No. 07-5553 -- Petitioners Brief (final Version)

07-5553 IN THE UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT ───────────── No. 07-5553-ag ───────────── CABLEVISION SYSTEMS CORPORATION, Petitioner, v. FEDERAL COMMUNICATIONS COMMISSION, UNITED STATES OF AMERICA, Respondents ───────────── On Petition for Review of an Order of the Federal Communications Commission ───────────── BRIEF FOR PETITIONER (Final Version) ─────────────

HOWARD J. SYMONS TARA M. CORVO MINTZ, LEVIN, COHN, FERRIS, GLOVSKY AND POPEO, P.C. 701 Pennsylvania Avenue, N.W., Suite 900 Washington, D.C. 20004 (202) 434-7300 February 8, 2008

HENK BRANDS PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLP 1615 L Street, N.W., Suite 1300 Washington, D.C. 20036 (202) 223-7300 Counsel for Cablevision Systems Corporation

ALLAN J. ARFFA J. ADAM SKAGGS PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLP 1285 Avenue of the Americas New York, New York 10019 (212) 373-3000

Corporate Disclosure Statement Pursuant to Rule 26.1 of the Federal Rules of Appellate Procedure, petitioner states as follows. Cablevision Systems Corporation is a publicly traded company. Cablevision Systems Corporation has no parent corporation. The following publicly held corporations own 10% or more of Cablevision Systems Corporation’s stock: Legg Mason, Inc. (through ClearBridge Advisors, LLC, Smith Barney Fund Management LLC, and ClearBridge Asset Management, Inc. as a group) and T. Rowe Price Associates, Inc. Directly or indirectly, Cablevision Systems Corporation owns and operates (among other things) cable systems.

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Table of Contents Page(s): Corporate Disclosure Statement . . . . . . . . . . . . . . . . . . . . . . . . .

i

Table of Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

ii

Table of Authorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

iv

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1

Decision Under Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3

Statement of Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3

Statement of Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4

Statement of the Case and Facts . . . . . . . . . . . . . . . . . . . . . . . . .

4

1. Broadcasting and Cable . . . . . . . . . . . . . . . . . . . . . . . .

4

2. The Must-Carry Statute . . . . . . . . . . . . . . . . . . . . . . . .

8

3. The Statute’s Market-Modification Mechanism. . . . . . .

12

4. WRNN’s First Attempt at Carriage on Long Island . . . .

15

5. WRNN’s Second Attempt at Carriage on Long Island . .

19

6. Judicial Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

25

Summary of Argument . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

27

Argument. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

31

I.

THE FCC ERRED IN ANALYZING WRNN’S SUPPOSED SERVICE TO LONG ISLAND . . . . . . . . . . . A.

The FCC’s Overruling of the Bureau’s Findings About Long-Island-Targeted Programming Is Unexplained and Unexplainable . . . . . . . . . . . . . . .

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31

32

B.

C. D.

E. II.

36

The FCC’s Reliance on Signal Coverage Is Directly Contrary to Governing FCC Precedent. . . . . . . . . . .

37

The FCC’s Refusal To Consider Local Programming Provided by Other Stations Is Contrary to Plain Statutory Text . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

39

The FCC’s Refusal To Consider Viewing Patterns Is Contrary to Plain Statutory Text . . . . . . . . . . . . . . .

41

THE FCC IGNORED THE STATUTORY INSTRUCTION THAT MARKET MODIFICATION SHOULD “BETTER EFFECTUATE THE PURPOSES OF” MUST-CARRY . . A.

42

The FCC Fundamentally Misapprehended the Governing “Value of Localism” . . . . . . . . . . . . . . .

42

The FCC’s Policy of Rewarding Must-Carry Gamesmanship Is Directly Contrary to the Statute’s Purposes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

45

THE FCC ERRED BY COMPELLING CARRIAGE IN VIOLATION OF CABLEVISION’S CONSTITUTIONAL RIGHTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

50

B.

III.

The FCC’s Interpretation of the “Historical Carriage” Factor Flies in the Face of Unambiguous Statutory Text . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

A.

Compelled Carriage of WRNN on Long Island Cannot Withstand a First Amendment Challenge . . .

50

Compelled Carriage of WRNN on Long Island Cannot Withstand a Fifth Amendment Challenge . . .

60

Constitutional Concerns Can and Must Be Avoided .

61

Conclusion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

64

B. C.

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Table of Authorities Page(s): Cases Blake v. Carbone, 489 F.3d 88 (2d Cir. 2007) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 Buckley v. Valeo, 424 U.S. 1 (1976) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 Century Communications Corp. v. FCC, 835 F.2d 292 (D.C. Cir. 1987) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Clearing House Assoc. v. Cuomo, 510 F.3d 105 (2d Cir. 2007) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 Field Day, LLC v. County of Suffolk, 463 F.3d 167 (2d Cir. 2006) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 Fox Television Stations, Inc. v. FCC, 280 F.3d 1027 (D.C. Cir. 2002) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 Fox Television Stations, Inc. v. FCC, 489 F.3d 444 (2d Cir. 2007) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Midwest Video Corp. v. FCC, 571 F.2d 1025 (8th Cir. 1978), aff’d, 440 U.S. 689 (1979) . . . . . . . . . . . . . . 61 Mistick PBT v. Chao, 440 F.3d 503 (D.C. Cir. 2006) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 Motor Vehicle Mfrs. Ass’n of United States, Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29 (1983) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 New York State Elec. & Gas Corp. v. Sec’y of Labor, 88 F.3d 98 (2d Cir. 1996) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 NLRB v. Aces Mechanical Corp., 837 F.2d 570 (2d Cir. 1988) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

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Page(s): Quincy Cable TV, Inc. v. FCC, 768 F.2d 1434 (D.C. Cir. 1985) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8, 55 Rust v. Sullivan, 500 U.S. 173 (1991) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 Time Warner Entm’t Co. v. FCC, 240 F.3d 1126 (D.C. Cir. 2001) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 Traction Wholesale Center Co., Inc. v. NLRB, 216 F.3d 92 (D.C. Cir. 2000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 Turner Broad. Sys., Inc. v. FCC, 512 U.S. 622 (1994) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . passim Turner Broad. Sys., Inc. v. FCC, 520 U.S. 180 (1997) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . passim Turner Broad. Sys., Inc. v. FCC, 819 F. Supp. 32 (D.D.C. 1993) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 United States v. Carolene Prods. Co., 304 U.S. 144 (1938) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 United States v. Gonzalez, 420 F.3d 111 (2d Cir. 2005) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 United States v. Morris, 928 F.2d 504 (2d Cir. 1991) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 United States v. Salerno, 481 U.S. 739 (1987) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 WLNY-TV, Inc. v. FCC, 163 F.3d 137 (2d Cir. 1998) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19, 32 Yang v. Gonzales, 478 F.3d 133 (2d Cir. 2007) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

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Page(s): Administrative Decisions 1998 Biennial Regulatory Review — Review of the Commission’s Broadcast Ownership Rules and Other Rules Adopted Pursuant to Section 202 of the Telecommunications Act of 1996, Biennial Review Report, 15 FCC Rcd 11058 (2000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2002 Biennial Regulatory Review — Review of the Commission’s Broadcast Ownership Rules and Other Rules Adopted Pursuant to Section 202 of the Telecommunications Act of 1996, Report and Order and Notice of Proposed Rulemaking, 18 FCC Rcd 13620 (2003) . . . . . . . . . . . . . . . . . . . . 5, 6 Amendment of Section 3.606 of the Commission’s Rules and Regulations, 41 FCC 148 (1952) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Amendment of Section 73.606(b), 11 FCC Rcd 12229 (1996) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Broadcast Localism, Notice of Inquiry, 19 FCC Rcd 12425 (2004) . . . . . . 5, 6, 7 Commission Seeks To Update the Record for a Petition for Reconsideration Regarding Home Shopping Stations, Public Notice, 22 FCC Rcd 8550 (2007) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 Definition of Markets for Purposes of the Cable Television Broadcast Signal Carriage Rules, Order on Reconsideration and Second Report and Order, 14 FCC Rcd 8366 (1999) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13, 50 Definition of Markets for Purposes of the Cable Television Mandatory Television Broadcast Signal Carriage Rules, Report and Order and Further Notice of Proposed Rulemaking, 11 FCC Rcd 6201 (1996) . . . . . . . 12 Market Modifications and the New York Area of Dominant Influence, Memorandum Opinion and Order, 12 FCC Rcd 12262 (1997) (“1997 Order”) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . passim Media Bureau Staff Report Concerning Over-the-Air Broadcast Television Viewers, MB Docket No. 04-210, 2005 WL 473322 (MB rel. Feb. 28, 2005) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 - vi -

Page(s): Petition of Cablevision, Memorandum Opinion and Order, 11 FCC Rcd 6453 (CSB 1996) (“1996 Order”) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18, 39 Petition of Time Warner New York City Cable Group, Memorandum Opinion and Order, 11 FCC Rcd 6528 (1996) . . . . . . . . . . . . . . . . . . . . . . . 16 Petition of WRNN License Co. LLC, for Modification of Television Market for WRNN-DT, Kingston, New York, Memorandum Opinion and Order, CSR-6956-A, FCC 07-151, 2007 WL 4208281 (rel. Nov. 29, 2007)(“2007 Order”) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . passim Service Rules for the 746-764 MHz Bands, and Revisions to Part 27 of the Commission’s Rules, Notice of Proposed Rulemaking, 14 FCC Rcd 11006 (1999) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 WRNN License Co., Memorandum Opinion and Order, 21 FCC Rcd 5952 (MB 2006) (“2006 Order”) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . passim WRNN License Co., 20 FCC Rcd 7904 (MB 2005) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 WRNN-TV Assocs., 19 FCC Rcd 12343 (MB 2004) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20, 54

Statutes 5 U.S.C. § 706(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 28 U.S.C. § 2342 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 47 U.S.C. 307(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 47 U.S.C. § 402(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 47 U.S.C. § 534 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 47 U.S.C. § 534(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 47 U.S.C. § 534(g)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 - vii -

Page(s): 47 U.S.C. § 534(h)(1)(A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 47 U.S.C. § 534(h)(1)(C) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 47 U.S.C. § 534(h)(1)(C)(i) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12, 14, 47 47 U.S.C. § 534(h)(1)(C)(ii) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . passim 47 C.F.R. § 1.115 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 47 C.F.R. § 73.606(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 47 C.F.R. § 73.625(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 47 C.F.R. § 73.1120 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 47 C.F.R. § 73.3526(e)(11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 47 C.F.R. § 76.55(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 47 C.F.R. § 76.59 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Other Authorities Audio Tape: Cablevision v. FCC, No. 07-5553, Oral Argument (Jan. 15, 2008) (2nd. Cir.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26, 46 Cable Television Consumer Protection and Competition Act of 1992 (“1992 Cable Act”), Pub. L. No. 102-385, 106 Stat. 1460 . . . . . . . . . . . . . . . . . 7, 9, 10 Cablevision’s Emergency Motion for a Stay, Cablevision Sys. Corp. v. FCC, No. 07-5553 (filed 2d Cir. Dec. 19, 2007) . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 FCC Adopts 13th Annual Report to Congress on Video Competition and Notice of Inquiry for the 14th Annual Report, News Release, (Nov. 27, 2007) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56, 57 FCC Opposition to Emergency Motion for Stay, Cablevision Sys. Corp. v. FCC, No. 07-5553 (filed 2d Cir. Jan. 10, 2008) . . . . . . . . . . . . . . . . . . . . . . . 47 H.R. Rep. No. 102-628 (1992) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 - viii -

