operated. In an earlier 1956 case, although not raising the Constitutional issue, the Court upheld very restrictive national limits on the number of broadcast stations a single entity could directly or indirectly control. As will be discussed further below, these cases represent a history in which the Supreme Court always upholds Congressional structural regulation of the media, that is, regulation not tied to or aimed at suppressing particular media content, against assertions that the regulations violate the First amendment rights of corporate owners.' In the context of constitutional attacks on structural regulation, the only regulation questioned by the Court was, as noted above, when the legislative authority-a city gover nt- was creating, not restricting, concentration in the cable industry. There the Court required that the city to show a good reason for its action The Supreme Court has been clear. Recent decisions by the lower courts, however, show that they have not gotten that message. Lower courts have increasingly found structural regulation of I FCC v National Citizens Committee for Broadcasting, 436 U.S. 775(1978) United States v. Storer Broadcasting Co, 351 U.S. 192(1956)(upholding a limit of seven per service category) 29 See C. Edwin Baker, Turner Broadcasting: Content-Based Regulation of Persons and Presses, 1994 Sup. Ct. Rev. 57 Los Angeles v Preferred Communications, 476 U.S. 488(1986). Although not related to control of concentration, the case sometimes cited for limiting government s power to engage in structural regulation, Miami Herald v. Tornillo, has been interpreted by the Court to have struck down the right to reply law because it(improperly) penalized specific content, that is, was a content not a structural regulation. Turner Broadcasting v. FCC, 512 U.S. 622, 653-55(1994). See Baker, supra note 29 Baker-11/06/02
Baker - 11/06/02 - 14 - operated.27 In an earlier 1956 case, although not raising the Constitutional issue, the Court upheld very restrictive national limits on the number of broadcast stations a single entity could directly or indirectly control.28 As will be discussed further below, these cases represent a history in which the Supreme Court always upholds Congressional structural regulation of the media, that is, regulation not tied to or aimed at suppressing particular media content, against assertions that the regulations violate the First Amendment rights of corporate owners.29 In the context of constitutional attacks on structural regulation, the only regulation questioned by the Court was, as noted above, when the legislative authority – a city government – was creating, not restricting, concentration in the cable industry. There the Court required that the city to show a good reason for its action.30 The Supreme Court has been clear. Recent decisions by the lower courts, however, show that they have not gotten that message. Lower courts have increasingly found structural regulation of 27 FCC v National Citizens Committee for Broadcasting, 436 U.S. 775 (1978). 28 United States v. Storer Broadcasting Co., 351 U.S. 192 (1956) (upholding a limit of seven per service category). 29 See C. Edwin Baker, Turner Broadcasting: Content-Based Regulation of Persons and Presses, 1994 Sup.Ct.Rev. 57. 30 Los Angeles v. Preferred Communications, 476 U.S. 488 (1986). Although not related to control of concentration, the case sometimes cited for limiting government’s power to engage in structural regulation, Miami Herald v. Tornillo, has been interpreted by the Court to have struck down the right to reply law because it (improperly) penalized specific content, that is, was a content not a structural regulation. Turner Broadcasting v. FCC, 512 U.S. 622, 653-55 (1994). See Baker, supra note 29
communications industries to unconstitutionally interfere with media entities'asserted First Amendment rights. Without a complete review, two lower court cases illustrate this point in relation to ownership (As will be noted, these cases may be prescient. The increasingly activist, conservative, pro-market Court may abandon its earlier approach as described here. Despite continuing to uphold structura media regulations, its recent decisions have been cast in scrutiny language suggesting the possibility of invalidating regulations on First Amendment grounds if corporate lawyers can convince the Court that the structural choices are inadequately justified-an approach that may encourage abuse by lower In the first, Congress and the FCC had concluded that telephone companies should not own cable systems in the geographic area of their joint operation. Phone companies were allowed to offer carriage" of cable programming over their phone lines-but the programming provider/seller had to be independent of the phone company. This ownership regulation could serve various purposes. Use of the phone company "wires" by firms other than the phone company could potentially produce competition for a local cable company. As a common carrier, the phone company would not be permitted to discriminate among potential video services wishing to deliver programming. Phone company carriage creates the possibility of multiple competitors who could avoid the huge cost of laying their own lines. In contrast, if the phone company itself were the cable operator, that is, if it sold the video programming to the public, the phone company might inappropriately cross subsidize its See tan and note 48 infra Baker-11/06/02
