At the end of December 1998, a three-judge panel of the U.S. District Court for the District of Delaware held that Section 505 of the Telecommunications Act of 1996 violates the First Amendment and issued an order permanently enjoining the federal government from enforcing the law. Playboy Entertainment Group, Inc. v. United States, Civil Action No. 96-94-JJF (D. Del. Dec. 28, 1998). The decision, written by Judge Jane R. Roth of the U.S. Court of Appeals for the Third Circuit, reversed an earlier decision by the same panel denying Playboy's request for a preliminary injunction. The permanent injunction voids FCC rules implementing Section 505 that had been enforced since May 1997.

Sections 504 and 505 of the Telecommunications Act

   The Communications Decency Act (CDA), adopted as part of the Telecommunications Act of 1996, included provisions addressing the issue of imperfect scrambling of premium cable channels, also known as "signal bleed." Although premium channels are scrambled as a matter of course except when a customer subscribes or orders a pay-per-view event, the scrambling is not always complete in all cable systems or for all subscribers. Non-subscribing cable customers may at times get a glimpse of intermittent audio or video signals from premium networks.

   To address this issue, the CDA included Section 504, which requires cable operators, without additional charge, to "fully scramble" or otherwise "fully block the audio and video programming" of any channel upon the request of a customer who does not subscribe to the channel. Section 504 defines scrambling as rearranging the content of the channel "so that the programming cannot be viewed or heard in an understandable manner." The provision codified a voluntary policy that had been initiated by the industry and formally adopted by the National Cable Television Association in February 1995.

   Despite the existence of Section 504, the CDA included another provision - Section 505 - which specifically targeted "adult" cable networks. Section 505 was added to the Act as a last-minute amendment, introduced on the final day of consideration by Sen. Dianne Feinstein (D-Calif.), for herself and on behalf of Sen. Trent Lott (R-Miss.). With no hearing or debate, the amendment was voted upon and passed that same evening. No evidence was presented in support of the amendment, and Congress issued no findings, either on the extent to which cable subscribers may receive partially scrambled signals of adult networks, or the extent to which such exposure, however fleeting, could be considered harmful to minors.

   Unlike Section 504, which empowered subscribers to prevent signal bleed from any channel, Section 505 imposed a scrambling requirement in advance for all households with respect to "sexually explicit adult programming or other programming that is indecent" transmitted on channels "primarily dedicated to sexually oriented programming." The law required that any such channel be fully scrambled even without a customer's request. Cable operators who could not comply with the full scrambling requirements were required to cease transmitting such channels "during hours of the day ... when a significant number of children are likely to view it." The FCC subsequently determined that networks covered by Section 505, unless fully scrambled, could not be made available to subscribers between 6 a.m. and 10 p.m., the equivalent of two-thirds of the broadcast day. Cable operators were permitted to transmit the affected networks during the so-called "safe harbor" hours of 10 p.m. to 6 a.m.

Ligitation Background

   Playboy Entertainment Group, Inc., whose video channels include Playboy Television and AdultVision, filed suit in the U.S. District Court for the District of Delaware to block enforcement of Section 505. On March 7, 1996, the U.S. District Court for the District of Delaware issued a temporary restraining order enjoining the federal government, including the Commission, "from enforcing or implementing Section 505 of the Telecommunications Act of 1996 in any manner." Playboy Entertainment Group, Inc. v. United States, 918 F. Supp. 813 (D. Del. 1996). On Nov. 8, 1996, after a hearing before a three-judge district court as required by the Telecommunications Act, the court issued a decision denying Playboy's request for a preliminary injunction, but kept the temporary restraining order in place while Playboy sought Supreme Court review. Playboy Entertainment Group, Inc. v. United States, 945 F. Supp. 772 (D. Del. 1996). In March 1997 the Supreme Court summarily affirmed the lower court, sending the matter back to the district court for further proceedings on the request for a permanent injunction. Playboy Entertainment Group, Inc. v. United States, 117 S. Ct. 1309 (1997). The FCC then adopted rules to implement Section 505, which took effect in May 1997. The court held a hearing on Playboy's request for a permanent injunction in May 1998.

