Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-93-05351/USCOURTS-caDC-93-05351-0/pdf.json

Nature of Suit Code: 440
Nature of Suit: Other Civil Rights
Cause of Action: 

---

<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued November 20, 1995 Decided August 30, 1996

No. 93-5349

TIME WARNER ENTERTAINMENT CO., L.P.,

APPELLANT/PETITIONER

v.

FEDERAL COMMUNICATIONS COMMISSION AND

THE UNITED STATES OF AMERICA,

APPELLEES/RESPONDENTS

ASSOCIATION OF AMERICA'S PUBLIC TELEVISION STATIONS, ET AL.,

INTERVENORS

Consolidated with

Nos. 93-1266, 93-1384, 93-5350, 93-5351

-

Appeals from the United States District Court

for the District of Columbia and

Petitions for Review of Regulations of the Federal

Communications Commission

(92cv02494)

(92cv02558)

(FCC-93-164)

(FCC-93-72)

Robert D. Joffe and Stuart W. Gold argued the cause for appellants.

With them on the briefs were Stephen S. Madsen, Brian Conboy,

Theodore C. Whitehouse, and Albert G. Lauber, Jr. Allan A. Tuttle

and Peter V. Lockwood entered appearances.

Jacob M. Lewis, Attorney, U.S. Department of Justice, argued the

cause for respondents. With him on the briefs were Frank W.

Hunger, Assistant Attorney General, Eric H. Holder, Jr., United

States Attorney, Mark B. Stern, Attorney, U.S. Department of

Justice, William E. Kennard, General Counsel, Federal

Communications Commission ("FCC"), and Christopher J. Wright,

Deputy General Counsel, Daniel M. Armstrong, Associate General

Counsel, and Clifford G. Pash, Jr., Counsel FCC. Douglas N.

Letter, Litigation Counsel, Barbara L. Herwig, Assistant Director,

Bruce G. Forrest, Attorney, and R. Craig Lawrence, Assistant United

USCA Case #93-5351 Document #220942 Filed: 08/30/1996 Page 1 of 59
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

States Attorney, and Renee Licht, Sue A. Kanter, and Gregory M.

Christopher, Counsel, FCC, entered appearances.

John F. Duffy argued the cause for intervenors Association of

America's Public Television Stations, et al. With him on the brief

were Mark H. Lynch, Marilyn Mohrman-Gillis, Paula A. Jameson, and

Nancy H. Hendry.

William R. Malone argued the cause for intervenors National Rural

Telecommunications Cooperative, et al. With him on the joint brief

were Joseph L. Van Eaton, John B. Richards, Arthur S. Garrett, III,

Lawrence R. Sidman, Edward J. Perez, Patrick J. Grant, Stephanie M.

Phillips, Carl A. Fornaris, and Paul J. Sinderbrand. Sheila A.

Millar and John B. Richards entered appearances for intervenor

National Rural Telecommunications Cooperative. Teresa D. Baer

entered an appearance for amici curiae The Alliance for

Communications Democracy and City of Los Angeles, California.

Robert A. Garrett entered an appearance for amici curiae City of

New York, et al.

David U. Fierst and James E. Meyers were on the brief for

intervenor Encore Media Corporation.

Angela J. Campbell, Andrew J. Schwartzman, and Gigi B. Sohn were on

the brief for amici curiae Consumer Federation of America, et al.

Douglas L. Parker entered an appearance.

John Thorne, Michael E. Glover, and James R. Young entered

appearances for amicus curiae Bell Atlantic Corporation. Edward P.

Kearse entered an appearance for amicus curiae National Association

of State Cable Agencies. David B. Goodhand, Elliot M. Mincberg, I.

Michael Greenberger, and James N. Horwood entered appearances for

intervenors Alliance for Community Media, et al.

Before BUCKLEY, RANDOLPH, and TATEL, Circuit Judges.

Opinion for the Court filed PER CURIAM.

Opinion dissenting in part filed by Circuit Judge TATEL.

PER CURIAM: These are facial challenges to nine provisions of

the Cable Television Consumer Protection and Competition Act of

1992, Pub. L. No. 102-385, 106 Stat. 1460 ("1992 Act"), and two

provisions of its predecessor, the Cable Communications Policy Act

of 1984, Pub. L. No. 98-549, 98 Stat. 2779 ("1984 Act"). A group

of cable television system owner/operators and programmers contend

that the following provisions infringe upon their First Amendment

USCA Case #93-5351 Document #220942 Filed: 08/30/1996 Page 2 of 59
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

right to freedom of speech: sections 611 (public, educational, and

governmental programming) and 612 (leased access) of the 1984 Act,

and sections 3 (rate regulation), 10(d) (obscenity liability),

11(c) (subscriber limitation, channel occupancy, and program

creation restrictions), 15 (premium channel preview notice), 19

(vertically integrated programming), 24 (municipal immunity), and

25 (direct broadcast satellite set-aside) of the 1992 Act.

We sustain the constitutionality of these provisions, with the

exception of section 11(c)'s "program creation provision." We hold

that the challenge to this portion of section 11(c) is not ripe for

judicial decision, and we consolidate the remaining challenges to

section 11(c) with Time Warner Entertainment Co. v. FCC, No. 94-

1035, which addresses the same issues and is being held in abeyance

pending reconsideration by the Federal Communications Commission of

regulations contested in that action.

I

BACKGROUND

The first cable television systems were built in the late

1940's to carry broadcast television signals to communities in

remote or mountainous areas. They were intended to enhance

broadcast television, not to compete with or replace it. Turner

Broadcasting Sys., Inc. v. FCC, 114 S. Ct. 2445, 2451 (1994)

("Turner"). The industry quickly developed, however, and by the

1970's cable systems began to carry not only television broadcast

signals but also new programming designed specifically for cable.

H.R. REP. NO. 934, 98th Cong., 2d Sess. 20-21 (1984), reprinted in

1984 U.S.C.C.A.N. 4655, 4658.

USCA Case #93-5351 Document #220942 Filed: 08/30/1996 Page 3 of 59
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

Broadcast and cable television are distinct in their

operations. While broadcast stations emit electromagnetic signals

from a central antenna that are picked up by television sets within

the antenna's range, in cable systems the transmitter is physically

connected to the sets of individual subscribers by conventional or

optical fiber cables that are similar in function to telephone

lines. Because these cables must be laid in public rights-of-way

and easements, cable operators must secure the necessary permits

from local governments. Thus, their operations must be franchised.

The cable industry is comprised of cable operators, who own

the physical assets and franchises and transmit the signals, and

cable programmers, who produce programs for sale or license to the

operators. Cable operators will often have ownership interests in

programmers, and vice versa. These are known as "vertically

integrated" entities. Cable operators create some of their own

programming, but much of it comes from outside sources, including

local and distant broadcast stations and such national and regional

cable programming networks as CNN, ESPN, and C-Span. Cable

subscribers select the stations they wish to receive by choosing

among various plans ("tiers") of cable service. At an additional

cost, a subscriber may receive "premium" channels (such as HBO and

Showtime). Many systems also offer "pay-per-view" programs for

which a subscriber pays a fee each time a specific movie or program

is selected.

Prior to 1984, cable television was largely regulated at the

local level, primarily through the franchise process. H.R. REP. NO.

934, supra, at 19, reprinted in 1984 U.S.C.C.A.N. at 4656. The

USCA Case #93-5351 Document #220942 Filed: 08/30/1996 Page 4 of 59
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

1984 Act established a national policy for the local, state, and

federal regulation of cable; but it continued to rely on local

franchising as the primary means of regulation. Id.

The 1984 Act authorized local governments to require cable

operators to set aside channels for public, educational, and

governmental ("PEG") programming. Id. It also required operators

of cable systems with more than 36 channels to set aside a

percentage of those channels for commercial use by entities

unaffiliated with the operator ("leased access"). Id. at 48,

reprinted in 1984 U.S.C.C.A.N. at 4685. The Act also allowed local

authorities to regulate rates for basic cable services if a cable

system did not face effective competition. Id. at 19, reprinted in

1984 U.S.C.C.A.N. at 4657. The FCC defined "effective competition"

in such a way, however, that 97 percent of all systems were exempt

from rate regulation. S. REP. NO. 92, 102d Cong., 2d Sess. 4

(1991), reprinted in 1992 U.S.C.C.A.N. 1133, 1136.

The cable industry experienced dramatic growth following the

enactment of the 1984 Act, and Congress was soon confronted by the

problems that accompanied this growth. Accordingly, it launched a

two-year review of the industry. This study laid the ground for

the passage of the 1992 Act, which revised certain provisions of

the 1984 Act, left others in place, and enacted a number of new

provisions. We will refer to the two statutes collectively as "the

Cable Acts."

Soon after the new legislation was enacted, the FCC initiated

a rulemaking to implement and interpret section 10. Implementation

of Section 10 of the Cable Consumer Protection and Competition Act

USCA Case #93-5351 Document #220942 Filed: 08/30/1996 Page 5 of 59
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

of 1992: Indecent Programming and Other Types of Materials on

Cable Access Channels, 7 F.C.C.R. 7709 (1992) (notice of proposed

rulemaking). At the conclusion of the rulemaking, the FCC issued

two orders construing section 10 and promulgating regulations to

implement it. Implementation of Section 10 of the Cable Consumer

Protection and Competition Act of 1992: Indecent Programming and

Other Types of Materials on Cable Access Channels, 8 F.C.C.R. 998

(1993) (first report and order); Implementation of Section 10 of

the Cable Consumer Protection and Competition Act of 1992:

Indecent Programming and Other Types of Materials on Cable Access

Channels, 8 F.C.C.R. 2638 (1993) (second report and order). Time

Warner petitioned this court to review these orders.

Shortly after the FCC initiated its rulemaking, five lawsuits

challenging various provisions of the Cable Acts were filed in the

United States District Court for the District of Columbia. After

these cases were consolidated, the challenges to two provisions

were severed and assigned for hearing by a three-judge panel of the

district court in accordance with section 23 of the 1992 Act, 47

U.S.C. § 555(c)(1). See Turner Broadcasting Sys., Inc. v. FCC, 810

F. Supp. 1308 (D.D.C. 1992). A single-judge district court

proceeded to consider the remaining issues, which are those that

now concern us, and concluded that three of the challenged

provisions were unconstitutional (the DBS set-aside obligation, the

premium channel preview notice requirement, and the subscriber

limitation), Daniels Cablevision, Inc. v. United States, 835 F.

Supp. 1, 8-10 (D.D.C. 1993), but upheld the validity of the rest.

Id. at 5-7, 10-12.

USCA Case #93-5351 Document #220942 Filed: 08/30/1996 Page 6 of 59
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

In this proceeding, the government appeals the district

court's holdings of unconstitutionality while Time Warner,

Discovery Communications, and the Learning Channel (collectively

"Time Warner") appeal the remainder of its conclusions on the

merits. Several parties have been granted leave to intervene, some

of whom question the district court's authority to hear this case.

We will deal first with the jurisdictional issue and then address

the constitutionality of the challenged provisions of the Cable

Acts. On Time Warner's motion, we have consolidated its appeal

with its petitions for review of the FCC's orders implementing

section 10. Any arguments that Time Warner could have raised with

regard to subsections (a)-(c) of section 10 have essentially been

foreclosed by the Supreme Court's recent decision in Denver Area

Educational Telecommunications Consortium v. FCC, 116 S. Ct. 2374

(1996) ("Denver"). Furthermore, Time Warner's briefs address only

subsection (d) of section 10a self-executing provision that in no

way involves FCC actionand offer no arguments challenging the

validity of the orders implementing section 10's other subsections.

Since this court generally does not consider issues that are not

raised in the parties' briefs, we deny the petitions for review.

