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Communications Law – Outline
I. Spectrum (2) A. Allocations Policy (2) – TV allotment goal = localism B. Assignments to Users (2) – command & control – license renewals gives FCC control II. Broadcasting (2) A. History and Overview (2) – “public service” used to require diversity, local, political, etc – mostly gone B. Content Regulation (3) 1. Fairness and Political Issues (3) – fairness doctrine (aff cover obligation + right of reply) 2. Indecency (3) – restrict indecent material to kids (Pacifica) 3. Children‟s Television (3) – V-Chip + core programming of kid vid – subsidies C. Digital Television (3) – issue: giving 2nd channel to broadcasters – could use it for other things D. Economic Structure and Ownership (4) – station ownership limits – network regs (PTAR, fin/syn) III. Cable and Satellite (4) A. History and Overview (4) – began w/ CATV, translator – deregulation in 80s, reinstated in ‟92, ‟96 Act ↓ regs B. Broadcast-Cable Relationship (4) – FCC gives broadcasters competitive advantage (non-dup, must carry, etc) C. Broadcast-Satellite Relationship (5) – compulsory license (C-band), carry-one / carry-all – favors independents D. Economic Structure and Ownership (5) – access to: operators (horizontal, vertical); programs IV. Telecommunications (5) A. Early History – Bell Monopoly (5) – natural monopoly argument – broken up into 7 pieces B. Toward Competition (5) – rate of return regs, price cap regs C. New Regime – 1996 Act (6) – local phone market, multiple regulated structures, long distance D. Universal Service and Access Charges (6) – subsidies for categories + cost-based charge for access V. Advanced Services and the Internet (7) A. Internet Regulation 101 (7) – choke points, individuals, address, protocols –CDA, COPA struck down –filter! B. Advanced Services (7) – cable modem (not telecom carrier) vs. DSL (common carrier) C. Internet Telephony (8) – access charges & universal service don‟t map together – ex: Vonage D. Network Neutrality (8) – fears: fast lane, police escort, preferential on-ramps E. Municipal Wi-Fi (8)
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I. Spectrum A. Allocations Policy 1. Vocabulary – distribution of rights to use spectrum a. Govt. allocates rights to broad types of uses b. Govt. assigns individual to use particular channel w/in block c. TV and satellite channels are allotted (= frequencies fixed at precise location) 2. Allocations starts at international level – UN agency discusses revisions to policies 3. U.S. Table – patchwork of uses – allocate space when new tech arises – suboptimal plan 4. TV band allotment – developed to solve interference problem of AM radio in ‟20s a. Goal – maximize viewing options and local options b. Priorities – each household gets one station; one local station; two stations; two local stations; etc c. Intermixed VHF and UHF together – ppl snapped up VHF stations – UHF underdeveloped d. ABC got screwed – CBS and NBC got first affiliate picks e. De-intermix – particular markets switched to all V or U – short space “drop ins” (VHF channels close) f. Cable might fix it – but V said cable is “enemy” to U – cable actually saved U, due to “must carry” B. Assignments to Users 1. Methods: comparative licensing, lottery („80s), auction (‟97) 2. Command & Control a. Features: service specific, no subdivision, only by FCC, non-market, licensee specific, “public interest,” content control, reallocation as command, “free,” resolve interference, tailored decisions b. Eval: inefficient, leaves unused spectrum, low innovation incentives, prevents monopoly, democratizes content, back-door regulation, set “transaction costs,” reliability c. Still primarily used today – can transfer license, but only for same thing 3. Alternatives: a. Commons – no real ownership, interference, high transaction costs, incentive to innovate i. Used for Part 15 devices (microwaves, wireless networks) b. Exclusive use – FCC won‟t do it – transferable, subdivision, high market value use, fed revenue 4. License renewals a. FCC keeps control: uses, public interest, performance b. Period – was 3 years; ‟96 raised to 8 – less fine-grained control – less $ spent on renewing c. Renewal expectancy is huge – it costs $, but basically just a tax d. All radio licenses are renewable (ex: city police