Interview Date: Thursday February 23, 1989
Interview Location: Washington, DC
Interviewer: Max Paglin
Collection: Penn State Collection
Note: Audio Only
PAGLIN: Good morning. It is February 23, 1989 and we are in the offices of the Golden Jubilee Commission in Washington, D.C. to start on a series of oral history interviews with George H. Shapiro, a partner in the law firm of Arent Fox Kintner Plotkin & Kahn.
George, you remember the materials that I sent you explaining what this oral histories project is all about, and as you know we are working in close coordination with the National Cable Television Center and Museum at Penn State, which was established by the Cable Television Pioneers. We are seeking to develop a record of the early and developing years of cable television through oral histories with cable pioneers.
I'm Max Paglin, the Executive Director of the Golden Jubilee Commission. I will conduct this interview. What I'd like to do in the first session is to start with your early personal history, where you were born, when, who your parents were, what your mother's maiden name was, your activities in your youth, location of your homes, etc. If you will start and we will just develop it as we go.
SHAPIRO: I was born in St. Louis, Missouri on November 10, 1936. We moved to Atlanta, Georgia in early 1942, but my memory is not too good about that period. I was brought up in Atlanta which I consider my home rather than St. Louis.
PAGLIN: You moved at about what age?
SHAPIRO: At about six.
PAGLIN: You were age six at the time.
SHAPIRO: I attended kindergarten and grammar school in Atlanta.
PAGLIN: So you're a native of Atlanta, so to speak.
SHAPIRO: I consider it my home anyway. In the South, you're not a native unless you were there during the Civil War.
PAGLIN: Tell us about your father and your mother and where they came from.
SHAPIRO: My father was Isadore T Shapiro. He was born in St. Louis as well. My mother was Alice Schucart. She was born in Moberly, Missouri.
PAGLIN: Moberly? Where is that?
SHAPIRO: It's not too far from Columbia, it's in central Missouri. All of my grandparents were Russian immigrants.
PAGLIN: They came from where in Russia? Do you remember what part?
SHAPIRO: I know that on my mother's side they were from the Odessa area. I'm not sure where they came from on my father's side. I'm embarrassed to say, I do not know.
PAGLIN: When did they arrive?
SHAPIRO: I don't know exactly when. I believe it would have been the early 1900s.
PAGLIN: Were you ever told, did they go directly to St. Louis or did they settle in New York or Boston?
SHAPIRO: My understanding was at least on my father's side they went to St. Louis and on my mother's side I don't know how they got to Moberly, but they were in Moberly when my mother was born. I believe that my grandfather ran a dry goods store in Moberly.
PAGLIN: Your maternal grandfather?
SHAPIRO: My maternal grandfather. When I first knew him he owned a dime store in St. Louis.
PAGLIN: They had already moved to St. Louis when you first knew them?
PAGLIN: And your father's?
SHAPIRO: I do not know what their business background was. My father was in the retail shoe business. He worked for a number of different chains of primarily low‑priced women's shoes, merchandising.
PAGLIN: So you started school in Atlanta and went through primary school?
SHAPIRO: I went through primary school in Atlanta. When I was in the tenth grade my Dad sent me to prep school in Massachusetts.
SHAPIRO: It was a place called Phillips Academy, Andover.
PAGLIN: You say it so modestly. It has an international reputation.
SHAPIRO: It is a very fine prep school. I was of mixed views about whether I wanted to go away from home at that stage, or whether I thought that prep school was the right thing. The primary purpose for going was that my family had questions about how solid the educational system in Atlanta was, and this was to make it easier for me to get into a good college. It certainly accomplished that purpose.
PAGLIN: In tenth grade you were how old?
SHAPIRO: I believe it would be about 14.
PAGLIN: Phillips Academy is how many years?
SHAPIRO: It's a four year school and I went there for three years.
PAGLIN: And then?
SHAPIRO: Then I went to Harvard College.
PAGLIN: Was this what we used to call rapid advanced, you made the four years in three years?
SHAPIRO: No, I entered it at the beginning of the second year.
PAGLIN: Oh, I see.
SHAPIRO: I just attended three of the four years.
PAGLIN: Then you went to Harvard, and that would have been what year?
SHAPIRO: I started Harvard in the fall of 1954.
PAGLIN: So you were in the class of '58 then? What were your major subjects at Harvard?
SHAPIRO: I was a government major. Some schools would call it political science.
PAGLIN: What other curricular subjects were you interested in?
SHAPIRO: I think I did like the government courses the best, but I took at least one economics course, some literature courses although not a great deal, and Harvard had some very good general education courses. They were sort of broad overviews of Western history and civilization. One of the courses that I took was in Far Eastern history. Harvard was a wonderful place. Teaching Far Eastern history you had John Fairbanks who was one of the old "China hands" and Edwin Reischauer who subsequently became an ambassador to Japan. He was very prominent in the field. I took a foreign policy course that was taught by McGeorge Bundy and Henry Kissinger.
PAGLIN: A few names here and there.
SHAPIRO: A little later I read about several of the these men in a book called The Best and the Brightest. It wasn't entirely complimentary about the results that these people got us into in Vietnam.
PAGLIN: So these were the people with whom you took courses. That must have been quite exciting.
SHAPIRO: It was an intellectually challenging, fermenting period.
PAGLIN: Reischauer, I know a little about and he's quite a contrast from a guy like Kissinger I would say. Who did you find to be most stimulating since they were internationally known names? Who impressed you most, would you say?
SHAPIRO: Of the people that you heard in the large lecture halls, these are not necessarily the people that you had a close personal relationship with. Kissinger's course they called jokingly, "Breakfast with Kissinger." You'd go in and ask Kissinger what he thought about stuff that appeared in the morning newspaper and the headlines that morning.
PAGLIN: Was that a kind of give‑and‑take type thing?
SHAPIRO: In his course he encouraged questions, but not everybody did.
PAGLIN: What year was this, your junior year?
SHAPIRO: This would have been either junior or senior year.
PAGLIN: So we're talking close to '56, '57, '58 when things were really beginning to get active I assume.
PAGLIN: Did you have any extracurricular interests when you were at Harvard?
SHAPIRO: When I was a freshman I was on the freshman swimming team. I was just about good enough for that but not good enough for the varsity. I worked on the yearbook staff for three or four years. I was the production manager of the yearbook in my senior year. I think those were the two major activities that I was involved in in college.
PAGLIN: So when you graduated, was there anything else in Harvard at that time as an undergraduate that you feel had a role in your thinking later?
SHAPIRO: I had to write an honors thesis which I wrote on a subject in Georgia politics, and Harvard had a venerable political science professor named V. O. Key. He was well known particularly because of his interests in Southern politics. I did have some contact with him in the course of working on this honors thesis.
PAGLIN: You mentioned honors, how did that come about, top grades?
SHAPIRO: Honors is a function of grades, plus if you want high honors you also have to write a thesis. At Harvard College a very high percentage of the students graduate with honors‑‑over fifty percent.
PAGLIN: Oh really?
SHAPIRO: At least at that time that was the case. I graduated magna cum laude from Harvard, but I was not in Phi Beta Kappa which I think means that I was not in the top 10% of the class.
PAGLIN: That's strange because with magna cum laude, one would almost assume that Phi Beta Kappa is right next to it. At Harvard was it the top 10%?
SHAPIRO: I could not tell you exactly on what basis they chose Phi Beta Kappa. I understood that it was more for the upper reaches of academe.
PAGLIN: Graduating magna cum laude from Harvard is quite a feat.
SHAPIRO: I was quite happy about it, but they do graduate a fair number of people with magna cum laude. I'm sure they would say that's because they have a very select student body to begin with.
PAGLIN: When you graduated did you go directly into law school?
SHAPIRO: Yes I did.
PAGLIN: And it was of course...?
SHAPIRO: Harvard Law School.
PAGLIN: So that would have been in the fall of '58?
PAGLIN: What was the nature of your studies, the general curriculum of course?
SHAPIRO: At that time, the first year, and most of the second year was all prescribed, or almost all prescribed, and it was a general legal program. I had at that point some interest in labor law. I took a course in labor law in my second year and it was taught at that point by an energetic young professor named Derek Bok who subsequently went on to become president of Harvard. I signed up for a seminar in labor law for my third year, that was supposed to have been taught by Archibald Cox. If you've been keeping track of the years, you will remember that that was 1960. Kennedy was elected president in the fall of 1960, and Archibald Cox took a leave of absence from the law school so I never had him for the seminar. I had Derek Bok again. At that point I had some interest in labor law.
PAGLIN: So Archie Cox was up there. I'm trying to figure out because of the contacts that I had when he was Solicitor General, but that was in the Kennedy Administration already, wasn't it?
SHAPIRO: Archibald Cox's greatest notoriety was the "Saturday Night Massacre" but that was in the Nixon Administration. That was much later.
PAGLIN: He was Solicitor General.
SHAPIRO: I do not remember that he was Solicitor General for that long.
PAGLIN: Were you law review?
SHAPIRO: I missed law review by one.
PAGLIN: But you were writing. You were writing papers?
SHAPIRO: Not when I was in college.
PAGLIN: In law school?
SHAPIRO: Nothing other than the required third year paper. I was on two honor societies. My second year I was on something called the Harvard Legal Aid Bureau, and my third year I was on the Board of Student Advisors which runs the moot court competition.
PAGLIN: That was in the third year?
SHAPIRO: Yes, the third year. One of my colleagues on the Board of Student Advisors has subsequently gone on to some prominence. His name is Anthony Kennedy. He's the newest member of the Supreme Court.
PAGLIN: Of course. I didn't know he went to Harvard.
SHAPIRO: He was a member of the class of 1961 at the Harvard Law School. I graduated magna cum laude from Harvard Law School as well. At Harvard Law School that does put you in the top 10% of your class, or at least at that time it did.
PAGLIN: We have you graduating in 1961. That was a very interesting year.
SHAPIRO: There was another step in academe.
SHAPIRO: After graduation, I applied for, and was awarded a Frank Knox Memorial Fellowship, which is a fellowship awarded by Harvard University. The person for whom it was named was the former publisher of the Chicago Daily News, a prominent Republican. I believe he was Secretary of the Navy during World War II. He had a particular interest in Anglo‑American amity. So, the award was at that time fairly generous in dollar terms, and it was essentially valid in any university in Great Britain or any of about six Commonwealth countries. You had the responsibility to apply to and get accepted to that university and it certainly didn't hurt that you applied with the mantle of having been awarded a Harvard University Fellowship.
PAGLIN: This was for post‑graduate study?
