Opinion ID: 395227
Heading Depth: 1
Heading Rank: 2

Heading: The Second Injunction

Text: 8 The 90-day moratorium had expired by the time of our decision in Boulder I, so the City enacted emergency ordinances on June 3 and June 24 placing further temporary restrictions on CCC's expansion in Boulder while the City considered its alternatives. By this time, three companies besides CCC had submitted proposals to provide cable services to Boulder. However, these other companies, including Boulder Communications Company, indicated they would not accept a permit in any area where CCC had authority to string cable. 9 The City concluded that direct competition in Boulder between cable companies within the same geographic area will not be possible in the foreseeable future. It settled on districting as the best practicable alternative. Under the City's plan, CCC will be restricted to servicing a single district comprising approximately one-third of the City's population. One or more cable companies will be granted permits to service other districts within Boulder. The City believes that although it cannot have direct competition, the districting plan will at least provide comparison. That is, by having more than one cable company operating in Boulder, the City will have a comparative basis for evaluating permit renewal applications. The City also believes that districting will achieve diversity of cable communications, especially if interconnection is required among cable systems whereby each cable company would make available to its subscribers some portion of the programming carried by other cable companies. In sum, through districting the City hopes to provide for its citizens multi-purpose, state-of-the-art cable communication services, including, for example, not only extensive programming but also two-way communications through the cable system. 10 To begin implementing its districting plan, the City enacted Ordinance No. 4515, see note 1 supra, which partially revoked CCC's long-standing permit and replaced it with a permanent geographic limitation on CCC's authority to operate a cable system in Boulder. CCC responded by filing a second motion with the district court for a preliminary injunction. The City cross-moved to enjoin CCC from violating the limitations of the new ordinance. 11 The district court denied the City's motion and granted another preliminary injunction in favor of CCC, reasoning that the cable company had demonstrated irreparable harm and a reasonable probability of success on the merits of both its Sherman Act and First Amendment claims. See Community Communications Co. v. City of Boulder, 496 F.Supp. 823 (D.Colo.1980) (Boulder II). On appeal, the City challenges the trial court's reasoning on both grounds. 12 As an initial matter, we note that the cable broadcasting industry has a prior history of federal, state, and local regulation. See, e. g., Besen, The Deregulation of Cable Television, 44 Law & Contemp. Prob. 79 (1981); Comment, Technology Meets Bureaucracy, The FCC's Policy for Two-Way Television, 31 Fed.Com.L.J. 413 (1979). Generally, regulation has been premised upon cable companies' need to use public streets and rights of way to lay or string their cable. Local regulation has commonly taken the form of licensing or franchising cable companies. See generally Albert, The Federal and Local Regulation of Cable Television, 48 Univ.Colo.L.Rev. 501, 508-13 (1977). The question in the present case is whether the City has gone too far under either the antitrust laws or the First Amendment in its efforts to regulate CCC's cable operations.
13 To the extent the lower court grounded its order on the Sherman Act claim, it is in error. In Boulder I, we reversed the district court's earlier grant of an injunction because we held the City immune from antitrust liability for its action in placing a moratorium on CCC's expansion. 4 The reasoning of Boulder I applies here as well. That the geographic restriction is now a permanent one, rather than a 90-day one, does not alter the applicability of the Parker-Midcal doctrine discussed at length in Boulder I. See 630 F.2d at 707-08. The districting program remains a clearly expressed act of government; active supervision and enforcement is being pursued. See California Retail Liquor Dealers Association v. Midcal Aluminum, Inc., 445 U.S. 97, 100 S.Ct. 937, 63 L.Ed.2d 233 (1980). 14 The district court reasoned that actively supervised under Midcal, id. at 105, 100 S.Ct. at 943, means the City must take control of the future of cable television in Boulder in a manner which is actually proprietary. Boulder II, 496 F.Supp. at 828 (emphasis added). The district court concluded, therefore, that the City is not entitled to antitrust immunity under our reading of City of Lafayette v. Louisiana Power & Light Co., 435 U.S. 389, 98 S.Ct. 1123, 55 L.Ed.2d 364 (1978). See Boulder I, 630 F.2d at 708 (antitrust immunity not extended in Lafayette to government acting in proprietary fashion). The district court's reasoning is flawed because if active supervision is to be equated with proprietary action, governmental antitrust immunity could never exist.
