. Rather, Congress apparently believed that once the clear dangers of combinations in restraint of trade were removed, competition among those providing broadcasting services in a given area would best protect. , the public interest. It is also significant that in both the Radio Act of 192777’ and the present version of the. Communications Act,2® the principal method which Congress provided for combatting anticompetitive practices is regulation through the licensing process—a _ method which the Commission deemed sufficient to pre- vent any abuses of economic power by STV operators. See Fourth Report, 15 F.C.C.2d at 548, 596-97. %. #2 We approve the Commission’s conclusion that it was not called upon to decide whether, or in what circumstances, its licensing regulatory functions might include surveillance or control over rates charged for services. The need for such control would presumably be rooted in developments in . the market which demonstrated that STV had been granted a monopolistic or~ ‘‘quasi-monopolistic”’ position, in which the competition of -ordinary i or other services was not 27 See 44 Stat. 1162, 1168-69 (1927). 28 see 47 US.C. 8 313-14 (1964). %¢ Sona ara aa aaa eR aw ay ee eee ep ce nan effective to prevent abuse. On the basis of the rates charged in the Hartford experiment, the FCC concluded there was no likelihood of rate abuse. Appellants claim that these rates were kept artificially low in order to obtain a good climate for general approval of STV. Perhaps so, but the Commission was entitled to take into account the facts as they now exist, without ranging inta such speculation. If and when the premises of its- regulatory approach change, the Commission can and should consider the issues involved. American Airlines; Inc. vy; CAB, 123 U.S. App.. DX. 310; 359 F.2d 624, 633 (en banc), cert. denied, 385 U.S. 843 (1966). Its - predictions as to the probable course of rates and existence of meaningful competition are certainly not unreasonable; and it is equally certain that the FCC was nat required to stake out at this time the techniques and methods it might desire to use in future circumstances that ha¥e not yet and may ‘not ever take shape. “In a ‘statutory scheme in which Congress has given an agency various bases of jurisdiction and various tools with which to protect the public interest, the agency is entitled to some leeway in choosing which jurisdictional base and which regulatory tools will be most effective in advancing the Congressional objective:’’. Philadelphia Television Broadcasting Co. v. FCC, 123 U.S. App. D.C. 298, 300,.359 F.2d 282, 284 (1966). C. The Question of Arbitrariness Petitioners advance a separate but related challenge . to the Commission’s treatment of the rate regulation question. Petitioners contend that, even if the authorization of STV was within the scope of the Commission’s power, its action in the Fourth Report was arbitrary and capricious because the Commission failed ‘to set forth adequate reasons for its decisions to employ regulatory measures less drastic than rate-making, and ie it avoid detailed inquiry into the question of whether ji possesses the authority to establish rates. A-21 In essence, petitioners’ argument rests on the premise that STV operations will be monopolies similar to the public utilities which have traditionally been subject to rate regulation (Brief for Petitioners at 41). In turn, this postulate apparently rests on the assumption that the relevant product market is the television station, and that a finding of any other product market would be so unreasonable as to be capricious.? 9 The question of market definition is hardly that simple. Within the ° confines of the Fourth Report, there are statements by various parties suggesting a\number of other possible product markets affecting \STV: all entertainment available in a given area; all television programming available in the area; all programs or performances of a ‘ given type, such as motion pictures or sporting events, which could be seen in live performances and other media; subcategories within program types, such as films less than two years old or athletic events featuring home town ‘teams; and unique individual programs. See generally 15 F.C.C. 2d at 474-88, 494-509. Obviously, entertainment is an industry in which antitrust concepts such as product market and cross-elasticity of demand? are exceptionally difficult to apply; the inquiry is further 29 Brief for Petitioners at 41 (emphasis in original): The Commission urges that rate regulation is unnecessary since: “We believe that the market place will regulate charges that are paid .. . .” Yet, it can fairly be asked: What market place? The Commission has limited pay television to only one station in each city with five television allocations. Under these conditions, it is simply fallacious to argue that a “market place” exists, the operation of which would protect the public. There is no “market place” when there is a government-authorized monopoly. 