SHAPIRO: This was for one year of post‑graduate study. I was awarded this fellowship. One of the things that you had to do to get the fellowship was to write up a little project of what it was that you' were going to study. I had mentioned that I had taken several labor law courses at that point. I dreamed up a project on the British system of compulsory arbitration of labor disputes. I applied to and was accepted to the London School of Economics as a graduate student. Law in Great Britain is primarily an undergraduate course, and it also tends to be a very theoretical course.
PAGLIN: In British law schools?
SHAPIRO: They tend to study jurisprudence and theoretical things of that kind and not very much practical work like tax law or labor law.
PAGLIN: Laws of evidence and things like that.
SHAPIRO: That comes later in your apprenticeship. Law graduates would be articled to either a firm of Barristers or Solicitors. The London School of Economics is probably a little bit more practical oriented than other British law schools, and the leading authority on labor law in the British Isles at that time was a fellow named Professor Otto Kahn‑Freund. Obviously from the name a German‑Jewish refugee, who had two specialties, British industrial law, and common market law. He took occasional years off to teach law at Yale, so he knew something about American law. He was a very prominent figure in British law, and he subsequently became a don at Oxford. He was a delightful fellow.
The fellowship was only for one year. At that time in England, at least at the London School of Economics, you could not get a degree if you only spent one year in residence, so his attitude was, essentially, " ... England's a wonderful place, I hope you take advantage of the opportunities here, but there are other opportunities, so don't get too bogged down in the books." He had a seminar, that he ran for some British industrialists, that I was invited to speak at and participate in. He was happy to see me whenever I wanted to see him, and he would read drafts and look at things, but I was under no pressure to produce anything or do anything. I learned a good deal about British industrial law. I did not end up with a publishable paper at the end. I may have been able to produce one if I had taken the time when I got back. I had a draft of something. It was a wonderful learning experience.
PAGLIN: Did you have a social life? Did you have people with whom you socialized while you were there, with whom you still have contacts, or was it just mostly study stuff?
SHAPIRO: There was a fair amount of social life. First of all there were three or four other Americans on this same fellowship from Harvard, one of whom I roomed with. We had some Australian, New Zealand, South African friends. We found the British pretty stand-offish. We did not have very many British friends. I still see occasionally many of the Americans that were there. I do not have continuing contact with any of the other Commonwealth people that we had known there.
PAGLIN: That was a one year program, then did you come back to the United States?
SHAPIRO: I came back to the United States.
PAGLIN: Then what happened?
SHAPIRO: I decided that I wanted to work for the government. Professor Bok, at Harvard, kindly wrote a letter to the Solicitor of the Labor Department, a fellow named Charles Donahue. I interviewed at the Labor Department and was offered a job at the Solicitor's Office, Legislative Division. It was my understanding, at the time, that I would also work on occasional special projects for the Solicitor, and I went to work at the Labor Department.
PAGLIN: When was this?
SHAPIRO: This would have been about September, 1962. At that point also having avoided the draft for all of these many years, and still not having turned 26, my draft board made it very clear to me that, if I didn't get into a reserve unit pronto, I would be drafted. At that time it was very easy to join a reserve unit. In fact, once you were in the unit, they would pay you a bounty if you could find someone else to bring into the unit as well.
PAGLIN: Truly a bounty?
SHAPIRO: It was not a large amount, maybe $45 or something like that. I joined the reserve unit and went into the Army for six months.
PAGLIN: This was in Washington?
SHAPIRO: It was in Washington. The unit met out at Arlington Hall Station in Virginia. I went into the Army from October of '62 to March of '63. I was a private in the Army.
PAGLIN: What unit was this?
SHAPIRO: It was the Army Security Agency.
PAGLIN: Well of course, Arlington Hall.
SHAPIRO: We were a branch of the National Security Agency.
PAGLIN: All this time, you were working at the Labor Department.
SHAPIRO: I was on leave of absence from the Labor Department.
PAGLIN: The reserve unit was a full‑time thing then?
SHAPIRO: Well, you had to take six months of active duty.
PAGLIN: I see. I thought it was a weekend type thing.
SHAPIRO: It was after your six months of active duty.
PAGLIN: They gave you a leave of absence? Then you came back.
SHAPIRO: Then I came back and let me say, I found my service for the government less than enthralling. I worked for the government about three months before I went into the Army. While I thought that there was some interesting work being done at the Labor Department, I thought it was going to be a number of years before I was doing much of it. I found the level of review of some of the simplest matters, stifling. I was not real happy with what I was doing, plus, as I indicated earlier, I had thought that I would work on occasional special projects for the Solicitor, but that was forgotten.
PAGLIN: When you were away in the Army?
SHAPIRO: If it was ever remembered at all. I never worked on a special project.
PAGLIN: So how long did you then stay with Labor?
SHAPIRO: I was there another three months. I was in the department a total of only about six months. I don't regret my time with the Labor Department because, if you remember Max, in those days, the early sixties, it was almost considered a pro bono job to work with the government. Kennedy was president, Arthur Goldberg was the Secretary of Labor, people were fighting over themselves to work for the Justice Department. You were at the Commission at the time.
PAGLIN: I was general counsel at the time, a very exciting time. The government was getting some of the best law students.
SHAPIRO: I'll never feel like I missed my big opportunity in life by not going to the government. It didn't work for me. It works well for other people, but for me it didn't work. I saw it and I said it wasn't for me. I'll never look back wondering what might have happened if I would have done it some different way.
PAGLIN: So you left the Labor Department in '62?
SHAPIRO: No, it would have been in the summer of '63. I came back from Europe in the summer of '62; I worked for the Labor Department for three months; I went into the Army for six months; and then I worked for the Labor Department for another three months. So that's '63. What happened then? When I was with the Labor Department and I decided to move, I began interviewing with some law firms. My recollection was that the father of a friend of my sister's who was practicing law here, suggested that I interview with the law firm Arent Fox. I interviewed there and at couple of other law firms as well. When I interviewed at Arent Fox, they seemed interested and there was an opening in the communications department to work with a guy named Harry Plotkin.
PAGLIN: With whom did you first interview at Arent Fox?
SHAPIRO: My recollection is that it probably was Harry. If it wasn't Harry, the first person, I certainly saw him that first day. Communications seemed to be an area where they were looking for someone, so it was logical that I would see Harry. At that point I did not know Harry Plotkin from Adam.
PAGLIN: Did you know that he was from Harvard Law School?
SHAPIRO: Harry was not reluctant to let me know that during the first interview.
PAGLIN: They made you an offer?
SHAPIRO: Yes, you'd be kind of amused at this. I knew they were checking my references. I had a young friend who was a year behind me in law school, who was working for the Commission at the time, I believe he was on the Opinions and Review staff. You may remember him, Jim Greilsheimer?
SHAPIRO: I asked Jim if he could check with some people at the Commission as to whether people thought working for Harry Plotkin was a good opportunity.
PAGLIN: You had a hell of a nerve.
SHAPIRO: Jim went to a couple of people. He went to Sylvia Kessler. He went to Henry Geller. I subsequently learned that these were practically Harry's children. They both 'fessed up that it might be a good opportunity to go to work for Harry Plotkin. He was well regarded.
PAGLIN: Your friend was understating it I'm sure. It was the opportunity of a lifetime.
SHAPIRO: He did. When I went to Arent Fox, I indicated that while I had considerable background in labor law, I didn't feel bound to stay in labor law. I did want to keep my hand in it. They told me that I would be able to spend half of my time in labor law. I also thought that my interest was really more in sort of the administrative law process, and it didn't have to be labor law, and communications law seemed to meet that criteria, so, I said, fine, I'll give it a try. I never did a drop of labor law. I went to work with Arent Fox in a July of 1963.
PAGLIN: Tell me about some of the early work that you did, when you first started there. In '63 the Communications Satellite Act had just been passed, Newton Minow was still the Chairman. Not long after that he left.
SHAPIRO: Bill Henry came in shortly after. I don't remember whether Minow was still Chairman or not.
PAGLIN: I think Newt left in '63 and Bill Henry succeeded him as Chairman.
SHAPIRO: There were two main things that I worked on in the early years, one of which was the famous Boston Channel 5 case. Harry represented one of the challenging groups, called Charles River Civic Television, consisting of a very prominent group of Bostonians, which was headed by Thomas Cabot.
PAGLIN: I remember that well.
SHAPIRO: Harry and Tom Shattenfield were primarily involved in that. I did a lot of the work that a young associate does. I worked, I prepared exhibits...
PAGLIN: This was for the hearing. Was it after the first court review?
SHAPIRO: This was after the Commission granted, essentially a four‑month license to the Boston Herald Traveler. Many of the practitioners regarded what the Commission did as an invitation to other parties to come in and file competing applications, a rather unusual situation. The other thing that I worked on, and this is I guess getting more to one of the reasons why you are talking to me...at that point probably the worst thing in the world that a young associate in a law firm in communications could do was work on a microwave application for one of these companies called CATV.
At that point they were totally unregulated, at least by federal regulation, the only contact they had with the FCC was that they wanted to bring in distant broadcast signals, and for that they needed a microwave application. Those applications were filed at that point in the Business Radio Service. Harry represented a company at that point which was the largest cable company in the industry. It was called H&B American Corporation.
PAGLIN: Harry represented them?
SHAPIRO: Yes. The person who was president when I started was Leon Papernow. It had about 100,000 subscribers, and this was '63, shortly after the Commission's decision in the Carter Mountain case had been affirmed by the Court of Appeals.
PAGLIN: Which established the need for licensing.
SHAPIRO: And also established that the Commission could condition microwave licenses on providing certain protection for local television stations. At this point, H&B was building a cable system in a town called Lompoc in California and had applied for a microwave license.
End of Tape 1, Side A
(Conversation began prior to recording)
SHAPIRO: The application proposed to bring in Los Angeles TV signals to systems to be built in Lompoc, which is located in Santa Barbara County. The Santa Maria Television station objected to the microwave application to bring the Los Angeles signal into Lompoc, and we had a hearing. The Commission designated the applications for hearing.
PAGLIN: These were the applications for microwave by H&B American. What were some of the issues on the hearing order? Do you recall offhand, besides public interest? We're going back aways.
SHAPIRO: My recollection is that they had to do with the effect that the carriage of nine Los Angeles stations on the cable system would have on the ability of the local station to succeed, and whether a carriage requirement and a non‑duplication requirement should be imposed on the cable system as conditions of the grant.
PAGLIN: This was before the First Report and Order? So it would have been before 1965. So this was an earlier hearing.
SHAPIRO: This was in '63 and '64.
PAGLIN: They, the FCC, were designing the issues at the time which would have led to the First Report and Order, and its economic impact on the local television stations. What were some of the other issues?
