Petition for Writ of Certiorari — Satellite Broadcasting & Communications Ass'n v. Federal Communications Commission

Supreme Court brief2002

Ask Donna

What actually matters in this document.

Text

° Oyprote Court, 5.5.

FILEN

‘ D4 1332 MAR 07 2002

Yr 4

No. 01-___ OFF es€ GF fr.£ Ce

In The

Supreme Court of the United States

SATELLITE BROADCASTING AND

COMMUNICATIONS ASSOCIATION, et al.,

Petitioners,

FEDERAL COMMUNICATIONS COMMISSION, et al.,

Respondents.

On Petition For A Writ Of Certiorari

To The United States Court Of Appeals

For The Fourth Circuit

PETITION FOR A WRIT OF CERTIORARI

CHARLES J. CoopEr*

MICHAEL W. Kirk

BRIAN S. KOUKOUTCHOS

HamisH P.M. Hume

Cooper & Kirx, PLLC

1500 K Street, N.W., Suite 200

Washington, DC 20005

(202) 220-9600

*Counsel of Record

Counsel for Petitioners

COCKLE LAW BRIEF PRINTING CO., (800) 225-6964

OR CALi COLLECT (402) 342-2831

QUESTION PRESENTED

Section 1008(a) of the Satellite Home Viewer

Improvement Act of 1999, Pub. L. No. 106-113, 113 Stat.

1501A-523, codified at 47 U.S.C. § 338(a), requires a pro-

vider of Direct Broadcast Satellite television to transmit

the television broadcast signals of all requesting local

television stations in a local market if the satellite carrier

chooses to carry the signal of any local station in that

same market pursuant to the copyright license granted

pursuant to 17 U.S.C. § 122. The question presented is:

Does this “carry-one, carry-all” provision violate the First

Amendment?

PARTIES AND CORPORATE DISCLOSURE

Petitioners are Satellite Broadcasting and Communi-

cations Association, EchoStar Satellite Corporation, Echo-

Star Communications Corporation, and DISH, Ltd., d/b/

a DISH Network.

DIRECT Enterprises, Inc., DIRECTV Operations, Inc.,

and DIRECTV, Inc. were plaintiffs-appellants below, and are

respondents in this Court pursuant to this Court’s Rule 12.6.

Respondents are the Federal Communications Com-

mission (“FCC”) and the United States of America,

respondents and appellees below; Michael K. Powell,

FCC Chairman, in his official capacity, and FCC Commis-

sioners Kathleen Q. Abernathy, Michael J. Copps, and

Kevin J. Martin, in their official capacities, defendant-

appellees below;! the United States Copyright Office,

Library of Congress, James H. Billington, Librarian of

Congress, in his official capacity, and Marybeth Peters,

appellees below; and the National Association of Broad-

casters,? the Association of Local Television Stations, Inc.,

1 The public officers named as parties in their official

capacities in the cases below were then-Chairman William E.

Kennard, and then-Commissioners Susan Hess, Harold

Furchtgott-Roth, Michael K. Powell, and Gloria Tristani. Their

successors in office have been substituted pursuant to this

Court’s Rule 35.3. .

2 In one of the consolidated cases below, Fourth Circuit

Docket No. 01-1272, which concerned issues that are not the

subject of this petition, the National Association of Broadcasters

was a petitioner and Paxson Communications Corporation was

an intervenor.

ill

PARTIES AND CORPORATE

DISCLOSURE - Continued

the Univision Network Limited Partnership and Univi-

sion Television Stations, Inc., the Association of Amer-

ica’s Public Television Stations, the Public Broadcasting

Service, the Corporation for Public Broadcasting, the

Consumer Federation of America and the Office of Com-

munication, United Church of Christ, Inc., intervenors

below.

SBCA is a nonprofit national trade association, with

no parent company and no publicly traded stock.

Petitioner EchoStar Satellite Corporation is a subsid-

iary of EchoStar Broadband Corporation, which in turn is

a subsidiary of petitioner EchoStar Communications Cor-

poration. Petitioner EchoStar Communications Corpora-

tion is a publicly held corporation that has issued

securities to the public. Petitioner Dish, Ltd., has merged

into EchoStar DBS Corporation. EchoStar DBS Corpora-

tion and EchoStar Broadband Corporation have also

issued securities to the public. Financiere De Videocom-

munication owns 10 percent or more of petitioner Echo-

Star Communication Corporation’s stock. Financiere De

Videocommunication is a wholly owned subsidiary of

Groupe Canal+, which in turn is a wholly owned subsid-

iary of Vivendi Universal. Vivendi Universal has issued

securities to the public.

TABLE OF CONTENTS

Page

CRIM OEULIIN FEU EER cc ocscccenedassecessasoces i

PARTIES AND CORPORATE DISCLOSURE ........ ii

SARs OP AUPE PINN Ne 6 ov es cccnseccscccdenssae vi

EE ME 5 coca cnescecncsnecssen te scenenen 1

PUNO 004.5 54060050 566b0sed24ceneensnee ts 1

CONSTITUTIONAL AND STATUTORY PROVI-

Pe POC GMED ck oss ecccsweccedenactanceeneat 1

: UNE 8 56k wa bk oer ng F4G iA odo andpkeahaeeanans i

E BRGS FURIE Cee cei ccescascswcsas 3

Il. SHVIA’S CARRY-ONE, CARRY-ALL REGIME.. 5

| ey Fm eee Uf er errr rrr 7

REASONS FOR GRANTING THE PETITION....... 11

I. THE COURT BELOW AUTHORIZED CON-

GRESS TO RESTRICT SPEECH IN ORDER TO

PROMOTE A MULTIPLICITY OF SPEAKERS

DESPITE THE ABSENCE OF ANY DYSFUNC-

TION IN THE MARKETPLACE OF IDEAS.... 15

Il. THE COURT OF APPEALS DISREGARDED

THIS COURT’S PRECEDENTS CONCERNING

THE APPLICATION OF STRICT SCRUTINY .. 21 ;

A. Speech-Triggered Restrictions on Editorial

Discretion Are Content-Based............. 21

- B. SHVIA’s Purpose Is Content-Based........ 24

TABLE OF CONTENTS - Continued

Page

Ill. THE COURT BELOW REFUSED TO APPLY THE

STANDARD ANNOUNCED IN TURNER II,

AND FUNDAMENTALLY REWORKED THIS

COURT’S INTERMEDIATE SCRUTINY JURIS-

POURED 0 a vs cdc ceeccdiak cane sneehawaeuee 26

ee. wht. «| Pp erwerrrrrrerrr rrr rr rrr rrr ry 30

TABLE OF AUTHORITIES

Page

Cases

Abrams v. United States, 250 U.S. 616 (1919) ......... 18

Arkansas Educ. Television Comm'n v. Forbes, 523 U.S.

GED CED O) cv ccccccccccccsctsensénsuncsceesscdaneuss 17 -

Buckley v. Valeo, 424 U.S. 1 (1976)........ 14, 17, 18, 25

Capital Cities Cable, Inc. v. Crisp, 467 U.S. 691

CEDGD oc cccenciduudesdscnuandsaeuendaneees ceeeeae 20, 23

Citizens Against Rent Control v. Berkeley, 454 U.S.

200 CHDGR) oa ncctncsdececsscsvsasencuasesesusesanes 17

FCC v. National Citizens Comm. for Broad., 436 U.S.

TFS (OOP ioc dnccecunksdeeesausseeeeee 17, 20

FCC v. Pacifica Found., 438 U.S. 726 (1978)........... 18

FCC v. Sanders Bros. Radio Station, 309 U.S. 470

tt. || BBPEPEEUPERP EET T er re ee eee 20

FCC v. WNCN Listeners Guild, 450 U.S. 582 (1981) .... 20

FEC v. Massachusetts Citizens for Life, Inc., 479 U.S.

ZEB (BGRG).. wu ccccscncceccsssscecesunaeeeaeeueeeay 17

Frisby v. Schultz, 487 U.S. 474 (1988) ................ 29

Hurley v. Irish-Am. Gay, Lesbian & Bisexual Group,

52S US. SSF (HOGG oni ccnccsvtescwenweceenseeas 18, 24

Leathers v. Medlock, 499 U.S. 439 (1991).............. 24

Legal Servs. Corp. v. Velasquez, 531 U.S. 533 (2001) .... 24

Lorillard Tobacco Co. v. Reilly, 533 U.S. 525, 121

S. CO. BERG Ges cic cA cacecteuaseses esse 14, 28

Los Angeles v. Preferred Communications, Inc., 476

Uh F:. ‘Peeper Pe ee 28

———— eee

TABLE OF AUTHORITIES - Continued

Page

Meyer v. Grant, 486 U.S. 414 (1988)..........-....... 17

Miami Herald Publ’g Co. v. Tornillo, 418 U.S. 241

CRE «wc db 0 0ebeweh 404s005000080080keskssneeers 14, 22

National Broad. Co. v. United States, 319 U.S. 190

PRR bc ckadeudsddusdeseseuutunessabedacasbeserass 20

Nguyen v. INS, 533 U.S. 53, 121 S. Ct. 2053 (2001) .... 27

Pacific Gas & Elec. Co. v. Public Util. Comm'n, 475

sl GG, Peererrrrrrerrrrr err eer 12, 17, 20

Swierkiewicz v. Sorema N.A., 534 U.S. __ (2002)...... 23

Turner Broad. Sys., Inc. v. FCC, 512 U.S. 622 (1994) . . passim

Turner Broad. Sys., Inc. v. FCC, 520 U.S. 180 (1997) . . passim

United States v. Midwest Video Corp., 406 U.S. 649

SUE sk ode cacceuesceeuns Uekhsasebasececeneresenen 20

Ward v. Rock Against Racism, 491 U.S. 781 (1989) .... 29

STATUTES AND CODES

Ue 6 sige ee 1, 6

YS = 5c dln on ee ee 1

Ue CO 3 one eee 1

TL a eee MER a eA rr 6

PETITION FOR A WRIT OF CERTIORARI

Petitioners Satellite Broadcasting and Communications

Association (“SBCA”), EchoStar Communications Corpora-

tion (“EchoStar”), et al., respectfully petition for a writ of

certiorari to review the judgment of the United States Court

of Appeals for the Fourth Circuit.

OPINIONS BELOW

The opinion of the Court of Appeals is reported at 275

F.3d 337 (4th Cir. 2001), and is reprinted in the Appendix

(“App.”) at la-66a. The opinion of the district court is

reported at 146 F. Supp. 2d 803 (E.D. Va. 2001), and is

reprinted at App. 75a-129a. The Order of the Federal Com-

munications Commission (“FCC”) (“FCC SHVIA Order”) is

reported at 16 F.C.C.R. 1918 (Nov. 30, 2000), and is reprinted

at App. 134a-335a.

JURISDICTION

The Court of Appeals entered judgment on December 7,

2001. This Court has jurisdiction under 28 U.S.C. § 1254.

CONSTITUTIONAL AND STATUTORY

PROVISIONS INVOLVED

The First Amendment to the United States Constitution

states in pertinent part that “Congress shall make no law

.... abridging the freedom of speech.” Sections 1002 and 1008

of the Satellite Home Viewer Improvement Act of 1999, Pub.

L. No. 106-113, 113 Stat. 1501A-523 (“SHVIA”) are codified at

17 U.S.C. § 122 and 47 U.S.C. § 338, respectively, and are

reprinted at App. 336a-358a.

STATEMENT

Petitioner EchoStar operates a Direct Broadcast Satellite

(“DBS”) television service, offering consumers an alternative

to cable television.! In SHVIA, Congress provided DBS oper-

ators with a statutory copyright license enabling them to

1 The Court of Appeals set forth a detailed and thorough

description of the nature and technological limits of satellite

offer subscribers their local broadcast television stations.

Congress attached a condition, however, to the use of the

license: if a DBS operator carries one local station in a

television market, it must (subject to limited exceptions)

carry all of the stations broadcasting in that market.

This case arises against the backdrop of Congress’ impo-

sition of a different must-carry requirement upon cable oper-

ators in the 1992 Cable Act and this Court’s decisions

upholding it, Turner Broadcasting System, Inc. v. FCC, 512 U.S.

622 (1994) (“Turner I”), and Turner Broadcasting System, Inc. v.

FCC, 520 U.S. 180 (1997) (“Turner II”). Analysis of the two

forced-carriage requirements begins with the same premise:

like cable system operators, satellite carriers exercise consti-

tutionally protected editorial discretion in the selection of

programming offered on their systems. See App. 27a (citing

Turner I, 512 U.S. at 636-37).

But as the court below recognized, quite unlike cable

operators, “[s]atellite carriers do not deny carriage to inde-

pendent broadcasters for anticompetitive reasons.” Id. at 56a.

Indeed, the court emphasized that “[t]here is nothing anti-

competitive about satellite carriers’ efforts to make the most

efficient use of their existing channel capacity.” Id. Moreover,

DBS operators serve only “about 13 percent of television

households,” whereas “[rjoughly 67 percent of television

households currently subscribe to cable.” Id. at 9a-10a (citing

June 2000 data); see also id. at 10a n.3 (DBS market share now

about 15 percent). Unlike cable operators, satellite carriers

lack both the anticompetitive incentive and the market

power to deny carriage to broadcasters for reasons unrelated

to audience demand.

These differences between the cable industry and the

satellite industry lie at the heart of this case. As explained by

the court below, in the 1992 Cable Act, “Congress was

concerned about anticompetitive practices”; cable systems

television, as well as the legal and historical background of the

industry. See App. 8a-19a.

not only “had bottleneck monopoly power over their sub-

scribers’ access to television signals,” but also “had substan-

tial economic incentives to abuse that power by denying

carriage to local broadcast stations even when those stations

were more popular with cable subscribers than some of the

cable channels that replaced them.” Id. at 53a-54a. In con-

trast, when it enacted SHVIA’s “carry one, carry all” provi-

sion, “Congress lacked similar evidence of anticompetitive

behavior by satellite carriers.” Id. Because this Court's anal-

ysis of the cable must-carry statute controls and forecloses

SHVIA’s carry-one, carry-all restriction for satellite televi-

sion, it is important to recall the relevant portions of the

Turner decisions in some detail, before recounting the salient

features of SHVIA and the proceedings below.

I. THE TURNER DECISIONS

1. Central to this Court’s decisions in both Turner cases

was the determination that imposition of must-carry on cable

system operators was “justified by special characteristics of

the cable medium: the bottleneck monopoly power exercised

by cable operators and the dangers this power poses to the

viability of broadcast television.” 512 U.S. at 661. In Turner I,

a five-to-four majority held that the cable must-carry require-

ment was content-neutral in both language and purpose and

thus did not warrant strict First Amendment scrutiny. The

majority relied upon “unusually detailed statutory findings”

made after three years of congressional hearings, id. at 646,

and repeatedly emphasized that (1) the cable medium had

effective monopoly control over 60 percent of all television

households, (2) cable system operators are to a great extent

vertically integrated with producers of cable programming

and thus compete for viewers with local broadcasters, and

(3) cable operators also compete with broadcast stations for

local advertising revenue. Thus, cable operators have both

the market “power and the incentive to harm broadcast

competitors,” id. at 633, and therefore constitute a genuine

threat to “ ‘the economic viability of free local broadcast

television.’ ” Id. at 634 (quoting Cable Act).

These “special characteristics of the cable medium” con-

vinced the Turner I majority that the Cable Act’s must-carry

requirement was distinguishable from other types of speech

restrictions held by the Court to warrant strict scrutiny. First,

Congress’ findings regarding cable’s market power and anti-

competitive incentives showed that enactment of the cable

must-carry provisions served a content-neutral purpose. The

_requirement was not “designed to favor or disadvantage

speech of any particular content,” but rather was “meant to

protect broadcast television from what Congress determined

to be unfair competition by cable systems.” Id. at 652. Sec-

ond, although the must-carry mandate constituted a

“speaker preference” favoring broadcasters over cable chan-

nels, it did so not “based on the content of programming

each group offers,” but rather to protect the broadcast indus-

try from “economic peril due to the physical characteristics

of cable transmission and the economic incentives facing the

cable industry.” Id. at 658-59. The Court thus remanded the

case for fact-finding under the O’Brien intermediate standard

of scrutiny “applicable to content-neutral restrictions that

impose an incidental burden on speech.” Id. at 662.

2. When the case returned to this Court, a majority of

the Justices, again divided five-to-four, upheld the must-

carry requirement, concluding that it “advance[d] important

governmental interests unrelated to the suppression of free

speech and [did] not burden substantially more speech than

necessary to further those interests.” Turner II, 520 U.S. at

189. Cable must-carry was designed to serve three “ ‘interre-

lated interests’ ”: “ ‘(1) preserving the benefits of free over-

the-air local broadcast television, (2) promoting the wide-

spread dissemination of information from a multiplicity of

sources, and (3) promoting fair competition in the market for

television programming.’ ” Id. (quoting Turner I, 512 U.S. at

662). The Turner II majority was itself divided, however, with

respect to the kind of threat to these governmental interests

that is necessary to justify the must-carry requirement’s

infringement on First Amendment freedoms.

