Amicus Curiae Brief — Cablevision Systems Corp. v. Federal Communications Commission

Supteme Court, U.S.

"*eO

FEB 26 2010

No. 09-901

OFFICE Me Tuc CLERK |

In the

Supreme Court of the United States

CABLEVISION SYSTEMS CORPORATION,

Petitioner

Vv.

FEDERAL COMMUNICATIONS COMMISSION

AND UNITED STATES OF AMERICA,

Respondents

On Petition for a Writ of Certiorari to

The United States Court of Appeals

For the Second Circuit

BRIEF OF AMICUS CURIAE

NATIONAL CABLE &

TELECOMMUNICATIONS ASSOCIATION

IN SUPPORT OF PETITIONER

NEAL M. GOLDBERG CHRISTOPHER J. WRIGHT

MICHAEL 8S. SCHOOLER Counsel of Record

DIANE B. BURSTEIN TIMOTHY J. SIMEONE

NATIONAL CABLE & MARK D. DAVIS

TELECOMMUNICATIONS WILTSHIRE & GRANNIS LLP

ASSOCIATION 1200 18 Street, N.W.

25 Massachusetts Washington, D.C. 20036

Avenue, N.W. (202) 730-1300

Washington, D.C. 20001 cwright@wiltshiregrannis.com

l

TABLE OF CONTENTS

Page

Fr IE FE boss tkdcsccdsscstocevesseencacocnenes li

INTEREST OF AMICUS CURIAE................... 1

INTRODUCTION AND SUMMARY ......................... 2

REASONS FOR GRANTING THE PETITION......... 5

CHANGES IN THE VIDEO PROGRAMMING

MARKETPLACE AND IN TECHNOLOGY

HAVE UNDERMINED THE BASES ON

WHICH THE MUST-CARRY PROVISIONS

OF THE STATUTE WERE UPHELD. ................. 6

ST iiss cadisisersdaaitipaccehessaésseececvdiesssdesiokaeis 13

11

TABLE OF AUTHORITIES

CASES: Page

Comcast Corp. v. FCC, 579 F.3d 1 (D.C. Cir.

Sit in aerate cea ugeat dias aecantrsa tte tineses 2,4, 7, 8,9

Time Warner Entm't Co., L.P. v. United States,

JiR ek Pek Fil Ree a Ae: | | | ne 9

Time Warner Entm't Co., L.P. v. FCC, 240

ee Bie Tid oe ee |) nee Lair g

Turner Broadcasting System, Inc. v. FCC, 512

ee ne eee ae passim

Turner Broadcasting System, Inc. v. FCC, 520

ee ec se paiuenieenseul passim

STATUTES AND REGULATIONS:

ee eee Be) ey ee eet RRP EER I

Er ee i cnc csesivaiectccn uasasiens Ft PIO OLE 7

OTHER:

Annual Assessment of the Status of

Competition in the Market for the Delivery

of Video Programming, Thirteenth Annual

Report, 24 FCC Red 542 (2009)................... 7,6, 3

Annual Assessment of the Status of

Competition in the Market for the Delivery

of Video Programming, Comments of the

National Cable & Telecommunications

Association, FCC MB Docket No. 07-269

ee cs veloute 8

Data Sought on Uses of Spectrum, Public

Notice, 24 FCC Red 14275 (Dec. 21, 2009)......... 12

INTEREST OF AMICUS CURIAE!

The National Cable & Telecommunications

Association (“NCTA”) is the principal trade

association representing the cable television industry

in the United States. Its members include cable

operators serving more than 90% of the nation’s

cable television subscribers, as well as more than 200

cable programming networks and services. NCTA’s

members also include suppliers of equipment and

services to the cable industry.

NCTA fully supports Cablevision’s petition for a

writ of certiorar: and submits this amicus bricf to

endorse Cablevision’s arguments that changes in the

video programming marketplace since this Court’s

decisions in Turner Broadcasting System, Inc. v.

