farrow commentpracticing law institute nov 1984

8/2/2019 Farrow CommentPracticing Law Institute Nov 1984

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REMARKS OF HAROLD R. FARROW

BEFORE THE PRACTISING LA W INSTITUTE

SEMINAR ON COMMUNICATIONS LAW

NEvi YORK CITY

November 8, 1984


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I have been asked t o t e l l you t o d a y what i s wrong w i t h

S.66 t h e Cable Communica t ions P o l i c y Act o f 1984 . I am s o r r y ,

I c a n ' t do t h a t . There i s n o t enough t ime a v a i l a b l e t o me o r t o

you . My copy o f t h e B i l l r u n s t o 28 p a g e s , and I cou ld spend tw o

days w i t h you j u s t p o n d e r i n g o v e r t h e d e f i n i t i o n s i n S e c t i o n 602

o f P a r t I . I w i l l , however, t r y t o ment ion a fe w minor prob lems

o f t h i s r a t h e r e x t r a o r d i n a r y e n a c t m e n t - - t h i s n o s t a l g i c r e t r e a t

t o th e p a t e n t and l i c e n s i n g l aws f o r t h e p r e s s i n t h e days o f

"Good Queen Bess" i n t h e 1 6 t h C e n t u r y.

But f i r s t l e t me t a k e t h e o p p o r t u n i t y t o c o n g r a t u l a t e t h e

N a t i o n a l League o f C i t i e s and i t s r e p r e s e n t a t i o n f o r what i s

c l e a r l y a v i c t o r y f o r them a s a l obby ing f o r c e . And I s ay t h i s

w i t h a l l s i n c e r i t y even w h i l e I r e c o g n i z e t h a t t h e y c o u l d n e v e r

have p u l l e d i t o f f w i t h o u t h e l p from NCTA s t a f f i n t h e f a c e o f

t h e growing knowledge among c a b l e o p e r a t o r s o f t h e a c t u a l

c o n t e n t s o f t h e b i l l , and t h e rumbl ings o f d i s c o n t e n t among t h o s e

\.Jho began t o f o r s e e t h e p r o b a b l e a f t e r - e f f e c t s o f a l i c e n s i n g law

f o r t h e med i a .

B u t , even i f C y n t h i a P o l s d i d have a l o t o f h e l p from

NCTA, i t wa s s t i l l t h e N a t i o n a l League o f C i t i e s ' win , and I f o r

one d o n ' t t h i n k i t was to o n i c e o f S e n a t o r Goldwa te r t o a t t e m p t

t o damn them w i t h f a i n t p r a i s e i n h i s famous l e t t e r t o th e

Chai rman o f t h e FCC.

I d o n ' t mean h e r e t o s h o r t NCTA a s t o i t s e f f o r t s on t h e

b i l l . A f t e r a l l , t h e b i l l ' s p a s s a g e was h i g h p r i o r i t y to NCTA

s t a f f , and t h e y c l e a r l y went a l l o u t i n t h e f i n e s t t r a d i t i o n o f

NCTA. I t may b e f a i r t o sa y t h a t t h i s Act i s a t y p i c a l NCTA

v i c t o r y .


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For example, Broadcas t ing Magazine, in i t s October 15th

i s s u e , quotes Mooney thus ly :

"This b i l l i s going to t ake the h e a r t out

of municipal r egu la t i on of cab le , " s a id NCTAPres iden t James Mooney, who has been th ei ndus t ry po in t nan on th e b i l l . "With th e

e l i m i n a t i o n of r a t e r egu la t i on and with sharp

r e s t r i c t i o n s be ing p laced on c i t i e s ' renewal

d e c i s i o n s , you a re going to t ake away much of

th e reason fo r be ing o f cab le r egu la to ryb u r e a u c r a c i e s .... You a re going to f ind a l o tof c a b l e r egu la to r s out of work in a couple ofyea r s . "

Of cou r se , t he r e i s sone ques t i on as to whether NCTA went

backwards or forwards by g iv ing up b e n e f i t s won from th e FCC on

r a t e de regu la t i on - - ; and, as to th e ques t ion of unemployment of

r e g u l a t o r s , and e l i m i n a t i o n of r e g u l a t i o n s , on th e same day in

MultiChannel News, t he r e appeared the fo l lowing:

LOS ANGELES TO ESTABLISH TELECOMMUNICATIONS

OFFICE: City Counci l here voted 12-1 to

e s t a b l i s h a new municipal depar tment of

t e lecommunica t ions to focus i n i t i a l l Y on terms

of cab le f r anch i se renewals fo r 12 f r anch i se s

t h a t exp i r e a t th e end of 1986.

