Brief — United States v. Midwest Video Corp.

| Supreme Court af the ssi ates .

OcToBEeR TERM, 1971 Sia

e .

No. 71-506

_ Unrrep. Stares oF AMERICA and FEDERAL |

COMMUNICATIONS COMMISSION, Petitioners,

- | v. ;

MIDWEST ViDE0 CORPORATION

‘On Petition for a Writ of ae to the United States Court

. of Appeals for the Eighth Circuit

| BRIEF FOR sirsachidasicnd VIDEO CORPORATION .

WayYNE W. OWEN A

Union Life Building .

- Little Rock, Arkansas 72201

Harry M. PuorKin: ‘

-, . . @xoreE H. Sapiro |

‘ Davin TILLOTSON

1815 H on N.W. |

ig? Washington, D. C. 20006 |

Of Counsel: Attorneys for Respondent -

Moses, MOCLELLAN, ARNOLD,

OWEN & McDermorr

Union Life Building

Little Rock, Arkansas 72201 |

ARENT, Fox, KINTNER, -

PLOTKIN & KAHN.

1815 H Street, iW.

Washington, D.C. 20006. |

April 1972

o

Sa NIGP TIT OT TE TTD

Press or Byron S. ApaMs Prinfinc, INC.,-WaAsHINGTON, D. C.

alia el Se

I. The Mandatory Origiantion Rule Is Not ia Ap-

propriate Exercise Of The Commission’s Juris-

diction Over Either Broadcast Stations Or

CATV Se eee ee ee ee 11

A. CATV Systems Ace Not Bioanal Stations

Within The Meaning Of The Communications

Act And Are Not Subject To The Same Regu-

latory Authority Of The Commission As Are,

Broadcast Stations...................0 600. 11 7

. B. The Mandatory Origination. Requirement For ..

. CATV Systems Is Not Ancillary To Any Re-

sponsibility Which The Commission Has For

The Regulation Of Broadcasting .......... 19.

II. The Mandatory Origination Rule Can Not Be

‘Sustained. On A Theory Of Benefit-Conferred . 27

Coxcuustor ees i haketeenenwaia vanes eaweedcans . 39

| TABLE OF AUTHORITIES

Cases:

- Black Hills Video- Corp. v. Federal omuunisations

Commission, 399 F. 2465 (8th Cir. 1968) ........ 26

. Delaware, Lackawanna & Western R. Co. v. Morris- .

town, 276 U.S. 182 (1928) ..2..........0.... eel on .

Federal Communications Commission v. Schreiber, 381 .

Wty BOW TREY hein cei k fehe cide cd neewen sen 13

_. Federal Power Commission, v. “Doaacoubnenia Gas

Pipe Lime Corp., 365 U.S. 1 (1961) ....... ».7-8,17,18

e

yee Index Continued

oo Page — 4

_ Fortnightly Corp. v. United Artists Television, Inc., 392 * -

eS, 990, (1968) ssi ane esnutene ene ".....10, 28, 29, 30

Frost & Frost Trucking-Co. v. Railroad Commission,

QT US. 583 (1926) «02.06. e eee eee eee .10, 32-33, 36 —

Georgia Power Co. .v, Georgia Public Service Commis-

. sion, 211 Ga. 223, 85 S.E. 2d 14 (1954) cevistonxee Se

Hollywood Chamber of Commerce v. Railroad Commis-

~ eion, 192 Cal. 307, 219 p. 983 (1923) :.........--- 33°

Interstate Commerce Commission v. Oregon-Washing.

ton R. & Nav. Co., 288 U:S. 14 (1933) .....--- 10; 16, 32,

Jones v. State Board of Education, 397 U.S. 31 (1970) 33

Michigan Public Utilities Commission v. Duke, 266 U.S.

5101925) so ciwie essere eee tote teens eae 33

Missouri Pacific R. Co. v..Nebraska, 164 U.S. 403 -

(1808) < 6.205 Seca cee er seen ea epee eas are os a

Mumn v. Tilimois, 94 U.S. 113 (1877). ...--- ee eee eens 28, 33

' National Broadcasting Co. v. United States, 319 U.S.

190 (1982) ssiceseeteres Ne tonea otis tee vies 14

Nebbia v. New York,-291 U.S. 502 (1934) .......--.-- 29,33

Northern Pacific R.R. Co. v. North Dakota ex rel.

McCue, 236 U.S. 585 (1915) .........----10, 33, 35, 36

Red Lion Broadcasting Co. v. Federal Communications

— Commission, 395 U.S. 367 (1969) ....-.-----+ee- 14

Sherbert v. Verner, 374 US. 398 (1963) .........-++- — © 33

Slochower v. Board of Higher Education, 350 U.S. 551

(1956)* 2.2.22 eee eee ees MvciwGieeskeien seas oO

Speiser v. Randall, 357 U.S. 51S (19568) .....-sccceee *. 83

Stahlman v. Federal Communications Commission, 126

F. 2d 124 (D.C, Cir. 1941) ......- eee eee eee eee - 13

Terral v. Burke Construction Co., 257 U.S. 529.(1922) 33

Thorpe v. Housing Authority, 386 U.S. 670 (1967) .... 33

_ Town of Beloit v. Public Service Commission, 34 Wis.

2d 145, 148 N.W. 2d 661 (1967) ...... 50. e seen eee 33

United States v. Southwestern Cable Co., 392 U.S. 157

(1968) ..... Ri oaT came te es sskees .3, 4, 8, 19, 26, 29

Utah Power & Light Co. v. Public Service Commission, —

- 122 Utah 284, 249 P. 24-951 (1952) .......--- 2 ees 33

_ Western Union Telegraph Co. v. Foster, 247 U.S. 105 .

(1918)* o.cscteess ore Pe erree ceewauscyetes .. 33

Index Continued | hi

Page

Apu! INISTRATIVE Decisions |

Carter Mountain Transmission Corp., 32 FCC 2d 459

(1962), aff’d sub nom. Carter Mountain Transmis-

sion Corp. v. FCC, 321 F. 2d 359 (D.C. Cir. 1963),

‘cert. denied, 375 US. 951 (1963) ..... ss ict ete ousets

First Report and Order, 38 FCC 683 (1965) ......-.3, 27

' M emorandum Opinion and Order in Docket No. 18397,

97 POC 2d 778 (1971) ~.3....-- rere “32

Midwest Television, Inc., 13 FCC od 478 (1968) ees 4, 25

. Panagra Terminal Investigation, 4C.A.B. 670 ( alas 33

Second Report and Order, 2 FCC 2d i ( 1966). . SS arance 3, 21. -

SraTurEs :

Communications Act of 1934, as amended, 47 U. S.C.

§§ 151 et seq. ....--.- ee eee eee te eebeepecccerees Co

‘D. Séction 1 ...... Paes S ceissese 7, 15,18, 24

Section 1 er ee oe ert er Ter 8

Section 3(h) ceeeees vonasaws Lopate ees sa seeees 15

Section 214 ...:.....00: Suenedeaee cieareian 16°

Section 301 .........e000e- <ueiaa enn oe 15.

"Section 303(a) ....sccsecceeeteceegetere iene 207

Section 303(g) ....scsccseeeeereeeeeeee 45, 18, 4

Section 303(h) .....++600b sere ae @veccees 20

‘Section 307(b) \ pavueivaboanerwrcovtyents 16, 18, 28 :

Section 308 ..........05e0eret ore neces 1 5

Section 309 ....... ee eee ciaee 15

“Federal Election Campaign Act of 1971, Public Law .

No. 92-225 ...... bcesiewin oe ieee maskmens 7,12, 18

_iv ” & ‘Index Continued =

. | . Page

REGULATIONS: . 8

Rules‘and Regulations of the Federal Communications

Commission, 47 C.F.R., Part 73.1.2... 204, er . 38

Section 73. 266 aaa aod Sadie Bek teies ‘ Rees 38

MIscELLANEGUS: FS 7

Inquiry Into the Tapaats of Community Antenna Sys-

tems, TV Translators, TV ‘‘Satellite’’ Stations,

and T'V ‘‘Repeaters’’ and the Orderly Develop-

‘ment of Television. Broadcasting, 26 FCC 463

I Sige ecw net yi aeens we wis fal Sa od a a

Senate Conférence Report No. 92,580, ‘92d Cong, 1st

ee ee ce 13

‘ > AF.

& = ; -

_ Federal Communications Cgmmission (‘‘the Commis-

a” | ' IN THE -

Supreme Court of the United States

_ Ocioser TERM, 1971

"No. 71-506

/

Unrrep States oF AMERICA and FEDERAL

. COMMUNICATIONS CoMMISSION, Petitioners,

_ Mipwest VipEo CorporaTION

On Petition for a Writ of Certiorari to the United States Court

«of Appeals for the Eighth Circuit —

° ee

BRIEF FOR MIDWEST VIDEO CORPORATION |

‘STATEMENT. |

This case avilves the question of whether the

sion’’) has the authority under the Communications

Act of 1934 to require community antenna television

_(“CATV’’) systems to.originate progranis as a ton-

‘dition of their remaining in business. The United

States. Court: of Appeals for the Eighth Circuit ruled

in’ opinion below’ that: the Commission did not. have

such authority.

