__________ CONTENTS Table of Materials....................................................................................................... xv Copyright Permissions............................................................................................... xix Preface ....................................................................................................................... xxi Part One. Spectrum and Broadcast ........................................................................ 3 Chapter 1. Why Regulate............................................................................................. 5 § 1.1 Introduction...................................................................................................... 5 § 1.2 Defining Spectrum ........................................................................................... 6 § 1.3 The Early History of Broadcast ..................................................................... 15 § 1.4 Rationales for Regulation............................................................................... 30 § 1.4.1 Scarcity/Interference ................................................................................ 31 Coase, Why Not Use the Pricing System in the Broadcast Industry? ................ 34 § 1.4.2 Special Interest Protectionism.................................................................. 38 Hazlett, The Rationality of U.S. Regulation of the Broadcast Spectrum ........... 38 § 1.4.3 Consumer Preferences.............................................................................. 46 Chapter 2. The FCC................................................................................................... 51 § 2.1 Introduction.................................................................................................... 51 § 2.2 A Regulatory Overview ................................................................................. 51 § 2.3 The Federal Communications Commission ................................................... 57 § 2.4 An Overview of Spectrum Management ....................................................... 62 § 2.5 Regulatory Tradeoffs and Allotment ............................................................. 64 Chapter 3. Zoning the Spectrum ................................................................................ 67 § 3.1 Introduction.................................................................................................... 67 § 3.2 Command and Control................................................................................... 68 § 3.2.1 Making Room for PCS............................................................................. 69 Redevelopment of Spectrum to Encourage Innovation in the Use of New Technologies ................................................................................................... 69 § 3.2.2 Authorizing Satellite Radio...................................................................... 77 Establishment of Rules and Policies for the Digital Audio Radio Satellite Service Band........................................................................... 77 § 3.3 Dedicating Spectrum to Unlicensed Uses ...................................................... 83 § 3.3.1 The Spectrum Policy Task Force Report ................................................. 83 Spectrum Policy Task Force Report................................................................... 84 § 3.3.2 Academic Commentary............................................................................ 93 Benkler, Some Economics of Wireless Communications .................................. 93 § 3.4 Alternative Approaches................................................................................ 101 § 3.4.1 Authorizing Additional Licensed Uses .................................................. 101 § 3.4.2 Unlicensed Secondary Services ............................................................. 103 § 3.4.3 Spectrum Leasing and Private Commons .............................................. 105 Promoting Efficient Use of Spectrum Through Elimination of Barriers to the Development of Secondary Markets ................................. 107 vii viii CONTENTS Chapter 4. Structuring and Assigning Licenses ....................................................... 113 § 4.1 Introduction.................................................................................................. 113 § 4.2 License Renewal and Transfer..................................................................... 114 § 4.2.1 License Renewal .................................................................................... 114 § 4.2.2 License Transfer..................................................................................... 119 Changes in the Entertainment Formats of Broadcast Stations ......................... 121 FCC v. WNCN Listeners Guild ....................................................................... 124 § 4.3 Merit-Based Hearings .................................................................................. 126 § 4.3.1 Uncontested Initial Assignment Hearings.............................................. 127 H.E. Studebaker ............................................................................................... 127 Charles Henry Gunthorpe, Jr............................................................................ 128 § 4.3.2 Comparative Initial Assignment Hearings ............................................. 130 FCC Policy Statement on Comparative Broadcast Hearings ........................... 132 § 4.3.3 Licensing Case Study............................................................................. 136 Application of Simon Geller ............................................................................ 136 § 4.3.4 Special Considerations for Racial Minorities and Women .................... 142 Metro Broadcasting, Inc. v. FCC ..................................................................... 143 Lutheran Church Missouri Synod v. FCC........................................................ 157 § 4.4 Transition to Lotteries, Auctions.................................................................. 164 § 4.4.1 Reform of the Licensing Process ........................................................... 165 Prevention of Abuses of the Renewal Process ................................................. 