A plurality found substantial evidence to support Con-

gress’ judgment that the anticompetitive predations of cable

——L ll

operators posed a “real threat justif[ying] enactment of the

must-carry provisions.” Id. at 196 (plurality opinion). Absent

must-carry, “ ‘significant numbers of broadcast stations

[would] be refused carriage on cable systems,’ and those

‘broadcast stations denied carriage would either deteriorate

to a substantial degree or fail altogether.’” Id. at 191-92,

(quoting Turner I, 512 U.S. at 666). Echoing the Turner I

majority, the Turner II plurality emphasized the cable

medium’s dominant “market power over local video pro-

gramming markets,” id. at 197, its extensive vertical integra-

tion with programmers, id. at 198, and its competition for

advertising revenue with local broadcasters, id. at 200-01. In

light of cable’s “systemic reasons for seeking to disadvantage

broadcast stations,” it was reasonable for Congress to “con-

clude that cable systems would drop broadcasters in favor of

programmers — even unaffiliated ones — less likely to com-

pete with them for audience and advertisers.” Id. at 201-02;

see also id. at 225 (Stevens, J., concurring).

Justice Breyer provided the fifth vote to uphold the

must-carry requirement, but he eschewed reliance on the

plurality’s “anticompetitive rationale.” Id. at 225 (Breyer, J.,

concurring in part). Whether the must-carry requirement

“does or does not sensibly compensate for some significant

market defect,” Justice Breyer concluded that it was justified

simply because it “seeks to provide over-the-air viewers who

lack cable with a rich mix of over-the-air programming,” and

thus serves the government's purpose of promoting “ ‘access

to a multiplicity of information sources.’ ” Id. at 226 (Breyer,

J., concurring in part) (quoting Turner I, 512 U.S. at 663).

II. SHVIA’S CARRY-ONE, CARRY-ALL REGIME

1. SHVIA was enacted in order to correct an unfair

“competitive advantage” that cable systems enjoyed over

satellite carriers. App. lla. Specifically, cable operators

enjoyed a statutory license “to retransmit broadcast televi-

sion signals without securing authorization from program

ment of SHVIA, satellite carriers had no statutory license

authorizing local-into-local retransmission of broadcast

signals. Because a broadcaster’s signal is subject to innu-

merable underlying copyrights governing “each of the

programs, advertisements, and music aired by that sta-

tion” 24 hour per day, 365 days per year, FCC SHVIA

Order ¥ 15, App. 153a, satellite carriers were effectively

precluded from offering their subscribers the program-

ming of local broadcast channels. Accordingly, Congress

created a statutory copyright license authorizing satellite

carriers to retransmit local television broadcast signals to

their subscribers in that station’s local market. 17 U.S.C.

§ 122, App. 336a.

However, Congress conditioned use of the statutory

upon carriage of all stations in that market. 47 U.S.C.

§ 338(a), App. 344a-345a. This “carry one, carry all” regime

divests a satellite carrier of any editorial discretion over

the selection of broadcast programming in any market in

which it chooses to offer local broadcast programming. A

satellite carrier choosing to carry a single local station in,

say, the New York City area, must also carry all 21 addi-

tional eligible stations as well. Given the technological and

economic limitations on the channel capacity of satellite

carriers, App. 10a-1la, SHVIA’s forced-carriage mandate

thus forces satellite carriers to provide local-into-local cov-

erage to fewer markets than would be served in the

absence of the mandate. As the Fourth Circuit put it,

rather than “allow[ing] satellite carriers to cherry pick [i.e.,

exercise their editorial discretion] by retransmitting some

stations (the major network affiliates) in many markets,”

Congress chose to “allow[ ] satellite carriers to retransmit

all of the stations in some markets.” App. 23a (emphasis in

original).

2. The animating purpose of SHVIA’s carry-one,

carry-all regime is openly avowed in the measure’s legisla-

tive history — simply to protect independent local broad-

cast stations from what the Court of Appeals called the

“practical realities of the television marketplace.” App.

2la. Congress candidly acknowledged that the provision

was designed to

DPN at TD All

Cee I Pee ee oe SOON. "gle, WA,

prevent| | satellite carriers from choosing to carry

only certain stations and effectively preventing

many other local broadcasters from reaching

potential viewers in their service areas. The Con-

ference Committee is concerned that, absent must-

carry obligations, satellite carriers would carry the

major network affiliates and few other signals.

H.R. Conr. Rep. No. 101-464 (1999) (“Conference Report”) at

101, App. 362a. :

Concerned that the program content of independent

local stations typically lacks strong viewer demand in the

marketplace, Congress determined that unless satellite car-

riers were forced to retransmit the programming of such

stations, satellite subscribers would not expend any effort to

“obtain over-the-air signals from independent broadcast sta-

tions.” Id. at 102, App. 363a. The purpose of this restriction

was “to preserve free television for those not served by

satellite or cable systems and to promote widespread dissem-

ination of information from a multiplicity of sources.” Id. at

101, App. 362a. As the Court of Appeals observed, Congress

believed that the forced-carriage mandate was necessary “to

provide [over-the-air] viewers with a rich mix of broadcast

programming from multiple sources.” App. 37a.

II. PROCEEDINGS BELOW

Petitioner EchoStar operates one of the Nation’s two

DBS services. Petitioners, along with the Nation’s other DBS

provider, DIRECTV, Inc., brought this action in the district

court, seeking declaratory and injunctive relief against

SHVIA’s carry-one, carry-all mandate.? Because EchoStar

2 DIRECTV joined petitioners in appealing the district court’s

decision to the Fourth Circuit, but has chosen not to seek certiorari;

accordingly, DIRECTV is a respondent pursuant to this Court’s Rule

12.6. While this case was pending before the Court of Appeals,

EchoStar and the parent of DIRECTV agreed to merge the two DBS

providers into one entity. The merger is subject to approval by the

FCC and antitrust regulators. After the entry of the decision below,

and DIRECTV hold the licenses for all 96 available frequen-

cies for the provision of DBS service across the continental

United States, see App. 10a, the Fourth Circuit's decision will

finally decide the constitutionality of SHVIA’s carry-one,

carry-all requirement absent review in this Court. All parties

currently subject to the restriction are bound by the decision

below.

Following discovery and the submission of cross-

motions for summary judgment, the district court granted

respondents’ previously filed motions to dismiss. App.

75a-129a. Separately, petitioners SBCA and EchoStar had

filed petitions for review of the FCC SHVIA Order. The

Fourth Circuit consolidated the petitions for review with

petitioners’ appeal of the district court’s decision dismissing

their complaint. On December 7, 2001, the court affirmed the

dismissal of petitioners’ district court complaint, and denied

the petitions for review.

1. The Fourth Circuit first addressed the level of First

Amendment scrutiny applicable to the carry-one, carry-all

regime. The court rejected petitioners’ submission that “the

carry one, carry ali rule is content-based on its face because

its burdens are triggered by a satellite carrier's decision to

transmit certain content, namely, the signal of a local televi-

sion station.” App. 30a. The court reasoned that “[a] satellite

carrier that privately negotiates the required copyright clear-

ances can retransmit the signal of a local broadcast station

without incurring any carriage obligations.” Id.

2. Having concluded that the carry-one, carry-all reg-

ime is content-neutral, the panel applied intermediate scru-

tiny. Throughout its opinion, the Court of Appeals

repeatedly recognized that “the government interests served

by the carry one, carry all rule are best characterized as a

EchoStar and DIRECTV announced that the additional capacity that

would be generated if the merger is approved would enable them to

offer local-into-local service to all markets nationwide as soon as 2

years later. However, the merged entity does not intend to carry all

channels in every market unless the decision below is upheld.

single interest in preserving a multiplicity of broadcast out-

lets for over-the-air viewers.” App. 36a-37a; see also id. at 21a

(Congress sought “to preserve a rich mix of broadcast outlets

for consumers who do not (or cannot) pay for subscription

television services”); id. at 8a, 24a, 35a, 36a.

The Court of Appeals acknowledged that in Turner II

this Court held that, to demonstrate that cable must-carry

materially advanced the government's interest in preserving

over-the-air broadcast outlets, the government must show

that absent must-carry a significant number of broadcast

stations would not be carried by cable and would “ ‘deterio-

rate to a substantial degree or fail altogether.’ ” App. 44a

(quoting Turner II, 520 U.S. at 208). The court did not dispute

petitioners’ submission that the government cannot possibly

satisfy this standard. Instead, the panel refused to apply “the

substantial deterioration standard” adopted by this Court,

holding that it “does not work here because that standard

was formulated to address a situation where the market for

subscription television services was dominated by a single

medium.” Id. at 45a.

The court below thought that “[i]t is more sensible to

allow Congress the latitude to view the regulatory landscape

as a whole by considering the cumulative effects of cable and

satellite without making fine distinctions regarding their

relative contributions in creating those effects.” Id. at 47a-48a.

Accordingly, because “Congress surely had a substantial

basis for concluding that satellite would soon become a

significant challenger to cable,” the panel held that “Con-

gress reasonably concluded that the carry one, carry all rule

addressed a real threat to the government's interest in pre-

serving a multiplicity of broadcast outlets for over-the-air

viewers.” Id. at 48a.

As part of its intermediate scrutiny analysis, the court

also introduced a second interest supposedly served by the

forced-carriage mandate: “preventing [Congress’] grant of

a statutory copyright license . . . from undermining competi-

tion in local markets for broadcasting advertising.” Id. at 35a.

In contrast to Congress’ well-documented interest in promot-

ing multiplicity, the Fourth Circuit cited nothing in the legis-

lative record indicating that Congress enacted the carry-one,

carry-all requirement to serve this interest. Absent a forced-

carriage rule, the court believed that SHVIA’s statutory copy-

right license would allow satellite carriers to “pick winners

and losers in local advertising markets.” Id. at 50a. The court

held that this interest was sufficiently substantial to justify

the restriction upon petitioners’ speech. Id.

3. The Court of Appeals gave “separate consideration”

to the central distinction between this case and the Turner

cases: whereas Congress “had substantial evidence that cable

operators had bottleneck monopoly power . . . [and] substan-

tial economic incentives to abuse that power,” it “lacked

similar evidence of anticompetitive behavior by satellite car-

riers.” Id. at 53a-54a. Unlike satellite carriers, cable com-

panies compete with local broadcasters for local advertising

revenue. Id. Also, satellite carriers are not significantly “ver-

tically integrated,” meaning they do not own nor are they

affiliated with companies that produce television program-

ming. Id.4 Rather, as the Court of Appeals recognized, given

the limited channel capacity of satellite carriers, and given

that the programming of broadcasters affiliated with major

networks is typically far more popular with viewers than the

programming of independent stations, see id. at 56a, the

“practical realit[y] of the television marketplace” is that “the

economically rational choice for satellite carriers is to

3 The Court of Appeals did refer to the testimony of a

broadcaster taken by a House committee over a year prior to the

enactment of SHVIA, see App. 50a, but there is no indication that

anyone in Congress shared the concern expressed in the testimony.

4 After the court below issued its opinion, Vivendi Universal, a

programming producer and distributor, acquired a 10.7 percent

interest in EchoStar. This transaction does not alter the basis on

which the Court of Appeals decided the case, for it recognized that

satellite carriers “are not vertically integrated with non-broadcasting

sources to any significant degree.” App. 54a (emphasis added).

Vea

ee a ee ne ee a

cherry pick the major network affiliates in markets where the

carriers offer local-into-local service.” Id. at 21a, 42a. Finally,

again unlike cable operators, satellite carriers lack significant

market power that would enable them to inflict anti-compet-

itive harm even if they were so inclined.

The Court of Appeals conceded that petitioners’ submis-

sion that these key differences in the cable and satellite

media are outcome determinative “cannot be summarily

rejected, for it is not immediately clear whether or how the

holdings in the Turner cases depend on evidence of anticom-

petitive practices in the cable industry.” Id. at 54a-55a. Nev-

ertheless, noting that Justice Breyer “provid[ed] the fifth vote

to uphold the must-carry rules without relying on the claim

that the rules ‘sensibly compensate for some significant mar-

ket defect,’” the court held that “the theme of preserving

broadcast television is more fundamental than the theme of

preventing unfair competition.” Id. at 55a (quoting Turner II,

520 U.S. at 226 (Breyer, J., concurring in part)).

REASONS FOR GRANTING THE PETITION

In the Turner cases, this Court recognized that the must-

carry provisions of the 1992 Cable Act implicated “the heart

of the First Amendment . . . [,] the principle that each person

should decide for himself or herself the ideas and beliefs

deserving of expression, consideration, and adherence.”

Turner I, 512 U.S. at 641. For this reason, the Court subjected

them to close First Amendment analysis before upholding

them. Three features of the Cable Act were central to the

Court’s ultimate conclusion, yet in upholding SHVIA’s

forced-carriage requirement, the Court of Appeals treated all

three as unnecessary to the result.

First, both Turner decisions repeatedly emphasized that

the must-carry regime was “justified by the special charac-

teristics of the cable medium: the bottleneck monopoly power

exercised by cable operators and the dangers this power

poses to the viability of broadcast television.” Id. at 661

(emphasis added). Indeed, only one Member of the Court

voted to uphold the statute without regard to the “anticom-

petitive rationale” relied upon by the plurality. Turner II, 520

U.S. at 225 (Breyer, J., concurring). In this case, the Fourth

Circuit acknowledged that this justification does not exist,

but nevertheless held that “if satellite carriers threaten the

government's interest in preserving a multiplicity of local

broadcast outlets, it does not matter whether the threat can

be traced to anticompetitive practices by those carriers.”

App. 55a.

The court below expressly adopted Justice Breyer’s

broad conclusion that the First Amendment permits Con-

gress to restrict editorial discretion solely in order to promote

“a multiplicity of information sources” without regard to

“[w]hether or not the statute does or does not sensibly

compensate for some significant market defect.” 520 U.S. at

226 (Breyer, J., concurring in part). No other Member of this

Court has ever concluded that Congress may exact the

“serious First Amendment price” entailed in “interfer[ing]

with the protected interests of the cable [and satellite] opera-

tors to choose their own programming,” id., merely to pro-

mote a multiplicity of speakers in a properly functioning

marketplace of ideas.

The Fourth Circuit's ruling, if left unreviewed, grants

Congress a blank check to suppress speech whenever it

concludes that the marketplace of ideas needs a larger or

more diverse rostrum of speakers, without regard to whether

the marketplace is infected with dysfunction. We respectfully

submit that if allowed to take root, the decision below not

only extinguishes petitioners’ First Amendment right to

choose “what to say and what to leave unsaid,” Pacific Gas &

Elec. Co. v. Public Util. Comm’n, 475 U.S. 1, 11 (1986) (plurality

opinion), but also places the First Amendment editorial free-

dom of all other speakers - from bookstore owners and

magazine publishers to movie theater operators and parade

organizers — at the regulatory mercy of any government

body with a claimed interest in promoting a “multiplicity of

information sources.”

Second, the Turner I Court concluded that the cable

must-carry restriction was content-neutral because all cable

operators were uniformly required to carry all local stations,

“regardless of the programs or stations they now offer or

have offered in the past. Nothing in the Act imposes a

restriction, penalty, or burden by reason of the views, pro-

grams or stations that cable operator has selected or will select.”

512 U.S. at 644 (emphases added). In stark contrast, the

carry-one, carry-all burden imposed by SHVIA applies if, but

only if, the satellite operator chooses to offer one or more

broadcast stations in a particular market. This Court has

never before upheld a speech-triggered interference with the

“editorial discretion over which stations . . . to include in [a

cable or satellite operator’s] repertoire,” which the Court has

held is “entitled to the protection of the speech and press

provisions of the First Amendment.” Id. at 636 (citation and

internal quotation omitted).

Third, the Turner I] Court concluded that the cable must-

carry restriction survived intermediate scrutiny because Con-

gress had substantial evidence demonstrating that, absent

the restriction, “ ‘significant numbers of broadcast stations will

be refused carriage on [satellite] systems,’ and those ‘broad-

cast stations denied carriage will either deteriorate to a

substantial degree or fail altogether.’ ” Turner II, 520 U.S. at

191-92 (citation omitted) (emphasis added). The must-carry

restriction on the speech of cable operators thus actually

advanced Congress’ interest in preserving a multiplicity of

over-the-air broadcast stations. The court below, however,

“reject[ed] the . . . argument that substantial deterioration of

non-carried broadcast stations is always the proper standard

for deciding when carriage rules are justified.” App. 45a. “It

is more sensible,” the court thought, “to allow Congress the

latitude to view the regulatory landscape as a whole by

considering the cumulative effects of cable and satellite with-

out making fine distinctions regarding their relative contri-

butions in creating those effects.” App. 47a-48a. In other

words, SHVIA’s restriction on satellite carriers’ speech need

not actually advance the objective of preserving over-the-air

television because Congress had substantial evidence justify-

ing a must-carry speech restriction on cable operators.

But this Court has never upheld a statute burdening free

speech on the basis of congressional findings underlying a

different statute regulating a different medium possessing dif-

ferent market characteristics. Such a rule would eviscerate the

bedrock First Amendment requirement that “[a] regulation

cannot be sustained if it provides only ineffective or remote

support for the government's purpose, or if there is little

chance that the restriction will advance the State’s goal.”

Lorillard Tobacco Co. v. Reilly, 533 U.S. 525, 121 S. Ct. 2404,

2428 (2001) (internal quotations and citations omitted).

Each of these departures from this Court’s reasoning in

the Turner cases breaks new ground in First Amendment

jurisprudence. Absent review, the Fourth Circuit’s decision

will be the final word of the Judicial Department on whether

SHVIA comports with the First Amendment, for all DBS

operators currently subject to the restriction are bound by

the decision below. See App. 10a. For that reason alone,

certiorari is warranted; the validity of a statute affecting

satellite television programming nationwide should be deter-

mined finally by this Court.

