United States v. Midwest Video Corporation

PETITIONER:United States
RESPONDENT:Midwest Video Corporation
LOCATION:Christian County, Kentucky

DOCKET NO.: 71-506
DECIDED BY: Burger Court (1972-1975)
LOWER COURT: United States Court of Appeals for the Eighth Circuit

CITATION: 406 US 649 (1972)
ARGUED: Apr 19, 1972
DECIDED: Jun 07, 1972

ADVOCATES:
Harry M. Plotkin – for respondent
Lawrence G. Wallace – argued the cause for the United States et al

Facts of the case

Question

Audio Transcription for Oral Argument – April 19, 1972 in United States v. Midwest Video Corporation

Warren E. Burger:

We will hear arguments next in number 71-506 United States against Midwest Video Corporation.

Mr. Wallace, you may proceed whenever you’re ready.

Mr. Wallace.

Lawrence G. Wallace:

Mr. Chief Justice, and may it please the court.

In this case, upon the challenge of the respondent, which is an operator of cable television systems in Missouri, New Mexico and Texas, the Court Of Appeals for the Eighth Circuit held invalid, a rule of the federal communications commission, which provides that a cable television system having 3,500 or more subscribers may not in the absence of waiver of the rule by the commission, which is not stated in the rule but it had become clear in subsequent reports, may not distribute the signals of television broadcast stations unless it “also operates to a significant extent as a local outlet by cablecasting” and by having available “facilities for local production and presentation of programs, other than automated services”.

The cablecasting simply means the providing of programming on the system, without the use of broadcast signals.

Most cable television service does originate as broadcast programming of the system that brings in through its antennas.

Cablecasting would be programming that it provides itself, rather than from broadcast services.

The background of the rule is this.

In June of 1968, this Court in the South Western Cable Company decision in 392 US upheld the FCC’s authority to stay cable transmission of distant broadcast signals into a community pending a hearing.

The situation there involving the 100 largest television markets.

The court held in that case that cable television systems engage in interstate communication by wire or radio within the meaning of Section 2(a) of the Communications Act and that the systems are therefore subject to the commission’s regulatory jurisdiction at least to the extent, that the commission’s regulation is reasonably ancillary in the words of the court to the effect of performance of the commission’s various responsibilities for the regulation of television broadcasting.

With uncertainties about the commission’s jurisdiction in regulatory authority over cable television thus dispelled at least to this extent, which I will argue as basically all we need here.

The commission has undertaken a major effort to integrate the rapidly burgeoning cable systems into the national communication systems in ways that will be consistent with and in furtherance of the public interest policy objectives of the Communications Act.

Since the decision in South Western, the commission has so far devoted more than three years of intensive study to cable television.

In a series of rulemaking proceedings, which began in December of 1968 with the notice of rulemaking, reprinted in the appendix, which resolved and the rule is at issue here.

Byron R. White:

That notice announced that the commission would explore “how best to obtain consistent with the public interest standard of the Communications Act, the full benefits of developing communications technology for the public, with particular immediate reference to CATV technology and potential services.”

Well, I think there is nothing expressed in the Act that says that a cablecasting as such is subject to the commission’s regulation.

Let’s assume which, is true that a cablecaster carried no broadcast signals, he just originated programs.

Is there something in the Act?

Lawrence G. Wallace:

There is nothing in the Act on that subject.

Byron R. White:

It had to be a common carrier by wire to be subject I take it.

Lawrence G. Wallace:

Well, we needn’t reach that issue that there is nothing in the Act on that subject, it would still be communication by wire, there might be interstate aspects to it.

Byron R. White:

Commission does have jurisdiction over interstate communications by wire?

Lawrence G. Wallace:

Yes, it does.

Byron R. White:

Are they common carriers?

Lawrence G. Wallace:

Well under Southwestern, we don’t think that that’s limited to common carriers but this case no more in a Southwestern requires the court to reach that issue.

Byron R. White:

But if there was some real statutory authority, obvious statutory authority over just wired communications, we wouldn’t have had this argument.

Lawrence G. Wallace:

Well, presumably, the Court of Appeals would have decided the case differently.

I agree, Your Honor, but I —

Byron R. White:

Well but the commission would have decided it differently.

Lawrence G. Wallace:

Undoubtedly.

If the Act as you know, was enacted in 1934 and has not been amended on this subject.

The commission is proceeding as best it can.

Warren E. Burger:

Has there been any amendment in this area since cable television emerged as a real —

Lawrence G. Wallace:

Not at all, Your Honor.

In Southwestern Cable, the court reviewed the attempts to amend the Act that up to that time had occurred in Congress and noted that none of them had resulted in the adoption of any legislation, and since that time, there has not even been a bill considered in committee on this subject since the Southwestern decision.

But we think there is some significance in the close scrutiny that Congress has been giving to the development of the commission’s rulemaking proceedings in this subject.

The commission has submitted several written reports to Congress on its cable television rulemaking endeavors during the periods in Southwestern to the requisite congressional committees, mostly the communication, subcommittees of the two commerce committees.

And members of the commission have at times been quite closely questioned about these efforts at committee hearings and while this is certainly not dispositive of the case, we believe that it’s significant because of this close scrutiny that there has so far been no substantial indication of any congressional dissatisfaction with the way the commission has been performing its task in this area.

Potter Stewart:

Has it been — it was the ordinary rulemaking function but has it been kind of a corporative effort with the — trying to reach accommodation among the various competing interest.

Lawrence G. Wallace:

Well, the commission has devoted a great deal of time and effort to that covering various subjects in the course of these rulemaking proceedings.

I can broadly characterize them as the carriage of television broadcast signals by cable systems and the use of cable television channels for the distribution of non-broadcast programming, the main one at issue here.

