TRASK, Circuit Judge:
Appellants, owners and operators of a subscription television service, seek review of the district court's dismissal of their complaint brought under section 605 of the Federal Communications Act, 47 U.S.C. § 605. The district court dismissed the
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.
Appellees are makers and distributors of decoding devices, not authorized by NST, which enable a television set to unscramble the NST visual signal and receive the NST audio signal. Use of one of appellees' devices enables a viewer to watch NST programming without paying any subscription fees.
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.
In support of their motion to dismiss, appellees alleged that NST's programming is of interest to a mass audience, and that its signal delivery system is capable of reaching such an audience. These allegations were admitted by appellants in their opposition to appellees' motion. Appellees contend that the mass audience appeal of NST's programming and the ability of its signal delivery system to reach mass audiences mean that appellants broadcast within the meaning of section 153(o), which defines "broadcasting" as "the dissemination of radio communications intended to be received by the public." 47 U.S.C. § 153(o). They further argue that all section 153(o) broadcasting is within the reach of the proviso, and, therefore, is unprotected by the general prohibitions against signal interception contained in section 605. The district court based its dismissal of appellants' complaint on this argument.
Conversely, appellants contend that NST's efforts to restrict reception of its signal to paying subscribers negate a finding of section 153(o) intent. They argue that NST does not broadcast within the meaning of section 153(o) and the proviso, and that its signal is thus protected by section 605.
The legislative history of section 605 does not speak to the question whether the section protects transmissions such as NST's, and caselaw on the applicability of the section to radio and television subscription services is sparse. The first reported decision on the issue is KMLA Broadcasting Corp. v. 20th Century Cigarette Vendors Corp., 264 F.Supp. 35 (C.D.Cal.1967). As part of a promotional campaign, 20th Century had given to some of its clients equipment which enabled them to receive KMLA's background music service without paying for it. KMLA sued for relief under section 605. The court held that KMLA's service was not section 153(o) broadcasting and did not fall within the proviso, but was instead private, point-to-point communication protected by the general prohibitions of section 605. 264 F.Supp. at 42. The court based this holding on KMLA's lack of intent to transmit its subscription signal to the general public, id. at 40-41, as evidenced by the existence of the special receiving devices needed to receive KMLA's signal, id. at 42.
KMLA was cited with approval by Home Box Office (HBO), Inc. v. Pay TV of Greater New York, 467 F.Supp. 525 (E.D.N.Y. 1979), which held that STV signals transmitted by a "multi-point distribution service" (MDS)
In Orth-O-Vision, Inc. v. Home Box Office (HBO), 474 F.Supp. 672 (S.D.N.Y.1979), HBO sought to enjoin interception of its MDS signal by Orth-O-Vision, an unauthorized receiver-converter. HBO filed suit pursuant to numerous statutes, including section 605, and immediately moved for summary judgment on its 605 claim. The court discounted the significance of the need for special equipment to receive the HBO signal, and focused on the nature of the programming and the capabilities of the signal delivery system. 474 F.Supp. at 682. The court ultimately denied HBO's motion, concluding that the evidence did not indisputably show either that HBO programming was not of interest to a mass audience,
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
274 F.2d at 548 (emphasis in original).
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:
Id. at 9.
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.
Appellees argue that programming appeal and signal delivery capabilities, which control the determination whether a transmission is 153(o) broadcasting, see Functional Music, Inc. v. FCC, supra; In re Amendment of Part 73, supra, are also the factors that determine whether a transmission falls within the proviso. See Orth-O-Vision, Inc. v. HBO, supra, 474 F.Supp. at 682. It is true that the analytical premise of some of the cases dealing with sections 153(o) and 605 is that transmissions that constitute broadcasting within the meaning of 153(o) fall within the proviso to 605, and, therefore, are unprotected, whereas transmissions that do not amount to 153(o) broadcasting are out of the proviso's reach, and thus are protected by 605. Compare Orth-O-Vision, Inc. v. HBO, supra, 474 F.Supp. at 680 with KMLA Broadcasting Corp. v. 20th Century Cigarette Vendors Corp., supra, 264 F.Supp. at 41-42 and HBO, Inc. v. Pay TV of Greater New York, supra, 467 F.Supp. at 528. But see Chartwell Communications Group v. Westbrook, supra, 637 F.2d at 465-67. Appellants do not dispute the validity of this premise, but urge instead that we overrule or limit the FCC's determination in In re Amendment of Part 73, supra, that STV transmissions constitute 153(o) broadcasting. Cf. Functional Music, Inc. v. FCC, supra (overruling FCC determination that subscription radio service did not constitute broadcasting).