But the Fourth Circuit’s sweeping transgression of the

limits carefully drawn in the two Turner opinions cannot be

confined to the satellite television medium. No communica-

tions medium is safe if Congress possesses the authority (i)

to restrict editorial discretion simply and solely to promote a

multiplicity of speakers in a genuinely open and competitive

marketplace of ideas, cf. Buckley v. Valeo, 424 U.S. 1, 48-49

(1976) (“[T]he concept that government may restrict the

speech of some elements of our society in order to enhance

the relative voice of others is wholly foreign to the First

Amendment .. . . ”); (ii) to impose a burden on speech that is

triggered solely by the exercise of editorial discretion, cf.

Miami Herald Publ’g Co. v. Tornillo, 418 U.S. 241, 256-58 (1974)

(speech-triggered burden on editorial discretion is uncon-

stitutionally content-based); and (iii) to impose on the speech

of one medium a burden that does not advance its stated

purpose simply because a different restriction, targeted at

different speakers possessing different market characteristics,

does advance that interest, cf. Turner I, 512 U.S. at 664

(government bears burden of demonstrating that restriction

on speech “will in fact” advance its purpose “in a direct and

material way”).

I. THE COURT BELOW AUTHORIZED CONGRESS TO

RESTRICT SPEECH IN ORDER TO PROMOTE A

MULTIPLICITY OF SPEAKERS DESPITE THE

ABSENCE OF ANY DYSFUNCTION IN THE MAR-

KETPLACE OF IDEAS.

1. This Court devoted substantial portions of its opin-

ions in Turner I and Turner II to the proposition that the cable

must-carry restriction was “justified by the special charac-

teristics of the cable medium.” Turner I, 512 U.S. at 661. The

Court recounted in detail Congress’ findings demonstrating

that cable operators have both the market power and the

economic incentives to deny carriage to broadcast stations

for anticompetitive reasons. See id. at 632-34, 646-47, 658-59,

660-61; Turner II, 520 U.S. at 191, 197-208.

This understanding of the government's interest was

central both to the Court’s analysis of the appropriate level

of First Amendment scrutiny in Turner [5 and to the

plurality’s analysis of whether the restriction survived inter-

mediate scrutiny in Turner II.6 Only Justice Breyer deemed

5 See 512 U.S. at 646-49 (must-carry restriction did not have

content-based purpose because it sought “to prevent cable operators

from exploiting their economic power to the detriment of

broadcasters”); id. at 657-59 (speaker preference based upon

medium (favoring broadcasters over cable programmers) not

content-based where Congress believed “the physical characteristics

of cable transmission and the economic incentives facing the cable

industry” imperiled broadcast stations); id. at 660-61 (imposition of

must-carry restriction on cable, but not other multi-channel services,

did not warrant strict scrutiny because other services do not possess

“bottleneck monopoly power”).

6 See 520 U.S. at 196-208 (plurality opinion) (relying upon

extensive evidence demonstrating cable’s market power and

economic incentives to deny carriage for anticompetitive reasons to

the plurality’s extensive development of the “anticompetitive

rationale” to be superfluous. Turner II, 520 U.S. at 225-26

(Breyer, J., concurring in part).

The Court of Appeals candidly acknowledged that

SHVIA’s carry-one, carry-all restriction cannot be justified on

the basis of any market dysfunction like that found in the

Turner decisions. App. 53a-56a. Indeed, the court conceded

that satellite carriers seek to make the most efficient use of

their limited channel capacity and that their “cherry picking”

of local stations is governed solely by viewer demand. Id. at

56a. SHVIA itself, however, employs a classic anticompeti-

tive “tying” arrangement for the acknowledged purpose of

propping up independent broadcasters that lack sufficient

viewer demand to succeed in a genuinely open and competi-

tive market. Thus, SHVIA’s carry-one, carry-all regime does

not correct a defect in the market for ideas, it creates one.

At bottom, the court below concluded that the Turner

Courts’ discussion of the anticompetitive justification for the

cable must-carry mandate, consuming some 15 pages in the

United States Reports, was wholly irrelevant to the outcome,

and that cable must-carry would have been upheld even if

cable operators had lacked monopoly power, had not been

vertically integrated with cable programmers, and did not

compete with local broadcasters for advertising revenue. See

App. 55a-56a. To the Court of Appeals, the First Amendment

makes no distinction between a denial of carriage resulting

from the anticompetitive predations of a market monopolist

and a denial of carriage resulting from the standard exercise

of editorial discretion to make the most efficient use of

limited communications capacity in an open and competitive

market for ideas.

The implications of such authority are breathtaking.

May the government require bookstores to devote a specified

percentage of shelf space to local authors simply because it is

conclude that must-carry restrictions were justified by a “real

threat”).

dissatisfied with the limited selection available in a mar-

ketplace increasingly dominated by the New York Times best-

seller list? May a municipality, concerned about the lack of

diversity in an annual parade through its streets, condition a

permit on the organizer welcoming all local organizations,

regardless of their message? May a zoning permit for con-

struction of a multiplex theater be conditioned on the reser-

vation of a certain number of screens for works of

independent or local film producers?

2. This Court has never suggested that a naked interest

in promoting a “multiplicity” of speakers, in the absence of a

dysfunction in the marketplace of ideas, could justify a

governmental restriction on editorial discretion (or any other

suppression of speech). To the contrary, this Court’s First

Amendment jurisprudence repudiates this notion.

The “concept that government may restrict the speech of

some elements of our society in order to enhance the relative

voice of others is wholly foreign to the First Amendment

....” Buckley, 424 U.S. at 48-49. Therefore, Congress may not

burden the speech of more popular network affiliates (or a

satellite carrier’s editorial choice to carry such stations) in

order to enhance the speech of less popular independent

stations. It is simply not the government's place to override

market-driven editorial choice in order to ensure a continu-

ing audience for speakers whose message is not popular

enough to compete on its own. Thus in Arkansas Educational

Television Commission v. Forbes, 523 U.S. 666 (1998), this Court

reversed a lower court order that compelled a broadcaster to

allow a relatively unpopular political candidate to participate

in a forum. See id. at 682-83 (“Forbes was excluded not

because of his viewpoint but because he had generated no

appreciable public interest”); see also Pacific Gas & Elec., 475

US. at 14 (plurality opinion); Meyer v. Grant, 486 U.S. 414,

426 n.7 (1988); FEC v. Massachusetts Citizens for Life, Inc., 479

U.S. 238, 257-59 (1986); Citizens Against Rent Control v.

Berkeley, 454 U.S. 290, 295-96 (1981).

The exception to this rule against government interfer-

ence in the marketplace of ideas arises when market dys-

function interferes with the free flow of speech. Thus, in FCC

v. National Citizens Committee for Broadcasting, 436 U.S. 775

(1978), this Court distinguished Buckley and upheld a rule

barring a newspaper owner from owning broadcast stations

in the same market. In dealing with the unique problems of

the traditional broadcast industry and the threat to free

speech presented by undue concentration of media control

within a given local market, Congress was not restricting the

speech of some to promote the speech of others, but simply

acting to correct a malfunctioning marketplace. Id. at 799-801

& n.18.

Similarly, in Turner I, the Court reaffirmed the Buckley

principle, 512 U.S. at 657-58, and acknowledged that the

cable must-carry rules distinguished among speakers so as to

favor some over others, id. at 644-45. But because Congress

was concerned with preserving a multiplicity of voices from

the threat of unfair competition by vertically integrated cable

monopolies, id. at 646-48, the market correction was justified.

This Court has unanimously read Turner I as turning on the

existence of a severe market dysfunction created by cable’s

“monopolistic autonomy.” Hurley v. Irish-Am. Gay, Lesbian &

Bisexual Group, 515 U.S. 557, 577 (1995).

The “marketplace of ideas” is the most familiar First

Amendment metaphor because it embodies the most endur-

ing and fundamental of First Amendment principles. Diver-

sity and a multiplicity of voices are, to be sure, important

virtues in a marketplace of ideas. But under the First

Amendment, such ends are achieved by ensuring a free and

open marketplace in which programs and ideas can compete

vigorously for the ear of the audience. After all, Justice

Holmes’ vision of “a free trade in ideas” in which “the best

test of truth is the power of the thought to get itself accepted

in the competition of the market,” Abrams v. United States,

250 U.S. 616, 630 (1919) (Holmes, J., dissenting), is funda-

mentally at odds with the notion that Congress may override

the free market’s rejection of speech in order to create a

marketplace more to its liking. For this reason, it has always

been “a central tenet of the First Amendment that the gov-

ernment must remain neutral in the marketplace of ideas.”

FCC v. Pacifica Found., 438 U.S. 726, 745-46 (1978) (plurality

opinion). The governmentally dictated multiplicity of

SHVIA, overriding the audience’s own choices in order to

achieve diversity by state command, is more reminiscent of

the Maoist doctrine of “let a thousand flowers bloom.” Such

an approach is wholly alien to our Constitution.

3. The court below seized upon this Court’s statement

in Turner II that “ ‘[fJederal policy . . . has long favored

preserving a multiplicity of broadcast outlets regardless of

whether the conduct that threatens it is motivated by anti-

competitive animus or rises to the level of an antitrust

violation.’” App. 55a (quoting 520 U.S. at 194). But this

observation cannot be understood to adopt the view

expressed by Justice Breyer in his separate opinion rejecting

the plurality’s reliance upon the “anticompetitive rationale”

for upholding cable must-carry. In this passage, the Court

merely observed that, to justify overriding First Amendment

rights in order to promote diversity, there must be some

“conduct” that threatens multiplicity; the rest of the Turner

opinions makes plain that the conduct must threaten to

distort the marketplace of ideas, even if it does not rise to the

level of a cognizable antitrust violation.

Thus, this Court’s First Amendment jurisprudence has

not read the Sherman Act into the Constitution; Congress is

not handcuffed by its own antitrust laws when acting to

ensure the free flow of information in a dysfunctional mar-

ketplace of ideas. But just as assuredly, Congress is hand-

cuffed by the First Amendment when it regulates a

genuinely open and competitive speech marketplace to

ensure the perpetuation of certain voices that Congress

values but the audience — the consumers in that marketplace

— does not. However much “federal policy favors multi-

plicity,” Congress surely may not stifle “conduct” that

“threatens” multiplicity when the conduct in question is not

predatory monopolistic behavior, but is instead the very ebb

and flow of free market forces (audience demand, speaker

response) that the First Amendment was designed to protect.

The cases cited by the Turner II Court in support of the

quoted passage-merely confirm that fostering a diversity and

multiplicity of voices in the marketplace of ideas are impor-

tant governmental interests. But none of these cases (or any

other decision of this Court) have ever held that this purpose

alone can sustain (even under intermediate scrutiny, let alone

strict scrutiny) a regulation that trenches upon First Amend-

ment rights. The cited cases either involved the controversial

Red Lion standard applicable only_to radio and television

broadcasters, or presented no First Amendment issue at all.

See National Broad. Co. v. United States, 319 U.S. 190, 227

(1943) (upholding, on basis of scarcity of radio spectrum,

various FCC regulations about station affiliation and owner-

ship); National Citizens Comm. For Broad., 436 U.S. at 799

(upholding, under Red Lion, FCC limits on television-news-

paper cross-ownership); Capital Cities Cable, Inc. v. Crisp, 467

U.S. 691, 714 (1984) (Court declined to address First Amend-

ment issue); United States v. Midwest Video Corp., 406 U.S. 649,

667-69 & n.27 (1972) (plurality opinion) (no First Amendment

issue in case); FCC v. WNCN Listeners Guild, 450 U.S. 582, 604

(1981) (upholding, under Red Lion, policy of relying on mar-

ket forces to ensure diversity in radio station formats).”

In sum, SHVIA’s carry-one, carry-all regime restricts the

editorial discretion of satellite carriers and burdens the

speech of popular broadcasters in order to promote the

speech of unpopular competing broadcasters. SHVIA’s pref-

erence for the programming of independent broadcast sta-

tions is thus a speech preference for its own sake. A writ of

certiorari is warranted, not only to preserve an important

national television medium’s First Amendment right to

choose “what to say and what to leave unsaid,” Pacific Gas &

Elec., 475 U.S. at 11 (plurality opinion), but also to protect the

editorial freedom of all other speakers from infringement by

7 Indeed, FCC v. WNCN confirmed, at great length, “that

market forces were the best available means of producing diversity,”

and that “the market is far more flexible than governmental

regulation and responds more quickly to changing public tastes.”

450 U.S. at 590; see also FCC v. Sanders Bros. Radio Station, 309 U.S.

470, 475 (1940).

any government body with a claimed interest in promoting a

“multiplicity of information sources.”

Il. THE COURT OF APPEALS DISREGARDED THIS

COURT’S PRECEDENTS CONCERNING THE APPLI-

CATION OF STRICT SCRUTINY.

A. Speech-Triggered Restrictions on Editorial Discre-

tion Are Content-Based.

Although the Turner I Court found that the cable must-

carry requirement “interfere[d] with cable operators’ edi-

torial discretion,” it held that the requirement was not con-

tent-based on its face because all cable companies were

uniformly required to carry all local stations, “regardless of

the programs or stations they now offer or have offered in the

past.” 512 U.S. at 643-44 (emphasis added). The Court

emphasized that “[nJothing in the [Cable] Act imposes a

restriction, penalty or burden by reason of the views, pro-

grams or stations that cable operator has selected or will select.”

Id. at 644 (emphasis added). A cable operator, therefore,

“cannot avoid or mitigate” its must-carry obligation “by

altering the programming it offers to subscribers.” Id.

The Court did not choose these words by accident:

“stations” are categorized with “programs” because both are

content. A television station is to its programs what a maga-

zine is to its articles. And television viewers select television

stations for the same reason that magazine readers select

magazines — because of their content. Like a magazine, a

television station is defined by, and has no meaningful iden-

tity apart from, its content. Turner I recognized that because

selection of a local station for carriage (like selection of an

article for magazine publication) is inherently content-based,

it follows that a regulatory burden triggered by that selection

is also inherently content-based. Id. at 643-44, 653-55.

SHVIA’s conditional forced-carriage requirement, in

contrast to the mandatory across-the-board cable carriage

requirement at issue in Turner, is on its face entirely depen-

dent upon the “stations the [satellite] operator has selected or

will select.” Id. at 644 (ernphasis added). Forced carriage of

unwanted local stations is required in a given market if, and

only if, the satellite carrier offers the programming of one or

more wanted local broadcasters in that market. Thus, a

satellite carrier, unlike a cable operator, “can avoid or miti-

gate” SHVIA’s forced-carriage requirements “by altering the

programming it offers to subscribers.” Id.

SHVIA is thus materially indistinguishable from the

right-of-reply statute struck down in Miami Herald Publishing

Co. v. Tornillo, 418 U.S. 241 (1974). Because a newspaper’s

statutory obligation to “grant access to the messages of

others” was triggered by the content of the newspaper, this

Court struck it down as a content-based “intrusion on the

newspaper’s ‘editorial control and judgment.’ ” Turner I, 512

U.S. at 653 (quoting Tornillo, 418 U.S. at 258).

The Court of Appeals never even cited Tcrnillo, let alone

tried to distinguish it. Rather, the Fourth Circuit suggested

that “SHVIA’s carriage obligations are not triggered simply

by the decision to carry a local broadcast station in a given

market,” but rather “are triggered by the decision to carry

that station by making use of the § 122 license.” App. 30a

(emphasis in original). Because a “satellite carrier that pri-

vately negotiates the required copyright clearances can

retransmit the signal of a local broadcast station without

incurring any carriage obligations,” the court believed that

the forced-carriage requirement depends not on a “satellite

carrier’s choice of content, but on its decision to transmit that

content by using” the statutory copyright license. Id. at

30a-31a.

The suggestion that satellite carriers may avoid the

restriction on their editorial discretion by privately negotiat-

ing the thousands of copyright clearances required for even a

single day of programming is both legally and factually

wrong. As an initial matter, petitioners specifically alleged in

their complaint that it is an “almost insuperable practical

problem” to negotiate retransmission agreements with each

individual owner of every copyrighted work contained

within a local television broadcast station’s programming.

Complaint { 37, App. 365a. This appeal arises from the

district court’s decision granting respondents’ motion to dis-

miss, and so the allegations in the complaint must be

accepted as true. E.g., Swierkiewicz v. Sorema N.A., 534 US.

____ (2002), slip op. at 1 n.1. The refusal of the court below to

accept that allegation as true alone mandates reversal.

But petitioners’ complaint is hardly the only source for

the proposition that, as a practical matter, retransmission of

local television broadcast stations is not possible for any

multi-channel television service provider without a statutory

to carry even a single broadcast station absent a statutory

license, a satellite carrier would have to negotiate individual

clearances with the countless “copyright holders of each of

the programs, advertisements, and music aired by that sta-

tion,” 24 hours per day, 365 days per year. FCC SHVIA

Order { 15, App. 152a-153a. Both Congress and this Court

have recognized that “cable operators would face virtually

insurmountable technical and logistical problems if they

were required to block out all programs as to which they had

not directly obtained copyright permission from the owner.”

Crisp, 467 U.S. at 709 n.13 (citing legislative history to 1976

amendments creating statutory license for cable). No carrier,

satellite or cable, has ever been able to secure such clearances,

despite their enormous economic incentive to do so.