But also a minimum technical standards for cable television systems, including minimum channel requirements, two-way transmission capability and separate neighborhood program origination centers and the whole question of the appropriate distribution of regulatory jurisdiction between federal and state and local levels of government, and question of limitation on local franchise fees paid by cable systems.

In the course of these proceedings over the past three years, more than 700 comments have been received from various industries, civic and academic groups and there were two lengthy realms of oral presentations and panel discussions held by the commission involving more than 200 participants.

One round in February 1969, before the orders at issue here were adopted and another realm in March of 1971, all together ten full days were spent on these hearings of panel discussions, and following the 1971 consideration, the commission in February of 1972 adopted a much more comprehensive set of rules on this subject than the rules at issue here.

We have lodged ten copies of these with the Court in this case.

And in addition to the reference materials that are cited in the briefs on the subject, there is a very lengthy and comprehensive article on the subject coming out in the forthcoming issue, the April issue of the Notre Dame lawyer which should be brought to the Court’s attention.

It’s an article by Professor Steven Barnett of the University of California Law School which discusses very comprehensively the new rules and also the issues involved in the question of the commission’s jurisdiction.

Potter Stewart:

And this so-called new rules are these as of this February?

Lawrence G. Wallace:

That is correct, sir.

You’ll find after the initial part of it which is the report and order discussing them on Page 3278.

You have it with you there.

There’s an index to the rules themselves which gives you some idea of the scope of it.

It might have been.

While Professor Barnett does take issue on policy grounds with some of the conclusions the commission has reached, he does say that his view — there is jurisdiction.

Now the 1969 rules challenged in this case, have three general aspects.

You get back to the rules at issue here.

And these were summarized — this case is only under the 1969 rules which had three general aspects summarized in Commissioner Bartley’s concurring state, concurring statement at the time of the adoption of the rules, that is in the appendix to the petition.

Great covered petition.

Lawrence G. Wallace:

On pages 55 and 56, at the bottom of page 55 Commissioner Bartley very briefly summarized what was involved in the rules that were challenged in this case.

One is the provision that a cable system may originate programs without limitation as to number of channels.

And beginning on January 1, any system with 3,500 or more subscribers is required to originate programs to a significant extent or else it’s just forbidden to carry broadcasting.

And then his B and C applied to the program originated, the cablecasting programs.

One was provisions that they may sell advertising with respect to such programs to be presented only at natural breaks or intermissions in the programs, and C is that this programming that they originate this cablecasting is required generally to comply with the equal opportunity and fairness doctrine provisions and sponsorship identification provisions of the Communications Act and of the rules.

The respondent here challenged all three aspects, that the Court of Appeals held that the program origination requirement is invalid and then refused to pass on the validity of the remaining rules on the ground that the respondent lacks standing to challenge them since it did not intend to originate any programming, once the programming requirement, the origination requirement was struck down.

So the only question before this Court is the validity of the origination or cablecasting requirement.

The respondent correctly points out that no cablecasting was involved in the Southwestern case.

And I have already mentioned that the rule at issue here applies only to systems that carry broadcast signals, not to the presently nonexistent possibility of a system that does nothing but cablecasting.

So there is no need for the Court in this case to reach any question of the commission’s jurisdiction over cablecasting as it stands alone.

Potter Stewart:

Will you tell me again what cablecasting is?

Lawrence G. Wallace:

That is a programming over the cable that does not involve any broadcast signals or any broadcast originating program.

Potter Stewart:

Wholly originated.

Lawrence G. Wallace:

Wholly originated by the cablecaster although it may not necessarily be local programming, there can be programming that supply to him from elsewhere, including networking possibilities here, but it would not be programming that originates through radio signals that are being broadcast to other viewers.

It could be programming that is sent to him by radio signals that are not really broadcast signals.

Byron R. White:

But no amended TV sets can received that?

Lawrence G. Wallace:

That is correct, sir.

Warren E. Burger:

Then the origination doesn’t really have controlling impact here, doesn’t it?

It could originate network in New York and be deliver in Ohama, Nebraska by cable, could it not?

Lawrence G. Wallace:

That is a possibility.

The rule contemplates that some of this origination requirement could be met by networking or other interconnected programming, although there is a requirement that there be local facilities available but —

Byron R. White:

Primarily emphasis is to include local —

Lawrence G. Wallace:

That is correct, Your Honor, but there is also the possibility of this networking including the use of satellites, which has been discussed in the course of these rulemaking proceedings as a possible way of networking cablecasting.

It’s not the primary purpose of the rule, but a substantial part of the cable systems obligations could be fulfilled by use of these services, and it’s one consideration that we think should be taken into account with respect to the commission’s authority here although it’s not the basic, the heart of the commission’s rationale here.

All of the programs whether broadcast originated or not, are supplied by cable systems as they exist today to their subscribers over the same cable, and from the standpoint of the viewer turning the dial from one channel to another, cablecasting offered by the system is for all practical purposes undifferentiated from the other services being offered, and indeed from broadcast services that he receives.

For this reason, we think it fairly clear that under the ancillary standard, reasonably ancillary standard of Southwestern Cable, the commission must have some authority to regulate cablecasting service because if the system were free to ignore its cablecasting, the fairness, equal opportunities, sponsorship identification requirements, that otherwise exist on the set, their overall effect would be quite seriously undermined and there is also the problem of the possible use of pay cablecasting.

This would be a per program or per service fee rather than just the subscription for hooking in to the cable, and the concerns of the commission has had about the siphoning off through pay television of programming that is now available free to viewers.

