Miami Court Issues Permanent Injunction Against Primetime 24 Prohibiting Satellite Delivery of Broadcast Network Programming to 2-3 Million Dish Owners

On Monday, following a trial this Summer in the long standing litigation brought by the broadcasters against PrimeTime 24, a federal court in Miami issued a final judgment and permanent injunction against PrimeTime 24 shutting down Primetime 24 and its distributors by ordering them to cease distributing CBS and FOX television network programming to subscribers anywhere in the country who are "served," e.g., live in areas where the local CBS or FOX broadcast signals are available over-the-air. The satellite copyright license restricts delivery of network signals by satellite to those who are "unserved." The restricted areas will be determined from maps showing the Grade B contours of the local network affiliate or from signal strength measurements taken at subscribers' homes.

The court found that PrimeTime 24 had been providing its network signals by satellite to subscribers who were served and thus ineligible, making PrimeTime 24 liable for copyright infringement. The court awarded injunctive and declaratory relief but did not award damages because the broadcasters had waived their right to damages before trial. This decision supplements the earlier preliminary injunction issued by the Miami court in July that affected approximately one million satellite subscribers (see our advisory dated July 15, 1998). However, the massive turnoff of those subscribers was delayed by agreement of the broadcast and satellite interests until February 28, 1999, to allow the FCC to complete its expedited rulemaking in which the FCC is considering amending its rules governing how grade B contours are calculated and measured.

The January order requires PrimeTime 24 and its distributors to turn off subscribers who signed up for the CBS and FOX services after March 11, 1997 by February 28, 1999. For those subscribers who signed up before March 11, 1997, the order gives PrimeTime 24 until April 30, 1999 to come into compliance. (A similar decision enjoining PrimeTime 24's sale of ABC programming in the Raleigh-Durham DMA was issued in July and is effective currently. The Miami court recognized that the FCC initiated an expedited rulemaking proceeding regarding the definition, prediction and measurement of grade B signal strength. In light of the rulemaking, the Miami court reserved the right to issue a supplemental order after the FCC issued its decision in the grade B rulemaking, so the February 28 and April 30 cutoff dates may be extended again, and fewer subscribers may be subject to losing satellite network services.

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December 9, 1998

DBS PUBLIC INTEREST REQUIREMENTS

In the first FCC proceeding to impose access requirements on the direct broadcast satellite ("DBS") industry, the FCC issued final rules implementing the "political broadcasting" and "public interest" requirements imposed by the 1992 Cable Act on all DBS satellite licensees providing video programming to subscribers. (Large dish C-band carriers and program distributors are exempt from these requirements under the terms of the 1992 Act and FCC rules).

Under the public interest provisions, the Commission will require all DBS providers to set aside the minimum amount of channels allowed by statute (4%) for qualified programmers providing non-commercial programming of an educational or informational nature. The FCC has given DBS providers a fair amount of flexibility in selecting eligible "public interest" programmers, and broadly interpreted eligible programmers to include all noncommercial entities (meaning non-profit with no advertisements) that have an educational mission, even those that have been selected by or have co-ventured with a DBS provider.

The FCC applied the political broadcasting requirements in a manner similar to that for cable operators (equal opportunities) but left for case-by-case determinations how to apply the "reasonable access" requirements. At least for now, access will be limited to candidates for national races. DBS providers may also look to the prevailing rates for broadcast and cable spots, rather than determining their own lowest unit charge when that rate is required.

Background

Congress established public interest obligations for DBS providers in the Cable Television Consumer Protection and Competition Act of 1992 ("1992 Act"). The 1992 Act directed the FCC to adopt rules requiring DBS providers to comply with the political broadcast requirements of the Communications Act and to set aside four to seven percent of each provider's channel capacity for use by national educational programming suppliers on reasonable terms and conditions. The Act also instructed the FCC to examine the opportunities that DBS provides for developing localism. Promulgation of the FCC's rules was delayed by a challenge to the constitutionality of the 1992 Act's requirements, and the 1992 Act's DBS requirements were ultimately upheld on appeal in 1996.