SHAPIRO: Those are the only ones that I remember, but the local manager of the Lompoc Cable System was a person who also subsequently became somewhat of a figure in the cable industry. His name was Chuck Trimble.
PAGLIN: I know of him.
SHAPIRO: Chuck was pretty wet behind the ears at that point, as was I. I remember working with Chuck on exhibits. I remember his testifying.
PAGLIN: How did the hearing go? I don't think we've had, in the course of these things, a description by a practicing attorney, maybe Strat Smith did in his oral history, representing a private applicant in a microwave application. Give us some idea what the early hearing, as far as you can recollect, was like. There was Commission counsel appearing wasn't there?
SHAPIRO: The details of it are pretty vague in my mind. My recollection is that there was Commission counsel. Let me go forward for a minute. What ultimately happened was that the hearing was settled. I don't remember whether that was the pre‑initial decision stage, or after the initial decision.
PAGLIN: But there was an evidentiary hearing.
SHAPIRO: There was an evidentiary hearing, at which people testified. I do not remember the nature of the exhibits that we did, they were not that extensive. What ultimately happened was that the settlement involved first of all H&B agreeing to accept carriage and non‑duplication conditions. It seemed to me, in light of Carter Mountain, it was inevitable that the Commission was going to try to impose those conditions anyway. This case had some notoriety in the industry because it was one of the early so‑called blackmail cases. Part of the consideration for the settlement was that the Santa Maria Television Station got an interest in ... I believe H&B had a cable franchise for Santa Maria, which had not been constructed. Santa Maria was the city of license of the television station and the television company got a minority interest in the subsidiary of H&B that I believe had the franchise for Santa Maria at that time.
That case, and one or two like it, I suspect probably had something to do with moving the Commission in the direction of the First Report and Order. Rules were adopted because it was essentially argued by people in the cable industry at the time that the Commission's processes essentially lent themselves to blackmail. Television stations, by filing objections could hold up the institution of cable service, and in return extract ownership interests in cable systems. And this was a good reason, seeing that if you were going to construct a railroad, that's not the way you would construct it.
PAGLIN: Was there any indication in the arguments back and forth that the television station owner, having an interest in the cable system, gave the appearance of a conflict of interest at that time and later, of course? These two media were considered to be almost mutually exclusive.
SHAPIRO: Max, maybe it's something I should look up in the papers because I have a feeling that the Broadcast Bureau and the Commission opposed the settlement, essentially on those grounds and that possibly there was an allegation on the abuse of process, that it is not proper for the television station to use the Commission's processes to extract an ownership interest. At that point the cable company, being party to a settlement and wanting to get on with its business, had to oppose the Commission. My recollection is that the Commission staff opposed the transaction. It would be very interesting to look up at least the settlement in that case if it was a published reported decision. I believe it was.
PAGLIN: It gives an indication of some of the things that later developed and are going on even today, 25 years later, about the relationship between cable and broadcast and the competitive forces going up and back, and this kind of thing, of blackmail. This process has been used when citizen groups opposed renewals of television stations, and now cable. If you have an opportunity between now and our next session to look into it, we can always pick it up in our next session.
SHAPIRO: I do not believe that we have the files any longer in that proceeding, but I will see if I can find something in the reported cases on that to test my recollection.
PAGLIN: Then they went forward and they built. Did the television station maintain its interest in the cable, do you remember?
SHAPIRO: Well it did for a while. It was ultimately bought out. I do not remember the circumstances.
PAGLIN: That would have been the usual thing, wouldn't it? He wasn't really interested in that, he was interested in what he could get out of it, no doubt.
SHAPIRO: Yes, I do not remember when that happened, but I'm fairly sure that the station was bought out.
PAGLIN: That was an interesting early development.
What other kinds of cases were you involved in in the early days? Let me put it this way, were you assigned particularly to H&B American; or was it broader by this time?
SHAPIRO: I don't know whether there was a formal assignment but this is how a lot of us who were active in the legal side of cable, got into cable. There was actually a similar case involving Wildwood, New Jersey. There were only four of us in the communications group at that time, Harry Plotkin, Gene Bechtel, Tom Schattenfield, and myself. I was the one who knew a little bit about cable, and once you work on a project, you become the expert. Without there being a formal assignment, I was the person who worked on H&B matters. I was the one who was familiar with cable and did work on H&B matters under Harry.
PAGLIN: The interesting thing is that you will see in some of the other interviews like Bill Daniels and Archer Taylor, from a technological stance, that H&B American comes up. As you say, it was one of the largest at the time.
SHAPIRO: It was the largest at that point. I do not believe that H&B American existed by the time satellites started providing service to cable systems.
PAGLIN: Who were some of the other clients of Arent Fox that you were working for in cable, we're talking about the period before '66?
SHAPIRO: At what point did you go back into government?
PAGLIN: That was in 1966 when I turned over Midwest Video to Harry Plotkin as a client.
SHAPIRO: I do not remember working on any specific cable clients other than H&B American until, as a result of your going back into government, you referred Midwest Video Corp. to Harry Plotkin. Again, since I was the person who knew the most about cable at that point, I worked with Harry on Midwest Video.
PAGLIN: We'll get to that. At this period, representing Leon Papernow and his company, did you have contact with other people in the industry, the NCTA people, other cable "pioneers," or was it mostly just representing Leon and that's it.
SHAPIRO: At that point, of course, Max, I was a pretty junior lawyer, and the principal people that I had contact with at least through about '67, '68, '69, were people within H&B. Another name that you may have heard was the person who became the president of H&B after Leon Papernow left H&B.
PAGLIN: About when?
SHAPIRO: I'm just guessing that it was around '68 or so. Harold Sugarman became the president. Harold had been the treasurer.
PAGLIN: His name keeps popping up all of the time.
SHAPIRO: I worked with Harold, and Chuck Trimble by that point had been brought in to the company as sort of an executive vice president. It's my recollection that one of the board members of H&B American was a prominent New York attorney, named Bill Jennings. I don't know if you know who Bill Jennings was. He was a partner in the law firm of Simpson Thacher and Bartlett. He was also president of the New York Rangers.
PAGLIN: A hockey team.
SHAPIRO: A hockey team. He had something to do with Madison Square Garden, and I'm not quite sure how he got involved with H&B American, but he was one of the directors of the company.
PAGLIN: Did Simpson Thacher do some of their corporate work?
SHAPIRO: I believe they did.
PAGLIN: That's how it probably happened.
SHAPIRO: Yes, I believe it is.
PAGLIN: Where was H&B's formal incorporation, their corporate domicile? Were they in Massachusetts or was it a Delaware type thing?
SHAPIRO: I thought it was a Delaware thing. It was a publicly traded company at that time. It was on the American Stock Exchange. Let me go back a minute, as a matter of fact, almost a third of the company was owned by Video Independent Theaters, which was a subsidiary of RKO General.
PAGLIN: Right. So it had to come from somewhere up in New England? RKO General was a tire company.
SHAPIRO: RKO General owned radio and television stations, it had its own cable division and it had an interest in H&B. The RKO Cable properties were ultimately sold to Cap Cities, which ultimately sold them to Post‑Newsweek where they are now.
PAGLIN: Who were the people you dealt with mostly at this time?
SHAPIRO: Historically the H&B Systems, I'm not sure about the details and how it happened, but the core systems of H&B had previously been owned by Jerrold. Milt Shapp and Jerrold had been found to violate the antitrust laws and had been required to divest. I don't know the details of how H&B was formed and acquired them, but H&B's core systems were the Jerrold systems that it had been required to divest as a result of the antitrust proceedings.
PAGLIN: My own recollection, and I was involved, H&B American was not its original name.
SHAPIRO: I think it was H&B American Machine.
PAGLIN: Something like that. I remember. It would probably be in the TV Factbook where they show the original owners, Al Warren's big Factbook.
SHAPIRO: The current one?
PAGLIN: The Factbook gives a history of group owners and it goes back to some of the original owners and names, and so on.
SHAPIRO: I would have to look, but under what company would you look?
PAGLIN: That's interesting because H&B went out of business.
SHAPIRO: H&B essentially merged in the late sixties with a company called Jack Kent Cooke Inc., at which point, Mr. Cooke became the principal owner of H&B. It (Cooke Inc.) was then acquired by TelePrompTer. TelePrompTer was subsequently acquired by Westinghouse. Westinghouse sold it and the properties have been distributed among a group of cable owners.
PAGLIN: What you would do is go back to the TV Factbook issue of 1964.
SHAPIRO: Did he include cable in '64?
PAGLIN: Absolutely, not as thick as they are today, but he had them in those days. I used to use them, I remember. If anyone reading the transcript to this tape wanted to go back and do a history of it, that's where they'd have to look. By the way, Al Warren has donated a lot of stuff to the library at the Cable Center.
SHAPIRO: I think you'd want to look at the Jerrold antitrust litigation too. My understanding, I don't know whether it was a court order or a consent decree, but Jerrold got into trouble because there were allegations that it was the only company making cable television equipment and it wouldn't sell you cable television equipment unless it got ownership interest in the cable system.
PAGLIN: Absolutely, the anecdotal aspect of it has come up in a number of interviews with some of the TV cable pioneers, without naming the one, he expressed himself on Milt Shapp's company's demands when he was looking for some equipment.
SHAPIRO: Ultimately they were forced to divest themselves of their cable interests.
PAGLIN: Let me digress. I was in the Paramount Merger case with Fred Ford.
SHAPIRO: Again, that was before my time.
PAGLIN: But the parallel, of the nature of the activity between the motion picture producers, distributors, exhibitors, which was in the early, early days, twenties, thirties, forties, and what we have now, the vertical integration that's developing in broadcast, cable and manufacturing, the whole bit of program production, and I'm sitting back as an elder statesman and saying, "I'm waiting for that bubble to go, "Pow" one of these days."
SHAPIRO: Current economic theories of the Justice Department promote efficiency.
PAGLIN: That's true, but it may not always be that way. The pendulum may begin to swing in a different direction.
PAGLIN: This is getting very interesting. We will go into some of the later developments, and your involvement in the federal regulatory response to cable litigation and things like that in our next session.
End of Tape 1, Side B
PAGLIN: This is the second session of the oral history of George Shapiro.
Good Afternoon. I am now in the law offices of Arent Fox Kintner Plotkin & Kahn. George Shapiro is a partner. Today is March 7, 1989.
George, last time we went through your early personal history and your first involvement in the cable industry. We left some loose ends, one of which I'll be referring to in a little while. One item of personal history that I forgot to include was that you're married now. When were you married?
