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TURNER BROADCASTING SYS. v. FCC

April 8, 1993

TURNER BROADCASTING SYSTEM, INC., et al., Plaintiffs,
v.
FEDERAL COMMUNICATIONS COMMISSION, et al., Defendants. DANIELS CABLEVISION, INC., Plaintiff, v. UNITED STATES OF AMERICA, Defendant. TIME WARNER ENTERTAINMENT COMPANY, L.P., Plaintiff, v. FEDERAL COMMUNICATIONS COMMISSION, et al., Defendants. NATIONAL CABLE TELEVISION ASSOCIATION, INC., Plaintiff, v. UNITED STATES OF AMERICA, et al., Defendants. DISCOVERY COMMUNICATIONS, INC., et al., Plaintiffs, v. UNITED STATES OF AMERICA, et al., Defendants.



The opinion of the court was delivered by: THOMAS PENFIELD JACKSON

THOMAS PENFIELD JACKSON, District Judge

 Sections 4 and 5 of the Cable Television Consumer Protection and Competition Act of 1992, Pub. L. No. 102-385, 106 Stat. 1460 (to be codified at 47 U.S.C. §§ 534 & 535) ("the 1992 Cable Act" or "the Act") require cable television system operators to carry the video signals of certain commercial and non-commercial educational television broadcast stations requesting that their signals be carried. The plaintiffs in these five consolidated lawsuits contend that these mandatory carriage (or "must-carry") provisions violate their First Amendment rights. Upon consideration of the entire record, *fn1" the Court holds that sections 4 and 5 of the 1992 Cable Act do not violate the plaintiffs' First Amendment rights.

 Background

 On October 5, 1992, Congress overrode a Presidential veto to enact the 1992 Cable Act. The Act subjects the cable industry to extensive regulation. Among other things, it subjects certain cable system operators to rate regulation by the FCC and by municipal franchising authorities; it imposes restrictions on distributors of cable programming that are affiliated with cable operators; and it directs the FCC to promulgate regulations imposing minimum technical standards for operators of cable systems.

 Sections 4, 5, and 6 of the Act limit the freedom of cable operators to refuse to carry the signals of local broadcast stations, and, as a corollary, prevent cable operators from carrying broadcast signals without a broadcaster's consent. *fn2" The plaintiffs' constitutional challenge to these three sections is the matter presently to be addressed by this opinion.

 Section 4 of the Act requires all cable system operators with more than 12 channels to carry, upon request, the signals of licensed "local" commercial broadcast television stations whose signal is received over-the-air in the same television market as the cable system. *fn3" The operator need not devote more than one-third of its active useable channels to deliver local broadcast signals, but if there are not enough local broadcast stations to fill the one-third set-aside, the operator must carry the signal of one or two "qualified" low power broadcast stations. *fn4" Cable systems with 12 or fewer channels must deliver the signals of at least three local commercial broadcast stations unless the cable system has 300 or fewer subscribers, in which case it is not subject to the requirements of section 4 at all. An operator must carry the entire programming schedule of each commercial station it is required to carry, and it may not accept or request payment for doing so. Every commercial broadcast station having a right to mandatory carriage must be carried by the cable operator, at the station's election, on its current over-the-air channel position, at the channel position it occupied on July 19, 1985, or at the channel position it occupied on January 1, 1992.

 Section 5 of the Act requires operators of cable systems able to deliver signals on more than 36 channels to carry the signals of every local non-commercial educational broadcast television station requesting carriage, *fn5" unless the educational station's programing substantially duplicates that of another station carried by the system. Systems with 12 or fewer channels must carry one qualified non-commercial station, and systems having 12 to 36 channels must carry between one and three such stations. Section 5, like section 4, directs cable system operators to carry the entire programming schedule of the broadcast stations they are required to carry, and similarly prohibits operators from accepting payment in exchange for carriage. Each non-commercial station having a mandatory carriage right must be carried, at its election, on its current over-the-air channel position or on its channel position as of July 19, 1985.