Under an ord inance approved by th e counc i l

on f i r s t read ing , th e Los Angeles depar tment of

t e l ecommunica t ions would assume r e s p o n s i b i l i t y

over m a t t e r s i nc l ud i n g enforcement an d

nego t i a t i on of f r a n c h i s e s , an d assurance of

a v a i l a b i l i t y of d ive r se programming on cab le

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sys tems . Those du t i e s prev ious ly were handledby th e c i t y ' s depar tment of t r a n s p o r t a t i o n .

The c i t y has a l r eady adopted an annual

budget t h a t i nc ludes an ou t l ay of S509,399 fo r

th e new depar tment . That amount provides fo rfunding of 12 new s t a f f p o s i t i o n s , f i ve

pa r t - t ime advisory commissioners , two p o s i t i o n s

t r a n s f e r r e d from t r a n s p o r t a t i o n . -

And on t h a t same day, October IS ; indeed in th e same

a r t i c l e which quoted Mooney, we have th e fo l lowing quote from

Cynthia Pols of th e Nat iona l League of C i t i e s :

. . the c i t i e s , "a re very happy to see we

have f i n a l l y put t h i s i s sue behind us in as a t i s f a c t o r y way," sa id Cynthia Po l s , "Youc a n ' t be l i eve how badly th e c i t i e s wanted t h i s

b i l l . They dread th e FCC."

The l e g i s l a t i o n " t akes th e FCC out of ourh a i r , " she s a i d . " I t e s t a b l i s h e s fo r us c l e a rr egu l a to ry a u t h o r i t y. I t gives us a f ivepe rcen t f r anch i se fee wi thou t s t r i n g s a t t ached ,

e s t a b l i s h e s a renewal orocedure t h a t d o e s n ' t

involve a presumption of renewal . The b igges t

se t -back i s th e r a t e r e g u l a t i o n , but what

go t t he re i s b e t t e r than what th e FCC has

a l r eady a t tempted to give us r e c e n t l y. "

Now yo u may t h i nk I am j u s t poking fun a t a normal b i t of

"doublespeak" expected from l obby i s t s - p a r t i c u l a r l y normal fromthose working with t r ade a s s o c i a t i o n s . And to some ex ten t I guess

I am.

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NCTA i s , a f t e r a l l , the same i n s t i t u t i o n which fought fo r

an d obta ined copyr ight l i a b i l i t y for cable a f t e r the Supreme cour t

sa id cable didn1t owe c o p y r i g h t ~which fought to go to the

copyr ight t r i b u n a l fo r a review of the l e v e l of copyr ight payments

years before such a review was due, an d presented as one of i t s

key wi tnesses a cable opera to r who ha d not even made h is copyr ight

f i l i n g s and payments as then requi red by law - - an d who thus

helped Mr. Valen t i increase copyr ight fees for each o f f - a i r

d i s t a n t s i g n a l s to 3.75% of gross revenues. And, of course , t h i s

grea t copyr ight work was a n a t u r a l fol low-up to NCTA's famous

3-5-7% Bel l pole r e n t a l nego t ia t ions t h a t would have, by now,produced r a t e s of $7.50 per pole a t a minimum, i n s t ead of r a t e s in

the $1 - $2 l e v e l .

While I could go on and deal with some of the o the r

noteworthy accomplishments of those who thus guard the i n t e r e s t s

of t h i s cable i ndus t ry - - l e t ' s s top the fun, an d go back to th er e a l message of S.66.

The Broadcas t ing a r t i c l e s a i d :

The compromise must have been a good o n e ~ eachs ide thought i t ha d got ten the b e t t e r p a r t ofthe d e a l .

As to the p a r t i e s quoted , i t was perce ived as a good

compromise. The C i t i e s an d NCTA s t a f f both be l i eved t h a t they gotwhat they wanted: Franchis ing for cab le , and both were prepared

to give up a l o t to ge t i t .

And, t h a t i s the h e a r t of t h i s a c t . Though the re w i l l be

much mischief caused by the var ious minor s e c t i o n s of the a c t : i t

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i s my b e l i e f t h a t , compared to the e v i l s t h a t can an d w i l l flow

from a l i c ensed pres s , a l l e l s e i s mere t r app ings an d s i d e - d e a l

compromises.

