National Ass'n for Better Broadcasting v. F.C.C.

• Decision Date: 17 June 1988
• Docket Number: No. 87-1198,87-1198
• Parties: , 57 USLW 2006 NATIONAL ASSOCIATION FOR BETTER BROADCASTING, Petitioner, v. FEDERAL COMMUNICATIONS COMMISSION and United States of America, Respondents, Home Box Office, Inc., US Satellite Broadcasting Co., Inc., Intervenors.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 665

849 F.2d 665

270 U.S.App.D.C. 334, 57 USLW 2006

NATIONAL ASSOCIATION FOR BETTER BROADCASTING, Petitioner, v. FEDERAL COMMUNICATIONS COMMISSION and United States of

America, Respondents,

Home Box Office, Inc., US Satellite Broadcasting Co., Inc.,

Intervenors.

No. 87-1198.

United States Court of Appeals, District of Columbia Circuit.

Argued March 9, 1988.

Decided June 17, 1988.

David W. Danner, with whom Andrew Jay Schwartzman, Washington, D.C., was on the brief, for petitioner.

Daniel M. Armstrong, Associate Gen. Counsel, F.C.C., with whom Diane S. Killory, Gen. Counsel, C. Grey Pash, Jr., Counsel, F.C.C., Robert B. Nicholson, and Laura Heiser, Attys., Dept. of Justice, Washington, D.C., were on the brief for respondents. Gregory M. Christopher, Counsel, F.C.C., and Catherine G. O'Sullivan, Atty., Dept. of Justice, Washington, D.C., also entered appearances, for respondents.

Jack N. Goodman, with whom Robert J. Aamoth, Washington, D.C., was on the brief, for intervenor, Home Box Office, Inc.

Marvin Rosenberg and James G. Ennis, Washington, D.C., were on the brief for Before WALD, Chief Judge, and STARR and SENTELLE, Circuit Judges.

intervenor, U.S. Satellite Broadcasting Co., Inc.

Opinion for the Court filed by Circuit Judge SENTELLE.

Dissenting opinion filed by Chief Judge WALD.

SENTELLE, Circuit Judge:

This petition presents for review a decision by the Federal Communications Commission ("the Commission" or "FCC") concerning the status under Title III of the Communications Act of 1934 ("the Act"), 47 U.S.C. Sec. 301 et seq. (1982 & Supp. III 1985) of subscription video services, including subscription television ("STV") and direct broadcast satellite ("DBS") services. Report and Order Subscription Video, 2 F.C.C.Rcd. 1001, Gen. Dkt. No. 85-305 (Feb. 17, 1987) ("Report and Order "). The petition by National Association for Better Broadcasting ("NABB") takes issue with two aspects of the Commission's decision: (1) the Commission's designation of subscription television and subscription direct broadcast satellite services as not being broadcasting within the meaning of the Act, and (2) the Commission's ruling that an existing licensee's change from conventional broadcasting to subscription operation would not be considered a "major" change under the Act or FCC rules. For the reasons outlined below, we uphold the decision of the FCC and deny the petition in both respects.

I. STATUTORY AND REGULATORY BACKGROUND

Title III of the Act establishes a broad grant of authority to the Commission to regulate radio (and television) communications ¹ including classification of stations, prescription of the nature of services to be rendered, regulation of the apparatus used, study of new uses and encouragement of more and effective uses of radio, and ultimately the issuance of licenses to operate stations when it finds that the public interest will be served thereby. 47 U.S.C. Secs. 303, 307 (1982).

The Act distinguishes between stations engaged in "broadcasting" and those providing fixed point-to-point services. Broadcasting is defined as the "dissemination of radio communications intended to be received by the public, directly or by the intermediary of relay stations." 47 U.S.C. Sec. 153(o ) (1982), Sec. 3(o ) of the Act. ² The Act imposes certain obligations and restrictions only on those stations that engage in "broadcasting." See, e.g., 47 U.S.C. Secs. 310(b), 312(a)(7), 315, 317, 318, 325, 503(b), 508, 509. Therefore, the determination of whether a station is engaged in broadcasting can at times be critical.

