SubscribeTo government and cable television lawyers, it was an eye-popping decision that a unanimous Supreme Court handed down in the case testing Oklahoma’s authority to ignore federal regulations in banning liquor advertising from cable television channels. So sweeping was the language of the opinion rejecting the state’s claim that there were some who felt there was no area of cable regulation from which the federal government was barred. Indeed, by the time they had finished reading the 23-page text, some cable television lawyers were wondering whether efforts to reach a compromise with the nation’s cities on legislation spelling out their authority over cable was worth the effort. Perhaps, they thought, the FCC holds the key to the creation of the regulatory framework that would suit the industry best.
At issue was an Oklahoma law, implementing a provision of the state constitution, that barred cable systems from carrying wine commercials in the signals they retransmitted from out of state. To Oklahoma, the fact that compliance would impose a heavy burden on cable systems and require them to violate FCC regulations was not controlling. The state cited its authority under the 21st Amendment, which not only repealed prohibition but authorized the states to regulate the sale of alcoholic beverages within their borders. The argument was not good enough for the Supreme Court. It said application of the advertising ban to out-of-state signals carried by cable operators is pre-empted by federal law and added that the 21st Amendment “does not save the regulation from pre-emption.”
That was only the thin edge of the wedge. “If the FCC has resolved to pre-empt an area of cable television regulation and if this determination ‘represents a reasonable accomodation of conflicting policies’ that are within the agency’s domain,” the opinion said, quoting from an earlier decision, “we must conclude that all conflicting state regulations have been precluded.” To some cable lawyers, that constitutes a broader grant of authority to the commission than the court granted it in Southwestern Cable Co., in 1968, when the court held that the commission’s regulation of cable was “ancillary to broadcasting.”
Whether that analysis is correct or not, FCC attorneys–who were not involved in the case–consider the decision a sweeping validation of commission regulation of cable. General Counsel Bruce Fein said that nothing in the opinion “suggests we can’t do anything we want, to regulate cable in the public interest.” The opinion, he added, “is a broad ratification of authority to pre-empt [state and local] cable regulation if we think it jeopardizes the quality of service.” Furthermore, he said, “It speaks volumes that this opinion was unanimous.”
Brent Rushforth, the attorney who appeared before the Supreme Court in behalf of the cable companies seeking reversal of the Oklahoma law, sees the decision as prohibiting local franchising authorities from regulating the content of cable programing, including movies of whatever rating. “It means state and local authorities can’t tell a cable system not to carry the Playboy Channel, for instance,” he said. “And it would be difficult for a municipality to condition a franchise on carriage or noncarriage of a program.” But on the other hand, a spokesperson for the National League of Cities noted, cable systems seeking franchises presumably would continue to offer the kind of programing they believe will win favor with the franchising authorities.
And Howard Bell, president of the American Advertising Federation, called the decision “a major victory for advertising and the cable industry.”
The opinion, written by Justice William J. Brennan Jr., left unresolved the question of whether the First Amendment prohibits the kind of regulation imposed by the Oklahoma law. The cable companies that brought the suit had raised a First Amendment as well as a federal pre-emption issue. And the National Association of Broadcasters as well as ABC, CBS and NBC had filed a friend of the court brief urging the court to overturn the state law on First Amendment grounds. But the court felt it was not necessary to address the constitutional question, since it had resolved the case in the plaintiffs’ favor on other grounds. However, the high court is expected to announce this week whether it will consider a case challenging a Mississippi law that prohibits radio and television stations, newspapers and magazines in the state from carrying liquor advertising. The law (which does not apply to cable television systems) was upheld by the U.S. Court of Appeals for the Fifth Circuit. The media seeking review by the Supreme Court are attacking the law solely on First Amendment grounds.
The Oklahoma case had its genesis in a declaration by the state’s attorney general in 1980 that the state would enforce the state’s constitutional and statutory bans on liquor advertising on cable television systems. The cable systems would be required to delete liquor commercials in broadcast signals imported from out of state. The ban had already been applied to broadcast stations in the state. As a practical matter, the ban applied only to wine, since broadcast stations do not carry liquor advertising and beer advertising was not covered by the ban. Four cable television companies–Capital Cities Cable Inc., Cox Cable of Oklahoma City Inc., Multimedia Cablevision Inc. and Sammons Communications Inc.–challenged the law. So did the Oklahoma Telecasters Association (which later merged with the state’s radio stations into the Oklahoma Broadcasters Association).