SHAPIRO: I was married in 1977.
PAGLIN: To whom?
SHAPIRO: Mary Kenney Leonard. We have one daughter, Ellen, who is now seven. She was born in 1981.
PAGLIN: Where is your wife from?
SHAPIRO: She was brought up in Connecticut. She was born, I believe, in New Haven and her family lives in West Hartford now.
PAGLIN: You met her here in Washington?
SHAPIRO: I met her here in Washington. She was on a fellowship where she worked for a year with the federal government on educational policy matters. She was working for one year at the Department of Health, Education and Welfare. I think that was before Education became a separate department.
PAGLIN: We want to pick up... but before I forget some other items. There must be in the law firm's records, a biographical sketch of you as a partner that you use for presentations and things, so when you get the chance...
SHAPIRO: Well, sketch probably is an elaborate way to describe it. It's kind of a resume, a curriculum vitae.
PAGLIN: That's the kind of thing that we usually have associated with the tapes and the oral history. In some instances, particularly when I've done the oral histories of members of law firms, Archer Taylor too, of a brochure that the firm puts out, you've seen some of these rather fancy brochures. Does Arent Fox have one of those; if not, they're quite different.
SHAPIRO: It's kind of amusing that you ask that question, Max, because we do have one. We are working on another one which I would be happy to provide you. I have refused to use the one that the firm first published because I think it makes a rather egregious error in its description of what we do in the First Amendment area. It indicates that we have worked to establish that the First Amendment rights of cable operators are comparable to those of broadcasters. As we go along in these discussions, I think you'll see that what we've tried to do is something quite different, that they're much more analogous to the rights of newspaper owners than to the rights of broadcasters, which in my view are somewhat limited. As a result, I do not use the current version of the firm brochure. It was an error that it went in that way, and I am hopeful that it will be corrected when the next version comes out.
PAGLIN: So when it's revised, you'll provide us with a copy?
SHAPIRO: That may be six months from now.
PAGLIN: By the time the transcript is finalized and put in the beautiful leather bound volume, it will probably be out.
We were going to pick up this time on the section of the outline that had to do with the federal regulatory response to cable, and your role in the cable industry activities with regard to things like FCC cable regulatory policy, Congressional Hearings, some of the early CATV litigation, and the problems with the broadcasters, the opposition by broadcasters. Would you want first to pick up on the Lompoc case that we mentioned, and you pulled out the actual opinion of the Commission? I think that's a good place to start.
SHAPIRO: At the end of the session last week, we were talking about the Lompoc case which was the first major case that I worked on, and the fact that the settlement agreement there involved payment, or a broadcaster obtaining the financial interest in, the cable operation there. You jogged my memory by asking me whether the Commission had any problem with that settlement and it was my recollection at the time that the Broadcast Bureau had in fact opposed a settlement. I went to the books between our last meeting and this one and I have given you a copy for the records, of the Commission's Memorandum Opinion and Order adopted July 7, 1965, approving the settlement. The document makes it clear that the settlement was opposed by the Commission's Broadcast Bureau. Notwithstanding that, it was approved by the Commission and there's an interesting concurring statement at the end, by the then chairman, E. William Henry, who indicates his difficulties with the settlement.
He indicates that since broadcasters may not have been on notice that the Commission would have any problems with this type of settlement, he voted to approve it in this instance, but indicated that in any future instances, he would require a great deal of justification to alleviate concern on his part that broadcasters may be abusing the Commission's processes by filing petitions opposing the operation of cable systems as a way of extorting financial interests in the cable systems. He's got about a page of rather florid discussion of why he's voting for it in this instance but he wants to keep much closer track of it.
PAGLIN: It's interesting because it sounds almost like a throwback to the old broadcast strike applications that was a part of the history of Commission processes, you probably recall.
SHAPIRO: Yes, although I guess I thought of the strike applications as being applications that were filed for the purpose of blocking another application, not for the purpose of extracting payment.
PAGLIN: Some of them were, existing broadcasters for example, but some of them were not. The other kind that took place of competing applications which were filed as it may have turned out, not in good faith, but merely to get a piece of the action of the guy who would buy them out. Now, here we are in 1988‑89 and you also know the Congress and the Commission are concerned about abuses of the renewal process over the same kinds of things.
SHAPIRO: The Commission's processes have always lent themselves to abuse and probably always will.
PAGLIN: Probably so. Now that's a good addition to this because it is a rather significant development. Tell me something now about what other contacts in your experience, in your recollections during the period that you were involved, which started about '63, '64, or a little earlier.
SHAPIRO: It started in '63, when the Commission was beginning to get into real substantive regulation of the industry, the cable industry. If I remember correctly, the First Report and Order on cable regulation came out in 1965. It either came out just before, or just after this opinion in the Lompoc case. The Commission's First Report and Order imposed carriage and non‑duplication requirements that were to be effectuated through conditioning the grant of microwave applications.
Simultaneously with the issue of the First Report and Order, the Commission also issued a further rule‑making notice proposing to extend this type of regulation to all cable systems whether served by microwave or not. That proposal was adopted in 1966, and became the Second Report and Order, which was essentially the basis for most cable television regulation subsequent to that day. It really was, as you say, the governing regulatory policy until about '72 when the certificate of compliance procedures were adopted in the Cable Television Report and Order.
PAGLIN: What kinds of things did you get involved in before the Commission? Give me some examples that stand out in your mind as a kind of landmark.
SHAPIRO: This is pre‑1970 we're talking about. The one that I remember perhaps the best was a case involving the cable television system in Dubuque, Iowa. The 1966 rules had established a dichotomy between cable systems in the top 100 markets, and cable systems below the top 100 markets. Dubuque was a below 100 market cable system. It was beyond the Grade A contours of any television station within the top 100 markets. In smaller markets, cable systems gave notice to nearby television stations of the signals they wanted to add, and if no objections were received within 30 days, the cable systems were then authorized to add these signals.
PAGLIN: That was part of the rules at the time?
SHAPIRO: That was part of the 1966 rules. At this point I worked with mainly the H&B cable systems. We gave the notice to add a number of signals to the Dubuque, Iowa cable system.
PAGLIN: Dubuque was one of these systems owned by H&B?
SHAPIRO: Yes it was one of the systems owned by H&B. A television station in Cedar Rapids, Iowa, came in and filed an objection. The basis for their objection was that it had a construction permit that would enable it to provide Grade A service to Dubuque. Cedar Rapids was a city in one of the top 100 markets. The television station alleged that because it had a construction permit for Grade A service, it would increase its existing facility. The television stations in that market were moving to a 2000' tower and there would be a substantial increase in their service area.
They filed a petition saying that because they had construction permits that would provide Grade A service to Dubuque, Dubuque should be treated as a top 100 market cable system, and not a small market system. At that time it was the Grade A contour, that determined the location of the top 100 markets. We filed a fairly elaborate set of pleadings at the Commission taking the position that the Commission's cable television rules were geared to operating facilities.
PAGLIN: And not construction permits.
SHAPIRO: And not CPs. Well, not to my surprise, but I think to the surprise of a lot of people, the Commission agreed with us. When you stop and think about it, that wasn't such an outrageous position.
SHAPIRO: The Commission agreed, and the Dubuque television stations took the case to the D.C. Circuit. They appealed.
PAGLIN: You mean Cedar Rapids?
SHAPIRO: Yes, the Cedar Rapids television stations took the case to the D.C. Circuit.
PAGLIN: Who owned that? Can you remember?
SHAPIRO: There were two parties to the appeal. One was station KCRG, it was Cedar Rapids Television Corp., I'm not quite sure who owned that one. The other was station WMT.
PAGLIN: That's the old three‑letter call.
SHAPIRO: Again, I can't remember who the owner was.
PAGLIN: Was that Ames, Iowa?
SHAPIRO: You're thinking of WOI.
PAGLIN: OK. There weren't many stations west of the Mississippi with the call letter "W." So they took it to the circuit court...
SHAPIRO: They took it to the circuit court and one of the giants of the broadcast bar was on the other side representing the television stations‑‑Ernie Jennes. You certainly know Ernie Jennes.
PAGLIN: Yes, his name comes up all of the time.
SHAPIRO: From Covington and Burling.
PAGLIN: Were they also members of AMST (Maximum Service Telecasters)?
SHAPIRO: My recollection, Max, is that the membership was secret, but everyone was pretty convinced that they were. The Commission counsel was somebody who has subsequently gone on to great success in the private world, Bob Hadl. I don't know if you know Bob?
SHAPIRO: He's general counsel to MCA. I represented the intervener in support of the Commission. When you're intervener supporting the Commission, the Commission counsel takes most of the time in the Court Oral Argument, and sometimes as a kindness they will accord the intervener three minutes or something in order to say a few words. Well this case, I suppose it's not fair for me to say that Bob Hadl had a bad day. I think Bob Hadl had a poorly written Commission decision to uphold. When Bob got up to make his oral argument, after Ernie Jennes had delivered one of his...
SHAPIRO: Ernie Jennes, I don't think he ever made a bad argument in his life, and while I wouldn't necessarily call his argument brilliant, it was very competent. Bob Hadl stood up and the Court was so mad at the Commission. They thought that the Commission had not explained what they were doing or why. They beat unmercifully on Bob. Judge Bazelon was on the panel, and Judge Bazelon, literally, after five minutes, turned his chair around, faced the wall and wouldn't listen to Bob anymore. Bob recognized that there was no point in beating a dead horse, and he very quickly sat down. So that gave me about 15 minutes to deal with a case where I was supposed to get up and make a few little nice remarks in support of the Commission.
PAGLIN: And not get them in trouble.
SHAPIRO: And not get the Commission in trouble. The case was a total shambles.
PAGLIN: What did you do at that point?
SHAPIRO: I vamped. It's a little hard for one to sing one's own praises. The only thing that I really knew was that the court was listening to me. Judge Bazelon turned back around. I made a presentation about how the error of the Court's ways was that they were expecting the Commission to explain why the cable system was not going to harm the stations by bringing in these additional signals, but that was putting the burden of proof the wrong way.
The Commission had already adopted regulations which (1) required the carriage of local stations and (2) required the non‑duplication of the network programming. That was a recognition of the fact that cable systems could have an adverse effect on broadcasters and created a built‑in series set of protections for the broadcasters. What these broadcasters were asking for was not protection-- the rules already gave them protection--but more protection than the Commission had already recognized. The burden should have been on the broadcasters to establish a need for even more protection. I also went through this pitch about how the purpose of the rules was to protect UHF stations, and these were two fat‑cat VHF stations, these weren't the types of stations that were the primary beneficiaries of the rules; nevertheless, they were getting the benefit.