1 The opinion below is reprinted as Appendix A to the Petition —-

for Certiorari. The various appendices to the Petition for Certio-

rari will be cited herein as ‘‘Pet.. App. — ’ with reference to the

appropriate ——

iS.

In order to place this. question in perspective, itis _.

neessary briefly to review the history: of the develop- -

- . ment of CATV regulation by the Commission. CATV

had its inception in. the late 1940’s when systems com-

menced operation as a means of providing television |

signals to communities where normal television recep-

tion was poor or non-existent. At the outset, these

systems ‘were, for the most. part, of limited capacity,

“providing service from generally no more than three

television-stations whose signals were captured directly ‘.

off-the-air at a relatively high location and distributed

by cable to subscribers. In these early stages of CATV |

| development, the Commission at fiyst largely ignored

such operations and then, sen cout an investi-* ¢

gation of the matter, concluded that CATV was not an °

appropriate subj ect for Commission regulation.” As

KO time progressed, the industry continued to grow ard

expand both in number of subscribers and number of

\ television channels delivered to subscribers. In addi-

tion, CATV systems also began to distribute to their

- subseribers television signals originating from stations _ .

- distant from the CATV community. Often these dis-

tant signals were delivered to the CATV system by

-means.of microwave relay.’ In view of these develop-. .

ments, the Commission, commencing in 1962 on a case-

_ by-case basis, began to reassess its role with respect to-

the CATV industry and to exercise jurisdiction oyer. it

_ 2 See ‘Inquiry dato the Impact. of Community Antenna Systems,

TV Translators, TV ‘‘Satellite’’ Stations, and. TV ‘‘Repeaters’’

~ and the gigs Development of Television ee 26 FCC

403 (1959).

8 Microwave relay involves receiving ‘ télovinion dighals at a -

favorable receiving location and transmitting them by means of;an ~

intermediate relay station to locations where the signal — of the

' originating station could not be received directly off-the- air.

in acting on n applications for microwave éuthotizations.*

- Later, by*rule.making, the Commission asserted: juris-

diction over all CATV operations where the selevinton

signals were received by means of microwave:® Ullti-

. mately, firtding the unregulated growth of ‘CATV

systems, whether receiving signals off-the-air or by

microwave,.could have an adverse effect upon the devel-~

opmentyf free over-the-air broadcasting, and in partic-

ular upon the growth and development of UHF broad-

casting, the Commission assumed jurisdiction over all -

CATV. operations by adopting rules and regulations -

designed to minimize the impact of CATV: development

on the bie and continued Haare of the oe 4

-industry.°

The iegulstiont adopted by. -the Gomimigsion during

this period related entirely to those functions of CATV

systems which involved reception of signals transmitted -

by broadeast stations and their simultaneous transmis-

sion by cable to subscribers. Thus, the rules dealt with

-the signals which a CATV system was eligible’ to carry,

those which it was required to carry, program exclu-

sivity requirements which CAT'V systems were required

to afford various classes of television stations, arid: the

procedures. for, : implementing these provisions.. The |

validity of these rules and regulations was sustained .

by this Court in United States v. Southwestern Cable:

Co., 392.U.8. 157 (1968). . In that decision, however, _

this Court emphasized that the only authority which ape |

4 See Carter Mountain ‘ensuite Corp.; 32 FCC 459 (1962),

aff'd sub nom. Carter Mountain Transmission Corp. v. Federal /

Communications Commission, 321 F. 24 359 (D.C. Cir. 1963), cert.

denied, 375 U.S. 951 (1963). : .

# Farst Report and Order, 38 FCC 683 (1965).

* Second Report and Order, 2 FCC 2d 725 (1966).

pat rs aon

4 /

»\ it ecognized the’ Commision to have over CATV: ‘was

. that ‘‘reasonably. ancillary to the effective performance

of thé. Commissien’s. various. reponsibilities for the he

- regulation of television broadcasting’’ and that it was .

Pa expressing n@ view ‘fas to. the Commission’s authority,

if any, to regulate CATV: under any other cireum-. |

.., \gtances or for any. other purposes. Td. at 178. °

— EN he rules and ‘regulations relating to CATV systems

“eon idered by this Court in Southwestern were silent.

. with respect to the right or obligation of CATV Systems

itself to this subject. Thus, in the administrative pro-

ceeding in Southwestern” the. Commission adopted an

* to originate some: programs, t ‘put: only on condition that

. ne commercial sponsorships or.commercial spots: ‘would

_ -be carried. Another system i in the San Diego area was

, directed to originate programs (again on a non-com-

mercial basis) _ asa condition of its nem to > import

signals from. Los Angeles.

On December 12,.1968; the Commission adopted its -

as to origitiate programs. of their own. By means of case

atop law, however, the Commission did commence to address

~ order with respect to.one CATV system permitting it _

Notice of Proposed Rule Making and Notice of Inquiry .

15 FCC..2d 417, instituting the proceedings. which

. yesulted in the promulgation of the rulé which is the —

‘subject, of: this proceeding. _In the Notice, the Com- .

“mission announced its tentative conclusion ‘‘that, for —

| ‘ now and in general, CATV program origination is in

the public interest’’ but that ‘‘there may: be a_need for —

some regulation thereof, in order to insure Qperation.. _

\-

t Midwest Télevition, Jne., 13, F.C.C. 2d 478 (1968).

.. ® The Notice of Proposed Rule Making and Notice of Inquiry is

Z tioners’ Brief. which will be — herein | as “dA. aid

gai. 9 lem

ou _ reprinted at pages 3-50 of the separate joint - appendix to — 7 =

6

_” fully consistent withthe public interest in the larger

' and more effective use of radio.’” Accordingly; the.

Commission requested comments on two principal sub-

jects. First, the commission asked whether it should —

impose upon some CAT'V systems a mandatory require-

_ment of program origination. Specific suggestions

were sought as: to the minimum size\of installation

Which should be subject to the mandatory. origination _

requirement. Second, with respect to CATV program

_ origination (whether voluntary‘ or pursuant to the

, mandatory requirement) the Commission asked what |

economic basis should be permitted for such operations —

(e.g., commercial sponsorship) and what detailed oper-

ating rules should be prescribed in stich areas as polit-

‘ical broadcasts, fairness, sponsorship identifieation, and

the like, | = ar

‘The Commission after considering thé comments and .

submissions: made by interested persons adopted a °

Report and Order and later a Memorandum Opinion’ °

_ and Order denying petitions for reconsideration (Pet.

_ App. C and D). In these documents the Commission

_ pointed out (Pet. App. C at 32) that there was general

_ agreement by the CATV interests that. program origi-

nation served the public interest and should be en- ~

couraged ; broadcast interests took a contrary position. -

However, both CATV and broadeast interests were

virtually unanimous in opposing mandatory orjgina-

tion. .The Commission in its Report adhered“to the

view set. forth in its Notice that it had the authority to

aa compel CATV systems to originate programming and

that the public interest would be served by the exercise

of its authority. . Addressing itself to the question as

’ to which systems should be subj ected to. this require-

9 JA at 7.

6 .

ment it set the figure at CATV systems having 3,500.

or more: subscribers. In so doing it relied. upon cost .

‘estimates furnished to it by 4 manufacturer of -cable-

.. casting equipment (Pet. App. C at 39-40) which pur-

ported to show. that the construction costs for cable-

casting systems would range from, $27,300 for a basic.

black and white system to $95,000 f ra full color system -

and that annual operating costs ‘would range from

$14,300 for black arid white systems to ‘approximately

. $33,000 for color operations. ,The ‘Commission con-

eluded that no CATV system with 3,500 or more sub-

scribers should be permitted to be or remain in the

business of. providing television broadcast signals to |

. their subscribers unless-‘‘the system:also operates to a

significant extent as a local outlet by. cablecasting and ;

has available facilities for local production and pres-

entation of programs. ‘other than automated services.’

(Pet. App. C at 43, 53). Specific regulations to that .

_ effect were adopted hy the “Commission.” :

Following the issuance of these regulations. Respond-

ent filed its Petitign for Review. The.Court: below .

held that the mandatory origination rule was beyond

the Commission’s authority.

” In the .same proceeding the Cormmission also adopted rules .

and regulations governing program originations by CATV systems,

whether undertaken voluntarily or pursuant to the Commission’s

'-madatory origingtion rule. Pet. App. C at 953- 55; Pet App. D at

. 62-63. These rules and regulations. are of the same character as

are applicable to broadcast stations in such areas as equal time

for political candidates, fdirness,’ lotteries, sponsorship and pay-TV:

programming. The Court below did not pass on the validity or

. invalidity of these provisions. . . .

