Federal Communications Commission v. Midwest Video Corporation – Oral Argument – January 10, 1979

Media for Federal Communications Commission v. Midwest Video Corporation

Audio Transcription for Opinion Announcement – April 02, 1979 in Federal Communications Commission v. Midwest Video Corporation

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Warren E. Burger:

We’ll hear arguments next in Federal Communications Commission against Midwest Video and the consolidated cases.

Mr. Wallace, you may proceed whenever you are ready.

Lawrence G. Wallace:

Mr. Chief Justice and may it please the Court.

This case presents statutory and constitutional challenges under the First and Fifth Amendments to three related sets of rules of the Federal Communications Commission relating to the cable television requiring certain defined cable systems in one rule to have the capacity by 1986 to provide at least 20 channels of service to their subscribers, in another rule to provide access to certain of those channels if demand exists access to third parties and if there is sufficient activated channel capacity and in the third set of rules to have available and make available certain equipment and facilities to those parties for those purposes.

I will summarize briefly the rules and then discuss later pertinent details as they relate to portions of the argument.

The channel capacity rules are really adequately summarizing what I said already that by 1986, 20 channels should be available to their subscribers.

The access rules apply to four categories of third parties who will have access to the extent there is available capacity for their access.

The public, educational authorities, local governments and paying leasors for those systems that were already in operation by June 21, 1976.

There is basically no obligation to bump any established programming other than automated time and weather service, which is a sort of ticker tape kind of informational programming, for systems constructed thereafter or for new capacity that’s added to existing systems there is requirement that at least one channel be available for access by these groups, but to the extent that demand doesn’t require more than one channel it can be a composite channel for access.

The third category of rules the equipment availability rules are basically designed to see to whether the equipment is there so that the people with the access rights will have some way of coming into the studio and having their programming broadcast.

The Court of Appeals treated the rules together rather than separately and struck down all of them under the Act, but also expressed the view quite firmly that the rules would in any event violate the Constitution.

So then in our view if the Court agrees with our contentions that the rules are authorized by the Act, it should go ahead and address the constitutional issues since a remand, the result of a remand will be foreordained in the case and it is — the statutory question should not really be considered in isolation in the constitutional contentions in any event.

Now more than 10 years ago in United States against Southwestern Cable Company, this Court established that Section 2 (a) of the Communications Act does confer jurisdiction on the Commission over cable television.

Potter Stewart:

Just before you go back just a moment, Mr. Wallace, why do you suppose the Court of Appeals addressed the constitutional question if you found that what the Commission did was not authorized by the Act?

Lawrence G. Wallace:

Well, as Judge Webster pointed out in this concurring opinion there was no need to do so but two of the judges choose to do so and the questions were argued to the Court and perhaps it was to make clear what would happen if this Court should disagree with the Court of Appeals on the statutory issue as it did in the last Midwest Video case disagreed with the same Court of Appeals’ interpretation of the Commission’s statutory jurisdiction.

Warren E. Burger:

Do you mean that is a typical alternative ground for decision?

Lawrence G. Wallace:

Well, they refrain from calling it an alternative holding but they made quite clear their view that the rules would violate the First Amendment and suggested strongly that they would violate the Fifth Amendment as well.

They did refrain from stating explicitly it was an alternative holding in fact they stated that their holding was based entirely on the statutory ground.

Potter Stewart:

Isn’t there — did they indicate in your view that their statutory holding was influenced by their constitutional views sometimes you know.

Lawrence G. Wallace:

Yes.

Potter Stewart:

And because of constitutional difficulties one feels impelled of construe a statute to certain way?

Lawrence G. Wallace:

It’s really hard for me to answer that question I don’t think the opinion is all that clear on the extent to which the constitutional view influenced the statutory holding.

I can’t really speak for the Court on that.

In any event the Southwestern case thus established the basic statutory authority on the face of the Act at least so long as the regulations adopted by the Commission are as this Court put it reasonably ancillary to its jurisdiction over broadcasting.

Then almost seven years ago now, in what we refer to as Midwest Video I in the briefs, this Court held that, that statutory authority extends to rules requiring cable systems and to put the holding in somewhat generic terms used by the plurality opinion to rules requiring the systems affirmatively to promote the statutory policies of the Act such as increasing outlets for community expression and providing more programming choices for the public.

Now to a large extent —

William H. Rehnquist:

It is difficult to describe that as a holding, is it not, in view of the fact of the Chief Justice’s concurrence in the result?

Lawrence G. Wallace:

Yes, but there was a judgment of the Court, there was a holding that those rules were valid.

William H. Rehnquist:

But the reasoning for upholding, I mean it cannot really be attributed to the Court?

Lawrence G. Wallace:

Well, I understand, but on the other hand there was no disagreement in any of the opinions with that proposition and this is I think an accurate, generic categorization of the rules that were issued before the Court and it was the Commission’s own description of the rules on the basis for its authority.

Lawrence G. Wallace:

Now I grant that there is no opinion of the Court and we are quite aware of that.

Nonetheless in Midwest Video I, the Court had before it many similar questions to the statutory questions that are now before the Court.

The rules there did have an equipment availability component that really is basically the same as the present equipment availability rule.

