United States v. Midwest Video Corp.
406 U.S. 649 (1972)

Annotate this Case

U.S. Supreme Court

United States v. Midwest Video Corp., 406 U.S. 649 (1972)

United States v. Midwest Video Corp.

No. 71-506

Argued April 19, 1972

Decided June 7, 1972

406 U.S. 649

CERTIORARI TO THE UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

Syllabus

The Federal Communications Commission (FCC) promulgated a rule that

"no CATV system having 3,500 or more subscribers shall carry the signal of any television broadcast station unless the system also operates to a significant extent as a local outlet by cablecasting [i.e., originating programs] and has available facilities for local production and presentation of programs other than automated services."

Upon challenge of respondent, an operator of CATV systems subject to the new requirement, the Court of Appeals set aside the regulation on the ground that the FCC had no authority to issue it.

Held: The judgment is reversed. Pp. 659-675.

441 F.2d 1322, reversed.

MR. JUSTICE BRENNAN, joined by MR. JUSTICE WHITE, MR. JUSTICE MARSHALL, and MR. JUSTICE BLACKMUN, concluded that:

1. The rule is within the FCC's statutory authority to regulate CATV at least to the extent "reasonably ancillary to the effective performance of the Commission's various responsibilities for the regulation of television broadcasting," United States v. Southwestern Cable Co.,392 U. S. 157, 392 U. S. 178. Pp. 406 U. S. 659-670.

2. In the light of the record in this case, there is substantial evidence that the rule, with its 3,500 standard and as it is applied under FCC guidelines for waiver on a showing of financial hardship, will promote the public interest within the meaning of the Communications Act of 1934. Pp. 406 U. S. 671-675.

THE CHIEF JUSTICE concluded that, until Congress acts to deal with the problems brought about by the emergence of CATV, the FCC should be allowed wide latitude. Pp. 406 U. S. 675-676.

BRENNAN, J., announced the Court's judgment and delivered an opinion in which WHITE, MARSHALL, and BLACKMUN, JJ., joined. BURGER, C.J., filed an opinion concurring in the result, post, p. 406 U. S. 675. DOUGLAS, J., filed a dissenting opinion, in which STEWART, POWELL, and REHNQUIST, JJ., joined, post, p. 406 U. S. 677.

Page 406 U. S. 650

MR. JUSTICE BRENNAN announced the judgment of the Court and an opinion in which MR. JUSTICE WHITE, MR. JUSTICE MARSHALL, and MR. JUSTICE BLACKMUN join.

Community antenna television (CATV) was developed long after the enactment of the Communications Act of 1934, 48 Stat. 1064, as amended, 47 U.S.C. § 151 et seq., as an auxiliary to broadcasting through the retransmission by wire of intercepted television signals to viewers otherwise unable to receive them because of distance or local terrain. [Footnote 1] In United States v. Southwestern Cable Co.,392 U. S. 157 (1968), where we sustained the jurisdiction of

Page 406 U. S. 651

the Federal Communications Commission to regulate the new industry, at least to the extent

"reasonably ancillary to the effective performance of the Commission's various responsibilities for the regulation of television broadcasting,"

id. at 392 U. S. 178, we observed that the growth of CATV since the establishment of the first commercial system in 1950 has been nothing less than "explosive.'" Id. at 392 U. S. 163. [Footnote 2] The potential of the new industry to augment communication services now available is equally phenomenal. [Footnote 3] As we said in Southwestern, id. at 392 U. S. 164, CATV

"[promises] for the future to provide a national communications system, in which signals from selected broadcasting centers would be transmitted to metropolitan areas throughout the country."