In fact, SHVIA owes its very existence to this practical

reality, for Congress recognized that without the statutory

license, satellite carriers could not provide local television

stations to their subscribers. See, e.g., Conference Report 93,

App. 360a (“[S]ection 122 license allows satellite carriers for

the first time to provide their subscribers with the television

signals they want most: their local stations.) (emphasis

added). Indeed, the Fourth Circuit itself repeatedly acknowl-

edged this practical reality. See App. 49a (Congress recog-

nized “that satellite carriers needed a statutory copyright

license to be able to compete with cable.”); id. at 13a-14a; id.

at 18a (“high transaction costs of obtaining the rights to

retransmit broadcast” signals effectively precluded local ser-

vice); id. at 20a (same).

Moreover, there is no doubt that SHIVA’s copyright

license is, at the very least, a valuable benefit to satellite

carriers, and the Constitution does not permit Congress to

condition such a benefit on the surrender of a constitu-

tionally protected right. See, e.g., Legal Servs. Corp. v. Velas-

quez, 531 U.S. 533, 541-47 (2001). Congress can no more

condition SHVIA’s copyright license on a surrender of satel-

lite carriers’ editorial freedom than the City of Boston can

condition a permit for the St. Patrick’s Day parade on the

parade organizers’ inclusion of groups whose messages the

organizers do not wish to convey. Cf. Hurley, 515 U.S. at 559.

In Hurley, forced inclusion of unwanted speakers could not

be justified even by a sovereign State’s weight interest in

enforcing its civil rights laws. Here, a fortiori, SHVIA’s forced

inclusion of unpopular local broadcasters cannot be justified

by a congressional desire to promote voices that have failed

to garner an audience in an open and properly functioning

marketplace of ideas.

B. SHVIA’s Purpose Is Content-Based.

Strict scrutiny is appropriate here for the independent

reason that the purpose of the carry-one, carry-all require-

ment relates to the content of speech. See Turner I, 512 U.S. at

643. As the court below conceded, Congress enacted the

restriction “to promote the survival of independent broad-

cast stations,” App. 3la, because those stations — and those

stations alone — were threatened by the “practical realities of

the television marketplace.” Id. at 21a. Unhappy with the

natural functioning of the marketplace, Congress “targeted

[satellite] television in a purposeful attempt to interfere with

its First Amendment activities,” Leathers v. Medlock, 499 U.S.

439, 448 (1991) - namely, editorial choices made in confor-

mity with audience demand.

Regulation that overrides editorial choice in order to

favor certain speakers over others within the same medium

engenders “risk . . . similar to that from content-based

regulation: It will distort the market for ideas,” and thus

warrants strict scrutiny. Id.; see also Turner I, 512 U.S. at

658-60. Indeed, if SHVIA’s tying arrangement were unrelated

to the relatively unpopular programming of independent

broadcasters, “there would have been no perceived need for

Congress to ‘equalize the relative ability’ ” of those stations

to reach viewers in an open and competitive market. Turner

I, 512 U.S. at 658 (quoting Buckley, 424 U.S. at 48).

The court below refused to apply strict scrutiny because

it deemed this aspect of SHVIA to be indistinguishable from

cable must-carry. The latter, we are told, also “primarily

benefited independent broadcast stations,” as the Turner

Court “understood perfectly well.” App. 31a. But in Turner,

Congress had not discriminated “among different speakers

within a single medium.” Turner I, 512 U.S. at 659. In con-

trast, as the court below conceded elsewhere in its opinion,

SHVIA distinguishes between major market independent

broadcast stations and network affiliates in smaller markets.

App. 23a-24a. In any event, the passage relied upon by the

Court of Appeals states merely that “Congress was under no

illusion that there would be a complete disappearance of

broadcast television nationwide in the absence of must-

carry” because it understood that cable systems would con-

tinue to carry the most popular broadcasters. Turner II, 520

U.S. at 191. This observation came directly on the heels of

this Court’s recognition that Congress acted because

“increasing market penetration by cable services, as well as

the expanding horizontal concentration and vertical integra-

tion of cable operators, combined to give cable systems the

incentive and the ability to delete, reposition, or decline

carriage to local broadcasters in an attempt to favor affiliated

cable programmers.” Id.

Thus, it is clear that Turner permitted cable must-carry’s

invasion of First Amendment interests only because that

measure protected the broadcast medium as a whole from a

substantial defect in the market for cable carriage, not

because it protected a particular subset of broadcasters from

the natural operation of a properly functioning, genuinely

competitive market for ideas. Whereas cable must-carry was

designed to protect all local broadcast stations from unfair

competition for cable carriage by monopoly operators, Con-

gress designed SHVIA to protect only independent local

broadcasters from fair competition for satellite carriage with

popular, typically network-affiliated broadcasters.

Ill. THE COURT BELOW REFUSED TO APPLY THE

STANDARD ANNOUNCED IN TURNER II, AND

FUNDAMENTALLY REWORKED THIS COURT’S

INTERMEDIATE SCRUTINY JURISPRUDENCE.

The Court of Appeals’ intermediate scrutiny analysis

rests upon a wholly unprecedented, plainly erroneous rule of

law: according to the court, a law restricting speech will

survive intermediate scrutiny so long as the government has

substantial evidence that another statute imposing a similar

speech restriction on a different medium advances an impor-

tant interest. Such a showing is sufficient, the Fourth Circuit

held, even though the government has no evidence (much

less substantial evidence) that the speech restriction at issue

advances its interest.

Both Turner decisions emphasized that a forced-carriage

requirement can advance the interest of “preserving” a mul-

tiplicity of broadcast outlets only if it can be shown that,

absent the requirement, non-carried stations would “deterio-

rate to a substantial degree or fail altogether.” Turner I, 512

U.S. at 666; Turner II, 520 U.S. at 208. There is no real dispute

that the government cannot meet that standard in this case -

it has no evidence that even a single broadcast station (much

less the “significant numbers” this Court required in Turner I,

512 U.S. at 666, and Turner II, 520 U.S. at 195), would

substantially deteriorate or fail absent the carry-one, carry-all

restriction on satellite carriers.6 Implicitly acknowledging

8 The Court of Appeals did quote the Conference Committee’s

assertion that broadcast stations not carried by satellite “would face

the same loss of viewership Congress previously found with respect

to cable noncarriage.” App. 42a (quoting Conference Report at 101).

The statement, however, is absurd on its face, given that cable has 67

percent of the market while satellite only has 15 percent. The court

read this assertion to suggest merely that such stations “would

suffer some degree of harm in the absence of the carry one, carry all

rule.” Id. at 44a. In any case, to the extent the quoted statement could

be read to suggest that SHVIA’s forced-carriage regime is necessary

to prevent substantial deterioration or failure of significant numbers

eater ec iecciei

this reality, the court below simply refused to apply “Turner

II's substantial deterioration standard,” holding that it “does

not work here.” App. 45a.

Specifically, the panel held that even though this Court

required Congress to satisfy the “substantial deterioration”

standard when it legislated to redress “the unitary threat”

posed by the cable industry, Congress did not have to meet

this Court’s standard when it passed SHVIA, but instead

“properly considered the effects of satellite and cable together

in deciding to protect over-the-air viewers from any signifi-

cant reduction in their viewing options.” App. 45a-46a

(emphasis added). The panel thus effectively imputed to the

satellite industry the anticompetitive traits of the cable indus-

try, concluding that the two different mediums constitute “a

common threat” to over-the-air viewers. Id. at 48a.? In

essence, the Fourth Circuit held that SHVIA survives inter-

mediate scrutiny even though Congress had no evidence that

SHVIA itself actually advances the governmental interest of

preserving a multiplicity of local broadcast stations.

This holding eviscerates the essential elements of inter-

mediate scrutiny analysis - namely, that the government

“must demonstrate that the recited harms are real, not

merely conjectural, and that the regulation will in fact allevi-

ate these harms in a direct and material way.” Turner I, 512

of over-the-air stations, it is utterly devoid of any evidentiary

support.

9 The court briefly attempted to justify the carry-one, carry-all

restriction as advancing a second interest, protecting “competition

in local markets for broadcast television advertising.” App. 35a.

However, there is no mention of this purported interest in the

statute, committee reports, or floor debates; it was advanced for the

first time in the FCC’s brief in the Court of Appeals. It is settled that

speech cannot be burdened in order to advance “conjectural”

interests conjured up as part of the government's litigation strategy,

for “[s]tatements from the government's brief are not conclusive as

to the objects of the statute . . . as we are concerned with the

objectives of Congress, not those of” the government’s lawyers.

Nguyen v. INS, 533 U.S. 53, 121 S. Ct. 2053, 2063 (2001).

U.S. at 664 (plurality opinion). This Court has always insisted

that a challenged restriction on speech must itself “advance

the asserted state interests sufficiently to justify its abridge-

ment of expressive activity.” Los Angeles v. Preferred Communi-

cations, Inc., 476 U.S. 488, 496 (1986) (internal quotation

omitted). The government must establish a causal link

between the challenged legislation and the advancement of

the claimed governmental interest. “This Court may not

simply assume that the ordinance will always advance the

asserted state interests sufficiently to justify its abridgement

of expressive activity.” Id. (internal quotation omitted). Here,

the Court of Appeals simply exempted the government from

its obligation to demonstrate that the speech restriction in

this statute, regulating the speech of the satellite industry,

would in any material way advance its interest.

The First Amendment does not permit Congress to bur-

den speech in such an overbroad manner. In Turner II, this

Court considered whether the Cable Act’s forced-carriage

rule was overbroad because it applied even to individual

cable operators lacking anticompetitive motives to deny car-

riage to broadcasters and to broadcasters that would survive

non-carriage. 520 U.S. at 216. The Court was “not persuaded

that either possibility is so prevalent that must-carry is sub-

stantially overbroad,” for it found that “cable systems serv-

ing 70 percent of [cable] subscribers are vertically integrated

with cable programmers, so anticompetitive motives may be

implicated in a majority of systems’ decisions not to carry

broadcasters.” Id. at 216-17. This analysis clearly suggests

that the broad-brush application of a forced-carriage rule

might very easily be overbroad even within the same medium;

Congress surely cannot impose a new and substantively

different forced-carriage restriction on a completely different

medium unless that new restriction could be independently

shown to actually advance an important governmental inter-

est. See generally Lorillard Tobacco, 121 S. Ct. at 2428 (“A

regulation cannot be sustained if it provides only ineffective

or remote support for the government’s purpose, or if there

is little chance that the restriction will advance the State’s goal

. ”) (internal citation omitted) (emphases added).

The holding below also flouts the settled requirement

that a restriction on speech must “ ‘promote[ ] a substantial

government interest that would be achieved less effectively

absent the regulation.’ ” Ward v. Rock Against Racism, 491 U.S.

781, 798-99 (1989) (citation omitted). A restriction on speech

“is narrowly tailored if it targets and eliminates no more

than the exact source of the ‘evil’ it seeks to remedy.” Frisby

v. Schultz, 487 U.S. 474, 485 (1988) (applying intermediate

scrutiny). Because no broadcast stations face substantial dete-

rioration or failure absent the carry-one, carry-all restriction

on editorial discretion, the interest in promoting multiplicity

will not “be achieved less effectively absent the restriction,”

and satellite carriers’ editorial choices are not “the exact

source of the ‘evil’ ” of diminished multiplicity.

The Court of Appeals attempted to justify examination

of the combined effect of cable and satellite carriage of

broadcast stations with a hypothetical scenario in which

“five different television delivery mediums each served 15

percent of television households, together serving 75 percent

of those households.” App. 46a. If the government were

required to justify its forced-carriage rule separately with

respect to each medium, the court observed, it could not

show that forced carriage was required to prevent substan-

tial deterioration or failure of local broadcast stations even

though collectively the five mediums produced that result.

Id. But in the panel’s hypothetical, the government’s asserted

interest in promoting multiplicity is advanced by imposing it

on all five mediums for they cannot be distinguished from

one another. In contrast, in this case, it is not: under the

holding in Turner II, cable must-carry is both necessary and

sufficient to promote multiplicity, while the carry-one, carry-

all restriction is neither necessary nor sufficient to prevent

“substantial deterioration or failure” of any broadcast sta-

tions. _

Moreover, the Fourth Circuit’s reasoning only under-

scores the untenable nature of the “multiplicity” rationale. A

moment's reflection demonstrates that the fully functioning

marketplace described by the court’s hypothetical must, in

fact, be immune from a forced-carriage rule, or else the First

Amendment has indeed disintegrated. For if Congress can

group together a number of market participants who sep-

arately each control only a marginal segment of a commer-

cial marketplace of ideas, but who when viewed together

control a majority, and can use that “majority control” to

justify usurping the editorial discretion of all of those

speakers in order to promote an even greater “multiplicity”

of voices, then it must be the case that Congress can impose

a forced carriage rule on every speaker in every marketplace.

Whether looking at bookstore owners, book publishers,

newspapers, or movie houses, it will always be possible to

group together a set of speakers who control 75 percent or

more of the market. It will also always be possible to find that

these “winners” in the marketplace of ideas constitute a

“joint threat” to the viability of other voices, whose unpop-

ularity may even lead to their extinction. Accordingly, if the

Court of Appeals is right, Congress can always protect the

losers in the marketplace of ideas by requiring the winners

to “carry” the speech.

CONCLUSION

For the foregoing reasons, we respectfully submit that

this petition for a writ of certiorari be granted.

March 7, 2002

Respectfully submitted,

CHARLES J. CoopER*

MICHAEL W. Kirk

BRIAN S. KOUKOUTCHOS

HamisH P.M. Hume

Cooper & Kirk, PLLC

1500 K Street, N.W., Suite 200

Washington, DC 20005

(202) 220-9600

Attorneys for Petitioner

*Counsel of Record

APPENDIX TABLE OF CONTENTS

Page

Satellite Broad. & Communications Ass’n v. FCC, 275

Bo gE eh er re rae la

Judgment, Satellite Broad. & Communications Ass'n

PU, ee. GED ESE CEM. 7, BOE) oes cdvccc vas 67a

Judgment, Satellite Broad. & Communications Ass'n

Order, Satellite Broad. & Communications Ass‘n v.

Pia Pee. Warde) GPO. Bly Bees 5 kos nck kanes veces 73a

Order, Satellite Broad. & Communications Ass‘n v.

Pits Pe Wee CO Boy GED s oie ska cide ues 74a

Satellite Broad. & Communications Ass'n v. FCC, 146

oy | a oT) 75a

Order, Satellite Broad. & Communications Ass’n v.

FCC, No. 00-1571-A (June 19, 2001)............. 130a

FCC Report and Order, 16 F.C.C.R. 1918 (Nov. 30,

Caan a ade ce alee een cewek ees oe 134a

Satellite Home Viewer Improvement Act of 1999,

Pub. L. No. 106-113, 113 Stat. 1501a-523 (1999)

| ee rar eee re rr re mr re eer 336a

S. Rep. No. 106-51 (1999) (excerpt) ................359a

H.R. Conr. Rep. No. 106-464 (1999) (excerpts)...... 359a

Complaint, Satellite Broad. & Communications Ass’n

v. FCC, No. 00-1571-A (Sept. 20, 2000) (excerpt) . . 364a

PUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

SATELLITE BROADCASTING AND

COMMUNICATIONS

ASSOCIATION,

Petitioner, No. 01-1151

FEDERAL COMMUNICATIONS

COMMISSION; UNITED STATES

OF AMERICA,

Respondents,

ASSOCIATION OF AMERICA’S

PUBLIC TELEVISION STATIONS;

PUBLIC BROADCASTING

SERVICE; CORPORATION FOR

PUBLIC BROADCASTING;

NATIONAL ASSOCIATION OF

BROADCASTERS; CONSUMER

FEDERATION OF AMERICA;

OFFICE OF COMMUNICATION,

UNITED CHURCH OF CHRIST,

INCORPORATED,

Intervenors.

ECHOSTAR SATELLITE

CORPORATION,

Petitioner,

No. 01-1271

FEDERAL COMMUNICATIONS

COMMISSION; UNITED STATES

OF AMERICA,

Respondents,

ASSOCIATION OF AMERICA’S

PUBLIC TELEVISION STATIONS;

PUBLIC BROADCASTING

SERVICE; CORPORATION FOR

PUBLIC BROADCASTING;

NATIONAL ASSOCIATION OF

BROADCASTERS; CONSUMER

FEDERATION OF AMERICA;

OFFICE OF COMMUNICATION,

UNITED CHURCH OF CHRIST,

INCORPORATED,

Intervenors.

NATIONAL ASSOCIATION OF

BROADCASTERS,

Petitioner,

PAXSON COMMUNICATIONS

CORPORATION,

Intervenor,

FEDERAL COMMUNICATIONS

COMMISSION; UNITED STATES

OF AMERICA, :

Respondents,

ASSOCIATION OF AMERICA’S

PUBLIC TELEVISION STATIONS;

PUBLIC BROADCASTING

SERVICE; CORPORATION FOR

PUBLIC BROADCASTING;

CONSUMER FEDERATION OF

AMERICA; OFFICE OF

COMMUNICATION, UNITED

CHURCH OF CHRIST,

INCORPORATED,

Intervenors.

No. 01-1272

On Petitions for Review of an Order of the

Federal Communications Commission.