6. .. 7

SUMMARY OF ARGUMENT

-

The Commission does nat have the saine jurisdiction

over CATV as it does over broadcast stations. While -

the Government asserts that the Commission does have

Such jurisdiction, it. cites no provision in the Communi-

cations Act to justify this conclusion. Its reliance on | -

_ the recent Federal Elections Campaign Act is mis-_

placed. While the Act includes CATV systems under

the definition of broadeasting stations for the purposes _

of the Féderal Elections Campaign Act it is clear both —

_ from the language of the ‘Act and its legislative history”

. that this definition is not for the purposes of the entire |

_ Communications Act but only with-respect to the sec-. —

_ tions of the Act rélating to political expenditures.:

Moreover, even if it be assumed arguendo that a_

CATV system is a broadcast station for regulatory pur-

“poses, no showing has been made how this justifies the

mandatory origination rule, The objective of the Com-

munications Act.is stated in Section 1 (47 U.S.C. § 151)

‘to make efficient radio service available to all people of.

the United States. The method for achieving this

objective so far as broadcasting is concertied is set

forth in Section 307(b) of the Communications : Act

(47 U.S.C. §307(b)) which directs the Commission

to make as equitable allocation of broadcast ‘facilities

among: the several states and communities but only =

‘‘when and insofar as there is demand”’ for - licenses,

and modifications or renewals thereof. Under this

grant of authority the Commission can choose amongst

competing applicants or even deny an uncontested |

application on an inferior end-use theory (Cf. Federal

8

Power Commission v. Transcantinental Gas Line Pipe .

Corp., 365 U.S. 1 (1961) ). but_ cannot compel a person

-against his will to enter the broadcast business or to.

- erect a station ina community not of his choice—no

‘ matter how well equitable allocation principles would

be served by. a station in such community. There is

even less statutory justification for compelling CATV |

—— to undertake programming a >

B. :

| This Court i in United States v. Soidiubestors Cable

Co., 392 U.S. 157 (1968). ‘upheld previous CATV

_ regulations of the Commission on the- ground that

| CATV operations are interstate communication by

- wire or radio within the meaning of Section 2 of the

| Communications Act (47 U.S.C. §152) and the partic-

ular CATV regulations were reasonably ancillary to the

‘effective regulation of television broadeasting. The

requirement that CATV systems’ originate programs

- has no ancillary relationship -to the regulation of

broadcasting.

The statutory responsibilities. of the Commission to

- which the regulation of CATV operations has been

© found to be ancillary are five-fold:

(1) Establishment of areas or zones to.be served ae :

broadcast stations; : )

(2) Protection of television broadcast ve from

unfair competition from CATV. operations ;

(3) Fostering the development of a nationwide tele- |

vision broadcast service through the maximum

possible utilization of UHF channels; ee

(4) Allocation on a fair, efficient and equitable basis -

' of broadcast facilities among the several States

and communities ; ‘and. ta a

9

(5) Making available radio service to. all of the

people of the United States and encouraging

the larger and more effective use of radio.

The’ requirement that CATV systems originate their °

own programs cannot possibly aid in the achievement _

of any of these objectives. Therefore, such a require- . -

ment cannot be deemed to be ancillary to. the accom-

plishment of any of the objectives which the courts

have heretofore recognized as having been entrusted to

the Commission’ under’ the Communications. Act of ©

a | |

Mandatory program origination cannot be imposed

‘on the theory that since CATV systems receive a bene-

fit through carrying broadcast signals they can be com-

pelled by the Commission to undertake affirmative =

action in exchange for this benefit which the Commis-

sion finds to be in the public interest: This basis for

asserting authority:to require CATV systems to engage

in program origination is premised on the assumption _

_that CAT'V systems are ‘“‘authorized’’ by the Comis-.

sion to carry broadeast signals and that the Commis: _

sion has authority to withhold such authorization, ot

to grant it subject to whatever conditions it may deem

appropriate. The right to carry broadcast signals and .

. distribute them to subscribers, however, is not con-

ferred-upon CATV systems by the Commission. Al-

though the Commission does have authority under the

Communications Act to impose appropriate restric-

_ tions upon the reception arid distribution of broadcast.

signals, the right of CATV systems to receive and dis- |

' tribute such signals is not itself conferred by. the Com-

mission. Broadcast signals are.deédicated to the. public

by broadcast stations and the right to receive and dis-

tribute them may be exercised by anyone with the

10

eapacity to capture such signals off the air. — Fort-

‘ nightly Corp. v. Umted Artists Television, Inc., 392 ,

U.S. 390 (1968)... Ss J |

' Byen assuming that the riglit to receive and distrib- .

ute broadcast signals is conferred upon CATV systems |

by the Commission and can, therefore, be -withheld.- |

‘altogether or. granted subject to reasonable conditions, |

- it is clear that this right could not be conditioned upon

CATV systems entering into the entirely different

activity of cablecasting. Frost & Frost Trucking Co.

- _-y. Railroad Commission, 271 U.S. 583 (1926) ; Northern.

- Pacific R.R. Co. v. North Dakota ex. rel McCue, 236

U.S. 585 (1915) ; Delaware, Lackawana & Western R.

Co. v. Morristown, 276 U.S. 182 (1928); Interstate

Commerce Commission V. Oregon-Washington Rail-

road & Nav. Co., 288 U.S. 14 (1933).

' ARGUMENT

The Commission by its mandatory-origination rule

has entered into'a new and distinct phase of regulating

‘CATV activities.“ In its prior actions it dealt exclu- -

sively with the reception functions of CATV systems. |

Those regulations were designed to control or limit

CATV reception activities in an effort to protect the

viability of television broadcast operations and to

insure that these reception functions were consistent

with the statutory objectives underlying the regulation

of broadcast stations. By the instant action the Com-

~ mission is entering a whole new field of.activity. By —

administrative fiat it proclaims to all persons now in

the CATV business or those who enter ‘in the future

that they may not confine themselves to the legitimate

activity of receiving and distributing broadcast signals

but that ‘they must become program ‘originators—if .

they choose not to do so they must terminate their

CATY activities entirely. _ 7 a

11 |

The Government in its Brief argues that the Con-

gress has given the Commission broad authority over:

\ all interstate and foreign communication by wire or

\radio ‘and over all persons engaged i in such communica- —

tion. Building on this premise two different justifica-

tions for the Commissidh’s rulé are set forth. - First,

the regulation i is an appropriate exercise of the Com-

mission’s authority with respect to interstate’ com-

‘munication by wire or radio on the alternative theory

_ that CAT V-systems are in effect broadcast stations or

that the mandatory-origination requirement ‘is reason- .

ably ancillary. to the Commission’s responsibilities for

the regulation of television broadcasting. Second,

since CATV systems derive their basic or sole economic

nurture from broadcasting, they are an integral part

of broadcast transmissions and their enjoyment and

retention of the economic benefits of the carriage of

broadcast signals subjects them to the pervasive juris-

diction of the’ Commission. Neither point is well taken.

co

1

_ THE MANDATORY ORIGINATION RULE IS NOT AN AP-

_ PROPRIATE EXERCISE: OF THE COMMISSION’S JU-

‘RISDICTION OVER EITHER BROADCAST STATIONS

OR CATV SYSTEMS

A.

. CATV Systems Are Not Broadcast Stations Within the Mean-

_ * ing of the Communications Act and Are Not Subject to

‘the Same Regulatory eer of the Commission as

Are Broadcast Stations

_ Phe Government has advanced a novel argument in

this Court to sustain its mandatory origination rule." -

1 This particular argument is made for the first time in this |

Court. This ground was ‘not articulated by the Commission itself —

in. the Reports which adopted the rule. in issue nor was the argu- —

ment made in the Government’ s Briefs in the Court below.

.

. - . ve

. “* o° . *

12

It. urges that CATV systems are in effect’ broadcast

stations for the purposes of the Comminications Act -

- and that accordingly the Commission has -‘‘essentially

the same jurisdiction over CATV that it has over the.

broadcasting industry.”’ (Br. 13) It cites no provi-

sion in the Communications Act on which it purports

to rely for this conclusion. Instead, it constructs a.

fanciful argument based upon sheer assumption and .

speculation.

First, reference is — (Br. 13, fn. 10) to the Fed :

eral Election. Campaign Act of 1971, Public Law No.

