Journal: Communications of the ACM June 1991 v34 n6 p19(5) * Full Text COPYRIGHT Association for Computing Machinery 1991. ----------------------------------------------------------------------------- Title: First Amendment rights for information providers? (Legally Speaking) (column) Author: Samuelson, Pamela. Summary: The application of the First Amendment of the US Constitution, which forbids the government from interfering with freedom of speech, to computerized communications is under consideration. The restrictions that were put in place when the Bell system was broken up in 1984, preventing Regional Bell Operating Companies (RBOCs) from owning an interest in an electronic publishing service, are discussed. The origins of the ban and its history are summarized, with attention to decisions by Judge Harold Greene who has played an important role in these matters. The RBOCs now claim that Judge Greene's prohibition against information services is a prior restraint on speech and is therefore unlawful in light of the First Amendment. If the RBOCs are not permitted to offer information services, they will have no incentive to build a much needed electronic information infrastructure and the nation will suffer in consequence. ----------------------------------------------------------------------------- Descriptors.. Topic: Telecommunications Information services Electronic publishing Telephone companies Government Regulation Deregulation Bell Regional Holding Companies Rights. Person: Greene, Harold (Science and technology policy). Record#: 10 838 484. ----------------------------------------------------------------------------- *Note* Only Text is presented here; see printed issues for graphics. Full Text: Applying the First Amendment of the U.S. Constitution to computerized communication of information is raising many interesting questions. While the general principle of this amendment can be simply stated--it forbids the government from interfering with freedom of speech--the specifics of its application over two centuries of American history have yielded a complex matrix of principles whose application depends on a variety of factors. Where computerized communication of information fits into this schema has yet to be definitively determined. The last "Legally Speaking" column (Mar. 1991) discussed some First Amendment issues raised by treating computerized information as private property, theft of which might be criminally prosecutable. This column will discuss quite a different First Amendment issue. But these two columns can only begin to introduce a few of the challenging First Amendment issues presented by the "Electronic Frontier." Since 1984, when the Bell system was "broken up" as part of the settlement of the government's monopolization case against AT&T and Western Electric, the seven Regional Bell Operating Companies (RBOCs) that were created as a result of this settlement have been barred from owning an interest in any electronic publishing service. The principal question this column will address is whether the RBOCs have a right under the First Amendment to offer such services to the public. The question has been hotly contested in the past several years. While the column will concentrate on the First Amendment issue, it will of necessity discuss a number of other issues raised by the information services ban. The column will begin with a review of the origins of the ban which were discussed in the 1982 decision of Judge Harold Greene concerning the terms of the settlement of the antitrust action against AT&T. Judge Greene was asked to reconsider this ban in 1987, but he decided in 1988 to retain the core restrictions on the RBOCs. In 1990 an appellate court ruled that Judge Greene should reconsider this ban. The matter is now pending once again before Judge Greene, and the RBOCs are pressing the First Amendment issue with vigor. Although the information services ban may eventually be lifted by Congress or by the courts on other grounds, whether the RBOCs have first Amendment rights enter the information services market is an interesting question, well worth exploration and thoughtful consideration. The 1982 Consent Decree When AT&T and the Department of Justice (DOJ) decided to settle the antitrust case that had begun in 1974 and had been litigated for nearly eight years, they drew up a document containing the proposed terms of the settlement and presented it to Judge Harold Greene for review. After giving other interested parties an opportunity to comment on the proposed settlement terms, Judge Greene decided that, with certain modifications, the settlement negotiated between the parties would serve the public interest. After the litigants indicated their willingness to accept the modified terms, Judge Greene issued an order reflecting the modified terms. (Because the order resulted from the consent of the parties, rather than from a final adjudication on the merits, it is known as a "consent decree.") The consent decree initially proposed by AT&T and the DOJ would have allowed AT&T to be in the business of providing information services of an "electronic publishing" nature. Because of their monopolies over local telephone services, the RBOCs were to be excluded from this business. A number of organizations thought that AT&T too should be barred