(00-96, 99-363)

SATELLITE BROADCASTING AND

COMMUNICATIONS

ASSOCIATION;

COMMUNICATIONS No. 01-1818

CORPORATION; DISH, LIMITED,

d/b/a DISH Network; DIRECTV

ENTERPRISES, INCORPORATED;

DIRECTV OPERATIONS,

INCORPORATED; DIRECTV,

INCORPORATED,

Plaintiffs-Appellants,

FEDERAL COMMUNICATIONS

COMMISSION; WILLIAM E.

KENNARD, Chariman; SUSAN

NESS, Commissioner, in her

official capacity; HAROLD

FURCHTGOTT-ROTH; MICHAEL

K. POWELL, Commissioner, in his

official capacity; GLORIA

TRISTANI, Commissioner, in her

official capacity; UNITED STATES

OF CONGRESS; JAMES H.

BILLINGTON, Librarian of

Congress; MARY PETERS, Register

of Copyrights, in her official

capacity; UNITED STATES OF

AMERICA,

Defendants-Appellees,

NATIONAL ASSOCIATION OF

BROADCASTERS; THE

ASSOCIATION OF LOCAL

TELEVISION STATIONS,

INCORPORATED; THE

UNIVISION NETWORK LIMITED

PARTNERSHIP AND UNIVISION

TELEVISION STATIONS,

INCORPORATED; ASSOCIATION

OF AMERICA’S PUBLIC

TELEVISION STATIONS; PUBLIC

BROADCASTING SERVICE;

CORPORATION FOR PUBLIC

BROADCASTING,

Intervenors/Defendants-Appellees.

PEGASUS COMMUNICATIONS

CORPORATION; CHANNEL

MASTER LLC,

Parties in Interest.

CONSUMER FEDERATON OF

AMERICA; OFFICE OF

COMMUNICATION, UNITED

CHURCH OF CHRIST,

INCORPORATED,

Amici Curiae.

NATIONAL CABLE SATELLITE

CORPORATION (C-SPAN);

SPACE SYSTEMS/LORAL,

INCORPORATED; PAXSON

COMMUNICATIONS

CORPORATION; NATIONAL

ALLIANCE FOR MEDIA ARTS &

CULTURE; ASSOCIATION OF

INDEPENDENT VIDEO AND

FILMMAKERS; VIRGINIA

CITIZENS CONSUMER COUNCIL;

CONEXANT SYSTEMS,

INCORPORATED; BROADCOM

CORPORATION,

Movants.

Appeal from the United States District Court

for the Eastern District of Virginia, at Alexandria.

Gerald Bruce Lee, District Judge.

(CA-00-1571-A)

Argued: September 25, 2001

Decided: December 7, 2001

Before WIDENER, NIEMEYER, and MICHAEL, Circuit

Judges.

Petitions for review denied and judgment affirmed by

published opinion. Judge Michael wrote the opinion, in

which Judge Widener and Judge Niemeyer joined.

COUNSEL

ARGUED: Charles Justin Cooper, Cooper, Carvin &

Rosenthal, P.L.L.C., Washington, D.C., for Satellite, et al.

Donald Beaton Verilli, Jr., Nory Miller, Jenner & Block,

L.L.C., Washington, D.C., for NAB. Mark Bernard Stern,

Appellate Staff, Civil Division, United States Department

of Justice, Washington, D.C.; Louis Emmanuel Peraertz,

Special Counsel, Federal Communications Commission,

Washington, D.C., for Federal Appellees. ON BRIEF:

Michael W. Kirk, Victor J. Wolski, Cooper, Carvin &

Rosenthal, P.L.L.C., Washington, D.C.; Brian

Koukoutchos, Mandeville, LA; Charles G. Cole, Pantelis

Michalopoulos, Rhonda M. Rivens Bolton, Steptoe &

Johnson, L.L.P., Washington, D.C., for Satellite, et al.

Henry L. Baumann, Benjamin F.P. Ivins, National Associa-

tion of Broadcasters, Washington, D.C.; Thomas P. Olson,

Wilmer, Cutler & Pickering, Washington, D.C., for NAB,

et al. Stuart E. Schiffer, Acting Assistant Attorney Gen-

eral, Jacob M. Lewis, Appellate Staff, Joseph W. Lobue,

Hannah Stires, Federal Programs Branch, Civil Division,

United States Department of Justice, Washington, D.C.;

Jane A. Mago, General Counsel, Daniel M. Armstrong,

Associate General Counsel, Federal Communications

Commission, Washington, D.C., for Federal Appellees.

Robert A. Long, Jr., Mark H. Lynch, David L. Franklin,

Covington & Burling, Washington, D.C.; Marilyn Mohr-

man-Gillis, Vice-President, Policy and Legal Affairs,

Lonna Thompson, Director of Legal Affairs, Andrew D.

Cotlar, Staff Attorney, Association of America’s Public

Television Stations, Washington, D.C.; Kathleen Cox,

Senior Vice President Policy, General Counsel and Corpo-

rate Secretary, Robert M. Winteringham, Senior Staff

Attorney, Corporation for Public Broadcasting, Washing-

ton, D.C.; Gregory Ferenbach, Senior Vice President and

General Counsel, Paul Grego, Vice President and Deputy

General Counsel, Public Broadcasting Service, Alex-

andria, Virginia, for Intervenors Public Television Sta--

tions, et al. Harold Feld, Andrew Jay Schwartzman,

Cheryl A. Leanza, Media Access Project, Washington,

D.C., for Intervenors Consumer Federation, et al. Craig C.

Reilly, Richards, McGettigan, Reilly & West, P.C., Alex-

andria, Virginia, for Intervenor Paxson.

OPINION

MICHAEL, Circuit Judge:

Direct broadcast satellite (DBS) service has recently

joined cable and broadcast television as a major force in

the market for delivering television programming to con-

sumers. In these consolidated cases, representatives of

the satellite industry raise various constitutional chal-

lenges to Congress’s efforts to regulate competition in

that market through the Satellite Home Viewer Improve-

ment Act of 1999 (SHVIA). Pub. L. No. 106-113, 113 Stat.

1501A-523. In addition, petitioners from the broadcast

industry argue that one provision (the “a la carte rule”) of

the FCC’s order implementing SHVIA must be struck

down as an unreasonable interpretation of the statute.’

By enacting SHVIA, Congress sought to promote compe-

tition between the satellite and cable industries by creat-

ing a statutory copyright license that allows satellite

carriers to carry the signals of local broadcast television

stations without obtaining authorization from the holders

of copyrights in the individual programs aired by those

stations. The Act also imposes a “carry one, carry all”

rule, which was designed to “preserve free television for

those not served by satellite or cable and to promote

widespread dissemination of information from a mullti-

plicity of sources.” H.R. Conf. Rep. No. 106-464, at 101

(1999) (SHVIA Conference Report). The rule, which is

1 The parties in these cases fall into three groups, according

to their interests regarding SHVIA: satellite industry

representatives (or the “satellite carriers”), including the

Satellite Broadcasting and Communications Association

(SBCA), DirecTV, Inc., EchoStar Communications Corp., and

Dish, Ltd., a wholly owned subsidiary of EchoStar doing

business as DISH Network; broadcast representatives (or the

“broadcasters”), including the National Association of

“Broadcasters (NAB), Paxson Communications Corp., and the

Public Broadcasting Service (PBS); and the United States,

essentially the Federal Communications Commission (FCC).

scheduled to take effect on January 1, 2002, will require

satellite carriers that choose to take advantage of the

statutory copyright license by carrying one broadcast

station in a local market to carry all requesting stations

within that market. We hold, as did the district court, that

the carry one, carry all rule does not violate either the

First Amendment or the other constitutional provisions

cited by the satellite carriers. We also hold that the FCC’s

a la carte rule, which allows satellite carriers to offer local

broadcast stations to their subscribers either individually

or as part of a single package, is not arbitrary, capricious,

or contrary to law. See 5 U.S.C. § 706(2)(A).

Nearly all consumers receive their television pro-

gramming through one of three delivery systems: broad-

cast television, cable, or satellite. Broadcast television

stations transmit electromagnetic signals over the air, and

these signals can be captured by any receiving television

antenna within range. Twenty percent of American televi-

sion households rely exclusively on broadcast stations for

their television programming. Viewers pay no fee to

receive broadcast signals. Instead, broadcast stations are

supported by advertisers who pay for air time at rates

determined by the audience sizes for particular pro-

grams. The most popular broadcast stations are affiliated

with one of the four major television networks (ABC,

CBS, NBC, and Fox). The major network affiliates com-

pete for viewers and advertisers with various indepen-

dent broadcasters, including independent commercial

ee oe Se.

a oo eo -

stations, noncommercial stations, and affiliates of emerg-

ing networks (UPN, WB, and PAX).?

The broadcasters’ principal competitors in the televi-

sion programming delivery market are the cable and

satellite industries. Cable and satellite companies now

serve around 80 percent of America’s television house-

holds. Unlike broadcasters, their primary source of reve-

nue is subscription fees. Cable television distributes its

signals to subscribers over a local network of wires. It has

for many years been the leading provider of television

programming to American homes. Roughly 67 percent of

television households currently subscribe to cable.

Although cable subscribers must pay for the right to

receive cable signals, they receive better picture quality

and a wider variety of programming options than do

television viewers who rely on antennas. Today, 84 per-

cent of cable systems offer their subscribers at least 30

channels, including national non-broadcast channels

(such as ESPN, MTV, CNN, and The Weather Channel)

and regional non-broadcast channels (such as the New

England Sports Channel). Cable operators also retransmit

the signals of local broadcast stations to their subscribers.

Providers of DBS (direct broadcast satellite) service

deliver television programming by uplinking signals to

satellites orbiting in space and then beaming thosé sig-

nals to receiving dishes connected to subscribers’ televi-

sion sets. In the 1980s satellite dishes were 6 to 10 feet in

2 For ease of reference, we will often describe the class of

broadcast stations that includes commercial independents,

noncommercial stations, and emerging network affiliates as

“independent” broadcast stations.

10a

diameter, and satellite carriers primarily served cus-

tomers in rural areas. During the 1990s satellite carriers

such as EchoStar and DirecTV developed much smaller

dishes and began to compete with cable for subscribers in

urban and suburban areas. Today, satellite carriers pro-

vide service in each of the nation’s 210 television markets

and serve about 13 percent of television households.?

Whereas cable systems deliver their signals to sub-

scribers over local wire networks, satellite is primarily a

national service. The satellites currently used by DBS

providers occupy one of three positions in the Earth’s

orbit (called full CONUS slots) that allow the satellites to

ema RY a single beam covering the entire continental

United States. The beam from a full CONUS satellite

contains multiple frequencies, and compression technol-

ogy enables multiple television channels to be carried on

each frequency. The FCC licenses the use of 32 frequen-

cies at each orbital slot; thus, there are 96 total frequen-

cies that satellite carriers can use to reach satellite

subscribers across the United States. Currently, 50 of

these frequencies are licensed to EchoStar and 46 to

DirecTV. Using their current compression ratios, EchoStar

and DirecTV each have the ability to carry between 450

3 Our figures about the market shares of broadcast

television, cable, and satellite are drawn from In the Matter of:

Annual Assessment of the Status of Competition in the Market for the

Delivery of Video Programming, Seventh Annual Report, CS Docket

No. 00-132, 2001 WL 12938 (2001) (FCC Seventh Annual Report).

The figures reflect industry data through June 2000. See id. at

106. The broadcasters contend that satellite service has grown

significantly since June 2000 and that satellite market share now

exceeds 15 percent of television households.

i aa ta Orig eae mel

lla

and 500 channels via full CONUS satellites. Every chan-

nel carried on these satellites is beamed to the homes of

all subscribers; however, channels that individual sub-

scribers do not pay to receive are blocked by the use of

software in the subscriber’s home satellite equipment.

Like cable, satellite service is financed by subscrip-

tion fees, and it offers better picture quality and more

viewing options than broadcast television. Satellite car-

riers can provide their customers with more national and

regional non-broadcast channels than most cable systems;

yet before SHVIA was passed, satellite carriers had diffi-

culty competing with cable for urban and suburban cus-

tomers. The root cause of this difficulty was plain. Cable

systems, but not satellite carriers, provided their cus-

tomers with access to the signals of local broadcast sta-

tions. This competitive advantage was rooted not only in

technology but also in federal copyright law. Unlike satel-

lite carriers, cable operators have never been required to

obtain copyright clearances for the broadcast program-

ming they retransmit to their subscribers. To explain the

origins of cable’s competitive advantage over satellite, we

must briefly review the history that produced the current

legal regime governing the relationships among cable,

broadcast television, and satellite.

In 1965, long before cable became a major force in the

television programming delivery market, the FCC

imposed “must-carry” rules on cable systems requiring

them to retransmit the signal of any requesting broadcast

station that was “significantly viewed” in its local mar-

ket. See Quincy Cable TV, Inc. v. FCC, 768 F.2d 1434,

1438-43 (D.C. Cir. 1985) (discussing the early history of

12a

cable regulation). The FCC feared that cable might under-

mine free, local broadcasting unless “local broadcasters

were assured access to the whole of their allocated audi-

ence.” Id. at 1441. Specifically, the must-carry rules were

designed to aid newer UHF stations, which lacked the

signal quality enjoyed by more established VHF stations.

The FCC was concerned that in the absence of carriage

obligations cable systems would carry only VHF stations

and that non-carried UHF stations would be placed at a

competitive disadvantage in the race for advertising dol-

lars. See id.

gress passed the Copyright Act of 1976, Pub. L. No.

94-553, 90 Stat. 2541, which provides that owners of copy-

rights in audiovisual works such as television programs

have the exclusive right to authorize public performances

of those works. 17 U.S.C. -§ 106(4). Although the Copy-

right Act of 1909 had granted copyright holders a similar

right to control public performances of copyrighted

works, cable operators’ secondary transmissions of

broadcast programs were not regarded as additional per-

formances of those programs under the 1909 Act and thus

did not infringe upon the intellectual property rights of

the program copyright holders. See Fortnightly Corp. v.

United Artists Television, Inc., 392 U.S. 390, 400-01 (1968).

The 1976 Act’s legislative history reveals that Congress

intended to countermand the result in Fortnightly by des-

ignating cable’s secondary transmissions of broadcast

programs as public performances of those programs: “a

cable television system is performing when it retransmits

the broadcast [of a television program] to its subscribers.”

H.R. Rep. No. 94-1476, at 63 (1976), reprinted in 1976

ab ttn

13a

U.S.C.C.A.N. 5659, 5677. As a result, copyright law now

generally requires parties seeking to retransmit the signal

of a broadcast television station to obtain authorization

from those holding copyrights in each of the programs

broadcast by that station. Cable operators, however, have

never been subject to this general rule. Congress found

“that it would be impractical and unduly burdensome to

require every cable system to negotiate with every copy-

right owner whose work was retransmitted by a cable

system.” Id. at 89, 1976 U.S.C.C.A.N. at 5704. As a result,

the 1976 Copyright Act granted cable operators a statu-

tory license that allows them to retransmit broadcast

television signals without securing authorization from

program copyright holders. See 17 U.S.C. § 111(c).

As cable grew in popularity, cable operators and

cable programmers began to chafe at the FCC’s must-

carry rules. Eventually, cable interests challenged the

rules as an unconstitutional burden on freedom of

speech, and the rules were struck down by the D.C.

Circuit in 1985. See Quincy Cable TV, 768 F.2d at 1463. The

FCC moved quickly to adopt a modified set of carriage

rules, but the D.C. Circuit again decided that the rules

violated the First Amendment. See Century Communica-

tions Corp. v. FCC, 835 F.2d 292, 293 (D.C. Cir. 1987). After

a period of several years during which cable enjoyed the

benefits of a statutory copyright license without the bur-

dens of carriage obligations, Congress reimposed must-

carry rules by passing the Cable Television and Con-

sumer Protection and Competition Act of 1992 (Cable

Act). Pub. L. No. 102-385, 106 Stat. 1460. Like the FCC’s

Original must-carry rules, the Cable Act’s must-carry

rules were designed to protect broadcast stations that

14a

might be refused carriage in the absence of a must-carry

requirement.

The Cable Act must-carry rules were also challenged

on First Amendment grounds, but were ultimately

upheld by the Supreme Court in Turner Broadcasting Sys-

tem, Inc. v. FCC, 512 U.S. 622 (1994) (Turner I), and Turner

Broadcasting System, Inc. v. FCC, 520 U.S. 180 (1997)

(Turner II ). In Turner I the Supreme Court held that the

must-carry rules were content-neutral restrictions on

speech, Turner I, 512 U.S. at 662, reviewable under the

intermediate First Amendment scrutiny standards estab-

lished by United States v. O’Brien. 391 U.S. 367 (1968). The

Court further recognized that the interests served by the

must-carry rules — preserving local broadcast television,

promoting the “widespread dissemination of information

from a multiplicity of sources,” and promoting fair com-

petition in the television programming market — were

important “in the abstract.” Turner I, 512 U.S. at 662-63.

However, the Court remanded the case for further factual

development on the question of whether these interests

were genuinely advanced by the must-carry rules and

whether the rules were a narrowly tailored means of

promoting these interests. After the remand the Court

held in Turner IJ that the cable must-carry rules fully

satisfied the O’Brien test. As a result, cable operators

today enjoy the privileges of a statutory copyright license

but are also bound by carriage obligations.

