Home Box Office, Inc. v. F.C.C.

• Decision Date: 20 May 1977
• Docket Number: No. 75-1280,75-1280
• Citation: 567 F.2d 9,185 U.S.App.D.C. 142
• Parties: , 2 Media L. Rep. 1561, 2 Media L. Rep. 1957 HOME BOX OFFICE, INC., Petitioner, v. FEDERAL COMMUNICATIONS COMMISSION and United States of America, Respondents, Professional Baseball et al., Intervenors. *
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 9

567 F.2d 9

185 U.S.App.D.C. 142, 2 Media L. Rep. 1561,

2 Media L. Rep. 1957

HOME BOX OFFICE, INC., Petitioner, v. FEDERAL COMMUNICATIONS COMMISSION and United States of

America, Respondents,

Professional Baseball et al., Intervenors.

No. 75-1280. ^*

United States Court of Appeals,

District of Columbia Circuit.

Argued April 20, 1976.

Decided March 25, 1977.

Special Concurring Opinion filed May 20, 1977.

SYLLABUS BY THE COURT

These 15 consolidated cases challenge four orders of the Federal Communications Commission which, taken together, regulate and limit the program fare cablecasters and subscription broadcast television stations may offer to the public for a fee set on a per-program or per-channel basis. Acting under its rulemaking authority, the Commission in 1975 issued rules which prohibited pay exhibition of: (1) feature films more than three, but less than 10, years old; (2) specific sports events (e. g., the World Series) shown on broadcast television within the previous five years; (3) more than the minimum number of non-specific (i. e., regular season) sports events which had not been broadcast in any of the five preceding years, and in some cases only half that number; and (4) all series programs (i. e., programs with interconnected plot or substantially the same cast of principal characters). In addition, the Commission prohibited commercial advertising in conjunction with pay exhibition of programming and limited the overall number of hours of pay operation which could be devoted to sports and feature films to 90% of total pay operations. See 47 C.F.R. §§ 73.643, 76.225 (1975). By subsequent orders in the same rulemaking, the series programming restriction was removed and recordkeeping requirements were imposed on feature film programming. The stated purpose of these rules was to prevent competitive bidding away of popular program material from the free television service to a service in which the audience would have to pay a fee to see the same material. Such competitive bidding, or "siphoning," is said to be possible because the money received from pay viewers is significantly more for some programs than money received from advertisers to attach their messages to the same material. For this reason, even a relatively small number of pay viewers could cause a program to be siphoned regardless of the wishes of a majority of its free viewers. Held :

1. Review of the rulemaking record indicates that the pay cable television regulations must be considered separately from those regulating subscription broadcast television. Because the Commission has exceeded its authority over cable television in promulgating the pay cable rules and because there is no evidence to support the need for regulation of pay cable television, these rules must be vacated. 185 U.S.App.D.C. at --- - ---, 567 F.2d. at 26-43.

a. The Communications Act of 1934, 47 U.S.C. § 151 et seq., contains no provision expressly authorizing the Commission to regulate cable television. The Supreme Court has nonetheless sanctioned regulation of cable television under § 2(a) of the Act, 47 U.S.C. § 152(a), but only where the ends to be achieved were "long established" in the field of broadcast television or were "congressionally approved." See United States v. Midwest Video Corp., 406 U.S. 649, 667-668, 92 S.Ct. 1860, 32 L.Ed.2d 390 (1972); United States v. Southwestern Cable Co., 392 U.S. 157, 173-176, 88 S.Ct. 1994, 20 L.Ed.2d 1001 (1968). These cases and considerations of administrative consistency further indicate that in most instances the proper test for Commission jurisdiction over pay cable television is whether the ends proposed to be achieved by Commission regulations are also well understood and consistently held ends for which broadcast television could be regulated. See United States v. Midwest Video Corp., supra, 406 U.S. at 667-668, 92 S.Ct. 1860; cf. Greater Boston Television Corp. v. FCC, 143 U.S.App.D.C. 383, 394, 444 F.2d 841, 852 (1970), cert. denied, 403 U.S. 923, 91 S.Ct. 2229, 2233, 29 L.Ed.2d 701 (1971). See also Hampton v. Mow Sun Wong, 426 U.S. 88, 116, 96 S.Ct. 1895, 48 L.Ed.2d 495 (1976). 185 U.S.App.D.C. at --- - ---, 567 F.2d at 26-28.

b. Under the standard set out above, the Commission has exceeded its jurisdiction and its rules must be vacated as unauthorized by law insofar as they regulate cable television. 185 U.S.App.D.C. at --- - ---, 567 F.2d at 28-34.

