Source: http://www.leagle.com/decision/19811464644F2d820_11327/NATIONAL%20SUBSCRIPTION%20TELEVISION%20v.%20S%20&%20H%20TV
Timestamp: 2017-03-27 20:27:48
Document Index: 32917176

Matched Legal Cases: ['§ 605', 'art 73', 'art 73', 'art 73', '§ 605', 'art 73', '§ 73', '§ 605', 'art 73']

NATIONAL SUBSCRIPTION TELEVISION v. S & H TV | 644 F.2d 820 (1981) | Leagle.com
644 F.2d
644 F.2d 820 (1981)
NATIONAL SUBSCRIPTION TELEVISION v. S & H TV
NATIONAL SUBSCRIPTION TELEVISION, and Oak Broadcasting Systems, Inc., Plaintiffs-Appellants,
S & H TV, JKL Electronics, Jon Karl Larson, R & R Associates, Richard L. Rathburn, Richard Rath, JK Electronics, Jacqueline M. Kennedy, Kenneth J. Kennedy, SCR Electronics, Stephen Robbins, J & R Electronics, V. DeFrancisco, Video Movie House, Rich Minard, and Maury Goldstein, Defendants-Appellees.
Argued and Submitted January 9, 1981.
Before TRASK and SCHROEDER, Circuit Judges, and CARROLL, District Judge.
Appellant National Subscription Television (NST) owns a subscription television (STV) service marketed under the name of "ON-TV." Appellant Oak Broadcasting Systems, Inc. is licensed to broadcast television signals in the Los Angeles area over UHF Channel 52. During certain hours of every day, Oak Broadcasting leases its transmission facilities to NST for use in transmitting ON-TV programs. NST transmits an encoded visual signal which is received in scrambled form by every television set in the area. Reception adequate for viewing, however, is obtained only by sets equipped with special decoding devices which are leased by NST to paying subscribers. The audio signal is transmitted on a special sub-frequency carrier and is received only by individuals who have special NST equipment. The decoders enable NST to monitor viewing of its programs and to generate monthly billings for subscribers.
NST and Oak Broadcasting filed a claim against appellees for injunctive and damage relief pursuant to section 605 of the Federal Communications Act (the Act), 47 U.S.C. § 605, which generally prohibits the unauthorized interception and divulging, or aid thereto, of radio communications.1 They also filed various state claims. The district court dismissed the section 605 claim under Fed.R.Civ.P. 12(b)(6). In its view, NST's signals were unprotected by 605 by virtue of the proviso to that section: "This section [605] shall not apply to the receiving, divulging, publishing or utilizing the contents of any radio communication which is broadcast or transmitted by amateurs or others for the use of the general public, or which relates to ships in distress."
"[A] complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-102, 2 L.Ed.2d 80 (1957) (footnote omitted); accord Experimental Engineering, Inc. v. United Technologies Corp., 614 F.2d 1244, 1246 (9th Cir. 1980); 2A Moore's Fed.Prac. para. 12.08, at 2271, 2275 (2d ed. 1980). The issue before us, then, is whether appellants' signals are "broadcast ... for the use of the general public" within the meaning of the proviso to section 605. If so, then as a matter of law appellants cannot avail themselves of the protections contained in section 605, and dismissal of their complaint under Rule 12 was proper.
The Orth-O-Vision opinion relies for its result on two prior cases, Functional Music, Inc. v. FCC, 274 F.2d 543 (D.C. Cir. 1958), cert. denied, 361 U.S. 813, 80 S.Ct. 50, 4 L.Ed.2d 81 (1959), and In the Matter of Amendment of Part 73 of the Commission's Rules and Regulations (Radio Broadcast Services) to Provide for Subscription Television Service, 3 F.C.C.2d 1 (1966) [hereinafter cited as In re Amendment of Part 73]. In Functional Music, Inc. v. FCC, supra, a radio station sought review of an FCC determination that the station's subscription music service was not 153(o) broadcasting, and thus was not properly disseminated by a general broadcasting licensee. Subscribers received the same musical programming as that transmitted by the station to the public-at-large, but were also given special equipment which enabled them to delete all advertising and promotional material from the transmissions. The court reversed the FCC's determination:
[P]rogram specialization and/or control is not necessarily determinative of [section 153(o)] intent .... Broadcasting remains broadcasting even though a segment of those capable of receiving the broadcast signal are equipped to delete a portion of that signal. [F]unctional programming can be, and is, of interest to the general radio audience.