radios – don‟t care how effective they are – hollow) e. FCC not serious about technology changes – only used once, for de-intermixture of VHF and UHF f. Indecency – FCC ratcheted up fines, not threatened non-renewal g. 2-stage process – [struck down] – renewed if performance acceptable, else = comparative hearing h. Test – licensee must provide “substantial service” 5. Lottery – costly for FCC – almost certainly goes to wrong person first 6. Auctions a. Initially gives license to highest value user – only need 2 nd market for changes b. Price = tax on users of the service c. Eval: generates FCC info (but so do hearings), perpetuates under-representation, not free-use d. Functionally – simultaneous, multi-round auctions – bid on individual licenses & groups e. Designated entity preferences – used for hearings (minorities, small businesses) – not for auctions f. § 525 – govt. can‟t revoke license simply by failure to make payments (Nextwave, p. 188) II. Broadcasting A. History and Overview 1. Broadcasters argued auctions would force them to pay 2X for channels – but they didn‟t pay at all! 2. Public service: balanced viewpoints, diversity, time of day, local, political 3. Licensee used to fill out programming form, showing how much of X stuff it aired – had to survey public 4. By „90s, most of this is gone – some categories were pointless, news takes care of itself, etc 5. FCC still claims “public service” means something
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B. Content Regulation 1. Fairness and Political Issues a. Statute requiring printed reply – struck down – denial of editorial discretion (Tornillo, p. 198) b. Fairness doctrine = affirmative obligation to cover + right of reply (personal attacks, political editorial) i. Must present info of public importance & controversy (almost never enforced) ii. If present an issue, must give reasonable & balanced treatment iii. Upheld – scarcity, mild regulation, rights of listeners to hear (Red Lion, p. 200) iv. BUT doesn‟t care about scarcity in Tornillo – govt. interferes w/ “right to hear” through licensing c. FCC slowly eliminates fairness – cable (no scarcity), too much chill, not narrowly tailored d. Requirements for complaint – issue (public importance), different viewpoints, fair balance e. Balance – chilling effect = 1 in 1000 chance of success VS. not getting much out of doctrine – 0 f. Equal time – opportunity to buy time – real chill = marginal candidates – what is an “appearance”? g. Political access (§ 312(a)(7)) – only to fed candidates – opp to buy time – SC affirmed – limited right h. DBS set-aside for non-commercial educational programming upheld i. (Time Warner, p. 248 – justified by scarcity – dissent overlooks cable access requirements) 2. Indecency a. 18 U.S.C. § 1464 – criminal to use obscene, indecent, profane language on radio b. Title V (§ 501) of Com Act – forfeiture for willful or repeated violations of Com Act or FCC regs c. Obscenity – receives no protection (not 1 st A speech) – moral/religious/societal concerns – nuisance i. Appeals to prurient interest (using contemporary community standards) ii. Depicts sexual or excretory conduct iii. Lacks literary, artistic, political, and scientific value (LAPS) d. “Dirty Words” monologue = indecent – not profane or obscene – should be kept away from kids i. (Pacifica, p. 254 – precedent: zoning of adult entertainment, looser standard for child obscenity) e. Safe harbor – 10pm (non-commercial, 12am (commercial), until 6am – passed after ACT II f. But what does non-commercial v. commercial mean? – unconst. distinction (ACT III, p. 266) g. Why fine broadcasters? – licensee, has technology, has incentive not to swear – artist has easier defense 3. Children‟s Television a. V-Chip i. FCC must adopt rating system, unless broadcasters do so voluntarily – FCC rubber stamps it ii. If show is rated, broadcaster must transmit the rating iii. FCC solves coordination problem – consumers, broadcasters, TV makers iv. Should we have ratings? – keep kids from smut – BUT granular, error, economics, skews creativity v. Why doesn‟t market do it? – coordination problem, lack of incentives, market power problem vi. This is a subsidy – completely consistent w/ broadcast regulation – lowers cost of V-chip vii. What is 1st A problem w/ mandating info (ratings)? – ppl might not