Satellite Broadcasting & Communications v. F.C.C.

• Decision Date: 19 June 2001
• Docket Number: No. CIV.A 00-1571-A.,CIV.A 00-1571-A.
• Citation: 146 F.Supp.2d 803
• Court: U.S. District Court — Eastern District of Virginia
• Parties: SATELLITE BROADCASTING & COMMUNICATIONS ASSOCIATION OF AMERICA, et al., Plaintiffs, v. FEDERAL COMMUNICATIONS COMMISSION, et al., Defendants, and National Association of Broadcasters, et al., Defendant-Intervenors.

146 F.Supp.2d 803

SATELLITE BROADCASTING & COMMUNICATIONS ASSOCIATION OF AMERICA, et al., Plaintiffs, v. FEDERAL COMMUNICATIONS COMMISSION, et al., Defendants and National Association of Broadcasters, et al., Defendant-Intervenors.

No. CIV.A 00-1571-A.

United States District Court, E.D. Virginia, Alexandria Division.

June 19, 2001.

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Robert J. Cynkar, Cooper, Carvin & Rosenthal, Washington, DC, for Satellite Broadcasting & Communications Assn. of America, Echostar Communications Corp., DIRECTV Enterprises, Inc. and DIRECTV Operations, Inc.

Susan Rebbeca Podolsky, Jenner & Block, Washington, DC, for National Assn. of Broadcasters, Assn. of Local Television Stations, Inc., Universal Network Ltd. Partnership and Univision Television Stations, Inc.

Richard Parker, U.S. Attorney's Office, Alexandria, VA, for defendants.

Thomas H. Yancey, Sidley & Austin, Washington, DC, for Pegasus Communications Corp.

Michael Joseph McManus, Brian Arthur Coleman, Drinker, Biddle & Reath, Washington, DC, for Channel Master LLC.

Eleanor Carrie Nixon, Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., Washington, DC, for National Cable Satellite Corp. April Renee Callahan, Willkie, Farr & Gallagher, Washington, DC, for Space Systems/Loral, Inc.

Craig Crandall Reilly, Richards, McGettigan, Reilly & West P.C., Alexandria, VA, for Paxson Communications Corp.

George Luther Washington, Jr., Covington & Burling, Washington, DC, for Assn. of America's Public Television Stations, Public Broadcasting Service, and Corp. for Public Broadcasting.

Anthony William Show, Brobeck, Phlefer & Harrison, LLP, Washington, DC, for Conexant Systems, Inc.

Liam O'Grady, Finnegan, Henderson, Farabow, Garrett & Dunner, Washington, DC, for Broadcom Corp.

MEMORANDUM OPINION

LEE, District Judge.

This case involves satellite carriers' facial challenge to the constitutionality of the copyright license created by the Satellite Home Viewer Improvement Act of 1999 and the license's "must carry" provisions under the First and Fifth Amendments to the Constitution. In essence, the satellite carriers assert that the "must carry" provisions of the new copyright license infringe upon carriers' First Amendment right to control program content and effect a "taking" of property in violation of the Fifth Amendment because the carriers are required to carry certain stations in a given market if the carriers want to take advantage of the copyright license in that market.

The specific issues before the Court are whether Plaintiffs have pled a cause of action that (1) the Satellite Home Viewer Improvement Act of 1999 ("SHVIA" or "Act"), on its face, violates satellite carriers' First Amendment rights; (2) Congress has exceeded its authority in promulgating SHVIA; (3) SHVIA effects a taking of satellite carriers' private property without just compensation in violation of the Fifth Amendment Takings Clause; and (4) SHVIA deprives satellite carriers of their property without due process in violation of the Fifth Amendment Due Process Clause.

The problem that led Congress to pass SHVIA was that, for the most part, satellite carriers did not transmit local television stations as a part of their basic satellite packages unless they secured permission from broadcasters or secured copyright licenses to retransmit the works of copyright holders. In practical terms, a satellite home subscriber could use their satellite dish to receive premium programs like Home Box Office ("HBO") programs, but the home viewer could not use their satellite dish to receive local news, and local independent and public programming. Home viewers were required to switch their televisions to local stations via antenna or cable television. This dual technology problem created an undesirable limitation on the home viewer's access to local television programs. This situation also created pressure on the home viewer to opt against satellite television, and to select cable television options, or to ignore the advances in technology and rely upon traditional broadcast free television.