It was put there as part of the — and it is referred to explicitly by the Court.

It was part of the origination of the programming requirement and the Court was ruling against the background of the rules that had been involved in the Southwestern Cable Company case in which a plurality of the court against said had been correctly upheld subsequently by several Courts of Appeals namely rules that required certain signal carriage, mandatory access if you want to use that word, mandatory carriage is usually used in that context, of local television programmings by the cable systems.

We are talking the access component in the sense that mandatory carriage is something that’s been familiar since the beginning, since the outset of the Commission’s regulation of cable television and was precisely what was before the Court in Southwestern Cable.

William H. Rehnquist:

Well, you are saying that the mandatory access was necessary to the decision of the Court in Southwest cable?

Lawrence G. Wallace:

No, the Court merely held that the Commission had jurisdiction to promulgate rules on this subject.

It did not uphold the validity of the rules, but subsequent Court of Appeals decisions did and four justices in the plurality opinion in Midwest Video said that those cases were correctly decided.

That was and still, you know that regulation still exists, but that was the beginning of Commission regulation more than ten years ago now.

In 1966 of cable television it was to require that local broadcast programs be carried on the cable and to prohibit duplication of network programming carried by local stations from distant signal stations.

That was that the first thing that the Commission did in this field was to prescribe certain carriage requirements.

Now it wasn’t accessed by the public, it was accessed by broadcasters, but the word access is not inappropriate in this context.

Moreover it was quite clear to this Court in Midwest Video I that the origination requirement and the equipment availability requirements before the Court at that time were tied in with rules than being developed and which had been adopted by the Commission prior to this Court’s decision in Midwest Video that would grant rights of access to this equipment.

And they also adopted channel capacity rules along with those prior to this Court’s decision.

All of that was made quite clear to the Court and as a matter of fact the discussions during the argument in that case were of that kind of programming that was foreseen and there is several references in the plurality opinion backgrounding these rules which make this quite clear on page 653 of Volume 406 US in footnote 5, the plurality opinion quotes the Commission as saying one of the purposes of the origination requirement is to ensure that cable casting equipment will be available for use by others originating on common carrier channels.

On the next page, page 654 there is also a quotation with approval from tentative conclusions of earlier notice of rule making that these the proposed rules also reflect our view, this is quoting the Commission that a multi-purpose CATV operation combining carriage of broadcast signals with program origination and common carrier services might best exploit cable channel capacity to the advantage of the public and promote the basic purpose for which this Commission was created.

William H. Rehnquist:

Mr. Wallace, did you think in this case these rules you are describing that the Commission is imposed on cable telecasters would be permissible for it to impose on broadcasters?

Lawrence G. Wallace:

Well, the Court suggested in The Democratic National Committee case, CBS against The Democratic National Committee that narrowly defined access requirements might be valid in broadcasting.

There is no practical way that these rules could be imposed on broadcasting because of the different physical constrains that are involved.

A cable caster has simultaneous cables running to its subscribers and can do his own programming on the great majority of them while still complying with these rules whereas the broadcaster only has the one frequency assigned to him into the extent that he is required to permit anyone else to have the access to it, he relinquishes his opportunity to broadcast it all —

William H. Rehnquist:

Why could not the Commission just say you broadcast for ten hours a day and let other people broadcast it for four hours a day?

Lawrence G. Wallace:

Well, that would be an analogous requirement, but it wouldn’t be the same requirement.

You are asking me if they could impose the same requirement and my answer was that it couldn’t practically be done, it couldn’t be done as a practical matter.

It would have to be a requirement adapted to the special physical situation of broadcasters and the Commission has been concerned about the fact that it requires interruption of the broadcaster’s right to be on the air at all if such a requirement is imposed.

In contrast what was adopted here which was basically a requirement that unused capacity be put to this kind of community use and that in rebuilding that would normally take place during the next ten-year period, a new building sufficient capacity to be built-in so that there would be basically this kind of access capacity.

Granted a cable television operator might argue that he would prefer to put it to some different use at sometime in the future but we are not talking about disruption of established programming services or established pay services.

We are talking about using this technology for new additional opportunities.

John Paul Stevens:

But is it not correct that the rule applies even if there is no unused capacity, even if there was a full that a licensee —

Lawrence G. Wallace:

The rule applies but with the qualifications that I mentioned that no established programming is to be bumped under this rule, no established programming in effect on June 21, 1976 other than automated time and weather programming.

John Paul Stevens:

Suppose next year or two, they do get enough period that they would like to put on, they are restricted as to just one thing —

Lawrence G. Wallace:

That’s right unless they want to build in additional capacity.

They could build in 60 or 80 channels if they wanted to and provide converters to their subscribers and the rule would not require any more of it to be devoted to access than if they have a 20 channel system.

John Paul Stevens:

Following upon Mr. Justice Rehnquist’s question about other licensee’s isn’t there a similarity between these rules and the prime time rules that say only three out of the four hours of prime time can be used for network television?

Lawrence G. Wallace:

Well there is a similarity in the constitutional argument being made here.

There are familiar rules, the prime time rule is a good example in which licensees and those authorized to use the broadcast signal are required to adjust the categories of programming that they can carry and in some cases to provide access broadcasters for example there is the personal attack rule, they have to provide access for response to personal attacks.