from entering this business, arguing that there was too grave a danger of competitive abuse and potential harm to First Amendment values to allow AT&T to offer these services. After reviewing the matter, Judge Greene agreed with the objectors, and decided to bar AT&T from this line of business, at least for a period of seven years. The perceived threat to competition was of two sorts. First, AT&T (and the RBOCs) could "cross-subsidize" its electronic publishing activities with revenues from its telephone services, enabling it to price its electronic publishing services low enough to deter entry or drive existing competitors out of the market (after which it would raise prices). Second, AT&T (and the RBOCs) could discriminate against competitors (and in favor of their own electronic publishing services) in the provision of necessary telephone services to the competitors. AT&T could, for example, give priority to traffic from its own publishing operations. It might also discriminate in interconnecting competitors to the network in the first place, or delay maintenance on the competitor's lines. Since it would have access to signalling and trafficking data about customer-competitors, it might discern proprietary information about competitive electronic publishing operations, thereby gaining a competitive edge over the other services. And in rate setting, it might also favor its own information services. Although AT&T and the Justice Department argued that market forces would curtail AT&T's ability to engage in anticompetitive activities, Judge Greene gave several reasons for deciding that the anticompetitive potential was grave enough to justify a ban on AT&T's entry into this line of business. He noted that electronic publishing was in its infancy as an industry. He expressed concern that small experimental electronic publishers would be so outsized by AT&T as to be deterred from pursuing innovative experiments. Electronic publishing, he said, was especially vulnerable to the kinds of anticompetitive threats AT&T posed. Delays in delivery of up-to-the-minute information could cripple electronic publishers. The judge also took note of evidence that AT&T had sometimes been slow in responding to needs of competitor-customers in the past, and that electronic publishers would be greatly dependent on the AT&T network to offer their services, making them particularly vulnerable to anticompetitive conduct. It was perceived that the RBOCs constituted similar dangers to competition in the information services market. Although Judge Greene thought he would be justified in barring AT&T from the electronic publishing industry on competitive grounds alone, he went on to say that "AT&T's entry into the electronic publishing market poses a substantial danger to First Amendment values." The First Amendment, he noted, aims to promote the widest possible dissemination of information from diverse sources. To promote diversity in sources of information, the government has regulated broadcasters, limiting the number of stations that can be owned by one person. Courts have upheld this as consistent with the public interest. Judge Greene likened his role in reviewing the consent decree to determine if it was in the public interest to the role of the FCC in regulating broadcasters; he decided the First Amendment values would best be served by barring AT&T from providing electronic publishing services to the public. The judge noted there had been an "unremitting trend" toward concentration in the ownership and control of the media, and warned that unless care was taken, concentration in the media would be significantly increased by new technologies, saying that it was "not at all inconceivable that . . . a single electronic publisher would acquire substantial control over the provision of news to large parts of the United States." To avert this danger and thereby protect First Amendment values, Judge Greene decided that AT&T (and the RBOCs) should be barred from the electronic publishing business until competitive conditions had changed so that the ban was no longer needed. He expressed a willingness to modify the consent decree to remove this line of business restriction when appropriate. He stated an intent to lift the ban as to AT&T in seven years if the parties applied for an end to this restriction. If able to demonstrate that there was no substantial possibility of their use of monopoly power to impede competition in the information services market, the RBOCs too could be relieved of the ban on their entry into this market. Although First Amendment issues were discussed in the 1982 consent decree proceeding, there was no discussion of whether AT&T (or the regional operating companies to be created as a result of this settlement) might themselves have First Amendment rights to "speak" as electronic publishers. This issue came up, however, in 1987 when the RBOCs and the DOJ tried to persuade Judge Greene to modify the 1982 consent decree to lift the electronic publishing ban as to the RBOCs. The 1987 Effort to Modify the Consent Decree The Justice Department was obliged under the decree to report periodically to Judge Greene on whether there was continuing need for the line-of-business restrictions set forth in the consent decree. In 1987, after reviewing a report concerning relevant aspects