165 § 4.4.2 Lotteries and Auctions ........................................................................... 169 Kwerel and Felker, Using Auctions to Select FCC Licensees ......................... 170 § 4.4.3 Initial Assignment by Auction ............................................................... 177 Implementation of Section 309(J) of the Communications Act—Competitive Bidding for Commercial Broadcast Licenses ................. 178 § 4.4.4 Bankruptcy and the Limits of FCC Authority........................................ 186 Nextwave Personal Communications v. FCC .................................................. 188 Chapter Five. Public Trustee Obligations ................................................................ 197 § 5.1 Introduction.................................................................................................. 197 § 5.2 The Fairness Doctrine and Related Obligations........................................... 198 § 5.2.1 The Fairness Doctrine ............................................................................ 198 Miami Herald Publishing Co. v. Tornillo......................................................... 198 Red Lion Broadcasting Co. v. FCC.................................................................. 200 Fairness Doctrine Report.................................................................................. 208 Complaint of Syracuse Peace Council ............................................................. 217 § 5.2.2 The Personal Attack and Political Editorial Rules ................................. 224 § 5.2.3 Political Broadcasting ............................................................................ 227 Request of ABC, Inc. for Declaratory Ruling .................................................. 228 Request for Declaratory Ruling of National Association of Broadcasters Regarding Section 312(A)(7) of the Communications Act ............... 237 Petition for Reconsideration by People for the American Way and Media Access Project of Declaratory Ruling Regarding Section 312(A)(7) of the Communications Act............................................. 240 § 5.2.4 The Scarcity Rationale in Other Media.................................................. 247 Time Warner Entertainment Co. v. FCC (1996) .............................................. 248 Time Warner Entertainment Co. v. FCC (1997) .............................................. 250 § 5.3 Indecent Broadcasts ..................................................................................... 254 FCC v. Pacifica Foundation ............................................................................. 254 Action for Children’s Television v. FCC [ACT III] ......................................... 266 CONTENTS ix Complaints Against Various Broadcast Licensees Regarding Their Airing of the “Golden Globe Awards” Program.................................. 286 Complaints Against Various Television Licensees Regarding Their Broadcast on November 11, 2004 of the ABC Television Network’s Presentation of the Film “Saving Private Ryan” ......................... 289 Complaints Regarding Various Television Broadcasts Between February 2, 2002 and March 8, 2005 ............................................. 294 § 5.4 Televised Violence and Blocking Unwanted Material................................. 300 § 5.5 Children’s Television................................................................................... 306 Children’s Television Programming and Advertising Practices ...................... 307 Policies & Rules Concerning Children’s Television Programming (1991) ..... 313 Policies & Rules Concerning Children’s Television Programming (1996) ..... 316 § 5.6 Commercialization, Ascertainment, and Other Rules .................................. 335 Deregulation of Commercial Television, Report and Order ............................ 336 Chapter Six. Digital Television ............................................................................... 347 § 6.1 Introduction.................................................................................................. 347 § 6.2 Making Room for HDTV............................................................................. 348 Advanced Television Systems (1991).............................................................. 349 § 6.3 Choosing A Standard ................................................................................... 355 Advanced Television Systems (1996).............................................................. 356 § 6.4 Rules For DTV Spectrum ............................................................................ 367 Advanced Television Systems (1997).............................................................. 367 § 6.5 Hastening the Transition .............................................................................. 378 § 6.6 Public Interest Obligations .......................................................................... 381 Final Report of the Advisory Committee on Public Interest Obligations of Digital Television Broadcasters............................................. 381 Chapter Seven. Structural Limitations ..................................................................... 389 § 7.1 Introduction.................................................................................................. 389 § 7.2 Television Networks and Vertical Integration ............................................. 389 Schurz Communications v. FCC ...................................................................... 392 § 7.3 Ownership Restrictions ................................................................................ 403 Prometheus Radio Project v. FCC.................................................................... 408 Part Two. The Emerging Video Marketplace .................................................... 435 Chapter Eight. Foundations ..................................................................................... 437 § 8.1 Introduction.................................................................................................. 437 § 8.2 The MVPD Competitive Landscape ............................................................ 438 § 8.3 Paying for Television................................................................................... 