There is also a statutory requirement that candidates for political office be allowed broadcast time.

So that the generic category of regulation is a familiar one yes and in many respects the category of regulation which was upheld unanimously by the Court in the Red Lion case.

William H. Rehnquist:

Do you think congress could impose these rules on newspapers?

Lawrence G. Wallace:

Well I think that’s very dubious theory.

There is a way of arguing a distinction of the Miami Herald against Tornillo case because the obligations here are unrelated to the content of anything previously published which was not true in the Tornillo case.

There the obligations came into effect only because of what the newspaper had published and the Court expressed solicitude for the chilling effect on such discussion by the newspaper that the rules might entail.

Warren E. Burger:

Well, isn’t that something more fundamental namely, broadcasting and its related elements are regulated.

Newspapers cannot be.

Lawrence G. Wallace:

Well of course I think basically that’s the difference.

If one might move to the First Amendment question here which is really what’s been raised I think the whole contention of the respondent here about journalistic discretion is really quite overdrawn when you look at the kind of enterprise we are talking about here.

Basically it’s an enterprise that is carrying and retransmitting the product of others without even the opportunity for the kind of editing that a newspaper can do when it uses wire-service stories.

It’s just retransmitted as a package, that’s their basic enterprise of the dissenting opinion in Midwest Video I described their enterprise as having no more content over what is transmitted on the wire than does a telephone company and —

John Paul Stevens:

But is that quite right, don’t they have the judgment as to which materials will be selected and which sources of material will be used?

Lawrence G. Wallace:

Of course they do have some —

John Paul Stevens:

It’s just a matter of editorial judgment.

Lawrence G. Wallace:

Of course there is editorial judgment and we do not contend that they do not have First Amendment protection.

John Paul Stevens:

So the analogy of the telephone company you really did not realize —

Lawrence G. Wallace:

It wasn’t my analogy and we don’t rely on it, [Attempt to Laughter] no but there are similarities to the telephone company and similarities to broadcasters, similarities to the print medias, similarities to common carriers and to other public utility companies all of which we argue in our brief have to be taken into account in looking at the first amendment contention and in addition to this basic point about the nature of the enterprise the familiar signal carriage requirements that I talked about before show that there has never been in this field, a promise of unfettered editorial judgment about what can or must be carried among the programming offered, there is —

John Paul Stevens:

Mr. Wallace, could you clear up one detail for me?

If the public access channel is not sufficient to take care of the domain for public access materials, how does the cable television company decide which applicant to satisfy, is there any regulation on that or is it first come first serve, do they exercise editorial judgment?

Lawrence G. Wallace:

The regulation says that the cable company should adopt procedures, rules for itself to show how it will handle request on first come first serve basis, so this anticipates that people don’t have to be given the particular time slot that they request that scheduling can be done to use the capacity that blackout time can be used on other channels when time is available and so forth and if the domain gets large enough and there is available a second channels and that two should be made available up to four channels if they are available, but the experience so far has been that a composite channel pretty much is able to cover it.

There are as the Commission indicated, quite explicitly in these rules, the details to the worked out refinements to be made.

This is a very dynamic field.

The Commission has been giving its sustained attention now for more than 10 years has changed direction considerably since the last time we were in this Court with respect to cable rules.

Lawrence G. Wallace:

It gave up the origination requirement in response to commentaries and experience.

It concluded that, that would be unduly burdensome on systems that did not want to themselves undertake to originate programming and is really using the access requirement largely as a substitution to serve the same kinds of community purposes and needs that the origination requirement was designed for and its cutback a great deal on the timetable for the channel capacity, your requirements and on the extent to which channels have to be made available for access.

The basic differences between the rules that existed in 1972 at the time of Midwest I, not all of which were before the Court, and the present rules is that the burdens on the cable systems have been alleviated.

The changes basically were designed to alleviate burdens that were imposed and the main burden that was imposed was the origination rule and it was the burden of having to become a programmer and to produce your own programming which these people had not necessarily undertaken to do in setting up what basically started as community antennae television systems that the four dissenting Justices in Midwest I found objectionable in that case and found to extend beyond the Commissions proper regulatory authority to commandeer someone who had undertaken merely to carry the products of others into producing his own products and transmitting them.

And the Commission’s new rules really need that objection by coming back for those who choose not to get into the business of producing their own programs just to stay with their familiar business of carrying the products of others.

Byron R. White:

Mr. Wallace, could I ask you, are there – does the Commission have rules of perspective to the acquisition or ownership of cable systems by broadcasters or by the networks?

Lawrence G. Wallace:

I’m not aware of them if they do, but I have not heard that they do but I can’t inform you of their content.

I think I’ll reserve the balance of my time if I may.

Warren E. Burger:

Mr. Shapiro.

Byron R. White:

Mr. Shapiro, could you at some point answer that question I just asked?

George H. Shapiro:

I certainly will Your Honor.

Byron R. White:

Thank you.

George H. Shapiro:

Mr. Chief Justice and may it please the Court.

Perhaps I should begin by asking answering Mr. Justice White’s question.

