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Supreme Court indecency ruling could affect broader FCC telecom enforcement

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The recent U.S. Supreme Court decision overturning enforcement of the Federal Communications Commission's indecency regulation reaches beyond the broadcast industry into the telecom sector.

Augustino

That's because in the June 21 ruling on FCC v. Fox Television Stations, the high court, in reversing penalties against broadcasters for so-called fleeting expletives and partial nudity, set a "high bar" for FCC enforcement under the Communications Act, thus affecting actions dealing with common-carrier regulation.

Specifically, the narrow, procedural Supreme Court ruling appears to limit regulators' ability to fine carriers for violations of Section 201(b) of the Communications Act, which bars unjust and unreasonable practices, including cramming and nefarious marketing of prepaid calling cards.

"Fox Television will significantly constrain the FCC's ability to impose fines in 201(b) cases, at least in the absence of clear FCC rules defining the conduct required or prohibited," Steve Augustino, partner at Kelley Drye & Warren LLP, opined in a client note.

The decision, he explained, placed in doubt over $35 million in forfeitures proposed by the five-member, independent commission.

In FCC v. Fox Television Stations, the Supreme Court held that the FCC's decency rules-- specifically, 18 U.S.C. §1464--failed under the due process clause, ruling Fox was not guilty of "indecency" over fleeting instances of vulgarity or nudity because the FCC had not given the broadcasters fair notice the content aired was, in fact, indecent.

The unanimous decision--by Associate Justice Anthony Kennedy--upheld an appeals court ruling that rejected the FCC's indecency regulations as unconstitutionally vague.

"Regulated parties should know what is required of them," Kennedy wrote, "so they may act accordingly; and precision and guidance are necessary so that those enforcing the law do not act in an arbitrary or discriminatory way."

He added: "A fundamental principle in our legal system is that laws which regulate persons or entities must give fair notice of conduct that is forbidden or required,"in the 17-page opinion.

The justices--by deciding the case on due-process grounds--did not address the First Amendment arguments presented to the court.

The case stems from two incidents involved Fox's live broadcasts of Billboard Music Awards shows in 2002 and 2003 in which Cher and Nicole Richie, respectively, uttered apparently impromptu fleeting expletives during the shows. In the third incident, an ABC broadcast of "NYPD Blue" included brief female nudity.  

ABC and 45 affiliates were hit with proposed fines totaling over $1.2 million. Fox, however, was not fined and the commission said regulators would not take the matter into consideration for license renewal or in any other context.

"The Court found the possibility of increased penalties for future violations to render the FCC's action sufficiently punitive to implicate the Due Process clause," Augustino said. "The FCC has a similar authority in non-broadcast cases to consider a carrier's 'history of compliance' in setting a penalty.  

As a result, non-broadcast enforcement actions will be impacted, even if they do not impose monetary forfeitures."

Even so, Peter Gutmann, broadcast transactions and regulation partner at Womble Carlyle Sandridge & Rice, noted in his analysis of the case, the "strongly disapproving terms" in which the FCC described Fox's conduct "constituted 'reputational injury' with audiences and advertisers to which broadcasters necessarily are sensitive."

The Supreme Court'd decision upheld a July 2010 ruling in the U.S. Court of Appeals for the Third Circuit, that the FCC's rule against fleeting expletives on the airwaves is arbitrary and capricious.

In a statement, FCC Chairman Julius Genachowski, a Democrat, said the Supreme Court ruling "appears to be narrowly limited to procedural issues related to actions taken a number of years ago. Consistent with vital First Amendment principles, the FCC will carry out Congress's directive to protect young TV viewers."

The FCC, in 2001, modified its decency policy, Industry Guidance on the Commission's Case Law Interpreting 18 U.S.C. §1464 and Enforcement Policies Regarding Broadcast Indecency (16 FCC Rcd. 7999, 8002).

The Supreme Court case is Federal Communications Commission, Petitioner v. Fox Television Stations, Respondent, Docket No. 10-1293.

For more:
 - read Augustino's analysis
 - read Gutmann's case note