Cases by Issue - Cable Television Regulation

FCC v. Beach Communications, Inc. - Oral Argument

Fri, 09 Jan 2009 14:49:25 +0000

Case:

FCC v. Beach Communications, Inc.

Media File:

92-603_19930329-argument.mp3

Related Transcript:

1992_92_603_argument.xml

Transcript:

Argument of John F. Manning

Chief Justice Rehnquist: We'll hear argument first Number 92-603, the Federal Communications Commission and the United States v. Beach Communications, Inc.--

Mr. Manning.

Mr. Manning: Thank you, Mr. Chief Justice, and may it please the Court:

A divided panel of the D.C. Circuit took the extraordinary step of invalidating a portion of an act of Congress, the Cable Act of 1984, on rational basis grounds under the Fifth Amendment.

In particular, the court rejected Congress' judgment that there is less reason for imposing a franchise requirement when cable facilities serve only commonly owned, controlled, or managed multiple-unit dwellings.

Instead, the court concluded that the only rational dividing line between franchised and unfranchised facilities in the use of public rights-of-way.

We submit that the court of appeals erred in redrafting the reasonable line drawn by Congress in defining the term, 1984.

The crux of the issue in this case is the proper classification of satellite master antenna television, or SMATV.

Unlike traditional cable systems, which pick up distant signals at a remote antenna and transmit them to the community through wires running under or over the city streets, an SMATV facility typically sets up a rooftop antenna and then transmits programming by wire to units in a building or group of buildings.

In enacting the Cable Act of 1984, Congress had to decide whether and when an SMATV system should be treated like a traditional cable facility and made subject to franchise requirements.

Contrary to the court of appeals' decision, the line drawn by congress was a reasonable one: an SMATV system is exempt from any franchise requirement if the system serves only multiple-unit dwellings under common ownership, control, or management, and uses no public rights of way.

Unknown Speaker: Are they generally free from FCC regulations, as well?

Mr. Manning: Well, the crux of this case is what a cable system is, and a cable system determines... one's status as a cable system determines whether one is subject to franchise requirements, but there are also other Federal requirements that apply to cable systems as well, such as--

Unknown Speaker: There are other--

Mr. Manning: --There are--

Unknown Speaker: --Requirements that these cable operators, that these small cable operators are subject to.

Mr. Manning: --That's right.

There are, for example, technical requirements dealing with signal interference, with the quality of the signal, and there are other requirements pertaining to rate regulation and so forth that apply to cable systems, but the only thing that's at issue here is whether it's constitutional to impose a franchise requirement on an SMATV facility that serves only commonly-owned buildings.

In enacting the so-called private cable exemption with its common-ownership requirement, Congress made the judgment that it did not want to impose franchise requirements on a building owner or condominium association that decides to put a satellite antenna on the building and provide cable television to its residents, perhaps as an amenity.

Unknown Speaker: Mr. Mann, when you are talking about a franchise requirement, are you talking about a requirement imposed by Congress, or a requirement that... franchise that allows local governments to impose?

Mr. Manning: Under 47 U.S.C. section 541, Congress has provided that with the exception of facilities that are grandfathered under subsection (b) of that section, a cable operator... that is, a person who operates a cable system... must obtain a franchise before beginning to provide cable service.

Unknown Speaker: And a franchise from the Federal Government.

Mr. Manning: Franchise... a franchising authority... it's not clear what they mean by franchise.

The act describes a franchise authority as a Federal, State, or local authority that has power to issue a license, but in practice what it means is a State or local franchise, not a Federal franchise, Your Honor.

Unknown Speaker: So although the act may not be clear, that is in practice what happens.

If you're subject to this requirement you must get a franchise from a State or local government.

Mr. Manning: That's correct.

That's correct, it's a State or local... in practice a State or local franchise requirement, and what Congress decided was that if a building owner or a condo association decides to put a satellite dish on the roof of the building and provide cable service to its tenants, then that would not be subject to a local franchise requirement.

Similarly, if the same building owner or condo association ran a couple of buildings, or ran a building complex and put a satellite antenna on the roof to provide cable television to all the residents in the complex, that also would not be subject to a local franchise requirement.

But where a satellite antenna is set up to serve multiple, separately-owned buildings, or if its wires run over or under the city streets, Congress made the determination that the facility looks more like a traditional cable system and should be subject to franchise requirements accordingly.

Unknown Speaker: Mr. Manning, is that the right-of-way criterion, whether it goes over city streets?

Mr. Manning: That's correct, Your Honor.

Unknown Speaker: So in New York City, you could wire up an entire city block without using city rights-of-way.

Mr. Manning: That's correct, and it could be... as your question suggests--

Unknown Speaker: Which is a lot of people.

Mr. Manning: --It could be quite a number of people, and the judgment that Congress made, that the common-ownership requirement in addition to the right-of-way requirement was a rational basis for distinguishing between franchised and unfranchised facilities, was a reasonable line.

The essence of the rational-basis test is that debatable policy judgments are left to Congress, not the Federal courts, and as this Court explained most recently in Sullivan v. Stroop, a classification in a piece of socioeconomic legislation must be sustained if any state of facts may reasonably be conceived to justify it.

Under that standard, the line-drawn by Congress in this case easily passes constitutional muster.

If a satellite antenna serves only a commonly owned building or set of buildings, a plausible legislator could think that it is more likely that the service is being provided as part of the package of services that management provides to its residents, that it's an incident of residency.

Equivalently, a reasonable legislator could conclude that the service provided by such a satellite antenna would be less likely to be run in the nature of an independent business venture, but even if you take a building complex--

Unknown Speaker: What would be the virtue of that conclusion, that it would be less likely to be run as an independent business venture?

Mr. Manning: --Well, you would think that if you were an owner of a building and you were putting up a satellite dish and providing the service to your tenants, that your primary interest would be in keeping your tenants happy, because you are making a lot more money from their rent, or from their condo fee, than you are from providing them with cable service.

So in that situation, you could conclude that there would be less need to interpose a franchising authority to provide consumer protection, when the building itself is really the provider of the service.

But even if you have a situation where the building is making a contract with an outside SMATV company to set up a satellite antenna on the building, to run the wires, own the wires, service the building, arrange for the programming, and bill the tenants separately, that company is still accountable to one set of owners for the service that it provides from that dish.

Every subscriber who gets service off of that satellite antenna can voice his or her complaints or desires to a single set of owners, and the ownership has a strong incentive to keep the subscribers happy, since there is a substantial interest in keeping the rental fees and the condo fees flowing.

Unknown Speaker: Mr. Manning, is it correct, I guess almost as a matter of definition, that on the scenario you're just describing, every unit of buildings is going to have to have its own complete system?

I mean, there's going to have to be an antenna, and so on, so the... what I'm getting at is the investment is going to be much greater in the cases subject to the exception and the cancellation of the business would consequently be far more disastrous.

Mr. Manning: That's correct, Justice Souter.

I mean, it wouldn't necessarily be a single business, but it would be a single... a single building... I'm sorry, a single building, but it would be a building or building complex.

And what you would do is, you would... it would involve the construction of a satellite head end, and it may or may not involve wiring the buildings, because a lot of these buildings have the old mater antenna television system wiring already in place, so you might or might not be able to use that.

So there is a substantial investment in building the satellite head end facility, and if you were serving a single set of buildings, and the ownership cancels that contract, then you've lost out a lot.

Unknown Speaker: You simply have more at stake in keeping them happy.

Mr. Manning: Right, whereas if you're serving 10 different buildings, then no one owner has that degree of leverage over your service.

And what's more, if a satellite antenna is not limited to serving commonly owned buildings, as Justice Scalia pointed out, it may well be expected, or a reasonable legislature could at least think that you would tend to have more subscribers served by that satellite antenna, because you could wire an entire city block in New York by running a wire from building to building.

In that case--

Unknown Speaker: And the owner would have real monopoly power over that... at least over all the people within that block.

Mr. Manning: --The owner would have substantial leverage, because the alternative for any of the buildings on that block--

Unknown Speaker: Is to put up--

Mr. Manning: --Would be to build your own system.

Unknown Speaker: --Right.

Mr. Manning: And now, I would like to--

Unknown Speaker: And therefore greater need for rate regulation, which the franchising authority would do.

Mr. Manning: --That's exactly right, and you could have... a franchise authority with consumer protection jurisdiction could more profitably exercise control over the rates and consumer service of a satellite antenna that serves separately owned buildings.

And what's more, if you assume, as a reasonable legislator could, that the size of the market served by that facility, served by that head end satellite antenna equipment, is larger if the common-ownership requirement is not met, then the costs of franchising could be spread among a greater number of consumers, and so Congress could have reasoned that the cost-benefit ratio of imposing a franchise requirement on a facility that serves separately owned buildings would be more favorable.

Unknown Speaker: There's a lot of reasons you can think of, aren't there?

I mean... but none of these really appears, as far as we know, in any of the debates.

Mr. Manning: Well, Your Honor, this Court has made perfectly clear in a number of cases, most recently Nordlinger v. Hahn, but perhaps most clearly in the case of Railroad Retirement Board v. Fritz, that the rationale for a piece of legislation does not have to appear in the legislative history or even in purposes articulated on the face of the statute.

That issue was raised very clearly in the Fritz case, where the dissent said that the evidence in that case involved a question of line-drawing between those who would be eligible for dual benefits under the social security system and the railroad retirement system and those who would not be eligible for that double-dipping, and Congress drew a line based on whether one was serving in the... to summarize very sketchily, whether one was serving in the railroad industry or had a current connection in 1974.

The dissent said that that line disserved the purposes of the statute as expressed in the legislative history because it didn't provide all of the people who had vested railroad retirement benefits with their ultimate benefits, and this Court said that the purposes of a statute for purposes of the rational-basis test did not have to be reflected in the legislative history, and that it was

"constitutionally irrelevant whether the rational basis was articulated by the legislature at all. "

The Court also stated that the best evidence of the legislative purpose is the text of the statute itself.

Unknown Speaker: Well, lots of times a bill starts out intending to do one thing and amendments are tacked on, so there may be several different purposes not necessarily consistent with one another.

Mr. Manning: That's exactly right, Mr. Chief Justice.

It's very difficult... as this Court has explained many times, it's very difficult to know precisely why a legislator is moved to vote for or against a particular piece of legislation, and if the rationality of a statute were measured in terms of the reasons suggested by some legislators on the floor or by a committee in a report, it would be very difficult indeed to sustain the validity of much legislation, and it would be quite an impingement on the independence of the legislative branch.

In rejecting the rational justification, what we call the consumer welfare rationale, the court of appeals offered very little explanation in this case.

Consumer welfare rationale was suggested by Judge Mikva, Chief Judge Mikva in his concurring opinion, and endorsed by the FCC on remand.

Rather than addressing the substance of that justification, the court of appeals merely dismissed it by saying, we have no basis for assuming its validity, and by calling it a FCC has wholly failed to flesh out.

Unknown Speaker: Mr. Manning, can I ask you a question about the... I'm not quite sure I entirely understand your rationale.

Are you sort of assuming that one of these singly owned complexes is a separate market?

Mr. Manning: That's correct.

Unknown Speaker: But aren't they... aren't there a lot of these condominium associations in a big city like Washington, or New York?

Mr. Manning: There are a number of these condominium associations, but--

Unknown Speaker: Do they each negotiate separately, or is there a rate that generally applies to all of them?

Mr. Manning: --That I'm not certain of, Your Honor.

Unknown Speaker: But if they're just part of a market, why are they a different part of a larger market if 10 buildings are owned by one person on the one hand and they're all owned by 10 separate people on the other?

Mr. Manning: Well, I think the thing that makes them a market is that what you're talking about when you're talking about a facility, which is the unit that you use to measure whether something's a cable system, you're talking about the hardware, the satellite antenna system, and as Justice Scalia pointed out, if you have a building, you have a satellite antenna that's placed on a building, then the people who own that building and--

Unknown Speaker: Well, if it's just one building, I guess it doesn't matter, because if it's one building it would be owned by one person or one association, but isn't the only... doesn't the problem only arise when you've got a complex of buildings on the one hand owned by a single owner and on the other hand by separate owners?

Mr. Manning: --I'm sorry, I'm not sure what you're asking.

If you have a complex of buildings... if you have the same 10 buildings, and in one case it's owned by a single owner--

Unknown Speaker: Right.

Mr. Manning: --You have a satellite dish on building 1.

It serves all 10 buildings.

Unknown Speaker: Right.

Mr. Manning: The same set of 10 buildings are all separately owned.

You have the satellite dish on building 1 and a wire is run among all 10.

Unknown Speaker: Right.

Mr. Manning: Why... that is the same market in each case, but--

Unknown Speaker: Then let's assume that there are 100 parallels throughout the city.

50 of them are singly owned, and 50 of them are owned by the 10 separate owners.

Now, you're saying that if you don't have regulation, they would all get different rates.

Mr. Manning: --Well, I think that it stands to reason... now, the record does not reflect what the actual practice is.

Unknown Speaker: No, but your theory is that this is what Congress must have thought.

Mr. Manning: The theory is that Congress must have thought that when you're putting the satellite dish on your own buildings--

Unknown Speaker: That units that are economically identical would receive different treatment in an unregulated market.

Mr. Manning: --That would have to be the theory, yes, Your Honor.

Unknown Speaker: Do you think that's sound?

Mr. Manning: I think that it's debatable, which is the only thing that's required under the rational-basis test.

I mean, you and I may disagree just as the--

Unknown Speaker: Is there any economic support for that hypothesis at all?

Mr. Manning: --Well, the support is common sense and the way the world works.

I mean, we may differ in what we think the right answer is to whether you'll get a better deal if you're served by a satellite antenna that only serves people in your building or if you're served by a satellite antenna that serves you and 10 other buildings, and we may disagree over whether the person in building 1 has more leverage because it's part of a collection of 10 buildings that negotiate as one for the service as opposed to 10 separate negotiators for the same service--

Unknown Speaker: Well, there are no brokers, there are no people that represent owners in dealing with the franchise companies in this--

Mr. Manning: --Again, the record is not clear, and the crux of the rational-basis test is that Congress is not disabled from legislating unless it can... it is not disabled from legislating at the risk of not being able to prove that its policy judgments are empirically justifiable or even correct.

That is the very clear import--

Unknown Speaker: --Or have any scholarly support whatsoever for them.

Mr. Manning: --Well, I mean, if you just take a case like Railway Express Agency v. New York, in that case New York City passed an ordinance, and the ordinance provided that there was to be a ban on advertising on trucks, but the ordinance also exempted self-advertisements on the same trucks.

The court said... the court upheld that classification on the ground that a legislator may well assume that those who advertise their own wares present less of a traffic safety concern given the nature and extent of the advertisements on their trucks.

There was no record support for that.

They didn't cite any scholarly treatises, they didn't cite any traffic reports, any economic textbooks.

What the court did was, it indulged in the democratic process by accepting plausible although unverified assumptions about the way the world works.

Unknown Speaker: Is it your position that it's plausible in the situation put by Justice Stevens to say that in the case where there's single ownership there is more leverage and therefore the market is different?

Mr. Manning: We think it's very plausible to think that.

We think that a reasonable legislator certainly could assume that when you have a satellite dish that's being put on a building that a) it's more likely that the satellite service is being offered as an amenity to the tenants, that it may not even be a separate market where the SMATV company comes in, puts on the satellite, bills the tenants and runs it separately.

But secondly, we think it's much more likely that when you have the negotiation focused between one set of owners for use of this very expensive piece of hardware and a satellite company, even if it runs a hundred of these satellite dishes around town, that the people who live within that building are more likely to have leverage over the product consumed than if you have the same company putting a dish on and running it to 10 buildings.

Not only is the accountability more focused, but if a satellite dish can only serve multiple-unit dwellings, it is more likely that you are going to have fewer subscribers, and that means that each subscriber is going to have more leverage over the product produced, and that the cost of franchising will be more significant for... per subscriber for subscribers who live in buildings under common ownership.

Unknown Speaker: Now, Mr. Manning, if you prevail on this argument, and in this case it's your position that we should remand to the court of appeals for the determination of whether or not some other more rigorous standard applies?

Mr. Manning: That's correct, Your Honor.

The court of appeals raised the question whether a fundamental rights equal protection analysis should be applied, but the court did not reach that question, and we believe that the Court should leave it for the court of appeals in first... in the first--

Unknown Speaker: Does the FCC have a position as to what standard applies if there is content significance to the regulations?

Mr. Manning: --Well, the... this Court's cases suggest that... no, we... actually, we have not taken a position in that case, and we would prefer that the Court not address that issue because it has not been addressed by the court of appeals and we think it would be preferable to leave it for consideration by the court of appeals on remand.