In In re Amendment of Part 73, supra, the FCC held that STV transmitting constitutes broadcasting within the meaning of section 153(o), and, therefore, is properly transmitted by an FCC broadcasting licensee. 3 F.C.C.2d at 8-10. The commission rejected the argument that restriction of signal reception to those willing to pay the transmitter is not 153(o) broadcasting:
The evident intention of any station transmitting subscription programs would be to make them available to all members of the public within range of the station .... [T]he primary touchstone of a broadcast service is the intent of the broadcaster to provide radio or television service without discrimination to as many members of the general public as can be interested in the particular program as distinguished from a point-to-point message service to specified individuals .... "[I]ntent" may be inferred from the circumstances under which material is transmitted, and the number of actual or potential viewers is not especially important.
The most recent decision in this area is Chartwell Communications Group v. Westbrook, 637 F.2d 459 (6th Cir. 1980) and United States v. Westbrook, 502 F.Supp. 588 (E.D.Mich. 1980). On facts identical to those in the case before us, the court held that STV is not broadcast for the use of the general public within the language of the proviso and, therefore, is protected by section 605. 637 F.2d at 465-67, 502 F.Supp. at 590-92.
We find it unnecessary to review the FCC determination because we conclude that section 153(o) does not control the reach of the proviso. See Chartwell Communications Group v. Westbrook, supra, 637 F.2d at 464-65. The proviso does not remove all broadcasting from the protection of section 605, but only communications broadcast "for the use of the general public." See 47 U.S.C. § 605. We think that an individual might "broadcast" — i. e., transmit a signal over the airwaves with the intent that it be received by the public within the meaning of section 153(o) — without such broadcasting being for the use of the public within the meaning of the proviso. For example, the operator of an STV service offers his product to any member of the public willing to pay the subscription price. Like any entrepreneur, the STV operator hopes that his product becomes popular and is subscribed to by most, if not all, of the public. Thus, the programming of STV is calculated to attract the largest possible audience, and the method of transmitting STV is premised on being able to accommodate widespread demand. It is in this sense that STV is "intended to be received by the public" — i. e., "broadcast" — under section 153(o). See generally In re Amendment of Part 73, supra. See also Functional Music, Inc. v. FCC, supra.
Nevertheless, it does not follow that STV is "broadcast ... for the use of the general public" within the meaning of the proviso. Indeed, the manner in which STV operators such as NST attempt to control their signals suggests the opposite. The visual signal is useless and the audio signal not receivable without special equipment supplied by the operator. Moreover, without the capability of monitoring program viewing through use of such equipment, it is doubtful that any STV operation can survive as a viable commercial enterprise. We conclude, therefore, that STV operators such as NST broadcast their programming, not for the use of anyone who is somehow able to receive their signals, but only for the use of paying subscribers. Chartwell Communications Group v. Westbrook, supra, 637 F.2d at 465-67 (relying in part on FCC Staff Report on Policies for Regulation of Direct Broadcast Satellites 124 n.17 (Sept. 1980) [hereinafter cited as FCC Staff Report]5); cf. KMLA Broadcasting Corp. v. 20th Century Cigarette Vendors Corp., supra, 264 F.Supp. at 42 (use of special receiving equipment evidences radio broadcaster's intent to broadcast for use of subscribers only). We reject the reasoning of Orth-O-Vision, Inc. v. HBO, supra, to the extent that it is inconsistent with this holding.
Appellees' actions also run counter to an FCC consumer protection policy. FCC regulations require that STV operations lease (rather than sell) decoders to subscribers. Over-the-Air Subscription Television Operations — Licensing Policies, 47 C.F.R. § 73.642(f)(3) (Oct. 1, 1979).7 Appellees' sales of unauthorized decoders implicate this policy no less than would sales of authorized decoders by NST itself.
FootNotes * Honorable Earl H. Carroll, United States District Judge for the District of Arizona, sitting by designation.