Page(s): Opposition of WRNN License Co., LLC to Motion for Stay of Cablevision, Cablevision Sys. Corp. v. FCC, No. 07-5553 (filed 2d Cir. Jan. 11, 2008) . . 46 Peter Grant & Dionne Searcey, Verizon’s FiOS Challenges Cable’s Clout, Wall St. J., Oct. 24, 2007. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 R.R. Bowker LLC, Broadcasting & Cable Yearbook 2006, at B-186 (2005) . . 15 Random House Webster’s Unabridged Dictionary 1004 (2001) . . . . . . . . . . . . 46 Verizon Communications, Inc., News Release, Verizon Provides New Financial and Operational Details on Its Fiber Network as Deployment Gains Momentum, Sept. 27, 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 Verizon Communications Inc., Press Release, Verizon Reports Continued Success in 3Q 2007, Oct. 29, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 WLNY-TV, Inc. v. FCC, No. 97-4243, Brief for Respondents (filed 2d Cir. Jan. 22, 1998) (“FCC’s WLNY Br.”) . . . . . . . . . . . . . . . . . passim WRNN License Company, LLC for Modification of the Television Market for WRNN-DT, Kingston, New York, CSR 6956-A, Opposition of Cablevision Systems Corporation (filed Feb. 13, 2006) (“Opp”) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . passim

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Introduction This case is about cynical gamesmanship by an upstate New York television station in pursuit of cable carriage on Long Island, where it has never had a viewing audience. In 1992, Congress enacted the so-called must-carry statute, which gives television broadcast stations rights to be carried on local cable systems. Shortly thereafter, investors bought WRNN, a cheap television station licensed to Kingston. They then changed the station’s format to home-shopping and started to seek cable carriage throughout the huge New York City television market. A decade ago, however, the FCC rejected WRNN’s effort, holding that carriage outside upstate New York would not promote “the value of localism,” the statutory touchstone for defining a station’s must-carry market. In doing so, the FCC noted that WRNN had never cast an over-the-air signal over Long Island and that its programming did not target Long Island. This Court affirmed. In the wake of that ruling, WRNN moved its antenna closer to Long Island and added a token amount of Long Island-targeted programming to its broadcast schedule. Based on those new facts, WRNN asked the FCC to reconsider. And the agency did so: it granted WRNN’s request.

That was error. The must-carry statute provides that the FCC may grant must-carry rights only insofar as they promote “the value of localism.” Granting carriage on Long Island to a station that is licensed to Kingston, a community with few economic, social, and cultural ties to Long Island, and that broadcasts only a token amount of Long Island-targeted programming, does not appreciably promote localism for Long Islanders. Meanwhile, such carriage harms television viewers in upstate New York. Stations licensed to outlying areas like Kingston are supposed to serve their community of license with local news and information. Granting broad cable carriage encourages them to replace programming targeted at their community of license with programming targeted at distant and more populous communities in pursuit of greater advertising revenue. Moreover, the must-carry statute was intended to restore stations to the audience that they had in a world without cable — not to make them better off. Thus, where the FCC previously defined a station’s natural market as not including Long Island, a station should not be granted a second bite at the apple after making some token changes solely with a view to obtaining more cable carriage.

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All of these points have particular urgency because compelled carriage on Long Island violates the Constitution. The Supreme Court upheld the must-carry statute against a facial challenge on the basis of a narrow rationale that by its terms cannot be used to justify carriage here. Thus, the FCC should have practiced “constitutional avoidance” by denying WRNN’s request on non-constitutional grounds. Decision Under Review The FCC decision under review is Petition of WRNN License Co. LLC, for Modification of Television Market for WRNN-DT, Kingston, New York, Memorandum Opinion and Order, CSR-6956-A, FCC 07-151, 2007 WL 4208281 (rel. Nov. 29, 2007) (“2007 Order”). The decision has not yet been reported. Statement of Jurisdiction A decade ago, the FCC excluded certain Long Island communities from WRNN’s local television market for purposes of Section 614 of the Communications Act.1 This case began when WRNN asked the FCC to re-include those communities. The Federal Communications Commission (“FCC”) entertained that request pursuant to 47 U.S.C. § 534(h)(1)(C) and 47 C.F.R.

1

47 U.S.C. § 534. -3-

§ 76.59. On May 25, 2006, a division of the FCC, the Media Bureau, released a Memorandum Opinion and Order granting WRNN’s request.2 After Cablevision filed a timely petition for review,3 the full FCC denied review in a Memorandum Opinion and Order released on November 29, 2007.4 Cablevision filed a timely petition for review in this Court on December 13, 2007. This Court has jurisdiction pursuant to 47 U.S.C. § 402(a) and 28 U.S.C. § 2342. Statement of Issues I.

Did the FCC err in analyzing WRNN’s supposed service to Long Island?

II.

Did the FCC ignore the statutory instruction that market modification should “better effectuate the purposes of” must-carry?

III.

Did the FCC err by compelling carriage in violation of Cablevision’s constitutional rights? Statement of the Case and Facts 1.

Broadcasting and Cable.

Broadcast television stations hold FCC-issued licenses to use the public airwaves for the broadcast of television programs. Anyone with a television set

2

WRNN License Co., Memorandum Opinion and Order, 21 FCC Rcd 5952 (MB 2006) (“2006 Order”). 3

See 47 C.F.R. § 1.115.

4

2007 Order. -4-

and a “rabbit ear” or roof-top antenna can view such programs. Unlike most other users of wireless spectrum, television stations are allowed to use over-the-air spectrum free of charge. In return, television licensees must observe certain requirements, including that they “air programming that is responsive to the interests and needs of their communities of license.” 5 There are commercial and non-commercial broadcast stations. While noncommercial stations rely on grants and contributions, commercial stations rely on revenue from the sale of advertising. The FCC issued most television licenses decades ago; because there is only so much spectrum assigned to over-the-air television, the licensing effort was mostly completed in the 1950s. In allotting licenses, the FCC was guided by Congress’s mandate that it “make such distribution of licenses . . . among the

5

Broadcast Localism, Notice of Inquiry, 19 FCC Rcd 12425, ¶ 1 (2004); accord 2002 Biennial Regulatory Review — Review of the Commission’s Broadcast Ownership Rules and Other Rules Adopted Pursuant to Section 202 of the Telecommunications Act of 1996, Report and Order and Notice of Proposed Rulemaking, 18 FCC Rcd 13620, ¶ 78 (2003) (“The Commission decided long ago that local station licensees have a responsibility to air programming that is suited to the tastes and needs of their community . . . .”); 1998 Biennial Regulatory Review — Review of the Commission’s Broadcast Ownership Rules and Other Rules Adopted Pursuant to Section 202 of the Telecommunications Act of 1996, Biennial Review Report, 15 FCC Rcd 11058, ¶ 89 (2000) (“broadcasters are required to air programming that is responsive to issues facing their communities of license”). -5-

several States and communities as to provide a fair, efficient, and equitable distribution of . . . service to each of the same.”6 Thus, the FCC granted each license to a particular community and required the broadcaster to serve that particular community.7 In distributing licenses among communities, the FCC has long sought to ensure not only that each community can receive television service, but also that it can receive television service from a local station.8 That way, viewers in smaller towns are able to receive not only news and information from a nearby metropolis, but also from their own community.9 The policy that, as much as possible, viewers

6

47 U.S.C. 307(b).

7

See 47 C.F.R. § 73.1120 (“Each AM, FM, TV and Class A TV broadcast station will be licensed to the principal community or other political subdivision which it primarily serves. This principal community (city, town or other political subdivision) will be considered to be the geographical station location.”). 8

See Broadcast Localism, Notice of Inquiry, 19 FCC Rcd 12425, ¶ 2 & n.5

(2004). 9

See, e.g., Turner Broad. Sys., Inc. v. FCC, 512 U.S. 622, 663 (1994) (“Turner I”) (“Congress designed this system of allocation to afford each community of appreciable size an over-the-air source of information and an outlet for exchange on matters of local concern.”); 2002 Biennial Regulatory Review — Review of the Commission’s Broadcast Ownership Rules and Other Rules Adopted Pursuant to Section 202 of the Telecommunications Act of 1996, Report and Order and Notice of Proposed Rulemaking, 18 FCC Rcd 13620, ¶ 75 (2003) (“In announcing the allotments, the Commission explained that dispersed allotments -6-

should have access to television stations from their own communities is known as “localism.” Since the beginning of television licensing in this country, this policy has been “a cornerstone of broadcast regulation.”10 Cable systems use a delivery technology different from that used by broadcast stations. Cable operators have not been granted over-the-air spectrum. Rather, they transmit video signals through wires that they string along poles and through underground conduits. Cable systems began as so-called “community antenna television”: cable operators built tall receiving antennas connected by wire to individual households, thereby providing them with better reception than might be available with the use of individual antennas. Later, cable operators also began to provide viewers with signals from sources other than broadcast television stations. In particular, cable operators began to provide services like HBO, CNN, and C-SPAN, which are not available over-the-air.

‘protect[] the interests of the public residing in smaller cities and rural areas more adequately than any other system.’”). 10

Broadcast Localism, Notice of Inquiry, 19 FCC Rcd 12425, ¶ 1 (2004); see Cable Television Consumer Protection and Competition Act of 1992 (“1992 Cable Act”), Pub. L. No. 102-385, 106 Stat. 1460, § 2(a)(10) (“A primary objective and benefit of our Nation’s system of regulation of television broadcasting is the local origination of programming. There is a substantial governmental interest in ensuring its continuation.”). -7-

The FCC began regulating the new cable medium in the 1960s, mostly to limit its impact on the more established broadcast medium. Among other things, the FCC imposed so-called “must carry” regulations, under which cable systems were required to carry local broadcast signals. In the 1980s, however, those regulations were struck down by the United States Court of Appeals for the D.C. Circuit. That court held that the FCC had not done enough to show that must-carry rules were necessary, thereby violating both the Administrative Procedure Act and cable operators’ rights under the First Amendment.11 2.

The Must-Carry Statute.