watch, if they know it‟s bad viii. Ct allowed labeled of foreign “propaganda” films – more info is better – Meese v. Keene b. Kid Vid i. FCC included children‟s TV in public interest – „64 ii. Two concerns („70s) – advertising amount, mandated programs iii. Networks adopted voluntary code, setting limits on commercial time – pleased FCC iv. DoJ terminated National Association of Broadcasters – ‟82 v. FCC shifts – ‟91, plenty of kid TV out there – ‟96, mandates 3 hour minimum of core kid TV vi. Why? – kid TV sold as quid pro quo for 2 nd digital channel, during TV transition vii. 3 hours aren‟t mandated, but you must make a special pitch if you fall short viii. Core program = educational / informational, >= 30 minutes, labeled, regular time slots ix. Why doesn‟t govt. just buy children‟s TV? C. Digital Television 1. Attempt to convert TV from analogue to digital, for HDTV 2. 2nd channel granted to existing licensees for conversion purposes w/o cost & given back after conversion 3. Demand for public interest concessions from broadcasters, for grant of extra channel
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a. Promote universal free service, spectrum efficiency & recovery, premised on value brought to public, public interest obligations, sets recovery date (2006), unsettled about must carry and retransmission consent, returned channels auctioned to highest bidders 4. Issue – wireless use of spectrum that is granted as extra channel to broadcasters, and other efficient uses 5. 2002, FCC decided to “encourage” transition – phase in digital tuner requirements 6. Congress set deadline of Feb 17, 2009 as “hard date” for broadcasters to stop analog D. Economic Structure and Ownership 1. Broadcast Stations a. Local i. Originally – “duopoly rule” – no more than one station, in each service, in same market ii. New rules relaxed a bit after ‟96 Act – currently in flux – (a) If 5+ stations in market, person can own 2 stations, but only one can be in top 4 (b) If 18+ stations, person can own 3 stations, but only one can be in top 4 (c) Both commercial & non-commercial stations counted (d) If < 11 stations, 2 top 4 stations can petition FCC for waiver, to allow merger iii. Radio – allowed 8 stations in largest markets, but no more than 5 in AM or FM – remanded iv. FCC modified cross-ownership in ‟03 – in small markets, still flat ban on cross-ownership b. National i. Originally 12 station limit nationally, also based on 25% of aggregate audience ii. ‟96 Act – eliminated radio station limitations & numerical limit – increased aggregate to 35% iii. FCC adopted “wait and see” approach before regulation more – struck down in Fox iv. FCC increased cap to 45% – Congress enraged, decreased it to 39% 2. Network Regulation a. Chain broadcasting rules (‟41) – tried to limit network control of radio stations b. Barrow Report (‟55) – no more “option” time for networks, reduced affiliate dependence through ads c. New rules i. Prime time access rule (PTAR) – period of evening prime time that networks can‟t control ii. “Syndication/financial interest rules” (Fin/Syn) – forbade networks from syndicating programs d. Effort to destroy rules – quashed by Reagan (‟83), quashed again by Hollywood – repealed later 3. Prometheus, p. 408 a. Ct said FCC hadn‟t provided enough support for numerical limits chosen for ownership rules III. Cable and Satellite A. History and Overview 1. Early uses – CATV, translator 2. Problem – bringing signals from outside the area – looks like alternative device 3. First Report – centered on microwave feed from distant area, but just temporary 4. Second Report – claims Title I jurisdiction (ancillary – anything that has effect on Title III) a. Must-carry – cable must carry all local systems w/in market b. Non-duplication / syndicated exclusivity – local station buys exclusivity from program provider c. Distant signal import restrictions – not allowed in top 100 markets 5. Consensus Agreement (‟71) – distant signal freeze lifted, pay-per-view restrictions (struck down in ‟77) 6. FCC eliminated distant signal import rules & non-duplication rules 7. Cable Act (‟84) – ratifies FCC policies, new restrictions on local regs – deregulatory 8. Rate regulation invigorated (‟92) – reinstates must carry, retransmission consent, syndicated exclusivity 9. Telecom Act (‟96) – rate regulation effectively disappears 10. Time Warner – FCC doesn‟t have jurisdiction to impose program origination or access-type rules on cable B. Broadcast-Cable Relationship 1. FCC wants to bestow competitive advantages on broadcasters w/ regard to cable a. Syndicated exclusivity b. Non-duplication c. Must-carry