FCC, 512 U.S. 622 (1994) (Turner I’), and Turner

Broadcasting System, Inc. v. FCC, 520 U.S. 180

(14997) (Turner If’), significantly undermine the

continued viability and constitutionality of “must

carry’ requirements,

As this Court recognized in the Turner decisions,

the must carry provisions at issue in this case

directly and_ significantly restrict the protected

speech of NCTA’s members — both its cable operator

members, who are compelled to set aside capacity on

their systems for broadcast signals that they would

.——— rr

1 Counsel for all parties have consented to the filing of this

bref, and their consents have been filed with the Clerk of this

Court. No counsel for a party authored this brief in whole or in

part and no counsel or party made a monetary contribution

intended to fund the preparation or submission of this brief. No

person other than amicus curiae or its counsel made a

monetary contribution to its preparation or submission.

not otherwise choose to carry, and its cable-program-

network members, who must compete for carriage on

cable systems and for desirable channel placement

without any such guaranteed carriage rights.

Fundamental changes in the marketplace since

Congress adopted the must-carry statute in 1992

have substantially eroded the bases on which this

Court upheld the constitutionality of such forced

carriage. In particular, the development of “ever

increasing competition among video providers,”

Comcast Corp. v. FCC, 579 F.3d 1, 8 (D.C. Cir. 2009),

and technological changes have eliminated the

“bottleneck control” on which the Court relied in

declining to apply strict scrutiny — the standard

normally warranted in cases involving forced speech

— and in finding that the must carry provisions

survived intermediate scrutiny. In addition, far

fewer households now rely on over-the-air reception,

which also decreases any governmental interest

served by the must carry rules.

Finally, NCTA also supports Cablevision's

petition for a writ of certiorari: because this case

provides a much-needed opportunity for the Court to

consider an as-applied challenge to the must-carry

rules.

INTRODUCTION AND SUMMARY

Although this Court rejected the facial challenge

to the must-carry provisions of the 1992 Cable Act in

its Turner decisions, all the Justices recognized that

the statute infringes free-speech values. ‘The

plurality acknowledged that the must-carry

provisions both “restrain cable operators’ editorial

discretion in creating programming packages by

‘reducing the number of channels over which [they]

exercise unfettered control” and “render it more

difficult for cable programmers to compete for

carriage on the limited channels remaining.” Turner

IT, 520 U.S. at 214, quoting Turner I, 512 U.S. at 637.

In casting the deciding vote, Justice Breyer similarly

recognized that the must-carry provision “extracts a

serious First Amendment price.” Turner II, 520 U.S.

at 226. And the dissenters concluded that it was

unconstitutional on its face for Congress to

“commandeer'] up to one third of each cable system’s

channel capacity for the benefit of local

broadcasters.” Jd. at 251.

Today, the must-carry rules continue to impose a

substantial burden on the free-speech rights of cable

programmers and cable operetors. But much has

changed in the market for television programming

since the must-carry statute was adopted in 1992.

Significantly, these changes tn the marketplace call

into question many of the considerations underlying

this Court’s rulings in the Turner cases.

In particular, regulations that require a medium

of communications to transmit speech that it does

not choose to carry are presumptively

unconstitutional and generally subject to strict

scrutiny. In Turner J, however, the Court held that

the must-carry provisions were subject only to

intermediate scrutiny. 512 U.S. at 661. The Court

explained that “special characteristics of the cable

medium” — in_- particular, cable operators’

“bottleneck control” over the programming available

to cable customers — not only justified this

departure from “application of the most exacting

level of First Amendment scrutiny,” id., but also gave

4

rise to a real threat of anticompetitive harm that

justified the must carry rules under intermediate

scrutiny.

In adopting the 1992 Act, Congress feared that

cable operators’ “bottleneck” control would allow

them to decline to carry small broadcasters in order

to capture the broadcasters’ advertising revenue.

Today, however, any potential concern about a cable

“bottleneck” has been eviscerated. Satellite operators

DirecTV and the EchoStar are now the second and

third largest providers of multichannel video

programming and the FiOS and U-verse offerings of

telephone companies Verizon and AT&T are growing

fast. As a result, as the D.C. Circuit recently held in

Comcast Corp. v. FCC, “[cl]able operators ... no longer

have the bottleneck power over programming that

concerned the Congress in 1992.” 579 F.3d at 8.

Both Congress and the Turner J Court also noted

another facet of the “bottleneck” that it found to have

existed in 1992: Once viewers connected their sets to

cable, they were essentially foreclosed from obtaining

video programming not carried by the cable system.

Again, however, these concerns are greatly

attenuated today. Because virtually all television

sets now include multiple video inputs, attachment

of a particular source of programming no longer

inherently closes off access to other sources.

