Riding on a diamond in the sky: the DBS set-aside provisions of the 1992 Cable Act.

• Author: Weber, Richard L.
• Position: Direct broadcast satellite systems; Cable Television Consumer Protection and Competition Act of 1992

As with all communications technology utilizing the electromagnetic spectrum, Direct Broadcast Satellite (DBS) systems have fallen under the watchful eyes of Congress and the Federal Communications Commission (FCC). Despite being the most successful consumer electronics product ever introduced,(2) DBS has been unable to escape the "public trustee" status that has shackled traditional broadcasting systems for decades. Section twenty-five of the Cable Television Consumer Protection and Competition Act of 1992 ("1992 Cable Act"), which Congress incorporated into the Telecommunications Act of 1996 ("1996 Act") as section 335,(3) placed a series of obligations on DBS operators designed to foster access to the DBS platform.(4) Among these obligations, the requirement that operators set aside four to seven percent of their carriage capacity for noncommercial, educational, or informational programming(5) is at best a dubious application of the public interest mandate. DBS programmers challenged the set-aside requirement as soon as Congress enacted it, but a significantly divided panel of the U.S. Court of Appeals for the District of Columbia Circuit ultimately upheld the obligation in Time Warner Entertainment Co. v. FCC.(6) In November 1998, after a delay of nearly six years, the FCC finally adopted regulations to implement the set-aside requirements of the 1992 Cable Act.(7)

This Note explores the rationale for imposing a set-aside requirement on the fledgling DBS technology. The first section provides a brief history of the DBS industry, including an overview of DBS technology, a survey of current DBS providers, a comparison of DBS to competing video programming services, and an examination of the relevant statutory and judicial provisions governing the DBS industry. The second section discusses judicial treatment of mass media regulation by examining the foundational cases that first supported the principle of programming in the public interest. Against this backdrop, this Note then explores the courts' attempts to apply such principles to the DBS public interest requirement in Daniels Cablevision, Inc. v. United States(8) and Time Warner. The third section discusses the regulations released by the FCC in late 1998. Finally, the fourth section offers a critique of the rationale behind the imposition of public interest programming requirements on DBS providers. This section disputes the applicability of the models developed in Red Lion Broad. Co. v. FCC(9) and FCC v. Pacifica(10) to this new technology, and argues for an alternative view of DBS's obligation to the public interest--one that would better account for DBS's unique attributes and role in the mass media marketplace.

THE BUSINESS OF DIAMONDS IN THE SKY

The Game and Its Players

Once the subject of science fiction,(11) DBS technology has existed for almost two decades.(12) Although the FCC first authorized DBS service on an interim basis in 1982,(13) full-scale commercial service did not begin until June 1994.(14) DBS works by transmitting programs from the Earth to satellites positioned in specific geostationary orbital "slots,"(15) which then disseminate the programs directly to customers who pay to receive the service.(16) Unlike traditional C-Band satellite dishes designed to capture low-powered signals from a multitude of orbiting satellites, the newer DBS systems use mid-to high-power signals transmitted in the Ku-band.(17) As a result, DBS dishes need not be the size of roadside billboards: the high-powered services DirecTV/USSB and EchoStar use eighteen to twenty-four inch dishes, while the mid-powered service Primestar uses thirty-six inch dishes.(18)

The public's response to this new media technology has been remarkable. The DBS market grew from 1.7 million subscribers in September 1995 to over 10.2 million subscribers by November 1998,(19) establishing DBS as the fastest growing consumer electronics product of all time.(20) DirecTV, owned by Hughes Communications,(21) remains the industry leader, capable of delivering over 200 channels of video and audio programming to its four million subscribers.(22) Primestar, a joint venture of several cable programmers,(23) provides its 2.2 million subscribers with 160 channels transmitted at mid-power.(24) EchoStar, the only "independent" DBS provider,(25) offers 240 video and audio channels to about 1.8 million subscribers under the name "DISH Network."(26) A fourth DBS provider, mid-powered AlphaStar, filed for bankruptcy in May 1997 and dissolved after reaching a peak of roughly 50,000 subscribers.(27) Other entities are in a position to enter the fray in the next few years.(28)