30 See, e.g., United States v. Columbia Pictures Corporation, 189 F. Supp. 153, 183-92 (S.D. N.Y. 1960); Section of Antitrust Law of the American Bar Association, Antitrust Developments 1955-1968 at 66-70 (1968). : A-22 complicated by the fact that the copyright law operates to create some permissible monopolies within the general area. In light of the extensive discussion devoted to these topics in the Fourth Report and the considerations enumerated in the preceding section, we are not prepared to hold that the Commission was arbitrary and capricious in determining that a substantial amount of economic competition would exist between STV and the other _forms of entertainment and enlightenment available in the community.?! Courts should be very, reluctant, we think, to declare that free market forces must be supplanted by rate regulation when neither Congress nor the agency administering the area has found that such— regulation is essential. IV. THE FIRST AMENDMENT AND EQUAL PROTECTION ISSUES ‘Petitioners also challenge the propriety of the Commission’s actions on the grounds ihat_ the authorization of STV_ constitutes an _ invidious discrimination against indigent persons who will be unable to afford STV equipment or fees, and that the program restrictions imposed upon STV _ operations constitute an impermissible restraint on free speech 31 The Commission devoted considerable attention to the likelihood that STV will compete not only with free television, but also with motion picture theatres and other “box office” attractions. See 15 F.C.C. 2d at 474-88, 497, 508-09. A-23 violative of section 326 of the Communications Act?? and the first amendment to the Constitution. At the outset, there is some doubt whether petitioners possess ‘the requisite standing to raise these issues. We note, for example, that in the proceedings before the Commission petitioner Joint Committee Against Toll TV proposed -and urged adoption of program restrictions which were quite similar to the ones which they now attack (J.A. 19-24), and that organizations vitally interested in free speech supported approval of STV as a means of promoting diversity of expression (see part IVB, infra). Similarly, it is significant that the Commission concluded from the Hartford experiment that in at least one instance STV subscribers were able to observe a major _ sporting event in their homes at a per capita cost which was substantially less than the prices being charged for viewing the same event on closed circuit television in neighborhood theaters (15 F.C.C. 2d at 485). At the same time, we are familiar with the line of authority cited by petitioners which supports an expansive interpretation of the standing requirement when 32 47 US.C. § 326 (1964): Nothing in this chapter shall be understood or construed to give the Commission the power of censorship: over the radio communications or signals transmitted by any radio station, and no regulation or condition shall be promulgated or fixed by the Commission which shall interfere with the right of free speech by means of- radio communication. A logical extension of petitioners’ constitutional arguments could well render any form~of direct-charge broadcasting unconstitutional. Thus, it could be argued that rules against siphoning of programs, talent, and audiences are required in order | to prevent STV from damaging. free television and imposing impermissible hardship on poor people, but any rules against siphoning would violate the first amendment, and thus the Commission’ and Congress are without. power to approve direct-charge broadcasting. A-24 ~~ oad - ‘challenges to the legality of administrative action’ are ‘ made;33 moreover, we think that petitioners’ long and vociferous opposition to the establishment of STV, both © here and before the Commission, is evidentiary of “concrete adverseness which sharpens the presentation of issues upon which the court so largely depends for illumination of difficult constitutional questions.” Baker v. Carr, 369 U.S. 186, 204 (1962); see also Flast vy. Cohen, 392 U:S. 83, 99 (1968). Finally, since we have determined that petitioners’ constitutional claims must ’ fail on the merits, we shall assume without deciding that they possess the requisite standing. > A. Discrimination Against the Poor _ Petitioners rely on several findings in the Fourth Report to support their. contention that the Commission’s authorization of nationwide STV _ will result in unconstitutional discrimination against people in low income groups. Specifically, they point to data from the Hartford experiment which showed that less than two percent of all subseribers had incomes in the range of $0-$3,999 (15 F.C.C. 2d at 493), while nearly thirty percent of the national population in 1964 had incomes of less than $4,000; thus, they conclude that the 33 The leading ‘case is FCC v. Sanders Brothers Radio Station, 309 U.S. 470, 477 (1940), where the Supreme Court stated that in enacting the standing provisions of the Communications Act, 47 U.S.C. § 402 (1964), Congress “‘may have been of the opinion that one likely to be financially injured by the issue of a license would be the only person having a sufficient interest to bring to the attention of the appellate court errors of law in the action of the Commission . . . .” The Court held that the. standing thus conferred encompassed “any relevant question of law in respect of -the order of the Commission.” See also Office of Communication of the United Church of Christ v. FCC, No. 19,409 (D.C. Cir., June 20, 1969); National Association of Securities Dealers, Inc. v. SEC, No. 20,164 (D.C. Cir., April 30, 1969) (slip op. at 24-36; Chief Judge Bazelon concurring). \ A-25 authorization of STV is “systematic discrimination” against thirty percent of our citizens.