DOJ: Drop Cable-Ownership Case

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Two federal laws purportedly designed to curb discriminatory conduct by cable
operators should not be reviewed by the U.S. Supreme Court, the Department of
Justice told the court in a Jan. 19 brief.

The DOJ said it wants the high court to let stand without further review a
lower-court ruling last May that said both laws were constitutional under the
First Amendment despite the objections of cable-system owner Time Warner
Entertainment.

'The decision of the [U.S. Court of Appeals for the District of Columbia
Circuit] is correct and does not conflict with any decision of this court or of
any other court of appeals. Accordingly, further review is not warranted,' the
DOJ said in a 21-page brief.

TWE -- a cable-system partnership 75 percent-owned by AOL Time Warner Inc. --
is challenging provisions of the 1992 Cable Act. One caps the number of cable
subscribers one operator may serve, while a second caps the number of channels
an operator may occupy with programming it owns.

If the DOJ were to prevail, the Supreme Court would end a case that just
entered its eighth year in the federal-court system. The case got held up for
years mainly because the D.C. Circuit refused to act while Federal
Communications Commission rules implementing both provisions were still before
the agency. The FCC adopted final rules in October 1999, which TWE and AT&T
Corp. promptly appealed to the same court that upheld the underlying laws.

In the lower court, TWE argued that both laws were content-based restrictions
on speech, akin to restricting the distribution of a newspaper and to telling a
newspaper owner that a certain number of pages need to set aside for
unaffiliated third parties. TWE said such laws are routinely struck down under
the most stringent test for judging the legality of federal laws regulating
speech.

In its Supreme Court brief, the DOJ said the provisions were closer to laws
requiring carriage of local TV stations that the Supreme Court upheld in 1997.
In that case, the court determined that 'must-carry' obligations were designed
to address cable's 'bottleneck power' not for the purpose of suppressing cable
speech, but to let the speech of others flourish.

In its rules, the FCC said a cable operator could serve no more than 30
percent of subscribers to cable, direct-broadcast satellite and other providers
of multichannel-video programming.

Regarding channel-occupancy limits, the commission said a cable operator
could not fill more than 40 percent of its first 70 channels with affiliated
programming.

The D.C. Circuit has been reviewing the FCC's rules since oral arguments in
October, and it could release a decision at any moment.

AT&T is especially interested in seeing whether the D.C. Circuit upholds
the FCC's ownership-attribution rules. Those rules, challenged by AT&T as
too broad, state that a 5 percent voting-stock interest in a cable operator
requires AT&T to include in its subscriber base all of the subscribers under
the control of that cable operator.

AT&T owns the other 25 percent in TWE. The FCC said that because
AT&T-owned cable networks sold programming to TWE, TWE's 9.7 million
subscribers were attributable to AT&T.

Since Dec. 15, the FCC has twice ordered AT&T to sell its interest in TWE
by May 19 in order to comply with the 30 percent cap.

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