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

No. 09-901 Suprame Court, U.S.

FILED.

FEB 26 2010

IN THE OFFinz Y= oni Se LERK

Supreme Court of the United States

—_———_———@»—><— >a —___———

CABLEVISION SYSTEMS CORPORATION,

Petitioner,

FEDERAL COMMUNICATIONS COMMISSION

and UNITED STATES OF AMERICA,

Respondents.

ON PETITION FOR WRIT OF CERTIORARI TO THE UNITED STATES

COURT OF APPEALS FOR THE SECOND CIRCUIT

BRIEF FOR AMICUS CURIAE TIME WARNER CABLE INC.

IN SUPPORT OF PETITIONER

FLOYD ABRAMS*

LANDIS C. BEST

ILANA EHRLICH

CAHILL GORDON & REINDEL LLP

80 Pine Street

New York, New York 10005

(212) 701-3000

fabrams@canhili.com

Of Counsel:

Attorneys for Amicus Curiae

MARC LAWRENCE-APFELBAUM Time Warner Cable Inc.

JEFF ZIMMERMAN

Time Warner Cable Inc.

60 Columbus Circle

New York, New York 10023

‘Counsel of Record

TABLE OF CONTENTS

PAGE

LABLE OF AUTHORITIES ...0...cc00s05eens ll

INTEREST OF AMICUS CURIAE.......... ]

SUMMARY OF ARGUMENT ................ 3

Pita MAAN fF eins ncn veecoves chee eee 5)

I. TIMI WARNER CABLE’S EXPERIENCE

WITH WRNN DEMONSTRATES THE

MISADVENTURE OF MUST-CARRY.

A. The Must-Carry Regime and the

1 Urner Decisions... .6i.45..5555555

B. Time Warner Cable’s Experience

With WRNN and the Must-Carry

RMIOG oi osik esas hie

Il. DRAMATIC CHANGES IN THE

MARKETPLACE AND TECHNOLOGY

SINCE THE 1992 CABLE ACT AND

THE TURNER DECISIONS MANDATE

REVIEW OF THE MUST-CARRY

POET 5c ocd csdaleyncdeeae eee

A. The Bottleneck Analogy No Longer

Apphes In A Vibrant and

Technologically Advanced Market .

Lo

PAGE

Bb. Broadcasters Have Demonstrated

Market Strength and Do Not Need

Must-Carry in Today’s Competitive

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NE ooo oc cs tcc nsec esse cccsens 25

11

TABLE OF AUTHORITIES

Cases PAGE

Cablevision Systems Corp. v. FCC,

570 F.3d 83 (ad Cir. ZOOS). ox < cc ccccccse 6n, 10

Citizens United v. FEC, No. 08-205,

Sin Ce. (FOR. 21, BOI cic esac de sss 4-5, 14

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

DOOR ocak hk 4,19

Turner Broadcasting System, Inc. v. FCC,

G33 Ue es seer ske eee passim

Turner Broadcasting System, Inc. v. FCC,

GRO 00, EO CIs ov avis cs esnxiennka passim

WLINNY-TY, Inc. v. FCC, 163 F.3d 137

(2d Civ. 1008). oc cece cede cannncss 8

Administrative Cases

Pet. of Time Warner New York City Cable

Group for Modification of ADI for

Station WRNN, Kingston, NY,

11 FCC Red 6528 (CSB 1996) ........... 8

Federal Statutes and Rules

LT ACE ae. 6 Peeve os aes cee een tes 6

Cable Television Consumer Protection and

Competition Act of 1992

47 U.S.C. § Sober) ok. ceo eeaecs ES 20

47 US.) S Bs eee ee 1, 5

47 U.S.C. § 534(b)(1)(B) ........0..-0 00

47 U.S.C. § 534(b)(6).............2.5.0..

Vee Coe |)

47 U.S.C. § 534(h)(1)(A) ...... eee eee

47 U.S.C. § 534 (h)(1)(C)(i).. se eee eee

47 U.8.C. § 634 (AKIKO ...... 6.0. eee 6,

vVeIR Come o.. |

er Rem ee ! : ee ere er 15n

Carriage of Digital Television Broadcast

Signals: Amendment to Part 76 of the

Commission’s Rules, CS Docket

No. 98-120, FCC 07-170 (rel.

Nov. 30, 2007) (Third Report

ie Mis bo og oo ok 4 ee ee ea

H.R. Rep. No. 628, 102d Cong.,

ee CBee eu oo he ee ee aia 22

Miscellaneous

Law Journal Articles

Ronald W. Adelman, J'urner Broadcasting

and the Bottleneck Analogy: Are Cable

Television Operators Gatekeepers of

Speech?, 49 SMU L. Rev. 1549, 1550

CPUTW- AGRURE TODS) ovo oss oe ck ace ce acedss

10

James A. Bello, Comment, Turner

Broadcasting System, Inc. v. FCC:

The Supreme Court Positions Cable

Television on the First Amendment

Spectrum, 30 New Eng. L. Rev. 695,

744 (1995-1996)

a a oe ae os oo ae a oe a ee ae ee er ee oe oe ee oe we ke er ee

Henry Geller, Turner Broadcasting, the

First Amendment, and the New

Electronic Delivery Systems, 1 Mich.