§2-225, and-in particular Section 104 which it cites as

authority for the proposition ‘that the current Con-

' gress appears to assume that the Commission has

broad authority.to regulate CATV.” The- material

_ eited has no bearing at all.on the subject; in fact it

points in the opposite direction. What Congress has

done in Section 104 is to impose certain limitations on

expenditures which may be made by candidates for

Federal office. A limitation is set forth governing |

‘expenditures in all “‘communications media”’ which is .

defined (in Section 102 ofthe Act) to include broad-

-. easting stations, newspapers, magazines, outdoor ad-

vertising facilities and telephone.’”’ No more than 60%

of such amounts may be spent for use of broadcasting

stations. The provision is then added that-‘‘for the

purposes of this section’ (not for the purposes of the

entire Communications Act). the ‘‘term ‘broadcasting

station’ includes a community antenna television

system.’ .Far from supporting the Government’s ©

argument ‘Section 104 strongly implies that a CATV

system is not a broadcasting station under the Com-. .

munications Act. It takes.a special statutory provi-

13

sion to make it so even for the limited purposes of

_ political expenditures.2 .

Of equal flimsiness is the Government’s attempt to.

. find comfort in the fact that reporting requirements

contained in the Senate Bill which became the Federal

Election. Campaign Act of 1971 were eliminated in _

conference because as stated by the Conference Com-

mittee ‘‘the- FCC has adequate authority to require

reports. under existing law.’’ However, the eliminated

section required ‘broadcasting stations and candidates

a.

.

to file such reports as were required under FCC regu-. *

| lations.” (8. Conf. Rep. No. 92-580, 924 Cong. 1st

. Sess., p. 26) ‘The deletion of this section connotes no -

- greater Commission jurisdiction over CATV than over

_ candidates. The Commission has long had the author-

ity to obtain. information from persons not subject to

its direct: regulatory jurisdiction.. Federal Communi:

cations Commission v. Schreiber, 381 U.S. 279 (1965) ;

Stahlman v. Federal Communications Commission, 126

F2d 124 (D.C. Cir. 1941).

‘Second, the contrived argument is made (Br. 13) to

the effect that it ‘‘seems logical” that if Congress had.

foreseen the development. of CATV it ‘would have

wanted that. industry to be regulated in furtherance

of the same policy objectives that obtain with respect

: to the broadcast industry. - Certainly more than such _

ee

a statement is required for Jurisdiction. -Even if -~ .

12 This reading is teenforced by the language of the Conference

Report (S. Conf: Rep: No. 92-580, 924 Cong. Ist Sess., p: 27) ‘to-

the effect that the ‘‘definition of broadcasting station incorporates

the definition of. broadcasting station used for purposes of: the.

Communication Act, but adds to-that definition community antenna -

television systems.’’

. ©

14 |

: : a] | i

CATV and broadcasting were essentially the same,

it would not necessarily follow that th me regulatory

power was corfrerred by Congress over both industries ©

unless a statutory basis can be shown for such a result.

But the fact.remains that the two industries are not

the same. Kor as the Government itself recognizes”

(Br. 13-14) regulation of broadcasting is bottomed

upon the need ‘to allocate the limited resources of the

broadcast spectrum—a scarcity factor which, the gov-

ernment admits, is not present in the case of ‘CATY. "|

_Nevertheless'the Government blithely brushes the point:

aside by simply asserting (Br. 14).: ‘In all other

- respects, however, there is 4s much need for the Com-

mission’s regulation of CATV as of broadeasting.”’ —

Such self-seeking statements do not create jurisdiction.

This Court has recognized that: the scarcity factor in--.

volved in broadcasting is an important foundation for

_ the constitutional existence of Commission power over

programming by broadcast stations—a power which

_may lack constitutional foundation in the case of non-

searce communications media. Red Lion Broadcasting

__-y. Federal Communications Commission, 395 U.S. 367.

(1969) ; National Broadcasting Co. v. United States, —

319 U.S. 190 (1943).: Whether Congress ean confer |

on the Commission the same authority over CATY °.-

‘that it possesses over broadeasting is not in issue here.

But certainly the absence of the vital element of

_ searcity in the case of CATV is so fundamental that

the existence of the. authority claimed must be clearly —

shown by Congressional ‘action—xiot simply by ‘‘it

seems logical’’ recitations. No such’ congressional .

grant.of authority has been shown to exist. :

_. Finally, even if the Government’s premise is accepted. ed

7 —i.e. that a OATYV system is a broadcast station for

7

a

Si

mapatubes: panera does not follow that a manda-:

“ tory origination rule would be valid. The Government

assumes that result; it makes no effort to prove it.. In .

fact, the statutory scheme is to. the contrary.

. The Communications Act forbids any person from.

| operating a broadcast station without first obtaining |

“a licensé from the Commission (Section 301 of the

Communications Act, 47 U.S.0. § 301). Only qualified

~- persoris may obtain licensés and they are required to

operate in the public interest (47 U.S.C. §§ 308, 309).

| The Commission is given specific authority to promul- »

gate rules, regulations and policies governing the op-

eration of the stations to make sure that the public

_ interest is served. But nowhere i is there any suggestion

that a: person may be compelled to enter broadcasting.

Yet that is precisely what the Commission is under-

taking to do by its mandatory originatio le.

_ The Government seeks.to justify its action by sidving |

on Sections 1 and 303(g) of the Communications Act

(47 U.S.C. §§ 151 and 303 (gy). The reliance ig mis- —

_ placed. Section 1 states that the purpose of the Act

is ‘‘to make available, so far as possible, to all people .

_ of the United States a rapid, efficient, Nat#®n-wide, and

‘ world-wide wire and radio communica p service.’

Section 303(g.) directs the Commission t® ‘‘encourage.

the larger and. more effective use of radio in the public

interest.’’ These Sections, however, confer no author-

ity as such on the Commission. They simply set forth:

statutory objectives; the achievement of these objec-

tives must be by means of _powers set forth in other :

portions of the Act. Broadcasting is ‘specifically de-

clared by Section 3(h) (47 U.S.C. §153(h)) not to be

a common carrier. Hence, entry into the field is. volun- .

tary and no power exists to force a broadcaster to ex-

4

24

1

pand his chosen: ficld-of activity—in contrast to commor

carriers where Section 214 of the Communications Act

(47 U.S.C. § 214) specifically authorizes the Comniis-

~sip® under closely defined standards to require carriers

“to expand their activities.”

- In the field < of broadcasting the manner of achieving

the. objective of making efficient.radio service available

-to.all people of the United States i is set‘forth in-Section . _

307(b) (47 U.S.C. § 307(b))< '.This section directs the -

‘Commission to make an equitablé: ‘allecation of broad- ”

cast facilities among the several states and communi-

ties’ but only ‘‘when and insofar as-there is demand”

for licenses and modifi¢ations and renewals thereof. In _

other words, the.-Commissior is not given a carte -

blanche to initiate broadcast stations. It cannot ‘com-

‘pel a pérson against his will to enter the broadcast

.usiness.. Nor can it compel a-person who desires to

. locate a station in city X to apply for a station in city

Be even though city Y may have a greater need. for the

- facilities than city X. The only power available to it

is to choose between competing. applicants for the same -

- facilitiés to‘be utilized in different communities, deny-

ing the application for city X as against one se peat

the same facilities in city Y, if there is a greater need o)

_ for the station in-city Y than i in X. But the Commis-. |

sion cannot sone s an applica desiring to locate in

>)

~~ = Even common carriers operating under statutes “with’/provi-

’< sions similar to Section’ 214 cannot: be constitutionally compelled

under guise of an order ostensibly to extend their existing lines to

uirdertake to construct what is in effect a new line simply because

‘ the — ory agency believes the area in question urgently needs

service. Interstate Commerce Commission, v. _ Oregon- “Washington

; Railroad & Nav. Co., 288 U. SPTI\ 1933).

need for service in city Y.** “ “@

Wo3

“

city X to specify-@ty Y because of the greater possible |

~~

tO

14 The end-use theory of regulation | upheld by this Court in :

Federal Power. Commission vy. Transcontinental Gas Line Pipe

Corp., 365 U.S. 1 (1961) is in accord with the delinegtion of Com-

‘mission jurisdiction described above. The Government (Br. 17)

cites Transcontinental but does not explain its purportedsig-

-nifjeance. In the Court below the Government relied kéavily on

this case and its end-use regulation thedry as establishing the right

of the Commission to condition CATV carriage of broadcast signals

on such CATV systems becoming program originators. . The’ Court

below (Pet. App. A. p. 25) held that the relianc® is misplaced.

Transcontinental involved an application by a pipe line company ;

for a certificate of public convenience and necessity petmitting the, ~

interstate transportation of natural gas which a public utility had

purchased directly from a producer. The direct sale of the gas

from the producer to the public utility was clearly beyond the

\

producer tothe

Scope of the Power Commission ’s regulatory authority; however,

the pipe line company which contracted to deliver the gas from the -

ublic. utility could not transportethe gas without

. obtaining a certificate of, public convenience and necessity from.