440 Coase, Why Not Use the Pricing System in the Broadcast Industry? .............. 442 § 8.4 Why Regulate: Natural Monopoly ............................................................... 444 § 8.5 Why Regulate: Implications for Broadcast .................................................. 450 Besen and Crandall, The Deregulation of Cable Television ............................ 451 Home Box Office (HBO) v. FCC..................................................................... 463 § 8.6 Who Regulates Cable Television ................................................................. 472 Time Warner Entertainment Co. v. FCC.......................................................... 476 Chapter 9. Shared Content ....................................................................................... 485 § 9.1 Introduction.................................................................................................. 485 § 9.2 Programs in Isolation ................................................................................... 485 § 9.2.1 Copyright Law ....................................................................................... 485 x CONTENTS § 9.2.2 Syndicated Exclusivity and Network Nonduplication............................ 489 United Video v. FCC........................................................................................ 490 § 9.2.3 Direct Broadcast Satellite....................................................................... 497 CBS Broadcasting v. Primetime 24.................................................................. 498 The Satellite Television Act of 1999................................................................ 505 § 9.3 Programs Grouped into Signals ................................................................... 511 § 9.3.1 First Amendment Challenges to Cable Must-Carry ............................... 514 Turner Broadcasting System Inc. v. FCC [Turner I]........................................ 514 Turner Broadcasting System Inc. v. FCC [Turner II] ...................................... 531 § 9.3.2 First Amendment Challenges to DBS Must-Carry................................. 548 Satellite Broadcasting & Communications Ass’n v. FCC................................ 549 § 9.3.3 Must-Carry and the Digital Transition ................................................... 561 Carriage of Digital Television Broadcast Signals, Second Report and Order .............................................................................. 561 Chapter 10. Structural Limitations........................................................................... 569 § 10.1 Introduction................................................................................................ 569 § 10.2 Protecting Program Suppliers .................................................................... 570 Time Warner Entertainment Inc. v. FCC ......................................................... 571 § 10.3 Regulation of Program Supply Contracts................................................... 585 § 10.3.1 The Program Access Rules .................................................................. 585 Development of Competition and Diversity in Video Programming Distribution and Carriage, First Report and Order ................. 585 § 10.3.2 Extension of the Program Access Rules............................................... 600 Implementation of the Cable Television Consumer Protection and Competition Act of 1992, Report and Order .......................................... 600 § 10.3.3 Extension of the Program Access Rules to DirecTV ............................ 604 General Motors Corp. and Hughes Electronic Corp., Transferors, and News Corp. Ltd., Transferee .............................................. 604 Chapter 11. Emerging Issues in the Video Marketplace.......................................... 613 § 11.1 Introduction................................................................................................ 613 § 11.2 Choice ........................................................................................................ 614 § 11.2.1 Is More Always Good? ........................................................................ 614 Sunstein, The First Amendment in Cyberspace .............................................. 614 Posner, Bad News ............................................................................................ 621 § 11.2.2 The Commission on Cable à la Carte................................................... 630 Further Report on the Packaging and Sale of Video Programming Services to the Public ............................................................. 631 § 11.2.3 Price Discrimination............................................................................. 637 § 11.3 Digital Copyright ....................................................................................... 639 American Library Association v. FCC............................................................. 643 Chapter 12. Indecency Revisited ............................................................................. 655 § 12.1 Introduction................................................................................................ 655 § 12.2 Cruz v. Ferre .............................................................................................. 655 Cruz v. Ferre ....................................................................................................... 655 § 12.3 Denver Area ............................................................................................... 658 Denver Area Educational Telecommunications Consortium, Inc. v. FCC....... 658 § 12.4 United States v. Playboy Entertainment Group, Inc. ................................. 678 United States v. Playboy Entertainment Group, Inc......................................... 678 CONTENTS xi Part Three. Telephone Regulation ...................................................................... 693 Chapter 13. An Introduction to Telephone Regulation............................................ 695 § 13.1 Introduction................................................................................................ 695 § 13.2 Telephone History...................................................................................... 695 § 13.3 Infrastructure and Intuitions....................................................................... 