In 1992, Congress enacted a statutory must-carry requirement. Mindful of the fate that had befallen the FCC’s earlier must-carry regulations, Congress made statutory findings that were unusually explicit and detailed. Must-carry, these findings explained, was necessary to salvage localism. As Congress found: “[a] primary objective and benefit of our Nation’s system of regulation of television broadcasting is the local origination of programming,” and, in “the absence of a requirement that [cable] systems carry local broadcast signals,” the “economic

11

See 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). -8-

viability of free local broadcast television and its ability to originate quality local programming will be seriously jeopardized.”12 In particular, Congress expressed concern that cable might drive broadcasters out of business by denying carriage for anticompetitive reasons. Congress reasoned that cable operators had an economic incentive to drop broadcast stations competing for local advertising,13 that cable operators generally faced no multichannel competition and were therefore free to act on this incentive without having to fear losing cable subscribers,14 that television viewers generally stop watching off-air television after subscribing to cable,15 that dropped stations

12

1992 Cable Act, § 2(a)(10), (16).

13

See id. § 2(a)(15) (“A cable television system which carries the signal of a local television broadcaster is assisting the broadcaster to increase its viewership, and thereby attract additional advertising revenues that otherwise might be earned by the cable system operator. As a result, there is an economic incentive for cable systems to terminate the retransmission of the broadcast signal, refuse to carry new signals, or reposition a broadcast signal to a disadvantageous channel position.”). 14

See id. § 2(a)(2) (“[M]ost cable television subscribers have no opportunity to select between competing cable systems. Without the presence of another multichannel video programming distributor, a cable system faces no local competition. The result is undue market power for the cable operator as compared to that of consumers and video programmers.”). 15

See id. § 2(a)(17) (“Most subscribers to cable television systems do not or cannot maintain antennas to receive broadcast television services, do not have input selector switches to convert from a cable to antenna reception system, or cannot otherwise receive broadcast television services.”). -9-

would therefore lose part of their audience, possibly bankrupting them as a result,16 and that consumers unable to afford cable would therefore be left with fewer stations to watch off-air.17 Ultimately, the Supreme Court — by a 5-4 vote — upheld the must-carry provisions against a facial First Amendment challenge. The Court unanimously ruled that cable operators are presumptively entitled to the same First Amendment protection available to newspapers.18 The Court was likewise unanimous in recognizing that must-carry imposes an onerous burden on cable operators’ speech.19 But, over a vigorous dissent, a bare majority held that Congress had

16

See id. § 2(a)(16) (“As a result of the economic incentive that cable systems have to delete, reposition, or not carry local broadcast signals, . . . the economic viability of free local broadcast television and its ability to originate quality local programming will be seriously jeopardized.”). 17

See id. § 2(a)(12) (“There is a substantial governmental interest in promoting the continued availability of such free television programming, especially for viewers who are unable to afford other means of receiving programming.”). 18

See Turner I, 512 U.S. at 639 (cable must be judged by “settled principles of our First Amendment jurisprudence”); id. at 675-76 (O’Connor, J., concurring in part and dissenting in part) (“As the Court explains in Parts I, II-A, and II-B of its opinion, which I join, cable programmers and operators stand in the same position under the First Amendment as do the more traditional media.”). 19

Id. at 637 (must-carry rules “reduce the number of channels over which cable operators exercise unfettered control”). - 10 -

enacted the must-carry statute for a content-neutral reason — namely, “to preserve access to free television programming for the 40 percent of Americans without cable.”20 Thus, the majority held, the statute was subject not to “strict” First Amendment scrutiny (under which a measure must be shown to be narrowly tailored to a compelling governmental objective) but to “intermediate” scrutiny (under which a measure need only be shown to substantially further an important objective).21 Even applying intermediate scrutiny, however, the Court could not immediately approve the statute. The majority determined that Congress’s rationale — “protecting noncable households from loss of regular television broadcasting service due to competition from cable systems”22 — was sufficiently “important in the abstract.”23 The Court remanded, however, for further factual development on the question whether the harms that Congress had recited were

20

See id. at 646; see also id. at 652.

21

See id. at 661-62.

22

Id. at 663 (internal quotation marks omitted).

23

Id. at 664 (plurality). - 11 -

“real, not merely conjectural.”24 Only after a remand, the Court (again by a 5-4 vote) held that Congress’s finding to that effect was entitled to deference.25 3.

The Statute’s Market-Modification Mechanism.

The must-carry statute requires cable systems to retransmit the signals of “local commercial television stations.”26 The statute defines as “local” a station that is “licensed . . . to [a] community . . . that . . . is within the same television market as the cable system.”27 The Act further provides that a station’s “market shall be determined . . . using . . . commercial publications which delineate television markets based on viewing patterns.”28 24

Id.

25

Turner Broad. Sys., Inc. v. FCC, 520 U.S. 180 (1997) (“Turner II”).

26

47 U.S.C. § 534(a).

27

Id. § 534(h)(1)(A) (emphasis added).

28

Id. § 534(h)(1)(C)(i). The statute as enacted in 1992 provided: “a broadcasting station’s market shall be determined in the manner provided in section 73.3555(d)(3)(i) of title 47, Code of Federal Regulations, as in effect on May 1, 1991,” words that in 1996 were amended to read “a broadcasting station’s market shall be determined by the Commission by regulation or order using, where available, commercial publications which delineate television markets based on viewing patterns.” The amendment was necessary because Arbitron withdrew from the TV ratings business and therefore stopped updating the ADIs used in the referenced FCC regulation. See Definition of Markets for Purposes of the Cable Television Mandatory Television Broadcast Signal Carriage Rules, Report and Order and Further Notice of Proposed Rulemaking, 11 FCC Rcd 6201, ¶ 12 (1996). - 12 -

Until the mid-1990s, the FCC delineated television markets on the basis of commercial publications of a media research organization called Arbitron, which carved the country up into “Areas of Dominant Influence” or “ADIs.” Currently, the FCC uses publications of Nielsen Media Research, which uses similar units but calls them “designated market areas” or “DMAs.”29 In either company’s methodology, “each county . . . is allocated to a discrete market based on which home-market stations receive a preponderance of total viewing hours in the county.”30 For example, Ulster County is assigned to the New York City DMA rather than the adjoining Albany DMA, presumably because residents of Ulster County watch New York City stations more heavily than Albany stations. Congress recognized, however, that ADIs and DMAs might sometimes give a station must-carry rights in a community in which it is not truly “local”: as the House Report put it, a cable system might be “so far removed from the station that

29

47 C.F.R. § 76.55(e).

30

Definition of Markets for Purposes of the Cable Television Broadcast Signal Carriage Rules, Order on Reconsideration and Second Report and Order, 14 FCC Rcd 8366, ¶ 6 (1999); see id. ¶ 11 (“Conceptually, [Arbitron’s and Nielsen’s] market designations — ADIs and DMAs — are the same. They both use audience survey information from cable and noncable households to determine the assignment of counties to local television markets based on the market whose stations receive the largest share of viewing in the county.”). - 13 -

it cannot be deemed part of the station’s market.”31 Congress therefore empowered the FCC to change a station’s market: “following a written request, the Commission may, with respect to a particular television broadcast station, . . . exclude communities from such station’s television market to better effectuate the purposes of this section.”32 Congress provided specific instructions on how the FCC should go about that task: In considering requests [for market modification], the Commission shall afford particular attention to the value of localism by taking into account such factors as — (I)

whether the station, or other stations located in the same area, have been historically carried on the cable system or systems within [the cable system’s] community;

(II)

whether the television station provides coverage or other local service to such community;

(III) whether any other television station that is eligible to be carried by a cable system in such community in fulfillment of the requirements of this section provides news coverage of issues of concern to such community or provides carriage or coverage of sporting and other events of interest to the community; and

31

H.R. Rep. No. 102-628, at 97 (1992).

32

47 U.S.C. § 534(h)(1)(C)(i). - 14 -

(IV) evidence of viewing patterns in cable and noncable households within the areas served by the cable system or systems in such community.33 4.

WRNN’s First Attempt at Carriage on Long Island.

Because the Commission has traditionally assigned television-station licenses in part based on population,34 most commercial television stations have their community of license in or near a DMA’s metropolitan center or “hub.”35 But, in most larger DMAs, the Commission has licensed a few stations to communities in the market’s “spokes.”36 For example, of the 23 stations assigned to the New York City DMA, 14 are assigned to New York City and its immediate environs, but nine have their community of license in outlying areas.37

33

Id. § 534(h)(1)(C)(ii).

34

See Amendment of Section 3.606 of the Commission’s Rules and Regulations, 41 FCC 148, ¶ 68 (1952). 35

See generally 47 C.F.R. § 73.606(b).

36

See, e.g., Amendment of Section 73.606(b), 11 FCC Rcd 12229, ¶ 5 (1996); see generally Amendment of Section 3.606 of the Commission’s Rules and Regulations, 41 FCC 148, ¶ 79 (1952). 37

See R.R. Bowker LLC, Broadcasting & Cable Yearbook 2006, at B-186

(2005). - 15 -

WRNN is a “spoke” station: since 1985, it has been licensed to Kingston, New York.38 Kingston is located at the very northern tip of the vast New York City DMA — the most populous DMA in the Nation. The upstate New York region in which Kingston is located has few economic, social, and cultural ties with the rest of the DMA.39 Thus, traditionally, WRNN pursued an audience only in the area immediately surrounding Kingston. Indeed, Nielsen initially assigned WRNN to the Albany DMA, believing that the station was of more interest to viewers there than to viewers in the New York City DMA.40 In addition, before must-carry, WRNN had never been carried on cable systems outside Kingston’s surroundings.41

38

See Market Modifications and the New York Area of Dominant Influence, Memorandum Opinion and Order, 12 FCC Rcd 12262, Order ¶ 2 n.2 (1997) (“1997 Order”). 39

See WRNN License Company, LLC for Modification of the Television Market for WRNN-DT, Kingston, New York, CSR 6956-A, Opposition of Cablevision Systems Corporation, at 29-32 (filed FCC Feb. 13, 2006) (“Opp.”) (A 300-A 303) (shopping and labor patterns confirm that the two spokes are distinct); id. at 17-22 (A 288-A 293) (state and federal agencies recognize that Long Island is not part of the same economic market as upstate New York). 40

See 1997 Order ¶ 66.

41

See Petition of Time Warner New York City Cable Group, Memorandum Opinion and Order, 11 FCC Rcd 6528, ¶ 24 (1996). - 16 -

In 1993, however, WRNN was acquired by new owners, who changed WRNN’s format to home-shopping and began aggressively pursuing carriage rights throughout the New York metro area, including Long Island. Apparently, WRNN’s new owners were hoping to parlay an inexpensive Kingston broadcast station into a valuable channel on cable systems in New York City and other parts of the DMA. Because those areas are vastly more populous than Kingston’s traditional service area, they hold out the promise of vastly greater advertising revenues. Presumably, WRNN’s new owners calculated that, if cable-enhanced reception and favorable channel placement would drive even a small fraction of New York City eyeballs to WRNN, the station would become vastly more profitable than it had been when serving only upstate New York. At first, however, WRNN’s cynical business plan failed to pay dividends. In the wake of the must-carry statute’s enactment in 1992, the FCC’s Cable Services Bureau conducted a comprehensive proceeding addressing the carriage rights of numerous spoke stations in the vast New York market. That proceeding culminated in a 1996 order in which the Bureau modified WRNN’s market to

- 17 -

exclude Long Island and much of the rest of the New York City DMA.42 The Bureau concluded that WRNN scored poorly under all four statutory factors, and noted that WRNN’s transmitter failed even to cast over Long Island a so-called “Grade B” quality over-the-air signal (the signal strength that the FCC generally uses to determine a station’s over-the-air reach).43 The next year, the full FCC agreed that carriage of WRNN on Long Island would not promote localism.44 Among other things, the FCC stated: “Grade B contour coverage, in the absence of other determinative market facts (i.e. where the four statutory factors by themselves define the market, where there is no clear proof that the contour fails to reflect actual coverage, or where there is a terrain obstacle such as a mountain range or a significant body of water), is an efficient tool to adjust market boundaries because it is a sound indicator of the economic reach of a particular television station’s signal.”45

42

See Petition of Cablevision, Memorandum Opinion and Order, 11 FCC Rcd 6453 (CSB 1996) (“1996 Order”). 43

See id. ¶¶ 65-68.

