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In a Dec. 14, 1995 ruling, a Federal District Court upheld the 1992 rules that require cable television systems to carry local broadcast channels. The three-judge panel had previously upheld the "must-carry" law, but the Supreme Court in 1994 asked the district court to determine whether there was enough evidence that local broadcasting was indeed threatened by the growing cable industry. Judge Stanley Sporkin wrote the majority opinion.
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
Turner Broadcasting, et al.,
Plaintiffs.
v.
Federal Communications Commission, et al.,
Defendants.
Civil Action No. 92-2247
(and consolidated cases)
(SFW, TPJ, SS)
FILED
DEC 12 1995
CLERK, U.S. DISTRICT COURT
DISTRICT OF COLUMBIA
Before WILLLAMS, Circuit Judge, and JACKSON and SPORKIN,
District Judges.
WILLLAMS, Circuit Judge, dissenting.
Table of Contents
I. Introduction
A. Procedural History...... 1
B. Overview..... 2
II. The Supreme Court's Mandate.... 5
III. Thc Posited Interests.... 9
A. The Economic Health of Local Broadcasting.. 9
1. The continued viability of broadcast as a whole ..10
(a) Total advertising revenue.......12
(b) Number of broadcast stations ...17
(c) Profits.....21
2. Maximum possible expansion of broadcast......23
3. The health of stations eleaing must carry....26
4. Survival of broadcast across all geographic markets
B. Unfair Competition......33
1. Anticompetitive behavior due to vertical integration
2. Anticompetitive behavior due to local monopoly regardless of
vertical integration ......40
(a) Independent programmers might outcompete broadcasters for
access.....40
(b) Broadcasters as conduit competitors with cable......44
IV. Narrow Tailoring.....47
A. Must-carry's Burden to Operators' and Non-Broadcast
Programmers' Speech...... 49
B. Less Restrictive Alternatives.....54
1. Leased, non-discriminatory access ...... 54
2. A/B or "input selector" switches...60
3. The Century Rules .....66
V. Conclusion ......67
I. Introduction
A. Procedural History
This case is on remand from the Supreme Court in Turner
Broadcasting Co. v. FCC, 114 S. Ct. 2445 (1994), with instructions to
resolve a variety of factual issues that the Court held were pertinent to
the plaintiffs' contention that sections 4 and 5 of the Cable Television
Consumer Protection and Competition Act of 1992 ("Cable act" or
"act"), 47 U.S.C. Sections 534-35, violate their rights under the First
Amendment. After extensive discovery yielding a record of tens of
thousands of pages, the parties have cross-moved for summary
judgment. For the reasons stated below, I would grant the plaintiffs'
motion and deny the defendants'.
The contested sections, together with the other provisions of the act,
permit a commercial television broadcast station to either (1) refuse to
allow a cable system to carry its broadcast signal unless payment to the
station is negotiated ("retransmission consent"), 47 U.S.C. 325(b), or
(2) force an area cable system to carry its signal even if the system
does not want to ("must-carry"). 47 U.S.C. Section 534. Non-
commercial stations cannot elect retransmission consent, 47 U.S.C.
Section 325(b)(2)(A), but may demand carriage. 47 U.S.C. Section
535. In any case of forced carriage, the station to be carried may
demand one of several specific channel positions on the cable system
in question. 47 U.S.C. 534(b)(6) (commercial stations); 47 U.S.C. 535(
)(5) (noncommercial stations).
We originally applied the "intermediate" standard of First Amendment
scrutiny set forth in United States v. O'Brien, 391 U.S. 367 (1968), and
a majority of this court found the must-carry provisions valid under
that standard. Turner Broadcasting Co. v. FCC, 819 F. Supp. 32
D.D.C. 1993). The Supreme Court affirmed that the must-carry rules
were content-neutral and thus properly to be tested under O'Brien's
standard, but remanded the case to this court for further factfinding
because of a "paucity of evidence" necessary to discern whether must-
carry met that standard. Turner, 114 S. Ct. at 2472.
The Court noted that there was a lack of evidence "indicating that
broadcast television is in jeopardy," as well as a lack of "any findings
concerning the actual effects of must-carry on the speech of cable
operators and programmers" and "findings concerning the availability
and efficacy of constitutionally acceptable less restrictive means of
achieving the Government's asserted interests." Id. After extensive
further development of the record it is clear that must-carry is not
narrowly tailored to address any government interests that are actually
at stake. The must-carry provisions burden substantially more speech
than necessary to advance the government's interests, and therefore
cannot meet the standard expressed in O'Brien and in Turner's specific
mandate to this court.
B. Overview
This opinion works through a large number of claims and variations on
claims, as well as detailed facts about the broadcast and cable
industries. There is obviously a risk in such an enterprise that the trees
will obscure the forest. Accordingly, I here give an aerial view of the
forest, confining myself to my central conclusions.
1. The parties agree that there is no threat to the continued viability of
broadcast television, either now in existence or looming on the
horizon. Section III.A.1.
2. The defendants have offered several concepts by which to measure
whether must-carry might advance some supposed governmental
interest--such as maximizing the number and prosperity of broadcast
stations. All but one of these (discussed in 13 immediately below) are
circular, in that, once it is posited that must carry would enhance the
profits of the stations electing must-carry (a point that seems never to
have been disputed), it is so obvious that must-carry will advance the
interest in question that we do not believe the Court would have
remanded for fact-finding if it had concluded that such interests were
adequate to sustain must-carry. Sections III.A.2, III.A.3.
3. While the government has pointed to conclusory assertions that a
significant number of stations have been materially injured by the
absence of must-carry, (1) I believe that such evidence would be
relevant only as evidence that there is some threat to the viability of
broadcast television, a claim defendants emphatically do not make,
and, in any event, (2) plaintiffs have met these conclusory assertions
with substantial contradictory evidence. While I would not rule that
summary judgment can necessarily be granted in favor of plaintiffs on
the issue, it is absolutely clear, based on the detailed character of
plaintiffs' evidence, that summary judgment cannot be granted in favor
of defendants. Section III.A.3.
4. The proposition that persons in cable households have no access to
broadcast stations except as the cable operator may carry their signals
is completely unfounded. Nothing about attachment to cable ipso facto
cuts a person off from broadcast. Every cable household can secure as
good access to over-the-air television as it had before adopting cable
simply by (1) retaining or acquiring the sort of antennae that the
uncabled 40% of households necessarily use, and (2) operating either
an input selector switch on their "remote" or an "A/B" switch that can
be acquired at a local hardware store for a trivial sum. Section IV.B.2.
5. To the extent that "fair competition" is threatened by cable
operators' characteristic monopoly over provision of cable services
(and in some cases their vertical integration with cable program
suppliers), the problem is readily cured by regulation under which all
suppliers of programming not affiliated with an operator (i.e.,
independent cable programmers and broadcast stations alike) are given
an entitlement to access at a price compensating the cable operator for
the costs of carriage. Such systems are in place for industries with
equivalent structural problems, such as gas, electricity, and wire
telecommunications. Such a system involves far less intrusion on
speech than must- carry while better serving the interests of fairness
and signal diversity: As non-broadcast programmers competing for
access over a cable system are not arbitrarily excluded by a fiat
entitlement in favor of broadcast, but compete for access on an equal
footing, the system enables consumers to choose between programs on
the basis of the usual price/quality factors that they use to make other
consumer choices. Section IV.B.1.
Accordingly, I now address the Court's mandate to us to assess the
reality of the harms to be cured and the fitness of the chosen remedy.
II. The Supreme Court's Mandate
Congress's overriding goal in enacting must-carry was to "preserve
access to free television programming for the 40% of Americans
without cable." Turner, 114 S. Ct. at 2461. The goal is an important
one, the Court said, because over-the-air television is a principal
source of information and entertainment for a great part of the nation's
population. Id. at 2469. In fact, the goal touches upon a government
purpose of the "highest order," because "the widest possible
dissemination of information from diverse and antagonistic sources is
essential to the welfare of the public." Id. at 2470 (internal quotations
and citations omitted). This goal, as the Court saw it, might be
jeopardized simply by the prosperity of the cable industry: to the
extent that viewers were lured by cable away from broadcast (and to
the extent that they abandoned the antennae and other paraphernalia
necessary to watch TV over-the-air), the potential audience for over-
the-air TV would shrink. Indeed, on these assumptions the potential
viewership of any station refused carriage by all of the local cable
systems serving the broadcast station's area would, on average, shrink
to 40% of what it would have been. This in turn might shrink or at
least seriously impair the broadcast industry, leaving non-cable
viewers with materially reduced options. Thus, Congress was dealing
with a special case of the general problem that competition from a new
industry may reduce the economies of scale enjoyed by an established
one, and thereby disadvantage consumers who use the goods or
services of the established industry.
I also understand the Court to find the congressional action grounded
in a related but distinct concern, focused more on the "unfairness" or
anticompetitive characteristics of the cable industry's competition with
broadcast than on the deprivations that might be suffered by non-cable
households. Id. The unfair or anticompetitive aspects of cable are said
to flow from a combination of the cablecasters' exploitation of their
market power as the sole providers of cable service in their respective
communities (as they are in the overwhelming proportion of cases/3
and from their significant degree of affiliation with cable
programmers, which create and market programs for release over
cable. Plaintiff Time Warner, for example, is a programmer, producing
channels such as Home Box Office, and also a cable operator. Its
pending merger with plaintiff Turner Broadcasting will broaden its tie
to cable programming.) Here the contention is that cable companies
might deny broadcast stations carriage on their systems simply to
protect or enhance the advertising revenue the cablecasters enjoy from
cable programming and to realize the cost advantages of using
affiliates' programming. To the extent that must-carry is addressed to
this problem, as a kind of specialized antitrust regime designed for a
possible anticompetitive injury, lesser impairments to viewer welfare
might suffice to warrant government action--compared to the more
fundamental threat to non-cable households' access to over-the-air TV
discussed above.
While these interests are important in the abstract, when the
government seeks to legislate in the area of free speech "it must do
more than simply posit the existence of the disease sought to be cured.
It must demonstrate that the recited harms are real, not merely
conjectural, and that the regulation will in fact alleviate these harms in
a direct and material way." Id. (internal quotations and citations
omitted).
Thus, the Supreme Court found in Turner that pursuit of the goal of
saving non- cable households' access to free TV by means that impinge
on free speech would be permissible only if that access were truly
threatened--if "the economic health of local broadcasting is in genuine
jeopardy" --and then only so long; as the government's remedy "does
not burden substantially more speech than is necessary to further the
government's legitimate interests." Id. (internal quotations and
citations omitted). Similarly, the goal of correcting anti-competitive
behavior can justify an infringement on free speech only if cable
companies are in fact engaging in anti-competitive behavior (or if
Congress could infer a serious risk of such behavior from
circumstances such as industry structure) and then only if the scope of
the proposed infringement--in this case, the must-carry regime--
reasonably fits the evil at hand.
This court's first task in applying O'Brien scrutiny, then, is to ensure
that Congress has drawn "reasonable inferences based on substantial
evidence" in finding that there is a real threat to the survival of free
broadcast television. (Section III.A.) In doing so we must accord
substantial deference to the predictive judgments of Congress, making
an independent judgment of the facts but not reweighing the evidence
de novo. Id. at 2471. The court must also evaluate the presence or
threat of anticompetitive behavior against broadcasting by the cable
industry. (Section m.B.) Finally, it must consider whether must carry is
narrowly tailored to address the risk or risks--if any--fount to be real.
(Section IV.)
Defendants have asked us first to consider only the information before
Congress as it passed the Cable act. If that evidence were substantial
enough to satisfy the defendants' burden, then, they argue, we need
look no further. Memorandum of the United States and the Federal
Communications Commission in Support of Their Motion for
Summary Judgment ("Government Brief") at 4. Only if that evidence
were insufficient might we look beyond. Id. at 5-6. I would reject this
contention. The Supreme Court has frequently considered evidence
outside the legislative record in constitutional review of statutes, see
generally Kenneth Karst, Legislative Facts in Constitutional Litigation,
1960 Supreme Ct. Rev. 75, never, so far as appears, suggesting that the
statute would be invulnerable to such evidence if it were supported by
the legislative record--a record, one suspects, typically put together
under the aegis of the statute's proponents. In any event, defendants
have deliberately chosen not even to present the record that was before
Congress in the usual sense of the term. The materials they have
assembled and labelled the "Congressional Record" are neither the
Congressional Record as such nor the documents and testimony
actually presented to Congress itself. Rather, they have included
voluminous materials submitted to the Federal Communications
Commission during the extended period that must carry was before
Congress. See, generally, Defendants' Joint Statement of Evidence
Before Congress. But if anything before the FCC was "before"
Congress, it is hard to see in what sense anything in the world was not
equally before Congress; all members of Congress have been
continuously free to consider any fact extant in the world. As
defendants have made no effort to isolate data that was peculiarly
before Congress, they have made it difficult or impossible for us to
apply the principle they invoke.