It could very well be undermined, if pay cablecasting could come in, and perform the same siphoning off of programming and the commission were powerless to regulate.

Warren E. Burger:

Well, is all cable television pay television?

Lawrence G. Wallace:

Well, not not that kind but I am talking about it.

Warren E. Burger:

But it comes into your home by wire.

Lawrence G. Wallace:

If there is a subscription fee.

Warren E. Burger:

It’s a pay television, isn’t it?

Lawrence G. Wallace:

In that sense, but now I am talking about the additional element of a per service or a per program fee that you can’t get the particular program unless you pay a particular fee for it, such as we have with pay broadcast television.

Warren E. Burger:

I noticed that Judge Gibson was somewhat exercised about the problems of advertising, is there advertising on cable television?

Lawrence G. Wallace:

Advertising it — there isn’t, with respect to the broadcast programming that is carried.

Warren E. Burger:

But not on those —

Lawrence G. Wallace:

But there — it is now — they can carry the advertising that is already put on the air by the broadcast.

Warren E. Burger:

If they pick it up from a network or another station and then run it by cable into the private home they take it as it is.

Lawrence G. Wallace:

As it is, and they don’t interfere with the advertising that is on it.

Warren E. Burger:

But the cable television as such does not introduce advertising on the wire, is that right?

Lawrence G. Wallace:

Well, in their cablecasting operations, the commission has authorized them to introduce advertising, but only at natural breaks in the programming.

They are not authorized to interrupt the programming, and those systems that are now engaging in cablecasting do have advertising from the originated program.

Warren E. Burger:

Does that mean the viewers are going to pay a fee to get advertising piped into their homes and televisions, ever since department can —

Lawrence G. Wallace:

They all do operate with subscriber’s fees.

Of course, to the extent that their programming cost can be defrayed through advertising there than able to reduce subscription fees, and the commission considers these matters and decided to authorize advertising to that limited extent with cablecasting.

Thurgood Marshall:

Does that include political advertising?

Lawrence G. Wallace:

Well, they have the option to carry it just as broadcasting.

Thurgood Marshall:

Is there anything to stop the cable television company, and it operates in three counties in the state during the month of October carrying nothing but political advertising?

Lawrence G. Wallace:

There is nothing to stop them if they choose to limit their advertising that way, they do have the fairness doctrine requirements and the equal opportunities requirements to comply with, and in the commission’s view, and not in the commission’s rule, if the commission has authority to apply them.

And of course we contend that they do, but the question here is whether the commission had authority to apply the origination requirement to cablecasters, to cable systems that would prefer not to do any cablecasting, that is the issue here, and while we do not concede that the reasonably ancillary standard of Southwestern sets the outer limit of the commission’s authority with respect to cable television.

Our position is that that standard is met with respect to the origination requirement also, which brings me now to the rationale of the commission which is at the heart of this requirement that they have imposed.

This Court in Southwestern recognize the legitimacy of the commission’s concern that local broadcast service not be destroyed or foreclosed by unregulated importation of distant broadcast signals on cable systems.

And there are two reasons for this concern.

One is the importance to the public of programming the deals with local issues of public importance which can only reasonably be anticipated on local service, and the other reason is the very practical problem that cable systems do not serve many persons in their area who are served by local broadcasting.

Both because some of these persons cannot or will not pay the subscription fees, and because it is prohibitively expensive to extend the cable to those who are in rural areas or other sparsely populated areas.

The development of cablecasting on these cable systems however offers in the commission’s view, compensating opportunities for service to the community that cannot otherwise be made available both because it overcomes the physical limitations of the broadcast spectrum on program diversity and because it offers new possibilities for specialized local service.

For example, if you have a system that brings New York City signals into a small community in Pennsylvania as we do or you could just as well use a system bringing Denver signals into small communities in Colorado or in Wyoming as we have.

You have an illustration of the sort of thing that I mean.

It may be that the ability of the local broadcasters to continue serving this small community and other small communities in the area will be threatened by the importation of these signals.

Lawrence G. Wallace:

And perhaps other communities will also have their own cable systems.

But it is also true that the cable system which now they have up to 20 channels on the cable and provide many services to the subscribers in this local community that really can’t as a practical matter be performed by broadcasters.

Because they serve only a very local community.

It’s quite possible for the two candidates for Mayor to have a debate on one of the cable casting channels or a panel discussion to be held on a local school board problems or other matters of particular local concern.

It’s even possible for small merchants who want only a local audience to advertise to.

To have available to them facilities that really are not available through broadcasting.

Byron R. White:

There is no grandfather clause here.

Lawrence G. Wallace:

There are some grandfather provisions involved.

But they are not at issue in the present case.

Byron R. White:

Or may be plenty of reasons for this but is your submission in terms of power that because a cablecaster does use broadcast signals that gives the FCC power to order him or to control rest of his program or to supervise the content of rest of his program?

Lawrence G. Wallace:

Well, our submission is that the power derives basically from the fact that these systems do use broadcast signals.

And what the commission has concluded here is that the impairment or the threat, the possible threat here to television service that results from the commission’s authorization of the use of the radio signals is the sustenance of these systems is offset.

It’s sufficiently compensated for by the news services to the community that cable casting can provide.

So that it’s only in light of both aspects of the operation that the commission is willing to go ahead and authorize the services to the extent they have to use radio signals.

Potter Stewart:

Well, I take it then a fortiori where you have a voluntary cablecaster and I suppose there are some.

Voluntary cable casters originating programs but also carrying broadcast signals.

I take that you would say automatically that the FCC has power to apply the fairness doctrine right across the board.

Lawrence G. Wallace:

Not only would I say but —

Potter Stewart:

Assume they had 20 channels and they filled them all up.