44

1997 Order.

45

See id. ¶ 17. - 18 -

This Court affirmed.46 The Court interpreted the must-carry statute as requiring the FCC to use its modification power so as to “ensure the continuation of the local origination of programming.”47 And, in limiting WRNN’s market, the Court held, the FCC “did not misinterpret the 1992 Cable Act or deny petitioners any rights granted them in that statute.”48 As the Court explained: [N]ot only does the New York ADI span four states, but the counties within this area are not contained in one contiguous land mass. Rather, they are separated by several bodies of water, including the Hudson River and Long Island Sound. New York City acts as a natural boundary because its complicated and congested traffic patterns make it difficult for residents at one end of the ADI to access communities at the other end. The ADI therefore has an obvious tendency to break itself up into smaller divisions reflecting localized regions. New York City serves as the “hub,” with its stations’ programming and advertising being of widespread interest across the ADI. Outlying communities are the “spokes,” with their stations generally showing programming and advertising of interest only to viewers in relatively close proximity to that community.49 5.

WRNN’s Second Attempt at Carriage on Long Island.

In the wake of this Court’s decision, WRNN became a digital-only broadcast station. Although all analog broadcast stations must relinquish their analog

46

See WLNY-TV, Inc. v. FCC, 163 F.3d 137 (2d Cir. 1998).

47

Id. at 143.

48

Id. at 139.

49

Id. at 144. - 19 -

broadcast spectrum in 2009, WRNN did so five years ahead of the deadline50 — something television stations have generally done to obtain compensation from wireless telephone companies.51 Since then, WRNN has been viewable over-theair only by the minuscule group of consumers that use a digital tuner and antenna. WRNN also moved its main studio to Manhattan. And, no doubt mindful that the Bureau had denied it carriage on Long Island because of its Grade B contour, WRNN moved its antenna to Newburgh, 50 miles to the south. Pointing to these new facts, WRNN asked the FCC to re-include Long Island in its market. In a 2006 order, the Bureau determined that, in most regards, WRNN’s case was no stronger than before.52 As the Bureau noted, WRNN had shown no historical carriage on Long Island,53 the record was “not impressive relative to WRNN’s programming targeted to the Nassau Communities,”54 there is “an abundance of far closer New York City and Long Island stations programming

50

See WRNN-TV Assocs., 19 FCC Rcd 12343 (MB 2004).

51

See Service Rules for the 746-764 MHz Bands, and Revisions to Part 27 of the Commission’s Rules, Notice of Proposed Rulemaking, 14 FCC Rcd 11006, ¶ 99 (1999). 52

2006 Order.

53

See id. ¶ 12.

54

Id. ¶ 16. - 20 -

to the cable communities,”55 and “Long Island viewership patterns of WRNN-DT” do not meet the “‘moderate level of viewership’ threshold.”56 Thus, the Bureau stated, “were we to apply the other three statutory factors without considering WRNN’s signal coverage, WRNN would have little if any carriage rights anywhere within its New York Market.”57 Noting, however, that WRNN cast a Grade B signal over the communities, the Bureau ruled that carriage should nonetheless be granted. According to the Bureau, “in instances where the other three factors would not add significantly to the analysis of a station’s market, Grade B coverage becomes a very relevant factor in determining whether to modify a particular station’s market.”58 After Cablevision sought review, the full FCC affirmed by a three-to-two vote.59 The majority largely adopted the Bureau’s reasoning, stating simply: “We

55

Id. ¶ 17 (internal quotation marks omitted).

56

Id. ¶ 18.

57

Id. ¶ 10.

58

Id.; see id. ¶ 14 (“Grade B coverage is an efficient tool to adjust market boundaries because it is a sound indicator of the economic reach of a particular television station’s signal.”) (internal quotation marks omitted); id. ¶ 16 (“More impressive, however, is the evidence that WRNN-DT places a Grade B signal contour over all of Nassau County.”). 59

2007 Order. - 21 -

have reviewed the record in this proceeding, which need[s] not be restated in detail, and we find that the Bureau correctly modified WRNN-DT’s market.”60 The majority disagreed with the Bureau in only two respects — both of which, according to the majority, only “serve[d] to add more support to the conclusions underlying the Bureau’s decision.”61 In particular, the FCC believed that “the Bureau erred in its analysis of WRNN-DT’s programming by finding that WRNN’s record evidence did not support a finding of significant programming targeted to communities in Long Island.”62 Said the FCC: “WRNN submitted a substantial record that details programming that focuses on Long Island, particularly communities in Nassau County and communities in Suffolk County that border Nassau County.”63 In a footnote, the FCC simply cited the submission in which WRNN had so argued.64 The FCC also stated that the justification for carriage “has strengthened since the [Bureau order], as WRNN-DT is now carried on competitive cable

60

Id. ¶ 4.

61

Id.

62

Id. (footnote omitted).

63

Id.

64

Id. ¶ 4 n.14 (“See WRNN Petition at Exhibit 4.”). - 22 -

systems in Nassau and Suffolk Counties.”65 According to the FCC, “Verizon carries WRNN-DT on its systems in Massapequa Park, Oyster Bay and Hempstead, New York. . . . This overlapping carriage provides support for WRNN-DT with respect to the historic carriage factor.”66 Although not known to be hostile to must-carry, Commissioners Copps and Adelstein dissented. Insofar as the majority discerned carriage-favoring facts other than Grade B contour, the dissenters disagreed. In the dissenters’ view, Verizon’s initiation of carriage “sometime during the past fifteen months” did not constitute “historical” carriage.67 Moreover, the dissenters believed that program coverage cannot be shown simply by “cit[ing] to an exhibit filed by WRNN without any explanation how the Bureau ‘erred’ or any attempt to address the contradictory evidence.”68 Insofar as the majority adopted the Bureau’s reasoning that Grade B coverage is enough by itself, the dissenters disagreed as well: [A]s the Bureau noted, the Commission found in the [1997 Order] that Grade B coverage “is an efficient tool to adjust market boundaries because it is a sound indicator of the economic reach of a particular station’s signal.” But the Bureau, and now the majority, fails to cite the immediately 65

Id.

66

Id. ¶ 4 n.15.

67

Id. Dissent at 1.

68

Id. Dissent at 1, 3. - 23 -

preceding language: that Grade B coverage is a sound indicator of a station’s economic reach “in the absence of other determinative market facts” such as “where there is a terrain obstacle such as a mountain range or a significant body of water.”69 As the dissenters pointed out, the Commission relied on such contrary indication in 1997 when denying WRNN carriage on Long Island. And, the dissenters explained: All that has changed is that WRNN now operates from a transmitter site well south of its old transmitter site (hence the improved signal strength over Long Island) and moved its main studio from Kingston, its community of license, to New York City. But that does not transform WRNN from a Kingston “spoke” station into a New York City “hub” station. WRNN is licensed to serve the residents of Kingston, not New York City or the New York region. The question from a localism perspective is whether the cable communities are in the same “local market” as the station’s community of license. A station’s Grade B contour is often a good proxy for that determination. Here, given the unique geography of the New York market and the distances involved, we believe it is not.70 The dissenters finally noted that expanded carriage does not necessarily promote localism: There is a point at which the concept of a “local market” reaches the breaking point and expanding it further will actually damage the localism interests we are trying to serve. For the sake of the people of Kingston, we hope we have not reached that point here.71

69

Id. Dissent at 1-2.

70

Id. Dissent at 2-3 (footnotes omitted).

71

Id. Dissent at 3. - 24 -

6.

Judicial Review.

Cablevision then filed a petition for review in this Court and meanwhile asked the FCC to stay its ruling pending judicial review. As Cablevision demonstrated, absence of a stay would inflict four different kinds of irreparable injury: (1) Cablevision would have to overhaul its channel line-up, which subscribers find annoying and confusing, (2) some programming that subscribers like to watch would have to be dropped, only to be replaced by WRNN, a homeshopping station; (3) in making the line-up changes, Cablevision would incur significant out-of-pocket expenses; and (4) Cablevision would incur First Amendment injury, which is always irreparable. When the FCC did not rule on the petition (as it still has not done to date), Cablevision filed a stay motion in this Court, pointing to the same irreparable harms. At oral argument on Cablevision’s motion, the Court asked several questions about the part of the FCC’s order stating that Cablevision’s carriage duty does not go into effect until “60 days from the date on which WRNN provides [certain] equipment,”72 something that had not yet happened as of the date of the oral argument. In particular, the Court inquired whether harm to both parties could

72

2007 Order ¶ 2. - 25 -

be avoided by expediting the appeal.73 Later that day, the Court entered an order containing an expedited briefing schedule, calling for oral argument on the merits about one month later. Although the apparent intent of the Court’s order was that expedition would safeguard Cablevision from injury pending review, WRNN the very next day sent Cablevision a letter stating that it had sent the equipment and that “Cablevision must commence carriage of WRNN-DT no later than March 16, 2008.” WRNN’s letter noted that, to begin carriage on that date, Cablevision might even earlier have to take certain costly and irreversible steps, such as providing notification to subscribers and installing equipment at the premises of about 19,000 subscribers. According to WRNN, “[i]n order to comply with the FCC’s order, Cablevision must take any preliminary actions necessary to carry WRNN.”74

73

See, e.g., Audio Tape: Cablevision v. FCC, No. 07-5553, Oral Argument (Jan. 15, 2008) (2nd. Cir.) (“So if we did nothing, to follow up on Judge Kearse’s inquiry, and we simply expedited this appeal, and if, assume for the argument, we decided at least in summary form one way or another within 60 days, there would never have been a need for a stay.”). 74

In light of WRNN’s actions, Cablevision respectfully requests that the Court announce its decision in this case as soon as convenient after oral argument. Cf. Audio Tape: Cablevision v. FCC, No. 07-5553, Oral Argument (Jan. 15, 2008) (2nd. Cir.) (“if . . . we decided at least in summary form one way or another within 60 days”). - 26 -

Summary of Argument I. The FCC committed numerous errors in analyzing WRNN’s supposed service to Long Island. First, in connection with Long Island-targeted programming, the FCC substituted its judgment for that of the Bureau without providing any explanation. Although the FCC cited an analysis submitted by WRNN, it never explained why the Bureau erred in crediting Cablevision’s contrary analysis. That is because no convincing explanation exists. Second, although the FCC relied on carriage by Verizon, that provider initiated carriage only a few months ago. The statute asks whether a station has been “historically carried” — not whether it has been carried recently. Third, the FCC apparently believed that WRNN should be carried throughout its Grade B contour. That belief runs counter to the 1997 order in which the agency recognized that spoke stations in the New York City DMA are entitled to less than their Grade B contour insofar as the Manhattan skyline, the Hudson River, and Long Island Sound separate “spokes” into distinct sub-markets. Fourth, the FCC erred in refusing to place weight on the statutory factor asking “whether any other television station” provides service to Long Island. The

- 27 -

FCC’s refusal flies in the face of not only the statutory text but also the “value of localism”: importation of distant stations undercuts true local stations. Finally, the FCC erred in refusing to place weight on the statutory factor inquiring into “viewing patterns in cable and noncable households within the areas served by the cable system.” Lack of viewership is directly relevant to localism. It is no answer to say that stations like WRNN have only a small audience: the agency can still determine the audience’s relative distribution. II. More fundamentally, the FCC misapprehended the meaning of “localism.” Localism calls for local stations addressing the needs of their community of license — not distant stations addressing the needs of communities that are distant from (but more populous and thus more lucrative than) their community of license. The FCC failed to inquire whether carriage might harm viewers in WRNN’s community of license — by providing WRNN with an incentive to pursue viewers (and thus advertising dollars) in distant but more populous areas. The FCC further overlooked that, where a station manipulates its signal and programming in a bid for additional cable carriage, rewarding such gamesmanship goes well beyond the statutory purpose of returning broadcasters to their “natural

- 28 -

market.” In enacting must-carry, Congress intended to restore broadcasters to the audience they would have had in a world without cable — not to make broadcasters better off than that. Rewarding gamesmanship like WRNN’s is also harmful to localism and contrary to prior FCC precedent. III. Compelled carriage of WRNN on Long Island violates the First Amendment. Although the Supreme Court in the Turner litigation upheld the must-carry statute against a facial challenge, it did so by holding that the statute’s rationale — that cable should be prevented from harming the existing system of localism by depriving broadcasters of their audience — justified the statute in the face of intermediate scrutiny. In defending against Cablevision’s as-applied challenge, the FCC cannot rely on that reasoning. First, the FCC proposes to grant WRNN carriage rights because of the Long Island-targeted content of its programming. That means that the FCC’s order is content-based and subject to strict scrutiny, which it cannot withstand. Second, the Supreme Court approved of must-carry as a measure to guarantee broadcasters the audience they would have had in a world without cable — not a measure granting them access to a new and expanded audience, as WRNN seeks.