The fact that cable can no longer credibly be

found to possess bottleneck control over video

programming suggests that forced carriage of

programming by cable systems may deserve the

same strict scrutiny that applies to forced carriage of

material by newspapers. But even under

intermediate scrutiny, the absence of bottleneck

control means that the burden of must-carry

requirements can no longer be justified as necessary

to promote a real, non-conjectural threat.

In addition, the fact that the number of over-the-

air viewers 18S now much smaller supports the

conclusion that forced carriage is no_ longer

warranted.

REASONS FOR GRANTING THE PETITION

In its Turner decisions, this Court upheld the

must-carry regime after applying intermediate

scrutiny even though it is typically appropriate to

apply strict scrutiny to statutes in which the

government compels speech, as here. The Court

based that decision largely on its finding that cable

operators have bottleneck control over what viewers

can watch. But changes in the competitive

marketplace as well as changes in technology have

undermined this finding. And the interest served by

the must-carry requirement has decreased in force as

the number of over-the-air viewers has decreased.

The Court should therefore grant certiorari to re-

examine whether compelling carriage of broadcast

stations that a cable operator would otherwise choose

not to carry can still survive First Amendment

scrutiny.

ee ee 7 —

? This case also squarely presents an important issue reserved

by the Court in Turner 1. Specifically, the Court there declined

to address the question whether FCC consideration of

programming content during market-modification proceedings

would require application of the strict scrutiny standard. /d. at

643 n.6. In this case, the FCC granted the market modification

sought by WRNN based in part on consideration of its

programming content, so the question whether strict scrutiny

apphies cannot be avoided.

6

CHANGES IN THE VIDEO PROGRAMMING

MARKETPLACE AND IN TECHNOLOGY

HAVE UNDERMINED THE BASES ON

WHICH THE MUST-CARRY PROVISIONS

OF THE STATUTE WERE UPHELD.

The Court rejected the facial challenge to the

must-carry statute in large part on the ground that

cable operators controlled a bottleneck. The finding

that cable had bottleneck control over access to video

programming was a significant basis for the Court's

decision to apply intermediate rather than strict

scrutiny. And it was a significant basis for its

determi. ation that, under intermediate scrutiny, the

must-carry rules addressed an _ important

governmental concern that was real and not merely

conjectural. But the development of vibrant

competition in the video programming marketplace,

as well as the ubiquity of multiple video inputs on

television sets have eliminated the bottleneck that

the Court had found to exist.

In Turner II, the Court emphasized that “[o]nly

one percent of communities are served by more than

one cable system [and] [e]ven in communities with

two or more cable systems, in the typical case each

system has a local monopoly over its subscribers.”

520 U.S. at 197. This finding of market power was

essential to the Court’s decision that the must-carry

rules were justified. The absence of competition, the

Court reasoned, permitted “cable industry favoritism

for integrated programmers.” Id. at 200. Accordingly,

the must-carry rules were justified as “regulation{s}

designed ‘to prevent cable operators from exploiting

their economic power to the detriment of

broadcasters.” Id. at 186, quoting Turner I, 512 U.S.

at 649.

In his short opinion concurring in part, Justice

Breyer agreed that “a cable system ... at present

(perhaps less in the future) typically faces little

competition,” and went on in the same sentence to

conclude that the resulting control of “the range of

viewer choice” justified “some degree — at least a

limited degree — of governmental intervention.”

Turner II, 520 U.S. at 227. Thus, all five justices

voting to uphold the must-carry statute against the

facial challenge in the Turner cases explicitly

recognized that the must-carry rules were premised

on the lack of competition. Even then, Justice Breyer

emphasized that only a lmited degree of

governmental intervention was warranted and noted

that the future development of competition might

eliminate the need for any such intervention. Id. at

227-28.

Of course, substantial competition has developed;

indeed there is “ever increasing competition among

video providers.” Comcast, 579 F.3d at 8. The FCC’s

most recent annual report to Congress on the state of

video markets required by 47 U.S.C. § 548(g)

documents this increase. That report shows that in

2006 DirecTV was the second-largest provider of

multichannel video programming services’ and

EchoStar was the third-largest. Annual Assessment

of the Status of Competition in the Market for the

Delivery of Video Programming, Thirteenth Annual

Report, 24 FCC Red 542, 581 76 (2009) (“2006

Competition Report’). DirecTV and EchoStar both

provide satellite service and hence compete with

cable systems on a nationwide basis, giving most

American households a choice of three providers.