 Section 6 of the Act, which becomes effective on October 5, 1993, prohibits cable operators from retransmitting the signals of any commercial broadcasting station without obtaining the station's consent. In conjunction with section 4, section 6 provides local broadcasters with an option to request mandatory (but uncompensated) carriage on a system or to negotiate a carriage agreement with the operator. (Presumably, cable operators will want to carry the signals of larger, viewer-popular broadcasters and will pay for the privilege; *fn6" less popular broadcasters will be able to force their carriage by making a carriage demand under section 4.).

 On the same day that the 1992 Cable Act became law, Turner Broadcasting System, Inc., the owner of several cable programming operations, brought this case against the FCC and the United States, challenging sections 4, 5, and 6 as unconstitutional under the First Amendment, asking for declaratory and injunctive relief. *fn7" Within the ensuing five weeks, four other plaintiff groups -- comprised of cable system operators and programmers -- brought similar suits seeking similar relief. *fn8" In addition to challenging sections 4, 5 and 6 of the Act, two of these plaintiff groups brought First Amendment challenges to multiple other provisions of the 1992 Act and to certain provisions of the Cable Communications Policy Act of 1984, Pub. L. No. 98-549, 98 Stat. 2782 ("the 1984 Act"). *fn9" This three-judge U.S. District Court ("the Court" or "this Court") was convened pursuant to § 23 of the 1992 Cable Act, which commands that a three-judge court hear "any civil action challenging the constitutionality of section [4] or [5]" of the 1992 Act.

 On November 23, 1992, this Court consolidated these five cases for the "purpose of determining issues related to the constitutionality of sections 4 and 5 of the [Act], and any matters determined to be ancillary thereto." Turner Broadcasting Sys., Inc. v. FCC, CA No. 92-2247, order at 2 (D.D.C. Nov. 23, 1992) (three-judge court). Four of the five plaintiff groups filed comprehensive preliminary injunction motions, but a hearing on those motions as to the must-carry provisions was postponed indefinitely upon the Court's approval of the parties' assent to a "standstill order" proposed by the parties. See id., standstill order (D.D.C. Dec. 9, 1992) (three-judge court). On December 15, 1992, this Court declined to exercise jurisdiction over any claim other than the must-carry claims, see Turner Broadcasting Sys., Inc. v. FCC, 810 F. Supp. 1308 (D.D.C. 1992) (three-judge court). *fn10"

 The matter, i.e., the constitutionality of sections 4 and 5, is now before the Court on the motions for summary judgment of all five plaintiff groups; on the cross-motions for summary judgment of several intervenor-defendants; on the federal defendants' cross-motion to dismiss; on an intervenor-plaintiff's motion for preliminary injunction of sections 4 and 5 on "religion clause" grounds; and on an intervenor-defendant's motion for summary judgment on a cross-claim.

 I.

 The plaintiff cable system operators and programmers contend that the must-carry provisions are, on their face, violative of their First Amendment rights to freedom of speech. The primary evil of those provisions, they assert, is that they force cable system operators to devote a portion of their finite signal-carrying capacity to deliver the signals of a privileged class of competing "speakers," i.e., over-the-air broadcasters, thus diminishing the number of channels remaining available to them for other programming they might prefer to carry. Must-carry also violates the First Amendment rights of the operators, they say, because it inhibits the operators' "editorial discretion" to determine what programming messages to provide to their subscribers, *fn11" compelling them perforce to deliver some programming they might otherwise choose not to carry. And the programmers argue that must-carry exalts broadcasters to preferred status as "speakers" by awarding them favored cable channel positions the programmers covet.

 The concept of governmentally ordained mandatory carriage of broadcast signals is not a novel threat to the cable industry. The FCC first began to experiment with must-carry rules in the early 1960s. *fn12" The perceived need for must-carry today is based on the same premise that gave rise to it then: that local broadcast stations, unable to secure carriage on cable systems serving the same viewer markets, will, over time, lose their audiences and perish. Compare 1992 Cable Act § 2(a)(15) and S. Rep. No. 92, 102d Cong., 1st Sess. 42-46 and H.R. Rep. No. 628, 102d Cong., 2d Sess. 50-57 with Rules Re Microwave-Served CATV, Dockets Nos. 14895 and 15233, 38 F.C.C. 683 P. 58-82 (1965). As the audiences of broadcasting stations decline, so the reasoning goes, their advertising revenues will decrease correspondingly. Local over-the-air broadcasting operations, once they become unprofitable, will expire. Cable carriage of local broadcasting was then and is still now thought by its proponents to be essential not merely to ensure the continuing availability of programming with a "local" flavor to cable system subscribers, but also to preserve the vitality of a free source of over-the-air programming to television viewers unwilling or unable to obtain a cable connection.