Moreover, as the Commission has noted,

"the expanding multi-channel capacity of cable systems could be utilized to provide a variety of new communications services to homes and businesses within a community,"

such as facsimile reproduction of documents, electronic mail delivery, and information retrieval. Notice of Proposed Rulemaking and Notice of Inquiry, 15 F.C.C.2d 417, 419-420 (1968). Perhaps more important, CATV systems can themselves originate programs, or "cablecast" -- which means, the Commission has found, that CATV can

"[increase] the number of local outlets for community self-expression and [augment] the public's choice of programs and types of service, without use of broadcast spectrum. . . ."

Id. at 421.

Page 406 U. S. 652

Recognizing this potential, the Commission, shortly after our decision in Southwestern, initiated a general inquiry

"to explore the broad question of how best to obtain, consistent with the public interest standard of the Communications Act, the full benefits of developing communications technology for the public, with particular immediate reference to CATV technology. . . ."

Id. at 417. In particular, the Commission tentatively concluded, as part of a more expansive program for the regulation of CATV, [Footnote 4] "that, for now and in general, CATV program origination is in the public interest," id. at 421, and sought comments on a proposal "to condition the carriage of television broadcast signals (local or distant) upon a requirement that the CATV system also operate to a significant extent as a local outlet by originating."

Page 406 U. S. 653

Id. at 422. As for its authority to impose such a requirement, the Commission stated that its

"concern with CATV carriage of broadcast signals is not just a matter of avoidance of adverse effects, but extends also to requiring CATV affirmatively to further statutory policies."

Ibid.

On the basis of comments received, the Commission, on October 24, 1969, adopted a rule providing that

"no CATV system having 3,500 or more subscribers shall carry the signal of any television broadcast station unless the system also operates to a significant extent [Footnote 5] as a local outlet by cablecasting [Footnote 6] and has available facilities for local production and presentation of programs other

Page 406 U. S. 654

than automated services."

47 CFR § 74.1111(a). [Footnote 7] In a report accompanying this regulation, the Commission stated that the tentative conclusions of its earlier notice of proposed rulemaking

"recognize the great potential of the cable technology to further the achievement of long-established regulatory goals in the field of television broadcasting by increasing the number of outlets for community self-expression and augmenting the public's choice of programs and types of services. . . . They also reflect our view that a multi-purpose CATV operation combining carriage of broadcast signals with program origination and common carrier services, [Footnote 8] might best exploit cable channel capacity to the advantage of the public and promote the basic purpose for which this Commission was created:"

"regulating interstate and foreign commerce in communication

Page 406 U. S. 655

by wire and radio so as to make available, so far as possible, to all people of the United States a rapid, efficient, nationwide, and worldwide wire and radio communication service with adequate facilities at reasonable charges . . ."

"(Sec. 1 of the Communications Act). [Footnote 9] After full consideration of the comments filed by the parties, we adhere to the view that program origination on CATV is in the public interest. [Footnote 10]"

First Report and Order, 20 F.C.C.2d 201, 202 (1969).

Page 406 U. S. 656

The Commission further stated, id. at 208-209:

"The use of broadcast signals has enabled CATV to finance the construction of high capacity cable facilities. In requiring, in return for these uses of radio, that CATV devote a portion of the facilities to providing needed origination service, we are furthering our statutory responsibility to 'encourage the larger and more effective use of radio in the public interest' (sec. 303(g)). [Footnote 11] The requirement will also facilitate the more effective performance of the Commission's duty to provide a fair, efficient, and equitable distribution of television service to each of the several States and communities (sec. 307(b)) [Footnote 12] in areas where we have been unable to accomplish this through broadcast media. [Footnote 13] "

Page 406 U. S. 657

Upon the challenge of respondent Midwest Video Corp., an operator of CATV systems subject to the new cablecasting requirement, the United States Court of Appeals for the Eighth Circuit set aside the regulation on the ground that the Commission "is without authority to impose" it. 441 F.2d 1322, 1328 (1971). [Footnote 14] "The Commission's power [over CATV] . . . ," the court explained,

"must be based on the Commission's right to adopt rules that are reasonably ancillary to its responsibilities

Page 406 U. S. 658

in the broadcasting field,"

id. at 1326 -- a standard that the court thought the Commission's regulation "goes far beyond." Id. at 1327. [Footnote 15] The court's opinion may also be understood to hold the regulation invalid as not supported by substantial evidence that it would serve the public interest. "The Commission report itself shows," the court said,

"that, upon the basis of the record made, it is highly speculative whether there is sufficient expertise or information available to support a finding that the origination rule will further the public interest."