E.g., FED. R. APP. P. 28(a)(6); El-Fadl v. Central Bank of Jordan,

75 F.3d 668, 673 (D.C. Cir. 1996); Carducci v. Regan, 714 F.2d

171, 177 (D.C. Cir. 1983).

II

JURISDICTION

The Communications Act, of which the Cable Acts are a part,

vests the courts of appeals with jurisdiction to hear any claim "to

USCA Case #93-5351 Document #220942 Filed: 08/30/1996 Page 7 of 59
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

enjoin, set aside, annul, or suspend any order of the [FCC] under"

the Act. 47 U.S.C. § 402(a). In Telecommunications Research and

Action Center v. FCC, 750 F.2d 70, 78-79 (D.C. Cir. 1984) ("TRAC"),

we held that "where a statute commits review of agency action to

the Court of Appeals, any suit seeking relief that might affect the

Circuit Court's future jurisdiction is subject to the exclusive

review of the Court of Appeals."

Three intervenors (the Association of America's Public

Television Stations, the Public Broadcasting Service, and the

Corporation for Public Broadcasting) (collectively "PBS") cite this

language in support of their claim that the district court lacked

jurisdiction to hear Time Warner's constitutional challenges to the

DBS provisions. PBS submits that the relief that Time Warner

sought from the district courtan order enjoining the FCC from

issuing any regulation under the 1992 Actwould circumvent the

process for judicial review provided for by statute. It asserts

that the claims are properly raised during judicial review of the

regulations the FCC will ultimately promulgate and that we should

disallow "preemptory strikes" to enjoin the FCC before it can act.

Although PBS's argument was aimed solely at the DBS provisions, its

reasoning is applicable to all other provisions that require the

promulgation of FCC regulations.

The district court addressed this issue earlier in the

litigation when the plaintiffs sought an order enjoining the FCC

from implementing or enforcing the challenged sections of the Cable

Acts. Time Warner Entertainment Co. v. FCC, 810 F. Supp. 1302

(D.D.C. 1992). In response to the argument that the court had no

USCA Case #93-5351 Document #220942 Filed: 08/30/1996 Page 8 of 59
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

authority to issue the requested orders in light of our decision in

TRAC, the court noted that

the D.C. Circuit has never held in subsequent cases that

TRAC precludes a district court from hearing a

constitutional challenge to an agency's enabling act

merely because the court of appeals ultimately has

exclusive jurisdiction over the agency's action taken

pursuant to the act.

Id. at 1304. The court then observed that the case "involve[d] a

direct constitutional challenge to congressional legislation,

which, if plaintiffs [we]re correct, could never justify future

agency action to implement or enforce it," and concluded that

"notwithstanding TRAC, district courts still have original

jurisdiction to consider plaintiffs' constitutional claims such as

those brought here." Id.

PBS maintains that this holding cannot be reconciled with

TRAC. In that case, we asserted exclusive jurisdiction over a

request for a writ of mandamus to require an agency to exercise its

rulemaking authority because section 402(a) endowed courts of

appeals with sole authority to review the agency actions that were

the subject of the mandamus petition. See TRAC, 750 F.2d at 77.

PBS reasons that because Time Warner's objective in seeking an

injunction was to prevent the FCC from taking any action pursuant

to the challenged provisions of the two Acts, our authority under

section 402(a) is implicated and, with it, TRAC's assertion of

exclusive authority to consider the request. PBS, however, fails

to make the necessary distinction between a constitutional

challenge that is exclusively directed to the source of putative

agency authority and a challenge to the manner in which the agency

has exercised or (as in the case of TRAC) failed to exercise that

USCA Case #93-5351 Document #220942 Filed: 08/30/1996 Page 9 of 59
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

authority.

This distinction has been made in several cases in which

courts have found it unnecessary to address TRAC's applicability to

constitutional challenges. For example, in Ticor Title Insurance

Co. v. FTC, 625 F. Supp. 747 (D.D.C. 1986), the plaintiffs mounted

a collateral facial constitutional challenge to the agency's

authority in order to enjoin an ongoing prosecution by the Federal

Trade Commission. The district court held that TRAC did not bar it

from hearing the claim because "[a] constitutional challenge to the

FTC's enabling statute would not appear to be within the "class of

claims' contemplated" by the statute governing review of FTC

actions. Id. at 749. The court subsequently dismissed the

complaint on other grounds. In affirming the dismissal, we found

it unnecessary to decide the TRAC issue. Ticor Title Ins. Co. v.

FTC, 814 F.2d 731 (D.C. Cir. 1987). In one of the three separate

opinions in that case, now-Chief Judge Edwards stated that he "need

not stop to consider here whether a constitutional challenge could

ever be so separate from the underlying agency proceedings that the

district court would have jurisdiction under [the general federal

question statute]." Id. at 743 (emphasis added). Judge Joyce H.

Green, sitting by designation, went even further and stated that

"TRAC is inapplicable to cases involving challenges to the

constitutionality of an agency's enabling statute." Id. at 757-58.

More recently, we relied on TRAC to hold that the district

court lacked jurisdiction to review an FTC order even though the

underlying challenge was based on the "purely legal question[ ]" of

FTC jurisdiction. Ukiah Adventist Hosp. v. FTC, 981 F.2d 543, 549

USCA Case #93-5351 Document #220942 Filed: 08/30/1996 Page 10 of 59
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

(D.C. Cir. 1992), cert. denied, 114 S. Ct. 88 (1993). As in Ticor,

the plaintiff in Ukiah brought the jurisdictional challenge after

the FTC had issued an administrative complaint against it. We

explained that "if the District Court enjoins the FTC proceeding

against Ukiah as requested, "the statutory obligation of a Court of

Appeals to review [the FTC's order] on the merits may be

defeated....' " Id. (quoting TRAC, 750 F.2d at 76). In contrast

to Ticor and Ukiah, this case is entirely independent of any agency

proceedings, whether actual or prospective. Furthermore, the

application of TRAC to this challenge would do nothing to advance

a primary policy consideration underlying that decision. As we

noted in that case, "[a]ppellate courts develop an expertise

concerning the agencies assigned them for review. Exclusive

jurisdiction promotes judicial economy and fairness to the

litigants by taking advantage of that expertise." TRAC, 705 F.2d

at 78. Questions concerning the constitutionality of an agency's

enabling statute, however, do not require any particular agency

expertise.

We conclude, then, that Time Warner was not jurisdictionally

barred from bringing this action in district court. We so hold

because TRAC does not deprive that court of its general federal

question jurisdiction to consider a facial challenge to a statute's

constitutionality so long as that challenge is not raised in a suit

challenging the validity of agency action taken pursuant to the

challenged statute or in a suit that is collateral to one

challenging the validity of such agency action.

III

USCA Case #93-5351 Document #220942 Filed: 08/30/1996 Page 11 of 59
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

THE RATE REGULATION PROVISIONS

Studies conducted by Congress subsequent to the passage of the

1984 Act concluded that cable operators possessed excessive market

power at the expense of consumers because of a lack of competition.

See 1992 Act, § 2(a)(2), 106 Stat. at 1460. This was reflected in

a 29 percent increase in average monthly subscriber rates between

1986 and 1992. Id. § 2(a)(1), 106 Stat. at 1460. As a

consequence, Congress incorporated into section 3 of the 1992 Act

a new definition of "effective competition," which empowers the FCC

and local authorities to regulate the prices charged subscribers by

the great majority of cable operators. See 47 U.S.C. § 543(a)(2)

& (l )(1). The statute requires the FCC to adopt regulations that

will ensure that the rates charged by the operators for their

"basic service tier[s]" are reasonable, id. § 543(b)(1); it

directs the FCC to establish criteria for determining when the

rates charged for other cable services are unreasonable, id. §

543(c)(1); and it details the factors that the FCC must consider

in carrying out these mandates, id. § 543(b)(2)(C) & (c)(2).

Section 3 also requires cable operators to provide certain

specified programming in their basic service tiers, id. §

543(b)(7)(A), and to maintain a uniform rate structure throughout

their service areas. Id. § 543(d). Time Warner asserts that these

provisions violate its First Amendment rights.

Subsequent to oral argument, Congress enacted the

Telecommunications Act of 1996, Pub. L. No. 104-104, 110 Stat. 56

("1996 Act"). Section 301 of that statute amends section 3 of the

1992 Act by, inter alia, phasing out the regulation of cable rates

USCA Case #93-5351 Document #220942 Filed: 08/30/1996 Page 12 of 59
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

after March 31, 1999. 1996 Act, § 301(b)(1)(C), 110 Stat. at 115

(codified at 47 U.S.C. § 543(c)(3)). Because the 1992 provisions

remain in effect until then, at least as to larger cable operators,

see id. § 301(c), 110 Stat. at 116, Time Warner's challenge has not

been rendered moot.

To review the relevant constitutional principles, " [t]here

can be no disagreement on an initial premise: Cable programmers

and cable operators engage in and transmit speech, and they are

entitled to the protection of the speech and press provisions of

the First Amendment." Turner, 114 S. Ct. at 2456. Therefore,

"laws that single out the press, or certain elements thereof, for

special treatment ... are always subject to at least some degree of

heightened First Amendment scrutiny." Id. at 2458. Laws that

regulate speech based on its content or "that compel speakers to

... distribute speech bearing a particular message" are subject to

strict scrutiny. Id. at 2459. Such laws are presumptively invalid

"and survive constitutional review only if they promote a

"compelling interest' and employ "the least restrictive means to

further the articulated interest.' " American Library Ass'n v.

Reno, 33 F.3d 78, 84 (D.C. Cir. 1994) (quoting Sable

Communications, Inc. v. FCC, 492 U.S. 115, 126 (1989)), cert.

denied, 115 S. Ct. 2610 (1995). By contrast,

a content-neutral [law] will be sustained if "it furthers

an important, or substantial governmental interest; if

the governmental interest is unrelated to the suppression

of free expression; and if the incidental restriction on

alleged First Amendment freedoms is no greater than is

essential to the furtherance of that interest."

Turner, 114 S. Ct. at 2469 (quoting United States v. O'Brien, 391

U.S. 367, 377 (1968)).

USCA Case #93-5351 Document #220942 Filed: 08/30/1996 Page 13 of 59
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

In this case, the district court upheld section 3 as a

legitimate, content-neutral regulation. Daniels Cablevision, 835

F. Supp. at 7. Time Warner disagrees. It contends that section 3

is subject to strict scrutiny because, among other reasons,

regulating cable rates inevitably affects both the content and

quantity of speech by limiting the amount of money that a cable

operator can spend on programming. This question, however, is no

longer open. In Time Warner Entertainment Co. v. FCC, 56 F.3d 151

(D.C. Cir. 1995) ("Time Warner I"), cert. denied, 116 S. Ct. 911

(1996), in which Time Warner made nearly identical arguments in its

challenge to the constitutionality of rules promulgated by the FCC

pursuant to section 3, we determined that intermediate scrutiny

applied. We noted that neither the rules nor the statute are

predicated on the ideas expressed in cable programs: "All cable

systems not facing effective competition are covered, and they are

covered regardless of the content of the programs they transmit."

Id. at 182. We specifically rejected the contention that the rate

regulations affected the content of cable operators' speech and

observed that, as promulgated, they "adequately insulated cable

operators" from the "potential for causing incidental effects on

content." Id. at 182-83.

We rejected strict scrutiny for another reason as well:

"Strict scrutiny of laws directed only at one element of the media

is unwarranted if the difference in treatment is "justified by some

special characteristic' of the medium"; we concluded "[t]hat cable

rate regulation [was] so justified ... [because] most cable

television subscribers have no opportunity to select between

USCA Case #93-5351 Document #220942 Filed: 08/30/1996 Page 14 of 59
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

competing cable systems." Id. at 183 (quoting Turner, 114 S. Ct.

at 2468). Accordingly, we found that "the rate regulations must be

analyzed by the same "intermediate' standard ... applied in Turner

Broadcasting." Id. at 184. On applying that standard, we

concluded that the cable rate regulations "[we]re not

unconstitutional [because] [t]he government has demonstrated a

substantial interest in reducing cable rates and the Commission's

regulations issued pursuant to section 3 of the 1992 Act are

narrowly tailored to meet that interest." Id. at 186.