As the spectrum of satellite programs expanded nationally, the limit on access to local news and programming inhibited the wide flow of information to television home viewers. Congress enacted SHVIA in response to the growing concern about the future of free television and the promotion of competition, and in recognition that the Copyright Act might have been impeding development of the satellite broadcast medium and local programming.

The satellite carrier plaintiffs welcome the grant of a copyright license to retransmit the copyrighted works of others without having to pay royalties, but they object to the Act's requirement that, as a condition to carrying a single station in a geographic market area royalty-free, the satellite carriers "must carry" (i.e., retransmit) all local television stations in that geographic area upon request of the local station. Plaintiffs assert that the must-carry provisions are unconstitutional. The satellite carrier plaintiffs' constitutional objections, while substantial, are not well taken.

The Court holds that the Satellite Home Viewer Improvement Act of 1999 is constitutional and does not in any way violate the First and Fifth Amendment rights of satellite carriers. Moreover, the Act is a proper exercise of Congress' plenary powers over copyright and Congress' power to promote the free and full exchange of information over the broadcast spectrum. In considering the satellite carriers' First Amendment claims, the Court holds first that SHVIA is subject to review using intermediate scrutiny. Next, the Court finds that the must-carry provisions do not violate Plaintiffs' First Amendment rights because (1) neither the provisions' language nor their purpose are contentbased; (2) the provisions are within the authority granted to the Government under the Copyright Clause; (3) the must-carry provisions further important governmental interests that are unrelated to the suppression of free expression; and (4) any incidental restriction on satellite carriers' First Amendment freedoms is no greater than necessary to further the Government's interests. With respect to the satellite carriers' Fifth Amendment claims, the Court holds that SHVIA does not effect a taking of satellite carriers' property because the carriers may choose to accept or decline a free copyright license to retransmit the local programs of any given market. Satellite carriers decide whether to incur the must-carry obligations because the obligations travel with the optional copyright license into various markets. Moreover, SHVIA's copyright license has the potential to expand the value of satellite carriers' property. Finally, the Court holds that the must-carry regulations do not violate due process because Congress has acted within its authority in promulgating the must-carry provisions, and the regulations do not strip satellite carriers' property of all of its value.

For these reasons, the Court does not sustain the satellite carriers' constitutional objections to SHVIA. Therefore, the Court grants Defendants' motions to dismiss for the reasons detailed below.

I. BACKGROUND

Plaintiff Satellite Broadcasting and Communications Association of America ("SBCA") is a nonprofit national trade association that represents all segments of the satellite industry. SBCA represents the interests of its members in protecting and expanding the use of satellite technology. Plaintiffs DIRECTV Enterprises, Inc., DIRECTV Operations, Inc., DIRECTV, Inc. (collectively "DIRECTV"), and Plaintiffs Echostar Communications Corporation ("ECC") and ECC's wholly-owned subsidiary Dish Ltd., d/b/a "The Dish Network" (collectively "Echostar") are competing satellite carriers that provide satellite television service to subscribers over direct broadcasting satellite ("DBS") systems. Satellite carriers are unlike cable system operators. Because satellites are a national medium, satellite carriers do not compete with local stations for local advertising revenues. Also, unlike most cable operators, satellite carriers do not enjoy a monopoly over service in their service territory. Satellite carriers compete with each other and with cable systems nationwide.

In 1999, Congress enacted the Satellite Home Viewer Improvement Act of 1999. Prior to enactment of the Act, direct-to-home satellite carriers such as Plaintiffs could not, with limited exceptions, include local television stations in the programming packages they offered subscribers. Congress had amended the Copyright Act in 1976 to grant owners of copyrights in audiovisual work, such as television programs, the exclusive right to perform or display the copyrighted work publicly, or to authorize a public display of the work. See 17 U.S.C. §§ 106(4), (5). Therefore, satellite carriers focused on broadcasting specialized premium channels and not local television stations' programming because retransmitting local programming required carriers to obtain copyright licenses. SHVIA created a new statutory copyright license, permitting, but not requiring, satellite carriers to engage in satellite retransmission of a local television station signal into the station's own designated market area ("DMA") without the need to identify and obtain authorization from copyright owners to retransmit the owners' programs. See 17 U.S.C. § 122.

The SHVIA license is similar to the cable systems operators' license created in the Cable Television Consumer Protection and Competition Act of 1992, 47 U.S.C. §§ 534, 535 (1992). In passing SHVIA, Congress sought to enable satellite carriers to compete more effectively with cable television operators in the marketplace by granting carriers a statutory copyright license similar to the license that had long been afforded cable operators. At the same time, Congress placed a "shall carry" (i.e., "mu...