Defendants cite the Court's statement that without "a more substantial
elaboration . . . of the predictive or historical evidence upon which
Congress relied or the introduction of some additional evidence,"
Turner, 114 S. Ct. at 2472 (emphasis added), it was impossible to
ascertain whether the alleged threat to broadcast television was real
enough, and read it as saying that must-carry must be upheld if either
source satisfied the constitutional standard. I think that a strained
reading, especially in light of the Court's prior reference to the absence
of any need for Congress to "make a record of the type that an
administrative agency or court does to accommodate judicial review."
Id. at 2471. In any case, the data supplied by defendants, taken all
together, fail to sustain the burden explicitly placed on them by the
Court of "demonstrat[ing]" the reality of the harms and their "direct
and material" alleviation by the remedy selected. Id. at 2470.
III. The Posited Interests
A. The Economic Health of Local Broadcasting
The parties strongly disagree over exactly what proposition concerning
broadcasting's health and viability this court was to test upon remand.
The congressional finding at issue is whether, "absent mandatory
carriage rules, the continued viability of local broadcast television
would be 'seriously jeopardized."' Turner, 114 S. Ct. at 2470, citing
2(a)(16) of the 1992 Cable act, 106 Stat. 1460 (emphasis added). See
also 2(a)(10) ("A primary objective and benefit of our Nation's system
of regulation of television broadcasting is the local origination of
programming. There is a substantial government interest in ensuring
its continuation.n) (emphasis added); 2(a)(12) ("There is a substantial
government interest in promoting the continued availability of such
free television programming, especially for viewers who are unable to
afford other means of receiving programming.") (emphasis added);
Turner, 114 S. Ct. at 2461 ("the provisions are designed to guarantee
the survival of a medium that has become a vital part of the Nation's
communication system, and to ensure that every individual with a
television set can obtain access to free television programming")
(emphasis added).
At first glance these congressional assertions and Supreme Court
reformulations of the government interest seem rather straightforward:
Congress believed that the continued availability of free local
broadcast television, a fixture of the American cultural landscape for
over fifty years, was in serious jeopardy. The defendants have urged
several other interpretations upon us, however, each entailing a
contention that is far more modest--and therefore more readily proven.
One is that the governmental interest identified as substantial in Turner
is the interest in ensuring that persons without cable have access "to
the greatest possible multiplicity of broadcast outlets." Reply
Memorandum of the United States and the Federal Communications
Commission in Support of Their Motion for Summary Judgment
("Government Reply") at 5 (emphasis added). That is, Congress
intended broadcast to be as successful as possible. Such an interest is
self-evidently in jeopardy without must-carry, since must-carry will
financially benefit the stations that adopt it; their resulting gains will
enhance the survivability of marginal stations and will enable them all
to invest more in programming. Defendants also offer another analysis
that is equally self-validating. In this variant they contend that
Congress's concerns about "continuation" and "survival" of local
broadcast applied only to those stations electing must carry; the health
of those broadcast stations not invoking must-carry is claimed to be
irrelevant to an evaluation of the health of local broadcast.3 A final
possible interpretation holds that Congress might have intended to
ensure that viewing areas across the country all enjoyed at least a
substantial number of broadcast signals; it is small solace to a viewer
in a location with few or no broadcast signals that viewers elsewhere
have plenty. I evaluate each of these interpretations in turn, both for
the likelihood that each is in fact what the Court embraced as an
objective substantial enough to justify must carry, and for the
possibility that each is really, rather than merely conjecturally, at stake.
1. The continued viability of broadcast as a whole
Sections 2(a)(10), 2(a)(12), and 2(a)(16) of the Cable Act, quoted
above, seem to assert on their face that the survival of local over-the-
air broadcast programming is in question. These legislative findings
emphasize the importance of a continuation of broadcasting and the
fear that without must-carry "the economic viability of free local
broadcast television and its ability to originate quality local
programming will be seriously jeopardized." Section 2(a)(16).
In fact the defendants unequivocally concede, in the briefs and in the
depositions of their experts, that the evidence they have introduced on
remand does not show that the health of the broadcast industry as a
whole is in danger.4 For example, the defendants' distinguished chief
expert, the economist Roger Noll, observed that he did not think that
must carry "in the current environment is properly characterized as
something that has to do with the viability of the entire industry."
Deposition of Roger G. Noll ("Noll Deposition") at 156. See also id. at
79 ("I do not believe that over-the-air broadcasting is going to
disappear because of the absence of 'must-carry'. If that's what the
sentence ["health of the industry"] is meant to imply, then indeed the
health of the industry isn't threatened."); Deposition of Harry
Shooshan, at 79 ("So do you need must-carry to support the health of
the broadcasting industry as [a] whole today, no."); Deposition of Jack
N. Goodman at 7 and 129 (agreeing that broadcasting was "fairly
healthy overall" and as of 1989, "the TV industry as a whole looking at
gross numbers was not in an economic decline").
The parties offer several means of empirically assessing broadcast's
health, all tending to vindicate the above statements. First, since the
mainstay of free commercial television's diet is the sale of airtime to
advertisers, changes in advertising revenue over time can reveal
whether broadcast is thriving. Second, changes in the overall number
of stations can be a rough proxy for whether the national broadcast
system is in ascendance, plateau, or decline. If the number of stations
has been holding steady or increasing, even in the period without must
carry, then it is difficult to see how the industry can be said to be in
danger. Third, the government suggests that profits for a particular
segment of the industry--UHF independents--are so abysmal as to put
the health of at least that segment in substantial doubt. Although this
latter data set relating to a special industry sector toes not directly
speak to the health of the industry as a whole, and does not appear to
be offered as a bellwether for other segments' futures, I treat it here to
consider whether it calls for any important qualification of defendants'
concession about the robust health of the industry overall.
(a) Total advertising revenue
Plaintiffs submitted sets of data from 1981 to 1991 from which gross
advertising revenues for broadcast, cable, and other industries can be
analyzed, see Time Warner Entertainment Company, L.P.'s Corrected
Appendix to Brief in Support of Its Motion for Summary Judgment
Exhibit ("Time Warner Ex.") 12, and defendants submitted the same
data, together with the consumer price index for the relevant years, see
Defendants' Joint Submission of Additional Evidence in Support of
Motion for Summary Judgment ("Defendants' Additional Evidence")
Vol. VII.W Exhibits 668 & 672. I have derived from them a table of
broadcast's total advertising volume in constant dollars during that
period, see App. #1, and a graph, Graph #1. In that ten-year period
taken as a whole, broadcast's overall gain in gross ad revenue was $3.7
billion in constant dollars.
After a rise in the early '80s, gross revenues were more or less flat
from 1986 to 1990, and fell off by about $2 billion from 1990 to
1991.5 In this pattern there are no extended declines, from which one
could draw a reasonable inference that the broadcast industry was in
jeopardy of losing its lifeblood. The only sharp decline is that of 1990-
91, congruent with the 1990-91 recession beginning in the second half
of 1990, cf. National Economic Trends, Federal Reserve Bank of St.
Louis, Oct. 1995 at 4; early in 1991 an official of the INTV (the
defendant trade association representing independent broadcasters)
attributed the nascent drop to the recession and concluded that "the
basic fundamentals of independent television are stronger than they
have ever been." Time Warner Ex. 5 (from TV Digest, Jan. 7, 1991).
The inference that broadcast is healthy, and not materially harmed by
cable, is further enhanced when the focus is expanded to look at
advertisers' expenditures on broadcast's competitors. The graph below,
Graph #2, shows expenditures on cable, broadcast, and broadcast's two
largest competitors throughout the period (newspapers and direct
mail), and all other modes put together.
First, it is apparent that in 1988-91, the period of broadcast's modest
decline of $2.9 billion (in constant dollars), the newspaper industry,
broadcast's twin heavy in the advertising world, suffered a similar drop
(actually $4.4 billion). And the total amount spent on advertising
across all industries dropped by $7.6 billion. In 1990-91, the year of
broadcast's adversity, newspaper also suffered a distinct drop while
direct mail and cable were only marginally higher. See App. #1.
Second, defendants have not even hinted at some theory as to how the
woes of newspapers, direct mail and "other" advertising venues could
be due to cable, and cable's diminutive status makes any such claim
implausible. For 1981-91 as a whole, broadcast gained $3.7 billion
over 1981's revenue to total $19 billion in 1991, while cable showed a
gain of $1.4 billion, taking its 1981 revenue of $150 million up to total
$1.55 billion in 1991. While cable's percentage gain was sharp, it
started from such a low base that its total impact was necessarily
modest. And if one looks to 1990-91, the year of broadcast's $2,000
million drop, there is only a $61 million gain for cable--obviously not
a serious explanation.
Interestingly, trends in cable advertising suggest that must carry has
little influence on the competition between the two industries for ad
revenue. One can usefully divide the period into two phases, 1981-85,
during which the FCC's must-carry regulations prevailed, and 1985-91,
the period after they were invalidated.6 In the first period the cable
industry's annual ad growth averaged $149 million per year; in the
second--when according to defendants cable was exploiting must-
carry's absence to leverage ad revenue from broadcast cable's average
growth was lower in constant dollars, $137 million per year. This
picture is confirmed when one puts the matter in terms of market share
and thus abstracts away the effect of overall changes in advertising
volume. Cable's market share increased at the rate of 0.14% per year
with must-carry ('81-'85) and 0.13% per year without it ('86-'91). App.
#1. Alternatively, as the Commission's so called Century's must-carry
rules were in effect from June 10, 1987 to December 11, 1987, see
Defendants' Additional Evidence Vol. VII.N Ex. 338,7 one might
divide the period into 1981-87 and 1988-91. Cable's average annual
gains in those periods were, respectively, $131 million and $158
million, the latter reflecting 1989's unusually high increase of $241
million.
I note at this point the defendants' argument that cable pulled its
punches in the must carry gap period, strategically refraining from
drops or refusals to carry in order to defuse the political pressure for
must-carry. Indeed, some officials in the cable industry trade
association actually exhorted cable companies to refrain from changes.
See, e.g., Defendants' Additional Evidence Vol. VII.N. Ex.321 (letter
from NCTA president urging cable operators to minimize channel
repositioning; ". . .a sensitivity to the political climate needs to be
shown . . criticism."); id. Ex. 330 ("By minding our social and political
P's and Q's, we will be better equipped to deal with the touchy
situation that will result with all of these deregulatory events
happening at the same time."); id. Ex.333 (after D.C. Circuit struck
down FCC's must-carry rules in Century, NCTA president states that
"[i]n the interim, and having in mind that this decision may well be
appealed, we will advise our members generally to behave as if the
carriage rules just struck down were still in effect."); id. Ex. 344
Viacom cable executive insists that local systems seek central approval
before dropping a broadcast station "[s]o that we do not become an
example of demonstrated abuse and thereby the justification for
reregulation").
But I find these statements an inadequate reason to distrust the record
before us. First, defendants offer not a clue as to how the cable
industry as an aggregate would overcome obvious collective-action
problems. While the industry as a whole might benefit from such
strategic self-restraint, one individual cable system out of more than
10,000 could hardly expect that its snipping off a broadcast station or
two would be likely to incur congressional wrath in the form of
legislated must-carry. Second, to the extent that the constitutionally
fatal aspect of must-carry is the absence of evidence of any visible
threat to broadcast, then the rules would become constitutional the
minute the industry was visibly threatened. Thus, under Turner, and
assuming no other constitutional infirmities, the cable industry will
have exactly the same incentive to hold back as it had in the 1985-91
period. Assuming the industry has the capacity to coordinate its self-
restraint (as defendants must), it will have to do so into the indefinite
future in order to avert enactment of a valid must carry.8
(b) Number of broadcast stations
Another way to measure the health of the broadcast industry is through
the number of stations. More stations presumably translate to more
choices for viewers of over-the-air television. The Supreme Court
found it significant that at the time it reviewed the case there was no
evidence to show that "local broadcast stations have fallen into
bankruptcy, turned in their broadcast licenses, curtailed their broadcast
operations, or suffered a serious reduction in operating revenues as a
result of their being dropped from, or otherwise disadvantaged by,
cable systems." Turner, 114 S. Ct. at 2472. The first two inquiries
(bankruptcies, abandonments of licenses) address the total amount of
broadcasting available throughout the nation, and an analysis of the
number of broadcast stations over time suggests why the government
on remand has not offered an overall count of the number of stations
that have fallen into bankruptcy through noncarriage (relying instead
on "evidence before Congress" pertaining to twenty-three independent
stations, Plaintiffs' Joint Response to Defendants' Proposed
Undisputed Facts ("Plaintiffs' Fact Response") 1 65). Indeed,
defendants have conceded their inability to show that any station,
commercial or public, turned in its license in the period without must-
carry. See Defendants' Response to Plaintiffs' Joint Statement of
Undisputed Facts Established by the Record ("Defendants' Fact
Response") Paras. 57, 59. I have generated the following graphs,
Graph #3 and Graph #4, depicting the change in the number of
broadcast stations from 1981 tO 199l and more broadly from 1953 to
1994. They are based on data provided in the Declaration of Stanley
M. Besen ("Besen Decl."), Ex. 5, which defendants have not contested
in this respect.