Time Warner I thus controls the level of review to be applied

to section 3 in this case. Time Warner's assertion that the basic

service tier requirements constitute a content-based restriction

does not compel a contrary conclusion. In Turner, the Supreme

Court held that the "must-carry" rules, which require cable systems

to carry certain local commercial television stations and

noncommercial educational stations, were content-neutral and

subject to intermediate scrutiny. 114 S. Ct. at 2469. It found

nothing in them that imposed a restriction, burden, or benefit "by

reason of the views, programs, or stations the cable operator has

selected or will select." Id. at 2460. If the government may

require a cable system to carry certain stations without triggering

strict scrutiny, it may require them to carry those stations in

their basic service tiers without inviting a finding of

content-based regulation.

Time Warner maintains, nevertheless, that section 3 fails even

intermediate scrutiny because the government has not demonstrated

that rate regulation will further an important or substantial

USCA Case #93-5351 Document #220942 Filed: 08/30/1996 Page 15 of 59
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

government interest, and because the means employed will burden

substantially more speech than is necessary. The very short but

sufficient answer is that Time Warner I settled each of the

questions. We found that the government's interest in "protecting

consumers from monopoly prices charged by cable operators who do

not face effective competition" was "evident," 56 F.3d at 184, and

that "the rate regulations are narrow enough: rate regulation is

triggered by the absence of effective competition and ceases when

effective competition emerges." Id. at 185.

In that case, of course, the finding that the government met

the requirements of intermediate scrutiny was concerned with

specific regulations issued by the FCC pursuant to section 3,

whereas this case involves a facial challenge to the section

itself. But

to prevail on a facial attack the plaintiff must

demonstrate that the challenged law either could never be

applied in a valid manner or that even though it may be

validly applied to the plaintiff and others, it

nevertheless is so broad that it may inhibit the

constitutionally protected speech of third parties.

New York State Club Ass'n v. City of New York, 487 U.S. 1, 11

(1988) (internal quotation marks and citations omitted). Time

Warner does not claim that rate regulation will affect the

protected speech of third parties; and it is foreclosed, by our

decision in Time Warner I, from maintaining that the section can

never be constitutionally applied.

IV

LEASED ACCESS PROVISIONS

In response to FCC v. Midwest Video Corp., 440 U.S. 689

(1979), the 1984 Act compelled cable operators of systems with more

USCA Case #93-5351 Document #220942 Filed: 08/30/1996 Page 16 of 59
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

1 Subject to the rates, terms, and conditions established by

the FCC pursuant to 47 U.S.C. § 532(c)(4), cable operators must

set aside capacity for leased access as follows:

(A) An operator of any cable system with 36 or

more (but not more than 54) activated channels shall

designate 10 percent of such channels which are not

otherwise required for use (or the use of which is not

prohibited) by Federal law or regulation.

(B) An operator of any cable system with 55 or

more (but not more than 100) activated channels shall

designate 15 percent of such channels which are not

otherwise required for use (or the use of which is not

prohibited) by Federal law or regulation.

(C) An operator of any cable system with more than

100 activated channels shall designate 15 percent of

all such channels.

(D) An operator of any cable system with fewer

than 36 activated channels shall not be required to

designate channel capacity for commercial use by

persons unaffiliated with the operator, unless the

cable system is required to provide such channel

capacity under the terms of a franchise in effect on

October 30, 1984.

47 U.S.C. § 532(b)(1). 

than thirty-six channels to set aside between 10 and 15 percent of

their channels for commercial use by persons unaffiliated with the

operator. 47 U.S.C. § 532(b)(1). The larger the number of

channels in the system, the greater the percentage of channels the

operator must set aside.1 "Leased access" was originally aimed at

bringing about "the widest possible diversity of information

sources" for cable subscribers. Id. § 532(a). Congress thought

cable operators might deny access to programmers if the operators

disapproved the programmer's social or political viewpoint, or if

the programmers' offerings competed with those the operators were

providing. "Diversity," as the 1984 Act used the term, referred

not to the substantive content of the program on a leased access

USCA Case #93-5351 Document #220942 Filed: 08/30/1996 Page 17 of 59
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

channel, but to the entitiesthe "sources"responsible for making

it available. See H.R. REP. NO. 934, supra, at 48, reprinted in

1984 U.S.C.C.A.N. at 4685.

The 1984 Act gave cable operators the authority to establish

the price, terms, and conditions of the service on their leased

access channels. 1984 Act, § 2, 98 Stat. at 2783 (original version

of 47 U.S.C. § 532(c)(1)). With respect to those channels, then,

the operator stood in the position of a common carrier. See

Midwest Video, 440 U.S. at 701; Implementation of Section 10 of

the Cable Consumer Protection and Competition Act of 1992:

Indecent Programming and Other Types of Materials on Cable Access

Channels, 8 F.C.C.R. 998, 1001-02 ¶ 22 (1993) (first report and

order). If an operator refused to provide service, persons

aggrieved had the right either to bring an action in district court

or to petition the Commission for relief. 47 U.S.C. § 532(d)-(e).

The operator's rates, terms, and conditions were presumed

reasonable, a presumption that could be overcome "by clear and

convincing evidence to the contrary." Id. § 532(f). The operator

was free to use any of the channels set aside for leased access

until someone signed up. Id. § 532(b)(4).

The 1984 legislation did not accomplish much. Unaffiliated

programming on leased access channels rarely appeared. See Donna

M. Lampert, Cable Television: Does Leased Access Mean Least

Access?, 44 FED. COMM. L.J. 245, 266-67 & n.122 (1992). Exactly why

is uncertain. Cable operators said the reasons were high

production costs and low demand in the face of the already wide

array of programming operators were already providing. Others laid

USCA Case #93-5351 Document #220942 Filed: 08/30/1996 Page 18 of 59
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

2 The House Committee mentioned a study indicating that

"there are 68 nationally delivered cable video networks, 39 of

which, or 57 percent, have some ownership affiliation with the

operating side of the cable industry." H.R. REP. NO. 628, supra,

at 41. 

the blame at the feet of the operators, claiming they had set

unreasonable terms for leased access. The FCC, in a 1990 report,

recommended amending the 1984 Act to provide a national framework

of leased access rules and to streamline the section's enforcement

mechanism. Competition, Rate Deregulation, and the Comm'ns

Policies Relating to the Provision of Cable Television Serv., 5

F.C.C.R. 4962, 5048-50 WW 177-83 (1990) (report). The House Energy

and Commerce Committee thought that cable operators had financial

incentives to refuse access to those who would compete with

existing programs. H.R. REP. NO. 628, 102d Cong., 2d Sess. 39-40

(1992). The Senate Commerce, Science, and Transportation Committee

concurred, observing that the interests of cable operators and

leased access programmers were almost certain to clash.2 This

Senate committee believed that the 1984 Act's leased access scheme

suffered from "fundamental problems" and that the Act's permitting

operators to establish the rates and terms of leased access service

made "little sense." S. REP. NO. 92, supra, at 30-32, reprinted in

1992 U.S.C.C.A.N. at 1163-65.

Amendments enacted in 1992 authorized the FCC to establish a

maximum price for leased access, to regulate terms and conditions,

and to establish procedures for the expedited resolution of

disputes. 47 U.S.C. § 532(c)(4)(A). At the same time, Congress

added a second rationale for leased access: "to promote

competition in the delivery of diverse sources of video

USCA Case #93-5351 Document #220942 Filed: 08/30/1996 Page 19 of 59
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

3 Time Warner has limited its challenge to subsections

(b)-(d) of 47 U.S.C. § 532 and has not made any arguments

regarding the constitutionality of subsections (h) and (j)

addressed in Denver, 116 S. Ct. 2374. 

programming." Id. § 532(a), as amended.

Time Warner's initial point regarding the leased access

provisions3 is that they should be subject to the most stringent of

the standards used to evaluate restrictions on speech. As the

company sees it, the provisions are content-based; the government

therefore must demonstrate a compelling interest to overcome their

presumptive invalidity. Time Warner I, 56 F.3d at 182. There is

nothing to this. The provisions are not content-based. They do

not favor or disfavor speech on the basis of the ideas contained in

the speech or the views expressed. Turner, 114 S. Ct. at 2459.

Whether, and how many, channels a cable operator must designate for

public leasing depends entirely on the operator's channel capacity.

Id. at 2460; see also Time Warner I, 56 F.3d at 182. What

programs appear on the operator's other channelsthat is, what

speech the operator is promotingmatters not in the least. So too

with respect to the speech of those who use the leased access

channels. Their qualification to lease time on those channels

depends not on the content of their speech, but on their lack of

affiliation with the operator, a distinguishing characteristic

stemming from considerations relating to the structure of cable

television. Turner, 114 S. Ct. at 2457, 2460-61, 2467-68; Time

Warner I, 56 F.3d at 184. The statutory objective, as well as the

provisions carrying it forth, are framed in terms of the sources of

information rather than the substance of the information. This is

USCA Case #93-5351 Document #220942 Filed: 08/30/1996 Page 20 of 59
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

consistent with the First Amendment's "assumption that the widest

possible dissemination of information from diverse and antagonistic

sources" promotes a free society. Associated Press v. United

States, 326 U.S. 1, 20 (1945). The Supreme Court has determined

that regulations along these lines are content-neutral. Turner,

114 S. Ct. at 2469-70.

Hence the standard must be intermediate scrutiny: it is

enough if the government's interest is important or substantial and

the means chosen to promote that interest do not burden

substantially more speech than necessary to achieve the aim. Time

Warner I, 56 F.3d at 184. Time Warner thinks the leased access

provisions fail even this test. The company's attack is not on the

sufficiency of the governmental interest. After Turner, "promoting

the widespread dissemination of information from a multiplicity of

sources" and "promoting fair competition in the market for

television programming" must be treated as important governmental

objectives unrelated to the suppression of speech. 114 S. Ct. at

2469-70. The problems Time Warner sees are elsewhere: there is

first the lack of any demonstration that the leased access

provisions address a real, non-conjectural harm; and there is

second the loose fit between the remedy of setting aside a

percentage of channel capacity and the supposed harm. See id. at

2469-72.

As to the alleged lack of any real harm, the Commission

recently said: "Cable operators and leased access programmers

agree that relatively little leased access capacity is being used

by unaffiliated programmers." Implementation of Sections of the

USCA Case #93-5351 Document #220942 Filed: 08/30/1996 Page 21 of 59
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

Cable Television Consumer Protection and Competition Act of 1992:

Rate Regulation, Leased Access, MM Docket No. 92-26, slip op. at 5

¶ 6 (F.C.C. released Mar. 29, 1996) (order on reconsideration of

first report and order and further notice of proposed rulemaking).

Four years earlier, the Committee reports accompanying the 1992

Amendments reached the same conclusion. S. REP. NO. 92, supra, at

30-32, reprinted in 1992 U.S.C.C.A.N. at 1163-65; H.R. REP. NO.