Was to:be transported for use un

\to be “‘inferior’’ from the standpoint of conserving a valuable

deme

the Power Commi . The Power Commissiog denied the appli-

eation for a-certificate on the ground, among\others, that the gas

der. industrial boilers, a use deemed

natural resource. This Court held that it was appropriate for the

Power Commission to take-into account the use which would be. -

made of the transported gas in determining whether the issuance

of the requested certificate would be in the public interest. Thus,

even though the Power Commission could not directly regulate

_ the use to which the public utility proposed to devote the ‘gas, the

Court held that the use could be weighed by the Pow&r Commission

in exercisitig its jurisdiction over the certification of pipe line trans-

mission of gas. -While sustaining the Power Cominission ’s authority

to refuse a certificate because of ‘‘end use’? considerations, this

Court was-careful to point out that the agericy could not go beyond —

‘the denial of certificate to ‘prevent an inferior use and require

the gas to be devoted. to’ an ‘‘end use’’ which: it favored. The

‘Courtestated (365 U.S. at 17):

The Commission cannot order a natural gas company to sell

gas to users that it favors; it can only exercise a veto power

é . ¢ . a . ft

se

PO Le ee} ‘ob

ATES PLE

HRY iba Slade gh ek

GA SOUES CaS NEES ig in

°

g

\

-.~ x

‘

Other analogies ca o be found in thé broadcast a

field. Broadcasting commenced in the standard broad-. _

east field (AM broadcasting). Then eame FM broad-

~easting aid finally. television. At the ‘@utset great

risks “vere involved in commeneing operation in ‘these

' new fields. When these new services were being estab- - -

lished, it was Commission policy to encourage AM op-”.

erators to enter the FM and TV field; the indycements

-. were - particularly. manifest. with respect to UHF

operation.” Yet,. neither the Commission nor-anyone,

alse ever suggested that the Commission’s authority’

under Sections 1, 303(g) and 307(b) was broad enough ~

to compel such ‘AM operators. to construct FM or

.. television stations. Desirable ‘as is the objective to

have all people of the United States enjoy. FM or |

television broadcast service, there ‘is no basis for con-

cluding that the Commission could order the owner of

an AM station to construct and opérate an. FM or TV

station in the same,community, or elsewhere. co

‘By the same token it is difficult to see how a CATV ™

system engaged in reception activities can be compelled

by. the Commission to undertake program origination

activities: Merely calling CATV. a broadcast. station “—

- ereates no, such ‘power. Nor is Commission power

-. established by the plaint (Br. 14) that from the stand- |

point’of the television viewer government regulation of .

-» GATV is necessary because the viewer can easily flip —

- the’ dial between broadcasting and cablecasting chan-

: re . if eS

_ over proposed transportation and it can only do this when a

palance of all the circumstances weighs against certification.

~* Censistent with Transcontinental the Commission can in assigning

scarce radio frequencies weigh the use to which they .will be put.

But having assigned such frequencies and having made its ‘‘end-

use?\determination, it cannot take the next step of forcing the

user of radio frequencies to undertaké a different, activity..

a 8

‘

. . \

\ | ae

e . g .

s > .

B :

19 ; a

nels. Without. regulation of CAV, the Commission

fears, iniportant policies ‘such as equal opportunities

for candidates, fairness, ete. would be undermined,

But this is beside the point. The most that this argu-

ment, can préve is that if CATV systems do originate’

programming, Commission program regulations should * .

apply to.them. But-as has been pointed dut the Com-.

‘mission. has promulgated rules governing CATV pro-_

gram operations and the opinion of the. Court below

has not affected their, validity. But merely because the

Commission may have authority to regulate the conduct

_ of CATV programming does not mean that the Com- .

“mission. can compel a CATV system to. originate pro- °°

grams. De - 2 «=

*

BN a : .

a The Mandatory Origination Requirement for CATV ‘Systeptsg :

Is Not Ancillary to Any Responsibility Which the’ Com-

mission Has for the Regulation of Broadcasting

‘The. Government in reluctant recognition that.this —

Court’s holdirfg in Southwestern restricted its approval .. “

of the Commission’s authority to regulate CATV to

regulation ‘‘reascnably ancillary. tothe effective per- |

formance of the Cemmissien’s various responsibilities

for the regulation of television broadeasting’’’ (392 .

US. at 178) has made an effort to address itself to the

ancillary nexus between mandatory origination and

broadcast objectives. However, it does so not by an

_ affirmative showing lof what broadeast objectives are

served either directly or in an ancillary manner by ft .

mandatory CATV origination but rather by character- a on

_ izing the opinion of: the Court. below _as_holding that

‘Congress intended to restrict the Commission to reg-

ulation designed to prevent deleterious competition -- ~

with the:broadeasting ifdustry” (Br. 16). This is not

an accurate reading of the Court’s opinion. It found

. . . . = 7

_ . > . ‘ ~

20

absenée of Commission jurisdiction based upon. a show- |

ing in the briefs that n@ ancillary relationship existed

between ‘the mandatory origination rule and any

responsibility the Commission | has with respett, t to

television broadcasting.

~~

The broadcasting statutory objectives to which

| CATV regulation has been-said to be ancillary have

been spelled out by the Commission in its various deci-

"sions and reports and orders. The following five ob- ©

~ " jectives have been relied upon:

4. The power to establish areas or zones to be

served dy broadcast stations. :

2..The power ‘to ‘protect television” broadcast

De stations from the unfair competition: of CATV.

1 3. The power to pole ‘and foster UF

stations. |

®

4. The - a cnt pStahaeent ‘ot the objectives of

Section 307 te of. the Act.

5. The duty to make radio servios available ami ———

to encourage the a and more: effective use of

radio.

: | The shuiatory origination, rv rule is irtelevant to all | -

- of these obj ectives.. |

1. The power to establish areas or zones to be served _-

_ by broadcast-stations—Sectidir 303(a) “of the Commu- -;

nications Act (47 U.S.C. §§ 303(a)) authorizes: the |

Commission to classify radio stations and Section

303(h) (47 U.S.C. § 303(h) ) authorizes the Commis-

sion to prescribe the areas or zones to be served by radio -

stations. omni this —- the. Commission has

on

" asserted jurisdiction to-compel CATV systems to carry

local signals—this is deemed to be ancillary ‘to. the -

- Commission’s responsibility to assure.that each station

Se is capable of being received on all sets located in its

prescribed gervice. area—and fo prohibit the unre-

. stricted importation of distant signals—this is deemed _

__ to be ancillary to tle Commission’s responsibility to

prevent a station’s signal from being extended beyond

the area the station is designed to serve Cunless a show-. °.

ing is made that such extension will serve the public.

interest). The requirement that CATV systems origi’

nate programs just, has no relatioriship whatsoever to.

_ either objective. - ity | ; c.7.*

2. The power to protect television broadcast stations

from the unfair competition of CATV—Throughout

_ the Commission’s reports™ adopting CATV. rules and -

' xegulations runs the theme that CATV. gystems, in .

carrying the signals of broadcast stations, pay no fee-—

"for appyrighted programs and herite havean unfair .

competitive advantage against local television stations

which must pay for their programs. The point is made ©

that the CATV system, by bringing in signals not read-_

ily available in the market, fractionalizes the audience

available to the local television stations and hence tends _

to deny: local stations some of. the economic means —

necessary for them to operate and pay for programsr -

This is degmed to be unfair cothpetition and the Com-

___——imission believes that regulation of CATV systenis is

reasonably ancillary to its duty with respect: to ‘tele- .

_ Vision broadcasting by limiting or eliminating the

effects of this unfair competition. , ./

a is See, e.g. Second Report and Order; 2 F.C.C. 24 725, 778-81 -

(1966). Notice -of Proposed Rulemaking and Notice ‘of. Inquiry,

’ J.A., at 16-17, an = a

F. .

P 4

: ra Po ‘

y .

92

a\.2 - - a 7 7 -! a | , | os

It is difficult to see how thé subject of compelled —

origination: of. programs by CATV systems has any

relationship whatsoever to the concept 6f unfair com-

petition. While televisién broadcast stations may be.

understandably" concerned with a new- medium com- .

eting with them by originating programs, the plain —

act is that so far as mandatory origination is concerned

‘such competition flows not from CATY volition but

“eur ,

from. Oominission-compelled conduct.. Far from_- a

insulating television stations from CATV: activity, the

Commission’s order pits CATV. direetly against téle- ~ .

vision stations ‘gnd forces: CATV systems to compete

with television stations both for audience and adver- -

__ tisers.~ We would have a classic case of bootstrapping |

-if the Commission could base its power on its own

order requiring CATV systems to originate programs

; and then justify such order on the basis that the origi- |

nated programs may have competitive effects on

television broadcast ‘stations.

“3 -Lhe. power to protect UHF stations—The Com-

missién has gone to great lengths ‘to explain the im- ya

portance of UHF stations: with only 12 VHF channels,

- effective utilization must be madé of thé. 57. VHF

channels if.a truly nationwide system of television is

to exist. The economic difficulties UHF sfations con: *

__ front and the adverse effect on their operations implicit —

in unrestricted CATV activities are of éoncern to the

Y

Commission. It is a well established: fact that tele- -- -

vision — are eaten and hence require rel-

. the top 100 television markets are- . the ones which can

generally be regarded as: the most: likely to provide.