Unknown Speaker: Well, two answers... number 1, it would be preferable, and number 2, you don't have a position.

Mr. Manning: We don't have a position, no.

In... we believe that the court of appeals' error in this case stemmed largely from the fact that it perceived that the line drawn by Congress was different than the line traditionally applied by the administrative agency in deciding whether the franchise requirement should be applied... namely, the crossing of public rights-of-way.

The FCC's traditional basis for imposing franchise requirements on cable facilities, however, is irrelevant to the constitutional question before this Court.

Congress has no constitutional duty to adhere to agency precedent or even to give a reasoned explanation for departing from it.

In any case, it is wrong to say that the only dividing line for franchise requirements had been the use of public rights-of-way.

Under FCC regulations in the 1970's, a facility that did not satisfy the common-ownership requirement could be classified as a cable system and thus made subject to franchise requirements whether or not it crossed public rights-of-way.

That ruling is reflected in the FCC's Bayhead decision which is cited in footnote 26 of our brief.

In addition, the FCC's 1983 Earth Satellite decision confirms that the Commission never preempted franchise requirements for the type of facility at issue here... SMATV facilities that serve separately owned buildings by wire.

Unknown Speaker: May I ask one other question about the common-ownership requirement?

Mr. Manning: Certainly.

Unknown Speaker: What is it that must be commonly owned?

A condominium, for example, each person living in the building owns his or her own apartment, but what is it they have a... just the satellite dish, or--

Mr. Manning: The common-ownership requirement we use as a shorthand for common-ownership control or management, so that a condominium association that had multiple units that were under the control or management of a condo association would satisfy the common-ownership requirement, as we call it.

Unknown Speaker: --What if a group of neighbors had an association to manage their satellite dish, with--

Mr. Manning: If they had an association--

Unknown Speaker: --Common ownership of the satellite dish?

That would not count.

Mr. Manning: --I think it probably would not count.

I think that what... it's not clear from the FCC's precedents, but I would think that an organization that was formed simply to, in effect, evade the franchise requirement would be insufficient to do so under the FCC's regulations.

Unknown Speaker: Well, to perform all the management functions that the management of the condominium association performs when it's handling television matters.

Mr. Manning: Yes, but the common ownership control and management requirement generally means that you have a bunch of units that are joined by a common economic link, that the management is providing a number of services.

It collects garbage, it may provide plumbing services, it may provide an answering service at the front desk that serves all these units.

So there is an integrated economic unit.

There's something that holds these units together, and when that's the case, I think that what the common-ownership requirement does is, it gives some assurance the cable system is simply--

Unknown Speaker: But common ownership of the television-related facilities would not be sufficient.

Mr. Manning: --Well, if it's simply another incident of a number of services that are provided by the same group in common--

Unknown Speaker: Well, say you have a neighborhood association that handles the collection of garbage for all the homes on the block, and handles some private security force... some neighborhoods have that... and maybe has... and then decides also to buy a satellite dish.

Mr. Manning: --Well, the more... I mean, the question is, when do you have something under common management for purposes of the rule, and certainly the more services that you add on that are handled in common, the more that it looks as if these buildings are under common management for some purposes.

I'm not--

Unknown Speaker: What if you just have garbage, security protection, protest of tax bills, and management of the satellite dish?

Mr. Manning: --I'm not--

Unknown Speaker: Is that enough?

Mr. Manning: --Your Honor, I'm not sure exactly where the line would be drawn, but I think the proper test would be whether one could say that, apart from the cable television services, that there is a substantial and bona fide common management or control of the buildings.

Unknown Speaker: With leverage in the marketplace.

I don't see how that fits with your rationale that people that are watching the television have diffused control where there's single ownership.

Mr. Manning: Well--

Unknown Speaker: If they get together and they have single control, isn't that precisely--

Mr. Manning: --When the--

Unknown Speaker: --The goal that the Government is trying to reach?

Mr. Manning: --Well, I mean the question is not the constitutional question here but the question of how to interpret the regulation, and it's true that perhaps a group of people could get together and in some cases negotiate together to provide for cable services.

But Congress doesn't have to draw perfect classifications, and what it decided was that it was going to use common ownership control and management in general as a proxy for those situations when all the tenants together have sufficient focus and accountability and bargaining power to get the services they want with the proper consumer responsiveness.

If there are no further--

Unknown Speaker: Did this definition just date from '88, 1988?

Mr. Manning: --No, Your Honor.

The definition goes back to 1965.

In the first set of cable rules, there was what was called an apartment house exception that went through some changes that are not material here.

Along the way, they had a common ownership--

Unknown Speaker: Were there satellite dishes in those days?

Mr. Manning: --In those days, the exception applied mainly to what's known as master antenna television, which was an antenna that was put on the roof and wired to buildings to get broadcast signals so that you wouldn't have a forest of antennas.

Satellite antenna... satellite master antenna television was developed in the late 1970's, but in the Earth Satellite decision in 1983 the Commission made very clear that the common ownership exemption clause--

Unknown Speaker: Is this case the first time the distinction has been challenged in court?

Mr. Manning: --There were two other cases that raised statutory questions of whether an SMATV facility would be a cable system.

Those were two district court cases which are cited in the FCC opinion.

This is the first constitutional challenge to that distinction.

Unknown Speaker: And the Congress has revisited this area several times since '65, I take it.

Mr. Manning: Congress passed the Cable Act of 1984, in which it adopted the common ownership exception, and in 1992 it passed another Cable Act in which it left the exemption unchanged.

Unknown Speaker: Where there was testimony before the committees opposing this distinction.

Mr. Manning: The FCC report on remand says that the matter in this case was brought to the attention of the committee, but I'm aware of no testimony that relates to the question whether to retain the common exemption.

Unknown Speaker: Did the Commission have a position on it?

Mr. Manning: The Commission initially took the position in interpreting the 19... you mean in the 1992 legislation?

Unknown Speaker: No.

The first time this distinction appears you said was in 1964.

Mr. Manning: 1965, in the Commission's first set of rules, yes.

Unknown Speaker: '65.

Did the Commission have a position then, or did they propose it?

Mr. Manning: They... I'm not sure, Your Honor.

If there are no further questions--

Unknown Speaker: Thank you, Mr. Manning.

Ms. Costlow, we'll hear from you.

Argument of Deborah C. Costlow

Mr. Costlow: Mr. Chief Justice, and may it please the Court:

Of all interstate media of communications not using the public streets and rights-of-way to deliver their signal, only a single media... that is, an SMATV facility serving separately owned and managed multiple dwelling units by wire has to obtain a franchise from a municipality in order to enter the market and is subjected to treatment as a cable system.

No franchise is required of an SMATV facility serving a single multiple-unit dwelling.

No franchise is required for that same SMATV operator to install a series of separate satellite dishes in order to serve the exact same apartment dwellings throughout the municipality.

No franchise is required if an SMATV operator wishes to interconnect separately owned or managed buildings by means of an 18-gigahertz microwave link.

No franchise is required of an SMATV facility who seeks to interconnect those same separately owned or managed multiple dwelling units by means of an infrared link.

Unknown Speaker: Ms. Costlow, what are the practical consequences when a franchise is required?

Does that mean that a cable operator will be subject to price regulation by the State or local government?

Mr. Costlow: The burdens that would be imposed upon an SMATV facility that would have to obtain a franchise would be the same burdens that would be imposed upon traditional cable operators, but those burdens would not apply to any other interstate media of communications.

Those burdens would include, for example, having to get a license to speak at all.

If the license is denied, then you cannot speak.

Those burdens would include, on the local level, typically a requirement to wire the entire municipality, not simply to obtain a franchise to interconnect the particular separately owned multiple-unit dwellings that the operator wishes to interconnect.

It would also include--

Unknown Speaker: It would include some sort of the price regulation.

Mr. Costlow: --Yes, it would include price regulation as a result of the '92 act, depending upon whether or not under the statute that particular market and the players within that market are subject to effective competition.

They would always be subject to potential regulation on the Federal level by treatment as a cable system because, as a result of the '92 act, any subscriber can bring a complaint to the Federal Communications Commission that the rates of the particular operator are unreasonable, and that kind of price and rate regulation is not imposed upon SMATV facilities serving a single building, serving commonly owned or managed buildings, serving those same buildings by means of microwave or an infrared link, leasing telephone company lines, for example, in order to interconnect those buildings, because you don't have to obtain a franchise to do that.

In other words, the only time a franchise is required to interconnect separately owned and managed buildings is when those separately owned and managed buildings are interconnected by a simple piece of wire, so the exact distinction here is that you cannot cross a public... a private property boundary line in order to serve separately owned or managed buildings by means of a wire, but you can cross that same private property boundary line to interconnect those same separately owned and managed multiple-unit dwellings by means of a wireless facility.

Unknown Speaker: It's a lot more expensive to... both to install and operate, isn't it?

I mean, you get a wire for a couple of dollars.

Mr. Costlow: It is obviously interconnecting separately owned or managed buildings by means of a piece of cable will be cheaper in all instances for any--

Unknown Speaker: Virtually costless.

Virtually costless.

Mr. Costlow: --I think it's 6 or 12 cents a foot, Your Honor, depending on how much cable is used.

The distinguishing characteristics here between the media who are subject to franchising requirements and the media who are not subject to franchising requirements, I do not believe that you should focus simply on an SMATV facility versus another SMATV facility, but must look at the entire interstate media that is potentially regulated as a result of the Communications Act and the Cable Television Acts which were a part of that act.

Unknown Speaker: Well, do you think a State can choose to regulate telephones without regulating cable?

Mr. Costlow: Telephone companies, Your Honor.

Unknown Speaker: Yes.

Yes, I--

Mr. Costlow: There are incidences of telephone companies that are both intrastate and interstate service, and so there has been a dual regulatory scheme adopted for telephones--

Unknown Speaker: --No, but I--

Mr. Costlow: --Precisely because of that.

Unknown Speaker: --Well, let me use another example.

You think that a State or the Federal Government could choose to regulate wire communications without regulating nonwire communications.

Mr. Costlow: I believe that the Feds and the... the Federal Government or the State government cannot discriminate in the circumstances in which they regulate particular speakers.

In other words, if there are no distinguishing characteristics between the various interstate media of communications, then I submit that it is impermissible to apply a particular set of burdens and to single out--

Unknown Speaker: Are you going to answer my question?

Are you going to get to the answer to my question?

Mr. Costlow: --I'm sorry, Your Honor, I thought that I was answering your question.

Unknown Speaker: I don't know--

Mr. Costlow: I must be misunderstanding your question.

Unknown Speaker: --Well, if you have, I don't know whether it's yes or no.

Can a State or the Federal Government choose to regulate wire communications and not regulate nonwire communications, or vice versa?

Can it distinguish between the two media, yes or no?

Mr. Costlow: Yes, but may I offer an explanation?

Unknown Speaker: Okay, sure.

Mr. Costlow: The explanation is that they can distinguish between those two media only if there are distinguishing characteristics that provide a justification for distinguishing between those media.

Unknown Speaker: One's over the air, one isn't over the air.

One's in wire, the other isn't in wire.

Mr. Costlow: But that is a distinction without a difference.

Whether you are operating a multipoint, multichannel distribution service or whether or not you are operating an SMATV service, you are offering news, entertainment, and information on a multichannel system.

You could have exactly the same programming services offered to subscribers, and I submit that the fact that you choose a particular technology, meaning a wire, versus a particular technology, which is microwave, to deliver those exact same services to consumers, is a distinction without a difference.

Unknown Speaker: How about the line of cases from this Court that say that the legislature can confront evils one step at a time and you know, make exceptions if it wants to?

It doesn't have to sweep every piece off the chessboard when it tries.

Mr. Costlow: Your Honor, it is true that Congress can act one step at a time, but if you look at the particular background and history and context of this particular regulation, the... neither the Federal Government nor Congress have ever subjected interstate media of communications operating by wireless, for example, to local franchising regulation.

They have not subjected to local franchising regulation SMATV facilities serving multiple-unit dwellings either singly or under common ownership management or control, so the step here... there is no indication that Congress is moving one step at a time to subject each of these interstate media to some sort of local franchising regulation.

The step is in the opposite direction.

All interstate media have typically been exempt from local regulation and exclusively under Federal jurisdiction and control, and only in a very rare instance has the Federal Government conceded or permitted local jurisdiction and control over an interstate media of communications.

Unknown Speaker: Well, maybe this... maybe Congress is in the process of changing its mind and is beginning to go the other way.

Mr. Costlow: Your Honor, the FCC has never done so.

The FCC's Orth-O-Vision decision was issued in 1978, which specifically preempted local regulation and control--

Unknown Speaker: Yes, but Congress isn't bound by previous FCC decisions.

I mean, Congress may have decided, look, maybe we want to get the States and local governments into some regulation.

Let's try it out in this area and see how it works.

Mr. Costlow: --Your Honor, Congress in 1984 chose to adopt the Orth-O-Vision decision and exempt wireless from regulation.

They just the 1992 Cable Act, and in that act they again did not subject any sort of wireless facilities to local franchising regulation, so that over the course of the entire history of when each of these media have come into the marketplace, Congress has not determined to impose local franchising regulation unless such facilities used a public street or right-of-way, except in this one, single instance.

Unknown Speaker: Counsel, I take it there's just no evidence in the legislative history as to what Congress thought the justification was for this distinction.

Mr. Costlow: No, Your Honor, there is not.

I must admit that there is evidence that the... at least in the context, that the... that Congress' reason for exempting SMATV's facilities serving commonly owned, the exemption itself serving commonly owned or managed facilities was not system size, that the reason for--

Unknown Speaker: Was not what?

Mr. Costlow: --Was not system size, which is the rationale presented by the Government.

What the rationale was is that was based on a decision issued by the Federal Communications Commission, the Earth Satellite decision, directly prior to the passage of the 1984 Cable Act.

And that decision exempted these types of facilities because they did not use a public street or right-of-way, they were indistinguishable from wireless, they were there to promote the open entry and the unfettered development of interstate satellite signals, and the Federal Communications Commission made a specific finding that local franchising jurisdiction and control acted as a barrier and chilled entry and therefore thwarted the FCC's policy in the unfettered development of interstate satellite signals.

Congress in the... that was a 1983 decision.

Unknown Speaker: Do you think that decision was also irrational?

Mr. Costlow: I don't think the decision to exempt SMATV facilities serving commonly owned or managed buildings was irrational.

The FCC did not reach... it specifically did not reach whether or not it would at some point exempt also facilities serving separately owned and managed dwellings.

They didn't say that they couldn't.

They just didn't reach it, and in '84 Congress adopted that same exemption--

Unknown Speaker: So you just think... you think Congress was just thoughtless when they... they just cribbed this out of a Commission decision.

Mr. Costlow: --That is certainly likely, Your Honor.

The other presumption would be that it is irrational simply because those same interests in which they--

Unknown Speaker: You would think that at some point since 1965 there would have been some considerable objections to this discrimination.

Mr. Costlow: --Your Honor, the first time Congres legislated in this area was '84, so when we were speaking of the definition being in existence since 1965--

Unknown Speaker: I thought counsel on the other side said this distinction first came on the books in '65.

Mr. Costlow: --At the Federal Communications Commission level, not on the congressional level.

The first time Congress legislated was in '84.

When it came up at the FCC level, Your Honor, SMATV facilities did not exist.

What existed were master antenna television facilities.

Unknown Speaker: Yes.

Mr. Costlow: SMATV did not really come into existence--

Unknown Speaker: Well, when... has there ever been objections made to Congress in their hearings since '84, because they certainly have been back in this area.

Mr. Costlow: --There's nothing to show anything on the record in the legislative history.

In 1984, this is the first time that Congres legislated this particular distinction.

When Congress was reconsidering the Cable Act in 1992, that is the time at which the lower court here issued its opinion.

That was made known to Congress.

In fact, it was made known that they were considering issuing that opinion, and then after the opinion was issued, that opinion was also made known to Congress, and we would submit, Your Honor, that the fact that Congress in 1992 knew of the decision here and chose to do nothing about it means that in essence that they have adopted the district court ruling here, but there is nothing on the record that explicitly says that.

Unknown Speaker: Even when that ruling was subject to appeal.

Mr. Costlow: Your Honor, I find it implausible that if Congress truly wanted to keep this distinction, and this distinction had been held unconstitutional by the district of columbia circuit, that Congress would have gambled on the fact--

Unknown Speaker: On us.

Mr. Costlow: --That this Court was grant cert--

Unknown Speaker: Would have gambled on us getting it right?

[Laughter]

Mr. Costlow: --No... I'm sure they would have gambled on this Court getting it right, and I submit that getting it right is affirming the decision below, but I don't think that if Congress felt strongly about this, they would have gambled on this Court potentially denying cert and therefore not reaching the issue.