628, supra, at 39-40. When we get to reasons why there have been

so few takers, the finger-pointing begins. The unaffiliated

programmers blame the operators, claiming that their high rates

made leased access unaffordable. Implementation of Sections of the

Cable Television Consumer Protection and Competition Act of 1992:

Rate Regulation, Leased Access, slip op. at 5 ¶ 6. The "operators

claim that the demand for leased access is weak regardless of the

leased access rate, because, at least in part, programming

production costs are high." Id. If we treated this as a factual

dispute and tried to resolve it in light of the evidence, we could

not do so on the current record. The Committee reports, which side

with the unaffiliated programmers, carry weight; but they are

basically conclusory, as one would expect. In their brief in this

court, the United States and the Commission point to the increasing

vertical integration of the cable industry: "[M]any of the most

popular cable programming services are owned in whole or in part by

cable operators," which gives operators an incentive to favor

programmers affiliated with them. Opening Brief for the FCC and

the United States at 46-47. A finding in the 1992 Act is more

circumspect: vertical integration "could make it more difficult

USCA Case #93-5351 Document #220942 Filed: 08/30/1996 Page 22 of 59
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

for noncable-affiliated programmers to secure carriage on cable

systems." 1992 Act, § 2(a)(5), 106 Stat. at 1460-61. Still, we do

not have before us any specific evidence showing either the extent

to which operators have refused to carry unaffiliated programmers

or the effect of the leased access provisions on the speech of the

operators. No section of the statute directly addresses these

evidentiary points.

A portion of the Turner opinion joined only by four Justices

said that in order to justify the provisions requiring cable

operators to carry local broadcast stations, the government had to

prove that broadcast television would be in jeopardy without the

provisions. 114 S. Ct. at 2472. This factual issue went not to

the interest of the government in preserving local broadcasting,

but to the need for enacting the must-carry provisions to advance

that interest. The plurality also thought that in order to

determine whether the must-carry provisions suppressed more speech

than necessary, there had to be "findings concerning the actual

effects of must-carry on the speech of cable operators and cable

programmers...." Id. The vote of Justice Stevens, concurring in

the judgment but not in this portion of the opinion, formed a

majority in favor of remanding the case to the three-judge district

court to resolve these factual disputes.

If this were purely an economic regulation subject to rational

basis review, we would say that the legislative decision embodied

in the leased access provisions "is not subject to courtroom

factfinding and may be based on rational speculation unsupported by

evidence or empirical data." FCC v. Beach Communications, Inc.,

USCA Case #93-5351 Document #220942 Filed: 08/30/1996 Page 23 of 59
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

508 U.S. 307, 315 (1993). But the Turner plurality, applying a

higher standard of review, believed that factfinding was needed.

Suppose we too followed that course and remanded. A series of

questions would then present themselves. This is a facial

challenge to the constitutionality of the leased access provisions.

Should the facts be determined as of the time Congress enacted the

provisions? At the time the complaint was filed? At the time of

the hearing on remand? Or should the district court consider the

state of affairs expected to develop sometime in the future, taking

into account rapidly changing technology and new legislation

opening up cable operators to greater competition?

The parties do not provide answers. Time Warner thinks it

sufficient to allege in its brief that there is not now, nor will

there be under new FCC regulations, any appreciable demand by

unaffiliated programmers for access to cable systems because cable

systems are already carrying a wide variety of programs from

diverse sources and because leased access does not make economic

sense in light of the costs of production. Brief for Appellants at

67. For the sake of argument, we shall accept this assertion as

true. We will assume, in other words, that on remand Time Warner

could prove the factual propositions contained in its brief. Would

that render the leased access provisions unconstitutional? We

think not. If unaffiliated programmers have not and will not lease

time on the channels set aside for themif, in other words, Time

Warner made its best casewe fail to see how the company could

establish that the provisions violate its First Amendment right to

free speech. In Turner, there was no doubt that local broadcasting

USCA Case #93-5351 Document #220942 Filed: 08/30/1996 Page 24 of 59
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

would occupy channels in cable systems; the open evidentiary

questions, according to the plurality, were whether this was

necessary to preserve local broadcasting and whether the effect

would be to force cable operators to drop programs they would

otherwise carry. Our case is very different. Under section

532(b)(4), a "cable operator may use any unused channel capacity"

set aside for leased access "until the use of such channel capacity

is obtained, pursuant to a written agreement, by a person

unaffiliated with the operator." That is, if unaffiliated

programmers have not and, as Time Warner predicts, will not exploit

the leased access provisions, then the provisions will have no

effect on the speech of the cable operators. See Turner, 114 S.

Ct. at 2456. None of their programming would have to be dropped.

The channels set aside for leasing will either be vacant or they

will be occupied according to the wishes of the cable operators.

The operators' editorial control will remain unimpaired and so will

their First Amendment right to determine what will appear on their

cable systems.

The same analysis applies to Time Warner's argument that the

leased access provisions are not narrowly tailored to achieve their

ends. One of the alleged defects stems from the statutory

requirement that the larger the number of channels in the system,

the greater the number of channels the operator must set aside. 47

U.S.C. § 532(b)(1). The company states that "because a cable

system has more channels does not mean there are any more

unaffiliated programmers" being excluded, and that "the more

channels a cable operator has, the fewer unaffiliated programmers

USCA Case #93-5351 Document #220942 Filed: 08/30/1996 Page 25 of 59
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

4 Time Warner also posits "a cable operator that voluntarily

has carried each and every programmer that asked for carriage up

until the point where it had no excess capacity [and yet] still

must set aside channels under the leased access system scheme to

carry other programming." Brief for Appellants at 70. This

seems to assume the opposite of the company's argument that there

is no demand for leased access. In any event, Time Warner has

mounted a facial constitutional challenge to the leased access

provisions. If an individual operator finds itself in the

position Time Warner describes, that operator may mount its own

as-applied First Amendment challenge. Our decision today deals

only with the facial validity of the provisions. 

would be excluded from carriage...." Brief for Appellants at 68-

69. Yet if this is accurate, operators of large cable systems

would scarcely have any customers asking to lease the access

channels; and the operators would thus be free to fill the unused

capacity as they saw fit.4

We therefore see no reason to remand this portion of the case

to the district court for factual findings. Time Warner has

mounted a facial challenge to the leased access provisions. If it

succeeded in establishing that few unaffiliated programmers will

take advantage of the provisions, section 532(b)(4) would insulate

it and other operators from suffering any infringement of their

First Amendment rights.

V

PEG PROVISION

Section 611 of the 1984 Cable Act provides that local

franchising authorities "may ... require as part of a [cable]

franchise ... [or] franchise renewal ... that channel capacity be

designated for public, educational, or governmental use." 47

U.S.C. § 531(b). The District Court upheld the "PEG" provision, as

it is commonly known, finding: that it was content-neutral and

USCA Case #93-5351 Document #220942 Filed: 08/30/1996 Page 26 of 59
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

thus subject to intermediate scrutiny, that it served a significant

regulatory interest by giving speakers with lesser market appeal

access to cable, and that it was narrowly tailored to accomplish

that purpose. Daniels Cablevision, 835 F. Supp. at 7.

Since the PEG provision permits, but does not require,

franchising authorities to mandate PEG access as a franchise

condition, we first ask whether Time Warner's challenge is ripe.

The ripeness doctrine's "basic rationale is to prevent the courts,

through avoidance of premature adjudication, from entangling

themselves in abstract disagreements." Abbott Labs. v. Gardner,

387 U.S. 136, 148 (1967). We test ripeness by balancing two

factors: the "fitness of the issues for judicial decision" and the

"hardship to the parties of withholding court consideration." Id.

at 149. As to the first of these factors, Time Warner argues that

any requirement to carry PEG programming imposed pursuant to the

statute is impermissibly content-based and unconstitutional.

Because any difference in the ways in which franchising authorities

might actually implement the requirement does not affect the First

Amendment analysis of this argument, "the issue tendered is a

purely legal one," id., and is thus fit for judicial review.

Furthermore, Time Warner has provided affidavits describing the

impact, in terms of both finances and substantive programming, that

the PEG requirements have had on cable operators around the

country. The hardship to Time Warner of withholding resolution on

the merits, the second of the ripeness factors, is thus clear. We

therefore conclude that Time Warner's facial challenge to the

constitutionality of this twelve-year-old statute is ripe.

USCA Case #93-5351 Document #220942 Filed: 08/30/1996 Page 27 of 59
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

Our decision in Beach Communications, Inc. v. FCC, 959 F.2d

975, 984 (D.C. Cir. 1992), is not to the contrary. In Beach, we

found unripe a First Amendment challenge to the section of the 1984

Cable Act requiring cable operators to obtain a local franchise.

In addressing the first of the two ripeness factors, the fitness of

the issues for judicial review, we held that because of the wide

discretion local authorities enjoy in imposing franchise

requirementsand hence, the different burdens that different

franchising regimes would imposea facial First Amendment challenge

was not fit for judicial decision. In one sense, the PEG provision

is quite similar to the general franchise requirement found unripe

in Beach: both depend upon the action of local franchising

authorities. In another sense, however, the PEG provision is

fundamentally different. Unlike the general requirement that a

cable operator obtain a franchise, the PEG provision's grant of

authority explicitly focuses on a particular type of speech:

public, educational, and governmental programming. Because we can

therefore determine that the statute affects the substance of cable

operators' speech in a direct way, the PEG provision is more "fit

for judicial decision" than the simple franchise requirement.

To prevail in its facial challenge, Time Warner must

"establish that no set of circumstances exists under which the Act

would be valid." United States v. Salerno, 481 U.S. 739, 745

(1987). Except in the case of an overbreadth challenge, which Time

Warner does not make here, "a holding of facial invalidity

expresses the conclusion that the statute could never be applied in

a valid manner." Members of the City Council v. Taxpayers for

USCA Case #93-5351 Document #220942 Filed: 08/30/1996 Page 28 of 59
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

Vincent, 466 U.S. 789, 797-98 (1984); see id. at 798 n.15.

Consideration of this standard is somewhat tricky here since rather

than requiring PEG channel capacity, the statute merely permits

local franchise authorities to require PEG programming as a

franchise condition. In fact, prior to the passage of the 1984

Cable Act, and thus, in the absence of federal permission, many

franchise agreements provided for PEG channels. See, e.g., Rhode

Island Rules Governing Community Antenna Television Systems §

14.1(b), cited in Berkshire Cablevision v. Burke, 571 F. Supp. 976,

987-88 (D.R.I. 1983), vacated as moot, 773 F.2d 382 (1st Cir.

1985). In passing the PEG provision, Congress thus merely

recognized and endorsed the preexisting practice of local franchise

authorities conditioning their cable franchises on the granting of

PEG channel access. See H.R. REP. NO. 934, supra, at 30, reprinted

in 1984 U.S.C.C.A.N. at 4667. All the statute does, then, is

preempt states from prohibiting local PEG requirements (if any

states were to choose to do so) and preclude federal preemption

challenges to such requirements, challenges that cable operators

might have brought in the absence of the provision. Preemption

issues aside, a statute that simply permits franchise authorities

to regulate where they had previously done so raises no First

Amendment problems unless the localities themselves infringe on

cable operators' speech. For this reason, although the concept of

an "application" of a federal statute that permits non-federal

franchise authorities to act is somewhat unusual, we consider each

individual franchise authority's PEG requirements to be an

"application" of the statute for purposes of this facial challenge.

USCA Case #93-5351 Document #220942 Filed: 08/30/1996 Page 29 of 59
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

Time Warner must therefore show that no franchise authority

could ever exercise the statute's grant of authority in a

constitutional manner. We can, of course, imagine PEG franchise

conditions that would raise serious constitutional issues. For

example, were a local authority to require as a franchise condition

that a cable operator designate three-quarters of its channels for

"educational" programming, defined in detail by the city council,

such a requirement would certainly implicate First Amendment

concerns. At the same time, we can just as easily imagine a

franchise authority exercising its power without violating the

First Amendment. For example, a local franchise authority might

seek to ensure public "access to a multiplicity of information

sources," Turner, 114 S. Ct. at 2470, by conditioning its grant of

a franchise on the cable operator's willingness to provide access

to a single channel for "public" use, defining "public" broadly

enough to permit access to everyone on a nondiscriminatory,

first-come, first-serve basis. Under Turner, such a scheme would

be content-neutral, would serve an "important purpose unrelated to

the suppression of free expression," id., and would be narrowly

tailored to its goal. Time Warner's facial challenge therefore

fails.