Both groups won in U.S. District Court, on First Amendment and federal-pre-emption grounds. But the U.S. Court of Appeals for the 10th Circuit reversed, holding that the liquor advertising ban was a valid restriction on commercial speech. At that point, the Telecasters Association dropped out of the fight.
The Supreme Court was unambiguous in its reversal of the Oklahoma law on federal-pre-emption grounds. “To the extent it has been invoked to control the distant broadcast and nonbroadcast signals imported by cable operators,” Brennan wrote, “the Oklahoma advertising ban plainly reaches beyond the regulatory authority reserved to local authorities by the commission’s rules, and trespasses into the exclusive domain of the FCC.” Brennan noted that commission rules permit Oklahoma to regulate the selection of franchises and construction oversight. But nothing in the opinion suggests the commission would be barred from pre-empting those operations as well.
The court said the advertising ban conflicted with commission regulations in a number of ways. For instance, Brennan noted that the commission requires cable systems to carry the signals of local stations “in full,” including commercials. Thus, he said cable systems that complied with the federal regulations would be subject to criminal prosecution for carrying out-of-state signals containing wine commercials. (This apparent acceptance by the Supreme Court of the commission’s must-carry rules chilled the enthusiasm that some cable television lawyers otherwise felt for the court’s opinion.) Brennan also noted the law runs counter to commission rulings encouraging cable systems to import signals from distant stations. (In Oklahoma, the source of such programing includes stations in Kansas, Missouri and Texas, as well as superstations in Atlanta and Chicago.) For cable systems are barred by commission regulations from deleting any portion of the signals, including the commercials, he noted. Again, Brennan said, cable operators obeying the commission rules would face criminal prosecution by the state.
What’s more, Brennan said, pay cable service would be jeopardized. He noted that cable systems would face a considerable task in developing the capacity to monitor each signal and delete every wine commercial before it is transmitted. As a result, he said, if the advertising ban were enforced, cable systems would face the choice of abandoning distant signals and pay programing “or run the risk of criminal prosecution.” Thus, he said, the public might well be deprived of the wide variety of programing options otherwise available from cable systems.
He said that result “is wholly at odds with the regulatory goals contemplated by the FCC,” and added: “As we have repeatedly explained, when federal officials determine, as the FCC has here, that restrictive regulation of a particular area is not in the public interest, ‘states are not permitted to use their police power to enact such a regulation.’”
Nor is it only commission policy that stands as a barrier to Oklahoma law. Brennan cited the Copyright Revision Act of 1976, as well. The act confers a compulsory license on cable systems wishing to carry copyrighted material. But cable systems must not delete the commercials in the programs if they want to take advantage of the licensing scheme. And while cable systems could comply with the Oklahoma ban simply by abandoning their importation of the signals covered by the Copyright Act, Brennan said, “such a loss of viewing options would plainly thwart the policy identified by both Congress and the FCC of facilitating and encouraging the importation of distant broadcast signals.”
As for the 21st Amendment, that did not prove an effective defense of the advertising ban. Brennan noted that the amendment gives states broad power to regulate the importation of liquor. But, he said, the presence of a conflicting federal interest requires “a pragmatic effort” to harmonize the state and federal powers. And in the case at issue, he noted the state’s interest is limited: The ban is directed only at occasional wine commercials in signals Oklahoma cable systems import from out of state; it does not even apply to out-of-state newspapers and magazines distributed within Oklahoma. When that “limited interest” is weighed against “the significant interference with the federal objective of insuring widespread availability of diverse cable services throughout the United States,” Brennan wrote, the state’s interest must yield.
To cable industry representatives who feel the NCTA has been too willing to compromise with the cities in the interest of securing cable television deregulation legislation this year, the opinion provides new grounds for at least considering turning away from the compromise that was reached. Jack Cole, an attorney who represents cable television systems and who in a letter to clients described the compromise NCTA reached with the cities on the House deregulation bill (H.R. 4103) as “vague and ambiguous … and susceptible to misunderstanding” where he does not believe it is contrary to cable interests, is a case in point. He said he regards the opinion “as a broad affirmation of FCC pre-emption of cable regulation.” And, as for its implications for the legislation moving through Congress, he said, “I feel the industry has to re-evaluate its position regarding [it]. This is a dramatic change in circumstances, which has to be taken into account.”
However, commission officials were doing nothing to encourage the industry to turn to the FCC General Counsel Fein, for instance, while describing the opinion as “sweeping” in its affirmation of commission regulatory authority over cable, cautioned that his views should not be considered a signal of commission intent. “By no means do I want to suggest that the commission intends to exercise the authority to the maximum.”