These data show that the number of stations grew from 1,065 in 1981
to 1,532 in 1994, with a net growth in stations every year. In fact, the
average net growth of 41 stations per year during must-carry's absence
from 1986-91 more than kept pace with the average growth of 39.4
stations per year from 1981-85, with must-carry in effect. If one takes
1981-87 vs. 1988-91 as the appropriate periods, the net annual
additions of stations are 46 and 30, respectively. Although this
suggests a lesser growth rate in the must-carry gap, annual growth of
2-3% in number of supplying firms is hardly anemic for a mature
industry.9 Over the whole period 1981-91, the broadcast industry
witnessed a 39% expansion of its total number of stations. Congress
could not have reasonably inferred from this that the industry was in
decline or even in jeopardy of any material decline. Although the data
on station increase comes from the Television and Cable Factbook by
way of plaintiffs, defendants do not dispute the increase. Rather, they
turn to the weakest subset of stations--UHFs--and point to a decline in
the growth rate in the period without must-carry. Graph #4 presents the
UHF stations broken out from total stations.
Besen Decl. Exs. 5-6. In the four-year period 1981-85, with must-
carry, there was an average of 39 new UHF stations per year, as
against an average of 35 new UHF stations per year in the five-year-
period 1986-91, without must-carry. From this the defendants
conclude that "this stunted growth of broadcast stations takes on
greater significance when contrasted with the vast potential for
broadcast television to expand." Memorandum of the United States
and the Federal Communications Commission in Support of Their
Motion for Summary Judgment ("Government Brief") at 36-37
(emphasis added). 10 But the decline in growth rate is so modest, and
the persisting actual growth so robust, that there can be no real claim
that the numbers prefigure an eventual leveling off of the actual
number of stations on the air waves, much less a decline.
(c) Profits
The parties sharply dispute the relevance of different data sets that
arguably relate to the prosperity of broadcast stations. The plaintiffs
call cash flow margins the "predominant industry yardstick" and point
to near-universal positive cash flow margin figures for stations both
with and without must-carry. See Plaintiffs' Fact Response 1 51.
Defendants object that since many stations can have low (but still
positive) absolute cash flows but high cash flow (percentage) margins,
absolute cash flow data may be deceptive.1l See Defendants' Fact
Response 1 67.
The defendants, by contrast, direct us to median profits--a number that
plaintiffs question, because, as they observe, it is subject to
manipulation as station owners may deplete profits by payments to
themselves in the name of salaries or perks. It is, moreover, a function
of accounting conventions that may not capture essential
characteristics. But one need not select among the parties' respective
analyses, because even the defendants' favorite metric seems to afford
them little support. They point to the dismal 1991 figures for UHF
independent stations, which as a class are the least prosperous of TV
stations. See Opposition of NAB and INTV to Plaintiffs' Motions for
Summary Judgment ("NAB Opposition") at 774. They show pre-tax
profits in dollars by percentile as follows:
PERCENTILE..........25%...................50%............
090)...........419, 613
Defendants' Additional Evidence VII.W, Ex. 669. In other words, the
median station was showing a pre-tax loss of over $400,000 in 1991.
Although the defendants do not offer similar figures for a succession
of years, which might enable one to discern patterns with some clarity,
they do supply comparable numbers for 1987, for half of which there
was no must carry and the other half must-carry under the "Century
rules," i.e., those in effect in the last half of 1987 and invalidated by
the D.C. Circuit in late 1987. See Century Communications Corp. v.
FCC, 835 P.2d 292 (D.C. Cir. 1987), clarified, 837 F.2d 517 (D.C. Cir.
1988). Putting both figures together one gets:
Percentile..........25%.........50% (median).....75%
1987............(2,542,540).....(1,207,525)....74,802
1991............(1,748,130).......(401,090)...419,613
Defendants' Additional Evidence Vol. VII.W, Exs. 669, 670. In other
words, in the period from the end of the Commission's must-carry
rules to the year before the onset of congressional must-carry, the
profit picture of broadcast's poorest relations improved markedly.
Average pre-tax profit of the strongest 25% more than quintupled,
losses of the median station fell by more than two thirds, and losses of
the very weakest 25% fell by about a third. This improvement in the
profit picture occurred, it should be recalled, in a period when the
overall number of stations grew by over 8%, and the number of UHF
stations grew by over 14%. One might expect per-station profit to fall
in an era of such expansion--at least where, as was the case, aggregate
advertising revenues were stable or declining. (See Graph #1.) Indeed,
the chairman of the INTV observed that part of the problem of a
softened advertising market for these stations was that there are "too
many hogs at the trough." Time Warner Ex. 5 (from TV Digest, Jan. 7,
1991). See also Id. (investment analyst observes that some individual
independent stations may not have done as well because of the
increase in the total number of stations); Defendants' Additional
Evidence Vol. VII.M, Ex. 288 at 38 explains that from 1986 to 1988
aggregate viewership of independent stations increased but revenues
dropped, finding an explanation in "the increasing number of
independent stations, which kept viewership per independent station
low.").
While the parties have offered no explanations of the low profitability
of independent UHF stations as a general matter, the defendants'
offerings on profitability do nothing to sustain their burden of
identifying the absence of must carry as a threat to broadcast's overall
health.
If, then, the question squarely put before us by the Supreme Court--
"whether the Government has adequately shown that the economic
health of local broadcasting is in genuine jeopardy and in need of the
protections afforded by must carry, Turner, 114 S. Ct. at 247 is, at it
appears on its face, a question about whether the broadcast industry is
in danger of failing or in peril of a downward spiral, the answer from
both parties, and that indicated by the evidence, is No.
2. Maximum possible expansion of broadcast
The government claims that the Act's retransmission consent
provisions, 47 U.S.C. 325(b), through which a broadcast station can
opt to forego must-carry and instead withhold its carriage from a cable
company until some form of payment is negotiated, "alone evidence
Congress's understanding that the broadcast industry as a whole would
not perish absent the must-carry rules." Government Reply Brief at 3.
The government accordingly offers a different interpretation of
promoting the "continued availability" of broadcast programming: that
the substantial interest to be tested is whether, without must-carry,
broadcast can expand as much as with it.
Thus, extrapolating from the Court's remark, "Likewise, assuring that
the public has access to a multiplicity of information sources is a
governmental purpose of the highest order," Turner, 114 S. Ct. at
2470, defendants assert that must-carry can be upheld if appropriate to
ensure that those without cable have access "to the greatest possible
multiplicity of broadcast outlets." Government Reply at 5 (emphasis
added). I would reject this analysis. I do not read the Court's statement
as meaning that we are to find that lack of must-carry impairs the
industry's health merely on the basis of evidence that its presence
would bring about a larger industry, measured by number of stations,
or a more prosperous one, by any metric. If the Court meant that
Congress had a substantial interest simply in increasing the prosperity
of a significant number of TV stations (and thus, depending on FCC
licensing policy, possibly increasing the overall number), it surely
would have declared in Turner that Congress could reasonably infer
such an effect; it would not have thought a remand necessary.
Nor do I accept defendants' alternative
formulation--that the Court meant us to examine whether must-carry
would, at the margin, tend to produce a "higher quality" broadcast
industry. The argument that must carry would do so is simple.
Increased potential audience implies an increased audience, and an
increased audience implies both a greater ability to spend on
programming (because of larger revenues) and a greater willingness to
do so (because each dollar invested in program quality will, with a
larger audience, yield a larger return. See Government Brief at 38-39;
Declaration of Roger G. Noll ("Noll Declaration") 36 ("[C]able
carriage is positively associated with station revenues and with
improvements in programming"). Again, the intuitive obviousness of
these results precludes the possibility that the Court remanded the case
to us to discover them.
Defendants alternatively invite us to look to the total number of
stations allotted to broadcast by FCC fiat, arguing that Congress might
have been concerned by a growth in the number of vacant channels;
indeed, the number of vacant UHF channels increased from 157 to 198
between June 30, 1989 and June 30, 1991. Government Brief at 37
n.81. But, as detailed above, the number of operating UHF stations
increased substantially in that period, so that the claim based on vacant
channels rests solely on the government's own decisions to increase the
number of theoretically available channels.12 Even if the spectrum
were filled with broadcast stations, however, the government
hypothesizes further possible growth of the broadcast industry, since
total broadcast viewership could grow even if the number of stations
remained constant. Here the baseline against which the government
measures the need for must carry is not (1) broadcast in the absence of
anticompetitive behavior by cable, nor even (2) broadcast in the
complete absence of the cable industry, but rather is (3) the maximum
broadcast audience growth, including the component that cable has
affirmatively made possible by enabling broadcast signals to be carried
farther and more clearly than they could over the air:
The extensive cabling of the nation extended the reach of UHF stations
because it overcame a substantial part of the "UHF handicap." UHF
stations had difficulty accessing all of their potential audience over the
hour because of the inferior propagation characteristics of the UHF
band .... When viewers subscribe to cable, the UHF stations were
received with greater clarity, and sometimes on a valued lower channel
number. As a result, they reached a wider audience, inducing more
stations to enter the industry .... Noll Declaration 1 40. See also
Declaration of James N. Dertouzos ("Dertouzos Declaration") 1 31
Local broadcasters are likely to benefit from an expanded audience due
to enhanced signal reception and access to wider geographic markets).
Thus, because cable enables its subscribers to receive "broadcast"
signals of higher quality than they could otherwise obtain, the
government argues that "cable carriage expands the reach of local
broadcasters and contributes to the health of local broadcasting."
Corrected Memorandum of the United States and the Federal
Communications Commission in Opposition to Plaintiffs' Motions for
Summary Judgment ("Government Opposition") at 91 (emphasis
added). The government employs parallel reasoning to defend the
must- carry provision that forces many cable operators to carry UHF
stations on a lower- numbered, and thus apparently more prominent,
channel position than the UHF station's own on-air position. See 47
U.S.C:. 534(b)(6); Defendants' Joint Submission of Congressional
Record in Support of Motion for Summary Judgment ("Defendants'
Record") Vol. I.R, Ex. 85, CR 11503 (UHF station chafed at having to
negotiate with a cable system for a valuable lower channel, absent
must carry's forced positioning provision). These theories claim, then,
that it is not enough for broadcast to be a net gainer from the presence
of cable (though, to be sure, defendants offer no econometric evidence
indicating the net effect); the harm to be cured is simply loss of the
benefits that must-carry would afford when added to the other benefits
afforded by cable in its absence.13 This "harm" of course is real by
definition, and thus, again, cannot be what the Supreme Court intended
for us to assess on remand.
3. The health of stations electing Must-carry
Defendants appear to propose another concept of the interest to be
advanced by must-carry, namely, the economic health of those stations
that elect must-carry. They argue that the assessment of harm from
must-carry's absence must be confined to broadcast stations that would
presumably be denied carriage or dropped absent must- carry since
they currently rely upon it.14 F or example, to counter plaintiffs'
evidence concerning gross broadcast advertising revenue across all
stations from 1985 to 1991, defendants respond that these numbers
include the revenue of network affiliates, which "are likely to be
unaffected by the must-carry regime." Defendants' Fact Response 1 62.
See also id. 173 ("[A] general statistic referring to the entire industry is
irrelevant, given the marginal financial condition of UHF independents
(the stations most often denied carriage absent must-carry)." Indeed,
first the defendants reject statistics indicating the health of network
affiliates because they "generally opted for retransmission consent, and
the stations most at-risk absent must carry are UHF independents and
public stations," id. 1 65. They then reject statistics regarding the
health of UHF independents in general: "[I]t is not the health of the
average independent station that is at issue here, it is the ability of
stations that have been denied carriage or repositioned to provide the
same quality and quantity of programming ....". Id. at 66.
By narrowing the field of stations to the most vulnerable, the
defendants attempt to identify stations whose financial health is truly
hanging in the balance--those for which the added subsidy of free
cable carriage could arguably make a critical difference. Again, the
unremitting growth in the number of even UHF independent stations
both with and without must-carry, see section III.A.1.(b) above, and
the improved profit picture for them on defendants' own data from
1987-91, see section III.A.l.(c) above, belie the notion that significant
numbers of stations are in jeopardy or that must-carry could greatly
affect their fate on the margin one way or the other. All defendants
have demonstrated is that, all else being equal, forced cable carriage is
at least of some benefit to the broadcast stations so carried. But this
alone can vindicate Congress's interest only if we take the valid
interest to be, circularly, maximum possible expansion for broadcast.