And not only with the broadcasting signals but with origination.

You think you could reach the originating programs, the fairness of the originating programs, just because of the use of some broadcast signals?

Lawrence G. Wallace:

That commission’s rule does apply in that case.

It’s largely because of the impact on the viewer to him the differentiation of whether it’s coming in his cable casting or his broadcasting is not all that apparent as he flips from one station to another.

Byron R. White:

True but Commission’s power and authority?

Lawrence G. Wallace:

Rather commission and if the fairness doctrine is to operate effectively or if the equal opportunities provision had to operate effectively but what is the commission to do, if the cablecasting is all going to feature people from one party.

Should the commission then say that in compensation for that the broadcasters must wait their presentations in favor of the other party.

It seems that the commission has the idea is to get an overall effect that’s fair through the television set.

Byron R. White:

Assume the non-existent cablecaster, doesn’t use broadcasting.

And assume that the commission had power over that broadcaster to license with that cablecaster.

Would you think the fairness doctrine would have the same basis in the constitution?

Lawrence G. Wallace:

The commission has not attempted to apply that far and that would present a much more difficult question.

But at least the viewer there would tend to be more aware that he’s listening only to someone who is coming in with a cable casting operation.

As it is now, it is served by a single cable that presents a mixture of broadcast originated programming where these protections apply.

And the other is not very aware of which he’s getting at any given moment.

Potter Stewart:

Do you think the Fortnightly Corporation decision has any relevance to the issues here?

Lawrence G. Wallace:

I think it has relevance in this respect.

Of course, it only decided whether there is —

Potter Stewart:

Whether there was a violation of — .

Lawrence G. Wallace:

But it does indicate that — it seems to me, it goes somewhat to the reasonableness of the commission’s rule and I am obviously not going to have time to discuss that issue at any length.

I think it’s well-developed in the course of the appendix here.

The considerations that the commission gave to financial arguments resulting ultimately in the waiver that they provided.

But the fact is broadcasters who do have to pay for networking and other programs that they receive.

And who do not receive any fees from their subscribes are all required by the commission to provide local service of a public interest nature.

And when it comes to the reasonableness of the rule, what the commission has done here is to say that cablecasters now have the capacity to provide additional kinds of local service that are not available through broadcasting.

Should be required to do the same sort of thing when they have the financial capacity to do so and the commission has been very cautious on the question of the financial capacity rather than just exist in a parasitic relationship to broadcasting.

Byron R. White:

Mr. Wallace that point is, we do have this demarcation of 3,500 subscribers.

Do we not?

Lawrence G. Wallace:

That is correct.

Byron R. White:

I suppose my question is, is there anything arbitrary about the 3,500 mark?

Lawrence G. Wallace:

Well it was developed in the course of very lengthy considerations here that I rehearsed quite a bit in the appendix to the petition.

And if I may just refer you to the relevant pages.

First is pages 38 through 45 of the appendix in which the commission originally arrived at that figure on the basis of detailed information that was submitted to it.

And especially noting that more than 70% of the cablecasters now in existence now cablecasting, have less than 3,500 subscribers.

And also in light of the flexibility of their rules, they’re not required in order to meet this rule to engage in a high cost operation.

The chart on page 40 of the appendix to the petition indicates that it’s possible to get down to what’s called a small monochrome system or minimum monochrome system that is much less costly for those who don’t really have the financial resources to do better.

And then if I may add references to pages 58 and 59, where the commission considered this further upon motions for reconsideration.

And then finally, pages 66 and 67 of the appendix to the petition in which the commission setup procedures for waiver and said that any system with less than 10,000 subscribers when it applies for a waiver, will get an automatic stay until the waiver situation is clarified, until the waiver decision is made.

The commission has been very cautious on the question of financial capacity and burden here.

Warren E. Burger:

Mr. Wallace as I read Judge Gibson’s concurring opinion at least, he doesn’t — he does not question FCC power in any broad sense, I noted in his opinion, he uses the phrase at this time at least to, perhaps three times in his opinion.

And he addresses himself to the particular order so that his question really doesn’t go to power but to the discussion of the commission in exercising pervasive power at this particular time and in particular way.

Lawrence G. Wallace:

If I may say so, Your Honor, it reads to me like a dissenting opinion of the commissioner to this report in order rather than an opinion on review.

Warren E. Burger:

Thank you Mr. Wallace.

Lawrence G. Wallace:

Thank you sir.

Warren E. Burger:

Mr. Plotkin.

Harry M. Plotkin:

Mr, Chief Justice and may it please the court.

Essentially a very simple issue is involved here, not the very complex issue that Mr. Wallace refers to because most of the things that he talks about are either rules and regulations that have been adopted since this case was before the court below as to which, the administrative process had not yet even been completed and the other aspect of which what happens with voluntary origination.

The rules and regulations commission were not passed upon by the court below and not before this Court.

What’s involved here is the simple requirement of the commission that says to a CATV system.

If you understand a business as a CATV system, you have got to originate programs, you got to become a broadcast station in effect.

If you refuse to do that, you have got to cease being a CATV system.

And I think it might be helpful if I just backed up a little bit and gave a little bit of history of CATV, so as to show how it fills in with respect to what the commission has done in this case.

CATV started when television broadcast stations were not able to fill in and provide service to their entire service area, principally communities located in valleys, where there are mountains in between the television antenna and the community whereas the television signal might extend for miles beyond this particular community, they were unable to receive the signals, television signals go line aside and the mountains cut them off.

So individual entrepreneurs undertook to put an antenna on top of the mountain where the signal was available, capture it, bring it down by cable into the community and then to distribute it.

