D. FCC Adopts Cable Rules for Digital Television Signals

     This initial ruling shows strong support for the cable operators’ position, as the FCC tentatively concluded that “a dual carriage requirement [that is, carriage of both analog and digital signals] appears to burden cable operators’ First Amendment interests substantially more than is necessary to further the government’s substantial interests.”  In the Matter of Carriage of Digital Television Broadcast Signals, First Report and Order and Further Notice of Proposed Rulemaking, CS Docket No. 98-120, FCC 01-22, para. 3 (rel. Jan. 23, 2001) (Digital Carriage Order).

     This tentative conclusion, however, does not definitively resolve the matter.  The FCC accompanied its ruling with a Further Notice of Proposed Rulemaking (FNPRM) addressing “several critical questions at the center of the carriage debate” so that it can “ultimately resolve the issue of mandatory dual carriage.” Id.

     The issue of cable operators being required to carry broadcast signals has a long history.  Initially, two successive FCC rules were struck down by unanimous panels of the U.S. Court of Appeals for the District of Columbia Circuit.  Quincy Cable TV, Inc. v. FCC, 768 F.2d 1434 (D.C. Cir. 1985); Century Communications Corp. v. FCC, 835 F.2d 292 (D.C. Cir. 1987), clarified, 837 F.2d 517 (D.C. Cir. 1988).

     The subsequent congressional enactment, however, was upheld by a sharply divided U.S. Supreme Court, applying intermediate scrutiny to rules it said were content neutral.  These regulations were designed to promote three substantial governmental interests: (1) preserving the benefits of free over-the-air television; (2) promoting the widespread dissemination of information from a multiplicity of sources; and (3) promoting fair competition in the television programming market.  Turner Broadcasting System, Inc. v. FCC, 512 U.S. 622 (1994) (Turner I); 520 U.S. 180 (1997) (Turner II).

     Thus, cable operators currently carry commercial television stations pursuant either to bargained-for “retransmission consent” agreements reached with individual stations, or through mandatory must-carry requirements for stations requesting such carriage.  Depending on its channel capacity, a cable system must devote up to one-third of its channels to must-carry.  Cable operators must carry local noncommercial educational television stations according to a different formula.  And cable operators must carry local television stations on a basic tier of service provided to all subscribers and on certain designated channel positions.

     The Commission previously ruled that once existing analog broadcast stations return their allotted analog spectrum to the FCC and convert to digital transmission, they will be entitled to mandatory carriage for their digital signals consistent with applicable statutory and regulatory provisions.  Service Rules for the 746-764 and 776-794 MHz Bands, and Revisions to Part 27 of the Commission’s Rules, Memorandum Opinion and Order and Further Notice of Proposed Rulemaking, FCC 00-224, para. 65 (rel. June 30, 2000).

      In its Digital Carriage Order, the FCC reaffirmed (with Commissioner Gloria Tristani dissenting) that, to the extent a digital television station is simultaneously broadcasting multiple video signals, only one signal (including its program related content) as designated by the broadcaster will be considered “primary video” under the statute for must-carry purposes.  Digital Carriage Order at paras. 54, 57.  A current digital-only TV station, commercial or noncommercial, can immediately assert its right to cable carriage.  Id. at para. 12.

     The most difficult issues, however, arise during what may be an extended transition period from analog to digital.  During this time there may be approximately twice as many broadcast stations on the air as now with an increasing redundancy of basic content between the analog and digital signals.  Id. at paras. 9, 117-18.

     Thus, the Commission had sought comment on a range of approaches: (1) immediate dual carriage, in which cable systems would be required to carry both analog and digital commercial television signals up to the one-third capacity limit; (2) an either-or proposal, in which broadcasters could choose must-carry for either their analog or digital signals during the transition period; or (3) no must-carry, under which digital signals would have no mandatory carriage rights during the transition, but only when the transition is complete.  Id. at para. 9.

     The FCC read the governing statute, 47 U.S.C. Sec. 534(b), as treating commercial and noncommercial television stations alike for cable carriage purposes and neither mandating nor precluding dual carriage.  Digital Carriage Order at paras. 14, 22, 113.  Interestingly, then, the FCC stated that its overall goal is “to facilitate an efficient market-oriented structure that implements the Act in a manner that, to the extent possible, permits private agreements to resolve issues.”  Id. at para. 4.

     For example, the Commission ruled that a broadcaster that is simultaneously broadcasting both analog and digital signals may treat the two differently for carriage purposes.  That is, the broadcaster may choose must-carry or retransmission consent for its analog signal while negotiating a retransmission consent agreement for some or all of its digital signal.  This is intended to further the digital transition, as a cable operator may be more willing to carry certain streams or portions of digital content even from a station that elects must-carry for its analog signal.  Id. at para. 27.

     For similar reasons, the Commission will allow a cable operator and a broadcaster choosing retransmission consent to negotiate for partial carriage of a local digital television signal.  Id. at para. 31.  This is a departure from the analog carriage rules that require a cable operator to carry local television signals in their entirety.  But a broadcast signal provided in high definition format must be carried in high definition on the cable system.  Id. at para. 73.

     The Commission reached a tentative conclusion that the dual carriage requirement would likely be unconstitutional, but declined to decide the issue at this stage.  Commissioner Susan Ness dissented even from the tentative conclusion, calling it gratuitous and premature.  The FCC noted that in the Turner cases, the Supreme Court had upheld analog must carry under intermediate scrutiny on the basis of a substantial record of harm to television stations and therefore to the three identified governmental interests.  Digital Carriage Order at paras. 113-14.

     The FCC thus issued a Further Notice of Proposed Rulemaking to gather evidence on a number of matters including: (1) the need for dual carriage for a successful transition to digital television and return of the analog spectrum (and when that return actually will occur); (2) cable system usable, activated channel capacity to accommodate dual carriage without displacing other programming or services; and (3) digital retransmission consent through which market forces can be relied on to provide cable subscribers access to digital television signals, and television stations access to carriage on cable systems. Digital Carriage Order at paras. 3, 112.  Commissioner Harold Furchtgott-Roth, however, saw no need for a Further Notice because it would engender delay and uncertainty about the final resolution. 

     The FNPRM also seeks comment on the proper scope of “program-related” content in the digital context as material that cable operators will be required to carry as part of a broadcaster’s designated primary video signal.  Id. at para. 122.  Should this, for example, include multiple camera angles or embedded statistical information in sports broadcasts or, more generally, other interactive program enhancements?

     The Commission also proposes to allow cable operators adding digital broadcast signals to their channel lineups to increase rates for each 6 MHz of capacity devoted to such signals.  In this way, subscribers would bear a fair share of the overall system costs associated with the number of channels delivered on the tier, relative to the system’s overall capacity.  Digital Carriage Order at para. 134.

     Although the Commission determined that constitutional questions and issues of economic impact precluded it from acting definitively on the central issue of dual carriage during the transition period, its tentative conclusion certainly favors cable operators.  On the other hand, the Commission remains vitally interested in promoting as prompt and full a transition to digital as possible.