See section III.A.2. above.
Defendants attach great importance to the Court's observation in
Turner that the government's claim that must-carry was necessary to
protect the viability of broadcast television rests on two propsitions:
(1) that unless cable operators are compelled to carry broadcast
stations, significant numbers of broadcast stations will be refused
carriage on cable systems;
and (2) that the broadcast stations denied carriage will either
deteriorate to a substantial degree or fail altogether. 114 S. Ct. at
2471.
A natural reading of this passage is that the Court reasoned that must-
carry would be justified if its absence would cause the deterioration or
failure of so many stations that one might infer a risk to the viability of
broadcast television. Defendants reject any such reading, disdaining
(as we have seen) any burden to show that broadcast television was in
any jeopardy at all. Rather, they argue that evidence showing that the
absence of must- carry materially injured a lot of stations would in
itself show the requisite need for must- carry. Accordingly they point
to statements "before" Congress (i.e., either made to a congressional
committee or made to the FCC and deemed before Congress), in which
individuals associated with the broadcast industry or with particular
stations made statements asserting harm to a station from the absence
of must-carry. See, generally, Defendants' Joint Statement of Evidence
Before Congress.
Plaintiffs have sought to respond as to each station identified by
defendants in briefs or evidence as having suffered--142 commercial
television stations (out of a total of 1138 in 1992) and 141 public
stations (out of 368). See Appendices to Time Warner Reply
Memorandum in Support of Motion for Summary Judgment. The
number 283 is surely not insignificant, so that, if (1) defendants are
right that the Court used "significant" in a sense completely
disembodied from the "viability" of broadcast, and (2) the assertions
"before Congress" were valid, defendants would prevail on this point. I
have already explained why I believe the first necessary condition is
not satisfied; I now comment briefly on the implausibility of the
second.
In its Broadcast Station Rebuttal Time Warner meticulously recites
evidence relating to the nearly 300 stations that at one point or another
defendants claimed were victims of the absence of must-carry. For
example, one station said to have "gone dark" because of being denied
carriage appears actually to have gone dark for the very understandable
reason that its transmitter was hit by a tornado. See Time Warner
Broadcast Station Rebuttal at 134-35. Moreover, despite the station's
travails with cable, its owners found a buyer at the price of $1.5
million (licenses, of course, are issued free) in May 1990--the depths
of must-carry's absence. Id.
If defendants' station-by-station rebuttal is accurate, see Time Warner
Reply Memorandum in Support of Motion for Summary Judgment,
Appendices A & B, for a summary, scarcely any of the 283 alleged
victims has been seriously jeopardized by the absence of must-carry.
Defendants make some attempt at a station-by-station refutation, see
Response of the United States and the Federal Communications
Commission to Time Warner Entertainment Company, L.P.'s
Broadcast Station Rebuttal, while continuing to point to the assertions
"before Congress." See Government Reply at 12 n.17. I have not
examined the station-by-station data in enough detail to say whether,
under the standards of Anderson v. Liberty Lobby, Inc, 477 U.S. 242,
247-52 (1986), summary judgment in favor of plaintiffs would be
proper on this issue. I can, however, unequivocally say that plaintiffs
have at a minimum put the individualized victimization accounts into
material dispute, so that if defendants' reading of the Court's
"significant numbers" passage is correct, a trial would be necessary to
apply that reading.
In considering whether the data on drops and carriage refusals tend to
demonstrate a threat to "the continued viability of local broadcast
television," Turner, 114 S. Ct. at 2470, I note that the defendants
repeatedly characterize the stations under threat of drop--i.e., those
likely to elect must-carry--as marginal. See, e.g., Noll Deposition at
17- 18; id. at 60 (absence of must-carry would lead to dropping of
stations of "relatively low audience rating"); id. at 221-22 (the less
popular a station the more important is must- carry to its welfare); id.
at 307-08 (nothing in his declaration or testimony says cable systems
will drop the "more popular or popular over-the-air televisions
stations"); Government Reply at 10 ("these same stations are
particularly weak financially"); Government Brief at 35 (discussing
"marginal financial position of these stations"). Indeed, they stress
their experts' observations that the audience appeal of the stations'
programs (whether measured in number of listeners or intensity of
preference) will not be enough to seriously enhance a cable operator's
subscriber revenue (via more subscribers or higher fees). See, e.g.,
Noll Deposition at 663; id. at 142 (drop of third noncommercial outlet
or weak UHF station will not affect decisions to subscribe); id. at 166
(similar); Second Declaration of Tom Meek 1 34. Plaintiffs have
offered evidence that the average cable subscriber was served by a
cable system carrying local broadcast stations accounting for about
97% of television ratings in non-cable households. Besen Decl. at 41;
Plaintiffs' Joint Statement of Undisputed Facts Established by the
Record ("Plaintiffs' Facts") 1 9. While defendants bristle at this
statistic, and suggest that there are defects in the type of Nielson data
that support it, Defendants' Fact Response 11 7-9, they offer no
alternative figure. And their own contentions--as to the marginality of
electing stations and as to the improbability that they would beef up
subscriber revenues--implicitly recognize that what is at stake without
must carry is a diminutive share of total television viewing.
We also note that defendants had claimed that without must-carry
cable operators often substituted even more poorly-rated cable
networks for broadcast stations that admittedly were already-poorly-
rated. Their first attempt at demonstrating such a trend (presumably to
show an anticompetitive motive in such a substitution) neglected to
account for the fact, all else being equal, a cable network carried by a
given system will have lower ratings than a parallel broadcast station
on that system because the broadcast station is additionally available to
the 40% of viewers in the area who do not subscribe to cable. See
Plaintiffs' Facts 1 176, 177. In endeavoring to correct for this,
defendants' expert Tom Meek tried to compare (as we read his
declaration) the ratings on cable of the least popular cable programs
with the ratings on cable of broadcast stations added pursuant to must
carry, and found that the must-carry stations had ratings higher than
many of the low-ranked cable programs. See Reply Decl. of Tom
Meek at 11-12. But this comparison ignored the issue of what fraction
of cable systems carried the cable programs being compared with
must-carry broadcasting. Government counsel acknowledged at oral
argument that the comparison still suffered apples/oranges problems,
saying in defense that they had used the data they had. See Tr. 167;
Defendants' Fact Response 1 177. Defendants now assert only that
there is no evidence that the must-carry programs "are less popular"
than the marginal cable programs that they replace. Id.
Ultimately the parties seem to agree that, for both marginal cable and
broadcast stations, operators' decisions on what to air will often not
rest on either's meager ratings. The First Amendment right at stake is
the operators' freedom to air what they choose--broadcast or cable--
having to answer only to their subscribers, not the government. The
risk that cable operators may exercise that right for anticompetitive
purposes may well permit government intervention, see section m.B
below, but in the absence of a threat to broadcast's general viability
there is no other ground permitting government veto power over a
cable operator's selection of scrvices.
4. Survival of broadcast across all geographic markets
A congressional interest in preserving access to free television
programming for the 40% of Americans without cable, see Turner, 114
S. Ct. at 2461, might be thought in jeopardy if areas with only a
handful of stations were threatened with the loss of just one. In such a
situation, the harm to a diversity of viewpoints--at least for the people
in those areas--would be far graver, and therefore worthy of remedial
intervention, than if carriage drops and refusals, and their adverse
effects, were concentrated in busy television markets.15 Or, to look at
the other side of the coin, it would be hard to call the local broadcast
unhealthy, or to find its health at risk, if one found that all localities
were enjoying the benefits of a significant number of stations.
As it turns out, though, if there is any pattern to carriage refusal, it is
concentrated in the most crowded broadcast markets. See Defendants'
Fact Response 1 11. For example, the government cites an FTC study
which found that the proportion of local broadcast stations carried fell
as the number of available local signals increased. Government
Opposition at 15. The study found that when three local signals were
available, all were carried; when nine local stations were available,
about six were carried. Id. Thus, those areas with the fewest broadcast
stations have the greatest proportion of voluntary carriage and the least
need for forced damage. It is only those areas in which the airwaves
are relatively busy--areas in which concern about the health of local
broadcasting would be at a minimum--that cable carriage becomes an
issue. Where stations are few and the loss of only one theoretically
significant, the defendants' figures indicate that cable carries the
signals voluntarily. Further, from 1981 to 1992 not one local television
market out of the 209 geographic ADIs experienced a decline in the
number of broadcast stations available. Besen Decl. Etc. 11. From
1987-92, the years of falling advertising revenues and the absence of
must-carry, the Boston ADI dropped from 15 to 13 stations (it had 9 in
1981) and four other ADIs lost a single station. The other 204 ADIs
had either the same or more stations. Id. The continued overall
broadcast station growth during what has been claimed to be the
industry's darkest hour, then, cannot be said to conceal failures in
certain geographic areas that are offset by growth in others.
Summary
I conclude that there is insufficient evidence from which Congress
could conclude that "broadcast television is in jeopardy," Turner, 114
S. Ct. at 2472, under any interpretation of that phrase consistent with
the Court's analysis. Only if the government's interest is taken to be the
maximum growth of broadcast, or enhancement of precisely the
stations that would elect must carry against the will of cable operators-
-intepretations of Turner's mandate that are manifestly implausible--
can the posited harms be viewed as real rather than conjectural.
B. Unfair Competition
The defendants assert two related bases for inferring that cable
operators will make "unfair" or anticompetitive carriage decisions at
the expense of broadcasters. Both depend on the characteristic
monopoly of cable franchisees over provision of cable in their areas.
The first theory looks at the combination of that market power with the
vertical integration between operators and cable programmers, and
argues that vertical integration will lead operators to unduly favor their
affiliates' programming over that of broadcasters. The second theory
relies solely on the typical cable operator's monopoly over cable, and
argues that various features--ranging from cable operator hopes of
predation to artificial distortions in the treatment of advertising--will
thwart competition and deny broadcast consumers the access to
broadcast that they would enjoy in a perfectly competitive market. I
here address these claims one by one. I conclude that--at least without
trial--it is impossible to preclude the possibility of a risk of
anticompetitive behavior, the correction of which would constitute a
substantial interest. This would not prevent me from granting summary
judgment for plaintiffs, however, for I find in section IV that must-
carry is plainly not a remedy narrowly tailored to any such risk.
1. Anticompetitive behavior due to vertical integration
Defendants argue that a vertically integrated firm controlling a
monopoly bottleneck may not make efficient decisions about what to
let through the bottleneck, unduly favoring the products of its own
affiliates. Thus, they say, unaffiliated suppliers (here creators of
programming, including broadcasters) will be disadvantaged in trying
to reach the market on the other side of the bottleneck. For purposes of
this analysis I accept not only the undisputed point that cable operators
characteristically have a monopoly over provision of cable services in
their areas, but also the more questionable proposition that cable
operators have a monopoly over the provision of video signals to
households subscribing to cable. As a person who subscribes to cable
does not, in fact, ipso facto lose access to over-the-air television, but
can continue to reach it merely by operating a so called "A/B" (or
input selector) switch and by maintaining whatever antenna may be
necessary (see section IV.B.2 below), the latter proposition would
require additional evidence. I nevertheless indulge it in favor of
defendants for these purposes.
Defendants' bias argument runs as follows. First, a significant number
of cable operators are affiliated with programming networks. See, e.g.,
Government Reply at 30- 31 (saying that as of 1994 operators serving
more than 70% of cable subscribers held vertical interests in cable
programmers); Plaintiffs' Fact Response 1 88; see also id. 11 25, 26
(indicating that cable operators have ownership interests in 39 of 68
nationally delivered cable video networks). Second, to a 100%
vertically integrated operator/programmer the real marginal cost of
using nits own" program is close to zero: it costs almost nothing to
make another copy (any stated charge is a wash on the firm's collective
books), and use by the affiliated cable operator does not in any way
limit the program-producing branch's opportunities to sell identical
copies of the same program to other operators. The cost of purchasing
similar programming from an independent network would be positive,
even though the independent network can also make extra copies of its
already-produced programming at near-zero cost. All else being equal,
this appears to tilt the balance arbitrarily in favor of the affiliate's
programming. For example, as between programming produced by an
affiliate that would boost subscriber revenue by 100 and that produced
by a non-affiliate that would boost revenue by 120 but was priced at
30, the cable operator might well choose the affiliate's programming
over that of the unaffiliated competitor,16 with a possible loss to
consumer welfare that is not offset by any cost-saving anywhere else
in the economy. See Noll Decl. 1 17; cf. Dertouzos Decl. 1 6.