1. Section 605 reads in relevant part: "No person not being authorized by the sender shall intercept any radio communication and divulge or publish the existence, contents, substance, purport, effect, or meaning of such intercepted communication to any person." 47 U.S.C. § 605. "Radio communication" as used in the Act has been construed to include television transmissions. See, e. g., Allen B. DuMont Laboratories v. Carroll, 184 F.2d 153, 155 (3d Cir. 1950), cert. denied, 340 U.S. 929, 71 S.Ct. 490, 95 L.Ed. 670 (1951). The courts have long recognized the existence of a private right of action under section 605. E. g., Reitmeister v. Reitmeister, 162 F.2d 691, 694 (2d Cir. 1947); see Chartwell Communications Group v. Westbrook, 637 F.2d 459, 466 & n.5 (6th Cir. 1980); Orth-O-Vision, Inc. v. Home Box Office (HBO), 474 F.Supp. 672, 681 & n.8 (S.D.N.Y.1979).
2. The court also relied on its determination that the service was a "special interest" transmission excluded by the FCC from section 153(o), because only stores, restaurants, offices and the like would be interested in the service, and on its observation that a different regulatory scheme existed for subscription services than for additional radio broadcasting.
3. This kind of transmission system transmits the television signal on a microwave frequency to various fixed receivers, which then convert the signal to a standard frequency and feed it by cable to paying subscribers.
4. On the contrary, the court concluded that the evidence showed HBO programming to have been designed to appeal to just such an audience. 474 F.Supp. at 682.
5. Note 17 reads in relevant part:
In reaching its conclusion [in In re Amendment of Part 73, supra,] that STV is broadcasting, the Commission stated that it regarded a [broadcasting] licensee's "intent to provide a radio or television service without discrimination to as many members of the general public as can be interested in the programs" as of primary importance to its determination. However, this conclusion appears to ignore the fact that, although a licensee's overall service (including adaptor, decoder, or converter) may be offered to the public generally, nevertheless, his actual radio transmissions, by themselves, may not be intended for general public reception. Moreover, a determination as to the latter issue would appear to be relevant to the applicability of Section 605 of the Act, and the Commission has not directly addressed the status of STV under this statutory provision.... Based upon its recognition of their "point-to-point" service characteristics, the Commission has concluded that FM radio and MDS subscription programming services are within the purview of Section 605. It also seems clear that there is no distinguishing factor that would justify the exclusion of STV programming, but not the subscription programming transmitted by other licensees, from the protection afforded by Section 605. For example, it is apparent that the conduct of FM subscription radio transmissions is not more "private" than STV transmissions and is not for that reason more entitled to Section 605 protection. Although many types of subscription radio services are highly specialized, they are not inherently confidential in nature. Indeed, as one court has noted, Section 605 was intended to protect persons from having their communications received by those not entitled to receive them, and STV operators can only operate their businesses if they can restrict viewers to paying subscribers.
6. Appellees cite language from Cable Vision, Inc. v. KUTV, Inc., 335 F.2d 348 (9th Cir. 1964), cert. denied, 379 U.S. 989, 85 S.Ct. 700, 13 L.Ed.2d 609 (1965), for the proposition that policy considerations should not determine whether NST's transmissions are protected by section 605:
[T]he courts are not charged by our constitutional system as arbiters of good policy. That function is reserved to Congress. In short, while it makes an appealing picture to see courts and administrative agencies hand in hand redeeming national communications policy, the fact remains that it is not the proper function of courts to do so.
7. The rationale is that subscribers are thereby protected from the danger of investing a large sum of money in a device which is likely to become technologically obsolete in a relatively short period of time. Another justification for the policy is that leasing gives consumers added flexibility and encourages competition among STV companies. Under typical leasing arrangements, a subscriber may cancel his STV service at any time at no cost to himself. When decoders have been purchased, however, it is thought that the large sunk cost that they represent might deter such action. Because decoders are not interchangeable between systems, the consumer who has purchased a decoder might consider himself "locked-in" to one STV system because of the purchase. (This, however, is contrary to contemporary economic theory, which maintains that current consumption choices are unaffected by sunk costs.) See generally Kelman, Consumption Theory, Production Theory, and Ideology in the Coase Theorem, 52 S.Cal.L.Rev. 669, 691-93 (1979).