Unknown Speaker: Ms. Costlow, what does an SMATV company do?

They construct the dish, and then they continue... they decide what programming goes through the dish.

Mr. Costlow: It is incorrect to assume that satellite master antenna television systems are always landlord-provided.

In fact, in practice, that is less then 10 percent of the SMATV facilities that are out there.

These are independent suppliers of cable television services and what they do is exactly the same thing that traditional cable does, that multipoint, multichannel distribution services do, that 18-gigahertz services do--

Unknown Speaker: Are they competitive?

Mr. Costlow: --Yes, they are competitive.

Unknown Speaker: Are there a number of competitors that come to buildings and say, we'd like to run an SMATV service?

Mr. Costlow: And I tell you how they compete.

They compete at the property line.

The property owner looks out in the marketplace and says, I can receive services from traditional cable, I can receive them from SMATV, I can receive them from MMDS.

Unknown Speaker: Okay.

Now, if I'm a property owner that owns a whole square block... I own all the buildings in the block... I would assume I have pretty good bargaining power with the various SMATV companies, right?

I can pretty much say, you know, I'd like to get it at such-and-such a price, I assume, if I have a whole city block in New York, who's all commonly owned, I control a whole block.

Mr. Costlow: That property owner has the same bargaining power whether it's a traditional cable, or SMATV, or MMDS.

Whatever bargaining power the owner has--

Unknown Speaker: Sure, that's true, but now let's assume that the block is not all owned by one person.

There are a hundred different buildings on the block.

One of the buildings signs up with a particular SMATV company.

Do you think that there's any chance that the remaining 99 buildings on the block will have a realistic choice which SMATV company they can use?

I mean, doesn't the SMATV company that signs up the first building have a lock on all other 99, because it costs a couple of bucks to just join the next building with a cable?

How can any of the other SMATV companies hope to compete within that block?

Mr. Costlow: --Are we speaking of separately owned buildings, or commonly owned buildings?

Unknown Speaker: I'm talking now of separately owned buildings.

Mr. Costlow: Your Honor--

Unknown Speaker: If they were commonly owned, as I say, there'd be some bargaining power at the outset, but one building gets the system.

How can any of the other companies hope to compete for the other 99?

Your company, if you're the one that gets the first one, you have a lock on the other 99 buildings.

It costs you a couple of feet of cable, that's all.

Mr. Costlow: --If you can interconnect by wire--

Unknown Speaker: Sure.

Mr. Costlow: --That may be potentially true, but I don't think that it gives you a lot more than the traditional cable operator.

The traditional cable operator has already installed its facilities in the public streets or rights-of-way.

All it has to do is run the same cable to serve these buildings.

Unknown Speaker: Well, that's right, but he's--

Mr. Costlow: So their entry costs are no greater than the entry costs--

Unknown Speaker: --But he's regulated.

Mr. Costlow: --Of an SMATV provider.

Unknown Speaker: But he's regulated--

Mr. Costlow: He's regulated--

Unknown Speaker: --And that's all they're trying to do here... regulate the SMATV provider.

Mr. Costlow: --Your Honor, everyone in the market has the potential to serve a separately owned building.

They have only regulated SMATV operators who operate on private property serving a separately owned building.

A wireless operator can serve a separately owned building without becoming regulated on the local level.

An 18-gigahertz operator can serve a separately owned building without being regulated on the local level, so the fact--

Unknown Speaker: It's a lot more expensive.

The monopoly differential is not as great.

It costs them, to serve each additional building, a lot more energy, whereas you just buy a couple of feet of wire and you've got the new building.

Mr. Costlow: --A wireless cable operator can install service to a multiple dwelling unit for somewhere around $300.

I don't see that as a significant entry barrier, so that in competition between a wireless cable operator meeting a multichannel, multipoint distribution service operator competing for access to that building--

Unknown Speaker: Well, that may be, ma'am, but you see, now, I didn't know that, and maybe a reasonably informed legislator wouldn't know that, and would think, gee, if I'm... you know, if I'm a company trying to compete with another company who's gotten one building in the block, I'm just out of competition, because they only have to... I can see a legislator thinking that and saying, that's sort of a monopoly situation that we ought to allow to be regulated.

I may be wrong, but I can't say that it's off the scope.

Mr. Costlow: --Your Honor, the purposes... I would submit that the purposes of the '84 act as confirmed in the 1992 cable act are a deregulatory purpose, and the purpose of... set forth and the objectives set forth in both those acts by Congress are that they sought to promote competition by free entry, not to impose regulations on system or entry barriers to system.

And I would submit that Congress could not have sought to promote competition in these acts by means of singling out only a particular medium for this kind of regulation as opposed to applying whatever justifies regulation of us justifies regulation of other like-situated media.

The system size rationale is the rationale that's relied upon by the Government here, and I would submit that that system size rationale was expressly rejected by Congress when it adopted the 1984 act.

Prior to the 1984 act--

Unknown Speaker: Well, excuse me, the Government's relying on a leverage rationale, not a crude size rationale, isn't that clear?

Mr. Costlow: --The Government is relying upon the fact that Congress intended to regulate systems of larger size, because systems of smaller size would somehow be more subject to consumer control.

Unknown Speaker: Well, it's resting on the assumption that certain systems will more likely be small and other systems will likely be larger, but the rationale ultimately on those assumptions is based on leverage, not a mere crude size cut-off, isn't that correct?

Mr. Costlow: That is the Government's position, you are correct.

I would submit, however, that a consumer has as much leverage over the owner of that building, whether that owner of that building... I mean, owns one building or three buildings.

Unknown Speaker: That may be so, but that's a different argument.

I mean, that is not an argument that Congress expressly rejected, and you started out by arguing that in rejecting the size rationale it had rejected the Government's argument, and I'm saying it's not quite that clear.

Mr. Costlow: The distinctions between different media and who does and does not have to have a franchise, they did not determine that larger systems such as MMDS or DBS or any of the other private property systems would be subject to local franchising regulation.

I would submit that if Congress were concerned that larger, multichannel video programming distributors serving separately owned buildings because there would be less consumer leverage should be subject to local jurisdiction and control, that they would have subjected all larger systems to such regulation and not simply singled out this particular media.

The Government does not respond to that argument.

The Government says, well, what they meant to do there was simply encourage SMATV facilities, these kinds of SMATV facilities, to migrate to wireless spectrum, and I would submit, Your Honor, that it has never been telecommunications policy to encourage migration to scarce frequencies.

Rather, the policy has been to encourage migration away from such scarce frequencies, and the Government has never, in my mind, submitted a justification for the discriminatory classification between wired facilities and wireless facilities, and I submit that basing that on a migration to wireless spectrum analysis simply is implausible.

Unknown Speaker: With wireless, I guess you can... can you get... does wireless use the public right-of-way if you shoot it across a street?

Is that considered to be using the public right-of-way?

It's not really using it.

Mr. Costlow: That's exactly my point.

None of the facilities at issue here use a public street or right-of-way.

Neither do these SMATV facilities.

Unknown Speaker: Why isn't the distinction between wireless and cable simply the distinction that it cost more, that you do not... the single system that has sold its service to one building on the block has... if it can connect by wire, it has a monopoly over all the other buildings on the block.

Other cable systems cannot... other SMATV systems can't hope to get their business.

If, on the other hand, you made them do it by wireless, the other systems might well come in.

Isn't that enough of a distinction?

Mr. Costlow: I find the fact that Congress would have intended to only harm the market entry and growth of SMATV facilities and not somehow... that they just... they wanted to advance and promote some technologies over others, or some speakers over others, not to be a plausible reason for Congress' actions here, because if you assume that Congress meant to impose, on purpose, greater cost on SMATV facilities that they did not mean to impose on other like-situated media, Your Honor, I have problems with that.

I do not believe that Congress meant to impose additional costs, and if, in fact, what Congress' objective was here was to ensure that these particular SMATV facilities had to be regulated if they got larger, then I submit they haven't achieved their purpose, because everyone can evade that regulation, including these SMATV facilities.

It may cost them to evade that regulation, but they can evade it, and they can get as large as they want, and it just simply doesn't make sense to me that if Congress had meant to subject larger systems to franchising regulation, that they wouldn't have subjected all larger systems to franchising regulation, and it wouldn't come down to the ownership of the building served, which isn't even a characteristic of those various interstate media, and it wouldn't have come down to whether or not it's interconnected by wire over a private property boundary line.

To me, that is an impermissible distinction, an impermissible line-drawing between like media of interstate communications.

That line was drawn with respect to traditional cable prior to the Cable Act because of cable's unique use and burden upon the public streets and rights-of-way.

What does a franchise get an SMATV facility here, Your Honor?

A franchise does not give them the right to speak on private property.

All that a franchise does is give them the right to install facilities in public streets and rights-of-way.

They do not seek to install facilities in public streets and rights-of-way.

They do not seek governmental benefits.

All they seek to do is install facilities on private streets and rights-of-way, so the franchise that Congress has dictated that these facilities must obtain does not even give them the right which they seek, which is to speak on private property.

What gives them the right to speak on private property is the private property owner.

Now, let's say the franchise--

Unknown Speaker: I suppose you could... there is such a thing as franchising the ownership of television sets.

I mean, the way public television is supported in England is by... you have to get a franchise to own a television set.

I mean, I don't know that there's any necessary connection between franchising and public property.

You can franchise things that occur only on private property.

You can franchise certain businesses.

You can't run a certain business on private property.

Mr. Costlow: --But when you franchise those businesses, that gives them the right to enter the market.

When... if you... when you franchise an SMATV operator here, that alone does not give the SMATV operator the right to enter the market.

The SMATV operator--

Unknown Speaker: Yes, it does.

It gives you the right to connect other buildings that aren't owned by the same... by common control to connect other buildings with a little piece of cable.

Mr. Costlow: --Not without the permission of the private property owner.

That is an additional act that must occur, so that even if I went and got a franchise which enabled me to interconnect separately owned and managed dwellings, that alone would not give me the right to enter the market.

Unknown Speaker: You can say the same thing about any private business that is franchised.

It doesn't give him the power to sell something.

He has to find somebody who's willing to buy it.

Mr. Costlow: But why--

Unknown Speaker: I mean, of course that's a condition of a franchise.

Mr. Costlow: --But why only harm the competitive entry of a particular interstate media?

Why not place similar franchising entry burdens on all interstate media of communications similarly situated?

Unknown Speaker: I agree.

I think it may be a very bad idea, but one... that isn't the issue, is it?

Mr. Costlow: Well, the issue is whether or not there is some objective here that Congress sought to achieve that this particular regulatory or discriminatory classification actually serves.

Unknown Speaker: May I ask you a factual question just to help me?

When a local community grants the franchise that you're saying they should not have the right to grant, do they grant a general franchise to interconnect all the units in the city, or do they grant them on particular installation by installation?

Mr. Costlow: Typically, in practice, a local franchise grants a franchise to extend cable facilities to extend cable facilities throughout the public streets and rights-of-way in the franchise area, which is usually equivalent to the individual municipality, the boundaries of the individual municipality.

Unknown Speaker: So there isn't a case-by-case determination about whether the... your bargaining power's been abused in a particular apartment complex, or anything like that.

Mr. Costlow: Exactly not, Your Honor.

All that it does is determine that on an overall community basis, and in fact the danger posed here, after passage of the '92 act, Congress in the '92 act tried to eliminate or correct the past franchising practices of municipalities, which were to grant a single franchise for an entire municipality.

Congress realized, or at least found in the Cable Act that that had created undue market power for particular providers of these services in the marketplace.

Unknown Speaker: Ms. Costlow, has your client applied for a franchise?

Mr. Costlow: Your Honor, until the FCC's decision below... the FCC after passage of the '84 act had determined that... had interpreted the language such that we would not have to obtain a franchise.

Unknown Speaker: So your answer is no, it has not.

Mr. Costlow: I'm sorry, Your Honor--

Unknown Speaker: Is that correct?

Mr. Costlow: --My answer is no, it has not, and may I offer an explanation?

Unknown Speaker: Well, no, I don't see that you should have to explain... I mean, if it hasn't, it hasn't.

My point is that you really don't know, then, what requirements any particular franchise you applied for might be... might subject you to.

Mr. Costlow: In the '92 act, which is what I was about to explain--

Unknown Speaker: I... any... I mean, where does your client want to have its services?

I mean, what geographical area?

Mr. Costlow: --The clients in front of this Court have these particular installations throughout the United States.

The... Pacific Cablevision, for example, has one in San Diego, California.

Unknown Speaker: Do you know without having applied for a franchise in San Diego what sort of requirements you would be subject to by that franchise?

Mr. Costlow: Yes, Your Honor.

A State statute in California says to Pacific Cablevision that if you are going to obtain a franchise in San Diego, your franchise has to be the same as the first franchise, which would mean that Pacific Cablevision would have to provide universal service throughout the entire municipality.

Unknown Speaker: How about the other 49 States in which you might want to do business?

Mr. Costlow: There are... with respect to a uniform franchise statute, Your Honor, I believe that there are about nine or ten of those in various States throughout the country.

Chief Justice Rehnquist: Thank you.

The case is submitted.

Attribution:

The OYEZ Project

Featured:

FCC v. Midwest Video Corp. - Oral Argument

Sun, 20 Jun 2010 20:42:50 +0000

Case:

FCC v. Midwest Video Corp.

Media File:

77-1575_19790110-argument.mp3

Related Transcript:

77-1575_19790110-argument.xml

Transcript:

Argument of Lawrence G. Wallace

Chief Justice Warren E. Burger: We'll hear arguments next in Federal Communications Commission against Midwest Video and the consolidated cases.

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

Mr. Wallace: Mr. Chief Justice and may it please the Court.

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

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

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

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

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

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

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

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

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

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

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

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

Chief Justice Warren E. Burger: Do you mean that is a typical alternative ground for decision?

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

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

Justice Potter Stewart: Isn't there -- did they indicate in your view that their statutory holding was influenced by their constitutional views sometimes you know.

Mr. Wallace: Yes.

Justice Potter Stewart: And because of constitutional difficulties one feels impelled of construe a statute to certain way?

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

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

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

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

Now to a large extent --

Justice William H. Rehnquist: It is difficult to describe that as a holding, is it not, in view of the fact of the Chief Justice's concurrence in the result?

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

Justice William H. Rehnquist: But the reasoning for upholding, I mean it cannot really be attributed to the Court?

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

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

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

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

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

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

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

Justice William H. Rehnquist: Well, you are saying that the mandatory access was necessary to the decision of the Court in Southwest cable?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Justice William H. Rehnquist: Why could not the Commission just say you broadcast for ten hours a day and let other people broadcast it for four hours a day?

Mr. Wallace: Well, that would be an analogous requirement, but it wouldn't be the same requirement.

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

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

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

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

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

Justice John Paul Stevens: But is it not correct that the rule applies even if there is no unused capacity, even if there was a full that a licensee --

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

Justice John Paul Stevens: Suppose next year or two, they do get enough period that they would like to put on, they are restricted as to just one thing --

Mr. Wallace: That's right unless they want to build in additional capacity.

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

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

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

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

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

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

Justice William H. Rehnquist: Do you think congress could impose these rules on newspapers?

Mr. Wallace: Well I think that's very dubious theory.

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

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

Chief Justice Warren E. Burger: Well, isn't that something more fundamental namely, broadcasting and its related elements are regulated.

Newspapers cannot be.

Mr. Wallace: Well of course I think basically that's the difference.

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

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

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

Justice John Paul Stevens: But is that quite right, don't they have the judgment as to which materials will be selected and which sources of material will be used?

Mr. Wallace: Of course they do have some --

Justice John Paul Stevens: It's just a matter of editorial judgment.

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

Justice John Paul Stevens: So the analogy of the telephone company you really did not realize --

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

Justice John Paul Stevens: Mr. Wallace, could you clear up one detail for me?

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

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

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

This is a very dynamic field.

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

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

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

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

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

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

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

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

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

Argument of George H. Shapiro

Chief Justice Warren E. Burger: Mr. Shapiro.

Justice Byron R. White: Mr. Shapiro, could you at some point answer that question I just asked?

Mr. George H. Shapiro: I certainly will Your Honor.

Justice Byron R. White: Thank you.

Mr. George H. Shapiro: Mr. Chief Justice and may it please the Court.

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

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

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

Justice Byron R. White: But not in other markets?

Mr. George H. Shapiro: Not in other markets.

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

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

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

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

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

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

It's a very minimal type of demand.

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

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

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

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

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

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

Mr. George H. Shapiro: Your Honor, cable system channels are -- a television set is only able to receive normally 12 channels of VHF transmission.

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

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

This will give him extra channels.