We find it unnecessary to review the FCC determination because we conclude that section 153(o) does not control the reach of
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]
Appellees contend that distinguishing between signals "intended to be received by the public" and signals "broadcast ... for the use of the general public" misconstrues the language of the proviso. They argue
Appellees cite no authority in support of their asserted construction of the proviso, and, in fact, the cases have assumed the opposite construction. See, e. g., Chartwell Communications Group v. Westbrook, supra, 637 F.2d at 466-67; Orth-O-Vision, Inc. v. HBO, supra, 474 F.Supp. at 680-81; HBO, Inc. v. Pay TV of Greater New York, supra, 467 F.Supp. at 528. See also United States v. Fuller, 202 F.Supp. 356, 358 (N.D.Cal.1962). We do not find that redundancy results from construing the phrases to modify the word "broadcast." Although substitution of the section 153(o) definition in place of "broadcasting" in the proviso yields language that is somewhat inelegant, such language nevertheless conveys the "important distinction between making a service available to the general public and intending a program for the use of the general public," Chartwell Communications Group v. Westbrook, supra, 637 F.2d at 465.
We note that protection under section 605 of STV transmissions such as NST's promotes express FCC policies.
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).
Appellees, on the other hand, advance several justifications for leaving STV signals unprotected. First, they argue that the airwaves belong to the public, and that an entity such as NST should not be granted monopoly control of a particular frequency without the express approval of Congress. As an FCC licensee, however, Oak Broadcasting already has the right to prevent others from broadcasting on its frequency. Furthermore, granting section 605 protection to NST's signals does not grant NST a monopoly, because it does not prevent other STV or pay-television operations from entering and competing in the Los Angeles pay-television market. Finally, although the public owns the airwaves, Congress and the FCC are charged with regulating them in the public interest. That interest would seemingly not be served by the demise of a product for which there is clearly considerable consumer demand.
Second, appellees speculate that Congress intended that STV operations protect themselves by technology. The appellees offer no authority in support of this reading of congressional intent, and we are not persuaded by it. On the contrary, we note that even the most technologically sophisticated decoder can be copied by processes of reverse engineering.
Finally, appellees argue that their actions provide needed competition to NST in the manufacture of decoders. This argument proves too much. Appellees' competitive success would result not merely in subscribers' acquiring decoders from them instead of NST, but would prevent NST from operating as an economically viable enterprise and eventually force it out of business. This would eliminate the reason for acquiring a decoder in the first place.
We hold that the broadcasting of NST in the case before us does not constitute "broadcasting ... for the use of the general public" within the meaning of the proviso to section 605 of the Act. Accordingly, appellants' signals are protected by section 605, and they have pled a complaint upon which relief may be granted. Thus, the district court's dismissal of appellants' complaint under Rule 12 was error.
Appellees contend that even if we are to find that NST's signals are protected by section 605, we must nevertheless affirm the district court's dismissal of appellants' complaint because appellees' actions do not constitute a violation of the statute. Appellees correctly state that to be held liable for a violation of section 605, a defendant must be shown to have (1) intercepted or aided the interception of, and (2) divulged or published, or aided the divulging or publishing of, a communication transmitted by the plaintiff. See, e. g., United States v. Butenko, 494 F.2d 593, 599-600 (3d Cir.) (en banc), cert. denied, 419 U.S. 881, 95 S.Ct. 147, 42 L.Ed.2d 121 (1974); Reston v. FCC, 492 F.Supp. 697, 704 n.4 (D.D.C.1980) (quoting Bufalino v. Michigan Bell Telephone Co., 404 F.2d 1023, 1027 (6th Cir. 1968), cert. denied, 394 U.S. 987, 89 S.Ct. 1468, 22 L.Ed.2d 763 (1969)); United States v. Fuller, supra, 202 F.Supp. at 358. Appellees argue that they neither intercepted nor aided interception of a signal, because the signal is already received by all television sets in the Los Angeles area, albeit in scrambled form. They also argue that they neither divulged nor published the NST signals, nor aided anyone in doing so.
This argument has no merit. Appellees' activities clearly "are assisting third parties in receiving communications to which they are not entitled." See Chartwell Communications Group v. Westbrook, supra, 637 F.2d at 466. Even if, technically speaking, appellees did not aid interception of NST's visual signal, it cannot be denied that their
Therefore, the district court's dismissal of appellant's complaint is REVERSED, and the case REMANDED for further proceedings consistent with this opinion.
(Emphasis in original and citations omitted.)
Id. at 353 (footnote omitted).
It is true that in our system of government the policy-making role is committed to Congress and not to the courts. Nevertheless, judges are not unmindful of the effects of their decisions and, although policy considerations are not determinative of the proper resolution of a legal issue, neither are they irrelevant to such resolution. Certainly we are not required to thwart legislative or regulatory policies already formulated by other branches of the government when, as here, a decision supporting such policies is consistent with the statutory scheme.