15 CCC contends that the districting ordinance violates the First Amendment in several ways. First, the ordinance is said to constitute an unlawful prior restraint on CCC's right to disseminate information because the ordinance denies CCC the right to reach two-thirds of its potential audience. Second, the ordinance is alleged to be an unconstitutional content-based restraint on expression, because it bans CCC's communications from most of Boulder so that a better speaker, i. e., one who will offer special services such as two-way communications, may service that area. Finally, CCC claims the ordinance is not the least restrictive means for achieving whatever legitimate interests the City may have. Thus, CCC essentially argues that the City's ordinance must be summarily declared unconstitutional because analogous prohibitions on a newspaper's right to reach even a small portion of its audience would be struck down as First Amendment violations. CCC contends that cases involving regulation of wireless broadcasters are wholly inapposite. The district court apparently accepted this view, for it stated that any differences between the freedom of newspapers and that of cable operators are not relevant to this case. See Boulder II, 496 F.Supp. at 829. 16 The City responds that (1) cable companies should not be analogized in every respect to newspapers for First Amendment purposes; (2) cable systems are natural monopolies, so that subjecting them to some reasonable regulation designed to achieve optimal use of the cable broadcasting medium does not offend the First Amendment; and (3) the districting ordinance, contemplating as it does the ultimate interconnection of all cable systems operating in Boulder, is a content-neutral regulation that promotes citizenry First Amendment interests in diverse and state-of-the-art communications services and programming, without impeding any cable operator's ability to reach audiences, since all audiences in the City will ultimately be reachable through interconnection. 17 These contentions reach us in the context of requests by both CCC and the City for preliminary injunctive relief. The touchstone for obtaining such relief is a showing of irreparable harm coupled with a substantial likelihood of success on the merits. See Lundgrin v. Claytor, 619 F.2d 61, 63 (10th Cir. 1980). There must exist a probable right and a probable danger. Crowther v. Seaborg, 415 F.2d 437, 439 (10th Cir. 1969). However, where irreparability exists and the balance of hardships tips in favor of a movant, the probability-of-success requirement may be somewhat relaxed: (I)t will ordinarily be enough that the plaintiff has raised questions going to the merits so serious, substantial, difficult and doubtful as to make them a fair ground for litigation and thus for more deliberate investigation. Lundgrin, 619 F.2d at 63; see Jack Kahn Music Co. v. Baldwin Piano & Organ Co., 604 F.2d 755, 758-59 (2d Cir. 1979). 18 Applying these principles here, we agree with the district court that this case raises substantial, difficult, and novel First Amendment concerns. Cable operators, like publishers and wireless broadcasters, are entitled to First Amendment protection. See Midwest Video Corp. v. FCC, 571 F.2d 1025, 1052-57 (8th Cir. 1978), aff'd on other grounds, 440 U.S. 689, 99 S.Ct. 1435, 59 L.Ed.2d 692 (1979); Home Box Office, Inc. v. FCC, 567 F.2d 9, 43-51 (D.C.Cir.), cert. denied, 434 U.S. 829, 98 S.Ct. 111, 54 L.Ed.2d 89 (1977). We also agree with the district court that (t)o the extent that First Amendment rights are infringed, irreparable injury is presumed. Boulder II, 496 F.Supp. at 826 (citing Elrod v. Burns, 427 U.S. 347, 373, 96 S.Ct. 2673, 2689, 49 L.Ed.2d 547 (1976)). But we believe that in comparing the competing claims of irreparable injury, id., the district court failed to consider that the citizens of Boulder also have significant First Amendment interests at stake. 5 The City claims that its districting plan will advance its citizens' First Amendment interests in high quality and diverse cable communications services and programming, including two-way cable services that will enable its citizens to be disseminators of information as well as recipients. 19 With respect to the likelihood of success on the merits, the specific issue here is whether the City's geographic districting plan for cable operators violates the First Amendment. More broadly, the issue concerns the nature and degree of governmental regulation that the First Amendment permits over cable operators. 20 At this juncture, facing as we do challenges to preliminary injunctive relief and an incomplete factual record, we cannot dispose of all the points raised by CCC and the City. 6 We do, however, agree with the City's contention that it was inappropriate for the district court to summarily apply to cable operators the First Amendment principles governing newspapers. The nature and degree of protection afforded to First Amendment expressions in any given medium depends upon the medium's particular characteristics. For example, the degree to which the First Amendment shields the editorial discretion of wireless broadcasters differs substantially from the degree to which newspaper publishers are shielded from governmental interference. Compare Red Lion Broadcasting Co. v. FCC, 395 U.S. 367, 89 S.Ct. 1794, 23 L.Ed.2d 371 (1969), with Miami Herald Publishing Co. v. Tornillo, 418 U.S. 241, 94 S.Ct. 2831, 41 L.Ed.2d 730 (1974). The Supreme Court has repeatedly emphasized that (e)ach medium of expression, of course, must be assessed for First Amendment purposes by standards suited to it, Southeastern Promotions, Ltd. v. Conrad, 420 U.S. 546, 557, 95 S.Ct. 1239, 1245, 43 L.Ed.2d 448 (1975), for differences in the characteristics of news media justify differences in the First Amendment standards applied to them. Red Lion, 395 U.S. at 386, 89 S.Ct. at 1804. See, e. g., Metromedia, Inc. v. City of San Diego, --- U.S. ----, ----, ----, ----, 101 S.Ct. 2882, 2888, 2896, 2901, 69 L.Ed.2d 800 (1981); Heffron v. International Society for Krishna Consciousness, --- U.S. ----, ----, 101 S.Ct. 2559, 2565, 69 L.Ed.2d 298 (1981); Schad v. Borough of Mount Ephraim, --- U.S. ----, ----, 101 S.Ct. 2176, 2185, 68 L.Ed.2d 671 (1981). 