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

Initially a system will have 12 channels.

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

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

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

Mr. George H. Shapiro: Normally it goes on the set Your Honor.

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

Justice John Paul Stevens: But does the system itself, how does system itself get capacity increased from 12 to 20?

Mr. George H. Shapiro: Well this depends on when the system -- modern systems have the capacity to deliver 20 or more channels if converters exist.

Justice John Paul Stevens: I see.

Mr. George H. Shapiro: The purchase – there is evidence in the record on the cost of converters.

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

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

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

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

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

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

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

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

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

Existing systems have until 1986 to meet these requirements.

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

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

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

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

Mr. George H. Shapiro: Yes, Your Honor.

Chief Justice Warren E. Burger: On condition that they dedicate 25% of the operating time to public educational programs selected by some described method, any barriers of that?

Mr. George H. Shapiro: Well, Your Honor I thought that the -- this Court's decision in the CBS versus Democratic National Committee was a barrier to that.

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

Chief Justice Warren E. Burger: Didn't that go to the specific content rather than the allocation?

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

Mr. George H. Shapiro: Let me be sure I understand your question, Your Honor.

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

Chief Justice Warren E. Burger: The content.

Mr. George H. Shapiro: Without -- and leaving the content of that programming to the broadcast station.

I believe that's a very close question.

I think --

Chief Justice Warren E. Burger: Well, let's back it up.

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

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

Mr. George H. Shapiro: I believe that they could.

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

Justice William J. Brennan: Is that the sort of thing we get on and tuck it from Atlanta Georgia.

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

There are other types of sports programming.

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

Justice William J. Brennan: Satellite.

Mr. George H. Shapiro: No, it's distributed by satellite Your Honor but it's not the retransmission of a broadcast signal.

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

Justice William J. Brennan: Well, It was sold by a common carrier I gather not by the --

Mr. George H. Shapiro: No Your Honor, it's sold by a joint venture of Madison Square Garden and a cable company which distributes the programming.

Justice Byron R. White: Well, is that a broadcaster then?

Mr. George H. Shapiro: No, it is not a broadcaster.

Justice Byron R. White: Unregulated then?

Mr. George H. Shapiro: Well, Your Honor, it's originated programming.

There are no regulations that are applicable to it.

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

Justice Byron R. White: That they don't originate, neither does a broadcaster?

They just hire --

Mr. George H. Shapiro: The cable system does not originate it in the same sense that a broadcast station which carries a network program doesn't originate.

Justice Byron R. White: In other words, it doesn't prepare it.

Mr. George H. Shapiro: It doesn't prepare it, that's correct, Your Honor.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Justice William H. Rehnquist: Which goals?

Mr. George H. Shapiro: Well the Commission -- they were the goals of increasing the outlets of community expression and providing diversified programming.

Justice Byron R. White: So it was connected with the broadcast?

Mr. George H. Shapiro: It was connected to the Commissions broadcast regulatory goals.

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

Justice William H. Rehnquist: Are those goals specified anywhere in the Act?

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

Justice William H. Rehnquist: So you don't read the plurality in Midwest I as authorizing the Commission to simply set goals quite apart from the statutory framework.

Mr. George H. Shapiro: I think its just the contrary Your Honor.

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

That was a very close decision.

There was not a majority.

It was only a plurality.

Justice Byron R. White: But there was a judgment?

Mr. George H. Shapiro: There was a judgment.

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

We think so for two reasons.

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

The Court found that they met specified goals.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Chief Justice Warren E. Burger: Do you think Congress has given them the authority to do it if they decided that was in the public entity?

Mr. George H. Shapiro: The Congress has given the FCC authority to --

Chief Justice Warren E. Burger: How is it given?

Mr. George H. Shapiro: To do what to regulate or --

Chief Justice Warren E. Burger: Regulate.

Mr. George H. Shapiro: Cable systems has common carriers?

Chief Justice Warren E. Burger: No, to regulate the rates just to that extent?

Mr. George H. Shapiro: Of broadcasters, Your Honor or cable systems?

Chief Justice Warren E. Burger: Cable.

Mr. George H. Shapiro: To the extent that -- the position thus far Your Honor the Court's recognition of the jurisdiction of the FCC is based upon -- has been based on broadcast regulatory authority.

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

Chief Justice Warren E. Burger: Could it?

Mr. George H. Shapiro: Huh?

Chief Justice Warren E. Burger: Could it, does it have the legal --

Mr. George H. Shapiro: I don't think it could under the existing statute.

Chief Justice Warren E. Burger: But you I take it from that you concede that the Congress could confer that power on the Commission?

Mr. George H. Shapiro: To regulate broadcasting rates?

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

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

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

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

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

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

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

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

Justice William H. Rehnquist: Well, the First Amendment gave it rather than this Court?

Mr. George H. Shapiro: Excuse me Your Honor I didn't her that.

Justice William H. Rehnquist: I would have thought the First and Fourteenth Amendments had given it to them rather than this Court?

Mr. George H. Shapiro: Perhaps I should say recognized rather than gave.

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

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

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

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

You must make an affirmative decision and pay someone.

Both offer multiple services.

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

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

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

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

Justice Byron R. White: Would you think then what you are saying now you don't think is inconsistent with what you said -- the way you answered the Chief Justice with respect to a broadcaster being required to allocate 25% of its broadcast time to public service?

Mr. George H. Shapiro: Well Your Honor --

Justice Byron R. White: Because there is a difference between broadcasters and cables and newspapers, I guess?

Mr. George H. Shapiro: Yes there is the different broad -- different regulation is always been applicable to broadcasters than to other media.

Justice Byron R. White: Because of spectrum limitations?

Mr. George H. Shapiro: Because primarily of spectrum limitation, there have been other types of differences in the --

Justice William J. Brennan: And you suggest Mr. Shapiro, the spectrum limitations do not apply to cable business?

Mr. George H. Shapiro: Spectrum limitations do not apply to cable, that is correct.

Chief Justice Warren E. Burger: What public resource does cable television use?

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

Justice William H. Rehnquist: When you say public easements, do you mean the easements own by the federal government?

Mr. George H. Shapiro: No, normally these are easements owned by states or municipalities.

Justice Byron R. White: Easement is over property?

Mr. George H. Shapiro: Easement is over property.

Justice Byron R. White: Or under?

Mr. George H. Shapiro: Or under.

Justice Byron R. White: But the limitations on them are more on being able to get them more economic than anything else?

Mr. George H. Shapiro: That is precisely our point Your Honor and in the Miami Herald versus Tornillo, this Court held that economic restrains did not --

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

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

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

It is not the rule.

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

My time is expired in it.

Thank you.

Rebuttal of Lawrence G. Wallace

Chief Justice Warren E. Burger: Mr. Wallace, do you have anything further?

Mr. Wallace: Yes Mr. Chief Justice.

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

On their face, the rules start off --

Justice William H. Rehnquist: Why do you call that as a public resource?

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

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

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

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

There are substitute for those rules.

Yes?

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

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

There is a use of signals there.

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

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

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

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

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

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

Justice Byron R. White: (Inaudible)

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

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

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

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

Justice William H. Rehnquist: Mr. Wallace, you spoke quite glowingly on two occasions in your response of the Chief Justice's concurrence in Midwest Video.

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

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

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

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

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

Chief Justice Warren E. Burger: Thank you gentlemen.

The case submitted.

Featured:

United States v. Midwest Video Corp. - Oral Argument

Thu, 23 Aug 2012 18:22:49 +0000

Case:

United States v. Midwest Video Corp.

Media File:

71-506_19720419-argument.mp3

Related Transcript:

71-506_19720419-argument

Transcript:

Argument of Wallace

Chief Justice Warren E. Burger: We will hear arguments next in number 71-506 United States against Midwest Video Corporation.

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

Mr. Wallace.

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

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

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

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

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

The background of the rule is this.

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

The situation there involving the 100 largest television markets.

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

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

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

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

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

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

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

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

Is there something in the Act?

Mr. Wallace: There is nothing in the Act on that subject.

Justice Byron R. White: It had to be a common carrier by wire to be subject I take it.

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

Justice Byron R. White: Commission does have jurisdiction over interstate communications by wire?

Mr. Wallace: Yes, it does.

Justice Byron R. White: Are they common carriers?

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

Justice Byron R. White: But if there was some real statutory authority, obvious statutory authority over just wired communications, we wouldn't have had this argument.

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

I agree, Your Honor, but I --

Justice Byron R. White: Well but the commission would have decided it differently.

Mr. Wallace: Undoubtedly.

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

The commission is proceeding as best it can.

Chief Justice Warren E. Burger: Has there been any amendment in this area since cable television emerged as a real --

Mr. Wallace: Not at all, Your Honor.

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

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

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

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

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

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

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

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

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

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

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

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

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

Justice Potter Stewart: And this so-called new rules are these as of this February?

Mr. Wallace: That is correct, sir.

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

You have it with you there.

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

It might have been.

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

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

You get back to the rules at issue here.

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

Great covered petition.

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

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

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

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

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

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

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

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

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

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

Justice Potter Stewart: Will you tell me again what cablecasting is?

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

Justice Potter Stewart: Wholly originated.

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

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

Justice Byron R. White: But no amended TV sets can received that?

Mr. Wallace: That is correct, sir.

Chief Justice Warren E. Burger: Then the origination doesn't really have controlling impact here, doesn't it?

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

Mr. Wallace: That is a possibility.

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

Justice Byron R. White: Primarily emphasis is to include local --

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

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

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

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

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

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

Chief Justice Warren E. Burger: Well, is all cable television pay television?

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

Chief Justice Warren E. Burger: But it comes into your home by wire.

Mr. Wallace: If there is a subscription fee.

Chief Justice Warren E. Burger: It's a pay television, isn't it?

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

Chief Justice Warren E. Burger: I noticed that Judge Gibson was somewhat exercised about the problems of advertising, is there advertising on cable television?

Mr. Wallace: Advertising it -- there isn't, with respect to the broadcast programming that is carried.

Chief Justice Warren E. Burger: But not on those --

Mr. Wallace: But there -- it is now -- they can carry the advertising that is already put on the air by the broadcast.

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

Mr. Wallace: As it is, and they don't interfere with the advertising that is on it.

Chief Justice Warren E. Burger: But the cable television as such does not introduce advertising on the wire, is that right?

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

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

Chief Justice Warren E. Burger: Does that mean the viewers are going to pay a fee to get advertising piped into their homes and televisions, ever since department can --

Mr. Wallace: They all do operate with subscriber's fees.

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

Justice Thurgood Marshall: Does that include political advertising?

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

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

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

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

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

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

And there are two reasons for this concern.

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

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

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

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

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

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

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

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

Because they serve only a very local community.

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

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

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

Justice Byron R. White: There is no grandfather clause here.

Mr. Wallace: There are some grandfather provisions involved.

But they are not at issue in the present case.

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

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

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

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

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

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

Voluntary cable casters originating programs but also carrying broadcast signals.

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

Mr. Wallace: Not only would I say but --

Justice Potter Stewart: Assume they had 20 channels and they filled them all up.

And not only with the broadcasting signals but with origination.

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

Mr. Wallace: That commission's rule does apply in that case.

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

Justice Byron R. White: True but Commission's power and authority?

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

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

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

Justice Byron R. White: Assume the non-existent cablecaster, doesn't use broadcasting.

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

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

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

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

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

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

Justice Potter Stewart: Do you think the Fortnightly Corporation decision has any relevance to the issues here?

Mr. Wallace: I think it has relevance in this respect.

Of course, it only decided whether there is --

Justice Potter Stewart: Whether there was a violation of -- .

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

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

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

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

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

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

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

Justice Byron R. White: Mr. Wallace that point is, we do have this demarcation of 3,500 subscribers.

Do we not?

Mr. Wallace: That is correct.

Justice Byron R. White: I suppose my question is, is there anything arbitrary about the 3,500 mark?

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

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

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

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

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

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

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

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

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

Chief Justice Warren E. Burger: Mr. Wallace as I read Judge Gibson's concurring opinion at least, he doesn't -- he does not question FCC power in any broad sense, I noted in his opinion, he uses the phrase at this time at least to, perhaps three times in his opinion.

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

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

Chief Justice Warren E. Burger: Thank you Mr. Wallace.

Mr. Wallace: Thank you sir.

Chief Justice Warren E. Burger: Mr. Plotkin.

Argument of Harry M. Plotkin

Mr. Harry M. Plotkin: Mr, Chief Justice and may it please the court.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

But beyond that they wouldn't permit it.

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

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

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

Justice Byron R. White: That's because they are carrying broadcast signals.

Mr. Harry M. Plotkin: They because they are carrying broadcast signals, that's right.

Justice Byron R. White: Even though that they are carrying it by wire.

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

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

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

Justice Byron R. White: And did Southwestern approve the power commission to force the cable TVs to carry things they didn't want to?

Mr. Harry M. Plotkin: No that wasn't even involved at that time.

Quite a contrary, when this --

Justice Byron R. White: What about the order to carry local stations?

Mr. Harry M. Plotkin: To carry what?

Justice Byron R. White: That the cable operators have to carry all local stations even though they didn't want to.

Mr. Harry M. Plotkin: Yes, that was what was involved there, the commission said as part of out authority.

Justice Byron R. White: Well I know, but was that involved in Southwestern?

Mr. Harry M. Plotkin: The rule was involved in that case that wasn't challenged.

Justice Byron R. White: It was upheld --

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

So the courts have upheld --

Justice Byron R. White: Do you challenge that as well, I mean if your position were sustained, would you say that commission couldn't force the cable TV people to carry all local station?

Mr. Harry M. Plotkin: That's the position we took several years ago and we were not able to persuade the courts that that was correct.

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

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

Justice Byron R. White: But I just wonder all, Mr. Plotkin, I just wondered if your position -- if your position were sustained, would it also invalidate that rule?

Mr. Harry M. Plotkin: No, in this case, not at all.

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

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

Justice William O. Douglas: (Inaudible) if any, with the state systems maybe they should?

Mr. Harry M. Plotkin: Well the state's -- the commission, at this stage of the game is undertaking in many areas to pre-empt the theory of state regulation, the states are fighting that and that matter is now --

Justice William O. Douglas: Is that involved in this game?

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

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

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

Justice William O. Douglas: Does any state have regulations covering origination?

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

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

Justice William O. Douglas: Well, then what would --

Mr. Harry M. Plotkin: What?

Justice William O. Douglas: They would fall under this regulation?

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

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

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

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

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

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

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

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

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

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

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

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

Now CATV system in --

Justice Byron R. White: Some of the mountainous areas out west can't get television without -- .

Mr. Harry M. Plotkin: That's right, that's right.

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

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

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

The pertinent is relatively simple.

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

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

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

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

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

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

Chief Justice Warren E. Burger: You say that the commission could never require that development -- it's now reaching for here.

Mr. Harry M. Plotkin: Under the statute that Congress had drafted, I say they do not have the statutory authority, that is correct.

Chief Justice Warren E. Burger: Under any circumstances.

Mr. Harry M. Plotkin: Under any of the present statute.

Chief Justice Warren E. Burger: That's what I mean.

Under the --?

Mr. Harry M. Plotkin: Under present statute they are not.

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

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

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

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

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

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

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

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

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

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

You have got to go out and buy a microphone.

You have got to hire people who creates programs.

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

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

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

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

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

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

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

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

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

That's what's involved in mandatory origination.

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

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

Justice Byron R. White: Let's assume there is a licensed TV station and the operator and the owner prefers to just to be a transmitter, to get a network 100%.

Mr. Harry M. Plotkin: Yes.

Justice Byron R. White: And doesn't the commission have power to tell him he has to put on the air, certain amount of local program and originate some programs.

Mr. Harry M. Plotkin: The commission says to him, that you can't operate a broadcast station without a license, and license requires you to operate in the public interest.

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

Justice Byron R. White: Now, say to the cablecaster, if you want to use broadcast signals, you've to get a little piece of paper from us.

Mr. Harry M. Plotkin: Only to --

Justice Byron R. White: That you call the license is it?

Mr. Harry M. Plotkin: Well, but the license that the --

Justice Byron R. White: He does anything -- they have to get permission?

Mr. Harry M. Plotkin: They have to get permission from the commission.

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

Mr. Harry M. Plotkin: That's what they are saying, what we are saying.

But that's the --

Justice Byron R. White: What's the difference between the two situations?

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

You must become a broadcast station.

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

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

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

Chief Justice Warren E. Burger: You want to answer that after lunch Mr. Plotkin?

Mr. Harry M. Plotkin: Yes.

Chief Justice Warren E. Burger: Continue.

Mr. Harry M. Plotkin: Thank you Your Honor.

Chief Justice Warren E. Burger: You have about ten minutes remaining of your time.

