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DANIELS CABLEVISION, INC. v. UNITED STATES

September 16, 1993

DANIELS CABLEVISION, INC., Plaintiff,
v.
UNITED STATES OF AMERICA, Defendant. TIME WARNER ENTERTAINMENT COMPANY, L.P., Plaintiff, v. FEDERAL COMMUNICATIONS COMMISSION, 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

 The plaintiffs in these three lawsuits present facial constitutional challenges to eleven provisions of the Cable Television Consumer Protection and Competition Act of 1992, Pub. L. No. 102-385, 106 Stat. 1460, and to two provisions of the Cable Communications Policy Act of 1984, Pub. L. No. 98-549, 98 Stat. 2780 ("the Cable Act" or "Acts"), contending that, for sundry reasons, these provisions infringe upon their First Amendment right to freedom of speech. *fn1" No other infirmities are alleged in these actions, however, and the Court is therefore not called upon to address other constitutional issues that may lurk elsewhere in this landmark legislation.

 The Court holds that section 11(c) of the 1992 Cable Act (insofar as it amends the Communications Act of 1934 to include new section 613(f)(1)(A)), and sections 15 and 25 of the 1992 Cable Act are unconstitutional. It concludes that all of the remaining provisions of the 1992 and 1984 Cable Acts in dispute are facially compatible with the First Amendment.

 I.

 The 1992 Cable Act subjects the cable television industry to extensive and unprecedented federal regulation. Controversial from the moment the legislation was first proposed, it was immediately assailed once enacted from several quarters in these and other lawsuits. The plaintiffs here are cable television system owner/operators and programmers. The named defendants are the United States and the Federal Communications Commission ("the FCC" or "the Commission"), the administrative agency charged with its enforcement. *fn2" The plaintiffs contend that multiple provisions of the 1992 Cable Act (and, in retrospect, others of its ancestor, the 1984 Cable Act), unconstitutionally interfere with their First Amendment right to "speak" as they wish through the cable television systems they own, control or use, to the audiences of their choice.

 Two other lawsuits, in which the plaintiffs challenged two particular provisions of the 1992 Act on similar grounds, were filed within days of the three lawsuits now before this Court. *fn3" All plaintiffs in all five lawsuits challenged sections 4 and 5 of the 1992 Cable Act (creating 47 U.S.C. §§ 534 & 535), the so-called "must-carry" provisions, which require cable operators to carry programming originating with certain over-the-air television broadcasters whose signals coincide with cable operators' service areas, and all five cases were consolidated as related cases. Thereafter, the claims in all cases challenging the constitutionality of the must-carry provisions were severed for hearing, as the statute expressly requires, by a three-judge district court convened in accordance with section 23 of the 1992 Cable Act. See Turner Broadcasting System, Inc. v. FCC, 810 F. Supp. 1308 (D.D.C. 1992). *fn4" All of the plaintiffs' claims other than those involving the must-carry provisions are presently before this single-judge district court on the summary judgment motions of each of the plaintiffs; on the cross-motions for summary judgment of the federal defendants; and on the briefs and dispositive motions of the several applicants for intervention and amici.

 II.

 Starting from the premise of the Must-Carry Opinion -- that the 1992 Cable Act is essentially a regulatory measure of economic rather than ideologic import -- much of its reasoning is apposite to a decision with respect to the remainder of the Act. Congress undertook to expand and tighten government's control over that segment of the television market in which the plaintiffs traded, namely the business of delivering video signals to a major portion of the nation's homes. Congress was largely unconcerned with what was being said with those signals. It was concerned, however, that the plexuses of wires linking video "speakers" and most of the television receivers across the country remain open to transmit a diverse mix of "voices," not only the messages chosen for delivery by those who owned or controlled the cables.