Telecomm. & Tech. L. Rev. 1, 26-27

(1994-1995)

Randolph J. May, Charting a New

Constitutional Jurisprudence for the

Digital Age, 3 Charleston L. Rev. 373,

393 (Winter 2009)

OO & Hh - OS © GE OO 682-4 OH EO FAS COO Oo BE

See ee eeeee ©6666 € C44 BEE OC C.O

Reports and Comments

In re Annual Assessment of the Status of

Competition in the Market for the

Delivery of Video Programming,

Comments of the NCTA

(May 20, 2009)

In re Annual Assessment of the Status of

Competition in the Market for the

Delivery of Video Programming,

Thirteenth Annual Report (adopted

Nov. 27, 2007, released

Jan. 16, 2009)

», 18

lon, 15-16, 17-18

vl

PAGE

Articles and Analyst Reports

Jessica Reif Cohen et al., Media and Cable:

The Tide Has Turned, Bank of America/

Merrill Lynch Analyst Report, at p. 1

OR Mc vey ac vncccencseuccansess 21

Neilsenwire, Total Viewers of Online Video

Increased 5% Year-Over-Year, Feb. 11,

2010, available at http://blog.nielsen.

com/neilsenwire/online)_ mobile/total-

viewers-of-online-video-increased-

Pa VOMPHOVOE YORE «oo c c ce ccccvccccesvecscns 18

Brian Stelter, Broadcasters Battling for

Cable Fees, N.Y. Times, Dec. 29, 2009 . 21

STATEMENT OF INTEREST OF AMICUS

CURIAE TIME WARNER CABLE INC:!

Amicus Time Warner Cable Inc. (“TWC”) is the

second largest cable operator in the country, with

over 14 million customers in 28 states. TWC offers

its customers various products and services,

including cable television, high speed Internet,

and telephone. TWC is recognized as a leader in

cable and fiber optic technology, and in 1994,

became the first cable company to receive an

Emmy Award by winning the Engineering Award

for Outstanding Achievement in Technological

Development for its pioneering work in using fiber

optics to transmit broadband signals.

As a cable operator, TWC, like Petitioner Cable-

vision, is subject to the must-carry regime set

forth in the Cable Television Consumer Protection

and Competition Act of 1992 (“the 1992 Cable

Act”). 47 U.S.C. § 534(a), (c), (h)(1)(A). Under that

regime, cable operators are obligated to set aside

a portion of their channel capacity to carry the

signals of local broadcasters who elect “must-

carry’ status. In the absence of must-carry, TWC

would exercise its editorial discretion and busi-

ness judgment in determining what programs to

carry on its system based upon many factors,

including customer demand.

Pursuant to Rule 37.6, amicus certifies that no coun-

sel for a party authored this brief in whole or in part, and

that no person or party, other than amicus, made a monetary

contribution to the preparation or submission of this brief.

Counsel of record for all parties have consented to the filing

of this brief and their written consents are on file with the

Clerk of this Court.

2

—

TWC, like Petitioner Cablevision, has also had

dealings with intervenor-broadcaster WRNN that

exemplify the negative real world impact of the

must-carry regime as applied in today’s market-

place. TWC believed at the time of the passage of

the 1992 Cable Act that the must-carry provisions

were not consistent with the First Amendment to

the United States Constitution. The Company was

involved in the cable industry’s facial challenge to

the must-carry requirements which led to this

Court’s Turner decisions, which ultimately upheld

the must-carry regime in a pair of 5-4 decisions.

Turner Broadcasting System, Inc. v. FCC, 512

U.S. 622 (1994) (“Turner I”); Turner Broadcasting

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

IT”).

To say that the market for video programming

has changed in the 18 years since Congress

enacted must-carry legislation and the subsequent

Turner decisions would be a dramatic under-

statement. TWC faces intense competition today

for increasingly technologically sophisticated con-

sumers who have a vast array of options from

which to get their video programming content,

such as satellite companies, telephone companies,

and the Internet. Because of these dramatic

changes in the ever-more-competitive market-

place, the rationale underlying the Turner deci-

sions has been eviscerated. TWC believes that

Cablevision’s petition for certiorari raises impor-

tant questions about the continued vitality of the

must-carry regime that are well worthy of con-

sideration by this Court.

3

SUMMARY OF ARGUMENT

Time Warner Cable’s own experience with

WRNN demonstrates the mischief caused by the

must-carry regulations. WRNN, a station lcensed

in Kingston, NY, had historically never been car-

ried on TWC’s New York City cable system.

Kingston is far away from New York City—both

geographically (over 80 miles) and culturally. The

program line-up of WRNN is primarily home shop-

ping and infomercials, one that is of limited inter-

est to TWC’s urban subscriber base in New York

City. WRNN offers, at best, a tiny amount of token

programming directed toward New York City

viewers, and in fact, offers very little program-

ming that is local even to Kingston, its community

of license. Threatened with a potential must-carry

order from the Federal Communications Com-

mission (“FCC”), however, TWC decided it would

rather strike a deal with WRNN. Under the must-

carry regime, TWC would be obligated to carry

WRNN in an analog format. This is significant

because analog carriage uses much more band-

width than digital—up to ten times more to carry

only one channel. Rather than risk losing this

valuable bandwidth on its cable system, TWC

decided to provide WRNN (i) two digital channels

in exchange for the one must-carry aualog chan-

nel; and (11) carriage on TWC’'s Albany system. an

area not normally within WRNN’s local market.