>4 We need not reach the question of whether the concepts. of equal — protection applicable to the federal government by implication fram the due -process clause of thie fifth’ amendment (cf. Bolling v. Sharpe, 347 U.S. 497 (1954)) are- any different from the concepts of equal protection applicable to the states under the fourteenth amendment; ‘by any accepted standard of equal protection, we find the petitioners’ claim insubstantial. Since the Commission promulgated a number of - rules designed to protect free television from economic incufsions by STV—rules which we think are reasonable and amply supported bythe record— ‘we must confine our inquiry to the proposition that any .form of pay broadcasting would, by itself; be discriminatory against the indigent. We-must also assume that the ‘chargés imposed by STV. operators will not be exorbitant, since we have: affirmed ‘the Commission’s determination that rate regulation is not ‘presently needed to prevent : monopoly profits. Thus, unless. there _is some factor which serves to distinguish broadcasting from other endeavors which are subject to federal regulation, we are being asked to render a decision which would go far | toward establishing the rule that every service provided by a regulated industry must be made available to all citizens on the basis of their ability to pay. Such a result. would clearly be a constitutional innovation that: we are unwilling to make; and -we are not convinced that the 34 Asa matter of statistical technique, we have some doubts about the reliability of figures obtained by comparing data taken from the Hartford area to data taken’ from the whole nation; in theory, it is possible that the Hartford area contains a substantially smaller proportion of people in the low.income evels than does ‘the nation as a whole, and that as a result the two percent figure is misleading. For present purposes, however, we’ shall ‘disregard this potential discrepancy. A-26 subject of television broadcasting has unique features distinguishing it from comparable regulated industries. - The equal protection cases cited by petitioners bear scant resemblance on their facts to this controversy; rather the cases involve poll taxes (Harper v. Virginia Board of Elections, 383 U.S. 663 (1966)) and the administration of criminal justice (Griffin v._Illinois, 351 U.S. 12 (1956)). Petitioners attempt to relate these cases and their progeny to subscription television by arguing that “in order to fulfill their citizenship requirements, or, indeed, to effectively achieve their tights, the poor must have access to the mass media” (Brief for Petitioners at 46). We think that this doctrinal bridge is far too insubstantial to bear the weight of petitioners’ argument, and that their analysis fails to take account of the realities which the Commission considered in authorizing STV. The public’s access to the broadcast media has never been wholly free; at minimum, it has ,been necessary to’ procure and maintain the necessary apparatus for receiving broadcasts, and this burden necessarily weighs , heaviest on those with least resources. Moreover, any “deprivation” of access to the broadcast frequencies which may result from the Commission’s approval of STV will almost certainly be slight. At most, one out of five stations serving a given community will be devoted to STV under the rules promulgated by the Commission; this station will be required to carry at least twenty-eight hours of free programming per week: The Commission also adopted detailed. programming restrictions which are designed to prevent the more popular kinds of free programs from migrating to subscription television. At the same time, the Commission found that the authorization of STV may create benefits for all citizens which gould well offset any deprivation. Thus, in some communities approval of STV operations could result in the opening of a new station rather than the conversion . of an existing free station; in this situation, there would A-27 , be a net gain in the amount of free broadcasts because of the STV _ operators’ obligation to provide free programs (15 F.C.C. 2d at 494). Similar considerations will be present when an existing station that is in serious financial difficulties manages to survive by converting to subscription operations (/d.). Subscription television may also make available to a larger viewing public entertainment which would otherwise be unavailable for reasons of distance, lack of seating space, the desire o promoters to protect their gate receipts, or because thd per capita cost of STV viewing is less than attendance af a “live” event. Cf. 15 F.C.C. 2d at 484-85. Finally, there is also the possibility that competition from STV will spur the free broadcasting networks and stations to make substantial improvements in ‘their services, resulting in an overall gain in the quality of television programming (15 F.C.C. 2d at 505). In short, we believe that the Commission gave full and fair consideration to the potential impact of STV on poor people and free television, and that its findings, conclusions, and rules on these issues were reasonable. B. The Program Restrictions and the First Amendment Petitioners’ final contention is that the program restrictions which the Commission established in order to prevent STV from siphoning programs, talent, and audiences from free broadcasting are repugnant to section 326 of the. Communications Act and the first amendment of the Constitution as a prior restraint on free speech. In_ general, these program restrictions provided that: (1) no advertising could be broadcast during subscription operations, except for announcements promoting STV programs; (2) feature films could not be offered which had been generally released more than two years prior to the broadcast date, with several exceptions; (3) sports events which had been _regularly broadcast live on free television in the two pte = abort | ENG Ay IRIE IARI PO is AEE EEE Gabe’ see oomecaemsr tc. A-28 years preceding their subscription broadcast could not be ad shown on STV; (4) no series program’ with interconnected plots or substantially the same cast of characters could be offered on a subscription basis; (5) not more than ninety percent of. the total STV broadcasting hours could consist of feature films and . sports events combined. 