As the above history indicates, the cable industry

developed within a context of extensive FCC regulations,

but it has been largely unaffected by copyright consider-

ations. Before 1976, cable retransmissions of broadcast

programs were not regarded as additional performances

CO,

15a

of these programs and therefore did not infringe program

copyrights. Since 1976, cable has enjoyed a statutory

until recently enjoyed relative freedom from FCC over-

sight, but its history has been shaped by a series of

changes in federal copyright law. When the 1976 Copy-

right Act was passed, home satellite service did not exist,

and the statutory copyright license created by 17 U.S.C.

§ 111(c) was granted only to cable systems. Although

early satellite carriers lacked the channel capacity to

retransmit the signals of local broadcast stations to the

local audiences of those stations (called “local-into-local”

service), the carriers did have the capacity and the desire

to offer their subscribers some distant network signals. In

other words, they had enough capacity to carry the sig-

nals of network affiliates in a major city (usually New

York) throughout the entire country, but not enough

capacity to carry local network affiliates in smaller cities.

It was unclear, however, whether satellite carriers’ sec-

ondary transmissions of the signals of network affiliates

infringed the copyrights in the various programs broad-

cast by those stations. Satellite carriers argued that they

might be eligible to use the § 111 copyright license as

“cable systems,” 17 U.S.C. § 111(c), or that their second-

ary transmissions of broadcast signals were noninfring-

ing under the exemption for passive carriers in 17 U.S.C.

§ 111(a)(3). Still, they asked Congress to resolve the

uncertainties about their copyright liability by passing

new legislation.

DR EE 06 tt Bead AAD tin Mit A MANGO EE se VE es ore.

tT ABA A OL bet GA NAA 94

Congress responded with the Satellite Home Viewer

Act of 1988. Pub. L. No. 100-667, 102 Stat. 3949. Recogniz-

ing that the high transaction costs involved in clearing

l6a

the rights to network signals might impede the growth of

the fledgling satellite industry, Congress gave carriers a

limited copyright license to retransmit the signals of dis-

tant network broadcast stations to unserved households

that were unable to receive an adequate over-the-air sig-

nal through a conventional rooftop antenna. 17 U.S.C.

§ 119(a)(2)(B) (1994), amended by § 119(a)(2)(B) (Supp. V

1999). “Unserved households” were defined in part as

those located outside a station’s “Grade B contour,” as

defined by FCC regulations. Id. § 119(d)(10) (1994),

amended by § 119(d)(10) (Supp. V 1999). Congress limited

the copyright license to retransmissions to unserved

households in order to respect the terms of network-

affiliate contracts, which grant local affiliates the exclu-

sive right to broadcast their networks’ programming in

their local markets. Congress reasoned that local affiliates

would lose the benefits of their bargained-for exclusivity

rights if satellite carriers were allowed to import distant

network signals into the affiliates’ local markets. The

limited license created by the 1988 Act spurred the

growth of satellite carriers and expanded the viewing

options of unserved households, though it did little to

help satellite effectively compete with cable in urban and

suburban areas where viewers could already receive high

quality broadcast signals.

In the late 1990s two problems led Congress to revisit

its work in the Satellite Home Viewer Act of 1988. First,

cable continued to enjoy a virtual monopoly in subscrip-

tion television services in metropolitan areas, and as a

result cable subscribers were paying too much for those

services. See S. Rep. No. 106-51, at 1-2 (1999). Second, the

1988 Act failed to deal adequately with the problems of

PAW aN Tey terre

Tas Bids ce

17a

satellite subscribers who lived within the Grade B con-

tours of network television stations. Although these sub-

scribers were ineligible to receive distant network signals

under the 1988 Act’s limited copyright licence, many of

them were unable to receive satisfactory over-the-air sig-

nals from their local network affiliates and thus remained

without any meaningful access to network programming.

See id. at 3-6. In addition, administrative difficulties in

deciding which households were genuinely unserved led

to increasingly bitter disputes between satellite carriers

and broadcasters, leaving bewildered, angry consumers

stuck in the middle. See, e.g., ABC, Inc. v. PrimeTime 24, 17

F.Supp.2d 478 (M.D.N.C. 1998), aff'd, 184 F.3d 348 (4th

Cir. 1999).

Progress in satellite technology seemed to hold out a

solution to both of these problems. Satellite carriers had

developed the channel capacity to offer local-isito-local

service to their subscribers in some markets. Congress

recognized that satellite carriers that could offer viewers

access to their local broadcast stations could compete

effectively with cable and drive down the price of sub-

scription television services. See H.R. Rep. No. 106-79, pt.

1, at 14 (1999). In addition, Congress understood that the

difficulties in deciding which households were suffi-

ciently unserved to receive distant network signals would

be irrelevant if satellite subscribers could watch their

local network affiliates. See id.

In 1997 and 1998 Congress conducted extensive hear-

ings on the possibility of extending the satellite carriers’

statutory copyright license to include local-into-local

18a

retransmissions. Representatives from the various indus-

tries had ample opportunities to state their views. Satel-

‘lite industry representatives argued that without a

statutory copyright license, the high transaction costs of

obtaining the rights to retransmit broadcast programs

would effectively prevent satellite carriers from offering

local-into-local service. The satellite representatives fur-

ther explained that their inability to carry local broadcast

stations placed them at a competitive disadvantage to

cable because viewers want to be able to receive all of the

televisions channels they watch from a single source:

“most people who walk into a satellite dealer’s show-

room turn around and walk out because they can’t get

their local TV channels through DBS.” Reauthorization of

the Satellite Home Viewer Act: Hearing Before the Subcommit-

tee on Telecommunications, Trade, and Consumer Protection of

the House Committee on Commerce, 106th Cong. 73 (1999)

(1999 House Hearing) (statement of David Moskowitz, an

EchoStar executive). The cable representatives stressed

the need for regulatory parity, arguing that if satellite

carriers were granted a statutory license comparable to

that enjoyed by cable, they should also be subject to the

must-carry rules and other regulatory constraints

imposed on cable. See The Copyright Office Report on Com-

pulsory Licensing of Broadcast Signals: Hearing Before the

Senate Committee on the Judiciary, 105th Cong. 50 (1997)

(statement of Decker Anstrom, President, National Cable

Television Association). Finally, representatives of the

broadcast industry emphasized that mandatory carriage

rules were needed to ensure that satellite local-into-local

service would not undermine Congress’s interest in

19a

preserving a vibrant system of free, local broadcast televi-

sion. They explained that without carriage rules satellite

carriers would choose to retransmit only the signals of

major network affiliates in most markets and that com-

peting stations in those markets would suffer from the

loss of access to a significant (and growing) part of their

potential audiences:

No rational doubt may exist that a local station

denied access to a portion of its inmarket audi-

ence is injured. Lack of carriage reduces poten-

tial audience and, therefore, actual audience.

Reduced audiences translate to reduced reve-

nue. Even where revenue reductions are less

than fatal, they still affect a station’s ability to

provide the best practicable service to the pub-

lic. At best, a local station which a satellite car-

rier refuses to carry would be placed at a

demonstrable disadvantage vis-a-vis competing

broadcast television stations which are carried.

Broadcast Signals (Part II): Hearing Before the Subcommittee

on Courts and Intellectual Property of the House Committee

on the Judiciary, 105th Cong. 68 n.38 (1998) (1998 House

Hearing) (statement of James J. Popham, Vice President

and General Counsel, Association of Local Television Sta-

tions).

Congress sought to balance all of these concerns

when it enacted SHVIA on November 29, 1999. The Con-

ference Report explained that the legislation was

designed to promote competition between satellite and

cable while “preserv[ing] free television for those not

served by satellite or cable systems.” SHVIA Conf. Rep.

at 101. Two interrelated provisions form the heart of

20a

SHVIA. The first provision, codified at 17 U.S.C. § 122,

amended the Copyright Act to create a statutory copy-

right license for satellite carriers similar to that enjoyed

by cable operators. The license enables satellite carriers to

make secondary transmissions of a broadcast station’s

signal into that station’s local market without obtaining

the authorization of those holding copyrights in the indi-

vidual programs broadcast by that station. 17 U.S.C.

§ 122(a). Satellite carriers that make use of this license

pay no royalties to program copyright holders. The sec-

ond provision, codified at 47 U.S.C. § 338, amended the

Communications Act of 1934 by creating mandatory car-

riage rules, including the carry one, carry all rule that is

the focus of this litigation. 47 U.S.C. § 338(a)(1).

Since SHVIA’s passage in late 1999 satellite carriers

have enjoyed the benefits of the § 122 license without the

burdens of the carry one, carry all rule. In order to phase

in satellite carriage obligations, Congress decided that the

rule would not become effective until January 1, 2002. Id.

§ 338(a)(3). As of that date the rule will require all satel-

lite carriers who use the § 122 license to make local-into-

local retransmissions in a local broadcast market to “carry

upon request the signals of all television broadcast sta-

tions located within that local market.” Id. § 338(a)(1). In

other words, the voluntary decision to carry one local

station in a market under the statutory copyright license

will trigger an obligation to carry all the requesting sta-

tions in that market.*

4 The obligations imposed by_the carry one, carry all rule

are more limited than the name implies. Satellite carriers are not

required to carry local commercial stations whose signals

2la

Like the cable must-carry rules, SHVIA’s carry one,

carry all rule was designed to preserve a rich mix of

broadcast outlets for consumers who do not (or cannot)

pay for subscription television services. SHVIA adopts

much of the machinery of the cable rules. For example,

broadcast stations may seek carriage from satellite car-

riers under either § 338’s mandatory carriage require-

ments, 47 U.S.C. 325(b)(1)(C), or under the Act’s

retransmission consent provision, 47 U.S.C. 325(b)(1)(A),

which allows broadcast stations to receive compensation

from satellite carriers in exchange for permission to

retransmit the broadcast stations’ signals. In allowing

broadcasters to choose between retransmission consent

and mandatory carriage, both SHVIA’s carry one, carry

all rule and the cable must-carry rules recognize the

practical realities of the television marketplace. Major

network affiliates have bargaining power and will be

carried voluntarily in most instances, so they will nor-

mally elect to proceed under the retransmission consent

provision. See Turner II, 520 U.S. at 191, (explaining that

the Cable Act’s retransmission consent provision reflects

the “popularity and strength of some broadcasters”). In

contrast, independent stations (affiliates of emerging

substantially duplicate those of another station in the same

market. 47 U.S.C. § 338(c)(1). In addition, satellite carriers are

not required to carry more than one affiliate of a given network

in any local market unless the market contains two affiliates of

the same network that are licensed to serve communities in

different states. Id. Finally, Congress instructed the FCC to issue

regulations limiting satellite carriers’ obligations to carry

multiple noncommercial broadcast stations in the same market.

i Id. § 338(c)(2).

RT SPOR Bee Eh RS URE aN RT ee

22a

networks, independent commercial stations, and noncom-

mercial stations) may need the protection of must-carry

rules and will normally elect mandatory carriage.

The primary difference between § 338 and the cable

must-carry rules is that § 338’s obligations are condi-

tioned upon the satellite carrier’s voluntary choice to

make use of the § 122 license in a particular television

market, but the cable must-carry rules are mandatory in

all markets. This difference reflects the technological dis-

similarities between cable and satellite. Cable systems are

local, and nearly all have enough channel capacity to

_carry all the broadcast stations in their local market and

still provide an attractive mix of national and regional

non-broadcast programming. The satellite carriers, in

contrast, currently beam the same 450 to 500 channels

throughout the continental United States and thus could

not comply with a rule requiring them to retransmit the

signals of each of the country’s roughly 1,600 local broad-

cast stations. See 1999 House Hearing at 95 (statement of

David Moskowitz). While Congress recognized that satel-

lite technology continues to improve and that eventually

an unconditional must-carry rule might be possible, it

still had to decide how to structure the satellite copyright

license in the interim.

5 Congress, for example, heard testimony from satellite

executives outlining plans to develop spot beam satellites,

which will have a much smaller footprint (geographic area

where the satellite’s beam is received) than the satellites

currently orbiting in full CONUS slots. See H.R. Rep. No. 106-79,

pt. 1, at 14 (1999); Satellite/Cable Competition: An Examination of

the EchoStar/MCI Deal. Hearing Before the Subcommittee on

Antitrust, Business Rights, and Competition of the Senate Committee

a A es we eK.

23a

Although minor variations were possible, Congress

had two basic options. It could have decided to give

satellite carriers a station-by-station copyright license

that could be used free of carriage obligations. Under

such a license, satellite carriers could “cherry pick” the

stations they wanted in each local market. Congress pre-

dicted that in practical terms a station-by-station license

would result in satellite carriers using their available

local-into-local capacity to carry only the major network

affiliates in as many markets as possible, beginning with

the largest markets and working toward the smaller ones.

The other choice was to impose the carry one, carry all

rule in order to create a market-by-market copyright

license. This kind of license forces satellite carriers to

expand their local-into-local service one market at a time,

beginning with the carriage of all requesting local sta-

tions in the largest markets and expanding from there. In

sum, Congress either could have allowed satellite carriers

to cherry pick by retransmitting some stations (the major

network affiliates) in many markets, or it could have

allowed satellite carriers to retransmit all of the stations

in some markets. While satellite carriers would have pre-

ferred (and now argue for) the first result, Congress chose

the second because it feared that cherry picking of major

on the Judiciary, 106th Cong. 40-41 (1999) (1999 Senate Hearing)

(statement of Charles Ergen, CEO of EchoStar). These satellites

will permit carriers to reuse their allotted spectrum frequencies

in different geographic areas and will thereby increase the

channel capacity carriers can use to offer local-into-local

service. One reason why Congress decided to delay

implementation of § 338 until January 1, 2002, was to give

satellite carriers time to develop this new technology. See S. Rep.

No. 106-51, at 14 (1999).

24a

network affiliates within local markets would make it

more difficult for non-carried stations in those markets to

reach their audiences:

Although the conferees expect that subscribers

who receive no broadcast signals at all from their

satellite service may install antennas or subscribe

to cable service in addition to satellite service,

the Conference Committee is less sanguine that

subscribers who receive network signals and

hundreds of other programming choices from

their satellite carrier will undertake such trouble

and expense to obtain over-the-air signals from

independent broadcast stations.

SHVIA Conf. Rep. at 102. Non-carried stations in cherry-

picked markets would “face the same loss of viewership

Congress previously found with respect to cable noncar-

riage.” Id. at 101. Congress therefore concluded that the

carry one, carry all rule would protect the ability of all

local broadcasters to reach their audiences and thereby

_—_—

“preserve free television for those not served by satellite

or cable systems and . . . promote widespread dissemina-

tion of information from a multiplicity of sources.” Id.

As directed by Congress, see 47 U.S.C. 338(g), the

FCC issued a report and order implementing § 338's

carriage requirements on November 29, 2000. In the Mat-

ter of: Implementation of the Satellite Home Viewer Improve-

ment Act of 1999: Broadcast Signal Carriage Issues,

Retransmission Consent Issues, CS Docket Nos. 00-96 and

99-363 (2000) (SHVIA Order). The only aspect of the

SHVIA Order at issue here is the a la carte rule adopted

athe asthe made vlgs enbedlia Maat st iy

25a

in paragraph 99 of the order. The FCC concluded in that

paragraph that § 338(d) does not require satellite carriers

to sell all local television stations in a given market as one

package. Instead, the Commission ruled that carriers

could offer local stations “as a package or a la carte, at

comparable rates.” SHVIA Order at { 99. This language

would arguably permit satellite carriers to offer their

subscribers a package including only the major network

affiliates while offering independent broadcast stations

only on an a la carte basis. However, in a subsequent

order issued while these cases were under consideration,

the FCC clarified its a la carte rule by stating that satellite

carriers may not offer their subscribers a package includ-

ing some subset of the local stations in a market (for

example, the major network affiliates) while offering

other local stations on an individual basis. See In the

Matter of: Implementation of the Satellite Home Viewer

Improvement Act of 1999: Broadcast Signal Carriage Issues,

Order on Reconsideration, CS Docket No. 00-96, at J 48

(2001) (Reconsideration Order). In other words, the Com-

mission has now ruled that satellite carriers offering

local-into-local service may offer their subscribers only

two options: subscribers may buy the local stations of

their choice a la carte at comparable prices, or they may

buy a package of all the local stations for a price less than

or equal to the cost of subscribing to all the stations

individually (for example, 12 stations at one dollar each

or all 12 for $12 or less). See id.

The present SHVIA litigation began on September 20,

2000, when SBCA, DirecTV, EchoStar, and DISH Network

26a

filed a complaint in the United States District Court for

the Eastern District of Virginia alleging that SHVIA’s

carry one, carry all rule, 47 U.S.C. § 338(a)(1), exceeds

Congress’s power under the Copyright Clause and vio-

lates the First Amendment and the Due Process and

Takings Clauses of the Fifth Amendment. NAB and PBS

intervened on the side of the FCC in order to defend the

statute. The satellite carriers moved for summary judg-

ment, but the FCC and its supporting intervenors filed

Rule 56(f) motions requesting discovery in order to

respond to the satellite carriers’ motion. The district court

granted their motions, and discovery began. The FCC and

its supporting intervenors then filed a Rule 12(b)(6)

motion to dismiss and (ultimately) a cross-motion for

summary judgment. After the parties had conducted

extensive discovery in support of their summary judg-

ment motions, the district court granted the FCC and its

intervenors’ motion to dismiss on June 19, 2001. See Satel-

lite Broad. & Communications Ass'n v. FCC, 146 F.Supp.2d

803, 809 (E.D. Va. 2001). The district court treated the

carry one, carry all rule as a content-neutral regulation of

the satellite carriers’ speech and upheld the rule under

intermediate First Amendment scrutiny. In addition, the

court rejected the satellite carriers’ arguments alleging

violations of the Copyright Clause and the Fifth Amend-

ment. The satellite carriers appealed. That appeal has

been consolidated with three petitions for review of the

FCC’s SHVIA Order. SBCA filed a petition for review of

the SHVIA Order in this circuit, and EchoStar filed a

similar petition in the Tenth Circuit. Both petitions

advanced constitutional challenges to SHVIA similar to

those advanced by the satellite carriers in the Eastern

27a

District of Virginia. NAB filed a petition for review in the

D.C. Circuit challenging the FCC’s a la carte rule as

arbitrary, capricious, and not in accordance with law. See

5 U.S.C. § 706(2)(A). Paxson Communications intervened

in this last petition on the side of NAB. The three peti-

tions for review were consolidated and assigned to this

circuit pursuant to 28 U.S.C. § 2112(a)(3).