- 29 -

Third, the Turner rationale contemplated the preservation of broadcast signals for the benefit of over-the-air viewers. WRNN’s over-the-air audience is de minimis. Fourth, the Turner rationale depended on the notion that cable operators were unconstrained by competition. Today on Long Island, Cablevision is subject to vibrant competition from two DBS operators and a telephone company. Fifth, the Turner rationale predicted that cable operators might deny stations carriage for anticompetitive reasons: to replace them with video-programming services on which they could sell advertising. Here, the record is devoid of any evidence to that effect. Finally, the Turner rationale predicted that, without carriage, stations would deteriorate to a substantial degree or fail altogether. There is no evidence that, without carriage on Long Island, this fate will befall WRNN. Compelled carriage of WRNN on Long Island would also effect a taking. A 6 MHz channel on cable is the electronic equivalent of a beach-front lot. There is no reason to treat electronic property differently from other property. If the order under review stands, WRNN will be allowed to occupy Cablevision’s property and to deny Cablevision all use.

- 30 -

Constitutional concerns provide further support for Cablevision’s other arguments. If possible, a statute must be interpreted to avoid not only actual unconstitutionality but also grave constitutional doubts. Moreover, where an agency’s reading generates significant constitutional doubt, that reading is not entitled to Chevron deference. Argument I.

THE FCC ERRED IN ANALYZING WRNN’S SUPPOSED SERVICE TO LONG ISLAND. The must-carry statute provides that, in considering market-modification

requests, the FCC must “afford particular attention to the value of localism”75 which, as explained above, is the principle that television viewers should have access to television stations from their own communities.76 Although the statute goes on to list four factors that the FCC must consider, each of those factors is subordinate to the statute’s overarching instruction to heed “the value of

75

47 U.S.C. § 534(h)(1)(C)(ii).

76

See supra, p.7.

- 31 -

localism.”77 As this Court accordingly concluded in WLNY, market-modification decisions must promote localism.78 In the order under review, the FCC asked only one question: whether expanding WRNN’s market to include Long Island would bring additional broadcast service to Long Islanders. We will explain below in Part II that this was the wrong question to ask: localism means that local stations broadcast programming of interest to local communities — not that distant stations broadcast programming of interest to distant communities. But, even in answering the question whether expanding WRNN’s market to include Long Island would bring additional broadcast service to Long Islanders, the FCC committed numerous fundamental errors. A.

The FCC’s Overruling of the Bureau’s Findings About LongIsland-Targeted Programming Is Unexplained and Unexplainable.

Before the Bureau, Cablevision submitted an analysis that carefully examined a representative week of WRNN’s programming schedule.79 That study 77

See 47 U.S.C. § 534(h)(1)(C)(ii) (FCC “shall afford particular attention to the value of localism by taking into account such factors as . . . .”). 78

See WLNY, 163 F.3d at 143 (market modification must “ensure the continuation of the local origination of programming”); see also 2007 Order Dissent at 1 (“Localism is our lodestar in cable market modification cases.”). - 32 -

showed that, of the 168 hours of WRNN’s broadcast week, over 131 hours — more than 78% — consisted of home shopping and infomercials.80 Another 6 hours and 42 minutes consisted of spot commercials.81 Of the remaining time, 4.2 hours consisted of national news and events, leaving only 8.1 hours — 4.8% of WRNN’s total broadcast week — for local coverage.82 Of those 8.1 hours, 6.25 hours covered the tri-state region generally and about one hour covered the Hudson Valley.83 Less than one hour covered Long Island issues.84 Cablevision further demonstrated that the two television shows that WRNN claimed provide Long Island-specific news devoted only 28.9 minutes per week and 1.5 minutes per week, respectively, to coverage of Long Island issues.85 Other shows that WRNN portrayed as containing Long Island-targeted programming

79

See Opp. Exh. 7 (A 487- A 655).

80

Opp. at 33 (A 304). Cablevision’s analysis demonstrated that none of this programming was specifically targeted toward Long Island. See id. at 37 (A 308). 81

Id. at 33 n.121 (A 304).

82

Id. at 33-34 (A 304- A 305).

83

Id. at 34 (A 305).

84

Id.

85

Id. at 35 (A 306). - 33 -

contained even less Long Island-specific programming.86 WRNN broadcast no Long Island-specific programming on weekends, and none of WRNN’s advertisements involved Long Island businesses or were targeted specifically at Long Island customers.87 Moreover, Cablevision showed that, for the 2003-2005 period, WRNN filed “Quarterly Issues Reports” (which stations must file with the FCC to list “programs that have provided the station’s most significant treatment of community issues during the preceding three month period”88) that did not contain a single Long Island-specific news report until the third quarter of 2005, just as WRNN geared up to file its market-modification petition.89 Even then, WRNN’s local coverage of Long Island consisted of only three news stories.90 In the fourth quarter of 2005, at around the time WRNN filed its petition, WRNN listed 14 Long

86

Id. at 35-36 (A 306- A 307).

87

Id. at 36-37 (A 307- A 308).

88

47 C.F.R. § 73.3526(e)(11).

89

Opp. at 37-38 (A 308- A 309).

90

Id. at 38 (A 309). - 34 -

Island-specific stories, for a total of 17 stories in the three-year period, all of which were aired in the weeks immediately surrounding the filing of WRNN’s Petition.91 In light of Cablevision’s showing, it was not enough for the FCC simply to state that WRNN provided “significant programming targeted to communities in Long Island.”92 At a minimum, the FCC was required to explain why Cablevision’s analysis was unpersuasive93 — a burden that was particularly heavy because the FCC substituted its judgment for that of the Bureau.94 The FCC failed

91

Id.

92

2007 Order ¶ 4.

93

See, e.g., Mistick PBT v. Chao, 440 F.3d 503, 512 (D.C. Cir. 2006) (“An agency’s failure to respond meaningfully to the evidence renders its decisions arbitrary and capricious. Unless an agency answers objections that on their face appear legitimate, its decision can hardly be said to be reasoned.”) (internal quotation marks omitted). 94

See, e.g., Traction Wholesale Center Co., Inc. v. NLRB, 216 F.3d 92, 10102 (D.C. Cir. 2000) (“Of course, the Board is free to substitute its judgment for the ALJ’s, but when the Board reverses an ALJ it must make clear the basis of its disagreement. Because the Board has failed to explain, in either its decision or its brief, why it disagreed with the ALJ that the insurance policy made rescission inappropriate, we grant the petition for review with respect to this issue and remand to the Board.”) (internal quotation marks and citation omitted); NLRB v. Aces Mechanical Corp., 837 F.2d 570, 574 (2d Cir. 1988) (“It is a fundamental principle of administrative law that the Board must furnish reasons for its decision. When applied to this case, the principle requires that the Board refer to specific facts inconsistent with the ALJ’s finding. The Board’s decision leaves ambiguous why the ALJ’s determination was rejected.”) (citation omitted). - 35 -

to shoulder that burden: its only explanation consisted of a bare citation to WRNN’s programming analysis.95 That citation showed only that the Bureau’s conclusion ran counter to WRNN’s arguments — it did nothing to explain why WRNN’s arguments were more persuasive than Cablevision’s or why the Bureau’s factual findings were wrong. The absence of an explanation is not surprising: based on the paltry evidence that WRNN submitted to the Bureau, no sustainable explanation could be given. As Cablevision’s submissions showed, WRNN’s Long Island-targeted programming was de minimis. Thus, the FCC’s order also fails for lack of substantial evidence.96 B.

The FCC’s Interpretation of the “Historical Carriage” Factor Flies in the Face of Unambiguous Statutory Text.

Although the FCC discerned “historical carriage” on Long Island, that determination is contrary to clear statutory language. The majority relied on carriage by a single provider, Verizon, that began carrying WRNN on Long Island

95

2007 Order ¶ 4 n.14.

96

See, e.g., Yang v. Gonzales, 478 F.3d 133, 141 (2d Cir. 2007) (agency’s factual findings may be upheld only when they are “supported by substantial evidence”). - 36 -

only after the Bureau issued its order.97 The statute asks whether WRNN has been “historically” carried in the communities under consideration98 — a limitation that goes hand-in-glove with the statute’s intent to preserve and restore (not expand) broadcasters’ audiences.99 Carriage initiated in the past few months does not constitute historical carriage. As the dissenters correctly pointed out, “[t]he majority reads the word ‘historically’ out of the statute.”100 C.

The FCC’s Reliance on Signal Coverage Is Directly Contrary to Governing FCC Precedent.

The FCC has traditionally attached significance to Grade B coverage as “one indication of [a station’s] natural market.”101 But Grade B coverage is not such an indication where, as here, it results from a recent move of the station’s antenna,102 where the station is seeking to have its market expanded to include communities with few economic, social, and cultural ties to its community of license,103 where

97

2007 Order ¶ 4 n.15.

98

47 U.S.C. § 534(h)(1)(C)(ii)(I) (emphasis added).

99

See infra, Part II-B.

100

2007 Order, Dissent at 1.

101

1997 Order ¶ 14.

102

See generally infra, pp. 54-55.

103

See Opp. at 17-22, 29-32 (A 288- A 293, A 300- A 303). - 37 -

the station has no over-the-air following,104 and where a good-quality signal cannot even be drawn off-air.105 Indeed, the FCC’s past precedent states quite clearly that carriage must be limited to an area smaller than the station’s Grade B contour “where there is a terrain obstacle such as a mountain range or a significant body of water.”106 As the Bureau acknowledged, Nassau County is separated from upstate New York by both a mountain range (the skyline of New York City) and two significant bodies of water (the Hudson River and Long Island Sound).107 Such geographic features serve to separate Long Island and upstate New York into distinct economic, cultural, and social communities. Indeed, the FCC itself a decade ago refused to order carriage of WRNN on Long Island precisely because of “the importance of geographic features such as expansive waterways like the Hudson River and the

104

See generally infra, Part III.

105

See 2007 Order ¶ 2 (recognizing that, “to receive a good quality signal at Cablevision's principal head-end,” it is “necessary” to rely on “specialized equipment”). 106

See 1997 Order ¶ 17 (emphasis added).