As just mentioned, the competing independent programmer's marginal
cost of allowing distribution by any one cable operator appears at first
blush also to be zero. But a programming firm selling all its products
at marginal cost would not recover its total costs. To stay in business
the independent must secure some sort of positive price, so it will
necessarily charge such a price. That accounts for the hypothesized
price of 30 in the example above. The careful reader, at this point, may
ask why the unaffiliated supplier does not simply lower its price to this
firm to somewhere between 20 and zero. At any such price both parties
will gain. The unaffiliated supplier will make more money than
without the sale, and, since its product contributes 20 more to revenue
than does the inside product, the vertically integrated cable operator
will also improve its position. Defendants do not explicitly address this
question, but I will try to supply a response. Clearly the transactions
costs of the hypothetical bargain may often be high. The outside
supplier will typically not have reliable information on the extra value
that its product contributes over and above the integrated firm's inside
product, so the relationship invites bluffing that may obstruct a
bargain. Moreover, the outside firm will reasonably fear getting a
reputation for undue willingness to cut its prices; if it keeps getting
chiseled down to the environs of marginal cost (i.e., zero), its hopes of
being a profitable enterprise will fade.l7
Before complicating the example with advertising (an additional
feature of defendants' analysis), one should reexamine this account.
Because by hypothesis the marginal cost of producing all copies after
the first one is about zero for any producer (regardless of integration),
one knows that the program-producing industry will not survive at all
on a stand-alone basis unless firms sell above marginal cost. Yet, as
soon as one recognizes this, one is saying that the conditions for
efficiency, in a first-best sense, cannot possibly be satisfied. One
should, therefore, be extremely cautious about concluding that the
complications added by vertical integration will necessarily make
matters worse. See R. G. Lipsey & R. Kelvin Lancaster, The General
Theory of the Second Best, 24 Rev. Econ. Stud. 11, 11 (1956); cf. 3
Phillip Areeda & Donald Turner, Antitrust Law 1 725c (1978) (vertical
integration of successive unregulated monopolies likely to improve
welfare).
Defendants press a particular version of the integration-bias argument
that focuses on cable operators' quest for advertising revenues. This, of
course, is the setting of most interest to broadcasters, because, by
tradition at least, they gain their revenue from ads, not from sale of
programming.18 For example, in some cases programmers sell
programs that include ads; the programmers, not the operators, are paid
for the ads by advertisers on the basis of expected viewership. (In fact
networks and operators make varied arrangements for allocating the
returns from advertising.) See Noll Decl. 1t 15-17, 23, 24. A fully
integrated system will reap the revenues for ads sold by its
programming division if its conduit division runs the program (and
thus will count them as a plus factor in selecting programming),
whereas the system would not reap equivalent revenues received by an
unaffiliated program supplier for ads contained in that supplier's
programs. Id.
In a case where the affiliate's program would yield the network 100 in
subscription revenue and the non-affiliate's 120 (i.e., the same numbers
as in the earlier example), and the outside alternative is offered at 30,
and in which the affiliate's program would generate 20 in ad revenue
and the non-affiliate's 30, the system is likely to choose the affiliate's
program because this allows it both to acquire the program at no cost
and to capture the ad revenue associated with the program. But by
hypothesis the affiliate's program still has less viewer appeal (as
measured by subscribers' willingness to pay and to submit to
advertising).
This second example appears to add nothing material to the earlier one.
Ad revenue is largely a function of viewership (see, e.g., Noll Decl. 1
36), itself a function of program popularity, and is thus simply one
way of realizing the return on the creation of programs. In this latest
example the outsider's program is more attractive than the inside
alternative (by 20), yet the firm may prefer the inside product. The
main difference is that both products, besides adding 100 and 120 to
subscriber revenues, are so appealing that they will do so even though
the viewers must submit to substantial advertising.
But the ad revenue's apparent enhancement of the inside product's
advantage is an illusion. The outsider, in the hypothetical, has simply
withheld a portion of the product's value, just as would an auto dealer
who offered a car for sale without wheels. As moderately alert
customers of the auto dealer would take that into account in agreeing
on a price, so would our integrated firm. The range of possible
bargains between the parties is essentially unchanged. Thus, if the
outsider agrees to allow the integrated firm to reap the ad revenue,
both of the parties can (as before) improve their positions by any sale
in the range of zero to 30. (E.g., at 10, the integrated firm gets 120 in
subscriber revenue and 20 in ad revenue, minus 10 paid the outside
supplier, thus doing 10 better than if it used its own programming.) If
the outsider insists on keeping the ad revenue, i.e., is already 30 ahead,
then the potential gain to the integrated programmer/operator from
buying outside drops by 30, so that it must be paid something between
30 and zero.19
There is considerable question whether the alleged "bias," once
analyzed, is actually a social problem at all. The orthodox thinking on
vertical integration by an
The Cable Act added a complication by requiring that a must-carry
station's material be used without change and by barring any payment
to the cable operator for carriage. See 47 U.S.C. SS 543(b)(3), 5351);
see also part m.B.2(a) below. But as Congress cannot invoke a
problem created by its remedy as a justification for the remedy, these
complications are not pertinent. unregulated monopoly is that such
integration normally adds nothing material to the distortions implicit in
the monopoly itself. A monopoly is able to achieve a single monopoly
profit on its sales, and its ownership of resources supplying an input
normally has no bearing on the extent to which the price of its final
product will exceed the competitive price. See 3 Areeda & Turner,
supra., 1725. Indeed, vertical integration between a monopolist and an
imperfectly competitive upstream industry may reduce the economic
distortions attributable to the monopoly, as the integrated firm will
base its output decisions on true calculations of the marginal cost of its
inputs, whereas a separate monopolist would base its decisions on cost
figures inflated by the independent supplier's selling at prices
reflecting its need to earn a profit on a stand-alone basis. Id. 1 725c.
Here, however, in view of the special importance Congress attached to
increasing the range of programming suppliers able to reach the
viewers, see, e.g., section 2(a)(6) of the 1992 Cable act ("There is a
substantial governmental and First Amendment interest in promoting a
diversity of views provided through multiple technology median), the
evidence might support a finding that the alleged "bias" constituted a
market distortion in whose possible correction there might be a
"substantial governmental interest."
The plaintiffs contend that any such bias of cable operators in favor of
affiliates is entirely theoretical and that the evidence shows that cable
operators have in fact displayed no bias against broadcasters. They
point to the finding of defense expert Dertouzos that one study
supplied no statistically significant evidence that a vertically integrated
operator is less likely to carry a broadcast station than an unintegrated
one. See Defendants' Fact Response 1 102; Dertouzos Rebuttal Decl.
11 l(a), 3-11. The defendants, however, point to instances suggesting
that the bias is at work, such as the overwhelming adoption of a TCI
network by TCI systems, as opposed to radically fewer adoptions by
non-affiliates. Government Opposition at 21; see also Noll Decl. 11
18-19 (describing studies finding that vertically-integrated cable
systems tend to favor their own affiliates in deciding which channels to
carry).
Moreover, because of the background fact of government regulation of
cable's rates, vertical integration poses a clear risk to a substantial
interest. A vertically integrated monopolist subject to price regulation
may be able to disguise its true costs by slipping ones that in reality
belong to the upstream market into its apparent costs in the regulated
monopoly sphere, thereby inducing the regulators to raise its rates.
Since regulation is presumably aimed at holding the monopolist's
prices below the profit-maximizing level, this price increase nets the
firm additional profits (i.e., the net gain per sale will not be fully offset
by lost sales). See 3 Areeda & Turner, supra, 1 726; Roger Blair &
David Kaserman, Antitrust Economics 290 (1985). Further, on a
widely held view, the firm is likely to use these profits to undercut
unaffiliated upstream suppliers. See Daniel F. Spulber, Deregulating
Telecommunications, 12 Yale J. Reg. 25, 60 (1995)./20 To put this
into the cable context, the argument would be that vertically integrated
cable companies would gain an unjustifiable competitive edge on
unaffiliated programmers (including broadcasters), to the detriment of
viewers' ability to choose quality programming.
Thus I conclude that Congress could reasonably believe cablecasters'
vertical integration with programmers constituted a problem--
especially if one takes into account the special congressional concern
for "promoting a diversity of views" and the price- regulated status of
cablecasters--for which it might seek a fix.
This finding in favor of defendants should also apply to must-carry for
public television stations. Here the analysis is slightly different,
because public stations do not rely on "ads" in the conventional sense
of the term. Apart from their government- provided subsidies and
foundation grants, they depend for revenue on viewer contributions.
But, as is true for commercial television and its ad revenue, the yield in
contributions is necessarily dependent on the number of viewers and
the intensity of their preference for the programs. There is no reason to
doubt that, insofar as there is a risk that cable operators may
disadvantage unaffiliated programmers for the reasons discussed
above, parallel reasons apply for public television, to the possible
detriment of public stations and their viewers.
2. Anticompetitive behavior due to local monopoly regardless of
vertical integratlon
Defendants also argue that even
non-vertically-integrated cable operators will unfairly discriminate
against broadcasters. Such discrimination might happen in two ways,
the first grounded in broadcast's potential as a programming provider
to cable, the other in broadcast's competition with cable as an alternate
video conduit. First, because cable programmers can bring "ad avails"-
-blank spots within a program into which the cable company can insert
ads--to the carriage negotiating table while broadcasters cannot, cable
operators will, as defendants see it, improperly favor the cable
programmers. See Noll Decl. 1 24. Second, broadcast stations and
cable operators are in competition. By denying carriage to a broadcast
station, an operator can limit the station's audience, thereby reducing
its potential to earn ad revenue. To the extent that ad revenue dries up,
the quality of the station's programming may suffer, and some viewers
may switch to cable. At the limit the station will be driven out of
business, again to the potential profit of the cable operator. I address
these issues in turn.
(a) Independent programmers might outcompete broadcasters for
access
There are a variety of ways in which the manager of a television
conduit--broadcaster or cable operator--might choose what
programming to air. Some programs or complete channel feeds will be
so popular that conduits will be willing to pay for them. Both cable
operators and broadcasters do so frequently, and the parties agree that
programming purchase costs turn out to be a large part of the typical
broadcaster's budget. Plaintiffs' Fact Response 1 68. Since broadcasters
are programmers, they are also in the business of selling programming.
Broadcasters nowadays do so regularly--whenever a broadcast station
demands retransmission consent before permitting a cable operator to
air its programming. The conduits expect to cover the costs of program
acquisition by various means. Cable operators may expect to cover
them through enhanced subscriber revenue, either by an increase in the
number of subscribers or an increase in per subscriber fees or both.
They also may use the programming value to garner ad revenues; part
of the transaction would be for the programmer to offer the operators
blank spaces in which to insert their own ads--spaces known in the
trade as "ad avails." As broadcasters have no ability to prevent viewers
from tuning in (apart from scrambling techniques), they of course get
their return solely in the form of enhanced ad revenues.
Other programming is not so directly popular. In such cases the
programmer might offer to pay the conduit instead of the other way
around. In transactions of this sort the conduit makes its money from
these very payments, typically (perhaps always) foregoing the
opportunity to earn money by additional ad revenues. (By hypothesis
these programs are ones unlikely to generate extra subscribers or
higher fees per subscriber.) The record contains several undisputed
examples of broadcast station conduits that earn their money through
such alternatives to traditional advertising sales. Some stations, for
example, are paid lump sums or commissions to carry home-shopping
feeds, or are paid by religious organizations to carry religious
programming. See Time Warner Broadcast Station Rebuttal at 33
(KMCI paid by the hour for programming blocks by Home Shopping
Network); id. at 60 (KTFO leased its daytime operations to Tulsa
Christian Television); id. at 78 (LeSea Broadcasting Stations--similar);
id. at 85-86 (similar; purchaser of all of WRDG's air time, "Jack
Rehburg Ministries," found its own sources of funding, i.e. donations,
dried up under some combination of lost cable carriage and the onset
of televangelist scandals).
Both sides concede that the broadcast stations most likely to avail
themselves of must-carry have comparatively low ratings. Such
stations are unlikely to be sought after by cable operators, especially
because on the margin they cannot be easily expected to affect cable
subscribership or rates. See Noll Decl. 1 19; Noll Rebuttal Decl. 1 20.
Comparatively low-rated cable programming might have an edge over
a broadcast station because the programmers offer the operators ad
avails. Defendants argue that these ad avails may be especially
appealing since Congress has regulated the rates cable operators may
charge their subscribers. Thus ad revenue has a possible advantage--
both in availability and in freedom from regulatory hassle--not shared
by higher subscription fees.22 But broadcasters cannot offer ad avails
at all. This is true, so far as the record shows, solely by the terms of the
commercial must-carry rules themselves; 47 U.S.C. 534(b)(3) requires
cable systems to run unaltered copies of the broadcast signals they
carry. See Memorandum of National Cable Television Association Inc.
in Opposition to Defendants' Motion for Summary Judgment at 17.
