Thursday, July 21, 2011

Court Ruling Factors First Amendment into Video Regulation Review

In prior blog posts we have analyzed D.C. Circuit rulings that call into question the relevance and legitimacy of legacy video regulation in light of today's dynamic video market. Now comes Cablevision v. FCC (2011), a ruling issued in June by the D.C. Circuit. Directly at issue was whether the FCC had the delegated authority to adopt program access regulation "closing the terrestrial loophole." The D.C. Circuit upheld most of the particular regulation at issue on statutory grounds. But the real significance of Cablevision is the latest jurisprudential wrinkle it provides regarding the analytical basis for video regulation and the requirements the FCC must meet to justify such regulation under the First Amendment.

First, Cablevision v. FCC confirms a subtle shift in the D.C. Circuit's analytical basis for upholding video regulation in the face of First Amendment challenges. Early and mid-1990s video regulations were upheld by the U.S. Supreme Court in Turner v. FCC I (1994) and Turner v. FCC II (1997) against First Amendment free speech claims on the basis of a perceived "bottleneck" for cable video services. Such regulation was said to satisfy intermediate level scrutiny because it responded to concerns about so-called cable bottlenecks. But as the D.C. Circuit observed in Cablevision:

The video programming industry does indeed look very different today than it did when Congress passed the Cable Act in 1992…Although cable operators then controlled approximately 95% of the national market for video programming… by 2007 their share had decreased to 67%, and it has apparently continued dropping in the face of competition from DBS providers and, more recently, from telephone companies offering fiber optic services…In addition, the number of programming networks has increased dramatically while the percentage of networks vertically integrated with cable operators has declined.

Echoing a prior ruling, Cablevision v. FCC (2010), the D.C. Circuit ruling from last month characterizes the video market as "mixed," with some geographical areas experiencing higher levels of competition than others. Now one might question whether the D.C. Circuit's characterization of the video market as merely "mixed" provides an oversimplified understatement of the competitiveness of today's market. And such a characterization is perhaps less forceful than the D.C. Circuit's assertion in Comcast v. FCC (2009) that "the record is replete with evidence of ever increasing competition among video providers…Cable operators, therefore, no longer have the bottleneck power over programming that concerned the Congress in 1992."

Those considerations aside, one should still recognize that by characterizing the video market as "mixed" in both cases the D.C. Circuit is effectively analyzing First Amendment challenges to legacy video regulation on a basis that differs from what the Supreme Court set out in Turner I and cases that followed.

This slight shift in the legal rationale for analyzing video regulation subject to First Amendment challenges makes it more likely that the Supreme Court will agree to revisit and perhaps reformulate its First Amendment jurisprudence regarding video regulation.

In such a future case the Supreme Court could, for instance, reexamine its precedents that give less speech protection to certain broadcast, cable, or other media than to print publications. On such an occasion, the Court could even address whether competition now present in the video market requires that legacy video regulation be subjected to strict scrutiny rather than to intermediate scrutiny – a possibility explored in prior writings by FSF scholars.

Second, Cablevision v. FCC is significant simply for taking First Amendment challenges to regulation of video market competitors seriously. The D.C. Circuit struck down the Commission's regulation that categorically treated as "unfair" all conduct involving terrestrially-delivered programming if similar conduct was designated "unfair" according to Communications Act Section 628(c)(2)'s provisions regarding satellite-delivered programming. In the court's words, the Commission "failed to justify its assumption that just because Congress treated certain acts involving satellite programming as unfair, the same acts are necessarily unfair in the context of terrestrial programming." At least when it comes to conduct in the video market not expressly prohibited by Congress, the court concluded that the Commission is required to consider and ultimately justify its prohibition of the types of conduct at issue. The D.C. Circuit's ruling pointed out that one of that the "substantially narrowed scope of [the Commission's] regulation…focusing on the effect of terrestrial withholding in individual cases…is one of the reasons why its [other] rules survive First Amendment scrutiny."

In other words, under the First Amendment the Commission cannot simply impose new video program regulations mirroring its old regulations without either statutory authorization or adequate analytical justification when using its ancillary powers. The ruling essentially requires that any FCC regulation of conduct in the video market involving programmers and multichannel video programming distributors (MVPDs) lacking express statutory authorization be justified by an analysis of the competitive aspects of the types of conduct at issue. And even where such justification exists, the First Amendment requires the Commission to provide a case-by-case process for inquiring into particular purposes or effects of conduct of particular video programmers and MVPDs such as cable operators and DBS providers.

The Communications Act, the Cable Act, and the Administrative Procedures Act, have long been recognized as providing statutory limitations on the FCC's power to adopt and enforce regulation of competitors in the video market. And the D.C. Circuit has given at least a slight nod to First Amendment considerations in recent cases. For instance, ruling by the D.C. Circuit in Comcast v. FCC (2009) offered First Amendment considerations for its remedial order vacating FCC regulation limiting video subscribership, though the Court invalidated the regulation on APA grounds.

But despite its upholding most of the FCC's expansion of video regulation, in this latest Cablevision ruling the D.C. Circuit took First Amendment claims head-on and made free speech considerations a matter of consequence to the validity of legacy video regulation. Without drastically reshaping First Amendment jurisprudence regarding video regulation, Cablevision suggests that First Amendment considerations will be taken more seriously in the times ahead, as they should be.