Baker - 11/06/02 - 15 - communications industries to unconstitutionally interfere with media entities’ asserted First Amendment rights. Without a complete review, two lower court cases illustrate this point in relation to ownership. (As will be noted, these cases may be prescient. The increasingly activist, conservative, pro-market Court may abandon its earlier approach as described here. Despite continuing to uphold structural media regulations, its recent decisions have been cast in scrutiny language suggesting the possibility of invalidating regulations on First Amendment grounds if corporate lawyers can convince the Court that the structural choices are inadequately justified – an approach that may encourage abuse by lower courts.31) In the first, Congress and the FCC had concluded that telephone companies should not own cable systems in the geographic area of their joint operation. Phone companies were allowed to offer “carriage” of cable programming over their phone lines – but the programming provider/seller had to be independent of the phone company. This ownership regulation could serve various purposes. Use of the phone company “wires” by firms other than the phone company could potentially produce competition for a local cable company. As a common carrier, the phone company would not be permitted to discriminate among potential video services wishing to deliver programming. Phone company carriage creates the possibility of multiple competitors who could avoid the huge cost of laying their own lines. In contrast, if the phone company itself were the cable operator, that is, if it sold the video programming to the public, the phone company might inappropriately cross subsidize its 31 See TAN and note 48, infra
cable service with revenue from its regulated phone service, thereby competing unfairly. Worse,it was feared that the phone company could and would discriminate in favor of its own programming over that of other entities who might deliver programming over the phone lines. Although formally regulation could prohibit both of these evils, the complex accounting and behavioral practices involved makes effective enforcement awfully difficult, resulting in the" hands-on"regulatory solution more theoretical than real. This regulatory difficulty, however, is largely eliminated by the separation reated by the cross ownership rule. The rule simply tells the phone company that, as long as it is a phone company(a common carrier), it can not also be a different type of company -a cable company that sells video content to the public. The corporate entity had to choose which business to be in. Nevertheless, two circuits found that this argument bordered on the irrational. They held that the ownership bar violated the telephone companies'First Amendment rights This conclusion represents a radical repudiation of the past. The notion, seemingly imp eliciT in all past Supreme Court decisions on the subject, had been that regulation of corporate entities in an companies may have a first amendment right to discriminate against some users on the basis of the one 32 Even the constitutionality of this regulation is unclear. Some lower court decisions suggest that pho content of their speech. Carlin Communications v Mountain States Tel. Tel. Co., 827 F 2d 1291(9 Cir 1987); Carlin Communications v Southern Bell Te. Tel Co., 802 F 2d 1352(11 Cir. 1986) 33 Chesapeake and Potomac Telephone Co v. United States, 42 F3d 181(4th Cir 1994), vacated, 516 U.S.415(1996);US West v. United States, 48 F3d 1092(9h Cir 1994), vacated, 516 U.S1155 (1966) Baker-11/06/02
Baker - 11/06/02 - 16 - cable service with revenue from its regulated phone service, thereby competing unfairly. Worse, it was feared that the phone company could and would discriminate in favor of its own programming over that of other entities who might deliver programming over the phone lines. Although formally regulation could prohibit both of these evils,32 the complex accounting and behavioral practices involved makes effective enforcement awfully difficult, resulting in the “hands-on” regulatory solution more theoretical than real. This regulatory difficulty, however, is largely eliminated by the separation created by the cross ownership rule. The rule simply tells the phone company that, as long as it is a phone company (a common carrier), it can not also be a different type of company – a cable company that sells video content to the public. The corporate entity had to choose which business to be in. Nevertheless, two circuits found that this argument bordered on the irrational. They held that the ownership bar violated the telephone companies’ First Amendment rights.33 This conclusion represents a radical repudiation of the past. The notion, seemingly implicit in all past Supreme Court decisions on the subject, had been that regulation of corporate entities in an 32 Even the constitutionality of this regulation is unclear. Some lower court decisions suggest that phone companies may have a first amendment right to discriminate against some users on the basis of the content of their speech. Carlin Communications v. Mountain States Tel. & Tel. Co., 827 F.2d 1291 (9th Cir. 1987); Carlin Communications v. Southern Bell Te. & Tel Co., 802 F.2d 1352 (11th Cir. 1986). 33 Chesapeake and Potomac Telephone Co. v. United States, 42 F.3d 181 (4th Cir. 1994), vacated, 516 U.S. 415 (1996); U.S. West v. United States, 48 F.3d 1092 (9th Cir. 1994), vacated, 516 U.S. 1155 (1966)