They started off originally, people doing it for themselves then making it available to their neighbors and they suddenly realized that when their neighbors came around that this was the sort of the service that everybody want to have and it became a business that they would charge people for the opportunity of being able to get television service that otherwise was not available.

And basically, while the rates for this service tends to vary throughout United States, mostly they are now between the low of $4 and a high of $6 per month for this service.

As the institution developed, what happened was in some communities, they did have their own television stations but they maybe only had one or two.

By means of CATV, sometimes by bringing them the signals by high antenna or sometimes by microwave, you were able to bring in the three networks and maybe independent stations whereas people could get some free television in their communities from the one or two stations there.

They were willing to pay this $4 to $6 a month for the ability to be able to get three-four-five or six signals which were distributed over the same cable.

Initially, the Federal Communications Commission paid no attention to this phenomena, neither did the broadcasting stations.

Quite to the contrary the broadcast stations were very happy with what CATV was doing because it was really filling out their service area in a way that geography and terrains had not intervened, the signal would be available and obviously the more people who are able to receive the signal, the better for the broadcast station because the broadcast station was able to sell advertising on the basis of a circulation.

But as this started to proliferate, and the commission initially even said, it had no jurisdiction on the subject matter.

But as it started to proliferate, and as the importation of signals tended to create an economic problem for some of the existing television stations because obviously if you are the only television station in town, with no CATV, you have a captive audience, people either listen to you or don’t listen anyone at all.

But when CATV brought in signals from two-three or four stations, it fractionated the audience. People were given the program choice, this is what the law and the policy of our government demands but obviously the local broadcaster was unhappy because he was losing his monopoly.

So he began to complain to the commission about this process and the commission undertook to regulate CATV systems to the extent that they imported signals and they adopted basically two types of rules and regulations on the subject.

One was a rule and regulation that said, that a CATV system must carry all local signals.

In other words, if the signal is locally available in a community, the CATV system must put it on its system.

Now this seems self-evident but at least at the outset, when CATV systems got started and when capacity on CATV system was rather limited.

The local station many time would not particularly (Inaudible) and the CATV system would bring in signals from outside, that were more salable and the local station therefore would tend to have difficulty in getting an audience because once a person was on a cable, if the local station was not on a cable, that subscriber would have difficulty in getting a local station.

So the commission said as a minimum matter, you must carry all local signals so as to make sure that the local station does not effect us and certainly the commission said that we will restrict the importation of distant signals because since distance signals come in to the market and tend to fractionate the audience.

It might cause a problem so far as the local station is concerned.

Harry M. Plotkin:

We will restrict it to make sure that you don’t overdo it, we will undertake to strike a balance.

So as to make sure that you do — you are able to bring in enough signal so that when added to the local signals, people get adequate service and by that they generally meant that they are able to get service at least from the three networks.

But beyond that they wouldn’t permit it.

That was challenged and ultimately this Court in Southwestern did sustain the authority of the commission to adopt such rules and regulations because these rules and regulations were ancillary to the commission’s authority with respect to broadcasting.

CATV systems, the commission held and this Court agreed, are engaged in communication by wire or radio within the meaning in the air.

Now, while they are not broadcast station themselves, they are instrumentality medium and in purpose of —

Byron R. White:

That’s because they are carrying broadcast signals.

Harry M. Plotkin:

They because they are carrying broadcast signals, that’s right.

Byron R. White:

Even though that they are carrying it by wire.

Harry M. Plotkin:

That’s right, they are really preforming no different function in that respect than you do in your home, when you put an antenna on top of your roof, you have a wire coming down from the antenna into your set.

This is obviously a much more sophisticated wire but they were doing the same thing.

They were also capturing the signal on the antenna and distributing over a long wire to many people.

Byron R. White:

And did Southwestern approve the power commission to force the cable TVs to carry things they didn’t want to?

Harry M. Plotkin:

No that wasn’t even involved at that time.

Quite a contrary, when this —

Byron R. White:

What about the order to carry local stations?

Harry M. Plotkin:

To carry what?

Byron R. White:

That the cable operators have to carry all local stations even though they didn’t want to.

Harry M. Plotkin:

Yes, that was what was involved there, the commission said as part of out authority.

Byron R. White:

Well I know, but was that involved in Southwestern?

Harry M. Plotkin:

The rule was involved in that case that wasn’t challenged.

Byron R. White:

It was upheld —

Harry M. Plotkin:

Yeah that particular moment wasn’t challenged but in another case, which Midwest had brought in the Eight Circuit where that rule was challenged, the Eight Circuit did uphold that regulation and so it was not solved.

So the courts have upheld —

Byron R. White:

Do you challenge that as well, I mean if your position were sustained, would you say that commission couldn’t force the cable TV people to carry all local station?

Harry M. Plotkin:

That’s the position we took several years ago and we were not able to persuade the courts that that was correct.

The reason we took was on that just for a little history was that this was a reception service and the commission only has jurisdiction over transmission service.

The courts agreed with the commission on that, said you can adopt rules and regulation —

Byron R. White:

But I just wonder all, Mr. Plotkin, I just wondered if your position — if your position were sustained, would it also invalidate that rule?

Harry M. Plotkin:

No, in this case, not at all.

Harry M. Plotkin:

Not only it wouldn’t invalidate that rule but it wouldn’t invalidate the rules and regulations that the commission had adopted that said that if you voluntarily originate, you will have to comply with the fairness doctrine, you have to comply with (Inaudible) law, with all the other rules and regulation with respect to it.

There are difficult legal questions I think that Your Honor was adverting to on questioning Mr. Wallace as to whether there are not constitutional queasiness about that because there is not at the same scarcity involved there but that’s not involved here and —

William O. Douglas:

(Inaudible) if any, with the state systems maybe they should?