In making the determination as to whether a particular transmission constitutes "broadcasting," the Commission, following Sec. 3(o ) and its history, must look to the licensee's intent. However, while the language of the section clearly mandates that the intent of the licensee is crucial in making this determination, neither that section nor any other provision of the Act provides criteria for determining that intent. For many years the Commission looked to the content of the transmissions to ascertain the intent of the licensee, reasoning that "broadcasting" did not occur when the transmissions were designed to be of interest to only a limited number of listeners. For example, the Commission has held that the provision of advice to specific listeners is not broadcasting, Scroggin & Company Bank, 1 F.C.C. 194 (1935); nor messages transmitted in cooperation with local police More directly related to the issues now at bar, the question of subscription radio services vis-a-vis "broadcasting" arose in various contexts over the years. In Muzak Corporation, 8 F.C.C.2d 581 (1941), the Commission considered a proposal to lease decoding equipment to subscribers, without which receipt of the transmission would be disturbed by a discordant sound or "pig's squeal" signal. The Commission at that time held this form of transmission to be broadcasting, since the service was "available to the public generally upon subscription therefor...." Id. Later in the 1955 Report and Order, the Commission concluded that subscription background music services of a sort were not "broadcasting" within the meaning of the Act because they were not primarily intended to be received by the public. Nonbroadcast Activities by FM Stations, 11 Radio Reg. (P & F) 1590, 1591-92 (1955). This Court reversed that decision. Functional Music, Inc. v. FCC, 274 F.2d 543 (D.C.Cir.1958), cert. denied, 361 U.S. 813, 80 S.Ct. 50, 4 L.Ed.2d 60 (1959). However, that decision did not involve pure subscription services, but rather a system in which music was simultaneously broadcast to subscribers and other receivers, the broadcasters being able by the transmission of a specific tone to delete advertising and other messages from the receivers of subscribers, leaving them only with the music. This Court held that "broadcasting remains broadcasting even though a segment of those capable of receiving the broadcast signal are equipped to delete a portion of that signal." Id. at 548.

Adelaide Lillian Carrell, 7 F.C.C. 219 (1939); nor transmission of coded horse race results, Bremer Broadcasting Co., 2 F.C.C. 79 (1935); nor the transmission of messages requesting a specific doctor to call the physician bureau, KFAB Broadcasting Co., 1 Radio Reg. 2d (P & F) 403 (1963).

But subsequent court and agency decisions addressing "pure" subscription radio services (those receivable only by subscribers) concluded that such services are not "broadcasting" under the Act. E.g., KMLA Broadcasting Corp. v. Twentieth Century Cigarette Vendors Corp., 264 F.Supp. 35 (C.D.Cal.1967); FM Table of Assignments, 61 F.C.C.2d 113, 117-18 (1976); Greater Washington Educ. Telecommunications Ass'n, Inc., 49 F.C.C.2d 948 (1974); WFTL Broadcasting Co., 45 F.C.C.2d 1152 (1974). The Commission exhibited some inconsistency in its treatment of various forms of subscription television service as being or not being "broadcasting." ³ However, with varying degrees of fidelity the Commission clung to a content-based approach, viewing the transmission of programming designed to appeal to mass audiences as constituting "broadcasting," without regard to the technology employed. The combination of rapidly expanding technology and Commission uncertainty finally brought to this Court National Ass'n of Broadcasters v. FCC, 740 F.2d 1190 (D.C.Cir.1984). In that case, we vacated a portion of the underlying FCC decision which had held DBS satellite lessees distributing programming to individual homes not to be engaged in broadcasting. We did so noting that "the test for whether a particular activity constitutes broadcasting is whether there is 'an intent for public distribution' and whether programming is 'of interest to the general ... audience.' " Id. at 1201 (citations omitted) (emphasis in original). We held that "the FCC at the time of the DBS decision was bound not to depart without reasoned explanation" from its prior determination that the appeal to general public as opposed to message-specific individuals distinguishes broadcasting from point-to-point service, and reminded the Commission of its prior words that " 'broadcasting remains broadcasting even though a segment of the public is unable to receive programs without special equipment ....' " Id., quoting from Further Notice in the Matter of Subscription Television Service, 3 F.C.C.2d 1, 9-10 (1966). Thereafter, in January

                of 1986, the Commission published a Notice of Proposed Rulemaking, proposing to classify subscription video services as point-to-multipoint nonbroadcast video services rather than as broadcasting.  Subscription Video Services, 51 Fed.Reg. 1817 (1986).  The Commission proposed to, and ultimately did, adopt new indicia of intent, abandoning the program content method, focusing on technology and re-classifying the SVS now before this Court as being outside the statutory definition of "broadcasting."    Report and Order, Subscription Video, 2 F.C.C.Rcd. 1001 (1987).  It is this decision of the Commission that petitioner now seeks to have us vacate
                

II. ANALYSIS

As noted above, petitioner attacks both the Commission's new criteria for determining intent and therefore exclusion from "broadcasting," and the determination that a change from conventional "free" telecasting to subscription services is not a "major" change. We will discuss these attacks in turn.

A. The New Criteria for "Broadcasting"

As indicated above, the Commission in its February 1987 Order abandoned the previous content-based intent determination, finding new indicia of intent relating to the use by the programming services of transmission techniques preventing the reception of the programming by nonsubscribers. Report and Order at p 40, et seq. Under the new approach, such signals as STV and DBS, being unreceivable without special antenna converters and/or decoding equipment supplied by the licensee or programmer, are now classified by the...