effort to promote a better communications order raised no serious First Amendment issues. Phone companies exist to serve people's communications needs and were subject to any form of regulation that served those needs. Individuals, not corporate enterprises, are the fundamental rights holders and any rights that media enterprises hold were derivative. These recent cross-ownership cases implicitly reject that view. Instead, they recognize rights of corporate entities entirely absent, at least until recently, in any Supreme Court decision. Whether these holdings are authoritative is unclear Congress adopted legislation that, in the name of deregulation, eliminated this restriction on the telephone companies. The Supreme Court then vacated the Court of Appeals decisions without indicating any view on the merits, remanding to determine mootness Second is a case involving ownership of cable systems. At the direction of Congress, the FCC adopted a rule permitting a single a multiple cable operator("Mso) to own cable systems that serve no more than 30% of the country's subscribers to multichannel video program distributor services(primarily subscribers to cable and direct broadcast satellite). A comparison might put this rule in context. The country has about 12, 600 radio stations and about 10, 400 cable systems. The Supreme Court upheld an FCC rule(since abandoned) restricting a single entity from owning more than seven FM and seven AM radio stations. Even if each owner owned the maximum, the country would have at least 900 radio station owners and each owner would be able to reach only a small $4 See the discussion below of Turner Broadcasting System v FCC, 512 U.S. 622(1994) 35 United States v. Storer Broadcasting, 351 U.S. 192(1956) Baker-11/06/02
Baker - 11/06/02 - 17 - effort to promote a better communications order raised no serious First Amendment issues. Phone companies exist to serve people’s communications needs and were subject to any form of regulation that served those needs. Individuals, not corporate enterprises, are the fundamental rights holders and any rights that media enterprises hold were derivative. These recent cross-ownership cases implicitly reject that view. Instead, they recognize rights of corporate entities entirely absent, at least until recently,34 in any Supreme Court decision. Whether these holdings are authoritative is unclear. Congress adopted legislation that, in the name of deregulation, eliminated this restriction on the telephone companies. The Supreme Court then vacated the Court of Appeals decisions without indicating any view on the merits, remanding to determine mootness. Second is a case involving ownership of cable systems. At the direction of Congress, the FCC adopted a rule permitting a single a multiple cable operator (“MSO”) to own cable systems that serve no more than 30% of the country’s subscribers to multichannel video program distributor services (primarily subscribers to cable and direct broadcast satellite). A comparison might put this rule in context. The country has about 12,600 radio stations and about 10,400 cable systems. The Supreme Court upheld an FCC rule (since abandoned) restricting a single entity from owning more than seven FM and seven AM radio stations.35 Even if each owner owned the maximum, the country would have at least 900 radio station owners and each owner would be able to reach only a small 34 See the discussion below of Turner Broadcasting System v. FCC, 512 U.S. 622 (1994). 35 United States v. Storer Broadcasting, 351 U.S. 192 (1956)
portion of the American public. The FCC's new cable rule allowed a single entity to own cable systems that serve 30%of the country' s subscribers. Assuming roughly equal sized systems and little overlap, a single entity could about 3, 467 cable systems. Under this rule, the country might be left with only four separate cable owners This turned out to be too great a restriction. The Court of Appeals in Times Warner Entertainment v. Fcc took the constitutional challenge to this rule very seriously. It observed that the rule" interferes with [the cable owners] speech rights by restricting the number of viewers to whom they can speak 37 The court then avoided the constitutional issue by finding that, on the record before it, the 30% horizontal limit is in excess of the FCCs] statutory authority. The court commented that it could understand reasoning that " would justify a horizontal limit of 60%. 'It recognized Congressional authority to prevent concentration to a degree that would allow a single Time Warner Entertainment Co v FCC, 240 F 3rd 1 126(D.C Cir. 2001) 37Id. at 1129. The court is not quite right. The rule leaves the cable company as free as anyone else in the country to try to place programming on others systems. What the cable operator wanted was to have speech rights that, on the courts reasoning, Congress could only guarantee to one other speaker (one other corporation)in the country- the opportunity to use its own monopolized facilities to speak to 38Idt1136 Id at 1132 Baker-11/06/02
Baker - 11/06/02 - 18 - portion of the American public. The FCC’s new cable rule allowed a single entity to own cable systems that serve 30% of the country’s subscribers. Assuming roughly equal sized systems and little overlap, a single entity could about 3,467 cable systems. Under this rule, the country might be left with only four separate cable owners. This turned out to be too great a restriction. The Court of Appeals in Times Warner Entertainment v. FCC36 took the constitutional challenge to this rule very seriously. It observed that the rule “interferes with [the cable owners’] speech rights by restricting the number of viewers to whom they can speak.”37 The court then avoided the constitutional issue by finding that, on the record before it, the “30% horizontal limit is in excess of [the FCC’s] statutory authority.”38 The court commented that it could understand reasoning that “would justify a horizontal limit of 60%.”39 It recognized Congressional authority to prevent concentration to a degree that would allow a single 36 Time Warner Entertainment Co. v. FCC, 240 F.3rd 1126 (D.C.Cir. 2001). 37 Id. at 1129. The court is not quite right. The rule leaves the cable company as free as anyone else in the country to try to place programming on others’ systems. What the cable operator wanted was to have speech rights that, on the courts reasoning, Congress could only guarantee to one other speaker (one other corporation) in the country – the opportunity to use its own monopolized facilities to speak to people. 38 Id. at 1136. 39 Id. at 1132