II.

The parties devote the lion’s share of their attention

to the satellite carriers’ First Amendment challenge to the

carry one, carry all rule enacted in 47 U.S.C. § 338.

Satellite carriers, like cable operators, function primarily

as conduits for the speech of others. They transmit pro-

gramming from a variety of sources (national and

regional non-broadcast channels, superstations, and local

broadcast stations) to their subscribers “on a continuous

and unedited basis.” Turner I, 512 U.S. at 629. Yet both

satellite carriers and cable operators engage in speech

-protected by the First Amendment when they exercise

editorial discretion over the menu of channels they offer

to their subscribers. See id. at 636-37. Insofar as the carry

one, carry all rule seeks to influence the exercise of that

discretion, it is open to challenge under the First Amend-

ment.

It is important to be clear at the outset, however, that

some of the speech interests present in the Turner cases

are absent here. The cable must-carry rules burdened the

speech of cable programmers who had to be dropped

from some cable systems in order to make room for local

28a

broadcast stations. See id. at 675 (O’Connor, J., dissent-

ing). To the extent the First Amendment guarantees

viewers and listeners the right to receive information, see

Bd. of Educ. Island Trees Union Free School Dist. v. Pico, 457

U.S. 853, 867 (1982) (plurality opinion); Red Lion Broad.

Co. v. FCC, 395 U.S. 367, 390 (1969), that right was also

burdened by the cable must-carry rules because the

voices of dropped cable programmers were effectively

lost to entire communities. Here, however, the satellite

carriers do not claim that the carry one, carry all rule will

force them to drop national or regional non-broadcast

programmers in order to carry more local broadcasters.

They claim only that they will have to carry independent

broadcast stations in larger markets at the expense of

major network affiliates in smaller markets. See Brief for

Petitioners SBCA and EchoStar at 26-27, 35 n.13. While

those major network affiliates would no doubt prefer to

be carried on satellite services, the carry one, carry all

rule does not deprive those affiliates of the ability to

reach their audiences. In fact, they will be in exactly the

same position under the carry one, carry all rule that they

would have occupied if SHVIA had never been passed.

Nor will any voices be completely lost to communities as

a result of the carry one, carry all rule. The rule’s only

negative effect on viewers will be that the major network

affiliates in some markets will be available to local

viewers through only two mediums (broadcast and cable)

rather than three. In sum, the carry one, carry all rule

burdens speech only to the extent that it affects satellite

carriers’ decisions about how to allocate their capacity for

offering local-into-local service by inducing them to carry

29a

a different set of local broadcasters than the carriers

would have preferred.

In considering the satellite carriers’ First Amendment

challenge, our first task is to determine the appropriate

standard of review. Turner I provides the starting point.

In that case the Supreme Court held that the cable must-

carry rules were content-neutral restrictions on speech

and were therefore not subject to strict scrutiny. See

Turner I, 512 U.S. at 662. Here, the satellite carriers repeat

many of the same arguments for strict scrutiny that were

examined and rejected in Turner I. Although the satellite

carriers labor mightily to distinguish that case, their

effort ultimately fails.

The Supreme Court has said that the

inquiry in determining content neutrality . . . is whether

the government has adopted a regulation of speech

because of [agreement or] disagreement with the message

it conveys.’ ” Id. at 642 (quoting Ward v. Rock Against

Racism, 491 U.S. 781, 791 (1989)). This inquiry involves

two steps. “First, we must examine the plain terms of the

regulation to see whether, on its face, the regulation

confers benefits or imposes burdens based upon the con-

tent of the speech it regulates.” Chesapeake and Potomac

Tel. Co. of Va. v. United States, 42 F.3d 181, 193 (4th Cir.

1994), vacated on other grounds, 516 U.S. 415 (1996). If it

does not, we then ask whether the regulation’s “ ‘mani-

fest purpose is to regulate speech because of the message

it conveys.’ ” Id. (quoting Turner I, 512 U.S. at 645).

‘principal

30a

The text of § 338(a)(1) provides:

[E]ach satellite carrier providing, under section

122 of Title 17, secondary transmissions to sub-

scribers located within the local market of a

television broadcast station of a primary trans-

mission made by that station shall carry upon

request the signals of all television broadcast

stations located within that local market.

47 U.S.C. § 338(a)(1). On its face, the rule confers benefits

on a content-neutral basis because satellite carriers must

carry all requesting local broadcast stations regardless of

the content of their programming. Cf. Turner I, 512 U.S. at

645 (“The [must-carry] rules benefit all full power broad-

casters who request carriage — be they commercial or

noncommercial, independent or network affiliated,

English or Spanish language, religious or secular.”). The

satellite carriers argue, however, that the carry one, carry

all rule is content-based on its face because its burdens

are triggered by a satellite carrier’s decision to transmit

certain content, namely, the signal of a local television

station.

We disagree. SHVIA’s carriage obligations are not

triggered simply by the decision to carry a local broadcast

station in a given market. Instead, they are triggered by

the decision to carry that station by making use of the § 122

license. A satellite carrier that privately negotiates the

required copyright clearances can retransmit the signal of

a local broadcast station without incurring any carriage

obligations, but a carrier that retransmits the same signal

by means of the statutory copyright license must comply

with the carry one, carry all rule. Thus, the burdens of the

EE ET SET NOE aS Le POI NE EIED Set SRT LON OS SAT Be tet, her se SER Ran SEL LB VOR Rs | ete ahe ae eA PT et

Re ee Ce ee ee

3la

rule do not depend on a satellite carrier’s choice of con-

tent, but on its decision to transmit that content by using

one set of economic arrangements rather than another.

Accordingly, we hold that the carry one, carry all rule is

content neutral on its face.

Next, we must decide whether the carry one, carry all

rule is content-based in its purpose. The satellite carriers

claim that the rule has a content-based purpose because it

seeks to promote the survival of independent broadcast

stations, including affiliates of emerging networks, com-

mercial independent stations, and public broadcasting

stations. In support of this claim they cite language from

the Conference Report indicating that Congress was con-

cerned that satellite carriers would choose to carry only

affiliates of the major networks and that other local

broadcasters would be cut off from portions of their

potential viewing audiences. See SHVIA Conf. Rep. at

102. In addition, the satellite carriers rely on legislative

history suggesting that Congress sought to protect local

broadcast stations because those stations provide valu-

able news and public affairs programming to their com-

munities. See id. at 92.

Again, we conclude that these points do not distin-

guish the present case from Turner I. Both Congress and

the Supreme Court understood perfectly well that the

cable must-carry rules primarily benefitted independent

broadcast stations. See Turner I, 512 U.S. at 672-73,

(Stevens, J., concurring in part and concurring in the

judgment); Turner II, 520 U.S. at 191-92. Similarly, the

statutory findings included in the Cable Act described

broadcast television as “an important source of local

news and public affairs programming, and other local

32a

broadcast services critical to an informed electorate,” Cable

Act § 2(a)(11), 106 Stat. at 1461, and stated that noncommer-

cial television “provides educational and informational pro-

gramming to the Nation’s citizens,” id. § 2(a)(8)(A), 106 Stat.

at 1461. Nevertheless, the Court determined that neither

must-carry’s benefits to independent broadcast stations nor

Congress’s recognition of the distinctive value of local pro-

gramming revealed a content-based purpose. Instead, the

Court concluded, “Congress’ overriding objective in enacting

-must-carry was not to favor programming of a particular

subject matter, viewpoint, or format, but rather to preserve

access to free television programming for the 40 percent of

Americans without cable.” Turner I, 512 U.S. at 646. Accord-

ing to the Court, Congress’s findings did not show a content-

based preference for broadcast television over cable televi- -

sion; they merely indicated that local broadcast television

was intrinsically valuable and therefore worth preserving. Id.

at 648. In sum, Turner I held that the cable must-carry rules

were content neutral in purpose even though the rules were

meant to protect independent broadcast stations and even

though Congress recognized that those stations provided

valuable local programming. Here, the satellite carriers do no

more than point to legislative history indicating that Con-

gress had the same purpose in enacting SHVIA and that

Congress continued to appreciate the distinctive value of

local broadcast programming. This is not enough to establish

that SHVIA has a content-based purpose.

We conclude, then, that the carry one, carry all rule

should not be subject to strict scrutiny. At most, it is a

content-neutral measure that imposes incidental burdens

on speech and is therefore subject to intermediate

First Amendment scrutiny under United States v. O’Brien,

ten ite

ai de leids De ab eleF BON test

33a

391 U.S. 367 (1968). Because, as we explain below, the

carry one, carry all rule passes constitutional muster

under O’Brien, we need not address the FCC and its

intervenors’ argument that the rule should be ewaluated

under a more lenient standard.®

O’Brien directs us to uphold a content-neutral regula-

tion of speech if “it furthers an important or substantial

governmental interest; if the governmental interest is

unrelated to the suppression of free expression; and if the

incidental restriction on alleged First Amendment free-

doms is no greater than is essential to the furtherance of

that interest.” O’Brien, 391 U.S. at 377. Deciding whether

an interest is important or substantial and whether that

interest is unrelated to the suppression of free expression

is usually simple enough, but this is only the beginning of

€ The FCC and the broadcasters argue that because § 338’s

carriage obligations are triggered by a satellite carrier’s

voluntary decision to make use of the § 122 license, the carry

one, carry all rule does not impose a burden on speech at all and

should therefore be subject only to rational basis review. They

point out that SHVIA grants satellite carriers a valuable benefit

(the statutory copyright license) and places conditions on the

use of that benefit, but does not deprive the carriers of any

rights they possessed before SHVIA was enacted. Accordingly,

the FCC and the broadcasters contend that SHVIA’s statutory

subsidy by analogy to Rust v. Sullivan, 500 U.S. 173 (1991), and

similar cases. As noted above, we find it unnecessary to address

this argument because we conclude that the carry one, carry all

rule is consistent with the First Amendment even if it is treated

as a content-neutral burden on satellite carriers’ speech.

34a

the inquiry. As the Turner cases explain, the O’Brien stan-

dard gets its bite from a two-part analysis. First, we must

determine whether the regulation materially advances an

important or substantial interest by redressing past

harms or preventing future ones. These harms must be

“real, not merely conjectural,” and the regulation must

“alleviate these harms in a direct and material way.”

Turner I, 512 US. at 664. If a regulation places even

incidental burdens on speech without yielding some gen-

uine benefit, it must be struck down. In making these

evaluations, we must “accord substantial deference to the

predictive judgments of Congress.” Id. at 666. Our “sole

obligation is to assure that, in formulating its judgments,

Congress has drawn reasonable inferences based on sub-

stantial evidence.” Turner II, 520 U.S. at 195 (internal

quotation marks and citation omitted). If the regulation

materially advances some important or substantial inter-

est, we then proceed to the second part of the O’Brien

analysis and ask whether the regulation is narrowly tai-

lored to serve that interest. The O’Brien narrow tailoring

requirement is less rigorous than that applied under strict

scrutiny. The requirement is met “so long as the regula-

tion promotes a substantial government interest that

would be achieved less effectively absent the regulation.”

Ward, 491 U.S. at 799 (internal quotation marks and cita-

tion omitted). In other words, the regulation must not

“burden substantially more speech than is necessary to

further the government's legitimate interests.” Id.

In sum, the carry one, carry all rule satisfies the

O’Brien standard if the rule materially advances at least

one substantial government interest in a narrowly tai-

lored manner. The satellite carriers claim that the rule is

35a

simply a way to promote the interests of some speakers

(independent broadcasters in large markets) at the

expense of others (major network affiliates in small and

medium-sized markets). Predictably, they contend that

this interest is not even legitimate, let alone substantial or

important. We agree that the carry one, carry all rule is

meant to preserve the ability of independent broadcasters

to reach their local audiences, but Congress did not view

that goal as an end in itself. Instead, Congress recognized

that protecting independent broadcasters from the harm-

ful effects of satellite cherry picking would further two

substantial government interests. The first is the govern-

ment’s interest in preserving a multiplicity of local broad-

cast outlets for over-the-air viewers, those who do not

subscribe to satellite or cable service. The second is the

government’s interest in preventing its grant of a statu-

tory copyright license to satellite carriers from undermin-

ing competition in local markets for broadcast television

advertising. Though these two interests are closely

related because both would be threatened in the same

manner without the carry one, carry all rule, they are

distinct because the first involves harms to over-the-air

viewers while the second involves harms to local adver-

tisers and to independent broadcasters themselves. As we

explain next in the first part of our O’Brien analysis, we .

find that both interests are materially advanced by the

carry one, carry ail rule. We will now address each inter-

est in turn.

Congress enacted the carry one, carry all rule to

“preserve free television for those not served by satellite

36a

or cable systems and to promote widespread dissemina-

tion of information from a multiplicity of sources.”

SHVIA Conf. Rep. at 101. These interests are clearly sub-

stantial and unrelated to the suppression of free expres-

sion. See Turner I, 512 U.S. at 662-63 (stating that the

government's interests in “preserving the benefits of free,

over-the-air local broadcast television” and “promoting

the widespread dissemination of information from a mul-

tiplicity of sources” were both important and unrelated to

the suppression of free expression). In deciding whether

§ 338 materially advances these two interests, it is useful

to characterize them more precisely. We therefore adopt

the characterization suggested in Turner II, where the

Supreme Court treated the two interests as a unified

whole: “Congress has an independent interest in preserv-

ing a multiplicity of broadcasters to ensure that all house-

holds have access to information and entertainment on an

equal footing with those who subscribe to cable.” Turner

II, 520 U.S. at 194; see also id. at 193 (stating that Con-

gress’s interest in “preserving the existing structure of the

broadcast industry discloses a purpose to prevent any

significant reduction in the multiplicity of broadcast pro-

gramming sources available to noncable households”

(internal quotation marks and citation omitted)); id. at 226

(Breyer, J., concurring in part) (describing the Cable Act's

purpose as “provid[ing] over-the-air viewers who lack

cable with a rich mix of over-the-air programming” and

“assur[ing] the over-the-air public access to a multiplicity

of information sources” (internal quotation marks and

citation omitted)). In short, the government interests

served by the carry one, carry all rule are best

Lace

37a

characterized as a single interest in preserving a multi-

plicity of broadcast outlets for over-the-air viewers.

This characterization accurately captures the con-

cerns expressed by Congress when it enacted § 338. In

explaining that a market-by-market license promotes

both the interest in preserving broadcast television for

over-the-air viewers and the interest in promoting wide-

spread dissemination of information from multiple

sources, Congress expressed its concern that “absent

must-carry obligations, satellite carriers would carry the

major network affiliates and few other signals. Non-car-

ried stations would face the same loss of viewership

Congress previously found with respect to cable noncar-

riage.” SHVIA Conf. Rep. at 101. In other words, Con-

gress understood that the threat to over-the-air viewers

was not the loss of broadcasting as a medium, but the loss

of the independent stations needed to provide those

viewers with a rich mix of broadcast programming from

multiple sources.

The proper question, then, is whether the govern-

ment’s interest in preserving a multiplicity of broadcast

outlets for over-the-air viewers is materially advanced by

the carry one, carry all rule. The satellite carriers appear

to concede that the rule would effectively combat any real

threat to this interest, but the carriers argue that they do

not pose a real threat. Congress, however, concluded that

satellite carriers would threaten this interest in the near

future if it gave them a statutory copyright license with-

out imposing carriage rules. See SHVIA Conf. Rep. at 101.

Our review of that judgment has both factual and legal

aspects. We must decide whether Congress’s factual pre-

dictions about the consequences of enacting a station-by-

38a

station copyright license were supported by substantial

evidence in the legislative record. See Turner II, 520 U.S. at

195-96. We may aiso look to evidence outside the legisla-

tive record in order to confirm the reasonableness of

Congress’s predictions. See id. at 196, 204. In addition, we

must determine whether the predicted set of conse-

quences is legally sufficient to count as a real threat to the

government’s interest in preserving a multiplicity of

broadcast outlets for over-the-air viewers.

Congress made extensive statutory findings in enact-

ing the Cable Act. See Cable Act § 2(a), 106 Stat. at

1460-63. SHVIA’s legislative record is less extensive, but

this does not affect our duty to accord substantial defer-

ence to Congress’s predictive judgments. “Congress is not

obligated, when enacting its statutes, to make a record of

the type that an administrative agency or court does to

accommodate judicial review.” Turner I, 512 U.S. at 666;

see also Sable Communications of Cal., Inc. v. FCC, 492 U.S.