At oral argument, Time Warner contended that this suit is also

an as-applied challenge, alluding to allegedly unconstitutional PEG

requirements imposed by specific municipalities. Yet Time Warner

styles its complaint as a facial challenge to the statute, failing

to name any local franchising authorities as defendants, and

seeking relief consisting solely of a declaratory judgment that the

USCA Case #93-5351 Document #220942 Filed: 08/30/1996 Page 30 of 59
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

statute is unconstitutional, along with an injunction against the

United States and the Federal Communications Commission. Under

these circumstances, we need not address the constitutionality of

the PEG requirements imposed by particular local franchising

authorities; and we express no view on their constitutionality.

VI

THE DBS PROVISIONS

A direct broadcast satellite ("DBS") service utilizes

satellites to retransmit signals from the Earth to small,

inexpensive terminals. It operates on a specified band of the

radio frequency spectrum. The FCC prescribes the manner in which

parts of that spectrum are made available for DBS systems. See 47

C.F.R. pt. 100. With the emergence of DBS technology, nations of

the Western Hemisphere entered into an agreement to assign orbital

satellite positions and channels. See Processing Procedures

Regarding the Direct Broadcast Satellite Serv., 95 F.C.C.2d 250,

251 (1983). The United States was assigned 32 channels at each of

eight orbital positions. Id. at 252 n.4. Through the use of

compression technology, one satellite channel can deliver up to

four channels of video service. DBS providers are allotted a

number of channels of a specified spectrum width.

Section 25 of the 1992 Act provides:

The Commission shall require, as a condition of any

provision, initial authorization, or authorization

renewal for a provider of direct broadcast satellite

service providing video programming, that the provider of

such service reserve a portion of its channel capacity,

equal to not less than 4 percent nor more than 7 percent,

exclusively for noncommercial programming of an

educational or informational nature.

47 U.S.C. § 335(b)(1). DBS providers have no editorial control

USCA Case #93-5351 Document #220942 Filed: 08/30/1996 Page 31 of 59
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

over the educational or informational programming they are required

to carry under this provision. Id. § 335(b)(3). The district

court held that section 25 is invalid because the government

provided no evidence that regulation of DBS providers is necessary

to serve any significant interest. Daniels Cablevision, 835 F.

Supp. at 8-9.

A

RIPENESS

We must first address a threshold question of ripeness. PBS

argues that the challenge is not ripe because the nature of the

regulations will be determined only through further FCC rulemaking.

"We test ripeness of this facial, pre-enforcement challenge ... by

balancing two factors: the "fitness of the issue for judicial

decision' and the "hardship to the parties of withholding court

consideration.' " Beach Communications, 959 F.2d at 984 (quoting

Abbott Labs., 387 U.S. at 149). We have held that a claim that

raises purely legal questions is presumptively fit for judicial

review so long as "the challenged policy is ... sufficiently

fleshed out to allow the court to see the concrete effects and

implications of its decision." Chamber of Commerce v. Reich, 57

F.3d 1099, 1100 (D.C. Cir. 1995) (internal quotation marks

omitted). Thus, "a controversy is ripe if further administrative

process will not aid in the development of facts needed by the

court to decide the question it is asked to consider." New York

State Ophthalmological Soc'y v. Bowen, 854 F.2d 1379, 1386 (D.C.

Cir. 1988), cert. denied, 490 U.S. 1098 (1989).

Here, we are faced with the purely legal question of whether

USCA Case #93-5351 Document #220942 Filed: 08/30/1996 Page 32 of 59
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

section 25 presents an unconstitutional infringement on DBS

providers' First Amendment rights, which we are able to resolve

without further agency action or factual development. Contrary to

PBS's contention, Beach Communications does not dictate a finding

that Time Warner's challenge is unripe. As we noted in our

discussion of the PEG provisions, see page 22 supra, in Beach

Communications, we found that a First Amendment challenge to a

section of the 1984 Act was not ripe because of the broad

discretion that local franchising authorities had in "defin[ing]

the [cable operators'] duty, and because the justification for that

duty will depend on local facts." 959 F.2d at 984. Here, however,

the challenge to section 25 does not depend on the nature or amount

of the educational or informational programming that DBS providers

are required to carry. Thus, because the potential impact on

speech is known and a resolution of the claim does not depend on

undeveloped facts, the challenge to section 25 is suitable for

judicial review; and because the issue is "clearly fit to be

heard," we need not consider whether petitioners would "suffer any

hardship from our postponing its resolution." Consolidated Rail

Corp. v. United States, 896 F.2d 574, 577-78 (D.C. Cir. 1990).

B

MERITS

Time Warner insists, for a variety of reasons, that the DBS

set-aside provisions must be subjected to strict scrutiny; it also

maintains that we may not consider the government's argument that

DBS systems are analogous to broadcast television and therefore

subject to no more than heightened scrutiny, because that argument

USCA Case #93-5351 Document #220942 Filed: 08/30/1996 Page 33 of 59
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

had not been raised before the district court. While it is true

that we will not ordinarily entertain an argument that the trial

court had no opportunity to consider, the Supreme Court has

recognized that "there are circumstances in which a federal

appellate court is justified in resolving an issue not passed on

below...." Singleton v. Wulff, 428 U.S. 106, 121 (1976).

We have noted that the discretion to consider issues not

raised earlier will be exercised

only in [such] exceptional circumstances ... [as]

uncertainty in the state of the law; a novel, important

and recurring question of federal law; an intervening

change in the law; and extraordinary situations in which

review is necessary to prevent a miscarriage of justice

or to preserve the integrity of the judicial process.

Roosevelt v. E.I. Du Pont de Nemours & Co., 958 F.2d 416, 419 & n.5

(D.C. Cir. 1992) (citations omitted). In Roosevelt, we considered

an issue raised for the first time on appeal because it was "purely

one of law important in the administration of federal justice, and

resolution of the issue [did] not depend on any additional facts

not considered by the district court." Id. The instant case is

concerned with the validity of a federal statute governing the

application of a new technology of enormous significance. Our

resolution of the legal issue presented here does not require the

consideration of facts not already in the record, and for us to

ignore the obvious similarity between DBS and broadcasting would do

nothing to preserve the integrity of the judicial process.

The Supreme Court recognized, in 1969, that because of the

limited availability of the radio spectrum for broadcast purposes,

"only a tiny fraction of those with resources and intelligence can

hope to communicate by radio at the same time...." Red Lion

USCA Case #93-5351 Document #220942 Filed: 08/30/1996 Page 34 of 59
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

Broadcasting Co., Inc. v. FCC, 395 U.S. 367, 388 (1969). The same

is true for DBS today. Because the United States has only a finite

number of satellite positions available for DBS use, the

opportunity to provide such services will necessarily be limited.

Even before the first DBS communications satellite was launched in

1994, the FCC found that "the demand for channel/orbit allocations

far exceeds the available supply." Continental Satellite Corp.,

4 F.C.C.R. 6292, 6293 (1989). Recently, the last DBS license was

auctioned off for $682.5 million, the largest sum ever received by

the FCC for any single license to use the airwaves. Mike Mills,

MCI Becomes a Broadcaster, WASH. POST, Jan. 26, 1996, at A1, A24.

As the Supreme Court observed,

[w]here there are substantially more individuals who want

to broadcast than there are frequencies to allocate, it

is idle to posit an unabridgeable First Amendment right

to broadcast comparable to the right of every individual

to speak, write, or publish.

Red Lion, 395 U.S. at 388.

In such cases, the Court applies a "less rigorous standard of

First Amendment scrutiny," based on a recognition that

the inherent physical limitation on the number of

speakers who may use the ... medium has been thought to

require some adjustment in traditional First Amendment

analysis to permit the Government to place limited

content restraints, and impose certain affirmative

obligations, on broadcast licensees.

Turner, 114 S. Ct. at 2456, 2457. Because the new DBS technology

is subject to similar limitations, we conclude that section 25

should be analyzed under the same relaxed standard of scrutiny that

the court has applied to the traditional broadcast media.

Both broadcasters and the public have First Amendment rights

that must be balanced when the government seeks to regulate access

USCA Case #93-5351 Document #220942 Filed: 08/30/1996 Page 35 of 59
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

to the radio spectrum. Columbia Broadcasting Sys., Inc. v.

Democratic Nat'l Comm., 412 U.S. 94, 102-03, 110 (1973) ("DNC").

Nonetheless, the Supreme Court has held that "[i]t is the right of

the viewers and listeners, not the right of the broadcasters, which

is paramount.... It is the right of the public to receive suitable

access to social, political, esthetic, moral and other ideas and

experiences which is crucial here." Red Lion, 395 U.S. at 390;

accord DNC, 412 U.S. at 102. An essential goal of the First

Amendment is to achieve "the widest possible dissemination of

information from diverse and antagonistic sources." FCC v.

National Citizens Comm. for Broadcasting, 436 U.S. 775, 799 (1978)

("NCCB") (quoting Associated Press, 326 U.S. at 20). Broadcasting

regulations that affect speech have been upheld when they further

this First Amendment goal. For example, in NCCB, the Supreme Court

recognized that "efforts to enhance the volume and quality of

coverage of public issues through regulation of broadcasting may be

permissible where similar efforts to regulate the print media would

not be." Id. at 800 (internal quotation marks, citations, and

brackets omitted); see also CBS, Inc. v. FCC, 453 U.S. 367, 395

(1981) ("preserv[ation] [of] an uninhibited marketplace of ideas"

is proper consideration in imposing public interest obligations on

broadcasters); FCC v. League of Women Voters, 468 U.S. 364, 377

(1984) (Congress may "seek to assure that the public receives

through this medium a balanced presentation of information on

issues of public importance....").

The government asserts an interest in assuring public access

to diverse sources of information by requiring DBS operators to

USCA Case #93-5351 Document #220942 Filed: 08/30/1996 Page 36 of 59
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

reserve four to seven percent of their channel capacity for

noncommercial educational and informational programming. Indeed,

a stated policy of the 1992 Act is to "promote the availability to

the public of a diversity of views and information through cable

television and other video distribution media." 1992 Act, §

2(b)(1), 106 Stat. at 1463. This interest lies at the core of the

First Amendment: "Assuring that the public has access to a

multiplicity of informational sources is a governmental purpose of

the highest order, for it promotes values central to the First

Amendment." Turner, 114 S. Ct. at 2470.

While Time Warner does not dispute the validity of these

interests, it asserts that the government made no findings

regarding the need for channel set-asides on DBS. We have

recognized that "when trenching on first amendment interests, even

incidentally, the government must be able to adduce either

empirical support or at least sound reasoning on behalf of its

measures." Century Communications Corp. v. FCC, 835 F.2d 292, 304

(D.C. Cir. 1987), clarified, 837 F.2d 517 (D.C. Cir.), cert.

denied, 486 U.S. 1032 (1988). Nevertheless, while it is true that

Congress made no specific findings in support of section 25,

"Congress is not obligated, when enacting its statutes, to make a

record of the type that an administrative agency or court does to

accommodate judicial review." Turner, 114 S. Ct. at 2471

(plurality opinion); see also Sable Communications, 492 U.S. at

133 (Scalia, J., concurring) ("[n]either due process nor the First

Amendment requires legislation to be supported by committee

reports, floor debates, or even consideration, but only by a

USCA Case #93-5351 Document #220942 Filed: 08/30/1996 Page 37 of 59
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

vote"). Indeed,

[s]ound policymaking often requires legislators to

forecast future events and to anticipate the likely

impact of these events based on deductions and inferences

for which complete empirical support may be unavailable.