The end result was the forced carriage of two

channels that are of little to no interest to TWC’s

subscribers.

As the WRNN example illustrates, given the

competitive marketplace in which TWC operates

today, must-carry acts as far too blunt an instru-

ment. The competitive and technological market

place for the delivery of video programming has

changed dramatically since the must-carry regime

was narrowly approved by this Court in its Turner

decisions. TWC faces intense competition from

other companies providing video content services

to consumers: traditional broadcasters, satellite

companies such as DIRECTV and Echostar, large

and well-capitalized telephone companies includ-

ing Verizon and AT&T, and multiple portals on

the Internet, such as YouTube, Hulu and other

streaming video websites all of which were

unheard of in 1992. At the same time, broadcast-

ers have demonstrated through their actions their

own increased market power in the changed com-

petitive landscape, most often choosing not to opt-

in to the must-carry regime at all. Must-carry

remains as a relic of a by-gone era that is not

needed to protect the broadcast industry, and at

worse, leads to twisted incentives that run against

the value of “localism,” one of the goals must-carry

was supposed to protect.

All of these changes lead to one conclusion: this

Court’s Turner decisions are based upon economic

and technological suppositions that are simply

inconsistent with the realities of the marketplace.

This conclusion is supported by the recent decision

of the D.C. Circuit Court of Appeals, which rec-

ognized that cable operators no longer possess the

bottleneck power that in large part drove the

Turner decisions. Comcast Corp. v. FCC, 579 F.3d

1, 8 (D.C. Cir. 2009) (“Cable operators ... no

longer have the bottleneck power over program-

ming that concerned the Congress in 1992”). And

even more recently, this Court, citing to Turner J

itself, warned of the dangers of making differen-

tiations between preferred and disfavored forms of

speech which may become “irrelevant or outdated

by technologies that are in rapid flux.” Citizens

United v. FEC, No. 08-205, Slip. Op. at 9 (Jan. 21,

2010) (citing Turner 1). Cablevision’s petition for

certiorari raises important questions about the

viability of must-carry in today’s market, ques-

tions worthy of this Court’s review.

ARGUMENT

I. TIME WARNER CABLE’S EXPERIENCE

WITH WRNN DEMONSTRATES THE

MISADVENTURE OF MUST-CARRY

A. The Must-Carry Regime and the

Turner Decisions

Under the must-carry provisions of the 1992

Cable Act, cable operators such as TWC are

required to carry the signals of a number of local

broadcasters. 47 U.S.C. § 534(a), § 535(a). The

statute generally requires cable operators to set

aside up to one-third of their channels for

mandatory carriage of commercial television

stations. Id. § 534(b)(1)(B). Cable operators are

not obligated to carry signals of distant

broadcasters; rather, the must-carry regime

applies to the signals of broadcasters deemed to be

“jocal” as to each community served by the cable

system. /d. § 534 (h)(1)(A). Thus an important

question under the must-carry regime is

determining a broadcast station's local status.

Currently, the FCC determines the local status

of a commercial television station by using

6

information generated by Nielsen Media Research

that divides the nation into a series of geographic

Designated Market Areas based on viewership

patterns. 47 C.F.R. § 76.55(e)(2). The 1992 Cable

Act also contains a market modification provision

which serves as the crux of the present litigation.

Under the market modification provision, the FCC

may, on written request, add certain communities

to, or exclude certain communities from, a given

broadcast station’s local market “to better

effectuate the purposes of the statute.” 47 U.S.C.

§ 534(h)(1)(C)(i). In reviewing market modification

requests, the FCC is supposed to examine four

statutory factors intended to “afford particular

attention to the value of localism,” including

“whether the television station provides coverage

or other local service to [the] community.” /d.

§ 534(h)(1)(C)(11).

In this Court’s Turner decisions, the Court

narrowly upheld the must-carry regime against a

facial attack brought by TWC and other cable

operators and programmers. In Turner I, Justice

Kennedy wrote for the 5 member majority, holding

that the Cable Act’s requirements were generally

content neutral and thus subject to intermediate

scrutiny.” The Court identified three “important”

’ The Court’s opinion, however, explicitly carved out

the market modification provision at issue in the instant lit-

igation, noting that tt appeared to be content-based due to

its focus on the “value of localism”, and noted that the dis-

trict court did not address this issue below but could do so on

remand, 512 U.S. at 643 n.6 (quotation mark omitted). In its

decision below, the Second Circuit recognized that the con-

stitutionality of the market modification provision was a

question left open by Turner I. Cablevision Systems Corp. v.

FCC, 570 F.2d 83, 97 (2d Cir. 2009).