of the telecommunications business written by an independent consultant, the DOJ recommended to Judge Greene that the information services restriction be lifeted, as did the RBOCs. The main argument offered in favor of lifting the information service restriction was that competitive conditions in the information services market had changed significantly in the years since the consent decree, and as a consequence, entry by the RBOCs would now be beneficial to competition. DOJ believed the market would be able to curtain any anti-competitive inclinations of the RBOCs. Some of the RBOCs also argued that the continued ban on their entry into the information services market infringed the companies' First Amendment rights. After a hearing at which interested parties (including existing information service providers, such as newspaper and cable television associations) had an opportunity to make their views known, Judge Greene decided that it would now be in the public interest for the RBOCs to be in the business of transmitting information services, as long as the information services were owned by other firms. The judge thus partially lifted the ban on the RBOCs' provision of information services. But he ruled that the RBOCs had not shown that competitive circumstances had changed enough to justify removing the restriction entirely. He was persuaded that information services continued to be vulnerable to the anticompetitive dangers of cross-subsidization and discrimination against competitor-customers. The judge thought that as long as the RBOCs did not own the information or services being generated, they would have incentives to maximize revenues by making the fastest and highest-quality access and transmission services available to other information service providers. Only in a footnote did Judge Greene respond to the argument that the information services restriction infringed the regional companies' First Amendment rights. He dismissed it on several grounds. He reasoned first that like all business establishments, the RBOCs were subject to antitrust regulation, and since the restriction was part of an antitrust consent decree, it was justifiable as an antitrust regulation. He went on to say that because the RBOCs were common carriers, they could be treated differently for First Amendment purposes than traditional news media would be treated (thus seeming to concede that other kinds of information providers might be protected by the First Amendment from a complete exclusion from the market). He also insisted that there was no infringement of the RBOCs' First Amendment rights because if they made the proper showing, the ban could be lifted, and after all, the restriction, like all other terms of the consent decree, had been agreed to by the parties, and the RBOCs had derived billions in revenues based on it. None of these arguments seem to meet the First Amendment issue head-on. Nor are they entirely persuasive. Because the RBOCs were not entirely satisfied with Judge Greene's ruling on the information services ban, they appealed it to a higher court. The Court of Appeals Review of the Modified Decree In what will appear to Communication's readers to be a "legalistic" response to the issues raised in this case, the Court of Appeals in April 1990 decided to send the case back to Judge Greene for further proceedings. The appellate court decided Judge Greene made an error in his ruling on partial continuation of the information services ban. The appellate court thought Judge Greene should not have required the RBOCs to prove there was no substantial possibility they would engage in anticompetitive conduct if the ban was lifted. The court also thought Judge Greene should not have refused to lift the ban because the RBOCs had not proven a significant enough change in competitive circumstances. While they would have had to prove such things either the DOJ or AT&T had challenge the RBOCs' efforts to get the restriction lifted, in this case, at least regarding this issue, the DOJ, the RBOCs, and AT&T were all in agreement that the information services restriction on the RBOCs was unnecessary. The appellate court said Judge Greene should have simply decided whether, in light of current market conditions, it would be in the public interest to remove this restriction as the parties to the decree recommended. The appellate court also cautioned that Judge Greene was not supposed to determine whether lifting the restriction was what would best serve society, but only whether it was reasonably within the reaches of the public interest. The appellate court did not reach the First Amendment issue in the case. First Amendment Principles The First Amendment provides that "Congress shall make no law . . .abridging freedom of speech or of the press." It has been interpreted as forbidding any branch of the federal government from interfering with speech rights of individuals (and of companies as well, which for many purposes are considered "persons" under the law). While the Amendment would, on its face, seem to be an absolute ban on government interference with speech, courts have generally construed it as not meant to be taken literally. Obscenity, for example, has been held not to qualify for First Amendment protection. The extent of First Amendment protection for other kinds of