Turner, 114 S. Ct. at 2471 (plurality opinion).

In this instance, Congress could not have made DBS-specific

findings for the simple reason that no DBS system was in operation

at the time the 1992 Act was enacted. Congress had to base its

decision to require set-asides on its long experience with the

broadcast media. In 1967, when it enacted the Public Broadcasting

Act, Congress recognized that "the economic realities of commercial

broadcasting do not permit widespread commercial production and

distribution of educational and cultural programs which do not have

a mass audience appeal." H.R. REP. NO. 572, 90th Cong., 1st Sess.

10-11 (1967), reprinted in 1967 U.S.C.C.A.N. 1799, 1801. Congress

noted the same problem in 1989, when it established the National

Endowment for Children's Educational Television. See S. REP. NO.

66, 101st Cong., 2d Sess. 12 (1989), reprinted in 1990 U.S.C.C.A.N.

1628, 1639. As the Supreme Court has observed, since 1939, the

government has "recogniz[ed] the potential effect of ... commercial

pressures on educational stations" by reserving radio frequencies

and television channels for educational use. League of Women

Voters, 468 U.S. at 367.

Section 25, then, represents nothing more than a new

application of a well-settled government policy of ensuring public

access to noncommercial programming. The section achieves this

purpose by requiring DBS providers to reserve a small portion of

their channel capacity for such programs as a condition of their

USCA Case #93-5351 Document #220942 Filed: 08/30/1996 Page 38 of 59
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

being allowed to use a scarce public commodity. The set-aside

requirement of from four to seven percent of a provider's channel

capacity is hardly onerous, especially in light of the instruction,

in the Senate Report, that the FCC "consider the total channel

capacity of DBS systems operators" so that it may "subject DBS

systems with relatively large total channel capacity to a greater

reservation requirement than systems with relatively less total

capacity." S. REP. NO. 92, supra, at 92, reprinted in 1992

U.S.C.C.A.N. at 1225. Furthermore, a DBS provider "may utilize for

any purpose any unused channel capacity required to be reserved

under this subsection pending the actual use of such channel

capacity for noncommercial programming of an educational or

informational nature." 47 U.S.C. § 335(b)(2).

We note, further, that the government does not dictate the

specific content of the programming that DBS operators are required

to carry. What the Court in Turner found to be true with regard to

the must-carry rules is just as true for DBS:

The design and operation of the challenged provisions

confirm that the purposes underlying [their] enactment

... are unrelated to the content of speech. The rules

... do not require or prohibit the carriage of particular

ideas or points of view. They do not penalize [DBS]

operators or programmers because of the content of their

programming. They do not compel [DBS] operators to

affirm points of view with which they disagree. They do

not produce any net decrease in the amount of available

speech. And they leave [DBS] operators free to carry

whatever programming they wish on all channels not

subject to [the set-aside] requirements.

114 S. Ct. at 2461-62.

The Supreme Court found that Congress's "overriding objective

in enacting must-carry was not to favor programming of a particular

subject matter, viewpoint, or format, but rather to preserve access

USCA Case #93-5351 Document #220942 Filed: 08/30/1996 Page 39 of 59
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

to free television programming for ... Americans without cable."

Id. at 2461. Section 25 serves a similar objective; its purpose

and effect is to promote speech, not to restrict it. Cf. NCCB, 436

U.S. at 801-02. Because section 25 is "a reasonable means of

promoting the public interest in diversified mass communications,"

it does not violate the First Amendment rights of DBS providers.

See id. at 802.

VII

VERTICALLY INTEGRATED CABLE COMPANY PROVISIONS

Section 19 of the 1992 Act requires the Commission to

promulgate regulations to govern the conduct of vertically

integrated video programmersthat is, video programmers in which

cable operators have "an attributable interest." 47 U.S.C. §

548(c)(2). Time Warner challenges section 19's "program access"

provision, which requires the Commission to prohibit vertically

integrated video programmers from "discriminat[ing] ... in the

prices, terms, and conditions of sale or delivery of satellite

cable programming or satellite broadcast programming among or

between cable systems, cable operators, or other multichannel video

programming distributors, or their agents or buying groups." Id.

§ 548(c)(2)(B). Exempted from this provision are reasonable

requirements for creditworthiness, as well as price distinctions

resulting from either differences in cost or economies of scale.

Id. § 548(c)(2)(B)(i)-(iii). Time Warner also challenges section

19's restrictions on exclusive contracts between cable operators

and vertically integrated programmers, and between operators and

vertically integrated satellite broadcast vendors. For

USCA Case #93-5351 Document #220942 Filed: 08/30/1996 Page 40 of 59
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

geographical areas served by cable on the statute's effective date,

the Act bars exclusive contracts unless the Commission determines,

according to enumerated criteria, that the contract is in the

"public interest," id. § 548(c)(2)(D), (c)(4); for areas not

served by cable on that date, the Act prohibits exclusive contracts

altogether. Id. § 548(c)(2)(C). The district court upheld the

vertically integrated programming provisions, finding that they are

content-neutral and satisfy intermediate scrutiny. Daniels

Cablevision, 835 F. Supp. at 7.

We first address the appropriate level of scrutiny. As the

district court properly recognized, these provisions are

content-neutral on their face, regulating cable programmers and

operators on the basis of the "economics of ownership," a

characteristic unrelated to the content of speech. See id.

Relying primarily on Minneapolis Star & Tribune Co. v. Minnesota

Commissioner of Revenue, 460 U.S. 575 (1983), Time Warner argues

that both provisions should nonetheless be subject to strict

scrutiny because they target a small group of speakers. In

Minneapolis Star, the Supreme Court invalidated a state "sales and

use" tax scheme that excepted periodicals from the general sales

tax and that instead imposed a special "use tax" on paper and ink

used by periodicals. Because the state effectively gave each

publication an annual tax credit of $4,000, most periodicalsall

but fourteen of 388 in one year and sixteen of 374 the

followingpaid no tax. A single large publisher paid roughly

two-thirds of the total use-tax revenue. The Supreme Court

declared the scheme unconstitutional because it singled out the

USCA Case #93-5351 Document #220942 Filed: 08/30/1996 Page 41 of 59
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

press and in practical application targeted a small group of

newspapers.

In Turner, the Supreme Court distinguished the must-carry

provisions from the tax scheme in Minneapolis Star, noting that the

First Amendment does not "mandate[ ] strict scrutiny for [every]

speech regulation that applies to one medium (or a subset thereof)

but not others." Turner, 114 S. Ct. at 2468. As the Turner Court

explained, Minneapolis Star called for "heightened scrutiny"

because the Minnesota tax scheme was "structured in a manner that

raised suspicions that [its] objective was, in fact, the

suppression of certain ideas." Id. The Supreme Court's suspicion

that revenue was not the scheme's only goal, and thus that the

state aimed the tax at the speech of particular speakers, arose

because the state could easily have avoided differential taxation

for different newspapers by simply subjecting newspapers to the

general sales tax. See Minneapolis Star, 460 U.S. at 587-88.

Because the Turner Court had no such suspicions with respect to the

must-carry provisions, the Court declined to apply heightened

scrutiny, noting that "the differential treatment [was] "justified

by some special characteristic of' the particular medium being

regulated." Turner, 114 S. Ct. at 2468 (quoting Minneapolis Star,

460 U.S. at 585).

The vertically integrated programmer provisions at issue here

are likewise "justified by ... special characteristic[s]" of the

affected companies: both "the bottleneck monopoly power exercised

by cable operators," Turner, 114 S. Ct. at 2468, and the unique

power that vertically integrated companies have in the cable

USCA Case #93-5351 Document #220942 Filed: 08/30/1996 Page 42 of 59
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

market, see S. REP. NO. 92, supra, at 25-26, reprinted in 1992

U.S.C.C.A.N. at 1158-59. Unlike Minneapolis Star, where the state

had no constitutionally valid reason for limiting the general

revenue-raising statute to so few newspapers, the vertically

integrated programming provisions apply to only a limited number of

companies for a perfectly legitimate reason: the antitrust

concerns underlying the statute arise precisely because the number

of vertically integrated companies is small. The vertically

integrated programmer provisions are thus not "structured in a

manner that raise[s] suspicions that their objective was, in fact,

the suppression of certain ideas." Turner, 114 S. Ct. at 2468.

We thus apply intermediate scrutiny, sustaining the statute if

" "it furthers an important or substantial governmental interest;

if the governmental interest is unrelated to the suppression of

free expression; and if the incidental restriction on alleged

First Amendment freedoms is no greater than is essential to the

furtherance of that interest.' " Turner, 114 S. Ct. at 2469

(quoting O'Brien, 391 U.S. at 377). Like one of its interests in

the must-carry provision at issue in Turner, the government's

interest in regulating vertically integrated programmers and

operators is the promotion of fair competition in the video

marketplace. According to Turner, this goal both furthers an

important government interest and is unrelated to the suppression

of free expression. Turner, 114 S. Ct. at 2469.

Time Warner contends that these provisions are not "narrowly

tailored" since they prohibit vertically integrated programmers

from favoring, or entering into exclusive contracts with, even

USCA Case #93-5351 Document #220942 Filed: 08/30/1996 Page 43 of 59
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

non-affiliates. The Supreme Court has made clear, however, that to

satisfy O'Brien 's narrow-tailoring requirement, a statute need not

be the "least speech-restrictive means of advancing the

government's interests." Turner, 114 S. Ct. at 2469. Rather,

"[n]arrow tailoring in this context requires ... that the means

chosen ... not "burden substantially more speech than is necessary

to further the government's legitimate interest.' " Id. (quoting

Ward v. Rock Against Racism, 491 U.S. 781, 799 (1989)). Both the

"program access" provision and the prohibition against exclusive

contracts satisfy this standard. Without these provisions,

vertically integrated cable operators could favor their affiliates

to the disadvantage of other programmers by, for example, giving

affiliates preferred channel positions or refusing to carry

competitor non-affiliates altogether. See S. REP. NO. 92, supra, at

25-26, reprinted in 1992 U.S.C.C.A.N. at 1158-59. That these

provisions reach beyond Congress's goal does not mean that they

burden substantially more speech than necessary, the crucial factor

in whether a regulation satisfies "narrow tailoring," since they

merely restrict Time Warner's ability to contract freely with

non-affiliates. To be sure, because the ability to enter into

exclusive contracts could create economic incentives to invest in

the development of new programming, prohibiting such contracts

might result in reduced programmingthat is, less speech. See,

e.g., Bigelow Aff. WW 6, 7, 10. In our view, however, this link

between the ability to favor and to enter into exclusive contracts

with non-affiliatesthe alleged statutory overreachand any impact

on Time Warner's speech is simply too conjectural for us to

USCA Case #93-5351 Document #220942 Filed: 08/30/1996 Page 44 of 59
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

conclude in a facial challenge that the provisions burden

substantially more speech than necessary to achieve the

government's goal. Moreover, Congress considered Time Warner's

argument and concluded that the benefits of these provisionsthe

increased speech that would result from fairer competition in the

video programming marketplaceoutweighed the disadvantagesthe

possibility of reduced economic incentives to develop new

programming. See S. REP. NO. 92, supra, at 26-28, reprinted in 1992

U.S.C.C.A.N. at 1159-61. To accept Time Warner's argument and

therefore invalidate these provisions would thus require us to

reject Congress's policy conclusions and reassess the merits of

Time Warner's economic theories. This we decline to do. See Board

of Trustees v. Fox, 492 U.S. 469, 478 (1989) (courts should be

"loath to second-guess the government's judgment" on whether a

statute burdens substantially more speech than necessary). Given

the attenuated nature of the connection between the overreach of

these provisions and Time Warner's speech, we therefore conclude

that Time Warner has failed to show that the provisions burden

"substantially more speech" than necessary. For purposes of Time

Warner's facial challenge, the "program access" provision and the

prohibition against exclusive contracts thus satisfy the

intermediate scrutiny test's "narrow tailoring" requirement.

