Certiorari Denied February 24, 1970. See 90 S.Ct. 914.
TAMM, Circuit Judge:
Today we are faced with a question of national importance, id est, whether the Federal Communications Commission possesses the requisite power to authorize nationwide over-the-air subscription television
I. PROCEDURAL HISTORY
The history of the Commission's involvement with subscription television (hereinafter STV) is indeed lengthy. Nearly two decades ago, on February 25, 1952, the Zenith Radio Corporation filed a petition with the Federal Communications Commission requesting authority
In 1959 the Commission issued its Third Report on subscription television, 26 F.C.C. 265, 16 P&F Radio Reg. 1540a, in which it reasserted the conditions for trial operations set out in the First Report. In addition, the Third Report stated that as soon as the trial operations provided sufficient data, public hearings would be held to determine whether STV should be authorized on a permanent basis. Pursuant to the Third Report, three applications were filed for trial STV operations; only one such station ever commenced operations, however.
In 1965 Zenith and Teco jointly filed a petition for further rulemaking to establish permanent nationwide STV on the basis of the data derived from their trial operation in Hartford. The Commission then issued, in 1966, a Further Notice of Proposed Rulemaking and Notice of Inquiry, 31 Fed.Reg. 5136, 7 P&F Radio Reg.2d 1501, which, in essence, requested further comments on the feasibility of nationwide STV. Subsequently, in 1967, the FCC's Subscription Television Committee submitted to the Commission a Proposed Fourth Report, 10 P&F Radio Reg.2d 1617 (1967); the FCC, en banc, invited comments and held oral argument on the proposed report.
After the issuance of the Proposed Fourth Report, which concluded that the Federal Communications Commission did have statutory power to authorize permanent nationwide STV, the Communications and Power Subcommittee of the House Interstate and Foreign Commerce
Finally, on December 12, 1968, the Commission issued its Fourth Report on subscription television, 15 F.C.C.2d 466, in which it reaffirmed its earlier conclusion that it possessed the power to authorize a permanent nationwide system of STV and established rules governing the operation of that system. The National Association of Theatre Owners and the Joint Committee Against Toll TV, participants in the Commission proceedings, filed a petition for review in this court pursuant to section 402 of the Communications Act, 47 U.S.C. § 402 (1964), alleging statutory and constitutional errors in the Commission's determinations.
II. THE FOURTH REPORT
The Commission's Fourth Report and Order is a lengthy (144 pages) and carefully reasoned document which surveys the potential advantages and disadvantages of subscription television in light of the Hartford experiment and the contentions of various parties interested in pay television. On the basis of its seventeen-year inquiry into STV, the Commission concluded that subscription television would provide a "beneficial supplement" to conventional "free" broadcasts
III. THE COMMISSION'S POWER TO AUTHORIZE SUBSCRIPTION TELEVISION
The petitioners advance three arguments in support of their contention that the Commission exceeded the proper bounds of its power in authorizing nationwide subscription television. First, they assert that the Communications Act contains no explicit grant empowering the Commission to allow direct charges on the public for broadcast services, and that no such power can be inferred from the language or history of the Act (Brief for Petitioners at 17-21). Second, petitioners contend that the Commission lacks authority to regulate the rates charged for broadcast services, and that the absence of such authority is persuasive evidence of Congress' intent to preclude establishment of direct-charge broadcast operations such as STV (Brief for Petitioners at 21-24). Finally, petitioners claim that even if the Commission did have the necessary authority to establish pay television, its failure to regulate rates or to decide the question of whether it possessed rate-making power constituted an arbitrary and capricious exercise of this authority (Brief for Petitioners at 35-43). We shall consider each of these contentions separately.
A. The Language and History of the Communications Act
Our inquiry into the scope of the Commission's authority begins with section 303 of the Communications Act of 1934, 48 Stat. 1082, as amended, 47 U.S.C. § 303 (1964), which sets forth the Commission's general powers and duties in regulating radio broadcasting. In pertinent part, this section directs the Commission, "as [the] public convenience, interest, or necessity requires," to:
In addition, section 307(a) of the Act, 47 U.S.C. § 307(a) (1964), provides that "[t]he Commission, if public convenience, interest, or necessity will be served thereby, subject to the limitations of this chapter, shall grant to any applicant therefor a station license * * *."
The basic structure of title III of the Communications Act, from which the foregoing sections are quoted, is a broad grant of general licensing authority to the Commission, subject to a number of specific exceptions and limitations. (See e. g., 47 U.S.C. §§ 310, 312, 313(b) (1964).) This plan is consistent with the dynamic and rapidly-changing nature of the statute's subject matter, radio broadcasting, and the courts have consistently recognized that Congress intended to vest expansive powers in the Commission in order to avoid the necessity of repetitive legislation.