When I sat down, all I knew was that the court had listened attentively which is 90% of the battle. It is not always so easy to get the court to listen so attentively. I don't know if you've ever heard me give an oral argument, Max.
PAGLIN: No I haven't.
SHAPIRO: Well, I'm not really very glib. I get the point across and I must get it across well, because my record is pretty good, but I slip and slide and "oh" and "ah." There was a lot of that here, particularly since I wasn't prepared for a full oral argument.
PAGLIN: To go out for 15 minutes. Who were the other members of the panel, just to interrupt? Can you remember?
SHAPIRO: No, I can't remember. The name of the case was Cedar Rapids Television Corp. vs. FCC. I believe it was decided in 1968. Anyway, the Commission was affirmed. We won.
PAGLIN: They did? What basically caught hold? Did they adopt some of your arguments?
SHAPIRO: They basically adopted our entire argument.
PAGLIN: I'm sure Bob thanked you.
SHAPIRO: Yes. Not Ernie Jennes, but the counsel for the other station, KCRG, who did not argue, was a fellow named Bob Beizer.
PAGLIN: Bob Beizer was with Bernie Segal's firm.
SHAPIRO: Schnader Harrison of Philadelphia. They now represent WGN. He is with that firm now. Then he was with the Kirkland, Ellis firm. The broadcaster at the moment has a lot in common with cable systems. Bob was, I guess gracious, when your opponent says, "I still don't understand how you pulled that one out of the fire."
PAGLIN: That's a compliment.
SHAPIRO: It is a compliment. I regard it as a compliment.
PAGLIN: That's interesting. I remember the case.
SHAPIRO: You remember that case?
PAGLIN: Yes. I was in practice at the time and I don't recall the opinion very well, but I do remember the Commission was affirmed when they were on very, very shaky ground in terms of the opinion they wrote. That's an interesting story. What other cases did you have of that kind, that come to mind, that in effect established some sort of principle?
SHAPIRO: Bear in mind Max, during this period, I was still a young associate in the law firm. I didn't become a partner until 1970. In some respects, the work that I was doing in the sixties was some of the most interesting work that I had ever done. In those days, the lawyers worked with the cable operators directly. There'd be a problem. The systems manager or the regional manager would call up from the field, you'd work out the problem, and you'd implement it.
As time has gone on, we've dealt mainly with corporate legal staffs. The corporate legal staffs have served primarily as the interface with the operating people, and it is more and more rare to actually talk with the person out in the field who has the problem. It was very satisfying then to be able to go out and deal with the people who had the problem.
At that point, I started as a young associate, and I was a developing associate. The associates were not the ones to handle the major cases on a primary level. As a matter of fact, one of the reasons that I argued the Dubuque case that we talked about was because in '68 I had been with the firm for five years, and I was ready to be a senior associate. This looked like a case where it was a good opportunity to give an associate some experience. It looked like an easy case, and you couldn't get into too much trouble.
PAGLIN: Also some of the partners who dealt with it were busy on other things, as usually happens.
SHAPIRO: The other partner who worked on it was Harry Plotkin. I had done the laboring oar on the work at the Commission, writing the pleadings that were successful. There's always a client issue whenever you have an associate arguing a case rather than the partner, but this case was seen as one where I couldn't get into too much trouble. It turned out, as we just discussed, not to be right. It was a good opportunity for me.
Aside from the Cedar Rapids case, I don't recall the other duplication cases. The other things that we were working on are things that you are familiar with. I forget exactly what year it was that you went back into government.
SHAPIRO: OK. Well, Midwest Video then became our client.
PAGLIN: It follows right through, because it was in the early part of '66. You remind me and I remember the days too when I was not with a big law firm. I was handling stuff, George Morrell's Midwest Video. His manager in Rapid City, South Dakota would be calling me up all the time, "What do I do about this?" What was her name, Helen Duhamel?
SHAPIRO: Helen Duhamel ran the television station in Rapid City.
PAGLIN: Yes. She was the opponent. He had a fuss with her it seemed like every week. He'd be calling me directly all hours of the day and night or George Morrell would call. Those were the days when it was a hands‑on operation.
SHAPIRO: As you know, when Midwest Video came over here, the Black Hills case had already been briefed and argued.
PAGLIN: I had argued it in the Eighth Circuit by that time.
SHAPIRO: That was the appeal from the First Report, remember, in 1965. If my recollection serves me correctly, the Second Report and Order came out in 1966, and there was a subsequent appeal of the Second Report and Order. The court consolidated the two, so that the First Report and Order case had been briefed and argued by you, but I believe that we did the brief in the Second Report and Order case. I worked with Harry on the brief in that case.
PAGLIN: That constituted some important issues in the First Report and Order and in the Second Report and Order. I think, not only because it was mine, but they were raising issues that had not been raised before on both reports and order as I recall. So tell us your view and what you were doing, and what the position of the law firm was in defending Midwest Video on that. Maybe not defending, but bringing the case.
SHAPIRO: If I'm not mistaken on that case, National Cable Television Association...
PAGLIN: Joined in it.
SHAPIRO: I don't think they were actually a party. They were helping to finance the litigation.
PAGLIN: Bob L'Heureux was their counsel?
SHAPIRO: He was the general counsel.
PAGLIN: He was involved in it too. I thought they did write an amicus brief, but that was a long time ago. I don't remember. I know he was there most of the time in the meetings and things. So anyway, for the purposes of this record...
SHAPIRO: One of the issues had to do with whether, since cable systems, at least other than those that use microwave frequencies, did not use the radio frequency spectrum...under what regulatory authority the Commission could regulate these cable systems. The Commission claimed the authority to regulate them under what they called their ancillary jurisdiction. Their authority was ancillary to their responsibilities for the implementation of a scheme of television broadcasting. It was, as at the time, very unclear whether that was a basis for jurisdiction.
Going back to the case that you argued, Max, while it was clear that the Commission had the authority to grant, or reject or not grant microwave applications, it was not so clear whether they could use the grant of microwave applications to condition the operation of the facilities that they didn't regulate. It had some very broad implications because most of us receive most of our telephone calls by microwave transmission. If the Commission had authority to regulate people, adopt rules that were applicable to people who received microwave transmission, that meant that they had the authority to regulate practically everybody in the United States. I believe these were some of the points that you probably made.
PAGLIN: In any event, the regulations were unreasonable, unfounded in fact, etc., if you remember.
SHAPIRO: Yes, I probably ought to try to pull out one of those briefs to see exactly what some of the other arguments were that we made.
PAGLIN: Like with the Lompoc case, if in our next session we can go back and supplement it, I think it would be useful.
SHAPIRO: OK. I'll try to pull out one of those briefs. As you recall, the case was argued in the Eighth Circuit.
PAGLIN: By Harry.
SHAPIRO: Then it got preempted.
PAGLIN: I remember that.
SHAPIRO: There was another case out in San Diego where an existing cable system was seeking to expand and somebody went for a stay to prevent their expansion and suddenly that case was decided and it was in the Supreme Court before there was a decision in Midwest Video vs. the FCC.
PAGLIN: That was Southwestern Cable wasn't it?
SHAPIRO: That was Southwestern Cable, in the Ninth Circuit. I don't remember whether the Eighth Circuit formally entered an order staying the decision in our case or not, but it's very clear that once the Supreme Court granted certiorari in the Southwestern Cable case, why should the Eighth Circuit decide Midwest Video until it heard from the Supreme Court?
SHAPIRO: Partly as a result of this, if I remember again correctly, Midwest Video filed an amicus curiae brief in the Supreme Court.
PAGLIN: In Southwestern?
SHAPIRO: In the Southwestern case at the Supreme Court, I guess one of the points that we'll come back to later...it is kind of interesting that basically, it's my recollection in the Midwest Video case there was no First Amendment argument.
SHAPIRO: I don't remember whether you made one in the Black Hills case.
PAGLIN: No, I resisted it because I remember it very, very well if I may interpose a personal note. Bob L'Heureux who was then the General Counsel of NCTA in the earlier case, tried to persuade George Morrell to dump the argument that we had, and raise solely the First Amendment, and I said, "You do that, and you get yourself another lawyer, because that's not the question here." So, I never adopted it, but now, looking back 20 years, it's a different issue.
SHAPIRO: Max, I don't think it was a wrong judgment at the time, but my personal view, and again we'll come to this as we go along, but the change in the nature of the cable industry came with the introduction of the satellite...
PAGLIN: It changed the whole picture.
SHAPIRO: Yes, it changed the whole picture, and made it possible to make the types of First Amendment arguments that I think you correctly, and I think many others, would have been laughed out of Court, had they been made in the late 1960s.
PAGLIN: It seemed to me, as I told Morrell and some of the other lawyers at the NCTA, that this would have distracted the Court from really considering what I consider to be the issues at heart and that was Commission jurisdiction to do what they were trying to do. That was where I felt the case really resided, right on that point. Strat had a thing about the First Amendment. Maybe he was prescient, I don't know, but certainly it wasn't relevant in my view at that time, and I think a number of lawyers agreed at the time.
SHAPIRO: I believe that certainly Mr. Plotkin here agreed, later on, and certainly Arthur Scheinor who had argued the Southwestern Cable case, agreed. You were not alone.
PAGLIN: That's interesting.
SHAPIRO: After the Supreme Court decision, the Eighth Circuit did rule in the Black Hills Midwest Video case.
PAGLIN: But did they ever write a decision?
PAGLIN: I'm trying to remember. I guess you're right.
SHAPIRO: It was not much of a decision.
PAGLIN: Right, because the Supreme Court had already decided the basic issue.
SHAPIRO: My basic recollection now is that they did discuss the First Amendment. I guess this procedure isn't supposed to involve homework on my part, but it sounds like I've got to do a little homework.
PAGLIN: What do they say? "Try it, you'll like it, because it will bring you back." Seriously George, my feeling is, things of this nature, that is, policy matters of importance, much as the old soldiers, never die, they don't even fade away. It turns out that a month or two, or six months from now, this stuff will become important again, and say, "Hey, this again is relevant." It will probably be worth it, as they say.
Were there some other cases of that type that you got involved in as a senior associate during that period, or as a partner later on, up until '70?
SHAPIRO: It was about that point that what became Midwest Video I in the Supreme Court started perking. It is my recollection that the Commission adopted the mandatory origination rule around 1969.
PAGLIN: Just for the purposes of this record, what were the principal issues of Midwest Video I, as we call it.