Harry M. Plotkin:

Well the state’s — the commission, at this stage of the game is undertaking in many areas to pre-empt the theory of state regulation, the states are fighting that and that matter is now —

William O. Douglas:

Is that involved in this game?

Harry M. Plotkin:

That is not, the State Illinois has filed a brief for amicus in this court which they assert that it is involved.

I don’t think it is involved myself and I don’t think the government feels that’s involved but the states at least see where it’s leading to, getting into this problem really.

I don’t think this particular rule and regulation does involve the divisions of authority between the federal and state authority but we think that the politics compel someone to go into a business that he doesn’t want to, the state will let that politics as much as the FCC does.

William O. Douglas:

Does any state have regulations covering origination?

Harry M. Plotkin:

Some municipalities, when you have to get a franchise from municipality to operate a CATV system because your wires cross over alleys and screeching, you have to get a franchise from it.

Now some of those franchises require the CATV operator to originate problems.

William O. Douglas:

Well, then what would —

Harry M. Plotkin:

What?

William O. Douglas:

They would fall under this regulation?

Harry M. Plotkin:

Not automatically because we think that what’s involved here is an absence of statutory authority with constitutional overtones but we don’t think you have reached a reached the constitutional problem because there’s an absence of statutory authority.

But if the constitutional overtone to argument is involved, the same constitutional limitation would be applicable to the municipalities or applicable to federal governments.

But that is not involved here because I think we don’t reach that because the commission has not been given this authority by Congress, where the Congress could give it the authority, is not entirely a clear question and it would depend entirely on a type of statute that congress drafted, the type of findings they made as to whether they could, as to what would be involved, but that’s not involved here.

We think it’s very clear, that Congress has not given the FCC authority with respect to that.

What Congress did give the Commission authority so far as reception activities are concerned is that you can adapt rules and regulations, that are reasonably ancillary to your regulation of broadcast station.

And for example, with respect to your mandatory carriage of all local signals.

Since the commission in Section 3, 303(a), and 303(h) of the communication provides that the commission has the authority to classify radio stations and to prescribe the areas to be served by them.

Well, obviously it’s ancillary to that jurisdiction says the court for the commission to require local CATV system to carry local signal.

Because if they don’t, the area that the commission has prescribed for a broadcast station, is cut-off by the same token when the commission says that you shall not import distant signals beyond where they are intended to be carried.

For example, if you are operating a system that cast for Wyoming and you’re trying to import a signal from Denver, Colorado, you’re obviously extending that signal beyond the area which the commission had prescribed which that station is to be served.

The commission under certain circumstances do permit those signals to be imported, but permitted only for the purpose of making sure that the people in Riverton, Wyoming have enough reception services.

So that was the theory upon which the commission upheld authority in the Southwestern case because it was reasonably ancillary to broadcast jurisdiction over television station.

Now CATV system in —

Byron R. White:

Some of the mountainous areas out west can’t get television without — .

Harry M. Plotkin:

That’s right, that’s right.

And this is why this does perform a very important public interest function and when they do perform their function, if there are engagements, state communication by wire or radio, they are subject to the jurisdiction that Congress has given to the commission, to make sure that it carries out to policies of regulating broadcast stations is not inconsistent therewith.

Harry M. Plotkin:

Now a CATV system, in this essence is a very, very simple matter.

It erects an antenna, cables come down, distribute it to the people who paid $4 to $6 a month for that service.

The pertinent is relatively simple.

The personnel involved in it are relatively few in number and unsophisticated personnel, the people that string cables or maintain cables, will hook up television receivers and a small billing department that goes out and bills the people $4 to $6 a month and collects it.

Now the commission comes along and says, CATV operates in many small communities that don’t have their own television stations.

Wouldn’t it be nice if those communities had television stations? And therefore the commission said that if you’re going to stay in the business, since you are using broadcast signals — if you’re going to stay in the business of providing broadcast stations, we want to know, we want, we demand that if you have 3,500 or more subscribers, that you must also become a broadcast station and that’s what cablecasting needs.

You must become a broadcast station, you must originate your own programs.

You must have facilities available for local program and you must originate it.

Now this is an entirely a business activity from what CATV is involved in.

Warren E. Burger:

You say that the commission could never require that development — it’s now reaching for here.

Harry M. Plotkin:

Under the statute that Congress had drafted, I say they do not have the statutory authority, that is correct.

Warren E. Burger:

Under any circumstances.

Harry M. Plotkin:

Under any of the present statute.

Warren E. Burger:

That’s what I mean.

Under the –?

Harry M. Plotkin:

Under present statute they are not.

I should point out to Your Honor that in a somewhat related field, when television receivers were first been marketed, they would be marketed with VHF channels only, even though they were both VHF and UHF channels, the television receivers have been marketed with VHF channels only and the commission – the television was not getting off to ground so far as UHF was concerned.

The commission went to Congress, to get a statute passed that says if you manufacture television receivers you must make sure that they have all the channels.

The commission felt the need of going to Congress to get some specific statutory authority, desirable as the objective was.

They felt powerless to doing things without getting an enactment of Congress.

The commission has similarly gone to Congress in the area of CATV to try to get additional or supplementary legislation and Congress had not done anything on the subject.

Not that Congress has approved, Congress has sat back and is watching what’s happening.

But the need to go to the Congress to get authority in this field is very, very clear.

In the reception field, where they had to get a statute which Section 303(s) which specifically authorizes the commission to prevent the shipment in Interstate Commerce of any television receiver unless it carries both VHF and UHF, so that the entire spectrum can be utilized.

Now, what the FCC is telling to a CATV system, is you must become a broadcaster.