And t h a t f r anch i s ing p roces s , supposedly now backed up by

Congress , i s what i s wrong with the Act . That concept of a

l i c e n s i n g process t akes us back over 300 years to th e days of th e

Tudors and th e S t u a r t s . To th e days of "pa t en t " p r e s s monopolies

an d a l l th e g r i e f of a l i censed pre s s which we thought we were

f i n i shed with in the 18th Century. As Professor S e i b e r t po in t s

ou t a t pages 364-365 o f h is book, Freedom o f the Press in England,

1 4 7 6 - 1 7 7 6 ~

The e ighteenth cen tu ry, th e ag e ofEnl ightenment , th e age o f th e

"Phi l sophes ," the age o f "na tu ra l r igh t s "

and of " r ea son , " witnessed the gradua l but

s teady des t ruc t ion of th e t r a d i t i o n a l

forms of con t ro l i n h e r i t e d from Tudor and

S t u a r t t imes . In England in th e secondq u a r t e r of th e cen tu ry, th e p o l i t i c a l

t h e o r i e s of John Locke growing out of th eRevolut ion of 1688 even tua l ly pene t r a t ed

th e deeply ingra ined a t t i t u d e of the

government toward th e p r e s s , an d fo r the

f i r s t t ime in English h i s t o r y the phrase"freedom of th e press" acqui red ar e spec t ab l e as wel l as a concre te

meaning. Freedom of the pres s in th e

f i r s t h a l f of the e igh teen th cen tury meant

freedom from l i cens ing an d nothing more.

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So, j u s t s t o p and t h i n k o f t h a t . Here we a r e , a p p r o a c h i n g

t h e 2 1 s t C e n t u r y, a l l e g e d l y i n t h e days o f e n l i g h t e n m e n t - - e

we a r e a t a t ime when even t h e l i c e n s i n g l aws o f b r o a d c a s t a r e

b e i n g s t r i p p e d t o t h e b a r e n e c e s s i t i e s needed t o d e a l wi th t h e

l aws o f p h y s i c s , and y e t we h a v e , a t t h e same t i m e , t h e

e x t r a o r d i n a r y phenomenon o f what c o u l d p e r h a p s be one o f t h e most

s u c c e s s f u l o f a l l media , f i g h t i n g t o go b a c k w a r i s in t ime -

f i g h t i n g t o g i v e up i t s f reedom.

And make no m i s t a k e a b o u t i t . Though t h e r e wa s and i s a

majo r s p l i t w i t h i n th e c a b l e i n d u s t r y on t h e i s s u e , I d i r e c t l y

q u o t e Ed A l l e n , 1984 Chai rman o f NCTA, who, when p r e s s u r i n g c a b l e

groups t o a c c e p t th e Act , h as s a i d , " A f t e r a l l , i t i s o u r p o l i c y

t o r e q u i r e f r a n c h i s e s fo r a l l o f c a b l e . " And, b o t h t h e Texas and

t h e N a t i o n a l Cab le A s s o c i a t i o n s - - on t h e c la im t h a t t h e s u b j e c t

p e t i t i o n s were d i s q u i s e d a t t a c k s on m u n i c i p a l f r a n c h i s i n g -

opposed p e t i t i o n s t o th e FCC t o p r e v e n t t e l e p h o n e companies from

d e n y i n g p o l e a c c e s s t o c a b l e compan ie s b a s on u n i l a t e r a l

d e c i s i o n s by t h e t e l e p h o n e compan ie s a s t o t h e v a l i d i t y o f

m u n i c i p a l f r a n c h i s e s .

A.nd, b e f o r e t h i s Act i s even i n e f f e c t , b o t h t h e C i t i e s

and t h e t e l e p h o n e com:?anies a r e a l r e a d y in t h e C o u r t s a rg u i n g t h a t

t h e Act g i v e s t h e c i t i e s t h e r i g h t , and t h e power t o d i s p l a c e

c o m p e t i t i o n i n th e c o ~ m e r c eo f news, i n f o r m a t i o n and e n t e r t a i n m e n ~

c l a i m i n g t h a t t h e y may l i c e n s e , o r n o t l i c e n s e a s t h e y p l e a s e

c l a i m i n g t h a t t hey may h o l d t h e i r a u c t i o n s f o r such l i c e n s i n g

a t t h e i r p l e a s u r e - - and on such t e rms as t h e y ma y c h o o s e .

