Court tosses long-time ban on political/issue-oriented spots in NCE band; Prohibition against standard “commercials” left in place.

Just as the political advertising season is about to shift into overdrive, the U.S. Court of Appeals for the Ninth Circuit has opened the competition for candidates’ cash to a universe of broadcasters previously excluded from that potential revenue stream. According to the court, the longstanding prohibition against the sale of paid political advertising by noncommercial educational broadcast stations – a/k/a “NCE” or “public” broadcasters – is unconstitutional.

Since the earliest days of broadcasting, the Communications Act has prohibited noncommercial stations from broadcasting “advertising”. The Act currently defines “advertising” in this context to include any broadcast content, aired in exchange for consideration of any kind, that either:

  1. promotes some for-profit activity; or
  2. expresses the views of any person with respect to any matter of public importance or interest; or
  3. supports or opposes any political candidate.

(Yes, yes, we know that most, if not all, NCE stations do broadcast items that look a lot like standard ads. Those are technically referred to as “enhanced underwriting announcements”. They are theoretically subject to considerably greater constraints that normal “ads” – and the FCC does occasionally fine stations for exceeding the permissible limits.)

The theory underlying the ban on ads is clear (if not entirely convincing to many): if public stations were allowed to accept advertising, so the thinking goes, they’d be inclined to replace niche educational programming with programming designed to attract a much broader audience, or maybe they’d feel pressure to alter the content of their programming to please their advertisers – the goal, in either event, being to attract more advertising dollars. (Note: whether or not that theory is valid is far from clear, but it’s the theory that Congress relied on.)

So how did much of the ban just get tossed?

The story starts a decade ago. In 2002, the FCC fined a San Francisco public station, KMTP-TV, $10,000 for broadcasting numerous prohibited advertisements. KMTP-TV paid the fine, but then sued in federal District Court in California for reimbursement. Its claim: all of the advertising prohibitions are unconstitutional restrictions on the station’s speech. The District Court upheld the prohibitions on advertising, and KMTP-TV appealed to the Ninth Circuit, which released its decision earlier this month.

The Circuit agreed with the FCC that Congress does have a substantial interest in supporting the types of “high quality educational” programming found on NCE stations. (The Court does not address the obvious question of how the term “high quality” programming is defined or who is defining it.) And the Court was also on board with the government’s claim that Congress had enough evidence supporting its general theory that the goals of noncommercial broadcasting would be undermined if advertising were permitted. (That’s the theory that NCE stations would (a) abandon niche educational programming in favor of more mass-market programming and (b) alter the content of their programming to attract advertisers.) To be sure, the evidence wasn’t particularly empirical and much of it dated back to 1981 and earlier – but the Court reasoned that Congress’s judgment is entitled to substantial deference.

Accordingly, the Court upheld the ban on regular advertising.

Political and issue advertising, however, were another story.

In the Court’s words,

neither logic nor evidence supports the notion that public issue and political advertisers are likely to encourage public broadcast stations to dilute the kind of noncommercial programming whose maintenance is the substantial interest that would support the advertising bans.

To illustrate this, the Court focused on two types of programming – public affairs and children’s/family programming – touted by the government as the types of NCE programming that Congress intended to protect. 

As to children’s programming, the Court concluded that allowing political/issue advertising would have minimal effect. That’s because most viewers of such programming (i.e., children) can’t vote, so (according to the Circuit) NCE stations would have no incentive to alter that programming to suit the preferences of a political candidate or “issue group” and thereby attract their advertising dollars.

As to public affairs programming, the Court acknowledged that stations might change the content of such programming to attract political and issue advertising on various sides of important issues. But the Court could find no evidence – either before Congress when it enacted the ban or before the District Court that initially upheld it – that suggested that Congress was, or should have been, worried about that speculative notion. To the contrary, Congress appeared to be concerned exclusively with “commercialism”. Campaign ads and issue ads don’t promote “commercialism” because, in the Court’s view, they “do not encourage viewers to buy commercial goods and services”.

Additionally, the Court was struck by the fact that the discriminatory effect of the advertising ban. The ban permits announcements that promote the goods and services of non-profit companies, but forbids political/issue announcements. Such governmental line-drawing based on the content of the communications at issue raises serious constitutional questions. The FCC was unable to justify to the Court’s satisfaction the content-based distinction drawn by the statutory prohibition.

So what does this all mean? For openers, it means that NCE stations – at least those in the states within the Ninth Circuit – can now sell advertising time to political candidates and groups seeking to address important public issues. That could alter some candidates’ strategies – since NCE stations may provide more direct access to certain audience demographics. It will certainly alter the operations of many NCE stations, which will now be able to market themselves to at least certain limited classes of advertisers.

By the way, (1) what states are in the Ninth Circuit, and (2) why does that matter? 

Answer to Question 1: Alaska, Arizona, California, Guam, Hawaii, Idaho, Montana, Nevada, Oregon, and Washington. 

Answer to Question 2: Because the Ninth Circuit has jurisdiction over only those cases arising in those states, and its decisions thus affect only those states. It is therefore at least conceivable – but not, in our view, likely – that the Commission could take the position that stations located outside of the Ninth Circuit are still subject to the advertising prohibitions. (We think it unlikely that the Commission will go that route because to do so would create, in effect, two separate sets of rules based purely on the accident of geography. It’s hard to imagine that the FCC would be eager to head down that road.)

Those public stations that elect to jump into the political advertising game will have to familiarize themselves with the complex of political ad rules that routinely beleaguer their commercial counterparts. Equal opportunities, lowest unit rates, political file obligations, etc., will presumably all have to be implemented in some fashion, even though the Court’s decision did not address any of those niceties. 

One thing that NCE stations won’t have to worry about: the “reasonable access” provision of the Communications Act. That provision mandates that candidates for federal office are entitled to “reasonable access” to advertising time. The precise extent of “access” that might be deemed “reasonable” has bedeviled the Commission and the courts for years. But the Act expressly exempts NCE stations from that obligation, and the Ninth Circuit’s decision does not alter that exemption.

Where do we go from here? The Commission could fold up its litigation tent and accept the Circuit’s decision, leaving it to Congress to amend the Communications Act to address the decision if Congress sees fit.

Alternatively, the Commission could ask the Ninth Circuit to reconsider its decision. The three-judge panel did include one dissenter, which might give the Commission some hope.  Or it could ask the full Circuit to rehear it en banc. Or it could go for broke and ask the Supremes to take a look. In the meantime, unless the FCC requests and is granted a stay of the effectiveness of the Circuit’s decision, the ban on political/issue ads on NCE stations (at least in the Ninth Circuit) is gone until further notice.

Check back here for updates on how the Commission chooses to proceed.

In closing, we note that KTMP is probably frustrated. In all likelihood, KTMP launched its appeal not with the goal of trashing the ban on political/issue ads, but rather to get rid of the more general ban on commercial advertising which had gotten it into hot water at the FCC. While it obviously came up short on that score, KTMP’s efforts have nonetheless established an important precedent for all NCE stations.