——- economic i wae for UHF operations.

- ?

s

e*

2s *' + @

xy

- the Commission focuses its concern for UHF stations,

CATV reception functions ig deemed to be ancillary

Pa

.

. Uncontrolled CATV activity in such top’ 100 markets

__While the CATV industry“has ‘not concedéd ‘that “+”

ee Commission fears for UHF from CATV operation

are real or well founded; the Short answer so ‘far-as anes

mandatory origination is: concerned is: that the Com-

as mission’s action has no possible relationship to aiding: -

. . UHF stations. ' First, the mandatory orizination re-

quirement is not limited to the top 100 markets where

‘Show how UHF stations are In any -way aided by a‘ :

Commission order requiring CATV systems to origi-

nate programs. If anything, arguments and _policy

considerations previously relied upon by.the Commis-

Second, and ‘more importantly, it ‘is not possible to

'. * sion for. protecting UHF point in a directign exactly

. Opposite to mandatory program origination. - | oe

* 4. The Atcomplishment Of the Obdjectives of Section -—

' 307(b)—Section 307 (b) .of the Comniunications Act.

(47 US.C.'§ 307 (b)) directs the Contmission in passing

- . upon. applications. for broadcast stations ‘to make a

_ fair, efficient and equitable allocation of stations among

the several states-and communities. The regulation of

- gh

th

to this section because the undue importation of gi~nals

may cause broadcast. stations to lose _their-economic an

ability to survive. If this happens, the mandatest—.”

Section 307(b) is disturbed in that there is a reduétion ~~ |

in the number: of broadcast ‘stations: available to the

several states and conimunities, a

a . oe \, |

Bs.

Ayr

_/It is difficult, however, to see how a requirement that

(CATV systems originate programs is. in any way re- —

‘ated to this objective. Indeed; the mandatory origi-

_nation*of programs can, if anything, have the same ~~

effect on tocal television stations a the importation of

signals. While CATV systems which. voluntarily origi- -

nate programs do. perform a valuable function in pro-

viding a new voice in the community, it is difficult ‘to

see how a mandatory requirement for that purpose-can _

be said to aid the Commission in preserving the avail-

ability of broadcast stations to the. several mane: and

communities.

. 5. The duty to make vedio service. available fm to

~ encourage the.larger and more effective use of radio. ;

_ Section 1 of the Communications Act (47 U.S.C. § 151).

states that the purpose of the Act is ‘‘to make Available, »

so far as possible, to all people of the United States*a —

rapid, efficient, Nation-wide, and world-wide wire and

radio communication service’> ‘Section - 303 (g) (47

U.S.C. § 303(g)) directs the Commission to encourage

the larget and more effective use of radio in the public.

interest.“ [From these two sections the Government |

argues that, pursuant to this mandate, the Commission

ean require, mandatory origination of programs so .

' . ¢hat a maximum number of communities, will have their

own outlets for. local self-expression. tay

. @

However, as has been pointed out with: smaped > a

similar argument as_to broadcast stations (supra pp. .

15-16) these provisions Ss merely “state” “obj ectiveg; the. -

achievement of these objectives must ‘be by means of-. -

poweF set toh in other portions ofthe sAct.. In the-

broadcast fied. itself we have already shown. that the ~

‘Commission has been given no authority to compel this

-yesult. It can only encourage the process ‘by making. .

» oaiane te : ~2 bi Et ee fT

. Z aes ; ot os ie A

_ frequencies available and by passing upon applications

_ . for stations by'.qualified applicants, - Be a £

Saie The. same rationale obtains in the- CATV field. A :

'-+\ person who enters into the CAT. business, does so for- ‘ :

x \, the purpose vf receiving television signals and distrib-. _

=, ie uting them to subscribers. Traditionally, these func-

; tions have: béen carried: out by CATV ‘systems dis-

" "~ tributing in an unaltered maziner the ‘programs of the

: originating stations, This activity by CATY has been

| - held to be communication by wire or radio and subject

‘‘ * to reasonable Commission regulation. The CATV -

-. operator may, if he chooses, also engage in other busi-

- hess activity. He may publish a newsletter, produce;

programs, provide fire or burglary services, or any}. -

other. type *of activity. | Whether such activities, if —

Voluntarily undertaken, wouldbe communication by :

_ + wire or radio and subject to Commission-jurisdiction is

| & moot m@ter. But'to say that the Commission can

order the VATV system to undertake such additional

activities because they are desirable services,-would be

to confer upon the ‘Commission the authority to impose :

more stringent conditions on the conduct of activities

‘ancillary té its area of primary responsibility than it

"ean impose ypon its broadcast licensees." | ices aan

—

ue 5 ' o ° i ; : ig ae

* It is anomalous to ‘compare the, Commission’s expressed cons.

ateortiaags to support the programming. See e.g. Midwest T¢e- pis a

| vision, Fnc., 13 FOC. 24 478 (1968).. Even in the instant pro- | o

- ceeding the Commission is not wholly committed to the idea of

Program origination by CATV. Thus the Commissidn’s rules pro-

vide (see Pet. App. C, at 45, 55) that a CATV system may sell.

« a, ; Strata ge y

¢ os

The Government (Br. 19) expresses» the fear that -

“denial of jurisdiction in the Commission to’ regulate

CATY systenis which transmit’ broadcast-signals would -

open the door to disparate state and loca regulation of \

CATV services in contravention of the -objectives of. :

uniform and integrated regulation ‘which Congress -

sought to achieve.’ But no argument is being fhade

_ here that the Commission has no jurisdiction to reg-

ulate-CATV systems which transmit broadcast signals.

_ Both this Court jn Southwestern and the Court below

in an’earlier opinion (Black Hills Video Corp. v. Fed- .

«eral Communications Commission, 399 F. 2d 65 (1968)

“sustained Commission jurisdiction when the regulation

- of CATV was reasonably ancillary to broadcast object-

tives. Nor did the Court below in the’instant case pass —

upon the authority of the Commission to adopt regula-

commercials only at the beginning and ending of each program 2°

and at natural breaks; no such restriction is imposed upon com- -

reial broadcasters. Moreover, the -Commission’s Memorandum:

inion and Order in this proceeding (Pet. App. D,.at 59-61)

expressly warns CATV systems that if. their origination of pro-

gramming is too successful and attracts too large an audience the

Commission might find it necessary to limit such program endeavors

by preventing CATV from carrying programs of the type which.

have proved to be most popular on television and -it is told at

this*will happen ‘‘at the first indication’of the need therefor.”

In light of this history _ of Commission attitude it is ironic to

read in the Government’s Brief (p. 18) ‘that ‘‘cablecasting by

_ CATV operators now pfavides a practical means for augmeNging

program diversificatién beyond the limitatigns inherent in ‘the

broadcast spectrum—a_ means that will be wasted if CATV -opera-

‘tors are pertnitted to transfer ‘the same limitations into their own

activities by restricting their operations to the transmission ~ of

" broadcast materials.” CATV. systems do not so’desiré to restrict -

their activities. They want to be freesgd originate programming,

but not. compelled to do so<gThe Commission would compel orig-—

ination but would place* obstacles in the ® path of effective pro-

gramming by CATV operators. a e

~~

SPs ce ee es:

: | | |

tions governing programming undertaken by CATV

systems. What the Court. below held was that the Com-

‘mission could not: compel CATV systems to orginate ©

programming. But the absence of such a power would -

no more open the door to disparate state and local reg-

ulation of CATV than has the absence of Commission

power to compel persons to-operate broadcast stations.

. IL

“THE MANDATORY ORIGINATION RULE CANNOT BE

_ mandatory originaton rule *"‘and in the Government’s

, SUSTAINED ON A THEORY OF BENEFIT-CONFERRED |

Both in‘ the Commission’s opinioris adopting’ the

Brief the attempt is made to construct the ‘requisite

nexus’’ between, the mandatory origination rule and

the Commission’s statutory_responsibilities by arguing

_ that, since the: principal product of CATV systems is

- the retransmission of broadcast signals and -since

_ CATV systems ‘“‘serve the sdme functions in many

areas as broadcasters’, CATV operators may be re-.

quired ‘‘to meet some of the same basic standards of

responsibility to the public that are imposed on broad-

easters.”’ (Br.17) .The short answer to this argument

is-that CATV systems do: not serve the same function

as broadcasters unless they originate programs. And

it is the right of CATV operators to refrain from being

, compelled*to originate programs and still remain in

a

business which is the only issue involved in this case:

The question as to the power of the. Commission to re-

quire CATV -operatorS who do originate program to

meet the same basic.responsibilities to the publi¢ as °

‘ 4 See €.g. First Report and Ovller, Pet. App. G at 34 38, 39,

48; 50-51, 52; Memorandum Opinion and: Order, Pet: App. D,

at 59-61. : ria ma .