Not only must you have this simple equipment up there for distributing signals, you have got to go out and buy cameras.

You have got to go out and buy a microphone.

You have got to hire people who creates programs.

We don’t create programs as the CATV system where a passive distributor programs, we’re really performing the function of distributing the signals that are dedicated to the public, we’re making them available to the people, that’s a simple dedicated function.

We are not created people in the sense of, of being able to create a program.

Harry M. Plotkin:

They say, we got to buy the equipment, the color — the television cameras to project the images, sophisticated people who can create programs, to the extent that their copyright programs are involved.

We got to go out and get copyrights on all those and even under fortnightly there is no doubt, that when we originate a program that involved copyrighted material, we must get a copyright license.

We never contended that we can do it without a copyright license.

Not like that, but we submit ourselves to a whole new area of regulation of the commission, we got to learn about fairness, we got to learn about the equal opportunity, the volumes and volumes of commission regulations that they have adopted, dealing with broadcast that we’ve got to learn about.

We’re not challenging that, that if we do it voluntarily.

But we’re saying this, as an entirely different business activity from what’s been involved in, when we dedicated our property really to being a CATV operator.

The commission now comes to say, find your CATV operator, but we now want to enter into an entirely different business activity from what you yourself undertook to do.

That’s what’s involved in mandatory origination.

The commission in effect says, if you’re all okay even in a small community, even if when there is no other television stations involved.

So you’re not having an impact on, and if you have 5,000 subscribers, important as your services, bringing television service to those people who might not get it otherwise.

Byron R. White:

Let’s assume there is a licensed TV station and the operator and the owner prefers to just to be a transmitter, to get a network 100%.

Harry M. Plotkin:

Yes.

Byron R. White:

And doesn’t the commission have power to tell him he has to put on the air, certain amount of local program and originate some programs.

Harry M. Plotkin:

The commission says to him, that you can’t operate a broadcast station without a license, and license requires you to operate in the public interest.

When you come to us and say, you want a station to operate in public interest, then they say, you’ve got to comply with —

Byron R. White:

Now, say to the cablecaster, if you want to use broadcast signals, you’ve to get a little piece of paper from us.

Harry M. Plotkin:

Only to —

Byron R. White:

That you call the license is it?

Harry M. Plotkin:

Well, but the license that the —

Byron R. White:

He does anything — they have to get permission?

Harry M. Plotkin:

They have to get permission from the commission.

Byron R. White:

The commission says to him, if you want to use these broadcast signals, you have got to carry for the houses, a certain balance of programs.

Harry M. Plotkin:

That’s what they are saying, what we are saying.

But that’s the —

Byron R. White:

What’s the difference between the two situations?

Harry M. Plotkin:

The difference between the two situations in effect they are saying is, that if you want to carry broadcast signals, you must become something additional to that.

You must become a broadcast station.

Byron R. White:

I know, but in the example I gave you, a man says all I want to do is, all I need is some equipment and I just transmit it automatic.

I don’t need a lot of people, I don’t need to produce programs, and make all that.

You are forcing the man to do another business of producing, I don’t want to produce anything.

Warren E. Burger:

You want to answer that after lunch Mr. Plotkin?

Harry M. Plotkin:

Yes.

Warren E. Burger:

Continue.

Harry M. Plotkin:

Thank you Your Honor.

Warren E. Burger:

You have about ten minutes remaining of your time.

Harry M. Plotkin:

The innovative question that Mr. Justice White asked and is really the novel case is, as to what is the nature of the undertaking of the commission’s jurisdictions.

I would like to address myself to the quintessence of the question that we use broadcast signal, because it’s an implication, not only an implication a direct statement to commission, that there is a benefit conferred that since we used broadcast signal.

But basically, this is not a parasitic or an exploitation relationship, it’s a symbiotic relationship.

Broadcast signals when they are transmitted over the year are worthless unless there is something on the other end to receive and then making use of it.

We are just as much a part of it, not as a recipient of the benefit, but as a part of the symbiotic processes as well.

We are no different than the sale, than the local dealer, that makes television sets to make them available to the people so that they can receive the broadcast.

Obviously, if no one will make them broadcast, there would be no market facets.

But by the same token, if no one were making sets there would be no purpose in transmitting signals over the year.

It’s a duality of the process, to tell us that just because we utilize broadcast signals in a manner in which they are intended to be utilized, and in a manner which unless we did something with them, they wouldn’t be useful at all, that therefore we should now undertake to become a broadcast station in effect as to be able to tell the manufacturer of television receivers or the sales or television receiver, since you are making use of broadcast signals.

You want to do some, you want to go in and open a broadcast station in your town.

We are undertaking positive process, the commission has certain jurisdiction over one part of process and another type of jurisdiction over the other part of the process, but no where has the Congress given the commission the power to say that if you do part of the process, you also must do another part of the process.

And this is, it’s like in the case of Frost & Frost (ph) where we cited in effect where the State of California told this gentleman if you want to use our road, you’ve got to be not just a private contractor for hire, you must be a common carrier for hire.

And the Supreme Court said, no, you can make reasonable regulations relating to the use of the road, and you may have even forbid the use of the road, but you can’t say that if you utilized the road, you can at the same time, say now since you are utilizing the road, you have become a common carrier even though that’s not what you intended to dedicate your property to.

Warren E. Burger:

But isn’t the commission saying here Mr. Plotkin that in order to perform and fulfill your total public function, you must do these additional things?

Harry M. Plotkin:

What I am saying — that’s what they are trying to say, and I am not saying that it’s an un-worthy thing that they are trying to do, but in effect they are telling us who only want to be — to manufacture and install receivers or to install receivers since we are performing that function, we ought to do something else.