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

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

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

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

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

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

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

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

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

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

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

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

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

Chief Justice Warren E. Burger: But isn't the commission saying here Mr. Plotkin that in order to perform and fulfill your total public function, you must do these additional things?

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

Chief Justice Warren E. Burger: Well, you are doing a little more than installing receivers, you are operating a system, the last stage of which is installing.

Mr. Harry M. Plotkin: That's right.

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

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

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

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

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

Chief Justice Warren E. Burger: And in the public interest?

Mr. Harry M. Plotkin: In the public interest related to the reception functions, and there is ancillary to the broadcast function.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

That also is part of it.

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

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

This is what the commission is doing.

We are not arguing with the desirability of the function.

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

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

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

Mr. Harry M. Plotkin: That's correct.

Justice Potter Stewart: Not whether or not it was good or bad.

Mr. Harry M. Plotkin: That's right.

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

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

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

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

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

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

But no grandfather protection has been recorded in this thing.

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

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

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

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

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

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

Chief Justice Warren E. Burger: Thank you Mr. Plotkin, thank you Mr. Wallace.

The case is submitted.

Featured:

U.S. v. Southwestern Cable Co. - Oral Argument

Thu, 23 Aug 2012 18:13:13 +0000

Case:

U.S. v. Southwestern Cable Co.

Related Transcript:

363_19680313-argument-incomplete

Transcript:

Argument of Henry Geller

Chief Justice Earl Warren: Number 363, United States et al.Petitioner, versus Southwestern Cable Company et al. and Number 428, Mid West Television Incorporated et al. versus Southwestern Cable Company et al.

Mr. Geller, you may proceed with your argument.

Mr. Henry Geller: The interim relief order which the Commission issued preserving the status quo was appealed to the Court of Appeals for the Ninth Circuit.

And that Court held that we lacked jurisdiction over community and antenna television, relying chiefly on opinion of this Court in Regents v. Carroll and that brings me to the first legal issue in the case, our jurisdiction over the off the air CATV.

Justice Potter Stewart: Is it clear to you what the Court of Appeals on the Ninth Circuit did hold and that it did hold that?

Mr. Henry Geller: We believe, yes, they did hold that that they we're saying that we lacked jurisdiction over a non-licensee CATV and we think subsequent cases, the Valley Vision Case particularly has borne that out.

There was no question of an interim relief order in Valley Vision.

They state our order and cited only the Southwestern Case here.

Justice Potter Stewart: And all that is crystal clear from this opinion law, is it?

Mr. Henry Geller: No.

The opinion is subject to construction.

Although, we think that reading it – we read it a saying that we lacked jurisdiction over CATV when it relies upon Carroll to say that we cannot extend our orders to a non-licensee and that would not just be interim relief order because there would also be rules.

And as I say in a subsequent case where there was no question of interim relief valley vision, the Court state our order and made clear in the all argument Judge Barnes was on the panel that they felt they had got to the jurisdictional issue and had held that we lacked jurisdiction over the off the air CATV.

Justice John M. Harlan: So this is from the appellant?

Mr. Henry Geller: That is correct.

Justice John M. Harlan: That case was not brought up here?

Mr. Henry Geller: It was not brought.

In the Buckeye Case, our jurisdictional position was fully sustained.

We believe that our jurisdiction stems directly from the explicit provisions of the Act.

Section 1 of the Act calls for the establishment of -- as efficient and nationwide system of wire and radio communication as possible and says that authority is being centralized in the FCC to achieve that.

Section 2 (a) of the Act says that the provisions of this Act are applicable to all interstate communication by wire and radio and Sections 4 (i) and 303 give us broad rule making powers to carry out the provisions.

Now, CATV comes within the provisions because it is an interstate communication by wire within the definition in 3 (a) and 3 (e) and that is not really in dispute here.

It also comes within the provisions that we think in another basis that it’s a -- it comes within the definition in 3 (b) of radio communication because it is an instrumentality incidental to the transmission of energy by radio and the definition includes that too, but it does come thus within two way.

The provisions of the Act are applicable and we have made rules to carry out certain provisions and the provisions which we are carrying out, we say, are, 307 (b) which calls for this nationwide plan of local television, 303 (h) which is very important here and which says that the Commission can establish the service area stations so as to achieve that nationwide plan, and 303 (s) which is the all channel law which calls for the promotion of UHF, again, is to get this system of local television.

And what -- it is that the CATV is in effect extending the service area stations.

That is what it does and the heart of our position is that since the provisions of the Act are applicable to it, we can regulate that extension of the service area by CATV in order to prevent the frustration of this nationwide plan of local service.

Now, we argue that our action therefore comes explicitly within the terms of the Act, but it also we urge, comes within the spirit and the purpose of the Act.

As this Court said in Pottsville, the very reason for the creation of the FCC was to keep a grip on this dynamic new technology that changes so much to prevent a chaotic allocation situation from resulting and in NBC, the Court said, we have been given comprehensive powers to achieve that purpose.

Justice John M. Harlan: And how does ever been the purpose of you and the submission of that?

Mr. Henry Geller: Yes, Your Honor.

Justice John M. Harlan: And you have – to put this together exclusive for the explicit as registration on this?

Mr. Henry Geller: Yes.

There are two dissenters from our jurisdiction out of the seven Commissioners.

We have sought clarifying legislation.

We sought at the time we adopted the second report.

We believe that an important new field like this, it would be desirable to have Congress legislate it.

There has been no legislation.

However, we argue that the recent legislative history, if anything, shows acquiescence when you examine this as we have pointed out in our brief.

Now the Regents v. Carroll that was relied upon by the Court below, we are just inapplicable here.

In Regents, the Commission as a condition of renewing the license of a radio station specified that the station had to terminate a contract it had with an outside party that prevented the station we found from serving the public interest fully.

The station terminated the contract.

There was a suit in the State Court for damages for Breach of Contract and this Court held that the Commission could not adjudicate the State Court matter, the issue of impossibility of performance because of the Commission’s action, all these were matters for the State Court.

The Court -- this Court did not come remotely close to holding in that case so that that the Commission lacked the authority to carry out the allocation provisions of the Act as to an entity coming expressly within those provisions, CATV, which is extending the service area or stations in a way that can frustrate the whole allocations plan.

The main argument that respondents have made against jurisdiction is that, the Act does not have any comprehensive scheme of regulation of wire communication.

It has some provisions they say like 605 but in the main, the Act deals in Title II with common carrier regulation, and in Title III with radio regulations.

Well, we would agree that the Commission does not have plenary jurisdiction to do it, everything or anything it wants to CATV, but that does not mean we lacked jurisdiction entirely.

What we have is the jurisdiction to carry out the pertinent provisions that do fit that are pertinent to CATV and that is what we are doing here.

We would also agree that the Congress in 1934 no more thought of CATV than it thought of television.

They couldn’t foresee developments like that.

What they did was to give us a broad grand of authority under a public interest standard, to carry out the provisions of the Act is to all interstate communication by wire or radio.

Justice Abe Fortas: What jurisdiction do you exercise over the cable that – over which network programs are distributed?

Mr. Henry Geller: We regulate the networks at the present time to their affiliates.

We --

Justice Abe Fortas: I know you do that, but that's not my question.

What jurisdiction do you exercise over the cable itself –

Mr. Henry Geller: Well, we --

Justice Abe Fortas: -- that is made for the cable and the service --

Mr. Henry Geller: We – that's common -- I beg your pardon, this common carrier jurisdiction.

We regulate the rates that are charged in networks.

We --

Justice Abe Fortas: You regulate that under your common carrier authority?

Mr. Henry Geller: That is correct.

Justice Abe Fortas: Do you claim any authority to regulate that as insularity or jurisdiction over broadcasting?

Mr. Henry Geller: No.

We have regulated the common carrier aspects, the common carrier reserves --

Justice Abe Fortas: Has the question ever arisen?

Mr. Henry Geller: No, it hasn't Your Honor because when we want to regulate the networks, we have gone in two ways to do that.

One way, we have gone is to make regulations applicable to their affiliates saying that we will not renew the license of an affiliate which engages in any activity we consider inconsistent.

Justice Abe Fortas: Do you see a distinction between your power derivative from your broadcasting jurisdiction over CATV on the one hand and over the cable service on the other hand?

I realize that one is sort of in the retail business and the others so to speak in the wholesale business, but I'm not sure that that's a difference?

Mr. Henry Geller: Well, the cable that serves a network is a common carrier.

It will serve anybody who comes along and we have held and all the parties are in agreement on this, said the CATV is not a common carrier.

It does not take messages --

Justice Abe Fortas: I understand -- yes, that's right.

So, you can't regulate CATV under your common carrier jurisdiction?

Mr. Henry Geller: We have declined to do it.

Justice Abe Fortas: Unlike that it talked about the as – the other side of the coin.

Mr. Henry Geller: Uh mm.

Justice Abe Fortas: Is there a meaning for a distinction between the jurisdiction that you claim over CATV and the cable situation with respect to your broadcasting jurisdiction and its implication?

Mr. Henry Geller: By cable, you mean the networks, sir?

I want to make sure –

Justice Abe Fortas: Yes.

Mr. Henry Geller: -- because on the network, there is a specific provision of the law applicable which says in 303 (i) that we can make regulations applicable to radio stations engaged in chain broadcasting.

We therefore focus on that when we act in the network field.

And we have adopted regulations that go – we – that go to the affiliate and we are now proposing, Your Honor, to adopt regulations in the television area that go directly to the network television licensee.

We say, they are radio stations engaged in chain broadcasting and we -- what I'm saying to you is a 303 (i) determines what we do in this area, and we are proposing direct regulation of the television network.

Now, that is being disputed by them and eventually, that's a different issue of me come before the Courts and have to be settled.

But --

Justice Abe Fortas: As I understand that the basis really of your claim of jurisdiction over CATV is that CATV operates as an extension of particular stations?

Mr. Henry Geller: Yes, sir.

Justice Abe Fortas: Extension of their service area and in that way and I think your allocation power?

Mr. Henry Geller: That is right, sir.

Justice Abe Fortas: And since it directly affects your allocation power in that way then we should assume -- we should determine that the statute authorizes certain – some regulation of CATV.

Is that not the basis of your argument?

Mr. Henry Geller: Yes, Your Honor.

The statute says, the provisions of this Act are applicable to all interstate communication by wire.

The provisions that we are applying are 303 (h) and 307 (b) which call for these plans and what the -- since CATV is extending the service area station, we say we can make those provisions applicable.

Now, an argument comes back that the provision for making applicable are radio provisions and we're making them applicable to a wire system and that there is a rigid dichotomy here.

And to that we cite Section 1 of the Act that says that, the authorities being centralized in 1 (h) and (c) in order to get this efficient nationwide system.

Previous to the 1934 Act, the ICC had wire and the Federal Radio Commission had radio.

And the Congress said in the reports that we've cited that, there is a need for a unified jurisdiction here for one comprehensive jurisdiction over the entire industry.

And that's why they centralized the authority in the Commission and we are exercising that centralized authority over both wire and radio in order to achieve this efficient nationwide system of local television outlets, but that is a statement -- you're correcting your statement of the basis upon which we are asserting jurisdiction.

Justice Byron R. White: Do you really don't need on that approach?

You really don't need the – need any authority over wire transmission, do you?

And you have – you'd make the same argument you have no authority of the wire?

Mr. Henry Geller: Well, if – well, what we do save point to though is we have Section 2 (a) of the Act that says, the --

Justice Byron R. White: Oh, I know you don't but you don't need two, do you?

Mr. Henry Geller: Well, it's explicit.

I think the Congress meant to say that we want you to have the unified jurisdiction over wire and radio to carry out the provisions of the Act.

Justice Byron R. White: Yes, but on the -- on the other hand, would you claim authority over this -- over CATV if it didn't – have any impact at all on your broadcasting authority?

Mr. Henry Geller: Well, we would have jurisdiction over but we would have no provisions we'd be carrying out.

There wouldn't be --

Justice Byron R. White: You just wouldn't be doing anything, would it?

Mr. Henry Geller: That's correct.

Absolutely.

Justice Byron R. White: And so you really must reach the broadcasting power –

Mr. Henry Geller: No, the --

Justice Byron R. White: -- you are asked to find what you do and it doesn't help you a whole lot to say that wire story, isn't it?

Mr. Henry Geller: It doesn't help us because then the next question comes, what are you doing to carry it out?

What provisions are you carrying it out?

But we say here that there are --

Justice Byron R. White: There are three commissions rested this – rested flatly in its opinion on the wire authority?

Mr. Henry Geller: Oh, no, Your Honor.

We start with that but you then have to go -- we're not saying that we could regulate them just because there are wire communications.

As you say, we're regulating them because there are wire communications --

Justice Byron R. White: You don't think you have any Chenery problem here at all?

Mr. Henry Geller: No, we are regulating them because they are wire communication which is extending the service area stations and having an impact on the nationwide system with television allocation and that is the basis that we are doing it.

Now The Chenery problem that was raised, the only one I'm aware of was it we did bring up the point that we could also regulate them as radio communication as incidental to the transmission of radio communication.

We don't believe there is Chenery point there either because this is a legal matter.

Chenery applied when – as to policy.

If the agency decided to act on one policy and then in court tried to shift, in Chenery said you couldn't do that.

But we have enunciated the policy in the major market in the carriage of non-duplication.

The question is whether we have the legal power to do so and we believe we do?

On the basis that they are interstate communication by wire which is affecting, extending the service area and affecting the plan and also on the basis that they are radio communication coming in within that definition also.

And incidentally we did note in our memorandum of law, Mr. Justice White, that it could come within either one of them, either 3 (a) or 3 (b), either in the state communication by wire or the radio.

We said it was unnecessary to resolve.

Now there is one other argument made in here in jurisdiction and that is it -- we have disclaimed jurisdiction previously.

In 1959, when we considered this question, we did not -- we did not pass on the issue whether we had jurisdiction, because of the impact on broadcasting.

We found that unnecessary to do so because we found no impact.

We expressly reserved the question to the jurisdiction on that basis and we have never disclaimed jurisdiction on the basis which is now asserted here before this Court.

I would like to turn now to the second issue in the case, the validity of our interim relief order, our orders that specify that pending the outcome of the evidentiary hearing, the respondents could not expend their system to throughout Los Angels – throughout San Diego with these Los Angles signals until we --

Chief Justice Earl Warren: May I ask -- may I ask when did the CATV first out an impact to on the District Court?

Mr. Henry Geller: When we looked that it 1959, we found no impact.

We think the impact begin coming in with a vengeance in the early 1960's.

Chief Justice Earl Warren: I see.

Mr. Henry Geller: Now with this rapid spurt in growth and there was a revolutionary new change where it began going in to the -- the major markets.

Chief Justice Earl Warren: I see.

Mr. Henry Geller: And there were a lot of claims of impact before, but when held the hearings we could not prove them and therefore we took no action.

Chief Justice Earl Warren: I see.

Justice Potter Stewart: When did this shift occur, that is the commencements are going into the major market?

Mr. Henry Geller: About 1962.

That was a beginning of it, 1962 and 1963, but it -- it began accelerating very rapidly after that.

Justice Abe Fortas: Does your brief state just what you think is a nature and extent of your jurisdiction, I forgot?

Mr. Henry Geller: Our brief states fully the nature of our jurisdiction over CATV, if we go --

Justice Abe Fortas: I don't mean -- I don't mean from way you drive it, but what you think you can do with respect CATV?

Do you think you can license --

Mr. Henry Geller: No.

Justice Abe Fortas: -- CATV System?

Mr. Henry Geller: No.

We think -- say we can carry out the allocation provision to prevent them from the extending a service area in such a way is direct local service.

Justice Abe Fortas: By an order --

Mr. Henry Geller: We think --

Justice Abe Fortas: -- directed to them?

Mr. Henry Geller: I beg your pardon.

Justice Abe Fortas: I order directed to the CATV.

Mr. Henry Geller: By rule and by order.

Justice Abe Fortas: You couldn't reach that by a rule and order directed to the stations to your licensees.

Mr. Henry Geller: Yes.

We -- we do licenses in station and specify what it could conserve.

And we go --

Justice Abe Fortas: No.

But I say could you reach the CATV by in that way?

Mr. Henry Geller: No, we could not.

Justice Abe Fortas: Why not?

Mr. Henry Geller: Because the CATV picks up the signal, moves it about and the station has no -- they do not come within what is called Section 325 (a) the rebroadcast prevision.

Broadcast stations have to get permission to pick up a signal and rebroadcast it.

The CATV is not a broadcast station so it just picks the signal up and moves it around.

The station couldn't do so, it couldn't put a translator, for example.

Justice Abe Fortas: You mean CATV can – does that without a permission of the station?

