Yesterday, the Federal Communications Commission released the full text of its “Digital Must Carry” decision, which was adopted by a 4-1 vote at the FCC’s public meeting two weeks ago. With the release of its Second Report and Order, the Commission finally resolved the two most significant issues in the highly-contentious proceeding, which since 1998 has pitted broadcasters against cable operators and cable programming networks over the manner for implementing broadcast signal carriage obligations in the digital transition. The FCC’s decision confirms its 2001 tentative ruling and rejects broadcasters’ demands that cable operators be required to (1) carry the duplicative analog and digital signals of a broadcast station that are simulcast during the digital transition period, and (2) carry the multiple programming streams of a digital broadcast station that transmits more than its primary broadcast signal in its allotted digital spectrum. Certain operational issues pertaining to digital carriage will be resolved in future orders but it is a virtual certainty that judicial review and legislative modification of this decision will be sought immediately.
I. Rejection of a dual carriage requirement
In 2001, the FCC tentatively concluded that cable operators would not be required to carry both the analog and digital versions of broadcast signals during the multi-year transition period in which most broadcasters are authorized to transmit simultaneously in both formats. Consistent with that tentative ruling, the FCC declined to mandate dual carriage in a number of must-carry complaint proceedings commenced since then.
In its decision released yesterday, the Commission formally confirmed its tentative conclusion. The Commission first found that the “must carry” provisions of the Cable Act were ambiguous on the issue of a “dual carriage” requirement—i.e., the statute neither mandated nor precluded mandatory simultaneous carriage of both analog and digital signals of a particular broadcaster during the digital transition. However, the FCC found that forcing cable operators to carry duplicative analog and digital signals would be inconsistent with First Amendment principles. Specifically, the FCC found that, unlike analog must carry, a dual carriage requirement would not be necessary to further either (a) the governmental interests identified by the U.S. Supreme Court in the 1994 and 1997 Turner Broadcasting Systems cases (which upheld the constitutionality of analog must carry); or (b) any of the other purported “governmental interests” put forth by broadcasters:
- Preserving the benefits of free over-the-air television for viewers. The FCC found that the record did not support broadcasters’ contentions that stations would face “undue hardship” (and thereby be unable to serve noncable viewers) absent a dual carriage requirement. The FCC concluded that there was no evidence that the availability or quality of broadcast signals to noncable subscribers would substantially decrease in the absence of a dual carriage requirement.
- Promoting the widespread dissemination of information from a multiplicity of sources. The FCC found no evidence that a dual carriage requirement would promote program diversity because it would not result in additional sources of programming and instead suggested that diversity would be diminished if carriage of duplicative simulcasts resulted in the displacement of competing nonbroadcast networks.
- Promoting fair competition in the market for television programming. The FCC found no need for a dual carriage requirement to alleviate concerns about vertical integration of television programming and distribution.
- Advancing the digital transition. The FCC found that requiring dual carriage would not be necessary to complete the digital transition. The FCC determined that voluntary carriage by the top MSOs (serving 85 percent of all cable subscribers) and carriage of high definition digital programming from nonbroadcast sources would facilitate the digital transition more so than forced dual carriage.
II. Rejection of a multicast requirement
The broadcasters also sought to require carriage of any additional programming streams or services that a broadcaster might deliver through its over-the-air digital channel in addition to the broadcaster’s “primary video” signal. Because even a high definition broadcast will not consume the entire 6 MHz digital bandwidth allocated for over-the-air digital transmissions, broadcasters are able to provide additional program services (video or data) and wanted local cable systems to be required to carry them all. However, consistent with its tentative conclusion in 2001, the FCC refused to adopt any rule requiring cable operators to carry more than the “primary” video programming stream of a digital television station that is also multicasting.
The FCC first noted that the term “primary video,” as used in the Cable Act, is ambiguous. The FCC found no clear Congressional intent from the legislative history that would require mandatory carriage of multicasts, nor did it find any evidence that carriage of multiple streams of programming would be necessary to achieve the underlying statutory goals of (1) preserving the benefits of free over-the-air local broadcast television for viewers, and (2) promoting the widespread dissemination of information from a multiplicity of sources. The FCC also concluded that there had been no meaningful showing that a multicast carriage requirement would facilitate the digital transition. Accordingly, the Commission concluded that the term “primary video” means “a single programming stream” and that, if a digital broadcaster elects to divide its digital spectrum into several separate programming streams, only one stream will be considered “primary” and entitled to mandatory carriage.
In considering whether mandatory multicast carriage would be necessary to preserve the benefits of free over-the-air broadcast television, the FCC noted the recent agreement between NCTA and the Association of Public Television Stations providing for carriage of multiple streams of at least one public broadcast station in a local market during the digital transition and for carriage of multiple streams of programming aired by every public broadcast station in the market after the transition, subject to nonduplication limitations. This voluntary agreement demonstrated that the interests of over-the-air television viewers would remain protected without requiring carriage of commercial broadcasters’ multicast programming. Commissioner Martin nonetheless dissented because of his concern for the ability of small independent and niche broadcasters to develop commercially viable programming alternatives in the absence of a multicast carriage requirement.
While the Second Report and Order is an important victory for the cable industry, dual and multicast carriage issues are far from settled. The National Association of Broadcasters has stated its intention to appeal the FCC’s decision and to lobby Congress to legislatively overturn the decision. However, should any forced simulcast or multicast requirement be proposed, the cable industry will undoubtedly argue that such requirements would result not only in an infringement of cable operators’ free speech rights in violation of the First Amendment, but also in an unconstitutional “taking” of cable operators’ property in violation of the Fifth Amendment, a separate argument the FCC found unnecessary to address given its rejection of mandatory simulcast and multicast carriage requirements in its decision.
We will keep you informed of further developments. Please contact us if you have any questions.