SHAPIRO: The Commission adopted the rule that required cable systems to originate their own programming. I believe they had to have more than 3,500 subscribers, but as the Commission was thinking about cable television and its role and the regulatory structure began to change. The Commission began to think that maybe cable television would not only be a passive retransmitter of broadcast signals but that it could effectuate affirmative goals of regulation. One of the Commission's goals of regulation was to increase the number of media voices and the extent of diversity. So the Commission adopted a rule that required cable systems to originate programming.
PAGLIN: Was this at the time that Henry Geller was still general counsel and Rosel Hyde was Chairman.
SHAPIRO: Henry was very active in this. Henry in 1968 was part of this thing called the public dividend plan.
PAGLIN: His crusades.
SHAPIRO: I think it involved... I forget all the details of it. It involved goodies for educational broadcasters, some commercial substitutions. I'd have to pull out some papers to recall the public dividend plan.
End of Tape 2, Side A
PAGLIN: You quoted George Morrell of Midwest Video saying about the Commission's attempt to make him kind of a broadcaster, "You can't do that to me" and they let it go from there.
SHAPIRO: It went to the Eighth Circuit.
PAGLIN: What happened at the Commission level?
SHAPIRO: The Commission adopted the rule.
PAGLIN: An appeal was taken, or a petition for a review.
SHAPIRO: A petition for review was filed in the Eighth Circuit. Stay motions were filed. It's my recollection that the rule was stayed. It's my recollection that the rule never actually went into effect.
PAGLIN: Was the stay motion obtained in the Eighth Circuit?
SHAPIRO: I don't remember.
PAGLIN: Well it probably would have to be.
SHAPIRO: No, not necessarily because you have to go to the Commission before you go to the Court.
PAGLIN: Of course, on a stay motion. So either the Commission stayed its own order or you got one from the Court pending the argument of the appeal?
SHAPIRO: That's my recollection.
PAGLIN: So that went to the Eighth Circuit?
SHAPIRO: That went to the Eight Circuit. The argument was that the Commission was seeking to regulate cable systems as broadcasters. They weren't broadcasters. They couldn't make people speak who didn't want to speak, and the Eighth Circuit I believe, agreed.
PAGLIN: They wrote an opinion.
SHAPIRO: They wrote an opinion throwing out the mandatory origination. Isn't that right?
PAGLIN: Yes. Then the Commission took it to the Supreme Court.
SHAPIRO: I assume that it would have been certiorari rather than appeal. I believe it was a cert petition, and it was granted.
PAGLIN: And Harry Plotkin argued the case. I sat there and listened to the argument with great interest. Who argued on behalf of the government? Was it the Justice Department or the Solicitor General's office?
SHAPIRO: The Solicitor General's office. I think it was a deputy solicitor named Larry Wallace.
PAGLIN: I did not know him then. What was the argument like? What was the interest of the Court? Can you tell us a little about that. By the way, parenthetically, here again is where you have suggested and others have suggested, in fact Jack Matthews even brought up the subject, "Why aren't you talking to Harry Plotkin?" I don't know if I told you, but I spoke to Esther Plotkin and she said, "Let me talk to Harry about it." Isn't it your opinion that at least in instances like this it would be valuable to get Harry?
PAGLIN: Maybe we'll twist his arm. From your point of view, as a senior associate assisting him in the case...
SHAPIRO: Max, I really don't have much of a recollection of the oral argument except that that sort of meant that it didn't go all that great. To me it wasn't memorable. The Court upheld the Eighth Circuit didn't they?
PAGLIN: No. I'm trying to remember. Isn't this the one...
SHAPIRO: This is the one where the Court was split 4-4‑1.
PAGLIN: So what happened?
SHAPIRO: The Court split. Four voted to uphold the Commission, four voted to uphold the Eighth Circuit, and Chief Justice Burger, a very short opinion, essentially said that this case reaches the outer limit of the Commission's jurisdiction. This is it but it was O.K. Again, as we will see later, the fact that Justice Burger drew the line in the sand there was helpful when we came back later in the Midwest Video II litigation. You can't get it any closer, 4‑4 with Burger making it very clear that he didn't like the decision, but he just wasn't prepared to overturn the Commission on it.
PAGLIN: Or the Court. Maybe we would be well advised, because it seems to follow, although chronologically it may not, could the next step be a discussion about Midwest Video II?
SHAPIRO: In chronology...
PAGLIN: It would be much later.
SHAPIRO: Not that much later. The Court's decision in Midwest Video I came in 1972. Of the major court cases, the next major one in my mind was the Home Box Office litigation on the pay cable rules as establishing some very significant jurisdictional and First Amendment law. The Home Box Office litigation ended in 1977 if I remember correctly. Midwest Video II was decided by the Eighth Circuit in 1978 and by the Supreme Court in 1979.
PAGLIN: All right, then let's take it chronologically. It's just that the issues are related.
SHAPIRO: The two Midwest Video cases are more related.
PAGLIN: That's what gave me the thought that it would be well to talk about them now. Let's go into Midwest Video II. How did that start? Begin at the Commission level.
SHAPIRO: It's actually got kind of a checkered career. The 1972 cable rules made applicable to cable systems in the top 100 markets a requirement that they provide access channels.
PAGLIN: What they called access channels at the time.
SHAPIRO: They had to have a public, an educational, a local government access channel, and other channel capacity had to be available for lease under reasonable terms and conditions.
PAGLIN: Again, for an explanation because I don't know whether it's been gone into before. When the Commission said "access channels" available for the public education, did they mean merely making a camera available, or did they mean making a studio, a camera, training, equipment, personnel?
SHAPIRO: The requirements as to what you had to provide were pretty minimal. For educational and government access channels, it's my recollection that nothing had to be provided. You just had to provide the channel. For public access, there was essentially a minimum equipment obligation, and a limited studio provision. The porta‑pack on the back was plenty. Then you had to have play‑back facilities where you could play those back over the cable system.
PAGLIN: Was there a requirement as to the number of hours that had to be made available to the educational and public groups?
SHAPIRO: There was a requirement for existing systems, there were waivers. You didn't necessarily have to have four channels available if you lacked the channel capacity. For a new system, the system had to have a full channel dedicated to each, a public, educational and governmental access. The "hours" provisions related to when you had to activate a second channel. Once certain usage criteria were met on the public access channel then the cable system could be obligated to activate a second access channel. The requirement of having a channel available was for a whole channel. Again, it's my recollection that there were provisions that if there was no programming available, the cable company could use the channel for non‑access purposes but the channel still had to be available for access.
PAGLIN: In other words, dedicated except when not being used.
SHAPIRO: That's my recollection.
PAGLIN: This came out in the form of the rule making. It was part of the rules.
SHAPIRO: I guess it was proposed in the rules starting in 1969 or so.
PAGLIN: With the Second Report.
SHAPIRO: The Second Report was in '66 when the Commission started the rule making that led to the Cable Television Report and Order. These rules were adopted in '72 and initially they applied only in the top 100 markets. Parenthetically, here, this was in my mind, one of the first times when I began to start thinking about First Amendment implications. Not too long after the Commission adopted the Second Report and Order, the Supreme Court in a broadcast case came out with what I always regarded as an anti‑access decision. This was the Supreme Court decision in CBS vs. the Democratic National Committee. There was a companion case to that from the D.C. Circuit, called Business Executives Move For Vietnam Peace. These cases had to do with whether broadcasters could be required to broadcast issue‑oriented spot announcements.
PAGLIN: That is to say, initiated by some outsider.
SHAPIRO: The Broadcast Executives Move For Vietnam Peace, wanted to broadcast anti‑Vietnam spot announcements. The broadcast of those announcements would have certainly triggered Fairness Doctrine obligations on the part of broadcasters. Some of the broadcast stations and some of the networks had policies at that time that the only public affairs‑type programming that they would run were programs that they had produced themselves. They took the position that these types of requirements were an interference with their editorial discretion.
PAGLIN: Your point is that you began to think already of the adaptation of these principles for cable.
SHAPIRO: There was not an opinion of the Supreme Court in the CBS vs. Democratic National Committee case. They went two or three different ways. Some of the justices took the view that any requirement that broadcasters carry issue‑oriented spots violated the First Amendment rights of broadcasters. Others took the view that it violated the provisions of the Communications Act on editorial freedom. One of the primary goals of the Communications Act was the preservation of editorial freedom on the part of broadcasters. Yes, always with the exception of equal time, and perhaps with the exception of the Fairness Doctrine. Even under the Fairness Doctrine, the programming provided under the Fairness Doctrine was still under the control of broadcasters. The broadcaster had an obligation to provide both sides of an issue, but he didn't have to run what someone else gave him. He could go out and produce his own program. There was a wonderful opinion by Justice Burger in CBS vs. The Democratic National Committee. He talked about the function of editors is to edit, and editing is the selection and choice of material.
PAGLIN: You actually remember the language?
SHAPIRO: I remember it in part, because we actually used it later. I think I was one of the first people to perceive that this language in the CBS vs. the Democratic National Committee Case might have some relevance to cable television access channels. As I mentioned to you before we started this taping session, Max, I think that I was on a panel at the National Cable Television Association convention in 1973, shortly after the Supreme Court decision came down in this case, and I gave a little presentation on how I thought this case had significant and favorable implications for the cable television industry.
PAGLIN: That's what we were talking about before we went on tape, to see if we could get that out of the archives of the Cable Museum now, and I'll try to get it for you.
SHAPIRO: If they have it, it would probably be convenient to put it with my materials here. It's not a lengthy presentation. To my mind it was one of the first sort of serious public efforts to start raising some First Amendment issues in the cable area. When you start getting into the area of cable systems having to originate, and therefore they talk and provide programming and therefore they become speakers, or when they have to provide programming for others and some of it they may not want to present, you start getting into questions of editorial judgment. Even before the satellites in the mid‑seventies, you're starting already to get to the point where the First Amendment issue started percolating up.
I hasten to add that all of this, at this point, was not particularly relevant to George Morrell's situation because it was limited to cable systems in the top 100 markets for the access requirements.
PAGLIN: That is to say that George Morrell did not have...
SHAPIRO: George Morrell's cable systems were all located in markets below the top 100. He had cable systems in places like Greenville, Mississippi; Paris, Texas; Poplar Bluff, Missouri; and Clovis, New Mexico.
PAGLIN: Rapid City, South Dakota.
SHAPIRO: Victoria, Texas.
PAGLIN: He owned a system in Austin by this time.
SHAPIRO: He had a half interest in the system in Austin by this time.
PAGLIN: Originally a whole interest, later a half.
SHAPIRO: I was not involved at the time that he had a whole interest, but somehow [with sarcasm] a family named Johnson ended up with a half interest in the cable system. [Editor's note: Lyndon Johnson]
PAGLIN: But you were taking it up, shall we say, not to be corny, as a matter of principle.