Rivals to DBS in the Video Marketplace

As a relatively new multi-channel video programming distributor (MVPD), DBS providers must establish and preserve their market share in the fiercely competitive atmosphere that characterizes the video programming industry in the twilight of the twentieth century. The primary rival is clear: cable television. Now available to 97.1% of all television households in the United States, cable dominates the MVPD marketplace.(29) DBS continues to challenge cable television's lock on program delivery.(30) In enacting the 1996 Telecommunications Act, Congress intentionally encouraged such direct competition for similar services that could result in lower rates and better service for consumers of both technologies.(31) Although cable remains the undisputed "big kid on the block," DBS is proving to be a strong competitor, often offering far more channels and better picture quality than otherwise available through conventional cable television.(32) Cable television, however, has a major competitive advantage--it retransmits local broadcast television signals,(33) a feature that DBS providers currently are unable to offer on a large scale.(34)

There are several forms of MVPD systems. Multi-channel multipoint distribution services (MMDS), also known as "wireless cable" systems, use microwave frequencies to distribute programming to rooftop antennas of subscribers.(35) By July 1997, approximately 252 wireless cable systems were in operation, serving about 1.1 million subscribers.(36) Satellite Master Antenna Television (SMATV) systems essentially function as private cable systems, transmitting programming from a single "headend" through the airwaves to rooftop antennas on commonly owned buildings.(37) Programming is then relayed throughout each building using traditional cable wiring.(38)

Local telephone companies were at one time thought to be the best potential rival to traditional cable services.(39) The 1996 Act allowed telephone companies to provide cable service,(40) and with an extensive existing network of wires in place, such a feat would--at least, theoretically--be relatively simple. Theory, though, is often far removed from reality, and the telephone companies have yet to obtain a significant foothold in the cable industry.(41)

Other nascent MVPD alternatives are on the horizon, but simply are not players in the current MVPD marketplace. Internet video service, which is already available on a limited basis, is one of these alternatives.(42) By either "downloading" a video programming file or visiting a web-site with "streaming" capabilities, users are able to receive video and audio programming directly through their personal computers.(43) With an estimated 132.3 million Americans using the Internet by the year 2000,(44) Internet video service represents a logical transmission method for the wide-ranging delivery of mass programming,(45) Indeed, the DBS industry has recognized the Internet's potential and has moved to capitalize on the revolution by instigating high-speed Internet access as part of its subscription service.(46)

Traditional broadcast television interests remain noncompetitors; for now, the relationship between DBS and broadcast television is symbiotic.(47) Network programs are still far and away the most popular programs on television, regardless of the transmission method.(48) As such, network broadcast programs are highly desirable candidates for inclusion on any MVPD, including DBS, and such carriage potentially benefits both entities. Broadcast television also is the primary method of receiving local signals for those using DBS systems--though intense pressure from the industry to allow carriage of local signals on DBS systems may result in the necessary alterations to copyright law to allow carriage of local broadcast signals on DBS.(49)

Perhaps underscoring the immense fluidity of the video programming marketplace, some broadcasters recently indicated that they may attempt to convert the spectrum allocated to them by the FCC for the creation of High Definition Television (HDTV) service into small subscription television services.(50) This tactic--known as "multicasting"--has received intense criticism from Congress and other MVPDs, and is unlikely to materialize anytime soon.(51)

The Rules of the Game

The 1996 Act, although extensively overhauling several aspects of telecommunications regulation, did relatively little to alter the rules of the DBS game. The governing provisions for DBS were established primarily with the Satellite Home Viewer Acts of 1988 ("1988 SHVA")(52) and 1994 ("1994 SHVA"),(53) and the 1992 Cable Act.(54) These earlier acts especially the 1992 Cable Act--were the first to reflect congressional response to the revolutionary changes occurring in the previously separate realms of common carrier telephone service, computers, broadcasting, and cable television. The provisions of these acts relevant to DBS emerged unscathed from the 1996 Act drafting process, and remain in effect today.

The need for major alterations in the regulatory schemes for these various telecommunications media became evident as a result of the "technological convergence" phenomenon.(55) As Professors Krattenmaker and Powe observed, "[N]either producers nor...