The FCC does have rules which prohibits broadcast stations from owning cable television systems within the service areas of the broadcast station.

The great bee contour is a line, imaginary line that extends about 60.

Byron R. White:

But not in other markets?

George H. Shapiro:

Not in other markets.

In light of before getting to the legal arguments that I would like to make I would like to take a few minutes to discuss some of the specifics of the rules and their impact on cable systems because Midwest Video’s perception of how those rules affect it is quite different from that described by Mr. Wallace.

It is true that commencing on the effective date of the rules cable systems are required to dedicate one full channel to use by the public for educational governmental public and leased-access users.

This requirement alone involves generally one-twelfth to one-twentieth of the assets of the company and we do not regard that as an insubstantial requirement, but the rules actually require much more than that.

The rules themselves specify that four separate dedicated access channels will be provided.

It’s under a qualification to the rule which indicates that if there is not immediate demand for all four of those channels then cable systems may until the demand develops combine different types of access programming on one channel.

Now what type of demand requires the activation of another channel?

It’s a very minimal type of demand.

The rule specifies that cable system must activate on additional access channel if existing channels are in use during 80% of the weekdays Monday through Friday for 80% of the time during any consecutive three hour stretch for six weeks, six consecutive weeks.

If you apply a little mathematics to that what it means is that less than two and a half hours of access used per day on a cable channel four days a week for six weeks requires the activation on additional access channel if the system has the activated channel capacity.

So while there are demand usage requirements all of the momentum of the rules is to encourage the implementation of more and more channels as only minimal usage requirements are met.

And those requirements don’t end when four channels are activated.

They continue ad infinitum as I said before up to the activated channel capacity of the cable system.

William H. Rehnquist:

Mr. Shapiro perhaps my colleagues don’t cheer my ignorance of cable television, but what is involved in activating a new channel for the cable TV operator?

George H. Shapiro:

Your Honor, cable system channels are — a television set is only able to receive normally 12 channels of VHF transmission.

In order to add new channels your cable system has to — most cable systems have essentially twelve channels, at least twelve channels.

To add additional channels the cable system has to do one or two things, he might be able to put in a converter which will take signals coming down the cable at frequencies the television set will not receive and convert them to frequencies the set will receive.

This will give him extra channels.

He may have to replace his old cable which may not be able to carry more than 12 channels, other cable with larger capacity or he may string a second cable but basically channels are added in incremental blocks.

Initially a system will have 12 channels.

The next incremental block tends to run another eight channels or so up to 20 and so forth.

The access rules also require cable systems to adopt their own rules requiring that the use of their channels be provided on a first come non-discriminatory basis and prohibiting the cable system from exercising any program content control over the channels.

John Paul Stevens:

Mr. Shapiro, perhaps I shouldn’t ask these kind of questions like Mr. Justice Rehnquist, does this converter that would increase capacity from 12 to 20 does that only goes on the sets or that goes on the cable system?

George H. Shapiro:

Normally it goes on the set Your Honor.

It’s a little box that fits on top of the set and there is evidence in the record it costs about —

John Paul Stevens:

But does the system itself, how does system itself get capacity increased from 12 to 20?

George H. Shapiro:

Well this depends on when the system — modern systems have the capacity to deliver 20 or more channels if converters exist.

John Paul Stevens:

I see.

George H. Shapiro:

The purchase – there is evidence in the record on the cost of converters.

I believe if they give us something like 40 dollars per converter.

That only takes cable systems up to a total of about somewhere between 20 and 30 channels.

It’s not the unlimited 60 or 80 type channels that you see in some descriptions of cable.

The access rule is also required cable systems to provide one channel for public use without any charge and to provide time for educational and local government use for period of five years without any charge.

No commercials can be presented on the public local governmental or excuse me the public, governmental or educational access channels.

Cable systems must install studio and origination equipment for the presentation of public access programs.

No charge can be made for the use of the studio or an equipment for public access programs not exceeding five minutes in length and charges for longer public access programs must be reasonable and consistent with the goal of affording a low cost means of television access.

Moreover if public access users produce their own programs, cable systems cannot charge for the use of the playback equipment necessary, but offer the time of the system personnel required to operate the equipment even if the access user wishes to run the programs outside of the normal business hours of the cable system.

New cable systems must be installed with a minimum channel capacity of twenty channels and the technical capability for non-voice, two-way return communications.

Existing systems have until 1986 to meet these requirements.

Now these requirements have a severe fact — impact on the ability of cable systems to select and present the type of program — to present programming to their subscribers.

There is an abundance of programming available to cable systems to fill their channels.

This programming has been described in some detail at pages 10 through 18 of Midwest Video’s brief.

Warren E. Burger:

Mr. Shapiro, is there any barrier that you can suggest if the Commission issued traditional broadcast license to a TV or a radio, not a cable TV or broadcast license.

George H. Shapiro:

Yes, Your Honor.

Warren E. Burger:

On condition that they dedicate 25% of the operating time to public educational programs selected by some described method, any barriers of that?

George H. Shapiro:

Well, Your Honor I thought that the — this Court’s decision in the CBS versus Democratic National Committee was a barrier to that.