Id. at 1328. "Entering into the program origination field involves very substantial expenditures," id. at 1327, and "[a] high probability exists that cablecasting will not be self-supporting," that there will be a "substantial increase" in CATV subscription fees, and that, "in some instances," CATV operators will be driven out of business. Ibid. [Footnote 16] We granted certiorari. 404 U.S. 1014 (1972). We reverse.

Page 406 U. S. 659

I

In 1966, the Commission promulgated regulations that, in general, required CATV systems (1) to carry, upon request and in a specified order of priority within the limits of their channel capacity, the signals of broadcast stations into whose service area they brought competing signals; (2) to avoid, upon request, the duplication on the same day of local station programing; and (3) to refrain from bringing new distant signals into the 100 largest television markets except upon a prior showing that that service would be consistent with the public interest. See Second Report and Order, 2 F.C.C.2d 725 (1966). In assessing the Commission's jurisdiction over CATV against the backdrop of these regulations, [Footnote 17] we focused in Southwestern chiefly on § 2(a) of the Communications Act, 48 Stat. 1064, as amended, 47 U.S.C. § 152(a), which provides, in pertinent part:

"The provisions of this [Act] shall apply to all interstate and foreign communication by wire or radio . . . which originates and/or is received within the United States, and to all persons engaged within the United States in such communication. . . ."

In view of the Act's definitions of "communication by wire" and "communication by radio," [Footnote 18] the interstate character of CATV services, [Footnote 19]

Page 406 U. S. 660

and the evidence of congressional intent that

"[t]he Commission was expected to serve as the 'single Government agency' with 'unified jurisdiction' and 'regulatory power over all forms of electrical communication, whether by telephone, telegraph, cable, or radio,'"

392 U.S. at 392 U. S. 167-168 (footnotes omitted), we held that § 2(a) amply covers CATV systems and operations. We also held that § 2(a) is itself a grant of regulatory power, and not merely a prescription of the forms of communication to which the Act's other provisions governing common carriers and broadcasters apply:

"We cannot [we said] construe the Act so restrictively. Nothing in the language of § [2(a)], in the surrounding language, or in the Act's history or purposes limits the Commission's authority to those activities and forms of communication that are specifically described by the Act's other provisions. . . . Certainly Congress could not, in 1934, have foreseen the development of community antenna television systems, but it seems to us that it was precisely because Congress wished 'to maintain, through appropriate administrative control, a grip on the dynamic aspects of radio transmission,' F.C.C. v. Pottsville Broadcasting Co., [309 U.S.]

Page 406 U. S. 661

at 309 U. S. 138, that it conferred upon the Commission a 'unified jurisdiction' and 'broad authority.' Thus,"

"[u]nderlying the whole [Communications Act] is recognition of the rapidly fluctuating factors characteristic of the evolution of broadcasting and of the corresponding requirement that the administrative process possess sufficient flexibility to adjust itself to these factors."

"[Ibid.] Congress, in 1934, acted in a field that was demonstrably 'both new and dynamic,' and it therefore gave the Commission 'a comprehensive mandate,' with 'not niggardly, but expansive, powers.' National Broadcasting Co. v. United States,319 U. S. 190, 319 U. S. 219. We have found no reason to believe that § [2] does not, as its terms suggest, confer regulatory authority over 'all interstate . . . communication by wire or radio.'"

Id. at 392 U. S. 172-173 (footnotes omitted).