Satellite operators initially Jacked — sufficient

spectrum to provide local broadcast channels, but by

2006 at least one of the two satellite providers

offered local broadcast channels in “approximately

175 of 210 television markets ..., which represent 97

percent of all U.S. television households.” Jd. at 584

484. The 2006 Competition Report noted that Verizon

had just entered the multichannel video market with

“FiOS” and AT&T had just begun to offer “U-verse.”

Id. at 548 914. Only about 14 percent of American

households did not subscribe to a multichannel

service in 2006. Jd. at 594-95 4108.

NCTA’s recent submission providing the FCC

updated information on the _ video-programming

market confirms that competition has continued to

develop. DirecTV and EchoStar remain the second

and third largest multichannel service providers, and

DirecTV has grown especially rapidly on account of

its aggressive advertising campaign focusing on its

high-definition programming. Annual Assessment of

the Status of Competition in the Market for the

Delivery of Video Programming, Comments of the

National Cable & Telecommunications Association at

9-11, FCC MB Docket No. 07-269 (May 20, 2009).

Verizon's FiOS network is now available to 17

million households in 14 states, and Verizon reported

that it gained approximately 300,000 new

subscribers in the first quarter of 2009. Jd. at 12.

AT&T's U-verse service gained almost as many new

subscribers in that quarter, and AT&T plans to

extend its service to 93 markets in 19 states. Id.

The D.C. Circuit’s recent Comcast decision

provided the exclamation point regarding the

ongoing increase in competition among video

programming providers. The Comcast court

addressed the 30-percent subscriber limit established

by the FCC under 47 U.S.C. § 533(f)(2)(A), vacating

that provision because the FCC had failed to

adequately consider the effects of the development of

competition. The subscriber-limit provision was

adopted in the same 1992 legislation that required

must carry, and the purpose of the subscriber limit,

in the words of the statute, is to ensure that cable

operators do not “unfairly impede ... the flow of video

programming’ by refusing to carry disfavored cable

channels. Shortly after its adoption, the D.C. Circuit

rejected a facial attack on the constitutionality of the

subscriber limit provision, but in 2001 held that the

FCC had not adequately justified the 30-percent

subscriber limit it adopted. Time Warner Entm't Co.,

L.P. v. United States, 211 F.3d 1313, 1315 (D.C. Cir.

2000) (rejecting facial challenge); Time Warner

Entm't Co., L.P. v. FCC, 240 F.3d 1126, 1136 (D.C.

Cir. 2001) (invalidating 30-percent ownership

requirement). The recent decision reviewed the

FCC’s repromulgation of the 30-percent subscriber

limit under a modified rationale. The D.C. Circuit

stated that the basis for the subscriber limit is that

cable operators once possessed “bottleneck monopoly

power.” Comcast, 579 F.3d at 6, quoting Turner 1,

512 U.S. at 661. Again, however, the court concluded

that “[clable operators ... no longer have the

bottleneck power over programming that concerned

the Congress in 1992,” Comcast, 579 F.3d at 8, and

held that the 30-percent subscriber limit could not

stand in hght of the development of competition.

This significant increase in competition similarly

undermines the principal basis on which the must-

10

carry requirements survived intermediate scrutiny.

Cable operators no longer control a bottleneck and

there is little reason to be concerned about abuse of a

bottleneck that does not exist, whether the potential

victim is a cable programmer, as with the subscriber

limits, or a broadcaster, as with the must-carry

rules. On account of vigorous competition, cable

operators must be especially vigilant to offer

programming preferred by viewers lest their

subscribers switch to a satellite provider or a

telephone company. This effect of the development of

competition — explicitly anticipated by Justice

Breyer, Turner IT, 320 U.S. at 227 — erodes the basis

for determining that must-carry requirements are

necessary to prevent a real, not merely conjectural,

threat, just as the D.C. Circuit recognized that it

undermined the FCC’s subscriber limits.

Cable operators’ “bottleneck control” was not only

the basis on which must carry survived intermediate

scrutiny, but also an important ground for the

Court’s holding that must-carry rules — unlike

forced speech requirements generally — should be

subject to intermediate rather than strict scrutiny.

