The U.S. Court of Appeals has rejected cable operators' First Amendment challenge to the FCC's program carriage regime, but did find that the commission's imposition of a standstill on prices, terms and conditions of a contract for which a complainant was seeking renewal was out of bounds.
The National Cable & Telecommunications Association had argued that the standstill needed more public vetting before the FCC adopted it.
Cable operators had also argued that the rules are content-based and needed to be subject to strict First Amendment scrutiny they had not gotten. The FCC had countered that the rules do not disfavor speech based on content, but instead regulates speech based on "affiliation with a cable operator," which, the commission points out, are the same grounds on which the D.C. circuit upheld leased access. The court agreed with the FCC on that score.
In a decision handed down Wednesday, the court said that the FCC's program carriage rules do not run afoul of the First Amendment because they are "content and speaker neutral" and thus warrant intermediate rather than strict scrutiny.
Under that test, the court said, the rules pass muster because they are "case-specific standards for identifying affiliation-based discrimination (a) serve important government interests in promoting competition and diversity in an industry still posing serious competitive risks, and (b) are narrowly tailored not to burden substantially more speech than necessary to further those interests.
The court did suggest that the FCC might want to take a fresh look at the carriage rules given the increased competition in the marketplace.
But the court found the standstill provision, adopted in 2011 as part of the FCC's effort to speed the complaint process, to have violated the Administrative Procedures Act because the FCC failed to provide sufficient notice and opportunity for public comment, and so vacated that part of the rules. NCTA had argued as much. "After the FCC began to formulate a specific approach to a final standstill rule, the public was entitled to a new opportunity to attempt to persuade the Commission," it wrote to the FCC in July 2008.
The court isn't even sure the FCC has the authority to impose the standstill. "Even if the FCC has issued standstill orders in other contexts, it is not clear that it has the authority to issue such an order under the program carriage regime," the Second Circuit said.
But it vacated the standstill without prejudice, which means the FCC is free to re-apply it after providing for that sufficient notice and comment.
Former FCC commissioner Robert McDowell, in his partial dissent from the FCC's 2011 program carriage tweaks, had warned that the standstill had not been sufficiently vetted. "The Commission, however, did not provide adequate notice and opportunity for comment under the Administrative Procedure Act. An analysis of a possible standstill framework would benefit significantly from further debate," he wrote in his statement at the time. "Accordingly, I respectfully dissent from this portion of the order."
“I am pleased that the court of appeals upheld the Commission’s program carriage rules against constitutional challenge," said acting FCC chairwoman Mignon Clyburn."As the Commission pointed out – and the court agreed in rejecting the cable industry’s arguments – these rules remain necessary to prevent anticompetitive conduct by video programming distributors, and they empower consumers to access a rich and diverse mix of programming. Although the court overturned the standstill rule on procedural grounds, it recognized that the Commission remains free to adopt the same rule in accordance with the requirements of the Administrative Procedure Act.”
“We are pleased with the court's decision to reject the FCC's attempted expansion of the program carriage rules, and with its statement encouraging the FCC to ‘reevaluate the program carriage regime as warranted by increased competition in the video programming industry," said the National Cable & Telecommunications Association in a statement.
Time Warner Cable, which joined NCTA in the court challenge, accentuated the positive, including language it said suggested the court had issues with the program carriage regime even if it did not find it unconstitutional.
“We’re pleased that the Second Circuit has agreed with us, and vacated the FCC’s so-called 'standstill requirement,' which would have required a distributor to continue carrying a cable network based solely upon the filing of a program carriage complaint," the company said in a statement. "We’re also gratified that the Court has called into question the future viability of the entire program carriage regime as competition in the MVPD marketplace continues to become more and more vibrant, and has recognized, as we urged, that the FCC should consider whether MVPDs possess market power before imposing program carriage obligations in response to individual complaints.”