Injunction Decision

   In granting a permanent injunction barring enforcement of Section 505, the court held that strict scrutiny is the applicable standard of review because the section is a content-based restriction on speech. Although the provision had a content-neutral objective of preventing signal bleed, the court noted that Section 505 was triggered only in response to certain types of adult programming. "Signal bleed from the Disney Channel, for example, does not come within the purview of the statute."

   The court also rejected various arguments for reducing the level of scrutiny. It denied the government's assertion that sexually oriented speech is less valuable, noting that "no majority of the Supreme Court has ever accepted the argument that sexually explicit, but not obscene, material receives less protection under the First Amendment than artistically, politically, or scientifically valued forms of speech." The court also rejected the government's proposed "secondary effects" model that applies in certain zoning cases, explaining that such analysis "does not apply where the regulation of adult movie theatres is based on the content of the films being shown inside the theatres." Accordingly, the government was required to demonstrate that Section 505 is necessary to serve a compelling interest and that it is the least restrictive means of achieving that interest.

   The court found that Section 505 served a compelling governmental interest, although it was troubled by the lack of evidence considered by Congress or presented by the Justice Department in support of that interest. Although it recognized that empirical proof is not required, the court noted that "[t]he mere articulation of a theoretical harm is not enough," and that "some evidence of harm short of definitive scientific proof must be presented." It was troubled by the fact that the government presented evidence "of only a handful of isolated incidents [of signal bleed] over the 16 years since 1982 when Playboy started broadcasting," and that it submitted "no clinical evidence linking child viewing of pornography to psychological harms."

   In particular, the court gave little weight to the government's expert witness, who had not written or researched "in any directly relevant area" and who "reviewed no literature concerning the effects of television viewing upon children except for the few articles provided to her by counsel for the government." It found that the lack of evidence provided by the government at trial "is reflected by the same dearth of evidence of harm within the legislative history of 505." Nevertheless, the court was not prepared to say that "there is no prospect [for] harm." It also pointed to the governmental interests in supporting parents' authority to raise their children and in protecting the privacy of the home, and found that "in sum," the interests "can be labeled Ocompelling.'"

   Despite the finding of a compelling interest, the court concluded that Section 505 was unconstitutional because it was not the least restrictive means of serving the government's purpose. It compared the subscriber-initiated blocking approach of Section 504 with the blanket mandate of Section 505 that applies "irrespective of whether a household has children," and concluded that Section 504 was the less restrictive option. "In fact," the court found, "two-thirds of all households in the United States have no children." It also found that the content-neutrality of Section 504 made it less restrictive of First Amendment interests than Section 505. The Justice Department submitted evidence showing that very few subscribers had availed themselves of the safeguards provided by Section 504. The court, however, countered that "the finding of minimal lockbox distribution is equally consistent with an ineffective statute as it is with a societal response that signal bleed is not a pervasive problem." "Indeed," the court concluded, "the Government has not convinced us that it is a pervasive problem."

   Considering the impact of the law on Playboy, the court found that the "restrictiveness of 505 is now evident" given the experience following the law's implementation. The record before the court demonstrated that the cable operators with insufficient scrambling technology "unanimously chose to stop all such programming on dedicated adult channels during the non-safe harbor hours." Although the parties disagreed about the financial impact on Playboy as a result, the court found that the actual amount of financial loss "is of little relevance to [the] First Amendment analysis."

   The court concluded that the time channeling requirement of Section 505 "diminishes Playboy's opportunities to convey, and the opportunity of Playboy's viewers to receive, protected speech." The court compared the relative burdens of Section 505 with the tailored, voluntary, and content-neutral alternative and found Section 504 to be less restrictive. At the same time, it required Playboy to arrange with cable operators to notify subscribers of the existence of Section 504 as a viable alternative. Because it resolved the case on the question of less restrictive means, the court declined to address Playboy's contentions that Section 505 was unconstitutionally vague and that it violated the Equal Protection Clause.

   The CDA provides a right of direct appeal to the U.S. Supreme Court when one of its provisions is declared unconstitutional by a three-judge district court. However, it is not yet known whether the government will appeal the decision.