Therefore, all else being equal, the possibility of added opportunities
to sell ad time gives low-rated programming offered by independent
programmers an appeal to operators that low-rated broadcast
programming cannot match.
The parties expend much energy arguing whether ad revenue is
important to cable, and whether, if now not very important, it is likely
to become much more so shortly. Because the quantitative importance
of ad revenue is immaterial in the view I take of the matter, I assume
throughout, in favor of defendants, that ad revenue is of great and
rapidly growing importance to cable.
To whatever extent broadcasters are competitively hobbled by
534(b)(3)'s implicit ban on ad avails, however, they cannot rely on it to
justify the constitutionality of the rest of the Act. The government
surely does not have a "substantial interest" in remedying a
competitive distortion that arises entirely out of a detail in its own
purportedly remedial legislation.
Further, advertising space is simply one form of the currency that
changes hands as cable operators negotiate carriage deals with content
providers. Just as a home- shopping channel might offer an outright
payment or a commission on sales to every conduit that will carry it
(either broadcast station or cable operator), presumably the
disadvantaged broadcaster can simply find another way to sweeten the
pot when competing for a carriage slot against a cable programmer
offering ad avails. At least it could do so if Congress had not
simultaneously barred such side payments. See 47 U.S.C. 535(i). For
example, but for the congressional ban on such payments, a
broadcaster could offer a cable operator some share of the ad revenue
increment expected as a result of carriage on the cable system, and
thus compete for space on cable on a par with independent operators.
The defendants' chief expert explicitly acknowledged this parity. See
Noll Deposition at 555, 10-05. Thus, insofar as broadcast stations
suffer a competitive disadvantage arising out of their failure to offer ad
avails, it arises entirely out of a provision in the remedy Congress has
enacted and cannot possibly constitute the "substantial interest" that
Congress was seeking to correct.
Accordingly, defendants' primary expert concluded--and the record
contains no material evidence to the contrary--that with reference to
this supposed market imperfection the only genuine difference
between an independent program network and a broadcaster was that
the weakening of a broadcaster harms non-cable households through
reduced revenue and reduced investment in programming. See id. at
105-06. But, as the discussion of the viability of the broadcast industry
has shown, the Court believed that the interest in programming for
noncable households could serve as a potential justification for must-
carry (apart from actual distortions of the competitive market) only if
the absence of must-carry would leave broadcast's capacity to serve the
nation's uncabled 40% seriously impaired, a standard not met by
defendants' evidence.
I would grant summary judgment for plaintiffs on defendants' theory
that cable poses an illegitimate competitive threat to broadcast by
virtue of independent cable programmers' supposed (but plainly
mythical) advantage over broadcasters in seeking access to viewers via
cable. The facts show that Congress could not have so found.
(b) Broadcasters as conduit competitors with cable
The defendants claim that a cable operator will have an incentive to
weaken broadcast competition in general through carriage denials,
regardless of whether the broadcaster is replaced with a cable network.
See Dertouzos Reply Decl. 1 23. The theory here is that even
broadcasters that would otherwise be worthy of carriage in the short
term (since their presence would enhance the cable system's appeal to
its subscribers) will be denied carriage in an attempt by cable operators
to strangle them. Cut off from the incremental ad revenue, marginal
broadcast stations will decline (disabled from investing more in
programming) and, at the limit, die. Especially if there is a separate
market for local advertising on limited-viewership television
(presumably with lower prices to reflect to smaller audience), then
destruction of the marginal broadcasters will redound to the benefit of
the cable operator. Even in the weaker version, which contemplates
carriage denials causing only lower station revenue and therefore fewer
program quality enhancements, cable is seen to profit "unfairly" in that
its carriage denials induce marginal non-cable viewers to switch to
cable, impairing the broadcasters' competition for ads.
The difficulties with this as a serious justification for must-carry are
legion. First, the cable operator must share many of the benefits of this
hypothetical policy with competing broadcast stations: so long as they
are around, the disappointed viewers of the station denied carriage can
still turn to other broadcast stations (not to mention book stores,
libraries and unnumbered other sources of diversion and instruction),
rather than to cable. Cf. Noll Deposition at 78-79 (nIt seems to me that
if there's three UHF independents in a city and one is dropped and two
aren't, the two that aren't dropped benefit; the one that is dropped is
harmed, and I don't understand how to add that up to be health of the
[broadcast] industry.")
Second, given the defendants' concession that must carry is generally
of interest solely to the more marginal stations, Defendants' Fact
Response at 65, 73, because a cable operator would not dare to incur
subscriber wrath by dropping stations as popular as local network
affiliates, id. 1 62, the likelihood of the policy's yielding many
conversions to cable seems remote.
Further, so far as inflicting fatalities on broadcast stations is
concerned, the hypothesized policy depicts the cable operators as
absolute Canutes: as the tide of broadcast stations rises, including even
stations of the least prosperous class, see Graphs #3 & #4, it must take
an invincibly obtuse operator to persist in trying to push it back--at
least if persistence is costly, as it would be wherever adding the
broadcast station would add to net revenues. And there would be such
an addition to revenues, in the absence of artificial congressional
impediments, whenever the additional revenue expected from carrying
the broadcast station--in subscriber fees, broadcast station payments or
the yield from ad avails--exceeded those on offer from independent
programmers proposing to fill equivalent channel capacity.
Finally, the problem identified appears ubiquitous, so that if it is
enough to sustain forced carriage it must be enough to sustain a wide
range of forced speech. The Washington Post would presumably gain
at the margin from the demise (or starvation) of its competitors; yet,
despite the enormous economies of scale that it enjoys (and a huge
local market share, cf. Business News Two, Investor's Business Daily,
March 28, 1995, A1), I doubt that Congress could legitimately force
the Post to carry whole pages of the Washington Times, with the
Times then able to obtain higher ad revenue from advertisers who
would see their ads freely circulated to Post readers as well.
Nonetheless, because the defendants offer some anecdotal evidence of
operator predation (resolution of which might require trial), see, e.g.,
Plaintiffs' Pact Response 11 447, I will assume that summary judgment
cannot be granted in plaintiffs' favor on defendants' claim that a kind
of competitive spite may induce cable operators to deny carriage to
some broadcast stations.
IV. Narrow Tailoring
I have found some of the assertions of harm offered by the government
to justify must-carry to be either pure conjecture (and largely refuted
by the defendants' own experts and data), and some so self-evident that
if the Supreme Court regarded them as adequate it would not have
remanded for additional factfinding. In the former category rests the
possibility that the future of free television as a whole or even in a
particular geographic market is threatened. All parties and the data
now appear to agree that no such threat is shown. See sections III.A.l
and III.A.4 above. In the latter category are defendants' contentions
that must carry was intended as a way to (1) maximize broadcast's
wealth in the interest of increased expansion and quality of
programming or (2) assist whatever stations might elect it. See sections
III.A.2 and III.A.3 above.
It follows from these latter definitions of the harm that must-carry is
by definition narrowly tailored, just as the harm itself exists by
definition. Thus, confronted with the suggestion that narrower must-
carry rules, such as those struck down in Century Communications
Grp. v. FCC, 835 F.2d 292 D.D.C. Cir. 1987), might be a better
tailored alternative, the defendants answer, inexorably, that if the
Century rules didn't help as many stations as the 1992 Act (and they
didn't), it follows by definition that they are not viable alternatives. See
Government Reply at 40. Similarly, since the defendants posit an
interest in enhanced broadcast programming, which as explained
above could logically be expected to flow from the revenue
enhancements that must-carry would generate, it follows as a matter of
logic that any solution that simply gives all would-be suppliers of
cable programming an entitlement to carriage for a fee remunerating
the cable operator's costs is inadequate: such a system would
contribute less money to broadcast stations' coffers. Government Reply
at 43-45 (dismissing leased access because it would "defeat must-
carry's purpose to the extent that [a broadcaster's] investment in
programming must be curtailed to pay for carriage"). If the defendants'
self-validating concepts of "harm" are indeed what the Court intended
us to examine, must carry fits them so perfectly that, as a matter of
definition, it must meet the requirements of narrow tailoring as well.
On the other hand, if I am right that the alleged threat to "access to free
television programming for the 40 percent of Americans without
cable," Turner, 114 S. Ct. at 2461, was conjectural rather than real, the
question whether must carry constitutes a narrowly tailored remedy for
injury to that "access" is moot.
Of the two remaining asserted harms by cable operators to the
broadcast industry--those distinct from a claim that broadcast is in
general ill health--I have assumed that Congress might reasonably
have found a problem to be fixed. First, I assumed that the affiliation
of a cable operator with a cable programmer, especially in an
environment of rate regulation, could result in an unjustifiable
competitive edge for the vertically-integrated firm against unaffiliated
programmers, including broadcasters. See section m.B.1 above. And I
assumed enough evidence that cable operators might conceivably be
willing and able to inflict predatory harm on broadcasters that I would
not necessarily grant summary judgment in favor of plaintiffs on the
issue. See section m.B.2(b) above.
I turn, then, to the narrow tailoring step of the analysis under O'Brien,
canvassing the evidence introduced on remand to answer the questions
contingently put to us by the Court, examining "the extent to which
cable operators will, in fact, be forced to make changes in their current
or anticipated programming selections; the degree to which cable
programmers will be dropped from cable systems to make room for
local broadcasters; and the extent to which cable operators can satisfy
their must-carry obligations by devoting previously unused channel
capacity to the carriage of local broadcasters." Id. at 2472. I then
consider the availability and efficacy of "constitutionally acceptable
less restrictive means" of achieving those asserted interests among the
legitimate justifications for must carry that have been proven or
assumed real: preventing anticompetitive behavior by vertically-
integrated cable firms and preventing predatory behavior against
broadcasters by cable in general. Id.
A. Must-carry's Burden to Operators' and Non-Broadcast
Programmers' Speech
The record shows that there are currently 128 national and 40 regional
cable networks (i.e., programming channels available to cable
systems), and the parties agree that the number is expected to grow.
Defendants' Fact Response 1 107. It is also undisputed that as of
October 1994 an estimated 86% of cable systems had a maximum
capacity of less than 54 channels. Id. 1 112. An overwhelming
majority of cable systems therefore had over a hundred programming;
sources available (not counting broadcast stations), far exceeding what
they could carry. Indeed, a study by plaintiffs found that in October
1994 cable systems serving about two-thirds of the industry's
subscribers had no available, usable channel capacity. Id. 1 l1Ci. The
defendants offer a survey which shows that 51% of cable systems have
no excess capacity. Id.; Plaintiffs' Fact Response 1 193. These surveys
are not necessarily in conflict; the first deals with number of
subscribers served and the other with the raw number of cable
operators affected.)
Must-carry is thus most commonly elected--by defendants' data, 51%
of the time, all else being equal--in an environment of scarce cable
channels. Defendants' additional data show that in 1993 must-carry
stations added as a result of the Cable Act accounted for between 1.4%
and 6% of the channels offered by sampled systems, and total must-
carry stations accounted for between 7% and 13% of channels.
Declaration of John L. Peterman Ex. 1. The average percent, weighted
for subscribership, was 2.4% for added stations and 12.28% for total
stations. Id. E x. 2. This forced carriage--whether in the form of a
required addition to a cable system (requiring the operator to eliminate
programming) or a mandatory retention (preventing the operator from
adding new programming)--is a tangible burden on operators'
speech.23
Defendants implicitly claim that the First Amendment harm to a
programmer denied carriage in the first instance because of a cable
system's full capacity (partially thanks to must-carry) is somehow
more remote than the harm experienced by a carried programmer that
is dropped in order to make room for forced carriage of a broadcast
station. While the former situation may be more difficult to prove, it is
no less a real manifestation of the effects of must-carry. Accordingly,
it follows that, except to the extent that there is excess channel
capacity (a matter we reexamine below), every benefit to a broadcast
station (through being added or being sheltered against removal) is
matched by an injury to a cable operator (in lost choice and possibly in
lost revenue) and programmer (through being dropped or, thanks to a
broadcaster's must-carry entitlement, not added).
I note various conflicting claims by the parties as to the comparative
value of their respective program material, accompanied by
disclaimers of the relevance of such data. See, e.g., Plaintiffs' Facts 11
9, 176, 177; Defendants' Fact Response 11 8, 9. We think the
disclaimers are sound. The value measures are necessarily rather
crude: as each side points out, the fact that a program has a lower rated
viewership than another cannot be a basis for congressional
preference.24 Accordingly, in the systems of constrained capacity,
which by any measure constitute at least half the market, benefits are
balanced by burdens--except that congressional choice has supplanted
that of cable operators seeking to maximize their net return.