Mr. Henry Geller: It does this without permission.

Justice Abe Fortas: Then how do you say -- how do you say that the CATV is an extension of the service area of the station?

Mr. Henry Geller: Because in -- in practical effect it is extending the service area.

It's taking the service area of the station, the New York stations and moving them into New York.

Now, the station has nothing to say about it, but the effect from point of view our allocation plan is the same.

The -- there are New York signals being carried, perhaps ups to 50% to 85% of all our homes in Philadelphia if it's allowed to grow and that has the same affect as if it the stations had done.

And we are looking if what the effect is saying that this is an interstate communication by wire which is -- which is extending that service area and if possibly ruining the new competition, we want in Philadelphia.

Instead of getting new stations in Philadelphia that could be the basis of the fourth network, well, we're getting in adjusting New York signals coming, they are not local.

Justice Abe Fortas: Well, suppose some a movie houses decide if this is imaginable, suppose the movie houses decide that they're going to run commercially throughout the country films, that were first reduced in sound on the facilities of television stations.

Mr. Henry Geller: There will be no problem on that.

We would not --

Justice Abe Fortas: Why not?

Mr. Henry Geller: Because the -- that happens all the time, both the movie houses and -- and the TV stations are competing for product?

Justice Abe Fortas: So what's the -- how do you distinguish of theoretically except as a matter of degree?

Mr. Henry Geller: Well, we -- what we say is what's happening here it's a CATV is taking a TV signal and actually extending the service area of that TV signal into another community and that this Commission was created to control.

We -- 3038 says if this Commission is to define the service area of station and that service areas suddenly moved from New York in the Philadelphia and we -- to the detriment of our -- of the public interest and larger more effective use of radio and we say, we can control that.

We have to be able to control it and that's the difference between them.

Justice Potter Stewart: You say there will be no problem about Mr. Justice Fortas' movie house question, no problem in what respect?

Mr. Henry Geller: We would not seek to regulated in any way --

Justice Potter Stewart: You would not have jurisdiction?

Mr. Henry Geller: We would not have jurisdiction over that.

We -- we don't have a jurisdiction over bowling alleys and movie houses anything doing what -- they are extending -- they not in the state communication by wire that is extending the service area stations.

That's all we've claim to do.

We carry out Mr. Justice Fortas other provisions to the Act that we haven't gone in here such as 315 and 317.

Justice Abe Fortas: Now, but that -- that's got two parts to it.

One is, what is -- what constitutes extending the service area of station that's not the easy one for me?

Mr. Henry Geller: But, we say as a practical matter that's what are they do.

They can take a signal from New York into Washington.

Now on the second issue in the case, our position is that the -- that respondents really are ignoring the whole basic regulatory scheme here.

That scheme is design to take hold of this situation and to have an evidentiary hearing before entrenchment, that's what 1107 does.

It's says, you can't move New York signals into Philadelphia until we determine that's in the public interest.

And that's precisely what 1109 is intended to do here also and it's particularized to application; it says, you cannot spread Los Angeles signals throughout San Diego until we will resolve that question.

Now, we could have adopted a blanket rule to that effect.

We couldn't adopted the rule that said that the CATV system which is operating in one of these top 100 market communities and which has very low penetration and bringing in a signal from another community which is not viewed to any great extent, cannot extend its -- its operations on effective date of our rule until we have resolved that public interest question.

That would have been a perfectly reasonable rule.

It would have the same public interest basis as the 1107 rule.

It should not have CATV operations going through out a community that can effect the development of UHF until we resolve the public interest question and as I said --

Justice Potter Stewart: You say you could -- you say, you could clearly have done that?

Mr. Henry Geller: We believe we clearly could have done that.

Justice Potter Stewart: Well, you could have done it if your right in your first point?

Mr. Henry Geller: Oh, yes.

I'm assuming now to --

Justice Potter Stewart: And now you could have done it.

Mr. Henry Geller: I'm assuming Your Honor that we have jurisdiction.

At this point, we are all assuming we have jurisdiction in respondents and the --

Justice Potter Stewart: I didn't realize we all were?

Mr. Henry Geller: I [Laughter] I beg your pardon.

Let me put a phrase respondent cited.

They -- there argument is, in assuming we have jurisdiction over CATV and assuming that the major marker policy is reasonable and even assuming at the end of the evidentiary hearing that we could order roll back of service, they say we cannot issue this interim relief for it.

And I'm saying assuming that we could have adopted this blanket rule, if we had adopted this blanket rule, it wouldn't stopped them right in their tracks at the date that the rule became effective.

Instead of doing that, we adopted the much more reasonable procedure of 1109 where we can give particularized consideration to the question of what is the most appropriate relief here?

In San Diego for example, the pleading showed there had to be an evidentiary hearing because all the facets to the major market question were there.

The pleadings also showed that -- there are -- that they were this eight islands service, eight discreet areas and that is not in dispute.

There was no need for an evidentiary hearing.

There was one issue in dispute and we resolved that in favor of the CATV.

So that we could look and see that the place to halt this, what -- these eight discreet areas and we can allow them to grow in these areas and at the same time prevent the all out expansion that would frustrate the very purpose of the hearing.

Justice Potter Stewart: So these areas delineated by how much?

Mr. Henry Geller: By a man.

They were affidavits attached and to both -- to the pleading of the petitioner showing where there were, these affidavits were not disputed except to one instance.

And then we -- we --

Justice Potter Stewart: Resolved in favor of CATV?

Mr. Henry Geller: -- in favor to San Diego.

Justice Potter Stewart: Then these are neighborhood areas basically?

Mr. Henry Geller: There are different parts of San Diego.

Chula Vista would be one discreet area and they could expand in there.

Paauwee would be another and they are -- they were various areas in San Diego where they could continue their growth.

Justice Potter Stewart: Within each one of these eight --

Mr. Henry Geller: Right.

Justice Potter Stewart: Good, eight areas.

Mr. Henry Geller: And what respondents argument comes down to we are argue therefore is that, he's saying we can approach this problem by a rule that would halt and preserve the status quo pending the outcome of the hearing, but that we can't do it by the more flexible approach of -- of 1109.

Now, we could have adopted that rule.

We agree we could have, but our position here is that under Chenery, the agency has the discretion to proceed by way of ad hoc particularized proceedings.

They have -- it feels that's appropriate.

That here that is obviously more appropriate.

It's fair to the CATV.

And if -- this is really one reasonable overall scheme of hearing -- evidentiary hearing before entrenchment and that this is a perfectly proper way, 1109, of carrying out that scheme and one that's available under 4 (i) in 303 (r).

Now, they argued that 4 (i) and 303 (r) just housekeeping provisions, that you can adopt rules.

Well, the 4 (j) is the provision that allow us to adopt rules.

4 (i) and 303 (r) allow the Commission to issue rules, orders, and other actions is that maybe necessary in the -- in the execution of its functions.

And this Court has in Storer and in American Trucking said that, these were -- these provisions mean just what they say.

They are broad grants of authority to take action necessary in the public interest.

Finally, I would like to say that on the 312 point.

It's argued there are actions here is inconsistent with the cease-and-desist provisions.

312 is applicable when the Commission is trying to halt some activity as a legal that it violates the Rule or the Act.

If we hold the very short evidentiary hearing then, determine whether is a fact finding one, to determine whether the activity is a legal that is we order to hold.

We didn't do that here.

We were not concerned with finding out whether any activity was illegal.

We did not order any halt to ongoing activity.

What were are concern with doing here is formulating the standard particularizing the application of the major market policy to the San Diego area.

And we urge that we can do so under Chenery by this ad hoc procedure and therefore, the existence of 312, no more bursars proceeding with this ad hoc waive and it does the main approach of 1107.

If we have jurisdiction, this Court finds to regulate CATV and the major market policy is reasonable and there is no showing that ti is not then we urge that we have the power to adopt these reasonable ad hoc procedures and to take the action that we need to under the explicit language of 4 (i) and 303 (r).

Chief Justice Earl Warren: Mr. Scheiner.

Argument of Arthur Scheiner

Mr. Arthur Scheiner: Mr. Chief Justice and may it have please the Court.

At the very outset, I would like to address myself to the first question in this case, the assumption of jurisdiction by the Commission.

This question comes up in connection with respondent CATV Systems which are off the air or none microwave fed and in that respect, certainly do not utilize the radio spectrum.

Now our attempt, our position on the lack of jurisdiction is a two-pronged basis.

The Commission asserts that its jurisdiction stems from Section 2 (a), its authority over interstate wire albeit by a non-common carrier, we submit on two basis that the Commission is in error.

First, the Commission does not have jurisdiction over interstate communication by wire by non-common carriers except to the extent that such authority is conferred under the provisions of the Act.

Secondly, we urge that the Commission is lacking in jurisdiction because there are no standards, no criteria, no definition, no congressional guidance of any nature whatsoever with a respect to the basis of jurisdiction that's asserted.

Let me address myself to each of these basis in turn.

First, it is the fact that prior to the Commission's assertion of jurisdiction over CATV, it has never asserted jurisdiction over interstate communication by wire, by non-common carries.

That statement is made in our brief.

It is not controverted in the petitioner's reply brief.

The only answer is and I believe I'm quoting “We did not probe that question.”

When I say that it has never done it, it has never done it despite the existence of thousands and thousands of miles of such interstate communication by wire non-common carriers, the typical example of the rights of Y Companies.

Now, I fully recognize rights the Y Companies words reasonable and feasible to utilize such a mode of communication.

Now, this type of wire use obviously does differ from the use involved here.

Namely that's the rights of Y Companies clearly had no so-called “impact”.

They are not involved then television broadcasting.

But I respectfully invite the Court's attention to those portions of our brief which detail at considerable length the legislative history with respect to the exclusion of the AP and UPI wire services from the purview of the Commission's jurisdiction.

We put particular stress, although, we have termed the absolute and force grant analogy to the networks.

We say it's absolutely in distinguishable in ever single respect.

The networks use interstate wire.

They use it on the transcontinental basis when respect to impact.

I think the Court may take the first jurisdictional notice.

In fact, the Commission itself has recognized to the networks the very life blood of television broadcasting and in the case of the networks, there has been an explicit disavow of direct authority over the networks.

True --

Chief Justice Earl Warren: If the Commission has no jurisdiction here, are you entirely free from regulation?

Mr. Arthur Scheiner: No, sir.

Chief Justice Earl Warren: Well, what is the regulation you would be under if they have no jurisdiction?

Mr. Arthur Scheiner: CATV systems and I might --

Chief Justice Earl Warren: I beg pardon.

Mr. Arthur Scheiner: CATV systems, Your Honor are subject to jurisdiction of local city governments, county governments, and at least in the case of two states, Connecticut and Nevada are subject to the jurisdiction of Public Utilities Commission -- Commissions and are regulated as such.

In this may I suggest, there's not a use of patient of power by the local governmental entities but rather is pursuant to the explicit invitation and recognition of the Federal Communications Commission that the selection of the franchise holders, their mode of operation and all of the indica of their operation, are quiet properly determined at the local level and not by the Federal Communications Commission except to the limited degree to which the Commission has asserted jurisdiction.

However --

Chief Justice Earl Warren: Well is the effect -- the effect of your CATV though is – goes beyond the state lines, doesn't it?

Mr. Arthur Scheiner: Curiously, the Commission if I may answer in this fashion, the Commission disavows --

Chief Justice Earl Warren: I beg pardon.

Mr. Arthur Scheiner: The Commission explicitly disavows jurisdiction of the CATV systems on the grounds that such systems are common carriers that is excluded precariously.

If it had asserted jurisdiction over CATV systems on that ground, we would not be subject to the provisions of Title II, Common Carrier of the Communications Act by reason of explicit exclusion under Section 2 (b) of the Act.

It is the fact that the Congress in delegating authority to the Federal Communications Commission did not delegate or legislate to the full extent of the Commerce Clause.

It provided that so-called connecting carriers, carriers operating within the state are not subject to the common carrier type regulation of Federal Communications Commission.

As it --

Chief Justice Earl Warren: Yes.

As I -- as I understood the counsel in the case of the networks, they were able to regulate the networks through regulation of the local -- of the local stations.

Now, is there any -- is there any way that there could be regulation over the end of your -- your possible interference with the allocation programs of the Commission, if they did not have jurisdiction over CATV?

Mr. Arthur Scheiner: Regulation by the Federal Communications Commission?

Chief Justice Earl Warren: Oh, well by anybody.

Mr. Arthur Scheiner: Oh, certainly.

Chief Justice Earl Warren: I'd like to who -- who can regulate that?

Mr. Arthur Scheiner: Oh, certainly.

In the case of Connecticut and Nevada they are presently regulated by two public utilities Commissions.

In --

Chief Justice Earl Warren: I know but suppose there's – suppose in Connecticut, you set up your CATV and it interfered with the program in New York and New Jersey.

How could -- how is that regulated in anyway?

Mr. Arthur Scheiner: Well, in the case of Connecticut with which I am most familiar, that agency, the Public Utilities Commission, prescribed with great precision the programs that might be carried, the amounts that might be charged the customer, the technical quality of the service, the whole host of characteristics and indica of common carrier regulation of public utility regulation and that was fully provided for by the Connecticut state statute.

Chief Justice Earl Warren: Well is that for the protection of the areas in Connecticut or is that, that assume to be for the protection of the service area of New York and New Jersey or parts of Pennsylvania let us say?

Mr. Arthur Scheiner: It's rather difficult to characterize very briefly the thrust of the purpose of the legislation in the State to Connecticut.I do think --

Chief Justice Earl Warren: No.

Do they -- do they assume to protect the New York area for instance or are there -- is there a function to protect the people of Connecticut?

Mr. Arthur Scheiner: I think it's fair to -- fair to say that that the primary function was to protect people of the State of Connecticut.

Chief Justice Earl Warren: Well, there is secondary function if they have to protect New York?

Mr. Arthur Scheiner: I -- I do not believe so because the question in -- as I view it didn't arise.

It was the regulation of CATV systems located within the State of Connecticut.

Chief Justice Earl Warren: Well, now as a practical matter without regard to what power the Commission actually had.

Wouldn't that -- wouldn't that leave the Commission in a bad situation if it could not protect New York's interest?

Mr. Arthur Scheiner: I -- I do not view it in that fashion and second to the extent that the Commission is without power, I suggest the ready answer is, that such power maybe conferred by Congress and the Commission has sought such authority from Congress on several occasions and thus far without success, but I do think that there are number of very serious and very difficult legislative type determinations to be made.

For example, is it appropriate that this type of new activity which has been exempted from the grant of jurisdiction to the Commission? Should this type of activity be regulated by a federal agency and if so should it be regulated by the Federal Communications Commission?

We may all agree that the aviation for air transport industry is clearly the proper subject to regulation, but clearly should it be regulated by the ICC?

Now, these are profound and difficult questions to answer, but they are questions of a legislative nature.

We have made, if I may continue?

Chief Justice Earl Warren: Yes, of course.

Mr. Arthur Scheiner: We have made a second basic attack on the jurisdiction asserted by the Commission, simply there no criteria or standards of any kind.

In answer to that contention, we get two curious replies in its reply brief and I submit for the first time the Commission, I'm sorry, the government asserts the criteria and standards that you think are required are spelled out in Title III and more particularly, the broadcast provisions of Title III.

And I think I'm quoting their brief when I say, they say, “These provisions are quiet explicit and CATV systems are subject to those explicit provisions.”

The other petitioner in its original brief suggest to this Court that the Federal Communications Commission under the statutory scheme at its option could have regulated CATV systems as common carriers.

So, we now have three claimed basis of jurisdiction; interstate wire or alternatively, if you don't like that one, the Government urges radio, broadcast provisions of radio and if you don't care for that one regulate them as common carriers.

And these arguments are submitted in answer to our contention that there are no criteria whatsoever governing the purported assertion of jurisdiction, but let as examine the Government's contention.

I think, I submit, it is absolutely untenable to suggest to this Court that the broadcast provisions of Title III of the Communications Act are applicable and govern the regulation of CATV systems.

If so, in the case of broadcasting, it is the Commission which picks licensees.

For the statuary limited term of 3 years and picks them based on specified statuary criteria including character, financial qualifications, technical qualifications and the frequencies are granted free in broadcasting and broadcasting is explicitly examined from the provisions of the common carrier sections.

In broadcasting by the decisions of this Court and the other Federal Courts, a State may not censor broadcast, a state may not impose a gross receipts tax on the operation broadcast stations.

Contrast that if you will with the whole scheme of the so-called regulatory regime as applied to CATV.

As I stated earlier, these licenses are granted pursuant to Commission invitation of solicitation by a host of local authorities.

They are granted on a basis of local criteria for periods arranging up from three years to much, much greater periods.

