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The 4th U.S. Circuit Court of Appeals has upheld as constitutional the Satellite Home Viewer Improvement Act of 1999 (SHVIA). Satellite Broadcasting and Communications Assoc. v. Federal Communications Commission, 2001 U.S. App. LEXIS 26120, Nos. 01-1151, 01-1271, 01-1272, 01-1818 (4th Cir., 12/7/01). In this action, various satellite TV providers challenged the constitutionality of the SHVIA. The interested parties are the satellite industry representatives, television program broadcasters and the United States (primarily the Federal Communications Commission). The district court granted the FCC’s Rule 12(b)(6) motion to dismiss after determining that the rule was content-neutral and warranted only intermediate constitutional scrutiny. The satellite carriers appealed to the 4th Circuit. A review of the legislative history of the SHVIA is helpful in analyzing this case. Because of developments in copyright law between 1908 and 1976, cable-TV carriers have the right to carry local TV programming without having to obtain permission from the holders of the copyrights in the individual programs. To promote diversity of programming (which would be undermined if cable carriers were allowed to carry only network channels and not other local programming), all cable companies that take advantage of this copyright exemption are required by legislation enacted in 1976 to carry all stations within their local markets that request inclusion on the service. Because satellite television was not a major influence by 1976, these exemptions to copyright law did not previously apply to satellite carriers. Consequently, satellite carriers were at a competitive disadvantage, as they could not carry local programming without obtaining permission from each program’s copyright holder, a prohibitively complicated task. Consumers making the choice of what type of service to receive have historically preferred cable, presumably in part because they could receive a wide variety of channels — plus their own local stations — through one service. The SHVIA was enacted to remedy this competitive disadvantage. Like the cable industry exceptions, the SHVIA created a statutory copyright license that allows satellite carriers to broadcast local television station programming without first obtaining permission from the individual programs’ copyright holders (17 U.S.C. � 122(a)). Unlike the cable industry’s version of the rule, satellite carriers are not required to carry local stations on their services, but those who do choose to carry one local station must carry all requesting stations within the local market (47 U.S.C. � 338(a)(1) (known as the “carry one, carry all” rule). The difference in the rules for cable and satellite broadcasters takes into account the reality that cable companies have a small local area that they serve and can, consequently, carry all the local stations in their areas with the equipment they have. Satellite carriers, on the other hand, which have an available capacity of 400 – 500 channels, cover the entire country and cannot be expected to provide all local stations (approximately 1,600 nationwide) with broadcast rights on their services. Since the SHVIA passed in 1999, satellite carriers have enjoyed the benefits of � 122 without the burdens of � 338, as this section of the act did not go into effect until Jan. 1, 2002. One option for implementing � 122, which Congress rejected, was the so-called “cherry picking” method, whereby satellite services could choose the stations they wanted to broadcast in each local market. This method, Congress determined, would undoubtedly lead to the carriers’ choosing to broadcast network programming in as many locations as possible, leaving nonnetwork stations without access. Congress chose instead the “carry one, carry all” rule, which forces the carriers to offer inclusion to all interested stations in one market at a time, presumably starting from the largest markets on down. For example, a satellite carrier might begin with the New York market, offering to broadcast all stations in that area, then offer the same opportunities to local stations in Los Angeles, Chicago, Denver, etc., until all its available channel capacity is spoken for. Network and local stations in other (presumably smaller) markets would not be included at all. The satellite carriers challenged the carry one, carry all rule as a violation of the Constitution’s Copyright Clause, the First Amendment and the Due Process and Takings Clauses of the Fifth Amendment. They asserted that the cherry-picking rule should have been adopted. The First Amendment challenge was based on the satellite carriers’ contention that because they normally exercise editorial discretion over which stations their services will offer, the carry one, carry all rule impedes that discretion, thus impeding their speech. They protested that the rule would force them to carry independent broadcast stations in larger markets at the expense of network affiliates in smaller markets. The satellite carriers claimed the “carry one, carry all” rule was not content-neutral because it was triggered by their decision to transmit certain speech (a local TV station’s programming) and so was subject to strict constitutional scrutiny. The 4th Circuit, however, found that the triggering event was a decision to take advantage of the copyright license exceptions offered by � 122, and that any company wishing to avoid the rule could do so by obtaining the normal copyright licenses. Therefore, the district court treated the rule as a content-neutral regulation of the satellite carriers’ free speech and applied the “intermediate scrutiny” standard. The carry one, carry all rule, therefore, would meet the intermediate scrutiny standard if it advanced at least one substantial governmental interest in a narrowly tailored manner. The Fourth Circuit identified two substantial governmental interests: (1) preserving a multiplicity of local broadcast outlets for over-the-air viewers who do not subscribe to either cable or satellite and (2) preventing the government’s grant of a statutory copyright license to satellite carriers from undermining competition in local markets for broadcast advertising. These interests, the court determined, would be undermined if the cherry-picking method were used, as satellite viewers would not watch local independent stations that were not on their satellite services, but had to be accessed through antennas. This would undermine those stations’ ability to get their messages to viewers and would decrease their attractiveness to advertisers. The court found the rule sufficiently narrowly tailored to serve these two government interests, and thus declared it did not violate the satellite carriers’ First Amendment rights. The satellite carriers also contended that the carry one, carry all rule exceeded Congress’ authority under the Copyright Clause because it uses the clause to play favorites by protecting the speech of independent local broadcasters. The court noted, however, that Congress’ power under the Copyright Clause is meant to allow it to balance the interests of authors against the public’s interest in a free flow of ideas. Because the carry one, carry all rule serves to prevent the statutory copyright granted under � 122 from being used to undermine the public’s interest in receiving a “rich mix” of local broadcast sources, Congress acted within its power in imposing the rule. Finally, the court rejected the Takings Clause objection to the rule. The satellite carriers claimed that the rule worked a per se taking because it limited their right to exclude the unwanted signals of local stations from their property. The court found, however, that because the rule involved no permanent physical occupation of property and merely placed conditions on the use of a benefit that the government need not have conferred in the first place, it could not be an unconstitutional taking. For plaintiff/appellant, Charles Justin Cooper of Washington, D.C.’s Cooper, Carvin & Rosenthal, P.L.L.C. For defendants/appellees, Mark Bernard Stern of the U.S. Department of Justice, Civil Division, Washington, D.C.

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