7

goals served by must-carry in the abstract: “(1)

preserving the benefits of free, over-the-air local

broadcast television, (2) promoting the widespread

dissemination of information from a multiplicity of

sources, and (3) promoting fair competition in the

market for television programming.” 512 U.S. 622,

662 (1994). The Court, however, found that the

record was not adequate for determining whether

the statute was sufficiently tailored to address

those interests without burdening too much

speech and remanded the case for further fact

finding. Jd. at 667-68.

Three years later, with a developed record, this

Court held that the must-carry provisions

satisfied intermediate scrutiny. Jurner Il, 520

U.S. 180 (1997). Justice Breyer, who gave the

majority its fifth vote, wrote separately to state

that he did not agree that promoting fair

competition in the marketplace for television

programming qualified as an important

governmental interest of the 1992 Cable Act. Jd.

at 226. Instead, Justice Breyer grounded his

Opinion in the governmental importance of

insuring over-the-air “access to a multiplicity of

information sources.” /d. (quotation marks

omitted). Foreshadowing the future, Justice

Breyer observed that the evidence showed that “a

cable system... at present (perhaps less in the

future) typically taces little competition, [and] that

it therefore constitutes a kind of bottleneck that

controls the range of viewer choice... .” Id. at

227-28 (emphasis added).

With this background in mind, TWC turns to its

experiences with the must-carry rules, and in

particular, its dealings with WRNN, the

broadcaster-intervenor in this case.

8

B. Time Warner Cable’s Experience With

WRNN and the Must-Carry Rules

TWC provides cable television service to much of

New York City, including Manhattan, Brooklyn,

Queens, and Staten Island. WRNN is a television

station licensed in Kingston, NY. It primarily

broadcasts home shopping, infomercials, and other

paid programming. Kingston is far away from New

York City in every sense of the word—geographi-

cally (e.g., approximately 89 miles from Brooklyn),

politically, and culturally. Thus, it is no surprise

that historically, TWC did not carry WRNN on its

New York City systems.

In the late 1990's, TWC prevailed in an action

that, under the very market modification

provision at issue in this case, excluded the

portions of New York City served by TWC from

WRNN’s “television market”, i.e., the area in

which it is entitled to demand must-carry status.

Pet. of Time Warner New York City Cable Group

for Modification of ADI for Station WRNN,

Kingston, NY, 11 FCC Red 6528 (CSB 1996),

recon. denied, Market Modifications and the New

York Area of Dominant Influence, 12 FCC Rcd

12262 (1997), aff'd, WLNY-TYV, Inc. v. FCC, 163

F.3d 137 (2d Cir. 1998). The primary basis for the

market modification ruling was that WRNN’s

Grade B contour coverage—the area in which

viewers could receive an adequate broadcast

signal over-the-air—did not reach the New York

City area.

WRNN thereafter moved its broadcasting tower

50 miles closer to New York City and—while

maintaining its city of license as Kingston—

opened a studio in Manhattan that it designated

9

as its “head studio.” Later that year, WRNWN filed

a Petition for Special Relief before the FCC for

market modification to add the New York City

specific communities back into its television

market in order to be eligible for must-carry

status as to TWC.

TWC opposed WRNN’s petition on numerous

grounds, many of which track those cited by

Cablevision here. For example, 'TWC pointed out

that WRNN failed to provide local programming of

interest to the NYC communities, but rather

primarily provided programming of a very generic

sort such as home shopping and iniomercials.

TWC noted that only one program, “NYC Metro

Live,” appeared to cover any issues of local

importance, and it was only broadcast for 4.5

hours a week, or less than 2.7% of WRNN’s weekly

broadcast schedule. In contrast, TWC set forth the

plethora of local programming carried on its

system by other providers. TWC also pointed out

that, ironically, given broadcasters’ supposed

responsiveness and benefit to local communities,

WRNN’s line up had very httle programming that

was directed toward its local community of license

—Kingston. Instead, WRNN, a predominantly

home shopping network, appeared to be ignoring

its own local community while presenting a token

amount of programming directed to New York

City that would permit a facially plausible must-

carry argument for expanded carriage into New

York City’s larger commercial market.

The Second Circuit's decision below in this

action makes reference to TWC’s dispute with

WRNN, noting that the FCC’s Media Bureau

granted WRNN’s petition and that TWC did not

10

appeal the decision to the full Commission.

Cablevision, 570 F.3d at 91. While that much is

true, it does not tell the full story of TWC’s

experience with WRNN. Due to the coercive and

distorting effect of the must-carry rules, TWC

made the business decision that it was better to

settle with WRNN than to continue with

litigation.

The deal TWC struck is instructive of the

mischief caused by the must-carry rules. Under

the must-carry regulations, a broadcaster entitled

to must-carry status must be carried in analog

format by a cable company such as TWC which

has both analog and digital capabilities. See

Carriage of Digital Television Broadcast Signals:

Amendment to Part 76 of the Commission’s Rules,

CS Docket No. 98-120, FCC 07-170 (rel. Nov. 30,

2007) (Third Report and Order). This is significant

because analog carriage takes up far greater

bandwidth than digital carriage. Every analog

channel takes approximately 6 MHZ of bandwidth.