 Not surprisingly, the parties have expended considerable effort and resources arguing over the level of First Amendment scrutiny to be applied to speech regulation in the cable context. The plaintiffs contend that the must-carry provisions must be subjected to exacting First Amendment scrutiny; if they are not per se unconstitutional, they are assuredly permissible only if found to have been precisely drawn to serve a compelling government interest, and to go no further. See, e.g., Sable Communications v. FCC, 492 U.S. 115, 126, 106 L. Ed. 2d 93, 109 S. Ct. 2829 (1989); Minneapolis Star & Tribune Co. v. Minnesota Comm'r of Revenue, 460 U.S. 575, 585 (1983). The defendants respond that if the First Amendment is implicated at all in this case, the must-carry provisions need only be judged by the interest-balancing traditionally applied to content-neutral speech regulation or legislation ostensibly unrelated to expression that is discovered to impose incidental burdens on speech. The nature of this inquiry, originating in United States v. O'Brien, 391 U.S. 367, 20 L. Ed. 2d 672, 88 S. Ct. 1673 (1968), and refined in Ward v. Rock Against Racism, 491 U.S. 781, 105 L. Ed. 2d 661, 109 S. Ct. 2746 (1989), is to uphold such regulation when shown to promote a significant government interest and not to burden substantially more speech than necessary to vindicate that interest. Rock Against Racism, 491 U.S. at 799.

 II.

 In 1989, Congress began the first in a series of several hearings to assess the video programming distribution landscape in light of the 1984 Cable Act. *fn13" After an exhaustive factfinding process including hearings held over three years, *fn14" the 1992 Act was passed. *fn15" Congress' principal finding was that, for a variety of reasons, concentration of economic power in the cable industry was preventing non-cable programmers from effectively competing for the attention of a television audience. See 1992 Cable Act §§ 2(a)(2), (4), & (15). See generally 1992 Cable Act § 2(a); 1991 S. Rep. No. 92; 1992 H.R. Rep. No. 628, 102d Cong., 2d Sess. (1992); H.R. Rep. No. 862 (conference report).

 Congress specifically found that cable had become the "dominant nationwide video medium." 1992 Cable Act § 2(a)(3); see 1991 S. Rep. No. 92 at 3. Almost 56,000,000 households -- 60 percent of the households with televisions -- receive cable television, 1992 Cable Act § 2(a)(3), and cable service is available to almost 90% of the nation, 1991 S. Rep. No. 92 at 3. In those homes receiving video signals by cable, cable has all but supplanted over-the-air broadcast television reception. 1992 Cable Act § 2(a)(17).

 Congress also found that despite the dominance of cable, there is insufficient competition within the cable industry. First, there is little competition between cable operators. For many reasons "including local franchising requirements and the extraordinary expense of constructing more than one cable television system to serve a particular geographic area," most regions of the country are served by one cable operator only. 1992 Cable Act § 2(a)(2). *fn16" Second, the industry has become horizontally concentrated -- many operators share common ownership. See 1992 Cable Act § 2(a)(4). *fn17" Third, the industry is becoming vertically integrated. 1992 Cable Act § 2(a)(5). Many large entities that operate cable franchises also own and operate programming enterprises. Id.; see also FCC Report, supra note 16, at PP 77-80.

 Congress determined that geographic monopolization, horizontal concentration and vertical integration have created barriers to entry for non-cable programmers, primarily broadcasters, attempting to obtain carriage on cable. Vertical integration contributes to this cable "bottleneck" by providing cable operators with economic incentive to grant affiliated programmers access to their systems while denying it to others. 1992 Cable Act § 2(a)(5). Similarly, horizontal concentration and the absence of effective competition among operators have obstructed broadcaster access by creating a climate conducive to another anti-competitive operator practice. Cable operators compete with broadcasters for advertising revenue. Id. at § 2(a)(14). Consequently, operators have an economic incentive to refuse carriage of broadcasters' signals to reduce broadcast viewership, thus attracting advertising dollars that otherwise would go to broadcasters. Id. at § 2(a)(15).