The Court noted that the technological

characteristics of cable systems gave them a degree

of physical “bottleneck control” that differentiated

them from newspapers, (which clearly could not be

compelled to carry speech not of their choosing).

Specifically, “the physical connection between the

television set and the cable network gives the cable

operator bottleneck, or gatekeeper, control over most

(if not all) of the television programming that is

channeled into the subscriber's home.” J'urner J, 512

U.S. at 656. But unlike in the early 1990s, when

cable was typically connected to the only video input

1]

of a subscriber's television set, virtually all television

sets today have multiple inputs, and viewers use

these inputs to switch seamlessly among a variety of

other devices that provide video content from other

sources, including gaming consoles and DVD players.

Therefore, any physical bottleneck that cable

operators once possessed — like any bottleneck

created by market power — no longer exists.

Along with the development of significantly

greater competition and technological improvements,

the number of Americans who depend on over-the-air

signals has declined sharply. When the Cable Act

was passed in 1992, 40 percent of Americans still

depended on over-the-air broadcasts, and the Court

reasoned that must carry was necessary “to preserve

access to free television programming” for those

Americans. Id. at 646. But since 1992, that number

has dropped sharply. As the FCC’s latest report on

competition in the video-programming industry

explains, only about 14 percent of U.S. households

now depend on_ over-the-air signals. 2006

Competition Report, 24 FCC Red at 549 916. And

even that number—which is based on 2006-2007

data—1is overstated because it does not account for

the large numbers of Americans who switched to

cable or satellite during the digital-television

transition. See Petition at 20 n.8.

This sharp decline changes the constitutional

analysis by diminishing the government's interest 1n

“protecting noncable households from loss of regular

television broadcasting service.” Turner I, 512 US.

at 647. In Turner IJ, this Court found that interest

to be sufficiently “important” to justify burdening the

First Amendment rights of cable operators because

12

“{florty percent of American households continue to

rely on over-the-air’ signals’ for television

programming” and_ because “broadcasting is

demonstrably a principal source of information and

entertainment for a great part of the Nation’s

population.” 520 U.S. at 190 (internal citation

omitted). But with fewer and fewer Americans

relying on broadcast signals as their source of news

and information, broadcasting is no longer the

“principal source” of information and entertainment

for “a great part” of the population, and the

government's interest is therefore no longer as

significant.

Even the FCC has recognized this point. In

December, the Commission initiated an inquiry to

determine whether spectrum currently allocated to

broadcast television should be reclaimed for more

productive use. See Data Sought on Uses of

Spectrum, Public Notice, 24 FCC Red 14275, 14277

"4B.5, D (Dec. 21, 2009) (requesting comments on

“the costs to replace over-the-air delivery to MVPDs

and consumers with other means (fiber, microwave)”

and asking “[w]hat market-based or other incentive

mechanisms should the Commission consider to

enable broadcasters to choose whether or not to

make any spectrum (excess or otherwise) available

for reallocation to wireless broadband use”). With

even the Commission suggesting that broadcast

spectrum should be put to better use, it is clear that

broadcast television no longer serves an “important”

government interest to the extent that it used to.

Thus, changed circumstances have drastically

shifted the balance between the government's

interest in the must-carry regime and the burden the

13

regime imposes on speech, a factor that this Court

found crucial in Jurner JJ. There, the Court

concluded that “the burden imposed by must-carry is

congruent to the benefits it affords.” Turner JJ, 520

U.S. at 215-16. But given the sharp decline in over-

the-air viewership, that conclusion is no longer true.

The Court should grant certiorari in this case to

determine how these. significant changes to factors

that were critical to the Court’s decisions in Turner

affect the constitutionality of the continued

application of must-carry requirements.

CONCLUSION

The Court should grant the petition for a writ of

certiorari.

Respectfully submitted

NEAL M. GOLDBERG CHRISTOPHER AY

MICHAEL S. SCHOOLER Counsel of Record

DIANE B. BURSTEIN TIMOTHY J. SIMEONE

NATIONAL CABLE & MARK D. DAVIS

TELECOMMUNICATIONS WILTSHIRE & GRANNIS LLP

ASSOCIATION 1200 18 Street, N.W.,

25 Massachusetts Washington, D.C. 20036

Avenue, N.W. (202) 730-1300

Washington, D.C. 20001 cwright@wiltshiregrannis.com