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d. Retransmission consent (redefinition of the property right) 2. Must carry rules a. Content neutral, intermediate scrutiny (Turner I, p. 514) b. Substantial interest: (Turner II, p. 531) i. Benefits of free, local TV – financial health of broadcasters, viewers ii. Widespread dissemination multiplicity – but not clear that must carry diversifies iii. Fair competition in TV programming – integration for vertical & horizontal markets c. Burden substantially more than necessary? – what about alternatives?! 3. Digital TV a. FCC doesn‟t require dual carriage OR multicasting – premised on 1st A grounds i. Only have to carry primary signal w/ attendant program information ii. FCC argues that denying carriage might be incentive to broadcasters to produce better content b. Broadcasters still fighting for must carry – multicast digital channels – need must carry to justify $ c. Operators argue – if your programming is good, we‟ll carry it d. If must carry is so important to broadcasters, why have +80% chosen retransmission consent? e. Small broadcasters might need must carry, but the big broadcasters are the ones pushing FCC C. Broadcast-Satellite Relationship 1. Satellite Home Viewer Act – C-band satellites get compulsory license to feeds, provided no air signal 2. Network signal broker doesn‟t get license – copyright protects local stations (Primetime 24, p. 498) 3. DBS providers have to “carry-one, carry-all,” just like cable (Satellite Broadcasting, p. 548) a. But this rule favors independent stations in larger cities b. Cable isn‟t burdened like DBS – stations don‟t accumulate across markets D. Economic Structure and Ownership 1. Two concerns: give producers operator access (Time Warner) & give competing MVPD program access 2. § 613 – targets independent producers (protect them) a. Horizontal – no group of MSOs may account for >30% of MVPD subscribers i. Why is 30% “magical”? – need 40% to ensure “open field” – keep 2 cable operators from colluding b. Vertical – cable operator must keep 60% of channels open to non-affiliated program producers 3. § 628 – program access rules – want MVPD to have access to operator-affiliated programming IV. Telecommunications A. Early History – The Bell Monopoly 1. Independents – grew up after Bell patents expired – but weren‟t interconnected 2. AT&T – started acquiring independents – refused to connect independents w/ long-distance 3. Antitrust case (‟13) – monopolization claim by DoJ – consent decree, interconnected independents 4. Willis-Graham Act (‟21) – terminated consent decree 5. Natural monopoly? – in the long term, wouldn‟t have competition a. Economies of scale – more efficient to have one provider b. Economies of scope – more efficient to provide products in bundle (telephone v. service) c. Network effects – network becomes more valuable as it grows 6. AT&T‟s theory – get rid of duplication – competition is wasteful 7. Erosion – microwave relays (long distance); attachments allowed; computers = “enhanced” services 8. Breakup – DoJ wanted competition – AT&T divided into 7 pieces (LATA = diff btw local & long distance) 9. Local companies restricted to “line of service” – no long distance or info services B. Toward Competition 1. Different role of regulation – protect: a. Local exchange users, where monopoly persists b. Long distance carriers/users against overcharge by dominant LECs for access c. New entrants (CLECs) against overcharge by incumbents (ILECs) for leasing local facilities d. Competition against predatory pricing by dominant firms 2. Two theories that drive remedies a. Predatory cross-subsidization