That same bandwidth could be used to offer TWC’s

customers 10 digital channels. In other words,

TWC could offer its customers 10 different

channels of varying subject matters, including

those with local interest, but because of must-

carry, it must instead offer only WRNN, a

predominately home shopping station with, at

best, a token amount of local programming that

one suspects was included solely to game the

must-carry regulations in general and the market

modification provision in particular. Putting aside

the harm to TWC’s First Amendment rights to

determine what it should carry on its own cable

system, it is difficult to see how this result

advances the consumer's interests, or the interest

11

supposedly served by the must-carry rules

themselves: preserving free, over-the-air local

broadcasting and promoting a widespread

dissemination of information from a multiplicity of

sources.

To make matters worse, the must-carry regime

further obligates TWC to carry must-carry signals

on the same channel position assigned to the

broadcaster in the broadcasting frequency. 47

U.S.C. § 534(b)(6). This means that TWC would

have to carry a broadcaster on a specific channel

on its line-up, even if thav numerical channel was

already assigned to a different content provider.

In the case of WRNN, all these rules would have

obliged TWC (in the event WRNN prevailed on its

petition) to carry WRNN in analog format and on

channel 48, which would have necessitated TWC’s

removal] of an already existing channel, most

likely C-SPAN 2, from its analog line up in order

to have enough capacity to carry WRNN. It is

ironic indeed that the must-carry provisions would

lead to such a result—the replacement of C-SPAN

2, a commercial-free service offering exclusively

government and public affairs programming, with

a home shopping/infomercial station on a valuable

analog channel.

To avoid these must-carry costs, TWC agreed to

withdraw its opposition to WRNN’s petition before

the FCC and to give WRNWN two channel slots in a

digital format, and to offer carriage on TWC’'s

Albany system, an area not otherwise in WRNN’s

market. In exchange, WRNN agreed to relinquish

its must-carry rights, including its right to one

analog channel.

12

TWC’s experience with WRNN is not an

anomaly. Since the FCC adopted its current must-

carry rules in 1993, TWC has been involved in

over 40 disputes in which it has defended against

must-carry complaints or has sought modification

of local station markets to avoid carriage of

stations not deemed of sufficient interest to TWC

subscribers in particular communities. And, as

explained more fully below, given the changing

competitive and technological landscape, must-

carry’s distorting and negative effect has grown

only more disproportionate. Whatever “fit” may

have existed at the time of Turner between the

goals served by the must-carry regulations and

the speech price paid by cable operators and

programmers is no more.

Il. DRAMATIC CHANGES IN THE MARKET-

PLACE AND TECHNOLOGY SINCE THE

1992 CABLE ACT AND THE TURNER

DECISIONS MANDATE REVIEW OF THE

MUST-CARRY REGIME

As the petition for certiorari demonstrates,

fifteen years after Turner J, the constitutionality

of the must-carry provision of the 1992 Cable Act

is ripe for review. Turner’s analysis is keyed to

industry conditions long outdated. The state of the

industry is rapidly changing—indeed, has changed

substantially even over the course of this

litigation—and is radically different from the

Turner era. The must-carry provision, bolstered by

the Turner decisions, is a study in the law of

unintended consequences, and a look at the

present state of the industry illustrates the

13

perversions to which a regulatory regime can lead

once its factual underpinnings vanish.

Turner I’s rationale was grounded in a

particular time, at a particular moment in the

development of video technology, when the power

of cable companies was on the rise and consumers

had relatively few alternatives and corre-

spondingly little control. See, e.g., Turner I, 512

U.S. at 632-33 (“increasing concentration of

economic power in the cable industry” and

exclusivity based on infrastructure); id. at 633

(industry characterized by power of cable

companies relative to broadcasters); id. at 634

(increasing vertical and horizontal integration).®

This Court found that the regulations were

‘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.” Jd.

at 661. Even at the time, however, the Court

recognized the “pace of technological advance-

$ The same is true in Turner IJ, where the Court relied

heavily on the notion that cable maintained a monopoly, and

that both horizontal and vertical integration were trending

upward. E.g., Turner II, 520 U.S. at 197-98, 206-07.

Tellingly, Turner IJ arrived at the Supreme Court after a

remand to consider additional factual material on a sum-

mary judgment motion, and much of the opinion was devoted

to the consideratien of various studies that are woefully out

of date. See, e.g., id. at 200 (specific evidence of cable

providers’ favoritism toward vertically-integrated content

providers); id. at 206 (information that “{oJn average, even

the lowest rated station added pursuant to must-carry had

ratings better than or equal to at least nine basic cable pro-

gram services carried on the system”); td. at 214 (studies

finding that cable operators were required to make few sub-

stantial changes as a result of the must carry regime).

14

ment,” and noted that there was an “ongoing

telecommunications revolution with still

undefined potential to affect the way [people]

communicate and develop [] intellectual

resources. Id. at 627. See also Citizens United,

Slip Op. at 9 (citing Turner J for the proposition

that courts should be wary of making distinctions

between favored and disfavored forms of speech

which may become “irrelevant or outdated by

technologies that are in rapid flux”).