Defendants point to an ancillary benefit of must carry: some fraction of
the revenue enhancement enjoyed by a carried broadcast station will
redound to the uncabled 40%'s benefit in the form of additional
program investment. Of course a parallel ancillary benefit results from
carriage of a cable programmer: just as added revenue both enables a
broadcast station to invest more in programming and gives it added
incentive to do so, so too must any additional revenue enjoyed by a
cable programmer as a result of carriage. Nothing in the record
supplies a clear reason for supposing one ancillary benefit more
valuable than the other. Except to the extent that broadcast survival is
at stake, as it is not, the purpose in such a wealth transfer is elusive.
Even looking simply at the class of programmers forced to "go dark"
to make room for new must-carry stations in areas in which they had
previously been carried through cable, the harm from must-carry is
substantial. For example, Time Warner added 240 broadcast stations to
its systems because of must-carry and had to drop programming on 7+
channels as a result. Defendants' Fact Response 1 117. This is an
obvious and direct burden on the First Amendment rights of both the
programmers affected and the cable operator, who had freely
contracted with the programmers to air their speech.
As indicated, 49% of cable systems have open capacity. It does not
follow, as defendants would have us believe, that such systems suffer
no injury from must-carry. Capacity is added at a cost, and one may
presume that cable operators add capacity only where they suppose
that they can profitably use the capacity. See Noll Dep. 258-59 (excess
capacity is a short-run phenomenon, arising from fact that new
capacity is added in "discrete lumps" that are not instantly filled).
When a retailer holds goods in storage, or a manufacturer holds parts
in inventory, their existence presumably contributes to the business
despite the absence of immediate active use.) Even for a system that
generally keeps a few channels open, presumably for flexibility in
responding to carriage opportunities, must-carry is a constraint,
inevitably hastening the day when it must invest in additional capacity.
Thus, defendants' evidence that the must-carry duty now embraces
only a weighted average of 12.28% of the capacity of cable systems,
and that that percentage will likely shrink as capacity is added, see,
e.g., Defendants' Fact Response 11 19-201, in no way answers the
point that any station carried involuntarily blocks the cable operator's
intended use of the channel, forcing it to make changes in its
anticipated, if not current, programming selections. If in the future
fiber optics or compression truly make functionally limitless channel
capabilities available at no extra marginal cost, must- carry's burden
would certainly be less along this dimension. But that day has simply
not arrived.
The channel positioning requirements of the Cable Act, 47 U.S.C.
534(b)(6) and 535( )(5), further demonstrate the intrusion into
operators' carriage decisions and programmers' speech. For example,
the Act offers commercial stations electing must- carry a channel
position either the same as their on-air positions or on positions
previously occupied on July 19, 1985, or January 1, 1992, whichever
they prefer. Since cable systems' capacities were much lower ten years
ago, this provision tends to permit stations whose forced carriage in
1985 had necessarily given them a coveted low-numbered channel slot
to insist upon that slot once again. The defendants put great weight on
channel position within a system. See, e.g., Government Brief at 18-
22. Channel position, they claim, is of great value because viewers
apparently tend to "graze" in the lower channels, not even bothering to
look among higher-numbered ones (a zone known as "Siberia,"
Defendants' Record Vol. I.R Ex. 85 CR 11503-04). WTOG, which is
on the air as channel 44, thus decries as an adverse repositioning a
cable system's decision to demote it from channel 9 to channel 25--
even though that is clearly preferable to its over- the-air position.
Defendants' Record Vol. I.R. Ex. 83 CR 11478.
Moreover, according to one UHF station president, "[e]xisting cable
technology prevents many [cable] subscribers from accessing cable
channels above 13 without a converter." Defendants' Record Vol. I.R
Ex. 85 CR 11503-4. For those cable subscribers, forced repositioning
of a cable programmer's channel to a higher-numbered station will
simply eliminate the channel from view. Those same viewers can use
their television sets to receive broadcast channels above 13. Affidavit
of David J. Large ("Large Affidavit") 1 15; Defendants' Record Vol.
I.R. Ex. 85 CR 11504. In such cases, then, a UHF station can reach the
viewer's set twice--through broadcast on its own over-the-air channel
and through forced carriage on a lower cable channel--while the
demoted cable channel will be unattainable.
The congressional mandate on repositioning casts the defendants'
contentions about the projected future expansion of cable channel
capacity in a special--and dim--light. Even the most optimistic claims
of expansion must, by defendants' own accounting, be tempered by the
fact that as cable expands, the only place it can grow is in the wastes of
post-channel-13 Siberia. Large tracts of the lower "grazing areas," and
any real or imagined boost to ratings that positioning there provides,
are claimed by the government for allotment to the broadcasters--even
ones that cannot obtain such favorable positioning within the
government's own broadcast spectrum allocation--and to that degree
are barred from use for cable programming.
In sum, on systems of clearly constrained capacity the benefits that
must-carry affords broadcasters are matched by burdens on cable
operators and programmers. In systems whose capacity is not fully
occupied by active channels, must-carry interferes with the operators'
purpose in maintaining channels available for use. Although increasing
channel capacity will over the years tend to diminish the value of the
losses inflicted on cable operators and programmers, it will never do
so entirely, because the marginal opportunity cost of channels will
presumably never fall to zero and because broadcast stations'
repositioning entitlements will force alternative cable programming
into high-numbered, less valued channels.
B. Less Restrictive Alternatives
Assessing the availability of less restrictive alternatives to must carry
helps determine the reasonableness of the "fit" between forced carriage
and the fulfillment of any substantial interests established by
defendants. Because in the first step of the analysis under O'Brien I
have only assumed two such interests--the interests in preventing
anticompetitive behavior by vertically-integrated cable firms and in
preventing predatory behavior against broadcasters by cable in
general--I focus mainly on fitness to those purposes. Occasionally,
however, I will make reference to those interests whose substantiality
the record does not support or that the Court's Turner decision
implicitly rejected. I consider three possibilities in this light--genuinely
non-discriminatory entitlements to carriage at regulated rates, the
"A/B" or input selector switch, and the rules struck down by the D.C.
Circuit in Century Communications Corp. v. FCC, 835 F.2d 292 (D.C.
Cir. 1987), clarified, 837 F.2d 517 D.D.C. Cir. 1988).
1. Leased, non-discriminatory access
One cannot correct an unlevel playing field by retilting the field to the
benefit of some previously-disadvantaged players--broadcasters--at the
expense of others who were already more severely disadvantaged--
independent programmers. Because must-carry suffers from this
defect, it is in virtually every respect mismatched to the concern that
vertically integrated cable bottlenecks will distort program selection
choices to the detriment of viewers.
First, the remedy is substantially overinclusive, in that it applies to all
cablecasters, including ones completely free of vertical integration. Cf.
Simon & Schuster, Inc. v. Members of the New York State Crime
Victims Board, et al., 502 U.S. 105, 121-22 & note (statute was
overinclusive even under content-neutral scrutiny because a substantial
portion of its burden on speech did not serve to advance government
goals). As even defendants claim only that as of 1994 operators
serving more than 70% of cable subscribers held vertical interests in
cable programmers, Government Reply at 30-31, Plaintiffs' Fact
Response 11 88-89, clearly those serving 30% do not. For the class of
non-vertically-integrated cable operators, must-carry levels a playing
field that was not tilted to begin with. Moreover, where the affiliated
program supplier provides only a limited line, e.g., programming for
one channel, the putative foreclosure effect appears miniscule. A
"solution" that preempts 20 channels in order to provide "fair
competition" on one plainly burdens more speech than is necessary.25
Second, although the structural defect within vertically-integrated
cable firms disadvantages independent programmers in precisely the
way it disadvantages broadcasters, see Noll Decl. 1 19; Noll. Dep. at
54-55,104 06; section m.B.2(a) above, must-carry singles out only
broadcast for forced carriage. This defect of the remedy is not merely a
matter of Congress exercising its authority to solve a problem "one
step at a time," cf. Williamson v. Lee Optical Co., 348 U.S.483,489
(1955), and to refrain from burdening additional classes of speech.
Rather, in two ways it undercuts any claim that must-carry is intended
as a remedy for the stated problem. First, the limitation of the must-
carry right to broadcasters renders the right "ineffective or remote" as a
solution to the problem. Central Hudson Gas & Elec. Corp. v. Pub
Serv. Comm 'n, 447 U.S.557,564 (1980); Edenfield v. Fane, 113 S. Ct.
1792,1799 (1993); see also FCC v. League of Women Voters, 468
U.S.364,396 (1984); Florida Star v. B.J.F., 491 U.S.524,540 (1989)
(government "must demonstrate its commitment to advancing [its]
interest by applying its prohibition evenhandedly"). Second, the
privileged status of broadcasters here comes substantially at the
expense of the other injured parties, the unaffiliated programmers,
narrowing their opportunities to compete for channels. See Turner, 114
S. Ct. at 2456. Yet the most obvious distinction betveen broadcasters
and unaffiliated programmers is one that argues for less protection for
broadcasters: they, in contrast to independent programmers, have their
own access to viewers--at a minimum to the 40% who lack cable (even
if one is assuming a station denied carriage by all cable systems in its
viewing area).26
Finally, the must carry remedy is both more burdensome to speech and
less fit to advance Congress's expressed competition-protection
purposes than are standard regulatory tools for assuring
accommodation of would-be users of a bottleneck. In industry after
industry--for example, interstate transmission of natural gas, interstate
transmission of electricity, local area telephone networks--federal and
state legislatures and regulatory agencies have sought to assure access
for would-be users on equal terms, and at prices at least allowing the
bottleneck owner to recover the associated costs. See, e.g., United
States v. Terminal Railroad Ass'n, 224 U.S. 383, 411-12 (1912)
(permitting access on equal terms for all railroad companies to railroad
bottleneck controlled by a subset); Federal Energy Regulatory
Commission Order No. 636, Pipeline Service Obligations and
Revisions to Regulations Governing Self-Implementing
Transportation, etc., 57 Fed. Reg. 13267 (April 16, 1992) (establishing
terms for interstate pipelines' transportation of others' gas); FERC
Notice of Proposed Rulemaking, Promoting Wholesale Competition
Through Open-Access Non-Discriminatory Transportation Service by
Public Utilities, etc., 60 Fed. Reg. 17662 (April 7, 1995); Federal
Power Act Sections 211 & 212, as amended, 16 U.S.C. 824j, 824k
(Supp. 1955) (providing limited authorization for orders to "wheel"
electricity); MCI Telecommunications Corp. v. FCC, 561 F.2d 365
D.C. Cir. 1977) ("Execunet"); MCI Telecommunications Corp. v.
FCC, 580 F.2d 590 D.C. Cir. 1978) ("Execunet II"); United States v.
AT&T, 552 F. Supp. 131, 227 (D.D.C. 1982) (provision of Modified
Final Judgment assuring non-discriminatory access of interexchange
carriers to local loop).
Such prices are critical if the intervention is actually to correct the
distortion without creating others that do equal or greater damage. If
there is no charge, or if the charge is set too low, there is a risk that the
bottleneck operator will pass a higher proportion of the protected
outsiders' material through than would an operator under perfectly
competitive conditions. See Noll Dep. 183-85 (acknowledging that
must-carry could result in carriage of more broadcast stations than in
perfectly competitive environment); see also William J. Baumol & J.
Gregory Sidak, Toward Competition in Local Telephony 73 & ch. 7
("The Pricing of Inputs Sold to Competitors") (1994). Conversely, too
high a price would disfavor the outsiders. While there are sharp
disputes as to exactly how such charges should be calculated, see, e.g.,
William J. Baumol & J. Gregory Sidak, The Pricing of Inputs Sold to
Competitors, 11 Yale J. Reg. 171 (1994); William B. Tye, Response,
id. at 203; Alfred E. Kahn & William E. Taylor, Comment, id. at 225,
I am unaware of any economist arguing that singling out a special set
of non- affiliated upstream suppliers and granting them access at a
price of zero is a "solution" to the bottleneck problem. The universal
solution in such mundane areas as gas, electricity, and wire
telecommunications is a non-discriminatory entitlement to access at a
price set by an administrative agency. Indeed, in section 9 of the 1992
Cable act (amending section 612 of the 1984 Act) Congress adopted a
comparable provision for cable, setting aside a portion of each
operator's channels for mandatory "leasing." 47 U.S.C. 532.
Regardless of whether defendants' complaints about the adequacy of
that specific remedy are correct, see Government Opposition at 92-93,
the type of remedy used for gas, electricity and wire
telecommunications appears to solve any bottleneck problems of
broadcasters in a way that creates no ancillary burdens on others
competing for bottleneck access. And no defendant even suggests the
contrary.
In fact, the government's response to leased access is precisely that
such access presupposes payment by broadcasters to cable--none of the
very evils that Congress noted." Id. But obviously carriage has some
value. While the government may decry an attempt by cable operators
to overcharge a programmer for carriage, the claims of anticompetitive
or "unfair" behavior provide no reason to treat any charge--including
one worked out through the processes described in comparable
situations above--as an "evil."
