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

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Amicus Curiae Brief
- **Published:** January 1, 2010
- **Citation:** 560 U.S. 918

## Text

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
ee ee cevaawehws 20

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

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386017_1541%3A8. Public record. Not legal advice.