21 The attributes of cable broadcasting technology indicate that the nearly absolute strictures against direct 7 governmental regulation of newspapers' dissemination of information cannot be applied in wholesale fashion to cable operators. To disseminate information, a newspaper need not use public property in the same way that a cable operator does. A newspaper may reach its audience simply through the public streets or mails, with no more disruption to the public domain than would be caused by the typical pedestrian, motorist, or user of the mails. But a cable operator must lay the means of his medium underground or string it across poles in order to deliver his message. Obviously, this manner of using the public domain entails significant disruption, especially to streets, alleys, and other public ways. Some form of permission from the government must, by necessity, precede such disruptive use of the public domain. We do not see how it could be otherwise. 8 A city needs control over the number of times its citizens must bear the inconvenience of having its streets dug up and the best times for it to occur. Thus, government and cable operators are tied in a way that government and newspapers are not. 9 22 A second basis for government regulation of cable, and the one directly relied upon by the City in enacting its ordinance, is medium scarcity. More specifically, the City asserts that there are physical and economic limitations on the number of cable systems that can practicably operate in a given geographic area. In physical terms, the City alleges a sheer limit on the number of cables that can be strung on existing telephone poles. Economically, the City argues that cable broadcasting is a monopolistic industry because it is not economically viable for more than one cable company to operate in any given geographic area. Together, the City contends, these limitations give cable companies the character of a natural monopoly and thus make the cable broadcasting medium scarce in much the same way that the finiteness of the electromagnetic spectrum makes wireless broadcasting a medium of essentially limited access. 23 Inherent limitations on the number of speakers who can use a medium to communicate has been given as a primary reason why extensive regulation of wireless broadcasting is constitutionally permissible. See Columbia Broadcasting System, Inc. v. Democratic National Committee, 412 U.S. 94, 101, 93 S.Ct. 2080, 2085, 36 L.Ed.2d 772 (1973); Red Lion Broadcasting Co. v. FCC, 395 U.S. 367, 388, 89 S.Ct. 1794, 1805, 23 L.Ed.2d 371 (1969); National Broadcasting Co. v. United States, 319 U.S. 190, 226, 63 S.Ct. 997, 1014, 87 L.Ed. 1344 (1943). When such limitations exist, and the medium requires use of a limited and valuable part of the public domain, the government must step in to allocate entry into that medium. In such circumstances, it confuses analysis to say that denying a potential disseminator the right to reach an audience is a prior restraint. No individual disseminator has the constitutional right to be the particular person who obtains the privilege to use the medium. See Red Lion, 395 U.S. at 389, 89 S.Ct. at 1806 (wireless broadcast licensee has no constitutional right to be the one who holds the license). 24 In rejecting the notion of medium scarcity, the district court preliminarily found that competition on the poles among cable operators is possible. Boulder II, 496 F.Supp. at 830. It is not clear whether this was a finding that no economic monopoly exists in Boulder, or whether this was only a finding that no physical law really limits the number of cables that can be laid or strung side by side. In any event, relying on Miami Herald Publishing Co. v. Tornillo, 418 U.S. 241, 94 S.Ct. 2831, 41 L.Ed.2d 730 (1974), the district court rejected economic monopoly as justifying any degree of regulation whatsoever. In Miami Herald, notwithstanding contentions that the nation is dominated by one-newspaper cities and that economic conditions have made new entry into the newspaper industry virtually impossible, the Supreme Court held that a state imposed public right of access to the pages of a newspaper violates the First Amendment. The district court concluded from Miami Herald that scarcity within the cable broadcasting medium arising from economic conditions could in no way justify regulation of cable operators. Boulder II, 496 F.Supp. at 830. Miami Herald, however, must be read in context. The Court was writing about newspapers, a communication medium protected by a long-standing and powerful tradition that keeping government's hands off is the best way to achieve the profound national commitment to the principle that debate on public issues should be uninhibited, robust, and wide-open .... New York Times Co. v. Sullivan, 376 U.S. 254, 270, 84 S.Ct. 710, 720, 11 L.Ed.2d 686 (1964). Moreover, Miami Herald involved an effort by state government to compel public access to a medium that is not tied to government in the way cable companies necessarily are. There, the characteristic of economic scarcity was unrelated to a disruptive use of the public domain requiring a government license. The state of Florida simply felt that access to the pages of newspapers was needed to ensure presentation of all differing viewpoints within the marketplace of ideas, and relied upon notions of economic concentration within the industry to justify its control upon newspapers. It was in this context that the Court concluded economic scarcity, without more, could not overcome the First Amendment objection against requiring a private newspaper to print what Florida's right-of-reply statute dictated. 25 The cable broadcasting medium presents very different circumstances. 10 As already noted, see note 9 supra, this industry has always been regulated in many respects. There is no tradition of nearly absolute freedom from government control. Most importantly, a cable company must significantly impact the public domain in order to operate; without a license, it cannot engage in cable broadcasting to disseminate information. This is exactly opposite of the situation in Miami Herald. 26 If when faced with a request for a license from a cable operator, government reasonably anticipates the kind of medium scarcity we have discussed, it must be permitted to deal with the effects of the scarcity that may attend the use of the license it is about to issue. That is, government must have some authority in such a context to see to it that optimum use is made of the cable medium in the public interest. In view of the lengthy franchises that cable operators seem to require, the City's districting ordinance might be justifiable as a means to avoid locking into an outmoded or less than state-of-the-art cable communications system. 27 The conclusion that natural monopoly is a constitutionally permissible justification for some degree of regulation of cable operators does not mean that the full panoply of principles governing the regulation of wireless broadcasters necessarily applies to cable operators. The general rationale for permitting government regulation may be the same, but the criteria upon which regulatory decisions may be made might differ. As the Supreme Court has stressed, (e)ach method of communicating ideas is 'a law unto itself' and that law must reflect the 'differing natures, values, abuses and dangers' of each method. Metromedia, --- U.S. at ----, 101 S.Ct. at 2888 (quoting Kovacs v. Cooper, 336 U.S. 77, 97, 69 S.Ct. 448, 458, 93 L.Ed. 513 (1949)). For example, differences in (1) the degree of natural monopoly or scarcity characterizing the medium, (2) the pace and potential for technological change, 11 or (3) the uses and possible uses of the medium such as two-way cable communications or even interconnection, might make kinds of regulations constitutionally permissible in one medium that would be forbidden in another. But we caution: the power to regulate is not one whit broader than the need that evokes it. Whether that power has been permissibly exercised by the City in this case calls for a particularized inquiry into the unique attributes of the cable broadcasting medium. The district court is best suited for such inquiry in the first instance upon a fully developed factual record. 28 In sum, the significant First Amendment issues create a presumption of irreparable harm on both sides in this case and present a fair ground for litigation for both parties. Each side has moved for preliminary relief. Balancing the hardships, we cannot agree with the district court's essentially one-sided grant of preliminary injunctive relief to CCC. Rather, we believe that relief pendente lite must be tailored so as to minimize irreparable harm to both sides and at the same time to permit a meaningful grant of whatever permanent relief may be warranted. Cf. Taylor Wine Co. v. Bully Hill Vineyards, Inc., 569 F.2d 731 (2d Cir.), appeal after remand, 590 F.2d 701 (1978) (extensive fashioning of preliminary injunctive relief on use of Taylor trademark as between Taylor Wine Company and Mr. Walter S. Taylor). See also Tracy v. Salamack, 572 F.2d 393, 396-97 (2d Cir. 1978); International Controls Corp. v. Vesco, 490 F.2d 1334, 1347 & n.18 (2d Cir. 1974); Omega Importing Corp. v. Petri-Kine Camera Co., 451 F.2d 1190, 1197 (2d Cir. 1971). This is best accomplished by freezing the parties in their present circumstances until trial on the merits, see note 2 and accompanying text supra, rather than either by allowing CCC to continue its expansion in complete derogation of Ordinance No. 4515, or by permitting the City to strictly enforce the boundaries of its ordinance, which would leave the City free to grant exclusive cable franchises outside those boundaries. 29 Taking into consideration the concepts we have outlined in this opinion, the task for the district court at trial is to determine, upon final fact findings, whether cable's unique attributes warrant, in First Amendment terms, the nature and extent of regulation the City seeks to impose on cable companies in Boulder. In so doing, the district judge must fashion the First Amendment standards to be applied to this new medium under the circumstances of this case. 30 Reversed and remanded for trial on the merits.