I thought that Section 3 (h) of the Communications Act —

Warren E. Burger:

Didn’t that go to the specific content rather than the allocation?

After all the air space is owned by the public, couldn’t the Commission condition it generally that way?

George H. Shapiro:

Let me be sure I understand your question, Your Honor.

Are you asking whether the FCC can require a broadcast station to provide a certain category of programming during a certain percentage of its time without dictating the –-

Warren E. Burger:

The content.

George H. Shapiro:

Without — and leaving the content of that programming to the broadcast station.

I believe that’s a very close question.

I think —

Warren E. Burger:

Well, let’s back it up.

Could Congress, could Congress authorize the Commission to do that.

Let’s assume the Commission doesn’t have the power now, could Congress authorize that?

George H. Shapiro:

I believe that they could.

I was describing that programming choices that are available to cable operators to fill their channels, aside from broadcast signals which they require to carry, there is available to cable systems the programming of independent educational and specialty television stations, pay television type programming consisting mainly of movies and sports events, religious programmings —

William J. Brennan, Jr.:

Is that the sort of thing we get on and tuck it from Atlanta Georgia.

George H. Shapiro:

What you get on them tuck it from Atlanta Georgia Your Honor probably an independent signal of a television station which is distributed by satellite.

There are other types of sports programming.

I have described in the brief, sports package, events from Madison Square Garden which is not the retransmission.

William J. Brennan, Jr.:

Satellite.

George H. Shapiro:

No, it’s distributed by satellite Your Honor but it’s not the retransmission of a broadcast signal.

It’s programming sold directly to cable systems without going and not simply carriage of a broadcast.

William J. Brennan, Jr.:

Well, It was sold by a common carrier I gather not by the —

George H. Shapiro:

No Your Honor, it’s sold by a joint venture of Madison Square Garden and a cable company which distributes the programming.

Byron R. White:

Well, is that a broadcaster then?

George H. Shapiro:

No, it is not a broadcaster.

Byron R. White:

Unregulated then?

George H. Shapiro:

Well, Your Honor, it’s originated programming.

George H. Shapiro:

There are no regulations that are applicable to it.

This is essential to the point which I am trying to make which is that there is today a considerable amount of programming distributed by cable system, two cable systems, created four cable systems which cable systems may choose or not choose may choose to carry or not to carry —

Byron R. White:

That they don’t originate, neither does a broadcaster?

They just hire —

George H. Shapiro:

The cable system does not originate it in the same sense that a broadcast station which carries a network program doesn’t originate.

Byron R. White:

In other words, it doesn’t prepare it.

George H. Shapiro:

It doesn’t prepare it, that’s correct, Your Honor.

And there are numerous types of programming of this kind that the access rules impair the ability of the cable operator to pick and choose between.

In fact the question arose when Mr. Wallace was speaking about whether cable systems ever edit any of these type of programming.

We’ve cited some language in our brief from the FCC’s reporting order adopting Equal Employment Opportunity Rules where the FCC cites some examples of cable operators specifically doing some editing of the programming that’s distributed to them and which they receive by satellite.

I would like also to make it clear Mr. Wallace has indicated that there would be no bumping of programming if a cable system was presenting a certain type of programming and an access demand arose and there was no vacant channel for access, he is indicated there would no bumping.

I believe that’s true for programs that were not carried prior to, or that were being carried prior to the effective date of these rules in 1976.

Much of the programming which I have been describing and which I described in our brief has become available to cable systems since 1976 and what the Commission says is that its our intention that established cable cast services provided by cable system operators will not be automatically displaced, but if there are conflicts between channels users we are prepared to consider each such situation individually on its merits.

This means that a cable system whose channels are full and the access channel demand arises has go to the FCC and the FCC then has to consider whether it is — whether it would be the Madison Square Garden programming or religious programming delivered by satellite or whether it would be movies, the FCC has — as a super program director and make a judgment about whether this access use is a more valuable use than the use that the cable operator has been making of the channel.

Well I think that this has given sufficient background as to some of the reasons why Midwest Video and other companies in the industry are concerned about these rules.

I would like to pass on for the moment now to the jurisdictional argument and why we think that these rules clearly do exceed the Commission’s jurisdiction.

I would like to also note that a question was raised earlier in the argument as to whether why the Eighth Circuit discussed constitutional issues and whether there was in the appendix on page 65 the Court specifically states that the First Amendment overturns another constitutional considerations present in the 1976 report are such as to reinforce our conclusions on the jurisdictional issue.

I think it is traditional that Courts do at least, it’s not unusual for Courts to look at constitutional issues because it may influence their views on the jurisdiction so that they may not be required to reach a constitutional decision.

By turning to the jurisdiction, this Court in both Midwest I and Southwestern held that the FCC has authority under Section 2 (a) of the Communications Act to regulate cable systems, no question about that.

It’s not an issue, but Section 2 (a) in and off itself does not specify any objectives for which the FCC’s regular authority regulatory authority can be exercised.

2 (a) alone without reference to something in the Act, we believe would be an unlawful delegation like Congress to the FCC to legislate as it pleases and the rules before this Court in Midwest I the plurality opinion upheld the rules because it looked carefully at the statutory provisions and the goals which the Commission was attempting — indicated it was seeking to implement in adopting the mandatory origination rules and it concluded that the mandatory origination rule met those goals.