15 F.C.C. 2d at 597-98. At the outset, it is appropriate to note the extreme difficulty and delicacy of the tasks which the first amendment imposes on the Federal Communications Commission. The Commission is charged’ with administering a scarce communications resource, the broadcast spectrum, in such a manner that the great objectives incorporated into the first amendment are realized and debate on public issues is “uninhibited, robust, and wide-open.” New York Times Co. v. Sullivan, 376 U.S. 254, 270 (1964). Thus the Commission must seek to assure that the listening and viewing public will be exposed to a wide variety of “‘social, political, esthetic, moral, and other ideas and experiences.” Red Lion Broadcasting Co. v. FCC, 395 U.S. 367, 390 (1969). In seeking to provide the broadcasting media with the diversity demanded by the first amendment,’ however, the Commission must avoid the perils of both inaction and overzealousness—or abdication which would allow: those possessing the most economic power to dictate what may be heard, and of censorship which would allow the government to control the ideas communicated to the public. The need to make choices of this kind requires the Commission to take some cognizance of the kind and content of programs being offered to the public.35 Further, the Commission must 35 See, e.g, Black Hills Video Corp. v. FCC, 399 F.2d 65 (8th Cir. ' 1968); Buckley-Jaeger Broadcasting Corp. of California v. FCC, U.S. App. D.C.:__, 397 F.2d 651 (1968); Buckeye Cablevision, Inc. v. FCC, 128 U.S. App. D.C. 262, 387 F.2d 220 (1967); Bay State Beacon, Inc. v. FCC, 84 U.S. App. D.C. 216, 171 F.2d 826 (1948). ( bi ti RE COB TN PRONE S Ce SERENA RT TRE IE = 3 A-29 be cautious in the manner in which it acts; regulations which are vague and overbroad create a risk of chilling free speech, while rules which are too finely drawn will arouse judicial suspicion that they are designed to suppress uncongenial ideas. Cf. Red Lion Broadcasting Co. v. FCC, 395 U.S. 367, 395-96 (1969). We are convinced that the Commission acted within these limits in promulgating its rules for subscription television. 4a In Banzhaf v. FCC, U.S. App. D.C. : ; 405 F.2d 1082, 1101-1103 (1968), we established several tests which can ‘aid in determining whether Commission ; rulings and orders are in conflict with the first ‘amendment. The first consideration mentioned in Banzhaf is whether the rulings ban speech, and, as the petitioners point out, the STV restrictions prevent subscription licensees from broadcasting certain kinds of programs. This characterization of the STV rules ignores their context and purpose, however; it seems obvious that -the Commissicn sought only to insure the continuing economic vitality of free television and not to affect the ideas which could be presented on either free or subscription television. Thus, when the net effect of the program restrictions is considered, it seems quite likely that the public in STV areas will receive more rather than less diversity of expression in its television programming. It is significant that the American Civil Liberties Unidn and the Americans for Democratic Action urged. 'the Commission to approve STV as a means of opening new avenues of speech, and suggested regulations which were similar in some respects to those ultimately adopted in the Fourth Report in order to assure that existing economic forces were directed toward achieving maximum diversity of expression. See generally 15 F.C.C. 2d at 516, 526, 546-67, 554-55, 575. Here, as in Banzhaf, the likely result of the Commission’s / action is to provide the public with additional A-30 information and ideas rather than repressing existing sources. See 405 F.2d at 1103. “ In addition, we note that the restrictions now being ~ challenged deal with categories_of speech which are, if anything, farther from the central concerns of the first amendment than those at issue when comparable rulings have been upheld by the courts. In Red Lion, the — Supreme, Court upheld against first amendment attack the “fairness doctrine,” which restricted broadcasting stations’ control over political statements—speech which is certainly the core of the first amendment guaranty. Similarly, our opinion in Banzhaf upheld restrictions which required broadcasters to allocate time for opponents of cigarette advertising, a matter which was characterized as a public health issue. We think that.the STV rules create far less risk of diminishing the debate on vital public issues. Finally, the Commission found that STV would be’a beneficial supplement to present television offerings, provided that neither