c. Even if the Commission had jurisdiction to promulgate its anti-siphoning rules, there is no evidence in the record supporting the need for regulation. Consequently, the rules must be vacated since a "regulation perfectly reasonable and appropriate in the face of a given problem (is) highly capricious if that problem does not exist." City of Chicago v. FPC, 147 U.S.App.D.C. 312, 323, 458 F.2d 731, 742 (1971), cert. denied, 405 U.S. 1074, 92 S.Ct. 1495, 31 L.Ed.2d 808 (1972). 185 U.S.App.D.C. at --- - ---, 567 F.2d at 34-40.

d. Moreover, although the Commission properly recognized the need to balance the benefits of regulation against the detriment to unfettered competition, it proceeded incorrectly. Contrary to the Commission's position, United States v. Southwestern Cable Co., supra, does not sanction regulation of cable television to prevent "unfair competition," but even if it did, the "unfairness" recognized in Southwestern Cable is not present here. Moreover, the balance between regulation and competition is not to be resolved on the basis of legal precedent, but by a considered decision upon the record in each rulemaking. 185 U.S.App.D.C. at ---- - ----, 567 F.2d at 40-43.

2. The cable television rules are inconsistent with the First Amendment. Even though substantially similar rules which applied to broadcast television were upheld by this court in National Ass'n of Theatre Owners (NATO) v. FCC, 136 U.S.App.D.C. 352, 420 F.2d 194 (1969), cert. denied, 397 U.S. 922, 90 S.Ct. 914, 25 L.Ed.2d 102 (1970), that case is not controlling since "differences in the characteristics of new media justify differences in the First Amendment standards applied to them." Red Lion Broadcasting Co. v. FCC, 395 U.S. 367, 386, 89 S.Ct. 1794, 1805, 23 L.Ed.2d 371 (1969). 185 U.S.App.D.C. at ---- - ----, 567 F.2d at 43-51.

a. The constitutional question in NATO was straightforward: whether a grant of a broadcast license could be conditioned on terms which made reference to the kind and content of programs being offered to the public. Phrased this way, the question was identical to that resolved in the affirmative over 25 years before NATO in National Broadcasting Co. v. United States, 319 U.S. 190, 212-217, 226-227, 63 S.Ct. 997, 87 L.Ed. 1344 (1943). Although NATO did not itself cite National Broadcasting Co., there was no need for it to break new First Amendment ground and a reading of NATO shows that it did not do so. The conflict among speakers using the electromagnetic spectrum which justified Commission regulation in NATO and National Broadcasting Co. is absent from cable television, however. For this reason, the conventional justification for Commission regulation of broadcast speakers cannot be applied to regulation of cable television. 185 U.S.App.D.C. at ---- - ----, 567 F.2d at 43-46.

b. The absence in cable television of the physical limitations of the electromagnetic spectrum does not automatically lead to the conclusion that no regulation of cable television is valid under the First Amendment. Because "the right of free speech * * * does not embrace a right to snuff out the free speech of others," Red Lion Broadcasting Co. v. FCC, supra, 395 U.S. at 387, 89 S.Ct. at 1805, government may adopt reasonable regulations separating broadcasters competing and interfering with each other for the same audience. In determining whether such regulations comport with the First Amendment, the proper test is that set out in United States v. O'Brien, 391 U.S. 367, 377, 88 S.Ct. 1673, 20 L.Ed.2d 672 (1968). 185 U.S.App.D.C. at ---- - ----, 567 F.2d at 46-48.

c. Analysis of the Commission's stated reasons for promulgating the anti-siphoning rules indicates that the rules are intended to remove a conflict between those with and those without access to pay cable television. This purpose is unrelated to the suppression of free expression as required by O'Brien. Nonetheless, the rules are invalid because the record here will not support the conclusion that there is in fact conflict between these groups. Moreover, the restraints imposed by the rules are greater than necessary to further any legitimate government interest, and this overbreadth is not cured by the waiver provisions associated with the rules since the procedures established for obtaining a waiver are fundamentally at odds with the standards set out in Freedman v. Maryland, 380 U.S. 51, 85 S.Ct. 734, 13 L.Ed.2d 649 (1965). 185 U.S.App.D.C. at ---- - ----, 567 F.2d at 48-51.

3. During the pendency of the rulemaking proceeding before the Commission, and even after the rulemaking record was supposed to be closed while the Commission deliberated, there were numerous ex parte contacts made between the parties to the rulemaking and various commissioners and Commission employees. Although this court sua sponte ordered the Commission to prepare and submit a list of all "ex parte presentations together with the details of each," it is still not possible to determine the effect of such communications on the integrity of the rulemaking. As a result, the elaborate public discussion in the dockets here under review may be a sham and a fiction. Our fundamental notions of judicial review require that reviewing courts have access to "the full administrative record" that was presumably before an agency when it exercised its discretion and promulgated rules. See Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 415-420, 91 S.Ct. 814, 28 L.Ed.2d 136 (1971). Where there have been frequent ex parte contacts,...