703 § 13.3.1 Telephone System Vocabulary............................................................. 703 § 13.3.2 Telephone Economics .......................................................................... 704 § 13.4 Telephone Regulation ................................................................................ 707 § 13.4.1 Categories of Regulation...................................................................... 708 § 13.4.2 Who Regulates ..................................................................................... 708 Chapter 14. Defining the Telephone Monopoly ...................................................... 713 § 14.1 Introduction................................................................................................ 713 § 14.2 Precursors to Divestiture............................................................................ 714 § 14.2.1 Competition in CPE ............................................................................. 714 Huber, Kellogg, and Thorne, Federal Telecommunications Law .................... 714 § 14.2.2 Competition in Long Distance Telephony ........................................... 718 § 14.2.3 Communications and Computer Convergence..................................... 720 Robinson, The Titanic Remembered: AT&T and the Changing World of Telecommunications ..................................................... 721 § 14.3 Breaking up Bell: The 1984 Divestiture .................................................... 723 § 14.3.1 The MFJ ............................................................................................... 724 United States v. American Telephone and Telegraph Co. ............................... 724 § 14.3.2 Notes on the Government’s Theory ..................................................... 732 § 14.3.3 Monopoly Boundaries After Divestiture.............................................. 739 Robinson, The Titanic Remembered: AT&T and the Changing World of Telecommunications ..................................................... 739 Chapter 15. Rate Regulation and Universal Service................................................ 747 § 15.1 Introduction................................................................................................ 747 § 15.2 Rate Regulation.......................................................................................... 747 § 15.2.1 Rate of Return Regulation.................................................................... 747 § 15.2.2 Price Cap Regulation............................................................................ 750 Policy and Rules Concerning Rates for Dominant Carriers ............................. 751 § 15.2.3 Rate Regulation as Markets become Competitive................................ 759 Robinson, The Titanic Remembered: AT&T and the Changing World of Telecommunications ..................................................... 761 § 15.3 Universal Service ....................................................................................... 763 § 15.3.1 Origins............................................................................................... 763 § 15.3.2 Ramsey Pricing ................................................................................. 765 § 15.3.3 Universal Service After Divestiture .................................................. 768 Chapter 16. The Telecommunications Act of 1996 ................................................. 771 § 16.1 Introduction................................................................................................ 771 § 16.2 The Local Competition Provisions............................................................. 772 Implementation of the Local Competition Provisions of the Telecommunications Act of 1996, First Report and Order ........................... 774 § 16.3 Jurisdiction to Implement the 1996 Act ..................................................... 781 § 16.3.1 Local Competition, National Regulation.............................................. 781 United States Telecom Association v. FCC (USTA II) .................................... 787 xii CONTENTS § 16.3.2 Case Studies ......................................................................................... 788 Nixon v. Missouri Municipal League............................................................... 789 AT&T Communications of Illinois v. Illinois Bell .......................................... 793 Chapter 17. Unbundling, Interconnection, and Line-of-Business Regulation Under the 1996 Act ........................................................... 799 § 17.1 Introduction................................................................................................ 799 § 17.2 Identifying UNEs ....................................................................................... 799 § 17.2.1 Iowa Utilities Board............................................................................. 799 AT&T Corporation v. Iowa Utilities Board ..................................................... 799 § 17.2.2 After Iowa Utilities Board ................................................................... 806 United States Telecom Association v. FCC (USTA II) .................................... 810 § 17.2.3 In Response to USTA II........................................................................ 820 Review of the Section 251 Unbundling Obligations of Incumbent Local Exchange Carriers ............................................................. 820 § 17.3 Pricing Network Elements ......................................................................... 825 Verizon Communications Inc. v. FCC ............................................................ 828 Review of the Commission’s Rules Regarding the Pricing of Unbundled Network Elements...................................................... 842 § 17.4 Interconnection .......................................................................................... 848 Developing a Unified Intercarrier Compensation Regime (2001) ................... 851 Developing a Unified Intercarrier Compensation Regime (2005) ................... 854 § 17.5 BOC Line of Business Restrictions............................................................ 861 Chapter 18. Universal Service and Access Charge Reform Under the 1996 Act .... 