The Rules

The DBS public interest requirements apply to all Ku-band satellite providers licensed under Part 25 and 100 of the FCC's rules, including non-U.S. providers. Currently this group includes DirecTV, Echostar, USSB and GE Americom (Primestar leases its channels from GE Americom). The rules exclude C-band (large dish) TVRO providers, and those Ku-band providers with less than 25 channels. The FCC rejected attempts to place responsibility for compliance directly on satellite programming distributors, such as retailers or other packagers, and left the responsibility on licensees, although the responsibilities can be delegated.

Set Aside for Non-Commercial Educational and Informational Programming
The FCC adopted rules requiring DBS providers to set aside four percent of their channel capacity for use by qualified programmers for noncommercial programming of an educational and informational nature. Channel capacity is determined on a quarterly basis based on the amount of spectrum required to transmit a single program. DBS providers are required to fill their set-aside requirements regardless of whether channels currently are occupied by non-qualifying programming networks. In other words, existing programming agreements are not grandfathered. While it is not stated specifically in the Order, it would appear that programming suppliers currently carried by the DBS provider still qualify for carriage under the set-aside. DBS providers may use this reserved capacity for any purpose until such time as an eligible programmer requests access.

Only non-commercial entities with an educational mission qualify for carriage. These include: non-commercial educational broadcast stations as defined in the Act, currently uplinked by DirecTV, Echostar and Primestar; public telecommunications entities as defined in the Act; accredited institutions or government organizations engaged in formal education of enrolled students or non-profit organizations whose purposes are educational and include providing educational and instructional material to such accredited institutions and government organizations; and other noncommercial entities with an educational mission. In defining "noncommercial," the FCC explained that a programmer does not qualify as noncommercial simply because its programming is commercial-free; the programmer must also be of a noncommercial nature. Entities organized as non-profits under the United States tax code are presumed to be noncommercial. An entity not organized as a nonprofit may also qualify if it demonstrates to the FCC that it was organized for a noncommercial purpose and has an educational mission. Joint ventures between commercial entities and noncommercial entities qualify for the set-aside provided that the joint venture is noncommercial and the venture's mission is educational. As to programming type or content, the FCC declined to define "educational or informational" at this time. However, eligible "national educational programming suppliers" under the 1992 Act will include local, regional, national domestic and international nonprofit programmers. 

Although DBS providers may not exercise editorial control over the content of specific channels, they may select the programmers based on program content when the reserved channels cannot accommodate all eligible programmers who wish to use the channels. However, DBS providers may not choose more than one channel from each program supplier. A single program supplier includes other programming suppliers under common control or ownership as defined by the broadcast attribution rules. Nor may DBS providers exclude programming because it is indecent or otherwise illegal, unless its character as such strips the program of its "educational or informational" nature. The FCC concluded that the Act implicitly protects DBS providers from liability for the program content of set-aside channels over which the provider exercises no editorial control.

The rates DBS operators may charge for carriage are limited to fifty percent of transmitting the signal to the uplink facility and uplinking the signal to the satellite. DBS operators may negotiate rates below this amount.

The rules require DBS providers to maintain and permit public inspection of complete records of: each provider's channel capacity; the entities to whom set-aside capacity is being provided, the amount of such capacity, the conditions under which such capacity is being provided and the rates for such capacity; and a record of the entities that have requested capacity, disposition of those requests and reasons for the disposition.

Political Broadcast Requirements
The FCC modified the existing political broadcast rules somewhat to accommodate the unique attributes of DBS providers. For example, the FCC stated that the rules apply in every case to candidates for the United States presidency and vice presidency, but may not apply to congressional elections where national distribution of advertisements is not necessary. In addition, while DBS providers are required to comply with the lowest unit charge requirements, DBS providers may use the commercial rates charged by broadcasters and cable operators to develop the lowest unit charge, given DBS providers' lack of established commercial rates on which to base such charges. Political equal opportunity requirements—which require making time available to competing candidates—will apply to DBS providers. DBS providers are required to maintain a political file of all requests for political advertising time and the disposition of those requests, similar to that maintained by broadcasters to demonstrate compliance. The FCC intends to examine access disputes on a case-by-case basis.

Localism
Noting the technical and legal impediments that prohibit DBS providers from delivering local broadcast signals to subscribers, the FCC declined to adopt any rules requiring DBS providers to develop local channels or programming at this time.