William H. Rehnquist:

Which goals?

George H. Shapiro:

Well the Commission — they were the goals of increasing the outlets of community expression and providing diversified programming.

Byron R. White:

So it was connected with the broadcast?

George H. Shapiro:

It was connected to the Commissions broadcast regulatory goals.

It was in the broadcast goals of the Act that the Commission found the limits which it used to test the authority of the FCC.

William H. Rehnquist:

Are those goals specified anywhere in the Act?

George H. Shapiro:

Well, the Court found them in Section 1, it found them in Section 303 (g) which authorizes the Commission to take action to further the larger and more effective use of radio in the public interest and it found them in Section 307 (b) which authorizes the Commission to allocate radio facilities on a fair efficient and equitable basis.

William H. Rehnquist:

So you don’t read the plurality in Midwest I as authorizing the Commission to simply set goals quite apart from the statutory framework.

George H. Shapiro:

I think its just the contrary Your Honor.

George H. Shapiro:

I think it’s even the plurality opinion is specifically tied to testing the FCC’s action against goals statutory goals.

That was a very close decision.

There was not a majority.

It was only a plurality.

Byron R. White:

But there was a judgment?

George H. Shapiro:

There was a judgment.

We think that rules now before this Court go far beyond anything that was contemplated in Midwest I.

We think so for two reasons.

First of all the rules in Midwest I were not contrary to any established goal of broadcast regulation.

The Court found that they met specified goals.

Here we find that we believe that this Court’s opinion in CBS versus Democratic National Committee established the fact that preservation of the goals of private journalism and editorial control are fundamental to broadcast regulation.

The Court pointed out that Congress specifically dealt with and firmly rejected the argument that broadcast facility should be opened on a non-selective basis to all persons wishing to talk about public issues.

In responding to arguments that the First Amendment required individual access to broadcast facilities, the Court referred to the erosion of journalistic discretion and the transfer of control over treatment of public issues for licensees who are accountable for broadcast performance.

The government’s principle answer to this is that the access goals — is that we are arguing about mutually inconsistent goals and that while it concedes that this goal of editorial control and discretion may exist, the Commission has selected other goals and its within the Commission’s discretion to select and choose between goals.

We think that the answer to this is that in the very decisions which were reviewed by this Court in the CBS case in dealing with Section 3 (h) and its relationship to the goal of editorial judgment and control by broadcasters, the FCC itself did not treat this goal as one to be placed in the balance with other perhaps conflicting goals.

The FCC’s opinion treated Section 3 (h) as a statutory prescription and the FCC held that broadcasters were not required to sell time to individuals or groups to comment on public issues.

It was this determination of the FCC that the Court upheld in the CBS case.

So if that’s the FCC’s policy as opposed — as applied to broadcasters and it’s a statutory policy that the FCC regards as paramount, we have difficulty seeing how if the Commission must look to broadcast regulatory goals for its authority to regulate cable television, how it can jettison that goal as applied to cable systems.

We think this Court’s decision in the CBS versus DNC case is also quite consistent with that approach, but there is another reason why we think that these rules far exceed the FCC’s jurisdiction.

Section 3 (h) of the Act specifies that a person engaged in radio broadcasting shall not insofar as such person is engaged, redeem common carrier.

In Midwest Video I, the FCC’s actions were not contrary to any specified means of regulation in the Act and therefore the subject of regulatory means was not discussed but Section 3 (h) prohibits the FCC from utilizing common carrier means to achieve broadcast goals.

We think that any other conclusion and for that reason we don’t think that we think that the FCC is also limited in that it means that it can apply to cable systems, perhaps they need not be the exact same means but to permit the FCC will apply a means specifically withheld for that from them in the broadcasting area gives as we believe is contrary to the provisions of the Act and we think that there are very good reasons for taking this position.

Any other conclusion would blend two types of regulations that are mutually inconsistent and they would leave the FCC’s exercise of jurisdiction over cable systems subject to no meaningful standards.

Some examples, we have already discussed the fact that editorial judgment and control are basic to broadcast regulation, but there the antithesis of common carrier regulation, common carrier regulation is based upon total lack of control by the owner of the facilities.

In order to ensure that broadcasters do not practice racial discrimination in the programming judgments and in the related ascertainment of community needs to be served by their programming the FCC can adopt equal employment opportunity rules applicable to broadcasters.

We think that this Court’s decision in NAACP versus Federal Power Commission makes it clear that most regulatory statutes governing common carrier operations will not support the adoption of Equal Employment Opportunity Rules.

Government is generally forbidden from imposing common carrier or public utility obligations on a business unless it permits the business to earn a fair rate of return and the hallmark of common carrier regulation is generally detailed regulation.

Broadcasting on the other hand is a feel to free competition without rate regulation.

The FCC does not regulate most cable television rates and it forbids any government entity from regulating rates for pay TV services the cable systems provide.

Warren E. Burger:

Do you think Congress has given them the authority to do it if they decided that was in the public entity?

George H. Shapiro:

The Congress has given the FCC authority to —

Warren E. Burger:

How is it given?