As early as 1995, commentators began to

recognize that the Turner J decision’s reasoning—

based as it was on the status of an obviously

dynamic’ technological industry—uinvited

obsolescence.’ Recent scholarly articles, with the

: See, e.g., Ronald W. Adelman, Jurner Broadcasting

and the Bottleneck Analogy: Are Cable Television Operators

Gatekeepers of Speech?, 49 SMU L. Rev. 1549, 1550 (July-

August 1996) (“The de facto monopoly that most cable oper

ators have historically enjoyed in their service areas—a

prerequisite to the Court’s bottleneck analysis—may soon be

a thing of the past.”); James A. Bello, Comment, Turner

Broadcasting System, Inc. v. FCC: The Supreme Court Posi-

tions Cable Television on the First Amendment Spectrum, 30

New Eng. L.. Rev. 695, 744 (1995-1996) (“[T]he advent of new

technology[] [has] brought about increased competition in

the cable television market. Thus, the economic justification

for imposing must-carry on cable operators is quickly becom-

ing moot.”); Henry Geller, Turner Broadcasting, the First

Amendment, and the New Electronic Delivery Systems, 1

Mich. Telecomm. & Tech. L. Rev. 1, 26-27 (1994-1995) (“With

the inevitable digital revolution and its convergence of media

|], there will be no way to distinguish between the media.

... [T]he bottleneck aspect of cable television, which under-

standably drove the decisional process in Turner, will dis-

appear.”),

15

benefit of hindsight, have also suggested that it is

time for the 7'urner regime to come to an end.°

A. The Bottleneck Analogy No Longer

Applies In A Vibrant and Technologi-

cally Advanced Market.

Vibrant competition in the marketplace for

provision of video services has swept far beyond

what anyone could have dreamed in 1992. It

continues to change even as this petition is

briefed. The most recent Annual Report from the

FCC, which itself lags several years behind,®

suggests that the proliferation of alternative

forms of delivery of video content has already

transformed the industry in a manner far from

that portrayed to the Court when it decided

Turner. See Federal Communications Commission,

In re Annual Assessment of the Status of

Competition in the Market for the Delivery of Video

x See, e.g., Randolph J. May, Charting a New Constt-

tutional Jurtsprudence for the Digital Age, 3 Charleston L.

Rev. 373, 393 (Winter 2009) (“[W]hatever Turner Broad-

casting’s merits when it was decided, .... [t]oday, with

many more media outlets available, along with the Internet,

the justification, if ever there were any, for providing special

protection to local broadcasters at the expense of cable oper-

ators’ First Amendment rights is even more problematic.

a P

° The Report, adopted in 2007 and published in 2009,

only reflects data from 2006. The 1992 Cable Act provides

that the FCC shall provide annual reports to Congress on

the status of the cable market. 1992 Cable Act, Pub. L. No.

102-885 (codified as amended at 47 U.S.C. § 548(g)). Those

reports are evidence in themselves of the dramatic changes

that have occurred in the industry. See Report; see also id.,

at p. 2n.1 (citing the Commission's previous reports, begin-

ning in 1994).

16

Programming, Thirteenth Annual Report

(“Report”) (adopted Nov. 27, 2007, released Jan.

16, 2009).

By 2006, cable’s competitive advantage had

decreased substantially. Im the area of traditional

provision of video services, cable penetration rates

had decreased, while satellite companies’ share of

the multichannel marketplace increased by 7.1%

and Local Exchange Carriers (LECs), like

Verizon's FiOS, expanded their service areas.

Report, at pp. 6-7, 39-40. In Comments submitted

to the FCC in May 2009, the National Cable &

Telecommunications Association (“NCTA”) noted

that cable’s share of the video marketplace had

dropped from 68.17% in June 2006 to 63.5% in

2009; that satellite companies’ revenues were up

8.3% from 2007; and that the number of homes

with FiOS and AT&T's U-Verse availability had

“more than quadrupled since 2008.” /n re Annual

Assessment of the Status of Competition in the

Market for the Delivery of Video Programming,

Comments of the NCTA (May 20, 2009) (“NCTA

Comments”), at pp. 8-12. The trajectory of the

industry suggests that cable television will

continue to lose subscribership while alternative

technologies increase in popularity; given these

realities, any monopoly that cable may have had is

inalterably broken.

Traditional over-the-air broadcasters still

compete with cable operators. However, the

percentage of Americans who receive their

television programming solely from over-the-air

broadcasts has declined significantly since Turner.

The Turner J Court noted that “nearly 40 percent

of American households still rel{ied] on broadcast

17

stations as their cxclusive source of television

programming.” 512 U.S. at 663. Today, that

landscape has shifted dramatically. As of the 2006

FCC Report, almost 87% of households subscribed

to an MVPD service; only 14% of the total U.S.

television houscholds relied solely on over-the-air

service. Report, at pp. 5, 8. Even this small

number was expected to drop after broadcasters’

transition from analog to digital in June 2009.

NCTA Comments, at p. 16.