 Several of the provisions of the 1992 Cable Act avowedly inhibit the cable operators and programmers in making full use of the capabilities of their systems to deliver signals to their subscribers. The plaintiffs challenge these provisions largely on the same grounds on which they based their challenge to the must-carry provisions in sections 4 and 5 of the 1992 Act. See Must-Carry Opinion, supra note 4. The Act, in effect, confiscates a portion of those capabilities for use by others. In First Amendment terms -- insofar as plaintiffs are deemed to be "speakers," i.e., purveyors of messages rather than of message-bearing electronic impulses -- Congress has deprived them of unlimited choice as to the messages they will deliver, to whom they may deliver them, and the "speakers" for whom they will do so. It is for these reasons, as some cases have held in other contexts, that the cable operators argue that the provisions must be strictly scrutinized.

 As the Must-Carry court observed, however, in its opinion rejecting similar challenges to the must-carry provisions, the crucial inquiry for determining the appropriate level of First Amendment scrutiny is not merely whether governmental regulation results in compelling certain speech, fetters the speaker's discretion in deciding what to say, or favors particular speakers at the expense of others, but is also whether the regulation is, overtly or covertly, content-based; that is, the government is telling the speaker what can or cannot be said. Constraints on speech, even if deriving from an exercise of governmental authority, need be strictly scrutinized only if the government has specified the speaker's message. See Turner Broadcasting, 819 F. Supp. at 42. Although the provisions at issue here may impose some limit on the autonomy of cable operators to speak only such speech as they would themselves pronounce, most do so only to serve regulatory goals unrelated to content. Accordingly, these other provisions, too, are constitutional, as was the case with must-carry, if those goals serve significant governmental interests and do not burden substantially more speech than necessary to serve these interests. Ward v. Rock Against Racism, 491 U.S. 781, 799, 105 L. Ed. 2d 661, 109 S. Ct. 2746 (1989); United States v. O'Brien, 391 U.S. 367, 377, 20 L. Ed. 2d 672, 88 S. Ct. 1673 (1968). *fn5"

 Mandatory Carriage of Public, Educational, and Governmental ("PEG") Programming and Leased Access Channels; Rate Regulation; Restrictions on Vertically Integrated Programmers.

 Section 7(b) of the 1992 Act, in conjunction with section 611 of the 1984 Act, the "PEG programming" provisions, allows local franchising authorities to require that franchise proposals submitted by aspiring cable operators contain assurances that a portion of their channel capacity will be designated for "public, educational, or governmental use." Once the franchise is awarded, the franchising authority may enforce these "PEG" commitments, 47 U.S.C. § 531(c) (1988), and the franchisee is not thereafter permitted to exercise any editorial control over the PEG programming it is obliged to carry. Id. § 531(e).

 Section 612(b) of the 1984 Act, the "leased access" provisions, obligates cable operators to reserve channel capacity for use by commercial programmers that are unaffiliated with the operator. *fn6" 47 U.S.C. § 532(b)(1) (1988). Again the cable operator is prohibited from exercising editorial control over its lessees' programming, except to the extent that it may consider content in establishing a reasonable price to charge the unaffiliated lessee, id. § 532(c), and it may also decline to carry programming that it reasonably believes to be obscene. 1992 Cable Act § 10(a).

 Section 19 of the 1992 Act, the "vertical integration" provisions, regulates the conduct of programmers in which a cable system operator has an attributable (i.e., a property) interest ("vertically integrated programmers" or "VPs"). Section 19 directs the FCC to promulgate regulations to "prohibit discrimination (by vertically integrated programmers] . . . in the prices, terms, and conditions of sale or delivery of . . . cable programming . . . between cable systems . . . ." 1992 Cable Act § 19(c)(2)(B). This provision would apply, for example, to a VP offering its product to an affiliated operator upon more favorable terms than to independent operators. Aggrieved cable operators may initiate an adjudicatory proceeding before the Commission, which has authority to impose reasonable prices or conditions of sale and may assess monetary penalties for noncompliance. Id. §§ 19(d) and (e). Section 19 also directs the FCC to adopt regulations prohibiting exclusive distribution contracts between VPs and operators. *fn7" Id. § 19(c)(2)(C).