In the case of the San Diego systems, we pay a gross receipts tax unlike broadcasting.

To suggest to this Court that the specific provisions of broadcasting in Title III apply to the regulation of CATV and this is the definition of limitation that we say does not exist in the Act.

These propositions I respectfully submit is completely untenable.

Let me give two specific examples if may, Under Section 326 of the Communications Act and this was not cited in our brief for the reason that the Government rely on the – relies on the explicit provisions of broadcasting was raise for the first time in its replied brief.

But under Section 326 it is provided, “No regulation or condition shall be promulgated or fixed by the Commission which I'll interfere with right of free speech by means radio communication.

That I submit is what the second report is all about.

Chief Justice Earl Warren: Well, may I ask this question and I will try not to disturb you anymore, but without -- without regard to whether Congress actually did leave you beyond in a regulation by the Commission, what do you have to say as to the reasonableness of the argument of counsel that -- that such power is essential to their having -- to their allocation systems that they -- that they have and not -- if unregulated it will -- will interfere with a --with their programs to a agreed that they cannot function effectively?

Mr. Arthur Scheiner: Your Honor please I do not agree with it.

Chief Justice Earl Warren: Well --

Mr. Arthur Scheiner: Basically, we must distinguish between two types of situations and in Mr. Geller's opening argument yesterday he said, “Counsel on this case do not in test the validity of Commission regulation of a microwave fed systems.

We don't contest it because it's not an issue on this case.

In this case, we are operating within the Commission's rules.

We are delivering the so-called Grade B signals and Grade B signals in my layman's terms or signals which the station is authorize to deliver.

We are not carrying New York signals to Chicago.

We are operating with in the confines of the Commission's own allocation report.

As the Court below found, we are local in ever respect and this was explicitly considered by the Commission.

We're delivering the very signals which the Commission's allocation plans, presumed station would be authorized to deliver.

That is the function of the CATV systems on this case.

I do have one further point in connection with the lack of standards argument.

And this sir relates to the -- it is a procedural point.

If in fact the broadcast previsions of Title III apply, let us assume that we were now a licensee.

If we were a licensee and the Commission wanted makes some change in the mode of our operation, the height or the power pursuant to which we were authorize to operate, it would have to do among other things at least two.

First, under the Section 316 of the Act, the Commission would have to tell us what it proposed to do us?

Second, it would have to tell us the reasons therefore.

Third, it would have to give us notice, a 30-days notice for a hearing and in that hearing the Commission would have the burden of proceeding with the evidence and the burden of proof.

Now, we have been -- now translating that 316 requirement to the facts to this case, I respectfully submit that we have been under sentence by the Commission for 19 to 20 months.

The very first time that we will be advised that what it is that the Commission proposes to do translating this to the 316 analogy, the specific broadcast provisions which counsel asserts furnish the limitation.

The first time that we will be told, of what the Commission proposes to do, is when the Commission issues its final report in the pending evidentiary proceeding which is now before the Commission itself.

Chief Justice Earl Warren: And then what review would you have?

Mr. Arthur Scheiner: Then -- then Your Honor, we would have to start over again.

We would have the opportunity for a judicial review by the – it will be the Federal, one other thing in the pending case before the Commission.

It was not the Commission that assumed the burden of proceeding with the evidence.

It was not the Commission that assumed the burden of proof but in those two respects, petitioner Mid-West and respondent CATV systems pursuant to Commission order shared various portions of these burdens.

In a sense, we've been dealing in the dark for close to two years.

The Commission has never advised us much less in writing of what the nature of the changes, restrictions, and limitations are?

And this raises what I submit is one of the very basic and in our view fatal defects in the scheme of the second report.

In the second report, what the Commission has done is write the rules of this game and they're detailed and they're specific.

And it is stipulated and found by the court below that we are in compliance, but they write one additional rule.

The risk, I don't believe this is an over statement, I don't think that Rule find its parallel anywhere in any other administrative agency.

That Rule explicitly says, “Having written the rules of the game, we can change them at anytime we please, in any manner we please, and to whomsoever we please and I would like if may, to refer the Court to the provisions of Section 1109 which are set forth in the appendix to the brief.

That Section says --

Chief Justice Earl Warren: What the page?

Mr. Arthur Scheiner: I'm sorry, Your Honor.

That's page 81 of the appendix in the buff colored volume.

It is the joint appendix in this case.

The Rule 1109 says, “Upon the petition and skipping the intervening words, upon the position in effect of any interested person, the Commission may waive any provisions of the Rules relating to the distribution of television signals by CATV systems impose additional or different requirements or issue a ruling on a complaint or disputed question.”

That is the standard on which are case has been tried.

The Commission may impose additional or different requirements.

Square that I suggest, with the mandatory requirements of Section 316 of the Communications Act and this is terribly important in our view, for the reason that throughout the entire Act, there is one grand overwhelming concern expressed by the Congress in Section 312, provision relating to the revocation of broadcast licensees or the issuance of cease-and-desist orders, 316 which I described, Section 204 relating to the imposition of requirements or changes on common carriers, the one grand premise expressed throughout the Act is a deep concern for the protection by way of procedural due process of all other persons who are licensed or do business subject to -- or by reason of Commission license, franchise or authorization.

And that grant concerned is completely ignored by the Government's view that the Commission proceeded properly in the face of Section 312, in the face of these other provisions by saying, we can do what we will, when we will, and in any matter that we chose to do it, and will tell you for the first time when we issue of final report.

Chief Justice Earl Warren: May I ask Mr. Scheiner just one more question.

If -- as I understood you in the San Diego area, you're not bringing in any additional service?

You're – you're following the rules of the regulation whatever they might be of the Commission?

Now would your argument be the same, if it were not that way and if you were bringing in some other part of the country something it would interfere with the -- with the allocation programs of the Commission?

Mr. Arthur Scheiner: Sir, the answer would not be the same and the reason is that in the alloca -- in the use of the spectrum space, the transmission of radio energy, the Commission does have quiet extensive power.

There is built in to the utilization of spectrum space of necessity a judgment as to how the spectrum space should be use.

There's a quality judgment involve and that is, is it better use for one purpose than for another purpose.

Of necessity, the agency has to make that determination.

So precisely stated, I would not make the same answer in that case.

However, the one significant point which follows from this is that, we might very well find our selves in a most anomalous position.

Two systems side by side; one system utilizing spectrum space and the other not utilizing the spectrum space.

One subject to the Commission's rather plenary authority over the utilization of radio spectrum and the other free of the same type of federal regulation.

Now, this is anomalous situation which suggest only that the necessity for regulation is an area of proper legislative concern.

Problems of this nature – problems of and the other types of problems that I address myself too, are properly to be resolved as a result of a careful and deliberate legislative concern.

For example, if Your Honor would refer to Appendix a in Southwestern's brief, where at the request of the Government, a Bill was sponsored looking towards conferring of jurisdiction over the Federal Communications Commission.

The Congress in that bill at least rather meticulously reviewed the appropriate provisions of the Communications Act.

And in Title III of that Act, as reflected in Appendix a, the -- and I'm never now referring to page 82 of respondent Southwestern's brief the blue covered brief, the Congress in the proposed bill, Section 330 (b) detailed 8 or 10 provisions of Title III which were applicable ignoring obviously a number of others.

It is this kind of determination which I submit is the appropriate decision to make by an informed legislature.

It is not in our view, the kind of determination which the agency itself may make without any guidance or limitation of any kind.

Sir, I've been advised that I've used my time, if their no further questions.

Chief Justice Earl Warren: No.

Oh, thank you.

Mr. Arthur Scheiner: Thank you, sir.

Chief Justice Earl Warren: Mr. Heald.

Argument of Robert L. Heald

Mr. Robert L. Heald: Mr. Chief Justice, may it please the Court.

The Mission Cable basically attacks the jurisdiction of a Federal Communication Commission on two grounds.

The first has been covered very extensively with Mr. Scheiner, but I would like to briefly summarize our position.

We think the failure of jurisdiction is very basic simply because Title III is a licensing statute and that all rules and regulations promulgated their under must be connected with, in harmony with, and for the further of this licensing function.

Of course, there are specific statutory exceptions that Congress has made like 303 (f).

We think this interpretation is consistent with statements of this Court.

Starting in 1940 in Pottsville, in Sanders 1943 and NBC, and of course in 1950 in the Carol case, this Court has described Title III as a licensing section.

Now, the Commission the Government has also contended that they have the right to regulate FCC -- the CATV under the definition of radio transmissions and they concede of course in Title III is as limited to radio or radio transmission.

And Mr. Geller referred to the definition contained in 2 (b) and 2 (d) of the Communications Act which provides that radio transmissions cover any service or communication that is incidental thereto.

And Mr. Scheiner has pointed out that under this interpretation they claim jurisdiction to regulate CN ---- the CATV under Title III.

We think the answer to this argument is very simple.

If they are radio transmissions, the present rules and regulations are invalid since they do not comply with the specific congressional directives contained in Title III.

For example they do not proceed in written applications, they don't give instructions permits, they don't grant licenses.

They don't determine the qualifications of the operator.

Equally important as Mr. Scheiner pointed out they don't give the CATV operator the protections provided in Title III for station licensees and again, he referred to Section 316 and 326.

And the freedom from censorship, I think could not be more clearly violated than the order in this case which prohibits Mission Cable from bringing in the signals of Los Angeles to the San Diego Area.

Justice Abe Fortas: But I didn't understand Mr. Geller's argument quite that way.

Perhaps I'm wrong, but I thought he was arguing sort of a necessary and appropriate power that is to say that implicit in the other parts of the Act in various parts of the Act, he asks this Court to find a power to the Commission to impose certain types of regulation on CATV as necessary and incidental to the explicit powers in the statute.

Mr. Robert L. Heald: Mr. Justice Fortas, we would say that that is not within the power the Commission to decide.

Justice Abe Fortas: I understand that but I -- that is his argument there's no problem --

Mr. Robert L. Heald: I didn't understand it that way.

I do understand that they -- I'm sorry.

Justice Abe Fortas: I beg your pardon, but as I understand that you're saying that the Governments' argument is that power to regulate CATV is found squarely with and not by implication.

Mr. Robert L. Heald: No, that is not sir.

I concede they asked by implication, but we suggest that if under the definition if they once argued the CATV operations do come as a regular transmissions then they are stock with everything in Title III.

They can't come up with what they describe as a limited programming.

In other words, they either have to stay in Title III or they have to get out of it.

They can't pick and choose in Title III what they want to use.

Justice Abe Fortas: But they're trying to get out on it?

Mr. Robert L. Heald: Well, they're trying to get out was first --

Justice Abe Fortas: As I understand on the ground that this is something that is necessarily incidental to the exercise of its powers explicitly vested in them?

Mr. Robert L. Heald: Mr. Justice Fortas --

Justice Abe Fortas: Is that -- am I correct in understanding that are things you should --

Mr. Robert L. Heald: I do not think that -- I didn't understand the argument that way.

They're using the term incidental as a definition term which brings him within the build he be classified as radio transmission.

They are not saying that that definition also says that they incidentally can use some powers to regulate.

That as I understand their argument, the words incidental to radio transmission means they are the same as radio transmission and therefore, they are under Title III.

The other side of the coin, may it please the Court, is if they are not radio transmissions then Title III clearly gives them no authority to regulate because by their own admission is limited to radio transmissions.

But I would like to go on to our second argument which we have expressed in our briefs and which we feel also that clearly shows that the Federal Communications Commission has no jurisdiction over CATV.

Justice Byron R. White: Would you -- excuse me a minute.

What if a licensed station owned a CATV cable installation for the purpose of extending its signals say into San Diego to Los Angeles, if you say this – this case operations is owned by the license station?

Mr. Robert L. Heald: Yes, sir.

Justice Byron R. White: Would the Commission have any authority whatsoever?

Mr. Robert L. Heald: Yes, I think they would. I think the analogy to the network would be direct then.

The Commission in NBC case have to – been to control the network affiliation --

Justice Byron R. White: Why is that?

Why could this if tell them their license station in Los Angeles which is broadcasting out to so many miles normally, why couldn't it tell that station that it could not have a cable extension into San Diego?

Mr. Robert L. Heald: I'm directing my attention to jurisdiction.

They clearly have jurisdiction over that station.

Justice Byron R. White: Well, why you would have – yeah, they have jurisdiction over the station but why would they had jurisdiction over that part of that station's operation?

Mr. Robert L. Heald: I would suggest that for the same reason I'm going to direct myself, they would not have that you would be in a proper -- improper exercise that their authority to tell that station it couldn't own a cable which was extending it to the great big come to a beyond.

Justice Byron R. White: Well, you say that – you've say that the Commission would be likewise be precluded --

Mr. Robert L. Heald: That is correct.

Justice Byron R. White: --from preventing a license station from extending its signal in the San Diego?

Mr. Robert L. Heald: That is correct.

And for the separates of which I like to direct the Court's attention to now is that they call it CATV rules by the Commission's own admission in the second report in order by a decision of the Court of Appeals in the Buckeye case are designed solely for the elimination of competition to CATV to the UHF stations primarily.

And to limit the ability of American citizens to watch signals that are freely available to them and do not cause any electrical interference to any existing station.

Now as I understood the Commission before did not claim any explicit authority Mr. Geller said, they did.

I understood they were claiming their authority under an applied interpretation of the statute.

Then, they had a little formula that it went like this.

They said take 2 (a) which is a definition the Commission has control of all interstate communications by wire and add to that the rule making provisions of 303 (f), 4 (i), and 303 (r) and apply that to the substantive provisions, 307 (b) and 303 (h) and you come up with jurisdiction.

Now, one factor in this equation that they don't particularly emphasize is that the rule making functions provide that these rules and regulations promulgated there under must be consistent with the Act.

And I also suggest to the Court that under in these implied powers the purposes of these rules and regulations must be consistent with the condition -- congressional directive for purposes of enacting the Act.

Now, this Court had occasion on numbers cases to point out, why Congress enacted the Communications Act and the Radio Act of 1927, its predecessor.

They were concern according to this Court, that the chaos that occurred in the radio that stations and people by jumping stations from frequency to frequency, from community to community were destroying all service to the American people so that in effect their was no radio service and therefore, it was necessary come up with a Licensing Act to control these people.

This Court has also stated that the second purpose was that Congress was spurred by the fear monopoly and they were concerned that some industries might gable up all the large frequencies and place them in a large metropolitan areas and this deprived other portions of the United States of the services and as many services as possible.

These two reasons clearly point out that Congress was interested in dividing up this electronic pie if you will in as many ways as possible consistent with the physical laws of electronic to make as many services as available to many people as possible.

Now under these interpretations consistent with these interpretations, this Court for instance has held that licensing per se is not a violation of freedom of speech because if we don't have licenses, we will destroy everything and therefore it's not an unreasonable interpretation.

This Court has held in the NBC case that Congress had -- the Commission has the power to regulate the network relations, the contracts with these -- which affiliated stations in order to provide better and more services and this was incidental to their licensing functions.

And in United States v. Storer this Court has held that the Commission could set up multiple ownership rules as incident to its licensing power such it would be useless to make a Commission on an application to which they have predetermined was already contrary to the public interest.

Well, the Commission is -- the Government in its brief has argued again and again until Congress has bestowed comprehensive powers upon this Commission and we agree.

But this Court had said these powers are not limitless and they must be interpreted in line with the provisions of the Act.

Now with this in mind, I would like to turn to the two specific provisions that the Commission claims gives it the power to regulate CATV and this is 303 (h) and 307 (b).

Now, 303 (h) provides as a directive to the Commission to set up areas and zones of service for stations.

I'm sure this Court is aware at the time the Communications Act was enacted, Congress was thinking primarily of the standard broadcast band, that is the band between 540 and 1600 GHz.

And they were concerned, that the interference that was being caused and Congress was fully aware that the factors that cause interference are the same factors that cause service.

Instead of broadcast station it is power and frequency which results in a usable service to a certain period of area and then far beyond that, is a creation of electrical interference that destroys other service.

And this was a directive to the Commission to set up different types of stations with different coverages and different power.

So again, they could get as many possible services to all the people of the United States within the capabilities of the physical laws of electronics.

Now, 307 (b) as the Court is aware provides that in handling applications the Commission should make a fair and efficient distribution of services and facilities throughout the communities and states insofar as there is a demand for the same.

I suggest this again with a clear indication that the Congress intent to make as many services available to all the people of the United States as would be possible within the physical laws of electronics and not allow them all to get in one place.

Now consistent with these two congressional directives, Congress has come up with this -- the Commission has come up with the series of rules and regulations to cover standard broadcasting and television.

In standard broadcasting, they have created classes of stations.

There's a local station which has power up to 1 kilowatt or a thousand watts, 250 at night.