 In summary, Congress concluded that the economic forces at work and the market conditions they had already produced had placed free local broadcast television in serious jeopardy. Id. at § 2(a)(16). It determined that mandatory carriage was necessary to remedy unfair trade practices, to preserve local broadcasting for those who do not receive cable television, id. § 2(a)(12), as well as those who do, id. at § 2(a)(7), and to ensure that the public will continue to have access to a wide diversity of sources of video programming, id. at § 2(a)(6)-(11).

 This Court is of the opinion that, in enacting the 1992 Cable Act, Congress employed its regulatory powers over the economy to impose order upon a market in dysfunction, but a market in a commercial commodity nevertheless; not a market in "speech." The commodity Congress undertook to regulate is the means of delivery of video signals to individual receivers. It is not the information the video signals may be used to impart. That the video signals can only be used to convey a message is of no particular significance. The same is true of printing presses, or broadcast transmitters; loudspeakers, or movie projectors. Yet no one doubts that Congress could regulate a market in those commodities in danger of chaos or capture without being accused of attempting to infringe the First Amendment freedoms of those by whom they will be used to express protected "speech." The Cable Act of 1992 is simply industry-specific antitrust and fair trade practice regulatory legislation: to the extent First Amendment speech is affected at all, it is simply a byproduct of the fact that video signals have no other function than to convey information.

 In other words, the Court holds that the must-carry provisions are essentially economic regulation designed to create competitive balance in the video industry as a whole, and to redress the effects of cable operators' anti-competitive practices. The regulation is justified by the existing structure of the cable business itself, and by the market peculiarities resulting from the technological differences in the manner in which different video signal distributors deliver their products to their viewers' receivers. So perceived, the Court concludes that the must-carry provisions are, in intent as well as form, unrelated (in all but the most recondite sense) to the content of any messages that these embattled cable operators, broadcasters, and programmers have in contemplation to deliver.

 That the First Amendment is to some extent implicated whenever a government endeavors to regulate a cable industry component, however, is a proposition now too well-established to reconsider. *fn18" But although many courts have considered the application of the First Amendment to various laws regulating cable, *fn19" the question of the First Amendment standard to be applied to compulsory signal-carriage requirements has yet to be definitively answered. Despite twice confronting the issue, the D.C. Circuit has avoided its resolution. See Century Communications Corp. v. FCC, 266 U.S. App. D.C. 228, 835 F.2d 292 (D.C. Cir. 1987), clarified, 837 F.2d 517 (D.C. Cir.), cert. denied, 486 U.S. 1032 (1988); Quincy Cable TV, Inc. v. FCC, 248 U.S. App. D.C. 1, 768 F.2d 1434 (D.C. Cir. 1985), cert. denied, 476 U.S. 1169, 90 L. Ed. 2d 977, 106 S. Ct. 2889 (1986). *fn20"

 It appears to this Court that the must-carry provisions of the 1992 Cable Act squarely present this fundamental issue, and these cases demand that it be resolved. The Court today holds that the government need not demonstrate that it has used the least restrictive means to accomplish what is, primarily and essentially, economic regulation of an industry in the business of delivering video signals. The Court concludes that sections 4 and 5 of the 1992 Act will pass constitutional muster if they satisfy the criteria established in O'Brien and its progeny.

 To be sure, in Quincy and Century, the D.C. Circuit held FCC rules requiring cable operators to carry the signals of local broadcasters to be unconstitutional. Neither case, however, is controlling here; the court of appeals was careful, in both opinions, to note that must-carry rules are not per se unconstitutional. Century, 835 F.2d at 304; Quincy, 768 F.2d at 1463. The court of appeals simply held, in both cases, that the FCC had failed to make a record demonstrating the existence of a governmental interest of sufficient moment -- whether "compelling" or merely "significant" -- to warrant such First ...


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