 Section 3 of the 1992 Act, the "rate regulation" provisions, requires cable operators to provide all subscribers with a basic service tier containing all section 4 and 5 mandatory carriage broadcast stations; all public, educational or governmental stations which must be carried pursuant to the franchise; and all regular non-satellite broadcast stations regularly transmitted by the operators. The FCC and local franchise authorities are empowered to ensure that the rates charged by cable systems subject to rate regulation *fn8" for the basic tier are reasonable, and the FCC is directed to establish a regulatory regime to entertain challenges to the reasonableness of rates charged for all other non-premium channels. *fn9" Section 3 also requires all operators to maintain a uniform rate structure throughout the geographic region in which the operator offers its services. Finally, section 3 prohibits operators from requiring subscribers to purchase any service, other than the basic tier, as a precondition to receiving any other pay-per-view or pay-per-channel service, and the price structure for such channels must be uniform regardless of the quantity of services ordered by a subscriber.

 The operators take issue with each of these provisions arguing, inter alia, that they interfere with their ability to design the packages of services that they would like to offer their subscribers. The programmers object to them on the ground that the provisions make it more difficult for operators to carry the products of certain programmers, and in consequence prevent the programmers from reaching their optimum audience.

 Specifically, to use First Amendment lexicon, the plaintiffs reiterate that the PEG programming and leased access provisions force operators to engage in "speech" they might not otherwise undertake, and favor the speech of PEG programmers and nonaffiliates over that of the operators themselves or other programmers the government deems less worthy. The vertical integration provisions, they say, interfere with their ability to "speak" to whom they like. Restrictions on the programmers' ability to offer special deals and conditions of delivery to certain operators will reduce the operators' incentive to carry them; without the ability to negotiate exclusive contracts or obtain special deals, the operators profess to be unable to create innovative program line-ups to differentiate their products from those of competitors. Finally, the plaintiffs contend that rate regulation burdens the speech of operators directly, and the programmers indirectly, by setting limits on the prices that subscribers can be charged. The Court holds that these provisions all are content-neutral, are thus subject to O'Brien/Ward balancing only, and that they withstand that level of scrutiny.

 The PEG and leased access provisions were enacted to serve a significant regulatory interest, viz., affording speakers with lesser market appeal access to the nation's most pervasive video distribution technology. H.R. Rep. No. 934, 98th Cong., 2d Sess. (1984), reprinted in 1984 U.S.C.C.A.N. at 4667. Enabling a broad range of speakers to reach a television audience that otherwise would never hear them is an appropriate goal and a legitimate exercise of federal legislative power. See Chicago Cable Communications v. Chicago Cable Commission, 879 F.2d 1540, 1549-50 (7th Cir. 1989); Telesat Cablevision, Inc. v. City of Riviera Beach, 773 F. Supp. 383, 412 (S.D. Fla. 1991); cf. Capital Cities Cable, Inc. v. Crisp, 467 U.S. 691, 714, 81 L. Ed. 2d 580, 104 S. Ct. 2694 (1984); United States v. Midwest Video Corp., 406 U.S. 649, 668-70, 32 L. Ed. 2d 390, 92 S. Ct. 1860 (1972) (plurality opinion); see Turner Broadcasting, 819 F. Supp. at 45-46.

 The leased access provisions are likewise content-neutral, and they are designed to serve a similar market regulatory function. The provisions promote fair competition by overcoming the natural tendency of cable operators to enhance the profitability of their affiliated programmers. See S. Rep. No. 92, 102d Cong., 1st Sess. 29-32 (1991); H.R. Rep. No. 934, 98th Cong., 2d Sess. (1984), reprinted in 1984 U.S.C.C.A.N. at 4667-73; see 47 U.S.C. § 532(a) (1988).

 Nor do the PEG and leased access provisions overreach. PEG use is negotiable, and leased access obligations are directly proportional to the number of channels a cable operator has available, never exceeding 15 percent of total capacity. Operators retain discretion over the remainder, and may, of course, utilize them ...


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