Moreover, data regarding the more traditional

forms of video delivery no longer present a

complete portrait of the competition facing cable

companies. Ihe 2006 FCC Report addressed

several new sources of content when they were

still in their relative infancy, finding that both

online/mail DVD services like Netflix and

streaming Internet video were swiftly becoming

part of the ever-growing community of video

providers. Netflix was increasingly identified as a

competitive alternative to cable “because it

offer|ed] services similar to premium and pay-per-

view offered by” video content providers, even

permitting customers to rent DVDs via streaming

video. Report, at pp. 79-80. As to Internet video, in

2006 three out of five Internet users viewed media

online in some form, and roughly the same

number downloaded video content; as an example,

more than 34 million people visited YouTube in

August 2006.’ /d., at pp. 72-73. lt 1s important to

Time Warner Cable is a provider of Internet services,

and that side of the business benefits from increased Inter

net offerings. This does not, however, negate the powerful

effect that the Internet has had—and will continue to have

on the traditional] cable television business

18

note that over-the-air viewers (not just MVPD

subscribers) can and do avail themselves of many

of these newer alternatives; thus, such viewers

have many additional choices of video content

than they had when must-carry was adopted.

Usage of these new technologies has only

increased since the 2006 FCC Report. By 2009, the

NCTA reported a 70% gain in revenue for Netflix

in the first quarter of 2008 and a 25% increase in

subscribership. NCTA Comments, at p. 15.

Similarly, by 2009, the popularity of Internet

streaming video had increased, and more than 6

billion videos were viewed on YouTube in January

2009 alone. /d., at pp. 4-5. Hulu, owned by Fox

Corp., NBC Universal, and Disney/ABC, is

another Internet portal for viewing videos that is

gaining in popularity. In January 2010, over

600,000 videos were viewed on Hulu, which

ranked second to YouTube that month. See

Neilsenwire, Total Viewers of Online Video

Increased 5% Year-Over-Year, Feb. 11, 2010,

available at http://blog.nielsen.com/nielsenwire/

online_mobile/total-viewers-of-online-video-

increased-5-year-over-year/,

Technological changes have also revolutionized

the industry as compared to the time of Turner.

Cable customers are offered a multitude of

services and products, including not only cable

television with hundreds of channels, but also

high speed Internet access, interactive two-way

digital applications, and telephone service

delivered through Internet protocol. Cable

television customers are offered high definition

(H1)) channels, video-on-demand, and digital video

recording (DVR) permitting subscribers to

19

customize their viewing experience. Further, both

cable subscribers and over-the-air viewers are

able to hook up new devices to their television

sets, such as iPods, Apple TV, Boxee, and DVD

players, all of which provide different channels for

video content and negate the dated concern that

cable, through placement of its cable set top box,

would act as a physical bottleneck with respect to

information sources. Such technological changes

have in turn further fueled intense competition in

the industry.

Given these drastic changes, the bottleneck

theory under girding the Turner decisions is no

longer viable.* This reality was recently

recognized by the D.C. Circuit Court of Appeals in

the Comcast decision which struck down as

arbitrary and capricious the FCC’s 30% market

share cap on subscribers to be served by any one

cable operator: “Satellite and fiber optic video

providers have entered the market and grown in

market share since the Congress passed the 1992

Act, and particularly in recent years. Cable

operators, therefore, no longer have the bottleneck

power over programming that concerned the

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

(emphasis added).

? The vertical integration argument often raised by

proponents of must-carry is a red herring. Vertical inte-

gration has always been discussed in conjunction with con

cerns about a horizontal stranglehold on the media industry

on the part of cable, see, e.g., Turner I, 512 U.S. at 634,

which, as discussed supra, no longer exists

20

B. Broadcasters Have Demonstrated

Market Strength and Do Not Need

Must-Carry in Today’s Competitive

Market

The Cable Act provides that every three years,

local commercial broadcasters must choose

whether they wish to apply for carriage on a cable

system through a retransmission agreement, or

whether they elect must-carry status. 47 U.S.C.

§ 325(b)(3)(B). In TWC’s experience, the large

majority of broadcasters elect retransmission

consent over must-carry. For example, in the

Hudson Valley system, there are 15 retransmis-

sion consent broadcasters as compared to only 3

must-carry broadcast stations. In North Carolina,

Raleigh carries 6 broadcasters by retransmission

consent and only 3 by must-carry. In Charlotte, all

8 broadcast stations are carried via retransmis-

sion agreement; none have chosen must-carry. Not

surprisingly, the broadcasters choosing must-

carry have much lower viewership than other

broadcasters. This trend is generally played out

throughout TWC’s operations around the country.

The fact the large majority of broadcasters

choose to be carried via retransmission agreement

rather than must-carry demonstrates, in and of

itself, that must-carry is simply not needed to

protect the broadcaster industry. Moreover, the

vibrant competitive market place in which TWC

operates insures that even less popular local

broadcast stations, so long as they have content of

interest to local subscribers, would be carried by

TWC in the absence of must-carry. This is made

all the more likely due to the increased channe!]

capacity on ‘TWC’'s systems as compared to 15

21

years ago. If TWC fails to be responsive to

subscriber demands, TWC will suffer a loss of

subscribers to competitors.