VIII

LIMITATIONS ON OWNERSHIP, CONTROL, AND UTILIZATION

Time Warner challenges three subsections of section 11(c) of

the 1992 Act: the "subscriber limitation," the "channel

occupancy," and the "program creation" provisions. Rather than

USCA Case #93-5351 Document #220942 Filed: 08/30/1996 Page 45 of 59
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

imposing any direct requirements on cable, these provisions either

require the Commission to promulgate regulations or authorize it to

consider the necessity of doing so. The "subscriber limitation"

provision requires the Commission to limit the number of cable

subscribers any one cable operator may reach. 47 U.S.C. §

533(f)(1)(A). The "channel occupancy" provision requires the

Commission to limit the number of channels that vertically

integrated programmers may occupy on affiliated cable systems. Id.

§ 533(f)(1)(B). The "program creation" provision directs the

Commission to "consider the necessity" of imposing limitations on

the degree to which cable distributors may "engage in the creation

and production of video programming." Id. § 533(f)(1)(C).

The Commission has promulgated regulations pursuant to the

"subscriber limitation" and "channel occupancy" provisions. See

Implementation of Sections 11 and 13 of the Cable Television

Consumer Protection and Competition Act of 1992: Horizontal and

Vertical Ownership Limits, 8 F.C.C.R. 8565, 8567 (1993) (second

report and order) (limiting each cable company to 30% of national

cable market and precluding vertically integrated operators from

having more than 40% of channels occupied by affiliated

programmers). Time Warner has challenged these regulations in a

direct appeal to this court in Time Warner Entertainment Co. v.

FCC, No. 94-1035, a case currently held in abeyance pending

Commission reconsideration. In the interest of judicial economy,

we consolidate this challenge to the constitutionality of these two

statutory provisions with the challenge to the regulations in No.

94-1035. When filing briefs in that case, both parties should

USCA Case #93-5351 Document #220942 Filed: 08/30/1996 Page 46 of 59
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

therefore address the constitutionality of the "subscriber

limitation" and "channel occupancy" provisions. At this point, we

express no opinion as to the constitutionality of either the

statute or the regulations.

Although the Commission "considered the necessity" of "program

creation" limits, it decided no such limits to be necessary at

present. 8 F.C.C.R. at 8567-68. Accordingly, Time Warner's

challenge to the "program creation" provision, which neither

regulates nor requires the Commission to regulate video

programming, is not ripe. Unless the Commission actually imposes

limitations, the challenge is not "fit for judicial decision," nor

will withholding court consideration cause any hardship to Time

Warner. See Abbott Labs., 387 U.S. at 149.

IX

MUNICIPAL IMMUNITY

Time Warner also challenges the section of the 1992 Act

limiting the remedies in suits against franchising authorities to

injunctive and declaratory relief. 47 U.S.C. § 555a(a). The

contention is that by prohibiting damages against municipalities,

this section prevents cable operators from protecting their First

Amendment rights and permits municipal licensing authorities to

censor the content of cable operators' speech.

Like the district court, we cannot understand how giving local

franchising authorities immunity from damages amounts to a direct

restriction on the speech of cable operators. Daniels Cablevision,

835 F. Supp. at 11. Depriving operators of a damage remedy does

not prevent them from showing whatever they please on their cable

USCA Case #93-5351 Document #220942 Filed: 08/30/1996 Page 47 of 59
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

5 Time Warner relies on the Senate version of the

legislation as evidence that Congress enacted municipal immunity

in order to disable cable operators from protecting their First

Amendment rights. The Senate version granted damages immunity

only to "any claim under the Civil Rights Acts asserting a

violation of First Amendment constitutional rights." S. 12, 102d

Cong., 1st Sess. § 13 (1991), reprinted in 137 CONG. REC. S587

(daily ed. Jan. 14, 1991); see also S. REP. NO. 92, supra, at

49, reprinted in 1992 U.S.C.C.A.N. at 1182. The Conference

Committee, however, deleted this section and replaced it with the

House language, which provided franchising authorities with

damages immunity in all actions regardless of their basis. H.R.

CONF. REP. NO. 862, 102 Cong., 2d Sess. 98-99 (1992), reprinted in

1992 U.S.C.C.A.N. 1231, 1280-81. Unlike the Senate version,

nothing on the face of the House version or its legislative

history displays discrimination against the speech of cable

operators. § 24, 106 Stat. at 1500; 138 CONG. REC. H6530 (daily

ed. July 23, 1992) (statement of Rep. Schumer). 

6 Although some of these provisions have been modified or

effectively repealed by the 1996 Act, §§ 301(b), (c), (e), (h),

systems. See Jones Intercable, Inc. v. City of Chula Vista, 80

F.3d 320, 325 (9th Cir. 1996). It may be that even a facially

speech-neutral provision will fall if it is enacted for the

manifest purpose of regulating speech because of its message.

Turner, 114 S. Ct. at 2461. But nothing of the sort stands behind

this legislation. So far as we can tell, Congress gave local

franchising authorities protection in order to insulate their

decisionmaking from the threats of suits for damages brought by

disappointed cable operators. See 138 CONG. REC. H6530 (daily ed.

July 23, 1992) (statement of Rep. Schumer).5 The Cable Acts

contain extensive restrictions on the discretion of local

authorities to award franchises. See, e.g., 47 U.S.C. §§ 541

(General Franchise Requirements), 542 (Franchise Fees), 543

(Regulation of Rates), 544 (Regulation of Services, Facilities, and

Equipment), 545 (Modification of Franchise Obligations), 546

(Renewal), 547 (Conditions of Sale).6 And as the district court

USCA Case #93-5351 Document #220942 Filed: 08/30/1996 Page 48 of 59
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

(j), 303, 304, 110 Stat. at 115-18, 124-25, they still represent

a sufficient limit on the franchising authorities' discretion to

comport with the First Amendment. 

held, the declaratory and injunctive relief still permitted under

section 24 enables cable operators to protect their First Amendment

rights against any improper actions by franchising authorities.

Daniels Cablevision, 835 F. Supp. at 11; see also Jones

Intercable, 80 F.3d at 326-27 (citing Bush v. Lucas, 462 U.S. 367,

388 (1983)).

X

OBSCENITY LIABILITY

We agree with the district court that the 1992 Act's

revocation of cable operators' immunity from liability for obscene

programming carried on PEG or leased access channels does not

violate the First Amendment. § 10(d), 106 Stat. at 1486 (codified

at 47 U.S.C. § 558). Section 10(d) merely imposes upon cable

operators the same responsibility that others face. As the

district court pointed out, "no speakerscable operators

includedhave a constitutional right to immunity" from obscenity

liability. Daniels Cablevision, 835 F. Supp. at 11 (emphasis in

original); see also Sable Communications, 492 U.S. at 124-25.

Although the 1984 Act initially made cable operators immune from

any liability for obscene programming carried on PEG or leased

access channels, 1984 Act, § 2, 98 Stat. at 2801, "Congress'

earlier decision to provide cable operators with immunity was a

matter of grace that it has always been free to rescind." Daniels

Cablevision, 835 F. Supp. at 11. Cable operators at times may find

it difficult to determine which programs are obscene. However,

USCA Case #93-5351 Document #220942 Filed: 08/30/1996 Page 49 of 59
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

7 By upholding section 10(a) of the 1992 Act, the Supreme

Court's judgment in Denver permitted cable operators to prohibit

the transmission of obscene (as well as indecent) programming on

leased access channels. See 116 S. Ct. at 2382-90 (plurality

opinion); id. at 2422-25 (opinion of Thomas, J., joined by

Rehnquist, C.J., and Scalia, J.). The Court's judgment struck

down section 10(c), which authorized operators to exert similar

control over PEG channels. But the judgment appeared to rest on

the principle that indecent material, unlike obscenity, is

entitled to some measure of constitutional protection. Section

10(d), of course, deals only with obscene programming. See id.

at 2428 n.14 (opinion of Thomas, J., joined by Rehnquist, C.J., &

Scalia, J.). 

such difficulties arise whenever the government regulates obscene

materials; they are insufficient to render an antiobscenity law

unconstitutional. Fort Wayne Books, Inc. v. Indiana, 489 U.S. 46,

60 (1989); Denver, 116 S. Ct. at 2390 (plurality opinion).

Time Warner complains that section 10(d) makes cable operators

liable for programming the Cable Acts force them to carry. But

section 506 of the 1996 Act amended 47 U.S.C. §§ 531(e) and

532(c)(2) to provide explicitly that cable operators may refuse to

transmit obscene material on leased access and PEG channels. 1996

Act, § 506, 110 Stat. at 136-37 (to be codified at 47 U.S.C. §§

531(e), 532(c)(2)). The constitutionality of section 506 is not

before us, nor could it be. Constitutional challenges to the 1996

Act must be heard by three-judge district courts in accordance with

28 U.S.C. § 2284. See 1996 Act, § 561, 110 Stat. at 142-43. We

therefore shall assume the validity of section 506. Because cable

operators may, under that provision, refuse to transmit obscenity

on PEG and leased access channels, section 10(d)'s revocation of

cable operators' obscenity immunity does not make them liable for

programming they are forced to carry.7

XI

USCA Case #93-5351 Document #220942 Filed: 08/30/1996 Page 50 of 59
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

PREMIUM CHANNEL NOTICE PROVISION

Premium channels are offered only to those who sign up and

agree to pay the extra fee. All other subscribers receive a

scrambled signal on the premium channel. As a marketing technique,

some cable systems provide free access to a premium channel for a

limited time. During the free preview period, all cable

subscribers receive the premium channel. Section 15 of the 1992

Act requires operators to give their subscribers thirty days notice

before offering free previews of premium channelsdefined as "any

pay service offered on a per channel or per program basis, which

offers movies rated by the Motion Picture Association of America as

X, NC-17 or R"and requires operators to block any preview if the

subscriber so requests. 47 U.S.C. § 544(d)(3)(A). The district

court struck down section 15 on the ground that it constituted a

content-based restriction of speech. Daniels Cablevision, 835 F.

Supp. at 9-10.

Exactly why the court treated the premium channel notice

provision as a restriction on speech is unclear. Nothing in

section 15 prohibits a cable operator from running any program a

subscriber desires. The provision simply requires operators to

disclose certain information before offering free previews of

premium channels, information that enables parents to decide

whether they and their children should tune in. See Meese v.

Keene, 481 U.S. 465, 480-81 (1987). If it is constitutionally

permissible to require foreign agents to inform American viewers

that movies made by foreign governments are "political propaganda,"

and Meese v. Keene held that it is, it is permissible to require a

USCA Case #93-5351 Document #220942 Filed: 08/30/1996 Page 51 of 59
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

cable operator to disclose to potential viewers that the premium

channel it will be providing free of charge shows movies rated X,

NC-17, or R.

Parents have a right to control what comes into their homes

and what thus becomes available to their children. Rowan v. Post

Office Dep't, 397 U.S. 728, 736-37 (1970). And the government has

a substantial interest in facilitating their ability to do so.

Sable Communications, 492 U.S. at 126. Advance notice of free

previews allows parents to decide if they will allow this type of

programming to appear on their television screens. See FCC v.

Pacifica Foundation, 438 U.S. 726, 748-49 (1978). In fact, the

premium channel notice provision imposes less of a burden than the

safe-harbor restriction upheld in Pacifica, 438 U.S. at 732. The

district court thought that section 15's thirty day notice

requirement would make previews "less practicable and more costly."