107

See 2006 Order ¶ 9 (“the Station is separated from [Cablevision’s] Suffolk County Communities by the significant barriers that the Long Island Sound and New York City present”). Although the quoted statement by its terms addressed only Suffolk County, the same thing is true of Nassau County. - 38 -

Long Island Sound and the interposition of Manhattan in the epicenter of the market with its extremely congested infrastructure, that act to remove communities from one another.”108 At a minimum, then, the FCC was required to explain why Grade B contourwide carriage was appropriate despite these geographic features and the economic and cultural barriers that they create.109 “In changing course, an agency must provide a reasoned analysis indicating that prior policies and standards are being deliberately changed, not casually ignored.”110 Here, that reasoned analysis is simply lacking. D.

The FCC’s Refusal To Consider Local Programming Provided by Other Stations Is Contrary to Plain Statutory Text.

Section 614(h)(1)(C)(ii)(III) requires the FCC to consider “whether any other television station . . . provides news coverage of issues of concern to [the

108

1997 Order ¶ 12; see also 1996 Order ¶ 50.

109

See, e.g., New York State Elec. & Gas Corp. v. Sec’y of Labor, 88 F.3d 98, 107-08 (2d Cir. 1996) (“When an administrative agency addresses a question in an inconsistent manner, departing from a position it has previously taken, it must make a clear statement of its new rule and articulate its reasons for making the change in order for an appellate court to conduct intelligible judicial review.”). 110

Fox Television Stations, Inc. v. FCC, 489 F.3d 444, 470 (2d Cir. 2007) (internal quotation marks omitted). - 39 -

cable] community or provides carriage or coverage of sporting and other events of interest to the community.”111 But, as the agency explained in the order under review, the FCC assigns weight to this factor only where it militates in favor of carriage (i.e., where there are no stations serving the “target” area), not where the factor militates against carriage (i.e., where — as here — there are such stations).112 That policy is directly contrary to both the statutory text (which requires the FCC to take this factor into account in all, not just some, cases), and the governing “value of localism.” Where there are stations serving the target area, an additional station will not appreciably add to the amount of programming catering to local viewers. More troublingly, carriage of a distant station may undercut local stations, which will face additional competition for viewers and advertisers and may therefore find it more difficult to invest in coverage from a perspective that is truly local.

111

47 U.S.C. § 534(h)(1)(C)(ii)(III).

112

See 2007 Order ¶ 4; 2006 Order ¶ 17. - 40 -

E.

The FCC Refusal To Consider Viewing Patterns Is Contrary to Plain Statutory Text.

Section 614(h)(1)(C)(ii)(IV) requires the FCC to take into account “evidence of viewing patterns in cable and noncable households within the areas served by the cable system.”113 The FCC has long interpreted this factor, too, in a “heads you lose, tails I win” manner. Under FCC precedent, actual viewership is counted in favor of carriage. In the case of “specialty stations” (which include homeshopping stations), however, the FCC refuses to consider absence of viewership as weighing against carriage.114 That policy is again directly contrary to the statute’s text and purpose. Lack of viewership suggests that a station is of limited interest to inhabitants of the cable community, a fact that is directly relevant to the “value of localism.” And it is no answer to say that home-shopping stations often have low viewership even near their transmitter. Must-carry was intended to prevent the proliferation of homeshopping stations — not to give them special benefits.115

113

47 U.S.C. § 534(h)(1)(C)(ii)(IV).

114

See 2007 Order ¶ 4; 2006 Order ¶ 18.

115

See Turner II, 520 U.S. at 234 (O’Connor, J., dissenting) (“Must-carry is thus justified as a way of . . . preventing an independent station from adopting a home-shopping format.”). - 41 -

Besides, if the FCC believes that even niche stations with small viewership have a right to compelled carriage, it can and should determine at least where that small viewership is located. Even if a station serves only a niche audience, that audience’s geographic location can still be identified. For example, in this case, the evidence showed that, to the extent WRNN has any audience at all, it is located in areas other than Long Island.116 By refusing to consider that fact on the theory that WRNN’s overall audience is small, the FCC threw out the baby with the bathwater. II.

THE FCC IGNORED THE STATUTORY INSTRUCTION THAT MARKET MODIFICATION SHOULD “BETTER EFFECTUATE THE PURPOSES OF” MUST-CARRY. In addition to the many errors that the FCC committed in analyzing

WRNN’s service to Long Island, the agency committed error of an even more fundamental kind: it misapprehended the statute’s very purpose. A.

The FCC Fundamentally Misapprehended the Governing “Value of Localism.”

Judging from the order, broader carriage of a spoke station always promotes localism, so long as the station provides some programming targeted toward the communities in which carriage is sought. But localism calls for local stations 116

See Opp. at 45 (A 316). - 42 -

addressing the needs of their community of license — not distant stations addressing the needs of communities that are distant from (but more populous and thus more lucrative than) their community of license. Thus, the FCC’s view rests on a fundamentally mistaken conception of localism. The FCC further completely ignored localism costs in the Kingston spoke. Carriage of spoke stations in the hub or in other spokes provides them with an incentive to pursue viewers (and thus advertising dollars) in populous areas removed from their community of license.117 Any targeting of other spokes necessarily comes at the expense of the station’s community of license. Thus, spoke stations should not be given carriage outside their own spoke. WRNN is the paradigmatic spoke station: its community of license is at the very rim of the vast New York City DMA, in an area (upstate New York) that is

117

See 2007 Order, Dissent at 3 (“There is a point at which the concept of a ‘local market’ reaches the breaking point and expanding it further will actually damage the localism interests we are trying to serve.”); WRNN License Co., 20 FCC Rcd 7904, ¶ 17 n.63 (MB 2005) (“we are concerned that placement of the main studio in New York, as well as moving the Station’s antenna might threaten the quality of service to WRNN-DT’s community of license”); WLNY-TV, Inc. v. FCC, No. 97-4243, Brief for Respondents at 13 (filed 2d Cir. Jan. 22, 1998) (“FCC’s WLNY Br.”) (“Local viewers will benefit from the stations’ concentration on local concerns, rather than those attractive to a distant, but more lucrative area.”). - 43 -

economically, socially, culturally, and otherwise distinct from the hub (New York City) and from other spokes (such as Long Island). Thus, carriage of WRNN on Long Island will diminish Kingston-targeted programming. Localism costs to Kingston are particularly severe where, as here, an upstate spoke station is seeking carriage not only on Long Island but also throughout the rest of the New York City DMA and even outside of it.118 Indeed, the record shows that this concern is far from imaginary.119 The FCC acknowledged the concern ten years ago, when it defended its 1997 Order in this Court. As the FCC then stated: “[I]f a station licensed to upstate New York were carried on cable systems serving, for example, more densely populated Nassau County, it would have an incentive to provide programming targeted at the more profitable Long Island communities at the expense of the community the station has been licensed to serve. That would

118

See Opp. at 34 (A 305) (“WRNN has on other occasions assured the Commission that it is providing local coverage to locations as far north as Warren County, New York, and Burlington, Vermont, as far south as Hamilton and Elizabeth, New Jersey, and as far east as Bridgeport, Connecticut”) (footnotes omitted). 119

See id. at 38 n.147 (A 309) (“WRNN has received numerous complaints regarding its lack of local programming, even in its own community of license”); Opp. Exh. 10 (collecting complaints). - 44 -

defeat the very localism that must carry is intended to promote as well as the congressional policy that television stations be licensed to various communities throughout the country and not just in the most populous areas.”120 Despite this acknowledgment ten years ago, and despite the concerns expressed by the two dissenters, the FCC now fails even to consider this aspect of the question before it: the order under review addresses only possible benefits on Long Island, and is silent about localism costs in upstate New York. In sum, the FCC considered only one side of a two-sided coin. “Normally, an agency rule would be arbitrary and capricious if the agency has . . . entirely failed to consider an important aspect of the problem.”121 B.

The FCC’s Policy of Rewarding Must-Carry Gamesmanship Is Directly Contrary to the Statute’s Purposes.

Even assuming that spoke stations should ever be carried outside of their own spoke, they certainly should not be where, as here, the FCC previously determined that the station’s natural market is limited to its own spoke, and the

120

FCC’s WLNY Br. at 29-30 (emphasis added).

121

Motor Vehicle Mfrs. Ass’n of United States, Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983). - 45 -

station seeks carriage on the basis of measures later undertaken solely with a view to obtaining must-carry rights. WRNN has conceded — indeed, trumpeted — that, after the FCC determined that WRNN’s natural market was limited to the upstate New York spoke, WRNN manipulated its signal and programming for no reason other than to acquire must-carry rights. For example, in the context of Cablevision’s stay motion, WRNN argued that it had invested in new Long Island-directed transmission equipment and programming with a view to obtaining cable carriage on Long Island, and that denial of carriage would result in “stranded . . . investment.”122 An “investment” is, of course, something that one parts with “in order to gain profitable returns.”123 Yet, according to the FCC, the signal and programming of a station engaged in such must-carry gamesmanship throw precisely the same weight on the scale as

122

See Opposition of WRNN License Co., LLC to Motion for Stay of Cablevision, Cablevision Sys. Corp. v. FCC, No. 07-5553 (filed 2d Cir. Jan. 11, 2008), at 18 (arguing that WRNN will be harmed if a stay will “deprive WRNN of the benefits of . . . substantial investments” in a new antenna and Long Islandtargeted programming); Audio Tape: Cablevision v. FCC, No. 07-5553, Oral Argument (Jan. 15, 2008) (2nd. Cir.) (“we would have stranded all our investment in that Long Island programming”). 123

Random House Webster’s Unabridged Dictionary 1004 (2001). - 46 -

the signal and programming of a station that has been broadcasting in the same way for decades.124 That reading is directly at odds with the primary purpose of must-carry — a purpose that the statute itself directs the FCC to observe.125 As illustrated by the statute’s focus on “historica[l]” carriage,126 the purpose of the must-carry statute was to return broadcasters to their “natural market.”127 Congress intended to restore broadcasters to the audience they would have had in a world without cable.128 Congress did not intend to make broadcasters better off than they

124

See FCC Opposition to Emergency Motion for Stay, Cablevision Sys. Corp. v. FCC, No. 07-5553 (filed 2d Cir. Jan. 10, 2008), at 13 (spoke station may qualify for carriage in the hub and other spokes if it “modifie[s] its operations to serve, through programming as well as signal coverage, the [other] communities at issue”). 125

See 47 U.S.C. § 534(h)(1)(C)(i) (FCC must use modification power “to better effectuate the purposes of this section”). 126

Id. § 534(h)(1)(C)(ii)(I).