In addition to the reality that most broadcasters

choose retransmission consent over must-carry,

many broadcasters are beginning to demand

payment for carriage of their content— content

that is broadcast for free over-the-air. This market

development, unimaginable at the time the must-

carry regime was instituted, renders Congress’s

efforts to protect the broadcast industry

unnecessary. See, e.g., Jessica Reif Cohen et al.,

Media and Cable: The Tide Has Turned, Bank of

America/Merrill Lynch Analyst Report, at p. 1

(Jan. 6, 2010) (recent events “turn[] the tide in

favor of broadcasters for negotiating leverage”):

Brian Stelter, Broadcasters Battling for Cable

Fees, N.Y Times, Dec. 29, 2009.

In addition, broadcasters have a much greater

likelihood of carriage on cable today due to the

increased channel capacity on cable systems.

While TWC still has a limited amount of

bandwidth and cannot carry all who seek carriage,

it is able to provide a far broader array of channel

choices to viewers than it could 15 years ago. For

example, TWC’s Brooklyn cable system currently

offers hundreds of channels to subscribers,

including multiple offerings that appeal to local

and niche markets in particular communities. A

local broadcaster with programming of interest to

local subscribers would find carriage on TWC’s

cable system without must-carry; if TWC is not

responsive to the demands of its local subscriber

base, TWC risks losing customers to competitors.

22

To the extent that the must-carry provisions,

and by extension the Jurner cases, were

predicated on a desire tuo protect broadcast

stations, current market realities illustrate that

this protection is no longer necessary or useful to

the purposes this Court has identified in

upholding it. Power exerted by broadcast stations,

combined with a substantial] increase in the

number of available communicative channels

accessible through digital cable, satellite service,

telephone companies, DVD players and other

consumer devices, as well as the Internet, ensures

that the vast majority of Americans can access the

multiplicity of sources of information that

Congress intended to protect. This is true whether

a consumer is an over-the-air viewer or a

subscriber to an MVPD service such as cable.

Moreover, at its extreme, the must-carry regime

has led to results in tension with at least one of

the aims of must-carry: to promote the value of

localism. Historically, one of the attributes of local

broadcast stations was its focus on local news and

issues; indeed, it was at least partially a respect

for localism that inspired Congress to initiate

must-carry. See, e.g., H.R. Rep. No. 628, 102nd

Cong., 2d Sess. (1992) (“Congress long has

advocated broad access to public television

services, regardless of the technology used to

deliver those services, in order to advance the

compelling governmental interest in increasing

the amount of educational, informational, and

local public interest programming available to the

nation’s audiences.”); id. at 69 (“Local public

television stations also provide a variety of special

services to their communities, including local

23

news and public affairs programs, programs

offering outlets for local cultural and artistic

groups, and coverage of local and state

government activities and personalities.”); see also

Turner I, 512 U.S. at 634 (“In light of these

technological and economic conditions, Congress

concluded that unless cable operators are required

to carry local broadcast stations, ‘[t]here is a

substantial hkelihood that... additional local

broadcast signals will be deleted, repositioned, or

not carried,’; the ‘marked shift in market share’

from broadcast to cable will continue to erode the

advertising revenue base which sustains free local

broadcast television, and that, as a consequence,

‘the economic viability of free local broadcast

television and its ability to originate quality local

programming will be seriously jeopardized.’”)

(anternal citations omitted, emphasis added).

By giving broadcasters a free-pass—t.e.,

automatic carriage—the must-carry regime has

distorted broadcasters’ decision making process,

perversely incentivizing them to forego the

interests of their local communities. A broadcaster

who can take advantage of must-carry can

effectively ignore its local community and

broadcast programming of any content, be it

generic entertainment, home shopping, or

otherwise, and still demand carriage. WRNN

offers a case in point. First, WRNN was able to

ignore its community of license, Kingston, and

build a predominately home shopping/infomercial

network and still demand carriage in its

legitimate market area. And then, by putting only

a token amount of programming geared towards

New York City viewers, it was able to demand

24

expanded carriage of its predominantly home

shopping network in New York City. This is

clearly not the “quality local programming” that

the Court had in mind in discussing the must-

carry system in Turner J. 512 U.S. at 634.

The competitive marketplace and _ the

technological landscape for video programming

distribution has undergone major changes since

this Court’s Turner decisions. Cable operators now

clearly face vibrant competition and the

bottleneck description no longer even plausibly

apphes. Broadcasters do not need must-carry to

survive and most do not take advantage of this

outdated mechanism, leaving it to aid only those

broadcasters with programming that is not of

interest to viewers or, worse, that is not consistent

with the “value of localism” that must-carry was

designed to protect. The viability of the must-

carry regulations, including the market

modification provision presented in Cablevision’s

challenge, is a critically important question

affecting communication, competition, and

commerce throughout our country. It is a question

well worthy of this Court’s review.

CONCLUSION

The petition for a writ of certiorari should be

granted.

Dated: February 26, 2010

New York, New York

Respectfully submitted,

FLOYD ABRAMS*

LANDIS C. BEST

ILANA EHRLICH

CAHILL GORDON & REINDEL LLP

80 Pine Street

New York, New York 10005

(212) 701-3000

Attorneys for Amicus Curiae

Time Warner Cable Inc.

*Counsel of Record

Of Counsel:

MARC LAWRENCE-APFELBAUM

JEFF ZIMMERMAN

Time Warner Cable Inc.

60 Columbus Circle

New York, New York 10023