Cable operators' Fifth Amendment claims applied to digital must-carry.

• Author: Laughner, Nissa

1. INTRODUCTION II. MUST-CARRY AND RETRANSMISSION CONSENT RULES A. Analog Must-Carry B. Analog Must-Carry Ru les Are Ctitutional C. Digital Must-Carry III. CABLE FIFTH AMENDMENT CLAIMS A. Physical Appropriation B. Regulatory Takings IV. COMPELLED SPEECH AND PROPERTY IN THE CABLE CONTEXT W. CONCLUSION I. INTRODUCTION

   As we face the widespread transition from analog to digital television, arguments are being made with increasing frequency by organizations such as the National Cable Television Association ("NCTA") that regulations like digital must-carry violate cable operators' Fifth Amendment rights. (1) These arguments have been made in the past, although most cases have failed to reach the Fifth Amendment claims by deciding the issues solely on First Amendment grounds. (2) And yet, without a clear understanding of the extent of the property rights held by cable operators, and the relationship between such property rights and speech rights, the legal analysis of such claims will remain incomplete.

   Although such claims are nascent, they ultimately raise important policy implications for the future of cable regulation, particularly in the broadband era. (3) Property rights may form an alternative basis by which to limit must-carry and access regulations because property rights form the basis of takings and due process claims brought under the Fifth and Fourteenth Amendments. The Takings Clause, as incorporated through the Fourteenth Amendment, prohibits both state and federal governments from appropriating private property for public use without just compensation. (4) Similarly, the Due Process Clause prohibits state or federal deprivations of property without due process of law. (5) At least theoretically, a taking requires just compensation while a due process violation requires invalidation. (6) Differences between due process and takings analyses, however, have been historically muddled. The process beginning with the 1922 Supreme Court decision in Pennsylvania Coal v. Mahon, in which the majority announced that certain regulations can go too far in their interference with property rights, thus becoming the de facto equivalent of a direct taking. (7)

   With respect to cable regulation, significant free speech implications may be muddying the waters further. Neither speech nor property rights are exclusive of one another. The degree to which cable historically has had autonomy over its facilities--as established through regulation and tradition--influences both speech and property rights. The legal ownership of particular channel space through obligations--such as public, educational, or government ("PEG") channels, leased-access, and must-carry--influences the degree to which a cable company may have editorial control over those channels. (8) The degree to which a franchise creates property rights, and the degree to which those rights and agreements may be modified by local or federal law, may influence how a cable facility is used and who can use the facility. (9) While private property owners, in the traditional sense, may have the right to exclude unwanted and disruptive speakers from their property, (10) cable operators operate under significant regulation, but unlike many regulated businesses, cable operates in a field historically imbued with free speech values. If regulation limits the property-based claims of highly regulated businesses in fields that do not directly implicate free speech concerns, (11) then potentially, regulations designed to serve free speech values may significantly constrain the property-based claims of cable providers.

   The recent resurgence of legal claims related to digital must-carry offers the opportunity to reconsider our approach to cable autonomy and to address the balance of these rights. Addressing this balance is particularly important given the programming diversity made available through digital innovation, which increases programming streams and scanning formats as well as cable capacity to transmit. The debate over digital must-carry must take into account the administrative and capacity burdens on a cable operator that attend such diversity, the concerns of local broadcasters in their attempt to reach cable subscribers, and the concerns of consumers over access to local broadcast programming. Conceptions of the property and free speech fights of cable operators influence each of these concerns. (12) While it may be easier to decide cable autonomy issues solely on First Amendment grounds, or to attempt to separate the speech and property concerns, a more holistic picture of cable autonomy rights may only be possible with the development of a hybrid analysis that looks at the intersection of speech and cable property rights.