This continuing imperative need for an expansive interpretation of the Commission's jurisdiction was recently reaffirmed by the Supreme Court in United States v. Southwestern Cable Co., 392 U.S. 157, 167-178, 88 S.Ct. 1994, 20 L. Ed.2d 1001 (1968), and has been observed
Notwithstanding this impressive body of authority, the petitioners contend that STV is clearly beyond the contemplation of the Communications Act. In essence, they assert that "over-the-air pay television represents a fundamental change in the nature of American Broadcasting" (Brief for the Petitioners at 13) and that therefore the power to license pay television cannot be inferred from the Act. Direct charges for broadcasting services are not wholly unprecedented in this country, however; testimony to this fact may be found in Functional Music, Inc. v. FCC, 107 U.S.App.D.C. 34, 274 F.2d 543 (1958), cert. denied, 361 U.S. 813, 80 S.Ct. 50, 4 L.Ed.2d 81 (1959), and Muzak Corp., 8 F.C.C. 581 (1941). Indeed, we referred to these cases in Connecticut Committee as instances in which subscription services "have been found perfectly acceptable by both [the] Commission and the courts." 112 U.S.App. D.C. at 250 n.2, 301 F.2d at 837 n.2. Since the matter now before us is basically a question of first impression,
The present statute governing the Commission's authority over broadcasting services is derived in large part from the Radio Act of 1927, 44 Stat. 1162.
Given this rather chaotic background, it is not surprising that the legislative history of the Radio Act casts little light on the precise question presented by this case. An early version of the Act, which was passed by the Senate, gave the regulatory body power to "regulate radio stations where a charge is made to listeners,"
(68 Cong.Rec. 2880-81 (1927).) The bill prohibiting direct charges was never passed, and further references to pay broadcasting during the debates were sparse and inconclusive; in most of these discussions, the principal concern seems to be the possibility that large chain broadcasting organizations would obtain monopoly power, through patent licensing agreements or other devices, and use pay broadcasting schemes to extract monopoly profits from the public. See generally 68 Cong.Rec. 2576-2577, 2580, 3033-3034, 4149 (1927). In the years intervening between the passage of the Radio Act of 1927 and the issuance of the Commission's Fourth Report on subscription television, Congress has, on occasion, been confronted with the suggestion that the present Act authorizes the Commission to license direct-charge broadcasting services,
Thus, we are unable to agree that the Communications Act absolutely precludes the Commission from approving a system of direct charges to the public as a means of financing broadcasting services. Rather, the Act seems designed to foster diversity in the financial organization and modus operandi of broadcasting stations as well as in the content of programs, and we feel that the Commission did not exceed its authority in concluding that subscription television is entirely consistent with these goals.
B. Rate Regulation and Licensing Power
Petitioners seek to negate the broad sweep of the Communications Act by asserting that the Commission lacks the authority to regulate the rates charged by STV operators, and that the absence of such authority reflects Congress' intent to prevent the Federal Communications Commission from authorizing direct-charge broadcasting. The contention that the Commission lacks rate-making authority for over-the-air STV is predicated on the structure of the statute: the Communications Act distinguishes between communications "common carriers" and "broadcasting" operators, providing the Commission with explicit authority to establish tariffs for the former but not for the latter. See 47 U.S.C. §§ 201, 203 (1964). However, we need not reach the difficult question of whether Commission power to establish rates for broadcasting services is implicit in some provisions of title III, since we are unable to agree with petitioners' interpretation of the role which rate-making authority plays in the Communications Act.
Federal control over telephone and telegraph evolved earlier than did regulation of radio broadcasting, and, in its early forms, it encompassed supervision of the rates charged by companies providing service.