/ 7 :

~

-

98 a

broadcasters gas not passed upon by the Court below. °

and the Commission’s detailed rules and regulations

which are designed to achieve this objective remain in

full effect.-. , | :

_ Tn its-simplest terms the. Commission’s rationale is ©

_” that the mandatory origination rule may be sustained

-it-is a quid pro quo fora benefit:

conferred upon. CATV systems by the -Commission.

The benefit conferred is that CATV systems earn their

revenues by carrying broadcast signals, that this car-

riage of signals takes place only pursuant to Commis-

sion authorization and that the -continued. carriage of

the. signals may, therefore, be conditioned upon the —

CATV systems undertaking other activities which the

_ Commission deems to be in the public interest.

The Commission’s penefit-conferred theory is subj ect

to two defects. First, it is not true that the Commis-

sion confers-authority upon’ CATV systems to receive

” broadcast signals and transmit them to subscribers. _

- This is a right which exists,independently of the Com-

‘ mission and which was exercised by CATV systertis |

_ long before the Commission took. cognizance of their

” activities: In this regard CATV is no different from

the ordinary home owner who buys a receiver and

installs an antenna or the manufacturer of television *

_ sets who constructs sets and sells them to the public

s6 they.can receive broadcast signals, or .businessmen

_whé construct and install antennas on homes enabling. ©

home, owners to: receive the signals which have been

dedicated to the public by broadcast, stations. Fort- »

nightly Corp. *v. United Artist Television, Ing., 392

-.U.8. 390 (1968). True, the activity of any such persons

may constitute commeanication by wire or radio and

hence be subject to appropriate Commission regulation.

29

‘ . “\ toy

It does not follow from the fact thatthe Commission”

may have the: authority to regulate a communication -

activity in appropriate instances that the right to

engage in the activity is eonferred by the Commission.

_. Cf. Nebbia v. New York, 291 U.S. 902, 531 (1934) ;

— Munn v-Tlinois, 94 U8. 113 ( 1877).

'_ Secondly, even if it can be assumed ayguendo that the

right to engage in CATV reception activities is*con- ‘a

ferred upon the companies by the Commissio# and can

be Withheld in appropriate circumstances, this does not ©

mean -that the Commission can condition the exercise

-of the right upon the, CATV operator relinquishing

"rights to which it is dwfully entitled or undertaking’

activities which the Conimission has: no independent

“authority to require. The holding of the Court below

was based. upon its finding that CATV systems are

engaged in the business of receiving and retransmitting

television signals to subscribers, that this business is

_ unrelated:to the business of producing and distribiffing ~ 7

_ original programs and that, therefore, CATV operators .

could not be required, as a“tondition of remaining in

the CATV. business, “‘to engage in the entirelyMiew and.

different business of originating programs.”” (Pet. — .

. App. A, at 23-24). . DT cn &

- The Court below was clearly correct. First, axpre- |.

vious decisions of this Cougt have recognized, CATV

systems are eiigaged in the business of receiving and.

retransmitting programs originated by television

broadcast stations. Fortnightly Corp. v. United Artist

_ Television, Inc., supra; United States v. Southwestern .

Lable Co., supra at 163. The reception-retransmission

activities of CATV systems are purely’ passive—the

CATV operator erects an antenna, installs head-end

w equipment, captures signals which ave been dedicated

> 30

to the public use, by broadcast stations and distributes . . |

‘them to subscribers. In Fortnightly, this Coyrt plainly

spelled out the distinction which exists between the

_ business engaged in by CATV operators and that

--engaged in by ‘broadcasters as follows (392 U.S. 390,

399-401 :° Se ae

... Essentially, a CATV system no more than

enhances the viewer’s capacity to receive the broad-

‘easter’s signals; it provides a well-located antenna’

with an efficient connection to the viewer’s tete-

vision set. It is true that:a CATV system plays.an |

‘Cactive’’ role in-making reception. possible in a

given.area, but so do.ordinary television sets and

antennas. .CATV Mice is powerful :and ~

sophisticated, but the basic function the equipment:

serves is little different from .that served by

the equipment generally furnished bya television

viewer. If an individual erected‘an antenna on a

hill, strung a cable to-his house, and installed the,

- necessary amplifying equipment, he would not be

‘‘performing’’ the programs he received on his -

' “\television Set. The result would be no- different

if several people combined to-erect a cooperative |

antenna forthe same purpose. The only difference

in ‘the case of CAT'V is that the antenna system: is

erected and owned not by its users but by an

entrepreneur. = "

The function ef CATV systems has little in com-

mon with the function of broadcasters. CATV

systems -do not in fact broadcast or rebroadcast. —

_ Broadcasters select: the programs to -be viewed;

CATV systems simply” carry, without editing,

18 Indeed this Court ‘was careful to point out in its opinion (392

U.S. at 392, fn. 6) that even for copyright purposes a-CATV.

‘system’ which originates programming is not necessarily the same

type of business activity as a CATV system which restricts its. -

role to’ reception and distribution of broadcast signals.

2

oP

*

os 4 31

_ whatevér programs they receive. Broadcasters ‘

.” procure .programs® and propagate them to ‘the.

public; CATV systems receive programs that have

. been released to the public ‘and earry them by: .

_ private channels to additional’ viewers. We hold

that CATV operators, like viewers and unlike

. broadcasters, do not perform the programs that

_ they receive and carry. : a an

The Court below correctly recognized: the funda-

mental distinction between the business of operating a.

CATV system and the business of originating progran:s

_ and elaborated upon this distinction as follows (Pet.

App: A, at 24): : : gt

Entering into the program origination field in-

volves. various substantial expenditures. Costly

equipment must be purchased. . Personnel must

‘ be employed who are skilted:in photography, sound... -

production, program planning and direction, and

in performing. ‘Such expenses will often prove:

_ burdensome because of the limi pro-

___ gram-will reach, See Federal Regulation of Cable

Television; The Visable Hand, Chazen & Ross, 83

Harvard L, Rev. 1820. oe

_ The Commission has itself recognized that the opera-

_ tion of a cablecasting’ system requires investment in .

facilities and personnel not normally associated, with

the operation of a CATV-system. This recognition is

~ implicit in the estimates of the costs involved in con- '

verting a CATV reception-distribution system to a,

cablecasting system which are set forth in the First

Report and Order: (Pet. App. C, at 40-41). These

‘estimates indicated that the cost: would range from .

$27,300 for a, basic black and white system to $95,000 |

- for a full color system and that annual operating costs

would range from $14,300 for black and white system

S

©

‘

oe © 32

to $33,000 for color operations.” A review of the var-

_ jous factors involved in these costs estimates leaves no —

doubt that cablecasting is not merely an adjunct of =

CATV operations but is, as the Court below found,an .”

entirely different business activity requiring different

- equipment, materials and personnel. . :

Second, in view of the fact that CATV operators and

~ cablecasting operations are wholly differen businesses,

the Court below correctly ruled that the Commission

was without authority to condition the right of persons .

_-y to engage in CATV operations upon their becoming _. _—

program originators. This holding did not~de end =

‘ upon a resolution of the question of the extent of the

_ Commission’s authority to adopt reasonable regulations

coneérning any. other aspects of the a prone of’

~ CATV systems. A long line of decisions of this Court

. relating. to the limits of the power. of theGovernment

to. regylate the conduct of businesses affeéted with a

public interest — establishes that the Commission

cannot condition the right of CATV opertors to engage. .

in, CATV reception activities on their relinquishing |

rights to which they are lawfully entitled or undertak- *

“ing other activities for the benefit of the public J nter-

/ state Commerce Commission, V: Oregon-Washington -

; R.R. & Nav. Co. 288 U.S. 14 (1933); Delaware, = *

Lackawanna. é Western R. Co. v. Morristown, 276 U.S.