They have created the regional stations with powers up to five kilowatts.

Clear channel stations of power of the 50 kilowatts, they have day time stations.

The Commission has recognized that in order to get this maximum service, they should limit the area service but what they are really doing, may it please the Court, is not limiting the area of service, they are limiting the interference implications which go far beyond that area service and which there is no practical way to live.

And Congress' directive to create different areas and zones was again a clear directive to make as many services available to the people of United States.

Now in television, it's still I might point out is in the sample that in United States we have a few frequencies with one's AM station.

If all frequencies have one AM station, we'd have 106 stations, but with this ability to create different classes of stations, we have today over 4,200 AM stations operating in the United States.

Now, the television and commission did the same thing, using a slightly different plan.

They set up the television allocation plan.

They provided from minimum separation distances between co-channel and adjacent channel stations and this was to prevent interference.

And then based upon this minimum separation distances, they allocated television frequencies to all the communities in the United States as many as possible while it could still avoid interference based upon these minimum separations.

And then they limited the tower height and the power which were two of the factors that cause both service and interference in television.

So that as many as possible, again, as many stations as possible could exist within this electronic spectrum.

Now, the Commission has set up classes of television service.

There are city grade, grade A and grade B.

Now I'm sure the Court is aware this grade B is nothing more than imaginary or fictional line it's drawn on the chart which is an engineer's attempt to show that at that spot, a certain grade of service, a certain strength of signal exists.

But the Commission has never contended that service stops at that Grade B contour.

Service goes far beyond that.

It may be a factor of terrain, a sensitivity of the receiver, the height of the antenna.

In San Diego, we have a force of their antennas which are listening off the air to this Los Angeles stations.

The Commission has never said that every station in the same community must have the same Grade B contours.

Within the limits of the maximum minimum power, they can have any height than any tower they want.

So in the same city, you will have stations with different Grade B contours, different service areas.

But in every case they are limited by the Commission's rules to preventing interference, to causing interference, beyond those Grade B -- beyond the interference which is well beyond the Grade B contour.

I submit that the purpose of Congress in enacting these two Sections was very clear.

It was to provide the max -- that the Commission should create the maximum number of services possible within the physical laws of electronics.

Now, Mr. Geller stated at the opening that the congressional -- Congress had given the Commission a mandate to have local service and he referred to 307 (b).

Now, if he was saying that Congress gave the Commission a mandate to provide for frequencies in every community so that they would be available if they were needed, I agree.

I submit for the FCC has gone wrong in the CAT regulations as they have attempted to go into a new field of economy – of the economics.

They have attempted to limit competition in an attempt to guarantee the viability of UHF stations whether the people want to see them or not and I submit that purpose is directly contrary to the congressional purpose in setting up Sections 307 (b) and 303 (h).

Now Justice Fortas, I think you ask Mr. Geller a question the other day as to whether or not CATV would cause -- would create competition to the network stations?

And I think Mr. Geller misunderstood your answer -- your question because the answer no because the duplication rules would prevent competition.

I assume your question was directed to point would unregulated CATV cause competition to networks and the answer in emphatically, yes.

They would be the prime source of competition and the federal government, the district -- Department of Justice in its brief in a District – United States Court of Appeals for the District of Columbia Circuit in the ITT case, specifically propose the merger on the grounds that ITT was going into the CATV business and this would be greatest possible source of competition to the networks.

Now, we have also asked this Court to reconsider and clarify its language in the Sander's case which we think is an eminently sound decision, since it holds that broadcasting is free.

It is a freely competitive business and that the Commission has no control over the business of broadcasting and that the broadcaster must stay on the fall upon the acceptability of his product.

Unfortunately, there is some other language in the case that Commission in licensing stations must consider impact of competition on the public.

And as the result of that language as the United States Court of Appeals for District Columbia Circuit on the Caroll case has come up with the Rule of the Commission must consider the protest or the petitioner of an existing station, if it objects to a new license being granted in the same community that alleges that the competition will hurt the public.

Now, there have been a lot of cases started to that rule.

There been a lot of hearings, but I know of no instance from the Federal Communications Commission has denied a license with the finding that the competition from other station will be detrimental to the public.

Now, the Commission is aware and I'm sure this Court can take judicial notice that time after time stations and communities are not financially successful and they go through one owner and two-owner, and three owners until finally somebody gets hold of that station and for some reason, either initiative hard work knowledge of local conditions he makes it successful and it starts producing a product that the people want to watch and then it starts contributing to the welfare of that community.

Now broadcasting is something unique, it is something that's based upon an initiative, all other forms of information, entertainment, education, or in competition and we submit Congress wisely left the broadcasting business to be in competition and broadcast station should rely upon their product.

And we submit that here, where non-micro way CATV does in no way causes electrical interference to existing stations, in no way prevents the development of local stations, if there is a demand from the citizens for that station, in no way prevents any person from watching, if he's desire friends to see -- when the CATV comes in upon his request, he can have a switch put in and still contain -- maintain his outside antenna.

It's strictly within his control what he wants to watch.

I submit that the purpose of the CATV Rules are diametrically opposed to the intend of Congress and that enacting both the Act in these two specific Sections which the Commission is relying upon and for that reason it's beyond the jurisdiction of the Commission.

Justice Abe Fortas: Why do you suppose -- what is your opinion as to the reason why Congress hasn't legislated on the subject?

Mr. Robert L. Heald: Mr. Justice Fortas, I am going to take to try and guess why Congress has enacted perhaps express in considering --

Justice Abe Fortas: I know but its nothing in the – there are no committee reports or anything in the sort that provide the basis for the less changing.

Mr. Robert L. Heald: As to why they have not acted?

No.

There is nothing in the reports.

They must be --

Justice Abe Fortas: Mr. Geller urges as I understand them that this Congress' inaction should be taken as acquiescence and what the Commissions were not to in this field and that's always a permissible line of argument.

Now, I wondered if you had the state your view as to the reason.

Mr. Robert L. Heald: Now, we feel on the contrary that this is such a complicated subject and it is the extending the power of the Commission into a brand new field which Congress has never considered the administrative agency should act before, that inaction is only because of the complicated subject that is involved.

Justice Abe Fortas: But that Congress has not acted because --

Mr. Robert L. Heald: Because we have -- they have just not have time to consider.

Now some of the unanswered questions --

Justice Abe Fortas: That's -- in other words, that Congress is different about legislating in this field?

Mr. Robert L. Heald: [Attempt to Laughter] I would hope they would take the time to examine any complicated questions that arise.

And I think one for instance that is bother than is whether not CATV's can originate?

And this is a question that is now before the Commission and whether or not the Commission can prohibit that either under present rules is whether Congress --

Justice Abe Fortas: An originate program?

Mr. Robert L. Heald: That's correct.

In addition, as you know a CATV system have multiple channels.

The ones in San Diego have 12 channels and they use some of those channels or can use some of those channels to other things other than bringing in television.

And they could originate there own programs, the news program or weather program, and film so the capability of CATV, the effect on economic status, I submit such a complicated subject that the inference that Congress has not acted at this time is not that they agree that the Commission has so far but perhaps it is such a complicated subject that they want to time the act upon it first.

Justice Abe Fortas: Well, it had a little while then?

Mr. Robert L. Heald: They've had I think two years.

Well, they asked first in 196o when Congress -- when Commission didn't ask for it in a very hard way and in the second time, they ask for it and as I'm not familiar with the hearings and what extent it was argued.

But I do know there was a very strenuous minority report which we quote in our brief which specifically points out, why the Commission should not have jurisdiction.

And raises the very problems the complications will arise unless Congress fully considers them.

Now, Mr. Chief Justice you raised the question as what was the answer to the reasonableness problem that Mr. Geller raises.

Now the force of course is, we've emphasized that there is no electrical interference.

The point is that its only economic impact.

I suggest that Mr. Geller may have a very reasonable argument.

There maybe a need for economic control against to ensure the viability of VHF and UHF television.

They're may be a need to limit the right of American public to watch television channels that are freely available to them.

There may be even a need to give this power to the Federal Communications Commission and administrative agency but I suggest that is a matter for Congress and Mr. Geller's argument is directed to the wrong forum since a federal agency should not be allowed to take itself up by its foot straps and launch itself into a new field, find you the control of economics, competition without specific congressional direction.

Now with time remaining to I would like to adjust myself for the decision of the Court below in which it said this Commission didn't have the power to which you would stay ordered.

We think the decision is eminently sound and that the Court made have very fine analysis of the powers to Commission.

And they very briefly pointed out that under the rule making Sections 4 (i), 303 (f), and 303 (r) which says that, the powers must be consistent with the Act.

That if they had the tremendous power, if the Commission has the tremendous power to issue a stay without a hearing and upon disputes of fact because there is a lot of disputes of fact in this petition in which they acted.

They had asked the Congress to do a useless thing in enacting 312 (b) because they clearly have the authority to do everything that 312 (b) gave them.

They also asked the Commission -- Congress to do I useless thing when it given the parts to find its forfeitures because I submit, that would clearly be encompassed in this broad authority they now claiming.

It is also equal important that when Congress did decide to give them some additional power cease and desist, after they claim, they had no right except the power to revoke licenses, the Congress very carefully hedged that power in with limitations to protect the rights of the licensee.

What we have here is a case where the federal agency claims that under the implied power it's taking out of specifics, it has greater power than it has under the specific authority granted to it by Congress.

And Mr. Geller has pointed out in his oral argument and he is also pointed in his brief that the Commission could have proceeded by a general order in this rule making.

They could have come up with an order saying that all CATV stops here.

Now, they cite no authority for this and we don't concede they would have this authority even though, we go under the premise they have something have jurisdictional with CATV.

Specifically, they would not have the authority by a rule making to issue a general order saying that all VHF televisions have to go off the air at 8 o'clock in order to give UHF economic protection.

The Section 316 would prohibit that because of the modification and license and then entitled adjudicatory hearing.

But we really think the argument is beside the point.

The Commission elected to follow another procedure.

They didn't go by the state order.

They didn't attempt by a stay order to control the lawful operations of the CATV systems.

They elected to go on the ad hoc basis and use a stay authority and an interlocutory type of authority and we submit they clearly do not have that authority.

And the Syracuse case that he refers to which upholds the authority of agency that either go by general rule making or specific case, as I read it says, our goals on the assumption that is clear that the agency has both those powers and the case says it's in our discretion to go one way to the other.

Here the key is and we dispute that they have the authority to go on the second method and if they lacked the power to issue a temporally injunction to stop the lawful activities upon pleadings which are completely in dispute as to fact, we submit, they do not have authority to issue a temporally stay.

For that basis we feel to the decision of the lower court was eminently sound, it is correct, and should be affirm by this Court.

Chief Justice Earl Warren: Mr. Jennes.

Argument of Ernest W. Jennes

Mr. Ernest W. Jennes: Mr. Chief Justice and may it please the Court.

Let me state once more the basis of the assertion by the FCC of jurisdiction here because I fear it's been a bit confused.

The Commission's assertion here is not based upon the notion of implied power.

It is based squarely on the fact that CATV systems are engaged in inter-state communication by wire or radio.

They extend the signals of television broadcast stations and the have an impact on National Communications Policy, and there are specific provisions of the Act to implement these jurisdictional provisions.

Justice Abe Fortas: Well, --

Mr. Ernest W. Jennes: Sir?

Justice Abe Fortas: I don't quite understand that because as I understand in your saying that there is explicit authority in the Act to regulate this but there isn't?

Mr. Ernest W. Jennes: No.

I'm saying that the Act specifically applies to communication by wire, interstate communication by wire or radio.

Justice Abe Fortas: Alright, now --

Mr. Ernest W. Jennes: CATV systems clearly come within that definition.

Justice Abe Fortas: But how?

Mr. Ernest W. Jennes: And that if I may –

Justice Abe Fortas: No.

No.

Mr. Ernest W. Jennes: -- and that if I may Section 2 (a) of the Communications Act says, the provisions of this Act shall apply to all interstate and foreign communication by wire or radio.

Now, this is not implicit.

This is an explicit --

Justice Abe Fortas: Now tell –

Mr. Ernest W. Jennes: Then we find the provisions in the Act that apply.

Justice Abe Fortas: Now, explain to me just how CATV fits with that definition?

Mr. Ernest W. Jennes: Well as to wire communication, CATV transmits the signals, pictures, and sounds by wire and cable between the points of origin and reception of such transmission.

Justice Abe Fortas: Between the points of origin?

Mr. Ernest W. Jennes: And reception of the said translation.

In other words, between --

Justice Abe Fortas: But that you mean by origin there, you must mean that CATV pick up?

Mr. Ernest W. Jennes: From the point of which the CATV system picks the signal up above the air to the point of which it carries it to the -- into the home and it does engaged in wire communication.

Justice Abe Fortas: But does that?

Justice Byron R. White: Then what made the Commission do about wire communication?

Mr. Ernest W. Jennes: Sir?

Justice Byron R. White: Then what make – what made the Commission do about wire communication?

Granted that this CATV system is a wire carrier or as transmitting by wire.

What made the commission do about it?

Mr. Ernest W. Jennes: The Commission may embrace all of the specific powers that are given to it by the statute such as Section 4 (i) which is an issue here to implement the policies which are to be found in provisions like section 307 (b), the provisions limiting the – the reach of television signals and the like.

Justice Byron R. White: So if they do anything with the wire communications that operation which is necessary to carry out its powers over radio broadcast.

Mr. Ernest W. Jennes: Well within the context of this --

Justice Byron R. White: That's what the commission is doing, isn't?

It's regulating the wire carrier to the extent necessary to make effective its powers over broadcast?

Mr. Ernest W. Jennes: That is right and similar --

Justice Byron R. White: Under Title II?

Mr. Ernest W. Jennes: -- under Title III.

Justice Byron R. White: III?

Mr. Ernest W. Jennes: That is right.

Justice Byron R. White: So it's really an adjunct to their exercising there explicit power you say as an adjunct to their or in supplemental to their Title III power?

Mr. Ernest W. Jennes: That is right.

May I suggest also --

Justice Byron R. White: So, if they could do -- I suppose you would argue that they could do that without any express authority over wire carriers.

Mr. Ernest W. Jennes: No, I'm not prepared to argue that.

Justice Byron R. White: Yes, alright.

Mr. Ernest W. Jennes: Then we're talking about inherit powers and this case is not about inherit powers, if it please the Court, it's about express powers.

May I suggest also that the policy question is not as respondents would have it one of Government protection of vested broadcast interest against competition.

This specific case deals with whether the San Diego area is to have a full measure of its own competitive service or is to be a television satellite of Los Angeles served principally or exclusively by Los Angeles stations via cable.

And more fundamental in San Diego and throughout the country, FCC regulation of CATV extension of distance signals is necessary because there's a clear and present danger that there would be and increasing concentration and centralization rather than expansion of media of communications.

Justice Abe Fortas: Well, I suppose if there's a result of some technological development, it will possible to have a 50 or 60 additional of VHF or UHF stations there.

The argument would be that the Commission can deny license and perhaps it's been indicated on the grounds that would be excessive competition?

Mr. Ernest W. Jennes: Well, I think that the Sander's case has indicated that -- that if –

Justice Abe Fortas: But that's about

Mr. Ernest W. Jennes: -- that if the extent of the competition as such as to take away services to something that Commission should take into account.

Chief Justice Earl Warren: Yes and that's essentially the argument here but as I understand it on the policy side or whatever one might want to call it?

Mr. Ernest W. Jennes: Plus the fact that under the broadcast rules of the Commission which are aimed to prevent concentration these Los Angeles television stations can't serve San Diego directly.

They can't own San Diego broadcast outlets to rebroadcast their signals.

Indeed, there's a short limit on the number of television stations that maybe commonly owned by a single entity and yet without CATV regulation, CATV by extending their signals could to for these large Los Angeles stations where they can't do for themselves.

Now, Mr. Chief Justice it has been suggested that if the Commission did not have jurisdiction here that these matters would all be taking care off by the States.

I suggest respectfully that the States are not concerned with the communications policy for the nation as a whole.

They are concerned with their own local but important networks and under the Communications Act as this Court said in Bennetti, here was provided a comprehensive scheme for the regulation of the interstate commerce and I might say also that it's quite interesting and noteworthy that when the CATV interests are appearing before State Public Utility Commissions on the matter of public utility regulation of CATV, they then content that CATV is an interstate commerce and there any State regulation of that kind is preempted by the Federal Communications Act.

Now, the system of regulation which the Commission has adopted was intended to resolve public interest considerations before entrenchment of CATV extension of distance signals.

And the Commission singled out different kinds of situations for handling in different manners.

I can't over emphasize that the concept of interim relief to maintain the situation until --

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