In a case that could have widespread implications for the nation’s cable television industry, attorneys for Los Angeles told the Supreme Court Tuesday that a city’s right to grant an exclusive franchise to one cable TV company does not violate the constitutional guarantee of free speech.
“We are regulating our right-of-ways in the public interest,” Edward J. Perez, assistant city attorney, told the court.
But an attorney for Preferred Communications, the cable TV company that challenged the city, argued that granting an exclusive franchise violates First Amendment rights of other cable firms. “We’re dealing with a licensing-of-speech case,” attorney Harold R. Farrow said.
Los Angeles appealed a March, 1985, ruling by the U.S. 9th Circuit Court of Appeals in San Francisco that extended federal constitutional protection to cable operators for the first time. The court ruled that the exclusive franchise granted by Los Angeles and other cities would violate the First Amendment when there was physical capacity to accommodate the cables of more than one operator.
The Supreme Court’s ruling, expected by July, could have a major impact on the nation’s more than 40 million cable TV subscribers who are served through more than 7,000 municipally regulated cable systems.
“What we have to decide here is what will happen to cable in this country,” Perez told the court during the hour-long argument. He warned that, if the case goes back to trial, it will spur many other lawsuits across the country.
Los Angeles, like most other cities, awards cable TV licenses through a competitive bidding process for a designated franchise area. Los Angeles has 14 franchise areas.
Generally, a city establishes certain operating requirements for the cable systems and then selects the firm that it decides is best qualified. The competitive bidding process to award a single franchise was endorsed by Congress in the 1984 Cable Communications Policy Act, which also permitted cities to collect an annual franchise fee of 5% of gross revenues from cable operators.
In this case, the disputed franchise involves the South-Central area of Los Angeles, including Watts. It is an area with more than 500,000 people and more than 180,000 homes.
Preferred Communications did not participate in the competitive bidding process, which resulted in the city granting a franchise to Sun Cable Inc. Instead, Preferred asked city officials directly to allow it to lease space on their poles for its cables.
Attorneys for Los Angeles have also argued that a cable system is a natural monopoly and that local governments, acting in the public interest, should be allowed to select the cable company for their community. In addition, Perez told the court that local officials have a legitimate interest in minimizing the disruption to public and private property that is caused by the construction of a cable TV system.
“There is no constitutional right to construct a cable TV system on government property without government permission,” Perez said.
Farrow disagreed, arguing that Los Angeles was assuming the role of an electronic publisher by establishing requirements for the programs that cable television companies could offer.
“The city has no more business there than they have running a newspaper,” Farrow said, adding that the city does not have the right to pick channels “any more than they have the right to use one out of every five taxicabs.”
If the Supreme Court rules against Los Angeles, the case will go to trial as the appeals court ruled.