George H. Shapiro:

To do what to regulate or —

Warren E. Burger:

Regulate.

George H. Shapiro:

Cable systems has common carriers?

Warren E. Burger:

No, to regulate the rates just to that extent?

George H. Shapiro:

Of broadcasters, Your Honor or cable systems?

Warren E. Burger:

Cable.

George H. Shapiro:

To the extent that — the position thus far Your Honor the Court’s recognition of the jurisdiction of the FCC is based upon — has been based on broadcast regulatory authority.

Broadcasting is a feel to free competition the FCC doesn’t regulate rates in the broadcasting.

Warren E. Burger:

Could it?

George H. Shapiro:

Huh?

Warren E. Burger:

Could it, does it have the legal —

George H. Shapiro:

I don’t think it could under the existing statute.

Warren E. Burger:

But you I take it from that you concede that the Congress could confer that power on the Commission?

George H. Shapiro:

To regulate broadcasting rates?

Your Honor, it would raise the question of whether broadcasting was the type of business affected with the public interest that was appropriate for a form of utility regulation.

For purposes of our jurisdictional argument I think that’s right but I can’t — it is not a subject that I have looked at closely.

Alright there are other differences between common carrier and broadcast regulation common — the Court of Appeals referred to another one in terms of the need, the FCC requires a strong showing of need for common carrier facilities before it builds them, before it require — before it permits parties to build the facilities.

If the FCC can choose one day from its broadcast authority and another day from common carrier utilize common carrier means which is designed to achieve completely different aims and completely different goals the next day the discretion that’s left in the FCC to pick from two contradictory schemes of regulation would leave its exercise of jurisdiction over cable television virtually without limit.

So we — for those reasons we believe that the rules — the Court below should be affirmed on the matter of the FCC’s jurisdiction.

I see that I only have a few minutes and I would like to speak briefly about the First Amendment, obviously the subject to that editorial control and the function of editors.

As I have discussed it in the jurisdictional context it’s equally relevant in the First Amendment context.

This Court in the Miami Herald versus Tornillo quoted constitution’s First Amendment status to the function of editors and it’s extremely important.

William H. Rehnquist:

Well, the First Amendment gave it rather than this Court?

George H. Shapiro:

Excuse me Your Honor I didn’t her that.

William H. Rehnquist:

I would have thought the First and Fourteenth Amendments had given it to them rather than this Court?

George H. Shapiro:

Perhaps I should say recognized rather than gave.

We believe that cable systems for purposes of First Amendment analysis are considerably more like newspapers than like broadcast stations.

This is a view which not only the Eighth Circuit below has taken but the Home Box Office, the DC circuit in the Home Box Office took situation took a similar position.

George H. Shapiro:

There are of course differences between a cable system and a newspaper, but in many respects they are the same.

Some one must subscribe to the services in order to get — to receive that services.

You must make an affirmative decision and pay someone.

Both offer multiple services.

They have a basic type of service that people usually buy them for but they seek fiercely additional subscribers based on other services.

With the newspaper its basic service is news, but it gets readers because of its sports page and its comic strips and its society page.

With the cable system, its basic service is retransmission of television signals, but it offers paid movies and it offers religion and it offers sports and it will soon be offering various types of public affairs programming.

And the function of a cable system is very analogous in terms of First Amendment analysis, distribution of information to the public to that of a newspaper.

Byron R. White:

Would you think then what you are saying now you don’t think is inconsistent with what you said — the way you answered the Chief Justice with respect to a broadcaster being required to allocate 25% of its broadcast time to public service?

George H. Shapiro:

Well Your Honor —

Byron R. White:

Because there is a difference between broadcasters and cables and newspapers, I guess?

George H. Shapiro:

Yes there is the different broad — different regulation is always been applicable to broadcasters than to other media.

Byron R. White:

Because of spectrum limitations?

George H. Shapiro:

Because primarily of spectrum limitation, there have been other types of differences in the —

William J. Brennan, Jr.:

And you suggest Mr. Shapiro, the spectrum limitations do not apply to cable business?

George H. Shapiro:

Spectrum limitations do not apply to cable, that is correct.

Warren E. Burger:

What public resource does cable television use?

George H. Shapiro:

To the extent that it uses any Your Honor, it uses its rights of way to the string cables over public easements, streets, highways.

William H. Rehnquist:

When you say public easements, do you mean the easements own by the federal government?

George H. Shapiro:

No, normally these are easements owned by states or municipalities.

Byron R. White:

Easement is over property?

George H. Shapiro:

Easement is over property.

Byron R. White:

Or under?

George H. Shapiro:

Or under.

Byron R. White:

But the limitations on them are more on being able to get them more economic than anything else?

George H. Shapiro:

That is precisely our point Your Honor and in the Miami Herald versus Tornillo, this Court held that economic restrains did not —

John Paul Stevens:

Is it not true Mr. Shapiro that it as a fact of the matter, any one local market is apt to be served by only one cable system because of these problems of physical installation and the like?

George H. Shapiro:

Your Honor, that is true in by far the bulk of the instances, just as it is true that there is only one newspaper in by far the bulk of the markets.