127

1997 Order ¶ 14.

128

See Turner I, 512 U.S. at 659 (“Congress granted must-carry privileges to broadcast stations on the belief that the broadcast television industry is in economic peril due to the physical characteristics of cable transmission and the economic incentives facing the cable industry.”); id. at 663 (“protecting noncable households from loss of regular television broadcasting service due to competition from cable systems is an important federal interest”) (internal quotation marks omitted); Turner II, 520 U.S. at 193 (“In short, Congress enacted must-carry to preserve the existing structure of the Nation’s broadcast television medium while permitting the concomitant expansion and development of cable television.”) (internal quotation marks omitted). - 47 -

would have been without cable.129 Again, the FCC itself so recognized in the brief that it filed in this Court ten years ago.130 The FCC’s policy of rewarding gamesmanship will also do great harm to the statutory purpose of promoting localism. As shown above in Part I, even a small 129

See, e.g., Turner II, 520 U.S. at 222 (“[A] system of subsidies would serve a very different purpose than must-carry. Must-carry is intended not to guarantee the financial health of all broadcasters, but to ensure a base number of broadcasters survive to provide service to noncable households.”); id. at 246 (O’Connor, dissenting) (“the must carry provisions have never been justified as a means of enhancing broadcast television”) (emphasis in original). 130

See FCC’s WLNY Br. at 12 (“Must carry was enacted to preserve the historical viewership of broadcast television stations in a cable-dominated world.”); id. at 3 (“Congress determined to restore stations’ assurance of being able to reach former over-the-air viewers.”); id. (“Congress intended to put stations back in the same position they were in before cable”); id. at 13 (“Must carry was intended to restore broadcast stations to the position they were in before the advent of cable dominance; that is, to replicate over-the-air signal availability.”); id. at 17 (“The Commission has fulfilled the purposes of the must carry regime by ensuring that petitioners will be able to reach each viewer they could have reached before cable became the principal video distribution medium.”); id. at 27 (“Must carry was implemented to help restore broadcast stations in a cable-dominated world to the position they were in before cable became the ‘dominant nationwide video medium.’”); id. (“Congress was, in other words, attempting to replicate by cable carriage stations’ over-the-air and pre-cable-domination signal availability. . . . The actions under review fulfill that goal exactly. Every viewer who watched or could have watched each of the three stations at issue before cable dominance will be able to watch them on their cable system: the stations have been restored to precisely the same position they were in pre-cable.”); id. at 30 (“There is no indication that Congress intended . . . to dramatically enhance the scope of a station’s reach far beyond where its signal would otherwise have carried it.”) (internal quotation marks omitted). - 48 -

amount of programming and an over-the-air signal appears to suffice under the FCC’s policy. Programming is malleable: a station can easily change it. A station’s over-the-air signal is no less protean: under FCC rules, broadcast stations are permitted to move their transmitter anywhere they like, so long as they cast a City Grade contour over their community of license.131 Because a City Grade contour can be over a hundred miles in diameter, broadcasters are free to move their antenna from their city of license (e.g., Kingston) to a remote location (e.g., Newburgh), thereby casting an over-the-air signal over an area that is even more remote (e.g., Long Island).132 In sum, the FCC’s policy encourages any spoke station to become a hub station, defeating the very localism Congress sought to promote. Finally, the FCC’s policy of rewarding gamesmanship is squarely at odds with the agency’s own prior pronouncements. In the 1997 Order in which it limited WRNN’s market, the FCC recognized that the purpose of market modifications is to return stations to their “natural market,”133 and accordingly explained the significance of programming as follows: “Programming is 131

See 47 C.F.R. § 73.625(a)(1).

132

See Opp. Exh. 5.

133

1997 Order ¶ 14. - 49 -

considered in the context of Section 614(h) proceedings only insofar as it serves to demonstrate the scope [of] a station’s existing market and service area, not as a quid pro quo that guarantees carriage or as an obligation that must be met to obtain carriage.”134 As the FCC thus recognized, programming should be considered to delineate what the station’s market was or would have been in a world without cable — not the market that the station seeks precisely because of cable. The FCC is not at liberty simply to ignore its prior pronouncements. III.

THE FCC ERRED BY COMPELLING CARRIAGE IN VIOLATION OF CABLEVISION’S CONSTITUTIONAL RIGHTS. A.

Compelled Carriage of WRNN on Long Island Cannot Withstand a First Amendment Challenge.

In the Turner litigation, the Supreme Court upheld the must-carry statute against a facial challenge.135 A facial challenge is “the most difficult challenge to

134

Id. ¶ 16; see also Definition of Markets for Purposes of the Cable Television Broadcast Signal Carriage Rules, Order on Reconsideration and Second Report and Order, 14 FCC Rcd 8366, ¶ 59 (1999) (same); FCC’s WLNY Br. at 47 (“[M]ust carry was meant to ensure that broadcast stations did not lose access to what had been their markets before the advent of cable television. Thus, the programming inquiry is a way to measure what a station’s market historically had been. The Commission found that brand new or future programming targeted towards a particular community does not demonstrate that the new community is within the market that must carry was intended to protect.”) (footnote omitted). 135

See Turner I, 512 U.S. at 671, 673. - 50 -

mount successfully, since the challenger must establish that no set of circumstances exists under which the Act would be valid.”136 The Turner Court therefore did not, and could not, hold that must-carry obligations would be constitutional in all circumstances. Thus, nothing in Turner bars this Court from holding that compelled carriage of WRNN on Long Island violates the First Amendment on an as-applied basis.137 Congress enacted the must-carry statute based on a specific rationale: that cable operators should be prevented from harming the existing system of localism by depriving broadcasters of their audience.138 That was also the theory on which the Supreme Court upheld the statute against facial attack: by the narrowest of margins, the Court held that the rationale was not content-based and therefore did not trigger strict scrutiny, and that the rationale was sufficiently weighty to justify

136

United States v. Salerno, 481 U.S. 739, 745 (1987).

137

See Field Day, LLC v. County of Suffolk, 463 F.3d 167, 184 (2d Cir. 2006) (“a finding of facial constitutionality does not foreclose ‘as-applied’ challenges.”). 138

See supra, pp. 9-10. - 51 -

the statute under intermediate scrutiny. As shown below, the reasoning on which the Supreme Court relied in the Turner cases cannot justify carriage here.139 First, and most fundamentally, unlike the Turner rationale, which granted carriage without examining a station’s programming content, the order under review is quite explicit in saying that WRNN is granted carriage rights because of the supposedly Long Island-targeted nature of its programming.140 As such, the order rests on a rationale that is openly content-based, thereby triggering strict scrutiny.141 In the Turner litigation, the Supreme Court side-stepped the question whether the consideration of programming content in the context of marketmodification proceedings subjected the entire statute to strict scrutiny, finding that the parties had not raised that question.142 Strict scrutiny cannot be side-stepped here. And no credible argument can be made that the order under review can

139

No alternative rationale to justify carriage in this case has ever been suggested. Given that must-carry even when justified under the Turner rationale survived by only the narrowest margin, it is not plausible that any alternative rationale could support carriage here. 140

See 2007 Order ¶ 4.

141

See Turner I, 512 U.S. at 642.

142

See id. at 643 n.6 (“the District Court did not address this provision”); id. at 676-77 (O’Connor, J., dissenting) (arguing that Section 614(h)(1)(C)(ii)’s concern with “localism” indicates that the statute’s “preference for broadcasters over cable programmers is justified with reference to content”). - 52 -

withstand strict scrutiny: plainly, it is not narrowly tailored to a compelling interest. Second, even if only intermediate scrutiny applied, the Turner rationale would not work on the facts presented. The Turner rationale contemplated the protection of noncable households from “loss of regular television broadcasting service due to competition from cable systems.”143 Thus, the Supreme Court approved a measure that guaranteed broadcasters the audience they would have had in a world without cable — not a measure granting them access to a new and expanded audience. If Congress had enacted a broader measure (requiring cable systems to carry, say, broadcast stations from all over the country), the Supreme Court could not have approved it. To be sure, the broader measure would have helped preserve broadcasting: it would have given broadcasters access to a larger audience. But the measure would also have constituted a naked preference for one kind of speaker (broadcasters) over others (cable operators and cable programmers). Such a preference would have triggered strict scrutiny under the settled principle that

143

See Turner I, 512 U.S. at 663. - 53 -

government may not “restrict the speech of some elements of our society in order to enhance the relative voice of others.”144 That principle did not doom the must-carry statute as enacted only because the Supreme Court concluded that Congress had sought to accomplish a goal that was not “concerned with the communicative impact of the regulated speech”145 — namely to protect broadcasters from cable-inflicted peril.146 That theory is unavailable insofar as carriage is compelled outside of a station’s natural market (i.e., the market it would have in a world without cable). Thus, any measure that grants carriage to a station outside of its natural market triggers strict scrutiny. Third, the Turner rationale contemplated the preservation of broadcast signals for the benefit of over-the-air viewers.147 But, even when WRNN was still broadcasting in analog format, WRNN lacked any over-the-air audience — not only on Long Island, but even in Kingston.148 Since then, WRNN has apparently 144

Buckley v. Valeo, 424 U.S. 1, 48-49 (1976).

145

Turner I, 512 U.S. at 658.

146

Id. at 659.

147

See, e.g., id. at 663 (“protecting noncable households from loss of regular television broadcasting service due to competition from cable systems is an important federal interest”) (internal quotation marks omitted). 148

See WRNN-TV Assocs., 19 FCC Rcd 12343, 12344 (MB 2004) (“WRNNTV Limited acknowledges that early return of its NTSC channel will result in loss - 54 -

sold off its analog over-the-air spectrum. There are virtually no consumers that have off-air antennas and digital equipment necessary to receive digital signals.149 At best, then, WRNN’s over-the-air audience is de minimis. Granting preferential cable-carriage rights to WRNN therefore cannot be grounded in the Turner rationale. If WRNN has no over-the-air viewers, seeking to protect them cannot be a governmental objective that qualifies as rational, let alone as important. As the D.C. Circuit put it in connection with a station that likewise lacked an over-the-air audience: “[T]he rule is completely adrift from its economic rationale. The affected cable system could not possibly have been injuring the benefitted broadcaster by fragmenting its audience.”150 Fourth, the Turner rationale vitally depended on the notion that cable operators were able to deny broadcasters carriage for anticompetitive reasons —

of an over-the-air analog service, but contends that the impact on the public will be imperceptive since, according to Nielsen Media Research, there was no reportable over-the-air viewing for the station for the month of April 2004.”). 149

See, e.g., Media Bureau Staff Report Concerning Over-the-Air Broadcast Television Viewers, MB Docket No. 04-210, 2005 WL 473322, at *1 n.4 (MB rel. Feb. 28, 2005). 150

Quincy Cable TV, Inc. v. FCC, 768 F.2d 1434, 1461 n.54 (D.C. Cir.

