August 13, 2018

Leased Access Mandates Infringe on the First Amendment Rights of Cable Operators, and the FCC Should Decline to Enforce the Regulations

Key materials
rule details

Leased Commercial Access; Modernization of Media Regulation Initiative
Agency: Federal Communications Commission
Proposed: June 7, 2018
Reply Comment Period Closes: August 13, 2018
Reply Comment Submitted: August 13, 2018
Docket ID: MB Docket Nos. 07-42, 17-105; FCC 18-80

The Technology Policy Program of the Mercatus Center at George Mason University is dedicated to advancing knowledge about the effects of media and technology regulation on society and innovation. As part of its mission, the program conducts independent legal and economic analyses to assess agency rulemakings and proposals from the perspective of consumers and the public.

The proliferation of online video content in the past decade has expanded viewer choice and disrupted the legacy broadcast and cable markets. It is encouraging that the Federal Communications Commission (FCC) and a wide range of commenters have expressed support for comprehensive media law reform. This comment explains that, in light of competitive dynamics in television markets, the FCC’s leased access rules are likely no longer constitutional and the FCC should decline to enforce them.

The rules survived constitutional review in the past only because of cable operators’ substantial market power, which justified, in the eyes of the Supreme Court in Turner I, diminished First Amendment rights for cable operators. The Supreme Court’s justification for intermediate scrutiny for cable access regulations—bottleneck monopoly power—has largely evaporated. As explained below, if litigated today, courts would likely subject these rules to strict scrutiny, as courts would for speech restrictions for other media distributors like bookstores and internet providers.

Access Regulations for Cable Operators are Constitutional Solely When Operators Possess "Bottleneck Monopoly Power" Over TV Content

Congress created the leased access laws for cable operators in 1984. Under these rules, cable operators are required to lease a subset of their channel capacity to programmers unaffiliated with them. These controversial rules have had meager effects on additional programming and competition, and continuing to enforce them burdens cable operators with compliance requirements and infringes on their First Amendment rights. In its Further Notice of Proposed Rulemaking (FNPRM), the FCC asked,

In seeking comment on updating the FCC’s leased access rules, we also seek comment on whether our rules implicate First Amendment interests. If so, what level of First Amendment scrutiny is appropriate, and how does that analysis apply to our existing rules and the potential changes we seek comment on here, in light of the statutory obligations of Section 612? In this context, we also seek comment on whether there have been any changes in the video distribution market since Congress and the FCC first addressed these issues that are relevant to the First Amendment analysis. For instance, are there relevant changes in the distribution market that we should now consider? Is the FCC’s 2015 decision regarding effective competition relevant to this analysis?

Access mandates—like leased access—imposed on media distributors have been litigated several times before because cable operators’, newspaper publishers’, and internet access providers’ decisions about what content to transmit to subscribers and what content to omit are protected by the First Amendment.

Content-neutral access regulations for cable operators are justified, the Supreme Court held in the 1994 Turner I case, solely because cable operators at the time possessed “bottleneck monopoly power” over TV content. In the Turner I case, the Supreme Court recognized that channel set-aside mandates “reduce the number of channels over which cable operators exercise unfettered control, and they render it more difficult for cable programmers to compete for carriage on the limited channels remaining.” Despite this regulation of speech, the Court declined to apply strict scrutiny to the access regulations for cable, as it did in Miami Herald v. Tornillo for access regulations for newspapers. Unlike laws for print media, laws requiring cable operators to carry content they don’t wish to carry, the Court held, are subject to intermediate scrutiny. Bottleneck monopoly power is the basis for cable’s junior varsity First Amendment rights.

The FCC Should Decline to Enforce Leased Access Laws Because Cable Operators No Longer Possess Bottleneck Monopoly Power over TV Content

The DC Circuit Court of Appeals relied on Turner I when it found in 1996 that the leased access rules are subject to intermediate scrutiny. However, the competitive TV marketplace and intervening cases at the DC Circuit and the Supreme Court put the constitutionality of leased access in doubt. There is ample evidence that cable operators no longer possess bottleneck monopoly power over TV content.

It was the express finding of the DC Circuit Court of Appeals in 2009 that cable operators “no longer have the bottleneck power over programming that concerned the Congress” in the 1990s. Cable’s market power has deteriorated even further in the nine years since the DC Circuit made that determination. Unlike in the 1990s, cable operators face significant competition in most local markets from satellite and telco TV providers. Over 99 percent of US households have at least three pay-TV options, and cable has lost over 15 million subscriber households since 2002. In 1997, when Turner II was decided, cable had over 90 percent of the pay-TV market. Cable operators’ market share has shrunk nearly every year since, and in 2015 cable had around 54 percent market share.

This competitive marketplace has stimulated massive investment and choice in TV programming. The typical household has access to far more channels than in the past. Independent researchers found that a typical US household in 1999 received about 50 TV channels. By 2014, the typical household received over 200 TV channels. In 2018, there will be an estimated 520 scripted TV series available, which is up nearly 50 percent from just five years ago.

There is evidence, including endorsement from the DC Circuit Court of Appeals, that cable operators no longer have the bottleneck monopoly power that the Supreme Court relied on in Turner I to justify FCC access regulations. In light of this, continued enforcement of the leased access regulations unconstitutionally infringes on cable operators’ First Amendment rights.

Under the Prevailing Marks Test, Lower Courts Will Apply Strict Scruitiny to the Leased Access Rules in Light of the Supreme Court's Denver Decision

In Denver Area Educational Telecommunications Consortium, Inc. v. FCC, the Supreme Court divided into concurrences as to the proper First Amendment category of cable operators, and whether intermediate or strict scrutiny should apply to the leased access laws at issue. The “Marks test” is the test lower courts use for determining the holding of a Supreme Court decision where there is no majority supporting the rationale of any opinion. Viewed through the lens of the prevailing Marks test, cable operators are entitled to “bookstore owner” status for First Amendment purposes.

On the issue of the First Amendment status of cable operators, Justice Breyer’s plurality opinion in Denver, joined by three other justices, expressly makes “no definitive choice” as to whether cable operators were analogous to “bookstore owners,” “common carriers,” or “broadcasters,” describing such a determination as unnecessary to answering the question at issue in Denver. Three justices concurring in the Court’s judgment assigned the bookstore owner designation to cable operators.

Over the subsequent years since the 1996 Denver decision, a converging interpretation of Marks has emerged across federal circuits to identify a “least far-reaching rule” or “common denominator” for deciding each issue across concurring opinions while ignoring any rationale introduced in dissent on that issue. For example, if two concurring justices provide a three-prong rationale for resolving an issue and another four resolve that same issue with one of those three prongs, then the latter justification is deemed the precedential test for resolving the issue. Given that four justices in Denver concur that one of the potential bases for deciding cable’s First Amendment status is the classification of cable operators as bookstores and three justices concur that this classification is the definitive justification for the judgment, the narrowest grounds for resolving the issue is simply this latter justification. Under the prevailing Marks test, then, lower courts will apply strict scrutiny to the leased access rules in light of the Denver decision.

Conclusion

The Supreme Court has said that “the concept that government may restrict the speech of some elements of our society in order to enhance the relative voice of others is wholly foreign to the First Amendment.” The leased access rules today represent a “wholly foreign” infringement on First Amendment interests. Good intentions cannot save unconstitutional media regulations. Cable operators no longer have bottleneck monopoly power over TV programming, and courts will likely examine the leased access regulations using strict scrutiny. To protect free speech interests and to conserve agency resources for more pressing regulatory issues, the FCC should decline to enforce the leased access regulations.