SHAPIRO: Taking up the access. I'm sure that's correct for George. We're not there yet.
PAGLIN: We're talking Midwest Video II now.
SHAPIRO: But that would have been in '70. I'm trying to build up a little bit to how we got to the actual rules applying to George Morrell.
PAGLIN: Right, okay. So, continue.
SHAPIRO: Sometime around 1975, as part of the Commission's consideration about... Let me step back for a moment. Midwest Video I, we talked about that a few minutes ago. However the rule was stayed and the Commission never, even after winning Midwest Video I, reimposed the mandatory origination. What it did do, was initiate a rule‑making proceeding that we called the equipment availability rule. It would have required cable systems that were not subject to the access channel requirements, to have equipment available for members of the public to use. My memory is hazy on exactly how that tied into the channel obligations. In the equipment availability proceeding, the Commission had adopted some rules, and Midwest Video Corp. filed an appeal. At some point, not very long after that, the Commission decided that instead of an equipment availability rule, applicable to systems in smaller markets, they were going to extend the access rules.
PAGLIN: I see.
SHAPIRO: So there were some problems with the equipment availability appeal, the nature of which, I really have trouble remembering now, but I do remember that we were happy as litigators in these cases, that we had an excuse not to proceed with the appeal. And on the equipment availability rule, we took the position that the extension of access requirements to the below 100 markets mooted the appeal from the equipment availability rule, and we appealed the access rules. George Morrell felt very strongly about this. George was somebody who you had to listen to. He was a man who hated lawyers, but he loved big lawsuits.
PAGLIN: I know that well.
SHAPIRO: He decided that he wanted to fight this one through.
PAGLIN: Which circuit did that go to, did it go to the Eighth again? His favorite circuit.
SHAPIRO: I'm just trying to think. I guess he had a choice of several circuits. He could have gone to the D.C. Circuit. The Eighth Circuit was the next logical circuit I think.
PAGLIN: Because of his headquarters in Little Rock, Arkansas, and this being a Section 402(a) case, he could have gone anywhere.
SHAPIRO: He could have also gone to the Fifth Circuit because of his systems in Texas. I believe that George felt that there were some political realities, that because some of the judges in the Eighth Circuit owed their appointments to certain politicians in Arkansas with whom he had continuing relations, who were on his board...
PAGLIN: You put it very kindly.
SHAPIRO: ...not that there would be any undue favoritism to him, but that he would at least go in with having kind thoughts of some of the judges.
PAGLIN: I remember it well from the Black Hills case. (Laughter) That's true, absolutely true. So he went into the Eighth Circuit.
SHAPIRO: So he went into the Eighth Circuit and of course by this point...it takes a long time for a whipper snapper like me to gain George Morrell's confidence...but by this point, I'd been working for George for close to ten years, and Max, you know what working for George is like.
PAGLIN: Oh yeah.
SHAPIRO: First of all, you can't safely go to the bathroom without worrying that somebody is going to come in after you to tell you that George Morrell is on the phone with an urgent telephone call.
PAGLIN: How well I know that. The way I used to do, if you forgive me again, I'd say to him, "George, I am sick and tired of this. Get yourself another lawyer." He'd say "No, no Max." He called me Max with his accent. (Sounding like Mox)
SHAPIRO: He was always calling other lawyers to check you out and to ask other lawyers whether they agreed with what you were telling him.
PAGLIN: That was why I'd always say to him, "I'm going to send you a bill. Get yourself another lawyer." He always said, "No. No. No."
SHAPIRO: He always used to tell us that Abe Fortas disagreed with what we said, and Harry used to say, "George ask him to give you a memorandum explaining why." We never saw a memorandum from him.
PAGLIN: I thought maybe when he got with your firm, an impressive, big firm, that he wouldn't pull these little shenanigans that he used to do with me, but he still did obviously.
SHAPIRO: No, one of the people who he used to call to check me out with, actually this is someone who I don't know if you're planning to interview for oral histories or not, but he's somebody who has some insight‑‑Gary Christensen.
PAGLIN: I don't know if he's on the list or not, maybe. Gary was with the NCTA at that time wasn't he?
SHAPIRO: I think by then Gary had gone to Hogan and Hartson.
PAGLIN: Had he? It's possible. George had his little stable that he used to bounce these things off. George had a way that you couldn't resist. When he'd get after you, you couldn't resist him.
SHAPIRO: Other people needed George's good will from time to time. George was the industry's primary conduit into Senator McClellan.
SHAPIRO: So, everybody wanted to keep their ties into George open, because God only knew when you would have reason to get Senator McClellan's ear, and George was the way to do it, if you needed to do that. The point was that by this point, I had been working with George long enough. I'm not quite sure why Harry didn't particularly want to argue the case, but when Harry sort of hinted to George that I probably ought to handle this case, George was very receptive to that and indicated that he agreed with that, so this was destined to be my case.
PAGLIN: Would this be a good place to stop now and we could get into the argument of the case and where it went from there?
SHAPIRO: It probably would be.
PAGLIN: We will then continue. Let us stop this tape now, and we'll continue our next session with the development of the case in the Eighth Circuit and thereafter.
SHAPIRO: I'll try to do a little homework on a couple of the issues that we talked about.
PAGLIN: I think we can stop it right here. This has been most fascinating, and I hope that my personal involvement with George Morrell has not interfered with your stories.
SHAPIRO: No, it's helped. Max, you know, you try to remember stuff that happened 10 or 15 years ago, it helps bring it out.
PAGLIN: We're talking more like 20‑some odd years ago. That's a long time ago. We'll close the tape now, and we'll set up another date.
End of Tape 2, Side B
PAGLIN: Good morning, we're now in the offices of George Shapiro at Arent Fox Kintner Plotkin & Kahn in Washington, D.C. We're preparing to do session number three of his oral history for the National Cable Television Center. It is March 14, 1989.
If you remember, George, in our last session we dealt mostly with your recollections of the CATV litigation in the early days. Also, your litigation before the Commission as well as the courts. What I'd like to do today is to continue with your recollections of your experiences with FCC regulatory policy in the cable field, the congressional hearings in which you or your clients participated, in which you had a role, the opposition by the broadcasters which you all had, and identifying the clients who you represented at the time in these various proceedings.
SHAPIRO: O.K. Let me go back for just a minute to one of the things we talked about last week. We talked about the appeal in the Eighth Circuit from the Second Report and Order that the Commission issued in 1966, which was a follow‑on to the Black Hills case that you had argued in 1965. The court deferred decision and consolidated the two cases. I had indicated that it was kind of a preparation for what was coming in the First Amendment area.
It was kind of interesting that there were no First Amendment arguments raised in that case. I indicated that I would take a look at the brief. I have now found the brief. It's dated July 17, 1967. It's interesting, I miss spoke in one respect. There was a First Amendment argument made in our brief to the Eighth Circuit. The interesting thing about the First Amendment argument is that we were not asserting that there was any violation of the First Amendment rights of the cable operator. We were asserting that the non‑duplication rules which require deletion of programming was a violation of the First Amendment right of the subscriber. It's kind of a graphic illustration of the fact that at that point even when our attention was directed to a First Amendment argument, we didn't really think there was any basis for arguing anything about the First Amendment rights for the cable operators, simply that the cable operator was acting as kind of the surrogate for his subscribers, and had standing to raise the rights of his subscribers. The only First Amendment rights discussed were those of his subscribers.
I have also taken a look at the amicus curiae brief that Midwest Video Corp. filed in the Supreme Court in February 1968 in the Southwestern Cable Case.
PAGLIN: That's the San Diego case.
SHAPIRO: That's the San Diego case, where my clear understanding is that Southwestern Cable did not raise any First Amendment arguments nor did we in our amicus curiae brief.
PAGLIN: Did any of the other interveners? Was NCTA an intervener in this case?
SHAPIRO: They're not listed as a party to the case.
PAGLIN: The amicus?
SHAPIRO: I don't have a list of who filed amicus curiae briefs. I do not remember that they filed a brief, but as you'll recall, they had some participation with Midwest Video in its filing. I don't really specifically remember it, but I believe that they had at least an opportunity to review and comment on the Midwest Video filing. I do not remember whether they made a separate filing or not, although that would be certainly reflected in the...
SHAPIRO: Yes. It would even be shown probably in the heading of the decision of the Supreme Court--the list of the parties. The Court normally lists who filed briefs.
PAGLIN: So at this time in the mid '60s, certainly the litigants weren't talking about First Amendment rights in the manner in which it's now being articulated.
SHAPIRO: That's right.
PAGLIN: Were there any other catch-up things before we go on?
SHAPIRO: I don't think so. Do you remember exactly where we stopped last time?
PAGLIN: Well we stopped last time when you were telling me then...
SHAPIRO: Was it Midwest Video I, the Supreme Court decision?
PAGLIN: Yes. The last mention was the merger of TelePrompTer with Jack Kent Cooke and then we were talking about TelePrompTer, Roy Shafto. I'm looking at my notes. The last thing you were talking about was the Eighth Circuit appeal.
SHAPIRO: On access or on mandatory origination?
PAGLIN: It was on the access rule. You said then that George Morrell felt very strongly about this and pushed on it, and he had been checking with some of the other lawyers, Gary Christensen from Hogan and Hartson, and so on. What I want to go on now is with the recollections having to do with some of the other regulatory policies promulgated by the FCC.
SHAPIRO: It's coming back to me where we were. We were going to talk about Midwest Video II, the access appeal next, because it follows on to Midwest Video I, and then we were going to come back to the Home Box Office pay cable case, which was in time, a little earlier. It seemed to me make more sense to talk about the access case together with the mandatory origination case.
We filed the access appeal in the Eighth Circuit. By that point we were into about 1977 when that case was filed. My recollection is that the access rules were extended to the systems in the smaller markets in about 1976. This was about the point where, historically, and we'll see this when we go back to the Home Box Office case, people began to make credible First Amendment arguments in the cable context. I mentioned earlier that I had pointed out the relevance of the Supreme Court's decision in the broadcasting field on issue‑oriented advertising in the CBS vs. DNC case to cable access.
PAGLIN: DNC being Democratic National Committee.
SHAPIRO: Democratic National Committee vs. CBS. I talked about that a little bit last time. The development that really made it possible to develop First Amendment arguments for cable occurred when programming started to be provided to cable television industry from the satellite.
PAGLIN: Which was after '72.
SHAPIRO: Yes. It was about 1976. It may have been '75, but it was right in that ballpark. The first transmission, if I'm not mistaken, was Home Box Office. One of the early transmissions following that was Ted Turner.