So, w h i l e i t may b e unkind t o s u g g e s t t h a t th e NCTA

s t a f f , and some o f t h e Washington communica t ions l a w y e r s , have

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chosen to be on th e s ide of th e c i t i e s and th e te lephone companies

v i s - a - v i s cab leJ i t shou ld be okay to note how much th e c i t i e s and

th e t e lephone companies seem to en joy be ing on th e s ide chosen by

NCTA an d those Washington communications l awyers .

The ques t ion then becomes, why? What 's to be gained by

t ak ing us back over 300 years in to th e pas t ? What 's to be ga ined

by c r e a t i n g some 10,000 l i t t l e c i t y - s t a t e s around the count ry with

th e power to auc t ion o ff th e r i g h t to speak , an d to s t i l l c o n t r o l

t h a t r i g h t even a f t e r i t has been bought an d pa id fo r? Why did

NCTA s t a f f work so hard to pass a b i l l which w i l l a lmos t c e r t a i n l y

c rea t e a huge i n c r ea s e in the cos t of l i t i t i on fo r an i ndus t ry

t h a t i s a l r eady l awye r- in t ens ive? c e r t a i n l y , one has to f i ne - tune

a comb look ing fo r any th ing good fo r cab le in t h i s B i l l .

And, t h i s i s p a r t i c u l a r l y puzz l ing when one recognizes

t h a t very l a rge por t i ons of th e cab le i ndus t ry d o n ' t l i k e t h i s Act .

Wel l , we could say t h a t th e answer i s t h a t th e b i l l i s a

s imple b a i l o u t fo r under-employed communications l awyers . But

whi le t he r e might be a touch of t r u t h t h e r e , I have to say t h a t I

have come to the conc lus ion t h a t th e r e a l mot iva t ing f o r ce was

f e a r . Nothing more or l e s s . The f ea r of compet i t ion by those

e x i s t i n g companies who have no conf idence in t h e i r a b i l i t y to

compete. And, i f I am r i g h t in t h i s , t h i s Ac t has now made them

hos tage to t h e i r own f e a r .

For, as we a l l know, "The Lord g ive th , an d th e Lord

t ake th away."

And, i f the c i t i e s can g ive , they can an d may t ake away:

an d they w i l l always t h r ea t en to t ake away. What they can

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f r a n c h i s e , t h e y can d e c i d e n o t t o r e f r a n c h i s e . As C y n t h i a P o l s

s a i d so c l e a r l y on b e h a l f o f t h e C i t i e s , i v e s no

p r e s u m p t i o n o f r e n e w a l .

Think what t h i s means t o a c a b l e p u b l i s h e r a s t h e end o f

a f r a n c h i s e t e r ~ a p p r o a c h e s . T h e r e w i l l , i n most c a s e s - be

g r e a t e r n e t i n v e s t m e n t i n t h e sys t em t h a n a t any o t h e r t i ~ e .

C e r t a i n l y , t h e r e w i l l be a g r e a t e r v a l u e f o r t h e m a r k e t t h a t , h e ,

as a c a b l e o p e r a t o r h a s s p e n t y e a r s t o d e v e l o p . Thus , t h e

t e m p t a t i o n f o r o u t s i d e r s t o use p o l i t i c a l i n f l u e n c e i n an a t t e m p t

t o s t e a l t h e " f r a n c h i s e " t o s t e a l t h a t ~ a r k e t- - a s opposed t o

compe t ing i n i t , w i l l be e x t r a o r d i n a r y , and t h e p r e s s u r e t o s a v e

t h e i n v e s t m e n t w i l l be h o r r e n d o u s . O f t e n , m i l l i o n s - - p e r h a p s

h u n d r e d s o f m i l l i o n s - - vvi l l b e a t s t a k e . And, >;,ho w i l l d e c i d e

t h e i s s u e ? L o c a l e l e c t e d o f f i c i a l s w i l l d e c i d e i t , w h i l e b e i n g

swayed and i n f l u e n c e d by swarms o f c a b l e c o n s u l t a n t s , and s t a f f

b u r e a u c r a t s , and l a w y e r s , and P. R . p e o p l e from a l l s i d e s .

I f t h i s i s n o t a d e s i g n f o r a c o r r u p t and c o r r u p t i n g

p r o c e s s , I d o n ' t know what would s o q u a l i f y . I ma y h a v e o n l y

s l i g h t l y e x a g g e r a t e d when I s a i d t h i s b i l l w i l l p u t more c i t y

counc i lmen i n j a i l t han p r o h i b i t i o n .

