FCC’s program-carriage rules mainly upheld by U.S. appeals court

Federal Communications Commission regulations intended to protect programming services from being discriminated against by cable and other TV-distribution companies mostly survived a legal challenge.

The U.S. Court of Appeals for the 2nd Circuit in New York preserved the bulk of the FCC’s so-called program carriage rules, which were challenged by Time Warner Cable and the National Cable & Telecommunications Assn. (NCTA), the pay-TV industry’s lobbying arm.

The rules -- established in 1992 and revised in 2011 -- were created to protect programmers from anticompetitive behavior by distributors. The fear was that multichannel video program distributors would favor networks they had a financial stake in over independent networks. A programmer that felt it had been discriminated against or dropped unfairly by a distributor can file a complaint at the FCC for review.

PHOTOS: Cable versus broadcast ratings

“I am pleased that the court of appeals upheld the commission’s program carriage rules against constitutional challenge. As the commission pointed out – and the court agreed in rejecting the cable industry’s arguments – these rules remain necessary to prevent anticompetitive conduct by video programming distributors, and they empower consumers to access a rich and diverse mix of programming,” said acting FCC Chairwoman Mignon Clyburn.

Time Warner Cable and the NCTA argued that the regulations violated the 1st Amendment. The court agreed that “there is no question that cable operators and other multichannel video program distributors ‘engage in and transmit speech’ protected by the 1st Amendment” but concluded that the rules were justified by a countervailing government interest.

The court added that a “regulation of protected speech that is content-neutral and that does not disfavor certain speakers is reviewed under the less-stringent intermediate level of scrutiny.”

“This opinion is significant because it shows that we can be reasonable about the 1st Amendment,” said Susan Crawford, a communications professor at Cardozo Law School. “Not all economic decisions about the transport of bits are the same as messages that should be protected by the 1st Amendment.”

PHOTOS: Hollywood Backlot moments

The court did not rule out the possibility that the rules could outlive their usefulness “in the not too-distant future.”

Time Warner Cable and the NCTA didn’t come away completely empty-handed. The court overturned the regulations’ “standstill” provision, which forced a distributor to continue to carry a network while the FCC ruled on the complaint.

In a statement, Time Warner Cable said it was pleased that the standstill requirement was tossed and added that it was “gratified that the court has called into question the future viability of the entire program carriage regime as competition in the MVPD marketplace continues to become more and more vibrant.”

The FCC can attempt to bring back the standstill rule, which was gutted on procedural grounds because it was not in accordance with the Administrative Procedure Act.

“The standstill decision is a modest victory for Time Warner Cable and other cable operators opposed to the provision, but the panel’s denial of their free speech arguments represents a missed opportunity as it would have strengthened the cable industry’s broader campaign against programming regulation,” said Christopher King, an analyst at Stifel Nicolaus Telecom Equity Research.

ALSO:

CBS and Time Warner Cable reach deal

Cord-cutting trend continues in second quarter

CBS fight with Time Warner Cable shows why dinosaurs are still scary

Follow Joe Flint on Twitter @JBFlint.