See also FCC v. Sanders Brothers Radio Station, 309 U.S. 470, 474, 60 S.Ct. 693, 84 L.Ed. 869 (1940). In short, we think that it is fair to infer that the differential treatment accorded to communications common carriers and radio broadcasters in the Communications Act reflects Congress' belief that commercial broadcasting is not a natural monopoly which creates the same kinds of risks that a telephone system does. Rather, Congress apparently believed that once the clear dangers of combinations in restraint of trade were removed, competition among those providing broadcasting services in a given area would best protect the public interest. It is also significant that in both the Radio Act of 1927
We approve the Commission's conclusion that it was not called upon to decide whether, or in what circumstances, its licensing regulatory functions might include surveillance or control over rates charged for services. The need for such control would presumably be rooted in developments in the market which demonstrated that STV had been granted a monopolistic or "quasi-monopolistic" position, in which the competition of ordinary TV or other services was not effective to prevent abuse. On the basis of the rates charged in the Hartford experiment, the FCC concluded there was no likelihood of rate abuse. Appellants claim that these rates were kept artificially low in order to obtain a good climate for general approval of STV. Perhaps so, but the Commission was entitled to take into account the facts as they now exist, without ranging into such speculation. If and when the premises of its regulatory approach change, the Commission can and should consider the issues involved. American Airlines, Inc. v. CAB, 123 U.S.App.D.C. 310, 359 F.2d 624, 633 (en banc), cert. denied, 385 U.S. 843, 87 S.Ct. 73, 17 L.Ed.2d 75 (1966). Its predictions as to the probable course of rates and existence of meaningful competition are certainly not unreasonable; and it is equally certain that the FCC was not required to stake out at this time the techniques and methods it might desire to use in future circumstances that have not yet and may not ever take shape. "In a statutory scheme in which Congress has given an agency various bases of jurisdiction and various tools with which to protect the public interest, the agency is entitled to some leeway in choosing which jurisdictional base and which regulatory tools will be most effective
C. The Question of Arbitrariness
Petitioners advance a separate but related challenge to the Commission's treatment of the rate regulation question. Petitioners contend that, even if the authorization of STV was within the scope of the Commission's power, its action in the Fourth Report was arbitrary and capricious because the Commission failed to set forth adequate reasons for its decisions to employ regulatory measures less drastic than rate-making, and to avoid detailed inquiry into the question of whether it possesses the authority to establish rates.
In essence, petitioners' argument rests on the premise that STV operations will be monopolies similar to the public utilities which have traditionally been subject to rate regulation (Brief for Petitioners at 41). In turn, this postulate apparently rests on the assumption that the relevant product market is the television station, and that a finding of any other product market would be so unreasonable as to be capricious.
In light of the extensive discussion devoted to these topics in the Fourth Report and the considerations enumerated in the preceding section, we are not prepared to hold that the Commission was arbitrary and capricious in determining that a substantial amount of economic competition would exist between STV and the other forms of entertainment and enlightenment available in the community.
IV. THE FIRST AMENDMENT AND EQUAL PROTECTION ISSUES
Petitioners also challenge the propriety of the Commission's actions on the grounds that the authorization of STV
A. Discrimination Against the Poor
Petitioners rely on several findings in the Fourth Report to support their contention that the Commission's authorization of nationwide STV will result in unconstitutional discrimination against people in low income groups. Specifically, they point to data from the Hartford experiment which showed that less than two percent of all subscribers had incomes in the range of $0-$3,999 (15 F.C.C.2d at 493), while nearly thirty percent of the national population in 1964
Since the Commission promulgated a number of rules designed to protect free television from economic incursions by STV — rules which we think are reasonable and amply supported by the record — we must confine our inquiry to the proposition that any form of pay broadcasting would, by itself, be discriminatory against the indigent. We must also assume that the charges imposed by STV operators will not be exorbitant, since we have affirmed the Commission's determination that rate regulation is not presently needed to prevent monopoly profits. Thus, unless there is some factor which serves to distinguish broadcasting from other endeavors which are subject to federal regulation, we are being asked to render a decision which would go far toward establishing the rule that every service provided by a regulated industry must be made available to all citizens on the basis of their ability to pay. Such a result would clearly be a constitutional innovation that we are unwilling to make; and we are not convinced that the subject of television broadcasting has unique features distinguishing it from comparable regulated industries.
The equal protection cases cited by petitioners bear scant resemblance on their facts to this controversy; rather the cases involve poll taxes (Harper v. Virginia Board of Elections, 383 U.S. 663, 86 S.Ct. 1079, 16 L.Ed.2d 169 (1966)) and the administration of criminal justice (Griffin v. Illinois, 351 U.S. 12, 76 S.Ct. 585, 100 L.Ed. 891 (1956)). Petitioners attempt to relate these cases and their progeny to subscription television by arguing that "in order to fulfill their citizenship requirements, or, indeed, to effectively achieve their rights, the poor must have access to the mass media" (Brief for Petitioners at 46). We think that this doctrinal bridge is far too insubstantial to bear the weight of petitioners' argument, and that their analysis fails to take account of the realities which the Commission considered in authorizing STV.