Daniels Cablevision, 835 F. Supp. at 9. But operators already

communicate with their subscribers on a monthly basis through

billing, and the increased costs associated with the advance notice

cannot be significant.

The district court also faulted section 15 for its use of the

Motion Picture Association's rating system. Daniels Cablevision,

835 F. Supp. at 9. There is no doubt that these ratings do not

measure which movies are constitutionally protected and which are

not. See, e.g., Gascoe, Ltd. v. Newtown Township, 699 F. Supp.

1092, 1096 (E.D. Pa. 1988); Motion Picture Ass'n v. Specter, 315

F. Supp. 824 (E.D. Pa. 1970). But there is also no doubt that the

ratings supply useful and important information to parents, and to

USCA Case #93-5351 Document #220942 Filed: 08/30/1996 Page 52 of 59
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

their children, about what to expect. We are dealing with a

disclosure statute, not a direct restriction on speech. See Borger

ex rel. Borger v. Bisciglia, 888 F. Supp. 97, 100-01 (E.D. Wis.

1995); Krizek v. Board of Educ., 713 F. Supp. 1131, 1139 (N.D.

Ill. 1989). The adults in the household still retain the ultimate

say; they alone decide whether to accept the free previews into

their home.

Time Warner suggests, as did the district court, that

"lockboxes" constitute a less intrusive and equally effective

method of protecting children. Daniels Cablevision, 835 F. Supp.

at 10; Reply Brief for Appellants at 38. But this would be so

only if parents who had lockboxesnot all doknew in advance what

sort of programs may be carried on a premium channel to which they

do not subscribe. Pacifica, 438 U.S. at 748-49. Otherwise, why

would anyone bother to place a lockbox in operation? For parents

to make an informed judgment about which course to follow, and

when, they must have information in advance, which is what section

15 gives them. Denver, 116 S. Ct. at 2393 (reasoning that

informational requirements are a more appropriate complement to

lockboxes than segregation and blocking requirements).

Time Warner also believes that annual notice would be

sufficient to enable parents to make appropriate choices on behalf

of their children. We cannot see how. It must be the rare family

indeed that plans its television viewing one year in advance.

Annual notice also disregards the possibility that programming

inappropriate for a child today might well be appropriate for that

same child sometime later. Thirty days notice would allow parents

USCA Case #93-5351 Document #220942 Filed: 08/30/1996 Page 53 of 59
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

to evaluate the appropriateness of a preview without having to

speculate about their children's level of maturity up to one year

in the future. Requiring only annual notice would also unduly

restrict the ability of programmers to adjust their preview

schedule to their business needs and the changing desires of the

viewing public. Providing only annual notice would, in short, work

to the disadvantage of both speakers and listeners.

* * *

In summary, we sustain the constitutionality of sections 611

and 612 of the 1984 Act and sections 3, 10(d), 15, 19, 24, and 25

of the 1992 Act. We hold unripe the challenge to section 11(c)'s

program creation provision and consolidate the remaining challenges

to section 11(c) with Time Warner Entertainment Co. v. FCC, No. 94-

1035.

So ordered.

TATEL, Circuit Judge, dissenting in part: I concur in all of

the court's opinion except Part XI which upholds section 15 of the

1992 Cable Act, the Premium Channel Notice Provision. I agree that

the government has a compelling interest in protecting children.

See Maj. op. at 42; see also Denver Area Educ. Telecommunications

Consortium, Inc. v. FCC, 116 S. Ct. 2374, 2387 (1996). But because

I do not believe we can sustain the statute's constitutionality on

this record, I respectfully dissent.

Section 15 plainly discriminates among programmers based

solely on the content of their speech. While operators must

provide thirty days advance notice to all subscribers when offering

USCA Case #93-5351 Document #220942 Filed: 08/30/1996 Page 54 of 59
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

free previews of "pay service" channels carrying movies rated R,

NC-17, or Xa rating system based solely on the movies'

contentthey need not provide such notice when offering free

previews of pay channels not carrying such movies. The court does

not dispute this.

Nor could the court deny that section 15 is patently overbroad

and underinclusive, and probably does not even accomplish its

intended goalall defects with significant First Amendment

implications:

! Section 15 is overbroad because it requires notice to even those

customers already subscribing to the premium channel, as well

as notice every time a premium channel seeks to show a free

preview, even a preview with no movies rated R, NC-17, or X.

Section 15 would thus require a cable operator offering a free

preview of Snow White and the Seven Dwarfs on a "premium

channel" to give thirty days advance notice.

! Section 15 is underinclusive because it covers only "pay service"

channels, not other stations seeking to show the same movies,

see Daniels Cablevision, 835 F. Supp. at 9, and it does not

apply to indecent programming not rated by the MPAA, id. at 9

n.16; see also Denver, 116 S. Ct. at 

2392 (noting "patently offensive" programming found on

both leased access and non-leased access cable channels);

In the Matter of Enforcement of Prohibitions Against the

Use of Common Carriers for the Transmission of Obscene

Materials, 2 F.C.C.R. 2819, 2820 (1987) (noting that

"non-MPAA member companies ... are not required to have

their movies rated" and that "the lack of a rating bears

no relationship to the content of a film" (internal

quotations omitted)).

! Because section 15 does not require operators to inform

subscribers that the term "premium channel" is defined as a

channel that shows movies rated R, NC-17, or X, the statute

only marginally furthers the government's stated interest of

warning parents about indecent programming. See 47 U.S.C. §

544(d)(3)(A)(i) (requiring notice that operator will provide

premium channel free preview); § 544(d)(3)(A)(ii) (requiring

notice of when it will offer the free preview); §

544(d)(3)(A)(iii) (requiring notice of customers' right to

block). Subscribers unaware that "premium channels" show such

movies would thus not have the very information the government

believes to be so valuable, that the free preview may include

USCA Case #93-5351 Document #220942 Filed: 08/30/1996 Page 55 of 59
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

materials inappropriate for their children. The Government

acknowledges this statutory flaw, stating in its brief that

section 15 "simply requires advance notice; the operator is

free to describe in any way the programming that is to be

previewed free of charge." Opening Brief for the FCC and the

United States at 66 n.21.

Section 15 thus "does not reveal the caution and care" First

Amendment jurisprudence requires. Denver, 116 S. Ct. at 2392.

Were the court to engage in ordinary First Amendment analysis, I

have little doubt it would be hard-pressed to uphold section 15

under either strict scrutiny, Sable Communications of Cal., Inc. v.

FCC, 492 U.S. 115, 126 (1989) (requiring that content-based statute

be "least restrictive means to further the articulated interest"),

or even the "close judicial scrutiny" standard endorsed by four

Justices in Denver, 116 S. Ct. at 2378 (plurality opinion)

(invalidating statute if it imposes "unnecessarily great

restriction on speech").

The court, however, sidesteps the free expression issues in

this case, concluding that because "[n]othing in section 15

prohibits a cable operator from running any program a subscriber

desires," Maj. op. at 42, the statute does not restrict speech. To

arrive at this conclusion, the court assumes that "the increased

costs associated with the advance notice cannot be significant."

Maj. op. at 43. Yet the record contains abundant uncontroverted

evidence that the costs of notice are not only significant, but

also so prohibitive as to make free previews financially

impractical. According to the President of Time Warner's Austin

Division, for example, "because of the requirements of the 1992

Cable Act regarding free previews, the Austin Division has

discontinued all previews of premium services that offer movies

USCA Case #93-5351 Document #220942 Filed: 08/30/1996 Page 56 of 59
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

rated by the Motion Picture Association of America as X, NC-17[,]

or R." Rutledge Aff. ¶ 3. Time Warner's San Diego Division

President stated that "[t]he notice, which takes the form of a bill

insert, has a cost of between .02¢.03¢ per subscriber, depending

on the number of other bill inserts included in a given month, or

a total of between $3,240.00$4,860.00." Burr Aff. ¶ 3. See also

Bewkes Aff. ¶ 7; Collins Aff. ¶ 39; Hanson Aff. WW 4-5; High

Aff. ¶ 3-4; Mitchell Aff. WW 3-4; Sharrard Aff. ¶ 2. Thus, the

court ignores both the record and, contrary to Supreme Court

precedent, the statute's practical effects. See FEC v.

Massachusetts Citizens for Life, Inc., 479 U.S. 238, 255 (1986)

(plurality opinion) ("The fact that [a] statute's practical effect

may be to discourage protected speech is sufficient to characterize

[it] as an infringement on First Amendment activities."); American

Communications Ass'n v. Douds, 339 U.S. 382, 402 (1950) ("[T]he

fact that no direct restraint or punishment is imposed upon speech

... does not determine the free speech question."). The court

overlooks "a notion so engrained in ... First Amendment

jurisprudence that ... [the Supreme Court] found it so "obvious' as

to not require explanation": "A statute is presumptively

inconsistent with the First Amendment if it imposes a financial

burden on speakers because of the content of their speech." Simon

& Schuster, Inc. v. Members of the N.Y. State Crime Victims Bd.,

502 U.S. 105, 115-16 (quoting Leathers v. Medlock, 499 U.S. 439,

447 (1991)).

The court relies on Meese v. Keene, 481 U.S. 465, 480-81

(1987), for the proposition that "disclosure" statutes do not

USCA Case #93-5351 Document #220942 Filed: 08/30/1996 Page 57 of 59
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

burden speech. In my view, Keene does not so hold. The Supreme

Court has long subjected disclosure statutes to serious First

Amendment scrutiny. See, e.g., Riley v. National Fed'n of the

Blind, 487 U.S. 781, 798 (1988) (subjecting to "exacting First

Amendment scrutiny" statute that required professional fundraisers

to disclose to potential donors percentage of charitable

contributions actually turned over to charity); Buckley v. Valeo,

424 U.S. 1, 64 (1976) ("[W]e have repeatedly found that compelled

disclosure, in itself, can seriously infringe on ... the First

Amendment."). Moreover, Keene did not involve the

constitutionality of disclosure requirements. See Keene, 481 U.S.

at 467. Keene's sole issue was the constitutionality of Congress's

use of the term "political propaganda" in a statute requiring the

labeling of certain films. The Supreme Court simply held that the

"mere designation" of a film as "political propaganda" does not

pose any "obstacle" to speech, and thus "places no burden on

protected expression." Id. at 480. Keene would be relevant here,

as might the Supreme Court's approving reference in Denver to

"informational requirements," only if section 15 required merely

the designation of programs as R, NC-17, or X, either at the time

of showing or in some other way that did not burden speech. But

section 15 goes beyond requiring labeling. Here we have

uncontroverted evidence that by requiring thirty days advance

notice, section 15 creates an obstacle to the exercise of free

expression by imposing a financial burden on speech, see Simon &

Schuster, 502 U.S. at 115a burden so great as to make certain

speech, solely because of its content, financially impractical.

USCA Case #93-5351 Document #220942 Filed: 08/30/1996 Page 58 of 59
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

Although I dissent from the court's conclusion that the notice

requirement does not burden speech, I do not believe the district

court should have granted Time Warner summary judgment without

affording the Government an opportunity for further discovery. The

district court concluded that "[t]he notice requirements make

carriage of free previews less practicable and more costly."

Daniels, 835 F. Supp. at 9. Given the uncontroverted factual record

before it, this conclusion was reasonable. But the Government

treated Time Warner's affidavits as "going only to support

plaintiffs' claims of injury for purposes of establishing

jurisdiction," Sitcov Decl. ¶ 3, properly requesting further

discovery pursuant to Federal Rule of Civil Procedure 56(f) were

the district court to treat any of Time Warner's evidence as

relevant to the merits of the case. See id. ¶ 4. I would

therefore remand for further development of the record on the

factual question of whether section 15 imposes financial burdens on

Time Warner's speech.

USCA Case #93-5351 Document #220942 Filed: 08/30/1996 Page 59 of 59