speech may vary somewhat depending on the nature of its content. Courts regard political speech, for example, as having the greatest degree of protection against government interference. Commercial speech (such as advertising), although First Amendment-protected, can be regulated by the government to a greater extent than would be acceptable for other kinds of speech. A second factor of importance in First Amendment analysis is the nature of the medium in which the speech is communicated. Newspapers, for example, are accorded the highest degree of freedom from government interference. Television broadcasters, by contrast, have generally been said to enjoy a narrower scope of First Amendment protection than newspapers. Spectrum scarcity is said to justify imposing certain public interest responsibilities on broadcasters that could not lawfully be imposed on newspapers. In the broadcasting context, the courts have sometimes been willing to consider the First Amendment rights of audiences to "hear" information from diverse sources as another justification for government regulations which require broadcasters to present other points of view besides their own. A third factor of importance to First Amendment analysis is whether the government is trying to restrain speech before it is uttered, or merely hold the speaker responsible later for unlawful speech activities. It is extremely rare for the courts to uphold "prior restraints" on speech (i.e., censorship). The especial First Amendment sensitivity to prior restraints can be traced to the historical circumstances leading up to the American Revolution and the adoption of the First Amendment as part of the Constitution, for British censorship was regarded by the colonists as an outrage. Courts, for example, will be reluctant to enjoin a newspaper from printing an article that a government official regards as libelous, although quite willing to entertain a suit for money damages if the news article is, in fact, libelous after it has shown up in print. Because the courts have made so many distinctions--as to the nature of the speech, the medium in which it occurs, and whether the government is acting before or after the speech is uttered--it is not surprising that the courts have also developed some different standards for reviewing First Amendment cases that take these distinctions into account. When a case involving government efforts to stop publication of political speech in newspapers comes before the courts, the judges will subject it to the strictest scrutiny. Only in the rarest of instances (such as a government ban on publication of troop movements or battle plans in the course of a highly controversial war) will such restraints be considered lawful under the First Amendment. By contrast, government regulation of advertisements on television may be acceptable under the First Amendment as long as the regulation is reasonably related to achievement of an important governmental objective (such as protecting consumers from deceptive ads) and is narrowly tailored to achieving that objective. The RBOCs' Arguments The RBOCs argue that Judge Greene's order prohibiting them from offering information services to their customers is a prior restraint on speech, which is unconstitutional under the First Amendment. It singles out one class of speakers and forbids them to speak in a forum in which they would choose to speak if permitted to do so. Not only do the RBOCs contend they are legal persons with First Amendment rights to speak to audiences who want to be spoken to, but the audiences themselves may well have some First Amendment rights to "hear" the RBOCs' speech. Indeed, the main reason for prohibiting these potential speakers from speaking is precisely because some fear that the audience will only be too eager to "listen" to this speech, and pay money for the privilege. Because the speech they intend to offer to their customers is entirely lawful in content, their exclusion from this aspect of the marketplace of ideas cannot be justified, particularly now that the Department of Justice has concluded that their entry into the market would be procompetitive. The RBOCs point out that the ban was initially imposed because of AT&T's anticompetitive conduct; not because of any action on the part of the RBOCs. (To put it more colorfully than they might ordinarily do, one might say that the RBOCs were born into a kind of bondage on account of their father's sins.) Even as to AT&T, the ban was adopted entirely as a cautionary measure. At the time of the antitrust lawsuit, AT&T had not entered the electronic publishing market; Judge Greene analogized the potential for anticompetitive conduct in the telephone services market that had given rise to the antitrust charges. While the RBOCs question that the ban was ever needed, they insist it certainly is not needed now, and can certainly not be said to be "narrowly tailored" to achieve the objective it is said to promote. The antitrust laws themselves will deter the RBOCs from engaging in anticompetitive activities; the FCC may also be able to monitor the RBOCs' competitive behavior. Hence, the ban on their participation in this market is a massively overbroad response to the perceived danger to competition. Besides, the RBOCs point out, consider who are the principal opponents to the