Warren E. Burger:

Well, you are doing a little more than installing receivers, you are operating a system, the last stage of which is installing.

Harry M. Plotkin:

That’s right.

Now if Congress had said that this whole business of installing, as a new business okay, that if you install and so forth, that as part of that, there ought to be certain responsibilities to it, that could be another matter.

But so far as our function is concerned, and as this Court pointed out in Fortnightly, true from a copyright point of view, what we do is perform the reception part of this, and not the transmission part.

It’s an entirely different activity that they are asking us to do, it’s not like the broadcast station, when a man who enters into operating a broadcast station must operate in the public interest.

But at the same — what they can do the analogy is – they say, if you got to be a CATV system, you got to be a CATV system which means you got to carry the local signals, means you got to carry them in such a way as not to degrade them, that you must meet certain technical standards in your operation of a CATV function.

We have no problem, that’s the business where in it’s legitimate and severable business, and the commission can lay down rules and regulations that if we enter the CATV business we must do it, in appropriate manner, and that’s what Southwestern was all about.

Warren E. Burger:

And in the public interest?

Harry M. Plotkin:

In the public interest related to the reception functions, and there is ancillary to the broadcast function.

I don’t see how it’s ancillary to the broadcast function to tell us that we must become a broadcast station in effect in a way that might yield benefits to the public.

Harry M. Plotkin:

But it does not help the broadcast stations in any event to have us become a competitor by originating problems.

The whole theory of regulation, even in a broadcast field, those of us who come from small towns who don’t have any broadcast stations — we’d love to have had broadcast station.

The commission has never had the power to say to someone that you’ve got to go in, and operate the broadcast station in that particular town.

They will say, if you want to operate a station in that town, you have got to live up to certain rules and regulation.

But the affirmative requirement that tells someone that he must operate a broadcast station is really what’s involved here.

That’s imposing a duty on difference of time, not just of decree, not just a definition.

They can tell us how to operate a CATV business, the quintessence of a CATV system.

But when they say beyond that, you now must undertake to operate in addition, a broadcast station.

The correlative of this would be, when in the area before there was an old channel law that is to say, when people were operating either VHF or UHF television stations and the commission said, television is not getting its maximum potential for the simple reason that there aren’t enough either cheap receivers out or there aren’t enough receivers outstanding that are capable of receiving UHF and therefore as a condition of operating your television station, we insist that you go into the manufacturing business and manufacturer receivers, so that people around to be able to receive those signals.

And not only didn’t the commission undertake to do that with respect to broadcast as I mentioned earlier even with respect to manufacture, to manufacturing receivers it took a specific enactment of Congress to enable the commission to be able to tell the manufactures that in order to engage in this business your receiver must carry all channels, and not just the channels that you want to put on.

When the commission adopted these rules and regulations which says that you can’t have the luxury of carrying only distant signal that if you got to be a CATV system, you must carry local signal.

That was enabling them to regulate the business that we have gone into perform and a recipient function.

If they say that the signal must have a certain quality to make sure that the public gets the same quality of signal on their set that’s been transmitted by the station.

That also is part of it.

But to say in addition, that we must become a broadcast station is in effect — the analogy that we cite in our brief like the distributor of the New York Times in Washington for example, is performing a function, he is taking advantage of newspaper function.

If some local authority said that in return for that privilege, we don’t think there is enough local newspapers in town, we think that you ought to publish a local newspaper.

This is what the commission is doing.

We are not arguing with the desirability of the function.

What we are saying is under our system of regulation that this volition that goes into business, that you cannot be compelled to dedicate your property to a business that you don’t use.

That you — that when you enter a business you are subject to rules and regulations, and if we voluntarily originate so far as this case is concerned, we can’t originate and fail to comply with the same fairness, equal opportunity (Inaudible) law that does a broadcast station.

Potter Stewart:

I thought the basic question here was whether or not this order of the commission was within its statutory authority.

Harry M. Plotkin:

That’s correct.

Potter Stewart:

Not whether or not it was good or bad.

Harry M. Plotkin:

That’s right.

It is, and that’s why I am saying, we are not arguing whether it’s reasonable.

Now, we are not arguing that the length should be 3,500 or 6,000 or 10,000, we are not arguing on that.

But what we are arguing is it’s not within the statutory jurisdiction to compel us to do this.

I do want to mention one further fact it’s not crucial to the case, but Mr. Justice Douglas had asked whether there are any grandfather rights with respect to this.

The grandfather right is not applicable here, this is applicable all CATV system no matter when they started.

The grandfather rights that the commission had recognized in this field, pertained to the situation that you are permitted to continue to carry the broadcast signal that you did before.

Harry M. Plotkin:

But no grandfather protection has been recorded in this thing.

We don’t think that’s crucial because we think the statutory jurisdiction is lacking for new system as well as old system.

But I didn’t want the record to be vague on that point.

In summary, the position that we have taken is that as a matter of statutory authority, the commission is authorized to regulate broadcast station.

They are authorized to regulate CATV system only to the extent that’s reasonably ancillary to broadcast function, and that relates to the type of rules and regulation as to carry the broadcast signals.

We do not argue because it’s not involved as to whether if we undertake voluntary origination that we are not subject to the same rules and regulation, as are applicable to broadcast station that is not before the court, we are not contesting insofar as this record is concerned.

We do say though that we cannot be compelled to enter into a brand new and entirely different kind of business as a condition of performing the function, or making the signals available that are dedicated to the public, by taking those signals and putting them to the use for which the dedication was contemplated.

Warren E. Burger:

Thank you Mr. Plotkin, thank you Mr. Wallace.

The case is submitted.