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i. If one business has high profits, shift that to another business – sell 2 service at lower cost ii. Drive everyone out of 2 nd market, then raise rates above market price iii. AT&T has incentive to hide where it really incurs costs iv. Long distance – competitive; local is not b. Discrimination against competitors who need local exchange i. Also discriminated against foreign attachments ii. No interchange systems allowed iii. Equipment manufacturing restrictions iv. Info services – kind-of like long distance rationale 3. Rate of return regs a. Trying to get rid of monopoly rents – drive down rates to cost of providing service b. But must figure out costs – operation cost + capital cost – apply revenue requirement to each service c. Problems: costly, complicated, poor incentives to keep costs down, over-investment in capital assets 4. Price cap regs a. Doesn‟t try to calculate cost of service b. Ignore revenue requirement of firm at large c. Start w/ baseline rates that cover costs d. Put price cap on each individual rate – raise/lower individual rates according to price index e. Special factors deflate price cap, if rates rise: X factor (2.5%), consumer dividend (0.5%) 5. Access charges – Congress mandated removal w/ ‟96 Telecom Act a. Charge for connecting long distance to local exchange network b. Subsidies for local users 6. Universal service – full interconnectivity + subsidy C. New Regime – The 1996 Communications Act 1. Three transitions a. Development of technically & economically feasible local telephone market b. Moving toward multiple regulated structures c. Long distance (out-of-region vs. in-region) 2. Local service – Act ties long distance competition to local service competition – promotes both a. Statute sets standards – public utility commissions can set local rates b. FCC sets up guidelines = forward-looking costs c. § 251 – duties i. Carriers must interconnect w/ others at all technically feasible points ii. LECs must allow resale, provide dialing parity, number portability, do reciprocal compensation iii. ILECs must negotiate w/ requesting carriers for: (a) Access to unbundled network elements (UNEs) (b) Interconnection (TELRIC) (c) Resale of LEC services (d) Collocation of equipment on ILEC premises (TELRIC) d. § 252 – how to implement – pricing standards, procedures for negotiating & approving interconnection e. TELRIC = Total Element Long Run Incremental Cost i. Calculation method that ILECs must use when charging CLECs for interconnection and collocation ii. Provides a price ceiling for such services iii. Problem – getting from resale services to facilities-based competition in long distance 3. Long distance a. § 214 – distinguishes between dominant & non-dominant carriers – special restrictions on dominant b. § 271(c)(1) – entry into in-region long distance conditioned on showing of competition in local market: i. (A) – show provision of interconnection to 1+ competing telephone exchange services under § 252 ii. (B) – enter 10 months after Act, if no provider requested access in (A), and EE shows terms that are being offered to provide access D. Universal Service and Access Charges
nd
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1. § 254 of ‟96 Act 2. Definitions: a. Universal service charge – tax on retained revenues – SUBSIDY (anything charged per minute) b. Access charge – cost-based charge for access to the local telephone network 3. What fits in this? – voice access, single party, emergency, operator, inter-exchange, directory, POTS 4. Aspiring values (§ 254(b)) – access to information & adv. services, evolving telcom 5. Why isn‟t broadband included? – should be, since people need it – but you choose where you live 6. Cost differential runs to the carrier, not the individual 7. Provide subsidies by matching up categories: a. Low income --- ?? b. Local/basic --- long distance c. Residential --- business d. Schools / libraries / health care 8. Really ends up being a wealth transfer 9. Problem – difficult to know what costs really are & squeeze out the subsidy 10. Object? – build out network – but which one? – is there a cutoff point? – FCC ignores cutoff point V. Advanced Services and the Internet A. Internet Regulation 101 1. Characteristics: a. Distributed – all to all – no node dependent on any other node b. Interoperable – protocols open, but can work w/ each other c. Packet-switched – doesn‟t reserve line connection – uses packets – but spends overhead locating comps 2. Collective action problem – node owners don‟t have incentive to keep them working 3. Geographic difficulty – if shut down one node, other ones can send prohibited data 4. Regulate the internet – regulate