   By identifying the legal and policy implications of property rights in the digital must-carry issue, this Article identifies underlying points of confusion associated with cable autonomy--a confusion that arises out of cable's quasi-public, quasi-private status. Absent such analysis, this confusion may create an inconsistent and unpredictable regulatory and legal regime in which ever-expanding notions of property may silently and slowly encroach on prevailing notions of access or, alternatively, buttress speaker rights. Part II of this Article will begin with a review of must-carry regulations, including the recent policy debate over dual and multicast carriage. Part III will present a traditional Fifth Amendment analysis of must-carry. Part IV will address some of the free speech implications of this property-based analysis. Finally, Part V will conclude by showing how these property-based claims may influence future cable regulatory policies.

2. MUST-CARRY AND RETRANSMISSION CONSENT RULES

   The Federal Communications Commission ("FCC") faces numerous concerns regarding must-carry and retransmission consent in the digital context, (13) most notably the calculation of cable channel capacity, (14) the definitions of "primary video" (15) and "program-related[ness],"(16) and the preservation of digital signal quality (e.g., material degradation). (17) Part of the FCC's dilemma in applying the must-carry rules to digital television is that initial rules were written in an analog environment when each station delivered programming in the same signal format (18) (NTSC, 525 lines, 4x3 aspect ratio) and in the same amount of channel space (6 MHz). (19) In a digital environment, however, each station can transmit in eighteen different scanning formats and may send up to six simultaneous digital streams of programming. As a result, the application of the must-carry rules in the digital environment creates a policy quagmire.

   1. Analog Must-Carry

      The original must-carry rules are found in the Cable Television Consumer Protection and Competition Act of 1992 ("1992 Cable Act"), which amends the Communications Act of 1934. (20) The 1992 Cable Act prohibits cable operators and other multichannel video programming distributors from retransmitting commercial and low-power television signals, as well as radio broadcast signals, without the broadcaster's consent. This permission is commonly referred to as retransmission consent. (21) When a broadcast station chooses to negotiate a retransmission consent agreement, the cable operator will compensate the station for the placement of its programming on the cable system. (22) Network-affiliated broadcasters are better positioned to negotiate retransmission agreements because of the popularity and ratings of their programs. Without these stations on their cable lineup, the cable system is likely to lose many customers. Estimates demonstrate that about 80% of commercial television broadcasters chose retransmission consent over must-carry in the 1993-96 election cycle. (23)

      Under the 1992 Cable Act, however, a station may elect the must-carry option when its carriage does not financially benefit the cable system. Section 4 of the 1992 Cable Act requires cable operators to carry "the signals of local commercial television stations and qualified low power stations...." (24) If a cable operator has twelve or fewer usable activated channels, the cable operator must carry only three local commercial stations, selected at the cable operator's discretion. Cable operators, however, may not select a low-power station over a local affiliate and, if the cable operator elects to carry a local affiliate of a network, it must carry the affiliate that is nearest to the area served by the cable system, if a cable operator has more than twelve usable activated stations, however, then this operator must carry local commercial stations as requested, up to one-third of all channel capacity. (25)

      Section 5 of the 1992 Cable Act also gives noncommercial (i.e., public) television stations authority to demand carriage. (26) Cable systems consisting of 12 or fewer channels are required to carry the signal of one qualified local noncommercial educational station. (27) Systems with thirteen to thirty-six channels are required to carry at least one but not more than three stations, (28) and cable systems with more than thirty-six channels are required to carry the signal of three noncommercial, educational stations. (29) In order to be considered a qualified noncommercial station, a station either must be licensed as such and "owned and operated by a public agency, nonprofit foundation, corporation, or association[,]" (30) or be owned and operated by a municipality transmitting "predominantly noncommercial programs for educational purposes." (31) Noncommercial stations rely exclusively on must-carry and, unlike their commercial counterparts, are not able to seek compensation under the retransmission consent provisions. (32)

      In the findings section of the 1992 Cable Act, Congress cited many justifications for the must-carry and retransmission rules. Congress found the cable industry to be highly concentrated and worried that this...