182 (1928) ; Frost & Frost ‘Trucking Go. v. Railroad. ©

19 In a Memorandum Opinion and Order in Docket No..18397, 27

FCC 2d 778 (1971) (Pet. App. E, at 66) issued in response fo

Midwest’s petition for a stay of the mandatory origination rules

pending action by the Court below, the Commission acknowledged ~

that the actual costs of converting to and operating an origination |

system may ‘be substantially higher than the estimates contained

in the irst Report: and Order: i*

— =

Ce ee ee ee

- Commission, 271 U.S. 583 (1926) ; Northern: Pacific

R.R..Co. v. North Dakota ex rel. McCue, 236 U.S. 585

(1915). 7 os ees

_- Frost & Frost and Northern Pacificare directly in -

‘point. Frost d: Frost dealt with the validity of a Cali- .

fornia highways could con ue to operate on the roads

- of California o-apon beotin: common carriers,

Mn rost, who was engaged in the busingss of private

+ contract carriage and who used the roads of ‘Californj

Other cases in which the principle involved in these cases has been

recognized are: Michigan Public Utilities Commission y. Duke, 266

U.S. 570 (1925) ; Terral v. Burke Construction Co., 257 U.S. 599

(9R22); Western Union Telegraph Co. v: ‘Foster, 247 U.S. 105

(1918) ; Missouri Pacific R. Co. v. Nebraska, 164 U.S, 403 (1896) ;

. Cf. Jones v. State Board of Education, 397 U.S. 31, 34 (1970)

. Commission, 122 Utah 284, 249 P.2d 951 ( 1952) ; Georgia Power

7 Co. & Georgta Public Service Commission, 211 Ga. 223, 85 S.E.

- 2d 14 (1954) ; Hollywood Chamber of Commerce v. Railroad Com-

mission, 192 Cal. 807,'219 P. 983 (1923) ; Panagra Terminal Inves-

. tigation, 4 CAB 670 (1944). ee ae

c

ia i at lal he id

beeen tia

5

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conbect Vis business from that of a private carrier to a

public carrier. It did hold, however, that the state had

the power to grant or altogether withhold from ‘its

citizens the privilege of using its public highways for

the purpose of transacting private business thereon and

_ that since the legislature could entirely withhold the

right of using the public highways for private business,

* it could grant that right‘on such conditions as it saw

fit to impose. Accordingly, the California, court -held °

_ that it was appropriate to condition the special privi-

lege which Frost enjoyed of using the ‘publie highways

for his private business on Frost’s dedicating his prop-- _

" erty to the. quasi public use of public transportation;

that Frost was not obliged to submit himself to_the-

: condition, but ifdbe did not, he would lose the pfivilege

of using the highway. Py,

This Court disagreed, holding the state action to be

“+ unconstitutional. The Court pointed out that the stat-

' . +ute in questiqn did not in any way.constitute a regula--

tion of the use of»public highways in that it was not:

In-any way designed to protect or conserve the high-

' ways.- As the Court stated (271.U.S. at 593) > —

. ‘There is involved in the.inquiay not a single power,

but two. distinct. powers. One of these—the power

to prohibit the use of the public highways in proper .

cases—the state possesses; and the other—the

power: to compel a private carrier to assume

against. his will the duties and burdens of a com- |

"mon carrier—the state does not possess. It is

Clear that any. attempt to exert the latter, sepa-

rately. and substantively, must fall before the |. -

paramount authority of the Constitution. May it

Stand in the conditional form\in which it is here

made? If so, constitutional guarantees, so care-_

fully safeguarded against direct assault, are open.

: to destruction by pe indirect but no less effective

' process of requiring a surrender, which, though,

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of a privilege, ‘which the state may grant or deny,

exeept a choice between the rock and thegwhirl-.

be vital to his livelihood, or t require- ~-

i

ment which may constitute an intolerable b

Northern Pacific involved the question of the power

of the state of North Dakota to fix intrastate rates for

-" public interest of: the people of ‘North Dakota by

~ encouraging the development of the local lignite coal |

‘industry. The Supreme Court of North Dakota held

charge for carriage of other commodities were. suffi-

ciently high to permit them to earn a substantial profit.

state’s action as follows (236 U.S. at 595) :

The railroad property is private property devoted °°

to a public use. As a rs Siete alin a owner is

Pent RK? Meare ARGOS BS na

to the private carrier . °

-

P ss ; a ‘ , = . [

’ co, .

subj ect. to the obligations of its charter. A& the -

holder of special franchises, it is subject to the -

conditions upon which they were granted. Aside .”

_.from specific requirements ofthis sort, the com-

mon carrier must diseharge the obligations which

Inhere mm the nature of its business. It must supply~

fagilities that are reasonably adequate; it must

carry: upon reasonable terms;’and it must serve

_ without unjust discrimination. These duties are

_ | prdperly ‘called public duties, and the state, within

the Kmits of its Jurisdiction, may enforce'them. ... 7

But, broad as is the power of regulation, the —

_ state does not enjoy the freedom of an owner.

- The fact that the: property is devoted to-a public

use on certain terms does not justify the require-

ment that it shall be devoted to other public pur-

poses; or to the same use on other terms,’ or the

_ imposition of restrictions that are not reasonably -

concerned with the pees conduct of the business

ertaking which the carrier has ©

- expressly or impliedly assumed. If it has held .

itself out as a carrier-of passengers only, it cannot »

according to the un

g

*,

be compelled to carry freight:. As a carrier for’ ©

hire, it cannot be required to carry persons or goods

gratuitously. The case would not be altered by

the assertion that the public interest demanded

such carriage. The public interest cannot be in-

_ voked as a justification for demands which pass

the limits of reasonable protection, and seek to

'. simpose-upon the Yarrier and its property buidens

.. that are not incident to-its engagement. Tigao

‘The ‘principles enunciated by this Court in Frost &~

Frost arid Northern Pacific are dispositive of this case. .

| pe the: extent that CATV operators have deédicated

tthe

| ir property to a public purpose and are subject to:

the regulatory authority ¢ither of the CommisSion or

:’ state or local regulatory agencies, they may be regu-.

ot

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h tie

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37

vir

?.

-quacy with which CATV systems are perforining thia’~

function. Nor.does the rule involve the reasonableness

_ ~ theseéutlets. The authofities cited above clearly estah-

lish that regardless: of ngw great a. public need there

“may be for additional ‘ou

. the Commission js withéut authority to singlé out

CATV operators and require that they devote their

property to the satisfaction of this public need, ~

originate programs, what -is there to stop it from re-

a ae Ye oP ,

lated in the public interest to insure that they ade--

quately discharge the obligations to thé public inherent. _'

. in the,nature of their business, They may not; how--:

. ever, be required ‘to devote: their property to other

¢

. he consequences : of approving the .Commission’s —_

_ theory of regulation would be staggering. . If the Com-

mission can legally condition the right of a CATY -

system to remain in business upon its undertaking to

quiring..a CATV system—or a broadcast station—to

38

publish a daily newspaper in its community ?** Surely

the public need served by a newspaper is at least as'

_ important as a’broadeast station. And there are many

- more communities which lack a newspaper than a radio

station. If the analogy is deemed. to be too far

fetched—since publication of newspapers is not within

the Commission’s jurisdiction—the illustration can be

brought directly within the Commission’s ambit by

inquiring as to whether the Commission could order

FM stations, as a condition to their right to survive, to

transmit newspaper by facsimile.” What the Com-

mission is attempting ‘to accomplish by its order is

tantamount to a government ukase to a company. like

General Motors that its right to continue in the business -

of manufacturing cars and trucks could be terminated.

unless it agreed to enter the business. of manufacturing

, nelopeere: Or the same emer could justify a.

21 The business of operating a CATV erate is closely analogous

-to the business of operating a newspaper distributorship and the

requirement that CATV systems originate programs as a condition

of remaining in business may properly be analogized to a require-

ment that newspaper distributors, as a condition of remaining in

‘business, publish and distribute to their subscribers a local news

supplement. Since-there are presently only three daily newspapers

of general circulation published in Washington, D.C., it would not

‘be unreasonable for the government: of that city to conclude that

the public interest would be served by the establishment of addi-

. tional newspapers devoted to local news, events and advertising.

Can there be any doubt, however, that the Government of the city

would be exceeding the limits of its authority if-it-were to require

that all persons engaged in the business of distributing out-of-town

newspapers to subscribers in the City of Washington must, as a

condition of remaining in such business, publish and distribute .

: to their subscribers a daily local news =e in order to

satisfy this public need?

22 See § 73.266 of the Commission’s Rules and Regulations, 47

C.F.R. § 73.266, permitting but not requiring FM stations to trans-

= facsimile. ‘

*

-

Latte A RAS Slot ge Sa

.

<9

? a

39.

municipality which has granted appropriate licenses -

for a corner grocery store to require it to open a dry |

goods store as a condition of: its right to continue to ~—,

hold a license. Even.-in wartime, Government powers _—s_—_.

have not been extended to this extent. __ aE

. - GONCLUSION

For the foregoing reasons it is. urged that the~

judgment of the Court below should be affirmed.

Wayne W. Owen .

oe Union Life Building ;

@.o.. ++ «” Gittle Rock, Arkansas 72201

I ..- Harry M. Prorrin. -

j= _GrorcE H. SHAPIRO

_ Davin Trt10Tson-

1815 H Street, N.W.

Washington, D. C.. 20006. .

| 7 Attorneys for Respondent —

Of Counsel: . | _

Moses, MCCLELLAN, ARNOLD,

Owen & McDermMorr _

Union Life Building ;

Little Rock, Arkansas 72201 |

ARENT, Fox, KInTNER; |

PLOTKIN & Kaun

1815 H Street, N.W..

Washington, D-C. 20006

April 1972