115, 133 (1989) (Scalia, J., concurring) (“Neither due pro-

cess nor the First Amendment requires legislation to be

supported by committee reports, floor debates, or even

consideration, but only by a vote.”). We can fairly con-

clude from the legislative record that Congress made the

following three factual predictions: (1) that satellite car-

riers would soon capture a significant part of the televi-

sion programming delivery market, (2) that satellite

carriers would continue to deny carriage to significant

numbers of independent stations in markets where they

chose to offer local-into-local service, and (3) that non-

carried stations in those markets would be harmed by

losing access to parts of their potential audiences. In sum,

Congress predicted that if satellite carriers enjoyed a

———

IFIP L IGA So.

dcabieipressaah eal,

OL hick SCC ath eLyt:

39a

statutory copyright license but were not bound by car-

riage rules, significant numbers of independent broadcast

stations would be harmed by losing access to significant

portions of their audiences. As we explain below, each of

Congress’s predictions was supported by substantial evi-

dence. The harder question is the essentially legal one of

whether the consequences Congress predicted constitute

a real threat to the government's interest in preserving a

multiplicity of local broadcast outlets for over-the-air

viewers. We begin with the three factual predictions,

addressing them one by one.

Congress’s prediction that satellite carriers would

become a significant force in the television programming

delivery market was supported by substantial evidence.

While Congress did not explicitly find that satellite car-

riers would attain any specific level of market penetra-

tion, it obviously projected that satellite carriers would

attract enough viewers to put downward pressure on

cable rates. Congress created the § 122 copyright license

to produce this result, see SHVIA Conf. Rep. at 91-92; S.

Rep. No. 106-51, at 1-3 (1999), and it cannot be unreason-

able for Congress to proceed on the premise that its own

legislation will be effective. Moreover, the rapid growth

in satellite service since SHVIA’s enactment suggests that

Congress’s prediction will soon come true. The number of

DBS subscribers grew by 28 percent between June 1999

and June 2000. See FCC Seventh Annual Report at { 61. In

comparison, cable subscriptions grew at an annual rate of

less than 1.5 percent. See id. at J 65. DBS providers have

attributed much of their growth to the § 122 license. See

id. at [ 68; see also id. at J 69 (stating that SBCA reported a

43 percent increase in the number of new DBS subscribers

40a

per month in the 6 months following SHVIA’s enact-

ment). In its comments for the FCC’s Seventh Annua!

Report, SBCA predicted that DBS service might have as

many as 16 million subscribers (over 15 percent of Ameri-

can television households) by the end of 2000.” See id. at

{ 65. In sum, Congress’s first prediction was entirely

reasonable.

Congress’s second prediction was that without § 338,

satellite carriers would refuse to carry significant

numbers of independent broadcast stations in markets

where they offered local-into-local service. See SHVIA

Conf. Rep. at 101. This prediction was supported by

substantial evidence in the record before Congress. See,

_e@.g., 1999 Senate Hearing at 10 (statement of Charles

Ergen). In addition, the satellite industry’s track record

under SHVIA has proven the prediction to be accurate.

As of November 5, 2001, DirecTV carried the four major

network affiliates in 41 markets (a total of 164 stations),

but carried a total of only 13 independent stations in

those 41 markets. See www.skyreport.com/skyreport/

local.htm. Similarly, EchoStar carried the four major net-

work affiliates in 35 markets (a total of 140 stations), but

carried only 13 independent stations in those markets. See

id. Thus, during SHVIA’s phase-in period the satellite

carriers have confined their local-into-local offerings

almost exclusively to major network affiliates. Moreover,

they have plainly announced their intention to continue

7 As noted above, see supra note 3, the broadcasters contend

that the market share of DBS providers now exceeds the 15

percent share forecast by SBCA in its comments for the FCC’s

Seventh Annual Report. ’

4la

cherry picking the major network affiliates so long as

they may lawfully do so. This preference for cherry pick-

ing will not simply wither away because it is rooted in

the national character of existing satellite technology.

As we have said, satellite carriers currently beam the

same signals throughout the nation from satellites orbit-

ing in full CONUS slots. As a result, a carrier who

chooses to retransmit the signal of an independent com-

mercial station in Boston beams that station’s signal to

subscribers nationwide, but blocks out the signal at the

homes of all subscribers who do not live in the Boston

area. As this example illustrates, local-into-local service is

a relatively inefficient use of a carrier’s finite channel

capacity. National programming uses that capacity more

efficiently because it can be expected to draw more

viewers across the country as a whole than any local

channel, even if the national programming is less popular

within individual local markets than the programming of

the independent broadcast stations in those markets. As a

result, satellite carriers have economic incentives to favor

national non-broadcast programming over local broad-

cast programming. While improvements in satellite tech-

nology, such as the deployment of spot beam satellites,

may reduce the inefficiencies that result from carrying

local broadcast stations, these inefficiencies will continue

to exist to some degree so long as the beams from indi-

vidual satellites cover multiple television markets. Yet

satellite carriers also recognize that their product is less

attractive to subscribers if they fail to carry the local

affiliates of major networks because most people watch

these stations about “65 percent of the time” they spend

watching television. 1999 Senate Hearing at 7 (statement

42a

of Charles Ergen). Under \these circumstances, the eco-

nomically rational choice for satellite carriers is to cherry

pick the major network affiliates in markets where the

carriers offer local-into-local service. We conclude, then,

that both the satellite industry’s track record and its

economic incentives provide substantial evidence sup-

porting Congress’s predictive judgment that satellite car-

riers will deny carriage to significant numbers of

independent broadcast stations if the carriers are not

bound by the carry one, carry all rule.

Congress’s third prediction was that lack of satellite

carriage would harm independent broadcast stations. See

SHVIA Conf. Rep. at 101 (stating that “[n]on-carried sta-

tions would face the same loss of viewership Congress

previously found with respect to cable noncarriage”).

This general prediction rested on the following series of

more specific predictions about the consequences of non-

carriage. First, a non-carried station will effectively lose

access to satellite subscribers if satellite carriers cherry

pick the major network affiliates in its market.§ Second, a

8 A non-carried station in a cherry-picked market loses

access to satellite subscribers in that market in the sense that

those subscribers will be significantly less likely to watch that

station than would be the case if the subscribers received either

all or none of their local stations via satellite. This proposition

rests on two plausible and widely shared empirical

assumptions. The first assumption is that television viewers

prefer to receive all of their programming from one source. For

subscribing households, satellite becomes the primary source of

television programming, and it follows that satellite subscribers

will be less likely to watch non-carried broadcast stations even

if they have antennas that can capture a clear signal from those

stations. The second assumption is that satellite subscribers

‘

43a

station’s loss of access to those subscribers will result in

lower ratings, which will in turn lead to lower advertis-

ing revenues. Third, lower revenues will lead to a

decrease in programming quality, which will then further

depress ratings and station revenues, all in a vicious

cycle. The record before Congress contains substantial

evidence to support these predictions. See ante at 16

(statement of James J. Popham); Copyright Compulsory

License Improvement Act: Hearings on H.R. 768 Before the

Subcommittee on Courts and Intellectual Property of the

House Committee on the Judiciary, 106th Cong. 47 (1999)

(statement of John Hutchinson, CEO, Local Television on

Satellite) (stating that “[s]atellite could effectively, like

cable, become the bottleneck which disenfranchises sta-

tions”). Further, the predictions are essentially the same

as those Congress made in passing the Cable Act. See

Turner II, 520 U.S. at 208-09 (discussing testimony from

broadcasters that explained how cable non-carriage leads

to declines in ratings, advertising revenues, and program

quality). As the Supreme Court explained in Nixon v.

Shrink Missouri Government PAC, 528 U.S. 377, 391 (2000),

the “quantum of empirical evidence needed to satisfy

heightened judicial scrutiny of legislative judgments will

vary up or down with the novelty and plausibility of the

who are able to receive local network signals via satellite will be

unlikely to obtain or maintain antennas in order to receive

independent local broadcast stations. See SHVIA Conf. Rep. at

102. In contrast, satellite subscribers who receive no network

signals via satellite will probably use antennas or subscribe to

basic cable in order to have access to network signals. This

assumption explains why the carry one, carry all rule benefits

independent broadcast stations even in markets where satellite

carriers do not offer local-into-local service.

44a

justification raised.” Because the justifications here were

both familiar and plausible, Congress could reasonably

conclude, at the very least, that non-carried stations

would suffer some degree of harm in the absence of the

depend, of course, on how many potential viewers of

non-carried stations became satellite subscribers.

So far, we have established that Congress had sub-

stantial evidence to support its overall prediction that in

a world where satellite carriers enjoyed the benefits of a

statutory copyright license without the burdens of the

carry one, carry all rule, satellite carriers would become —

significant competitors to cable and would continue to

cherry pick major network affiliates in markets where

they offered local-into-local service. In that world, non-

carried stations in cherry-picked markets would lose

access to significant parts of their local audiences. Again,

the harder question is whether this predicted set of con-

sequences is enough to justify imposing the carry one;

carry all rule on satellite carriers in order to protect the

government’s interest in preserving a multiplicity of

broadcast outlets for over-the-air viewers. In other words,

the question is whether preventing the consequences

Congress predicted counts as addressing a real threat to

that interest in a material way.

This is essentially a legal question, and the satellite

carriers claim that it has a clear answer. Relying on Turner

II, they argue that imposing carriage rules on a particular

television programming delivery medium is justified only

when stations not carried by that medium will “deterio-

rate to a substantial degree or fail altogether.” Turner II,

520 U.S. at 208. It is only at this point, they claim, that

45a

carriage denials affect the interests of over-the-air

viewers. The satellite carriers contend that under Turner

II’s substantial deterioration standard, the carry one,

carry all rule does not address a real threat because

Congress lacked substantial evidence to support the judg-

ment that stations denied access to (at most) 15 percent of

their audiences would substantially deteriorate. The car-

riers remind us that when Congress enacted the Cable

Act in 1992, cable controlled 60 percent of the television

programming delivery market. See Cable Act § 2(a)(3),

106 Stat. at 1460.

To the extent that the satellite carriers would have us

decide this case by looking at the difference between the

13 to 15 percent market share of satellite carriers today

and the 60 percent market share enjoyed by cable in 1992,

they oversimplify the issues. For one thing, Turner II held

only that Congress could reasonably conclude that a

broadcast station’s loss of access to 60 percent of its

market was sufficient to cause that station to substantially

deteriorate. It left open the possibility that Congress

could reasonably conclude that some smaller level of

audience loss would significantly harm non-carried sta-

“tions. More fundamentally, however, we reject the satel-

lite carriers’ argument that substantial deterioration of

non-carried broadcast stations is always the proper stan-

dard for deciding when carriage rules are justified. The

substantial deterioration standard does not work here

because that standard was formulated to address a situa-

tion where the market for subscription television services

was dominated by a single medium.

When Congress passed the Cable Act of 1992, cable

television was the sole threat to the government's interest

46a

in preserving a multiplicity of broadcast outlets for over-

the-air viewers. The substantial deterioration standard

employed in Turner II assumes the existence of a unitary

threat by insisting that the government show that denial

of carriage on an individual medium would threaten the

viability of independent broadcasters. See Turner II, 520

U.S. at 195. But the substantial deterioration standard

was not meant to address situations in which the threat to

broadcasters comes from competitors in multiple

mediums, and it yields implausible results when applied

outside its intended context. Suppose, for example, that

five different television delivery mediums each served 15

percent of television households, together serving 75 per-

cent of those households. If the standard applied in these

circumstances, it would mean that Congress could not

impose must-carry rules on any of the mediums because

stations denied carriage on any one medium would lose

access to only 15 percent of their audiences and therefore

would not suffer substantial deterioration. That cannot be

the law.

In enacting SHVIA, Congress properly considered

the effects of satellite and cable together in deciding to

protect over-the-air viewers from any significant reduc-

tion in their viewing options. Cable and satellite together

currently serve around 80 percent of America’s television

households, with cable accounting for about 65 percent

and satellite about 15 percent. We have already explained

that both services pose the same kind of threat to broad-

cast stations because both — by making selective carriage

decisions - threaten to cut off independent broadcast

stations from parts of their audiences. Together, cable and

NE DALE ae CPE rh PS A Oy wd Pulte ty FAL HOF HO

47a

satellite would pose an overwhelming threat to indepen-

dent broadcasters if neither were bound by carriage rules.

Congress evidently reasoned that with increasing compe-

tition from satellite carriers, the threat to independent

broadcasters posed by cable would become a threat

jointly posed by cable and satellite. It therefore concluded

that it could regulate both contributors to that common

threat: “The [Conference Committee] expect[s] that, by

January 1, 2002, satellite carriers’ market share will have

increased and that the Congress’[s] interest in maintain-

ing ffee over-the-air television will be undermined if local

brvadcasters are prevented from reaching their viewers

by either cable or satellite distribution systems.” SHVIA

Conf. Rep. at 101 (emphasis added).

The satellite carriers contend that the carry one, carry

all rule needlessly restricts their speech because it is not

necessary to protect the interests of over-the-air viewers.

Again, they claim that those interests are not threatened

because broadcasters denied satellite carriage will not

lose access to enough of their audiences to suffer substan-

tial deterioration. But if over-the-air viewers are currently

safe, that only reflects the fact that cable is already bound

by must-carry rules. In other words, the satellite carriers’

arguments boil down to the claim that even if both cable

and satellite jointly contribute to a common threat to the

government's interest in protecting a multiplicity of

broadcast outlets for over-the-air viewers, Congress may

not impose carriage rules on satellite carriers because

their contribution to that common threat is smaller and

because cable is already regulated. The First Amendment

does not require this result. It is more sensible to allow

Congress the latitude to view the regulatory landscape as

48a

a whole by considering the cumulative effects of cable

and satellite without making fine distinctions regarding

their relative contributions in creating those effects.

Where multiple competitors jointly pose a common threat

with a common structure, the First Amendment permits

Congress to protect important government interests from

that threat by imposing reasonable content-neutral

restrictions on every competitor who significantly con-

tributes to that threat.

Under this standard, Congress’s factual predictions

easily justify the imposition of the carry one, carry all

rule. Even if it is debatable whether satellite’s current

market share is sufficient to count as a significant contri-

bution to the common threat posed by cable and satellite,

Congress surely had a substantial basis for concluding

that satellite would soon become a significant challenger

to cable in the television programming delivery market.

Accordingly, we hold that Congress reasonably con-

cluded that the carry one, carry all rule addressed a real

threat to the government’s interest in preserving a multi-

plicity of broadcast outlets for over-the-air viewers. That

interest therefore survives the first part of the O’Brien

inquiry: it is substantial, and it is genuinely advanced by

the carry one, carry all rule.

_ The FCC argues that the carry one, carry all rule also

materially advances a second substantial government

interest: the interest in preventing SHVIA’s grant of a

statutory copyright license to satellite carriers from

undermining competition in local markets for broadcast

49a

television advertising. This interest is, as we have said,

closely related to the interest in preserving a multiplicity

of broadcast stations for over-the-air viewers. Both inter-

ests are threatened when independent broadcasters lose

access to parts of their local audiences as a result of

cherry picking by satellite carriers. But although cherry

picking threatens both interests in the same way, the

interests are nonetheless distinct. The first interest is ulti-

mately an interest in protecting over-the-air television

viewers. The second is an interest in protecting the broad-

casters themselves, as well as the advertisers who benefit

from vigorous competition among the broadcast stations

in their local markets.

The satellite carriers attempt to portray the carry one,

carry all rule as a self-conscious government attempt to

manipulate a previously undistorted marketplace of ideas

in order to prop up weak broadcast stations. This por-

trayal misrepresents the realities of the television market.

When Congress considered SHVIA in 1999, that market

was already pervasively shaped by government policies:

FCC licensing of broadcasters, the cable must-carry rules,

and (to a lesser extent) satellite are only a few examples.

Against that backdrop Congress explicitly sought ways to

improve the competitive position of satellite in relation to

cable because it believed that cable rates were too high.

Nothing in the text of SHVIA or its legislative history

indicates that Congress thought broadcasters enjoyed any

unfair advantages in relation to satellite or cable. Recog-

nizing that satellite carriers needed a statutory copyright

license to be able to compete with cable, Congress then

}

50a

considered the possible effects on independent broadcas-

ters of the decision to grant that license.

As we have explained above, the choice was between

offering satellite carriers a station-by-station license and a

market-by-market license. Congress understood that

allowing satellite carriers to offer local-into-local sérvice

by cherry picking network affiliates would deprive non-

carried stations of access to significant (and growing)

parts of their audiences. We have already discussed at

length the possibility that cherry picking would ulti-

mately harm over-the-air viewers by reducing the quality

or quantity of broadcast outlets available for those

viewers, but here we are concerned with the immediate

effects of selective carriage on local television advertising

markets. Local broadcasters and cable companies com-

pete with one another in those markets, and their compet-

itive positions are a function of their ratings. Independent

stations that lost access to even a small part of their

potential audiences would therefore be placed at a com-

petitive disadvantage compared to carried stations in

their efforts to attract local advertisers. See 1998 House

Hearing at 68 n.38 (statement of James J. Popham). Con-

gress heard testimony that a station-by-station license,

would essentially enable satellite carriers to pick winners

and losers in local advertising markets, undermining the

efforts of emerging television networks to compete with

the established broadcast networks: “Nothing could more

surely dull the cutting edge of competition from new

networks, their local aff

This text is long and has been trimmed here. Open the source document for the complete record.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.