There are some with two, Midwest Video happens to operate in two communities where there are two.

It is not the rule.

George H. Shapiro:

It’s very small percentage of the cases, but it does happen.

My time is expired in it.

Thank you.

Warren E. Burger:

Mr. Wallace, do you have anything further?

Lawrence G. Wallace:

Yes Mr. Chief Justice.

These rules apply only to cable systems that are using a public resource namely television broadcast signals.

On their face, the rules start off —

William H. Rehnquist:

Why do you call that as a public resource?

Lawrence G. Wallace:

Well, that they have been treated as such in the history of regulation under the Communications Act.

Even if one would quarrel with the terminology, the factual point I want to make is that the rules apply only to cable systems which retransmit television broadcast signals so that basically what the Chief Justice had to say in his concurring opinion in Midwest Video I applies when he said, it has been elaborated more by himself in prior opinions and by others, but he said the essence of the matter is that when they, the cable systems interrupt the signal, it is a broadcast signal and put it to their own use for profit.

They take on burdens, one of which is regulation by the Commission to serve the public interest goals that are specified in the Communications Act and that are the very same goals that were involved in the rules that were upheld by the Court’s judgment in Midwest I.

There is no difference in the goals being served by the rules.

There are substitute for those rules.

Yes?

John Paul Stevens:

Does the government take the position that there was power to promulgate these rules, if they were not limited to systems that retransmitted television stations?

Lawrence G. Wallace:

Well, I think there would be because even in the instances of other kinds of programming that Mr. Shapiro referred to, programming beamed in from satellites, those are beamed on microwave transmissions that are regulated under Title II of the Communications Act.

There is a use of signals there.

It’s not signals from the television broadcast spectrum, but they are signals from the public airwaves that are regulated by the Federal Communications Commission.

We are not dealing with the medium that is divorced in important aspects of its activities from the radio spectrum.

Now, I would like to say a word about a Section 3 (h) which appears in full in the appendix to the Commission’s petition on page 210.

It is Section 153 (h) of Title 47 and you will notice that all that is there, when you read it in context, is the definition Section of the Act defining who is a common carrier and it’s by way of a caveat that just because someone engages in radio broadcasting it doesn’t mean that he is a common carrier subject to all of the filing regulations and dedicating all of his facilities to common carriage in the rest of it that otherwise would follow from this definition, even if he did allow some others to use his facilities.

Now to the extent that this expresses a policy that the Commission is to follow and that means that it utilizes in conducting its other regulatory activities, it certainly is far from an absolute prohibition.

It is merely something to be taken into account along with other policies expressed in the Act and it is entirely consistent with the suggestion made in this Court’s opinion in CBS against Democratic National Committee that limited kinds of access obligations are consistent with the Communications Act and might be imposed on broadcasting if they were carefully drawn and concluded to be in the public interest by the Commission.

Byron R. White:

(Inaudible)

Lawrence G. Wallace:

That is an example and certainly there is no further limitation on cable television which is not even referred to in this Section 153 (h).

Now, finally I would like to say that Congress has been very aware of the Commission’s activities in this area in recent years.

As I say the Commission has been making a ten-year sustained effort not only as this reported regularly to Congress in annual reports and appropriations, hearings and the likes, but there has been recent legislative activity in Congress which shows a continuing awareness of it.

We have cited on page 34 of our brief in a footnote, a recent public law which specifically refers to cable operators those over whom the Commission has continuing jurisdiction and the law actually says that the forfeiture penalties of the Act to be applied not only for failure to comply with licenses as we quote there but also for failure to comply with the rules and the Senate committee report which is report number 95-580 of the 95th Congress first session refers to this Court’s decisions in Southwestern Cable and Midwest 1, so that the admonitions of the Chief Justice’s concurring opinion that Congress has been relying and keeping a watchful eye on the Commission’s activities in this field and can be counted on step in if it disagrees with what the Commission is doing in its responses to the changing dynamics of this industry and as it gains experience in this filed are even more pertinent here after seven more years of experience and adjustment by the Commission.

William H. Rehnquist:

Mr. Wallace, you spoke quite glowingly on two occasions in your response of the Chief Justice’s concurrence in Midwest Video.

In his opinion in Columbia Broadcasting versus Democratic Committee at page 107 of 412, he refers to the fact that in the Act of 1934, Congress rejected a proposal that would have imposed a limited obligation on broadcasters to turn over their microphones to persons wishing to speak out on certain public issues.

William H. Rehnquist:

If that cannot be required of broadcast, do you think it can nonetheless be required of cable broadcasters by the Commission?

Lawrence G. Wallace:

Well, I do not concede that it cannot be required of broadcasters because the very same opinion points out that limited access rules might be properly required of broadcasters notwithstanding that can be drawn from failure of Congress to enact an exclusive requirement, Congress nevertheless gave the Commission authority to further public interest goals.

The Congress specified in ways that should seem appropriate as experience with the industry develops and as needs become apparent that Congress was not at that point willing to anticipate.

I do not think that anymore than that opinion internally indicates that the mere facts of that provision was not adopted at the outset meant that the Commission is without authority because the opinion says the contrary.

Warren E. Burger:

Thank you gentlemen.

The case submitted.