The public's access to the broadcast media has never been wholly free; at minimum, it has been necessary to procure and maintain the necessary apparatus for receiving broadcasts, and this burden necessarily weighs heaviest on those with least resources. Moreover, any "deprivation" of access to the broadcast frequencies which may result from the Commission's approval of STV will almost certainly be slight. At most, one out of five stations serving a given community will be devoted to STV under the rules promulgated by the Commission; this station will be required to carry at least twenty-eight hours of free programming per week. The Commission also adopted detailed programming restrictions which are designed to prevent the more popular kinds of free programs from migrating to subscription television. At the same time, the Commission found that the authorization of STV may create benefits for all citizens which
B. The Program Restrictions and the First Amendment
Petitioners' final contention is that the program restrictions which the Commission established in order to prevent STV from siphoning programs, talent, and audiences from free broadcasting are repugnant to section 326 of the Communications Act and the first amendment of the Constitution as a prior restraint on free speech. In general, these program restrictions provided that: (1) no advertising could be broadcast during subscription operations, except for announcements promoting STV programs; (2) feature films could not be offered which had been generally released more than two years prior to the broadcast date, with several exceptions; (3) sports events which had been regularly broadcast live on free television in the two years preceding their subscription broadcast could not be shown on STV; (4) no series program with interconnected plots or substantially the same cast of characters could be offered on a subscription basis; (5) not more than ninety percent of the total STV broadcasting hours could consist of feature films and sports events combined. 15 F.C.C.2d at 597-598.
At the outset, it is appropriate to note the extreme difficulty and delicacy of the tasks which the first amendment imposes on the Federal Communications Commission. The Commission is charged with administering a scarce communications resource, the broadcast spectrum, in such a manner that the great objectives incorporated into the first amendment are realized and debate on public issues is "uninhibited, robust, and wideopen." New York Times Co. v. Sullivan, 376 U.S. 254, 270, 84 S.Ct. 710, 11 L.Ed. 2d 686 (1964). Thus the Commission must seek to assure that the listening and viewing public will be exposed to a wide variety of "social, political, esthetic, moral, and other ideas and experiences." Red Lion Broadcasting Co. v. FCC, 395 U.S. 367, 390, 89 S.Ct. 1794, 1795 (1969). In seeking to provide the broadcasting media with the diversity demanded by the first amendment, however, the Commission must avoid the perils of both inaction and overzealousness — of abdication which would allow those possessing the most economic power to dictate what may be heard, and of censorship which would allow the government to control the ideas communicated to the public. The need to make choices of this kind requires the Commission to take some cognizance of the kind and content of programs being offered to the public.
In Banzhaf v. FCC, 132 U.S.App.D.C. 14, 33-35, 405 F.2d 1082, 1101-1103 (1968), we established several tests which can aid in determining whether Commission rulings and orders are in conflict with the first amendment. The first consideration mentioned in Banzhaf is whether the rulings ban speech, and, as the petitioners point out, the STV restrictions prevent subscription licenses from broadcasting certain kinds of programs. This characterization of the STV rules ignores their context and purpose, however; it seems obvious that the Commission sought only to insure the continuing economic vitality of free television and not to affect the ideas which could be presented on either free or subscription television. Thus, when the net effect of the program restrictions is considered, it seems quite likely that the public in STV areas will receive more rather than less diversity of expression in its television programming. It is significant that the American Civil Liberties Union and the Americans for Democratic Action urged the Commission to approve STV as a means of opening new avenues of speech, and suggested regulations which were similar in some respects to those ultimately adopted in the Fourth Report in order to assure that existing economic forces were directed toward achieving maximum diversity of expression. See generally 15 F.C.C.2d at 516, 526, 546-547, 554-555, 575. Here, as in Banzhaf, the likely result of the Commission's action is to provide the public with additional information and ideas rather than repressing existing sources. See 405 F.2d at 1103.
In addition, we note that the restrictions now being challenged deal with categories of speech which are, if anything, farther from the central concerns of the first amendment than those at issue when comparable rulings have been upheld by the courts. In Red Lion, the Supreme Court upheld against first amendment attack the "fairness doctrine," which restricted broadcasting stations' control over political statements — speech which is certainly the core of the first amendment guaranty. Similarly, our opinion in Banzhaf upheld restrictions which required broadcasters to allocate time for opponents of cigarette advertising, a matter which was characterized as a public health issue. We think that the STV rules create far less risk of diminishing the debate on vital public issues. Finally, the Commission found that STV would be a beneficial supplement to present television offerings, provided that neither service could acquire sufficient economic power to drive the other from the marketplace. The program restrictions are designed to preserve this balance and to insure against programming duplication; thus it can be said here, as in Banzhaf, that "[e]ven if some valued speech is inhibited by the ruling, the First Amendment gain is greater than the loss." 405 F.2d at 1102.
Since our review of the petitioners' contentions reveals no error in the Commission's determinations, the Fourth Report and Order must be
H.Rep.No.1886, 69th Cong., 2d Sess. 17 (1927); S.Doc. 200, 69th Cong., 2d Sess. 17 (1927).
A logical extension of petitioners' constitutional arguments could well render any form of direct-charge broadcasting unconstitutional. Thus, it could be argued that rules against siphoning of programs, talent and audiences are required in order to prevent STV from damaging free television and imposing impermissible hardship on poor people; but any rules against siphoning would violate the first amendment, and thus the Commission and Congress are without power to approve direct-charge broadcasting.