service could acquire sufficient economic. power to drive the other from the market-place. The program restrictions are designed to preserve this balance and to insure against programming duplication; thus it can be said here, as in Banzhaf,, that “{e]ven if some valued speech is inhibited -by the fuling, the First Amendment gain is greater than the loss.” 405 F.2d at 1102.: Since: our review of the petitioners’ contentions reveals no error in the Commission’s determinations, the Fourth Report and Order must ,be , 2 ee Affirmed. APPENDIX B The Constitution AMENDMENT [I] Congress shall make ‘no law _ respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom.of speech, or of the press; or the right of the people peaceably to assemble, and: to petition the Government for a redress of . grievances. - AMENDMENT XIV Section 1. All persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States and of the State wherein -they reside. No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State. deprive’ any person of. life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws. “The Cananuniéétions Act of 1934 Section 3(0). ‘‘Broadcasting’’ .megns_ the. dissemination of radio communications ‘intended to be received by the public, directly or by the.intermediary of relay stations. Section 301. It is the purpose of this Act: among other things, to maintain the centrol of the United States over all the channels of interstate and foreign - radio transmission; and to provide for the use of such . channels, but not the ownership thereof, by persons for limited periods of time, under licenses granted ‘by Federal authority, and no such license shall be construed to create any right, beyond :the terms, conditions, and B-2 periods of the license. No persons shall use or operate ‘ any apparatus for the’ transmission of energy or communications or signals by radio (a) from one place in ° any territory or possession of the United States or in the District of Columbia to another place ‘in the same territory, possession, or district; or (b) from any state, territory, or possession’ of the United States, or from the _ District of Columbia to any other state, territory, or possession of the United States; or (c) from any place in any state, territory, or possession of the United States, or in the District of Columbia, to: any place in any foreign country orto any vessel; or (d) within any state - when the effects of such use extend byond the borders of said state, or when interference is caused by such,use. or operation with the transmission of such energy, com- munications, or signals from within’ said state to»any place heyond its borders, or from any place beyond its borders to any place within said state, or with the .transmission or reception of such energy, communica- tions, or signals from and/or to places beyond the bor- ders of said state; or (e) upon any vessel or aircraft of the United States; or (f) upon any ‘other mobile stations within the jurisdiction of the United States, except under _and in accordance with: this Act and with a license in that behalf granted under the provisions of this Act.* * * Section 303. Except as otherwise provided in this Act, the Commission from time to time, as public convenience, interest, or necessity requires, shall — : S (a) Classify radio stations; : : ; (b) Prescribe the nature of the service to be , rendered by each class of licensed stations and each station within any class; (c) Assign bands of frequencies to the various classes of stations; and assign frequencies for each B-3 ro individual station and. determine the power which each station shall use and the time — which it may operate; (d) Determine the location of classes of stations or individual stations; (e) Regulate the kind of apparatus to be used with respect to its external effects and the purity. and sharpness of the emissions, from each Statiqn _and from the apparatus therein; (f) Make such regulations not inconsistent with law as it may deem _ necessary to” prevent interference between stations and to carry out the. provisions of this Act: Provided, however, .that changes in the frequencies, authorized power; or in’ the times of operation of any station, shall not be made without the consent of the station licensee © unless, after a public hearing, the Commission shall determine that such changes will promute - public. convenience or interest or will < sefve public necessity, or the provisions of this Act will be mote fully complied with: 3 - (g) Study new uses for radio, provide . experimental uses of frequencies, and generally encourage the larger and more effective use of radio’ in the public interest; (h) Have authority to establish areas or zones to be served by any station; — * (i) Have authority to make special regulations applicable ‘to .radio stations “engaged in chain broadcasting; | (j) Have authority ‘to make general rules and regulations requiring stations to keep such records of programs, transmissions of energy, - communications, or signals as_ it may deem desirable; : 2 ok ok * * * I AT ee. nee et ae * o “ B-4 Section 326. Nothing in this Act shall be understood or construed to give the Commission the power of censorship over the radio communications or signals’ transmitted by any radio Station, and no regulation or condition shall be promulgated or fixed by the Commission which shall interfere with the right of free speech by means of radio communication. ‘ 7 a > . ;