1985). - 55 -

supposedly because cable operators were unconstrained by competition.151 The apparent thinking was that, at the time, cable operators could drop even popular broadcast signals without having to worry about subscriber losses: because there was no competition, consumers had no other place to go. Real-world market conditions on Long Island today could not be more different.152 There are two providers of Direct Broadcast Service (DBS), DirecTV and Dish Network, which provide a multichannel package that is similar to the 151

See Turner I, 512 U.S. at 649 (“Congress designed the must-carry provisions . . . to prevent cable operators from exploiting their economic power to the detriment of broadcasters, and thereby to ensure that all Americans, especially those unable to subscribe to cable, have access to free television programming”); id. at 661 (“The must-carry provisions . . . are justified by special characteristics of the cable medium: the bottleneck monopoly power exercised by cable operators and the dangers this power poses to the viability of broadcast television.”); id. at 669-70 (Stevens, J, concurring in part and concurring in the judgment) (“The mustcarry provisions are amply justified by special characteristics of the cable medium, namely, the bottleneck monopoly power exercised by cable operators and the dangers this power poses to the viability of broadcast television. Cable operators’ control of essential facilities provides a basis for intrusive regulation that would be inappropriate and perhaps impermissible for other communicative media.”) (internal quotation marks and brackets omitted); Turner II, 520 U.S. at 197 (“cable operators possess a local monopoly over cable households”); id. at 227 (Breyer, J., concurring in part) (“a cable system . . . at present (perhaps less in the future) typically faces little competition”). 152

See Opp. at 54 (A 325); FCC Adopts 13th Annual Report to Congress on Video Competition and Notice of Inquiry for the 14th Annual Report, News Release, at 3 (Nov. 27, 2007), available at http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-278454A1.pdf. - 56 -

package provided by cable operators like Cablevision. In just over a decade, DBS’s market share has grown from zero to about 30%.153 In addition, telephone companies have begun providing multichannel video service,154 including, as the order under review itself observes, on Long Island.155 Verizon is investing billions of dollars in its video service,156 and analysts have observed that, of all cable operators, Cablevision is most squarely caught in Verizon’s cross-hairs.157 In sum,

153

See FCC Adopts 13th Annual Report to Congress on Video Competition and Notice of Inquiry for the 14th Annual Report, News Release, at 3 (Nov. 27, 2007), available at http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC278454A1.pdf (“DBS subscribers comprise the second largest group of MVPD households, representing 29 percent of total MVPD subscribers as of June 2006.”). 154

See Verizon Communications Inc., Press Release, Verizon Reports Continued Success in 3Q 2007, Oct. 29, 2007, available at http://investor.verizon.com/news/view.aspx?NewsID=863 (reporting that, as of the end of the third quarter of 2007, Verizon had approximately 717,000 subscribers to its FiOS TV service (an increase of approximately 600,000 over the past 12 months), and its fiber-to-the-home FiOS network passed 8.5 million premises). 155

See 2007 Order ¶ 4 n.15 (“Verizon carries WRNN-DT on its systems in Massapequa Park, Oyster Bay and Hempstead, New York.”). 156

See, e.g., Verizon Communications, Inc., News Release, Verizon Provides New Financial and Operational Details on Its Fiber Network as Deployment Gains Momentum, Sept. 27, 2006, available at http://newscenter.verizon.com/press-releases/verizon/2006/verizon-providesnew.html (reporting that Verizon “expects to invest $18.0 billion in net capital from 2004 through 2010 in deploying [FiOS]”). 157

See, e.g., Peter Grant & Dionne Searcey, Verizon’s FiOS Challenges Cable’s Clout, Wall St. J., Oct. 24, 2007, A12 (“Cablevision clearly is in the front - 57 -

Long Island in 2008 shows a competitive landscape that was unimaginable at the time of Turner. It is therefore not plausible to suppose that Cablevision could profitably act on anticompetitive incentives.158 Fifth, there is no evidence whatsoever that Cablevision has declined to carry WRNN with a view to stifling competition.159 Cablevision declines to carry the home-shopping station because it has no audience: people are not interested in watching it. By any measure, Cablevision can make better use of the cable spectrum that would be required to carry WRNN. It is worth noting that, when Congress enacted the must-carry statute, it specifically carved out home-shopping stations, leaving it to the FCC to decide whether those stations should have mustcarry rights — or, indeed, broadcast licenses at all.160 Although the FCC in 1993

lines of the FiOS battle. Already 25% of the homes it serves are exposed to FiOS service compared with about 4% for Comcast and Time Warner Cable Inc.”). 158

See, e.g., Time Warner Entm’t Co. v. FCC, 240 F.3d 1126, 1134 (D.C. Cir. 2001) (“in [justifying another set of rules based on the assumption that cable operators had market power] the Commission will have to take account of the impact of DBS on that market power”). 159

See Opp. at 62 n.231 (A 333).

160

47 U.S.C. § 534(g)(1). - 58 -

ruled that home-shopping stations should have must-carry rights, it recently initiated a proceeding to reconsider that conclusion.161 Finally, the Turner rationale posited that “broadcast stations denied carriage will either deteriorate to a substantial degree or fail altogether.”162 The record is entirely devoid of any evidence that, without carriage on Long Island, this fate will befall WRNN. To the contrary, WRNN has been on the air for more than 22 years and has prospered even without carriage on Long Island — so much so that it was able to fund expensive changes to its signal and programming without any guarantee of broader carriage. To defend must-carry against a facial challenge, it may have been enough for the FCC to show that, without must-carry, financial hardship would have been suffered by many television stations.163 In the face of an

161

Commission Seeks To Update the Record for a Petition for Reconsideration Regarding Home Shopping Stations, Public Notice, 22 FCC Rcd 8550 (2007). 162

Turner I, 512 U.S. at 666 (plurality).

163

But see Turner I, 512 U.S. at 682 (O’Connor, J., dissenting) (“If Congress wants to protect those stations that are in danger of going out of business, or bar cable operators from preferring programmers in which the operators have an ownership stake, it may do that. But it may not, in the course of advancing these interests, restrict cable operators and programmers in circumstances where neither of these interests is threatened.”). - 59 -

as-applied challenge, more is needed: there must be a showing that financial hardship will befall the particular station seeking carriage rights.164 B.

Compelled Carriage of WRNN on Long Island Cannot Withstand a Fifth Amendment Challenge.

In its order, the Commission rejected Cablevision’s “per se” takings claim on the theory that must-carry “effectuates no permanent physical occupation of a cable operator’s property, such as installation of the physical equipment at issue in Loretto v. Teleprompter Manhattan CATV Corp.”165 Rather, the Commission said, “a programming stream is transmitted in bits of data over cable bandwidth through electrons or photons at the speed of light while the cable operator retains complete control over its physical property (e.g., headend equipment).”166

164

As explained in the text, compelled carriage of WRNN on Long Island violates Cablevision’s First Amendment rights regardless of whether, if a facial challenge were brought today, the Supreme Court would reach the same conclusion as it did in the Turner litigation. Given the dramatic changes in circumstances that have occurred in the wake of the Turner litigation, however, it is not plausible that the Supreme Court would reach the same conclusion again. See, e.g., United States v. Carolene Prods. Co., 304 U.S. 144, 153 (1938) (“the constitutionality of a statute predicated upon the existence of a particular state of facts may be challenged by showing to the court that those facts have ceased to exist”). 165

2007 Order ¶ 8 (footnotes omitted).

166

Id. (footnotes omitted). - 60 -

But compelled carriage of WRNN involves the electronic equivalent of a beach-front lot: a 6 MHz channel on an analog cable tier. There is no reason to treat valuable electronic property differently than other property.167 If the order under review stands, WRNN will be entitled to occupy Cablevision’s Channel 48 entirely, denying Cablevision any and all rights to the channel’s possession and use. When WRNN occupies Channel 48, a taking occurs, and compensation will fall due. C.

Constitutional Concerns Can and Must Be Avoided.

Although compelled carriage of WRNN on Long Island violates the Constitution, this Court need not so hold. It is well established that any “statute must be construed, if fairly possible, so as to avoid not only the conclusion that it is

167

See Midwest Video Corp. v. FCC, 571 F.2d 1025, 1058 (8th Cir. 1978) (“a requirement that facilities be built and dedicated without compensation . . . would be a deprivation forbidden by the Fifth Amendment”), aff’d, 440 U.S. 689 (1979); Turner Broad. Sys., Inc. v. FCC, 819 F. Supp. 32, 67 n.10 (D.D.C. 1993) (Williams, J., dissenting) (“The creation of an entitlement in some parties to use the facilities of another, gratis, would seem on its face to implicate Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419 (1982), where the Court struck down a statute entitling cable companies to place equipment in an owner's building so that tenants could receive cable television.”), vacated on other grounds, 512 U.S. 622 (1994); see also United States v. Morris, 928 F.2d 504, 511 (2d Cir. 1991) (characterizing computer “hacking” as a form of trespass). - 61 -

unconstitutional but also grave doubts upon that score.”168 It is further well established that, where an agency’s reading would generate significant constitutional doubt, that reading is not entitled to Chevron deference.169 Thus, the Court can and should avoid constitutional questions: it should hold that, by interpreting the statute to permit it to compel carriage of WRNN on Long Island, the FCC misread the statute, for the reasons set forth above in Parts I and II. *

*

*

In sum, because the FCC violated the statute, failed to explain its order, and failed to avoid constitutional concerns, the order under review should be set aside.170 Because the FCC cannot lawfully require WRNN to be carried on Long

168

Rust v. Sullivan, 500 U.S. 173, 191 (1991) (internal quotation marks omitted); see also United States v. Gonzalez, 420 F.3d 111, 124 (2d Cir. 2005). 169

See, e.g., Clearing House Assoc. v. Cuomo, 510 F.3d 105, 113 (2d Cir. 2007) (“‘[W]here an administrative interpretation of a statute invokes the outer limits of Congress’ power, we expect a clear indication that Congress intended that result.’ That broader principle is rooted in the doctrine of constitutional avoidance, which the Supreme Court has recognized may, in some instances, trump the deference typically afforded to an agency’s interpretation of the statute it administers.”); Blake v. Carbone, 489 F.3d 88, 100 (2d Cir. 2007) (“Courts interpret statutes to avoid constitutional infirmities . . . . We therefore reject the government’s request for deference.”). 170

See 5 U.S.C. § 706(2). - 62 -

Island, and because interim carriage would be disruptive,171 the order should be vacated.172

171

See generally Cablevision’s Emergency Motion for a Stay, Cablevision Sys. Corp. v. FCC, No. 07-5553 (filed 2d Cir., Jan. 10, 2008), at 17-19. 172

See, e.g., Fox Television Stations, Inc. v. FCC, 280 F.3d 1027, 1048 (D.C. Cir. 2002) (“The decision whether to vacate depends on the seriousness of the order’s deficiencies (and thus the extent of doubt whether the agency chose correctly) and the disruptive consequences of an interim change that may itself be changed.”) (internal quotation marks omitted). - 63 -

Conclusion The order under review should be vacated. Respectfully submitted,

__________________________ HENK BRANDS PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLP 1615 L Street, N.W., Suite 1300 Washington, DC 20036-5694 (202) 223-7300 HOWARD J. SYMONS TARA M. CORVO MINTZ, LEVIN, COHN, FERRIS, GLOVSKY AND POPEO, P.C. 701 Pennsylvania Avenue, N.W., Suite 900 Washington, D.C. 20004 (202) 434-7300

ALLAN J. ARFFA J. ADAM SKAGGS PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLP 1285 Avenue of the Americas New York, New York 10019 (212) 373-3000

February 8, 2008

Counsel for Cablevision Systems Corp.

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CERTIFICATE OF COMPLIANCE Pursuant to Federal Rule of Appellate Procedure 32(a)(7)(B) and (C), the undersigned certifies that this brief complies with the type-volume limitation. Exclusive of the portions exempted by Federal Rule of Appellate Procedure 32(a)(7)(B)(iii), this brief contains 13,770 words. This certificate was prepared in reliance on the word-count function of the word-processing system (Microsoft Word 2003) used to prepare this brief. The undersigned further certifies that the PDF version of this brief has been scanned for viruses and that no virus has been detected.

_________________________ Henk Brands

CERTIFICATE OF SERVICE I hereby certify that, on this 8th day of February 2008, I caused two copies of the foregoing Brief for Petitioner to be served by first-class mail upon the following parties:

Jacob M. Lewis Office of General Counsel Federal Communications Commission 445 12th Street, S.W., 8th Floor Washington, D.C. 20554

Andrew G. McBride Todd M. Stansbury William S. Consovoy Wiley Rein & Fielding LLP 1776 K Street NW Washington, DC 20006

Nancy Caroline Garrison Catherine G. O’Sullivan U.S. Department of Justice Antitrust Division Appellate Section 950 Pennsylvania Avenue, NW Room 3224 Washington, DC 20530-0001

_________________________ Anthony Portelli

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Special Appendix