people who use it 5. Addresses – route servers must tell ppl where to go – if you control addresses, you control the net 6. Methods: choke points, individuals, addressing, protocols 7. Indecency regs a. Can ban obscenity over the phone, but not indecency for adults (Sable, 1989) b. CDA struck down – banned transmission of indecent material to 17-year-olds (Reno v. ACLU, p. 927) i. Can restrict material that is harmful to minors (Ginsburg) – but CDA standard doesn‟t fit the rule: (a) Prurient interest of minors (b) Patently offensive to prevailing standards in adult community (c) Utterly w/out socially redeeming importance to minors ii. Do NOT apply lower Pacifica standard (broadcast indecency): (a) History of regulation in broadcast (b) Invasiveness of broadcast v. internet (c) Time regulations (could have separated extension) (d) Absolute prohibition v. time, place, manner (e) Scarcity (comes from Red Lion) c. COPA struck down – can‟t shift indecency responsibility to website owners (Ashcroft II, p. 936) i. Filtering software is the least restrictive means B. Advanced Services 1. FCC defines “advanced services” – broadband, high speed internet 2. Architecture – backbone in tiers – peering (bill & keep) and/or transit (buying access) 3. Unbundling – deregulated advanced services component of ILEC 4. Last mile a. Access charges – ISPs don‟t pay metered charges to ILEC – VoIP gets by for free b. Reciprocal compensation – is dial-up ISP local or long distance? – FCC uses bill & keep for them 5. Cable access a. Cable co sends user‟s bytes to internet, sends its own info (DNS) back to user
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b. Cable internet is NOT cable service – cable modem is NOT telecommunications (Portland, p. 986) c. But is it a telecommunications carrier? (Brand X, p. 990) i. Def – providing telecommunications, for a fee, directly to the public ii. Governs whether you are under Title I or Title II (common carrier obligations) iii. If it‟s under Title II, FCC can forebear, not regulate as common carrier iv. Which is better? – Title I gives flexibility – but DSL is under Title II – really a monopoly, Title II 6. DSL a. Treated differently than cable modem b. History of monopoly – regulate as common carrier – use cable rates to set DSL rates c. DSL companies provide “naked” broadband – but consumers don‟t really want it d. Provided over network that was built in regulated universe e. Cable modem construction didn‟t have assurance of returns C. Internet Telephony 1. Different types:
Type Name Access Charges Universal Service Charge
P2P Pulver N N PSTN IP PSTN AT&T Y Y IP PSTN ? Vonage N Y 2. Why does it matter? a. Information v. telecommunications – info not regulated, but telecom is b. Inter-carrier compensation (reciprocal comp, access charges) – telecom pays, info doesn‟t c. Universal service charge – should track access charges, but doesn‟t for Vonage d. Others – interconnection (§ 251), Title II obligations e. 911 – FCC claims it hs ancillary jurisdiction 3. Criticism a. FCC can‟t figure out why they‟re regulating b. Can look at outcome, think what you want, and regulate accordingly i. Inter-carrier compensation – SkypeOut should pay access charge ii. Universal service – direct subsidy – all services should pay iii. Interconnection – do we want ppl to opt-in to services where they can‟t reach others? iv. 911 – paternalistic v. CALEA – can‟t let ppl do regulatory arbitrage & get around requirements 4. Won‟t let ILEC block port for VoIP (Madison River, p. 1040) D. Network Neutrality 1. Broadband providers vs. big content providers 2. Argument – provider can mix content w/ carriage, but can‟t discriminate against any content 3. Fears: closed fast lane, paid police escort, preferential on-ramps to “slow” lane 4. Two discriminations: business model & type of content 5. What better way to pay for YouTube than charging the content provider itself? 6. Proposals: wait-and-see, ban any discrimination 7. Another solution: build more pipes! E. Municipal Wi-Fi 1. States can prevent muni from offering telecom (Missouri Municipal League, s 6) 2. But who should say what cities can offer? – cities close to ppl, but city has competitive advantage 3. For this to be valuable, must be installed where broadband doesn’t exist 4. Lock-in effect, if muni makes big investment in network