863 § 18.1 Introduction................................................................................................ 863 § 18.2 Universal Service Reform.......................................................................... 863 FCC News Release: Joint Board Adopts Universal Service Recommendations ......................................................................................... 866 Federal-State Joint Board on Universal Service (1997) ................................... 868 § 18.3 Access Charge Reform............................................................................... 881 Access Charge Reform, First Report and Order............................................... 881 Federal-State Joint Board on Universal Service (2004) ................................... 891 Part Four. The Internet and Advanced Services ................................................ 903 Chapter 19. The Internet .......................................................................................... 905 § 19.1 Introduction................................................................................................ 905 § 19.2 The History and Architecture of the Internet ............................................. 905 § 19.3 Internet Regulation..................................................................................... 913 § 19.3.1 The Principles of Internet Unregulation............................................... 915 A Framework for Global Electronic Commerce .............................................. 915 § 19.3.2 Regulation of Indecency....................................................................... 917 Sable Communications of California, Inc. v. FCC........................................... 918 Regulations Concerning Indecent Communications by Telephone.................. 923 Reno v. ACLU ................................................................................................. 927 Ashcroft v. ACLU............................................................................................ 936 § 19.3.3 Copyright Infringement......................................................................... 947 MGM Studios, Inc. v. Grokster........................................................................ 948 Chapter 20. Advanced Services ............................................................................... 955 § 20.1 Introduction................................................................................................ 955 § 20.2 Advanced Services Under Section 706 ...................................................... 955 CONTENTS xiii Inquiry Concerning the Deployment of Advanced Telecommunications ........ 957 Availability of Advanced Telecommunications Capability in the United States...................................................................... 968 § 20.3 Unbundling, Interconnection, and Advanced Services .............................. 973 Intercarrier Compensation for ISP-Bound Traffic............................................ 980 § 20.4 Regulating DSL and Cable Modem Services.............................................. 984 AT&T v. City of Portland ................................................................................ 986 National Cable & Telecommunications Ass’n v. Brand X Internet Services... 990 Appropriate Framework for Broadband Access to the Internet over Wireline Facilities (2002) ............................................ 1007 § 20.5 Network Neutrality .................................................................................. 1012 Appropriate Framework for Broadband Access to the Internet over Wireline Facilities (2005) ................................................ 1013 Atkinson and Weiser, A “Third Way” on Network Neutrality ...................... 1015 § 20.6 Voice over Internet Protocol (VoIP) ......................................................... 1028 Petition for Declaratory Ruling that pulver.com’s Free World Dialup is Neither Telecommunications nor a Telecommunications Service........... 1030 Petition for Declaratory Ruling that AT&T’s Phone-to-Phone IP Telephony Services are Exempt from Access Charges, Order.................... 1035 American Council on Education v. FCC........................................................ 1041 § 20.7 Competition in Telephony and Advanced Services .................................. 1047 Part Five. Epilogue ............................................................................................. 1053 Chapter 21. Antitrust and Merger Review in Telecommunications....................... 1055 § 21.1 Introduction.............................................................................................. 1055 § 21.2 Merger Enforcement and Telecommunications Regulation..................... 1055 § 21.2.1 Background on Merger Policy ........................................................... 1056 § 21.2.2 The SBC/Ameritech Proceeding ........................................................ 1060 Applications of Ameritech Corp., Transferor, and SBC Communications, Inc., Transferee, for Consent to Transfer Control of Licenses and Lines Pursuant to Sections 214 and 310(D) of the Communications Act......................................................................... 1060 Separate Statement of Commissioner Harold Furchtgott-Roth ...................... 1071 Statement of Commissioner Michael K. Powell ............................................ 1076 § 21.2.3 Reforming the FCC’s Merger Review Process ................................. 1078 Statement of Chairman William E. Kennard.................................................. 1078 Statement of Commissioner Harold Furchtgott-Roth..................................... 1080 § 21.2.4 The FCC’s Own Institutional Reforms .............................................. 1081 § 21.2.5 The Elusive Effort to Restrict Merger Review Authority .................. 1084 FCC Approves SBC/AT&T and Verizon/MCI Mergers................................ 1085 § 21.3 Antitrust in a Regulatory Thicket............................................................ 1091 Verizon v. Law Offices of Curtis v. Trinko ................................................... 1091 Statutory Appendix................................................................................................. 1097 Conceptual Index and Telecommunications Glossary............................................ 1171