This conclusion, however, did not end the analysis, for § 2(a) does not, in and of itself, prescribe any objectives for which the Commission's regulatory power over CATV might properly be exercised. We accordingly went on to evaluate the reasons for which the Commission had asserted jurisdiction, and found that

"the Commission has reasonably concluded that regulatory authority over CATV is imperative if it is to perform with appropriate effectiveness certain of its other responsibilities."

Id. at 392 U. S. 173. In particular, we found that the Commission had reasonably determined that "the unregulated explosive growth of CATV,'" especially through "its importation of distant signals into the service areas of local stations" and the resulting division of audiences and revenues, threatened to "deprive the public of the various benefits of [the] system of local broadcasting stations" that the Commission was charged with developing and overseeing under § 307(b) of the

Page 406 U. S. 662

Act. [Footnote 20] Id. at 392 U. S. 175. We therefore concluded, without expressing any view "as to the Commission's authority, if any, to regulate CATV under any other circumstances or for any other purposes," that the Commission does have jurisdiction over CATV

"reasonably ancillary to the effective performance of [its] various responsibilities for the regulation of television broadcasting . . . [and] may, for these purposes, issue 'such rules and regulations and prescribe such restrictions and conditions, not inconsistent with law,' as 'public convenience, interest, or necessity requires.'"

Id. at 392 U. S. 178 (quoting § 303(r) of the Act, 50 Stat. 191, 47 U.S.C. § 303(r)). The parties now before us do not dispute that, in light of Southwestern, CATV transmissions are subject to the Commission's jurisdiction as "interstate . . . communication by wire or radio" within the meaning of § 2(a) even insofar as they are local cablecasts. [Footnote 21] The controversy,

Page 406 U. S. 663

instead, centers on whether the Commission's program origination rule is "reasonably ancillary to the effective performance of [its] various responsibilities for the regulation of television broadcasting." [Footnote 22] We hold that it is.

Page 406 U. S. 664

At the outset, we must note that the Commission's legitimate concern in the regulation of CATV is not limited to controlling the competitive impact CATV may have on broadcast services. Southwestern refers to the Commission's "various responsibilities for the regulation of television broadcasting." These are considerably more numerous than simply assuring that broadcast stations operating in the public interest do not go out of business. Moreover, we must agree with the Commission that its

"concern with CATV carriage of broadcast signals is not just a matter of avoidance of adverse effects, but extends also to requiring CATV affirmatively to further statutory policies."

Supra at 406 U. S. 653. Since the avoidance of adverse effects is itself the furtherance of statutory policies, no sensible distinction, even in theory, can be drawn along those lines. More important, CATV systems, no less than broadcast stations, see, e.g., Federal Radio Comm'n v. Nelson Bros. Co.,289 U. S. 266 (1933) (deletion of a station), may enhance, as well as impair, the appropriate

Page 406 U. S. 665

provision of broadcast services. Consequently, to define the Commission's power in terms of the protection, as opposed to the advancement, of broadcasting objectives would artificially constrict the Commission in the achievement of its statutory purposes and be inconsistent with our recognition in Southwestern

"that it was precisely because Congress wished 'to maintain, through appropriate administrative control, a grip on the dynamic aspects of radio transmission' . . . that it conferred upon the Commission a 'unified jurisdiction' and 'broad authority.'"

Supra at 660-661. [Footnote 23]

The very regulations that formed the backdrop for our decision in Southwestern demonstrate this point. Those regulations were, of course, avowedly designed to guard broadcast services from being undermined by unregulated CATV growth. At the same time, the Commission recognized that

"CATV systems . . . have arisen in response to public need and demand for improved television service, and perform valuable public services in this respect."

Second Report and Order, 2 F.C.C.2d 725, 745 (1966). [Footnote 24] accordingly, the Commission's express purpose was not

"to deprive the public of these important benefits or to restrict the enriched programing selection which

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