And n o t e , t h i s i s n o t l i k e ne w f r a n c h i s i n 3 t where a l l b u t

t h e winne r can walk away l o s i n g o n l y t h e i r f r a n c h i s i n g c o s t s .

Here t h e l o s s by an e x i s t i n g company w i l l be d e v a s t a t i n 3 , and t h e

p r i z e f o r t h e winne r i n a c o n t e s t f o r t h e marke t w i l l b e huge - - a

marke t f o r p e a n u t s , and a g o i n g s y s t e m - i n - p l a c e f o r p e n n i e s on t h e

d o l l a r .

I f you h a v e some d o u b t s as t o t h i s and t h i n k a l o s i n g

company can g e t a n y t h i n g l i k e marke t v a l u e f o r h i s sys t em i n such

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of bUsiness so i t could auc t ion o f f th e market to someone e l s e .

We c la imed , an d we be l i eve we e s t a b l i s h e d , t h a t th e c i t y had no

r i g h t to disp lace compet i t ion in the commerce of i dea s , and th e

Supreme co u r t he ld t h a t t he re was no municipal immunity from th e

a n t i t r u s t laws. That vote was c l o s e , 5 to 3, and I d o n ' t be l i eve

we would have won i f we ha d been a gar e company or a t e lephone

company. So what happened to t h a t weapon?

Wel l , t h i s Act does not t ake away t h a t weapon. I t does

no t a f f e c t i t . So, as to c l e an d c i t i e s , th e a n t i t r u s t laws do

app ly.

What does t h a t mean?Can th e c i t y d i sp l ace compet i t ion or not? Not by th e

Cons t i t u t i on i t c a n l t . And, i f a cou r t t r i e s to f i t t h i s new Act

to th e Cons t i t u t i on , then not by t h i s Act .

But c l e a r l y , th e c i t i e s th ink they can d i sp l ace

compet i t ion , an d j u s t as c l e a r l y some w i l l a t t e m p t to do so , even

i f they dec ide they a re probab ly wrong. Why? Because a n o t h e r new

Act , "The Local Government A n t i t r u s t Ac t o f 1984" says t h a t i f th e

c i t i e s v i o l a t e th e a n t i t r u s t laws they cannot be he ld l i a b l e fo r

damages. Only i n j u n c t i v e r e l i e f - - a s l ap on th e w r i s t - - i s

a v a i l a b l e .

But th ink of t h a t fo r a moment - - most such a n t i t r u s t

s u i t s have two d e fend a n t s , and th e o the r defendan t i s not given

f r e am from l i a b i l i t y from damages.

so , th e l o s e r in an e f f o r t to compete with an e s t a b l i s h e d

company in the market , or th e l o s e r in an e f f o r t to compete with

an e s t a b l i s h e d company fo r th e marke , w i l l always look fo r a

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co-defendan t should he dec ide to sue t h e C i ty. Guess who t h a t

w i l l b e ?

Tru ly t h i s "v i c to ry" fo r c a b l e does seem to pose a few

problems fo r th e i n d u s t r y.

What to do? Well , f i r s t o f a l l , i t i s c l e a r t h a t c a r e f u l

plann ing must be made by e x i s t i n g cab le companies to a t t e m p t to

avoid l i t i g a t i o n . That means t h a t such companies must now begin

to d e a l on a r egu l a r and planned b a s i s with t r i a l counse l , along

with t h e i r co rpo ra t e , an d S ~ C , an d communications an d EEO counse l .

But , in a d d i t i o n , I be l i eve they must do tw o o the r

t h ings . And I am happy t o r e p o r t t h a t many are a l ready doing th e

fo l lowing :

1 . They must use t h e i r own medium more. They must

e d i t . They must p u b l i s h . They must demons t ra te t h a t they are

p a r t of th e p r e s s ~they must he lp to p r o t e c t th e Cons t i t u tu ion

t h a t p r o t e c t s t h e m ~and

2 . They must work t oge the r in a group, ou t s ide of an d

independent from th e e x i s t i n g t r ade o rgan i za t i ons which have

s igned o ff on t h i s Act , an d form an a s s o c i a t i o n of cab le

t e l e v i s i o n pub l i she r s so as to be ab le to make sure t h a t t h e i r

s to ry i s being t o l d , an d l i s t e n e d to .

r am happy to r epo r t t h a t s u b s t a n t i a l progress i s be ing

made in t h i s area a l s o .

Thank you.

- 1 1

farrow commentpracticing law institute nov 1984

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