entry of the RBOCs into the information services market: cable television companies, newspapers, and other information service providers. These are the firms with whom the RBOCs would be competing, and who want to be sheltered from competition with the RBOCs. (Newspapers have also been somewhat sheltered from competition by the government's willingness to let many of them operate under joint operating agreements that limit the extent to which they compete with each other.) Since the Justice Department, which is the guardian of the public interest in competition, has concluded that it would be procompetitive for the RBOCs to enter the market, they should be able to do so, both as a First Amendment analysis and of competition policy. Some Opposing Arguments The principal arguments made against lifting the ban are that the ban continues to serve the same important public policy purpose of preventing anticompetitive conduct in the information services market that it served when first adopted, that it is carefully tailored to achieve this purpose, and that competitive conditions have not changed significantly enough to justify a lifting of the ban. Because the information services the RBOCs want to offer are "commercial speech," and because of the similarities between electronic information services and broadcasting, there is precedent in First Amendment law which would justify a greater degree of regulation of RBOCs than might be warranted for other information providers. Opponents point out that there have been many instances in which the government has limited entry into information markets in order to promote diverse sources of information without violating the First Amendment. Newspapers have, for example, generally been barred from ownership of television stations, as have cable television operators. Telephone companies are also barred from owning cable television services. When "cross-ownership" bans of this sort have previously been challenged on First Amendment grounds, courts have upheld the bans on the ground that they are reasonably necessary as prophylactic measures aimed at preserving diverse sources of information and ensuring the existence of competition in information markets. If these bans have not violated the First Amendment, neither should a similar ban against owning information services distributed by telephone by the RBOCs. In addition, opponents argue that it will be too difficult to detect cross-subsidizations and the kinds of subtle discriminations against competitive services that will occur if the RBOCs are able to participate in this market. It will not be until the competitive harm is done, and competitive information services have been eliminated from the market that it will be possible to determine for sure that the RBOCs have engaged anticompetitively, and then it will be too late. The FCC has too much other work to do to be able to monitor the RBOCs closely enough to prevent the anticompetitive potential from ripening into anticompetitive conduct. Electronic publishing is still in its infancy as an industry; it is still vulnerable to the same dangers Judge Greene identified in 1982. Information services are a special sort of industry: the public has deeper policy interests in the widest competition from diverse sources as a way to promote diversity of points of view. First Amendment interests in an unconcentrated marketplace of ideas justify the restrictions on the RBOCs' ownership of information services. Conclusion Even if Judge Greene does not lift the ban on the RBOCs' ability to operate information services, Congress may well decide to do so. Among the other arguments that the RBOCs have been making for lifting this ban (and other consent decree restrictions, such as on the RBOCs' ability to manufacture telecommunication equipment) is that unless the RBOCs are able to offer these services, they will not be able to justify investing in electronic information infrastructure, such as wiring the local loop from central office to home with fiber optic cables which will permit much more powerful information services to be distributed to American homes and businesses. As yet, electronic information services have enjoyed only limited commercial success. Yet many believe it is only a matter of time before they become major sources of strength in the economy. The RBOCs have the financial resources and incentive to experiment with the development of high-quality information services. Muzzling them may, in the long run, hurt the U.S. consumers whose choices are artificially limited by this ban, and quite as seriously, the ban may harm the U.S. position in the telecommunications market. The better public policy choice may well be to let the RBOCs participate in the information services market, but to impose common carrier responsibilities on them to carry competitive services on a non-discriminatory basis, and to use the FCC to monitor their compliance with this requirement, as well as to guard against cross-subsidizations that will unfairly disadvantage competitive services. This would serve First Amendment interests by not excluding a class of speakers from the marketplace of ideas, while at the same time preserving competition in the economic marketplace. Pamela Samuelson is a professor of law at the University of Pittsburgh School of Law.