If carriage generates for broadcasters the enormous incremental
revenues that defendants claim, it is especially odd to find them
disparaging the idea that they should pay any of the costs of access to
this bonanza. In describing the value of carriage to broadcast stations,
for instance, defendants point to evidence of a cable operator's estimate
that for a particular broadcaster "for every 5% drop in cable viewers,
this station would lose $1,480,000 in gross revenues and $1,258,000 in
operating income." Defendants' Fact Response 1 54. I suspect the
station in question is not typical of those allegedly jeopardized by the
absence of must-carry, but the point is the same for all stations.
Neither in terms of equity nor of economic efficiency have defendants
offered a reason why broadcast stations should not bear any of the
costs--or pay any of the value--of the access that they identify as
valuable.
Thus the government fundamentally errs when it claims that
mandatory free carriage for broadcasters serves consumers' interests as
measured by the standards of a free market. The Government says:
It is cable operators who deny access by significant numbers of local
broadcast stations to a significant share of their market, thereby
disabling that market from ever reaching a 'verdict.' The must-carry
rules address this reality, and are premised on the principle that, after
free access to the marketplace is restored, fair competition can begin.
Government Opposition at 41. But granting broadcasters free (as in
"no charge") access to cable's subscribers--and thereby denying access
to independent programmers--certainly does not enhance free (as in
"free and open") competition between broadcasters' programming and
that of independent programmers. Ultimately, in the absence of an
overall threat to broadcast's survival, the salient difference between
independent programmers and broadcasters is that the latter enjoy use
of a valuable asset given them by the government--a broadcast license-
-that the former lack. I cannot see how principles of "fair competition"
are enhanced by a rule under which the broadcast license, itself a
government subsidy, becomes an admissions pass to an additional
government- enforced subsidy, paid for by cable operators and
independent programmers.
Accordingly, I would conclude that must-carry violates the First
Amendment requirement to use the least restrictive alternative, as that
has been understood since Ward v. Rock Against Racism, 491 U.S.
781 (1989), by adopting a mandate of completely uncompensated
carriage in favor of a privileged class of users, at the expense of other
speakers whose access to viewers is subject to more severe limits.
The analysis is parallel for public television. Access to cable
subscribers who have abandoned their antennae is undoubtedly
valuable for public stations, and we have already found support for a
congressional fear of a risk of discrimination against broadcasters and
other unaffiliated program suppliers. But just as commercial
broadcasters could use part of the anticipated extra revenue from non-
discriminatory access at a regulated rate, so too, public stations could
pay for the access with a part of the extra contributions it is expected to
yield. The only reason offered by public television for more favorable
treatment--apart from content-based paeans to the quality of its
programming, see Public Broadcasters Defendant-Intervenors'
Memorandum of Points and Authorities in Support of Motion for
Summary Judgment at 15-18--is that the public is already subsidizing
public television and is entitled to protect its investment. See id. at 19-
21. But public television advocates point us to no precedent for the
proposition that a watered down version of least-restrictive-alternative
analysis is to be applied to a case of coerced speech simply because the
stated purpose is to enhance the value of a previously granted public
subsidy.
I close by acknowledging what is obvious about the governmental
purposes not based on "unfair" competition. If the defendants are right
that the government has a "substantial interest" in maximizing the
revenue or net profits of broadcasters, or maximizing the growth rate
of UHF independents, then any charge, no matter how legitimate and
no matter how parallel to permitted charges in other bottleneck
situations, will fail to advance the interest as well as a free, fiat
entitlement. I have already stated my belief that the Court did not
endorse those goals as substantial government interests. But for the
stated goals of preventing "unfair competition," in any of its alleged
manifestations, non-discriminatory access at agency-regulated fees
burdens far less speech and fits--rather than fights--the stated goals.27
2. A/B or "input selector" switches
An "A/B" or input selector switch, despite the slightly forbidding
name, is simply a switch with one position for cable and one position
for broadcast. Coupled with whatever antenna is necessary (e.g., the
one in place before the viewer subscribed to cable), such a switch
permits the viewer to switch between cable's offerings and all the
television programming that would have been available to the viewer
if cable had never been installed.
All parties have pitched their arguments about the use of such switches
in terms of whether they qualify as a "less restrictive alternative" to
must-carry. I frankly doubt this classification. The availability of A/B
or input selector switches is simply part of the landscape. If they
enable cable subscribers to reach programs they wish to see, as
plaintiffs argue, that is simply a fact that tends to undermine the claim
that the continuation of over-the-air television is in any way in
jeopardy or that cable operators have a "bottleneck" over provision of
video services to cable subscribers (a foundation of any claim of
anticompetitive behavior).28 If defendants are right in their assertion
that the use of such switches is infeasible, that fact merely supports
their claims as to the fate of marginal broadcast stations and the
existence of bottleneck distortions in the market. Nonetheless, as both
parties treat these switches as some sort of "alternative," I address
them here in that light.
A cable subscriber is able to retain access to broadcast television if
willing (1) to pay the $10 or less required for the A/B or input selector
switch (in some cases the subscriber receives it as part of a TV's
remote control), Large Affidavit 1 22, (2) to use the switch, and (3) to
retain whatever antenna is necessary to pick up over-the-air signals.
The first barrier is apparently lessening. The record shows that most
cable-ready TV receivers now on the market have built-in input
selector switches operable by remote control. Defendants' Fact
Response 1 154. The record does not disclose, however, just what
portion of the existing stock of television receivers has this advantage.
Id. In any event, it would seem that anyone who could afford cable
could also afford the $10 for an A/B switch for use with an old
television set.
The defendants claim that A/B switches do little to ease cable's
monopoly in the houses of its subscribers because consumers find
them "unacceptable." "Most telling," the government says in its
evaluation of A/B switches, is that "79% of cable viewers stated that
the A/B switch was inconvenient for the plain and simple reason that
they 'had to get up' to use it." Government Reply at 41.29
"Telling" indeed: the Government's point tells us that consumers are
willing and able to use an A/B switch if they believe it will provide
access to a program that is worth "get[ing] up" from the couch for,
once to switch to broadcast, once to return to cable. (We put aside
those with input selectors in their remotes, who need not even get up.)
Compare Century, 835 F.2d at 302 (rejecting the FCC's "sluggish
profile of the American consumer" as inconsistent with fact that "even
costly items like the video cassette recorder, the cordless telephone, the
compact disc-player ant the home computer have spread like
wildfire").
The 1992 Cable act in fact precipitated a controlled experiment in
consumer resourcefulness. In late 1993 the three major television
network local affiliates were unable to reach agreement on
retransmission consent with a TCI cable system in Corpus Christi,
Texas, resulting in a three-month span in which ABC, CBS, and NBC
were all absent from cable. In an attempt to placate irate cable
subscribers, TCI provided A/B switches so that the subscribers could
switch from cable to broadcast and back again. See Defendants'
Additional Evidence Vol. VII.M Ex. 291; Large Affidavit 1 71.
Before the dispute the networks collectively captured a 70% share of
the total cable audience; after a month off cable (and with the
distribution of A/B switches), they had a share of 67-69% of the total
cable audience. Defendants' Fact Response 1 161; Large Aff. Para. 72;
Defendants' Additional Evidence Vol. VII.M Ex. 291.
Defendants note that nearly 70% of sampled cable subscribers in
Corpus Christi said the switches were "inconvenient" to use.
Defendants' Fact Response 1 161. It is from this sample that 79% said
the switches were inconvenient because they "had to get up" to change
them. Defendants' Additional Evidence Vol. VII.M. Ex. 291. But
government-mandated carriage seems a rather astonishing solution to a
problem now redefined as consumers' occasional need to "get up."
The Corpus Christi episode lends credence to plaintiffs' contentions
that the primary reason viewers choose not to use A/B switches is that
cable already carries the broadcast stations that viewers regard as
worth switching to. Defendants concede as much when they address
the fact that subscribers to direct broadcast satellite, or DBS, must use
an A/B switch to retain access to any local broadcast stations because
the DBS feed does not include them. (DBS has joined over-the-air
broadcast and cable as another way of receiving video signals.) The
government claims that "[u]se of A/B switches by DBS and MMDS
[yet another video delivery system] subscribers involves the
completely different situation where the consumer must resort to A/B
switches to receive virtually any broadcast stations whatsoever."
Defendants' Fact Response 1 158. This appears to be no more than an
ornate way of acknowledging that consumers will use A/B switches
whenever they want to--i.e., whenever they are aware of a non-carried
station that is worth a few dollars' capital investment and the
occasional flick of a switch. Defendants do not contend that DBS
subscribers--or Corpus Christi residents--are more handy or spry than
Americans generally.
Defendants point out that use of an A/B switch is successful only to
the extent that a suitable antenna will pick up the desired signal, and
observe that antennae may costs as much as $300. There is no
suggestion that that is a common price, or anywhere near average.) Yet
the uncabled 40% of America, which in this litigation is often
presumed to be unable to afford cable, somehow manages the burdens
of antenna ownership, as do DBS subscribers, who alone amounted to
1.53 million people in 1994. Large Affidavit 1 ;73; Defendants' Fact
Response 1 158. Interestingly, it appears that the desire to secure local
broadcast signals that are not supplied by cable, DBS or some
alternative service is powerful and rising: from 1993 to 1994 there was
a 51% increase in the sales of indoor antennas (from 3.5 million units
to 5.3 million units). Affidavit of Joseph Stem 1 33. Congress made
specific findings regarding A/B or input selector switches in the 1992
Cable Act. Section 2(a)(17) states that
[(a)] [c]onsumers who subscribe to cable television often do so to
obtain local broadcast signals which they otherwise would not be able
to receive, or to obtain mpn signals. [(b)] Most subscribers to cable
television systems do not or cannot maintain antennas to receive
broadcast television services, [(c)] do not have input selector switches
to convert from a cable to antenna reception system, or [(d)] cannot
otherwise receive broadcast television services.
Section 2(a)(17) (emphasis added). Scction 2(a)(18) states that
[(e)] [c]able television systems often are the single most efficient
distribution system for television programming. [(f)] A government
mandate for a substantial societal investment in alternative distribution
systems for cable subscribers, such as the 'A/B' input selector antenna
system, is not an enduring or feasible method of distribution and is not
in the public interest.
Section 2(a)(18). Several of the drawbacks mentioned--items (b) and
(c) are simply conclusory assertions of the supposedly insuperable
barriers posed by the need for switches ant antennae. But these are
belied by the Corpus Christi episode ant by the behavior of DBS
subscribers. Neither switch nor antenna is so mysterious, costly or
unworkable as to be beyond the means of a private citizen who values
access to a program at the price of a diminutive capital investment and
the ongoing cost of pushing the switch when necessary.
The remainder of the findings--see items (a), (d), and (e)30_appear to
reject A/B switches in large part on the ground that cable in many
cases enhances broadcast stations' signals or even brings them to areas
they could not otherwise reach. Cf. Noll Declaration Para.Dertouzous
Declaration 1 31; Government Opposition at 91. But neither the
enhancement of television options for cable subscribers, nor extending
broadcast's reach to cable subscribers in otherwise signal-deprived
areas, was embraced by the Supreme Court in Turner as an interest
substantial enough to justify must-carry. See section III.A.2 above.
In fact, use of cable to enhance (or create) a signal in previously-
signal-deprived areas may affirmatively injure the uncabled 40%.
Again, obviously only cable subscribers would directly enjoy the
enhanced (or new) signal. Further, as forced carriage would reduce a
station's potential audience to be reached over-the-air, it would pari
passu reduce the station's incentive to invest in enhancement of its
over-the-air signal (say, by buttressing its transmitter).
Moreover, while a cable operator in areas where broadcast signals are
weak or non- existent may have a "monopoly" not only over cable but
also over television services more generally, defendants' claims about
cable operators' supposed motives to impoverish or destroy broadcast
stations for anticompetitive reasons, see section m.B.2(b) above,
cannot apply in such areas: cable operators have no motive to destroy a
"competitor" that is unable to compete.
The insufficiencies of A/B switches in weak-signal areas, nonetheless,
make them, in such areas, an inadequate alternative solution to
Congress's stated concern that cable's "bottleneck" powers might deny
consumers adequate access to diverse programming from unaffiliated
programmers. See sections III.B.1 and III.B.2(a) above. But the
defendants have made no effort to quantify the weak-signal areas,
which from all that appears may represent a very small fraction of the
country. Accordingly, as the 1992 Cable Act imposes its burdens on
speech throughout the country, while broadcast's own access to
consumers via A/B switches adequately counters cable's alleged
anticompetitive tendency to foreclose broadcast programming
everywhere except in weak-signal areas, it burdens more speech than is
necessary even with respect to those purposes.31
3. The Century Rules
The plaintiffs appeal to the previously-struck-down Century rules, 835
F.2d 292, which required fewer forced carriages, as less restrictive. As
already menti |