PAGLIN: The Superstation.
SHAPIRO: The Superstation. We'll see a little bit of the development of how the ability to make the First Amendment arguments from programming came along. When the brief was written in Midwest II in the Eighth Circuit, it's kind of interesting. I'm not sure whether the reason for the analogies was because I had a female attorney working on the case, or whether the facts continued to develop sufficiently.
PAGLIN: Where's the analogy?
SHAPIRO: The brief that we filed in the Eighth Circuit pointed to editorial discretion as an important factor. The analogies were to the chef creating his menu and selecting different items to put into the menu. When the case got to the Supreme Court, the brief contains a very detailed statement of facts which draws on a large number of different services which had then developed. The brief makes the newspaper analogy and analogizes cable systems to newspapers, talking about the sports page and society page, and what have you.
PAGLIN: The choice of the editor as to what goes in each section.
SHAPIRO: Aside from the influence of a female who was more chef‑oriented than I might have been, I think that at the time the Eighth Circuit brief was filed, the chef analogy was just right, because there weren't really that number of services that would have supported the newspaper analogy, and that the facts changed before our very eyes, and developed.
By the time the case got to the Supreme Court, we were able to put together on an editorial discretion basis a respectable case that cable operators did exercise significant editorial discretion. I guess I'm getting a little bit ahead of myself.
PAGLIN: I trust that any future researcher reading the transcript will say something about what a sexist thing to say.
SHAPIRO: It was not intended to be a sexist remark at all. I suppose most chefs are men. It was a good analogy. It was a good brief. Anyway, the case was in the Eighth Circuit, and it was a very interesting oral argument. Just as kind of a side note, one of the three judges on the panel was William Webster who subsequently became head of the FBI and is now the director of the Central Intelligence Agency. As it so happens, this was Webster's last case. The decision was issued the day before Webster was sworn in as the head of FBI.
Tape 4, interview 3 (continued)
PAGLIN: We're continuing the oral history of George Shapiro. This is session number three, March 14. Something happened to the last tape we were using about two-thirds of the way through and the rest of the material did not get recorded. So, if you would go back over this very fascinating and dramatic story about the oral argument.
We were talking then, at the end of the tape, we were talking about the fact that Judge Webster was on this panel, who later became director of the FBI, and later became director of the Central Intelligence Agency. The last point on the tape was, I think that they kind of rushed the opinion out because he was about to resign and become director of the FBI. According to my notes you began to describe in vivid terms...It was the oral argument before the Eighth Circuit on the access case. You were giving us a description of it in terms of the types of objections that were being made in your argument, to the access rule, contrasting it with the kind of jurisdiction the Commission would have over common carriers, as contrasted to that that it would have over broadcasters.
SHAPIRO: It is vivid in my memory, Max, partly because it was one of my few moments of glory, but also because it is very rare when a lawyer argues a case and essentially wins every one of his points, some of them more forcefully than he had even argued them himself, which was what happened here.
PAGLIN: The basic argument first.
SHAPIRO: Let me start by saying, when I stood up to argue the case, the Court didn't particularly react very much one way or the other. I didn't have much of a sense of how things were going. Fairly early on, into the argument, Judge Webster was sitting there with a copy of a case that was obviously Midwest Video I. He was sort of holding it in his hand, and he interrupted and said something like, "Wait a minute counsel, wasn't all of this decided in this case that I have in my hand, Midwest Video I, and do you have any authority for your argument?
PAGLIN: Which was a Supreme Court opinion.
SHAPIRO: Midwest Video I was a Supreme Court opinion which had reversed the Eighth Circuit, and appellate courts don't like to be reversed by the Supreme Court. They were particularly sensitive that once burned, they didn't want to get reversed again, and Webster appeared to have some concern about why Midwest Video was bringing this case. I gave him essentially a short answer which said, "This is quite different from Midwest Video I, and we think that Midwest Video I is the primary case in support of our argument." He looked at me kind of funny and I essentially threw away the script that I had brought with me about what I was going to argue. I said, "Well your honor, let me spend a few minutes on this point because it's critical to our argument that this court understand why this case is different from Midwest Video I and why the Supreme Court's opinion in Midwest Video I actually supports our argument that these rules are invalid."
PAGLIN: That was a program origination opinion.
SHAPIRO: Midwest Video I was the program origination opinion. So without recreating my whole 20 minutes of oral argument, the point that we had made throughout, which I made in the balance of my time in the oral argument, was that the Commission was regulating cable systems under their authority ancillary to broadcasting. I indicated that under the CBS vs. the Democratic National Committee case, that I discussed earlier, if this cable system were a broadcast station, the Commission would not have the authority to impose access obligations because such obligations interfered with the editorial discretion of broadcasters, which was one of the highest goals sought to be achieved by the Communications Act, to preserve the editorial discretion of broadcasters.
I told the Court that it seemed rather anomalous that in a situation where the cable systems are being regulated pursuant to the Commission's ancillary authority over broadcasters, the Commission was seeking to do something to cable systems that they could not do to broadcasters and in fact that it was seeking to impose common carrier type obligations on cable systems, and that carrier obligations were essentially the antithesis of broadcasting obligations particularly referring to the fact that broadcasting puts such emphasis on editorial judgment. Common carriers are barred from even considering content.
PAGLIN: Content of any kind.
SHAPIRO: Yes. So that was the pitch that was made, and then I sat down. I didn't get very many questions as had been the case that I described earlier when I had argued the Cedar Rapids case. It seemed clear to me that the Court was listening and listening fairly intently, but I didn't really get much of a sense at that point of what they were going to do. Then the Commission counsel got up. I can't remember who the Commission counsel was except that it was not one of the top people at the Commission. It was not the general counsel or the deputy general counsel, or one of their distinguished litigators.
PAGLIN: We could find that in the report.
SHAPIRO: That would be in the Federal Reports where they report the case. I don't mean to demean the person who argued it. He did a competent job, it's just that as you know from your days as general counsel, you can sometimes get a sense of how important or difficult the Commission thinks the case is by who they send out to argue it. If they send the general counsel or the deputy general or the assistant general counsel for litigation out to argue a case, either they think it's going to be a tough case and they need an experienced litigator, or for political reasons, they have to have shown the flag and demonstrate that they have done everything they could to win the case. If Joe Blow, their great litigator couldn't win it, then nobody could. This tied into the fact, as I believe we discussed earlier, that I don't think anybody at the Commission thought that there was much risk with this case.
PAGLIN: Particularly because of Midwest Video I. I think you had mentioned earlier that they had gone along for years and they never thought anybody would raise the question.
SHAPIRO: These rules had been in effect since 1972 and now it was 1977 by the time the case was argued and no challenge. So I sat down from the oral argument, and the Commission counsel gets up and he starts to make his argument. He gets not very far into his argument, and one of the judges says to him...
PAGLIN: Did you say it was Judge Markey?
SHAPIRO: It may have been Markey but Markey stands out in my mind as coming very shortly after, but I do not remember whether the first question came from Markey. One of the judges, perhaps Markey, said, "Counsel, Mr. Shapiro has told us that if you had tried to apply these rules to broadcast stations, you wouldn't be able to do that. Is that correct?" At that point I thought to myself, "Ah ha, they were listening." Commission counsel, as he had to do, said, "Well, that's correct your honor." Then he went through a fairly elaborate argument that I have trouble understanding to this very day. He was trying to argue that because of the nature of cable systems being different from the nature of broadcast stations and the fact that the cable systems operated on several channels while broadcasters operated on only a single channel, that there was nothing inconsistent about seeking to impose carrier type obligations on a cable system, on some of its channels, even though it could not impose those obligations on a broadcast station.
PAGLIN: The thought being that there could be a diversity of programming.
SHAPIRO: The thought, I guess, could be that there could be a diversity of programming and that the Commission wasn't bound by the types of regulations it would impose on broadcasters. The Court was having none of it. Judge Markey's face, at this point, sort of got red, and he gave a little speech about how important it was that limitations on government established by the Constitution were adhered to. The rest of the argument, the Commission counsel was just battered unmercifully primarily by Markey, but it also seemed pretty clear that Judge Webster was not overwhelmed by the Commission's argument. I can't remember who the other judge was, he was fairly quiet, but it was very clear that the Commission was in big trouble. There were two interveners in the case, actually there were three. A representative from the Department of Justice there.
PAGLIN: This being a 402(a) appeal.
SHAPIRO: This was a 402(a) appeal with the United States as a statutory party. There was the American Civil Liberties Union which was involved. Michael Botein was there for the American Civil Liberties Union. There was another group, it may have been the United Church of Christ, but Charley Firestone argued.
PAGLIN: He was with them at the time, I think.
SHAPIRO: The argument went on and on.
PAGLIN: Did they get time?
SHAPIRO: They all had time. We went way beyond the amount of time allocated. I don't remember whether I did, I'm sure I reserved time for rebuttal. My recollection is that when rebuttal time came, I said something like, "I believe the Court understands the issues of this case and if there are no questions I will yield the rest of my time." Rebuttals, sometimes you need them, but if things look like they're going your way, they can only do you damage.
PAGLIN: Silence is golden at that point. How did the decision come out, just for the record?
SHAPIRO: For anybody who enjoys reading amusing decisions, this is in my mind, one of the most amusing decisions that you have ever seen. It was written by Judge Markey. Judge Webster concurred. He did not join in Judge Markey's opinion. He concurred in the jurisdictional discussion, but Markey went on to discuss constitutional issues and Webster took the view that those issues need not be reached in light of the discussion on the jurisdictional issues. This was a lengthy decision in double‑spaced text which was the version we got first from the Court. It ran something like 60 or 70 pages. It is hilarious. Judge Markey describes the Commission as having visions of Valhalla. He said that the Commission saw the future and directed the cable industry to go out and create it. He got carried away. He got absolutely carried away. He's extremely colorful. In dealing with the Commission's argument of how Midwest Video I supported its action, he used the phrase "déjà vu will not do."
PAGLIN: We've got to get a copy of that.
SHAPIRO: I'd be happy to get you a copy.
PAGLIN: It would be amusing to someone who's going to read this transcript and say "What did he say?"
SHAPIRO: It is just hilarious.
PAGLIN: And the basic holding?
SHAPIRO: The basic holding was just that the Commission lacked jurisdiction to impose these obligations. One of the arguments that we had made was that, in supporting the access rules, the Commission was describing all of the wonderful things that would come out of access, and we kind of tried to poke fun out of it.
I believe we have a paragraph in the brief that says something to the effect that the Commission was trying to make the world safe for democracy. If access was upheld on the basis argued by the Commission, they could really do anything because the Commission was just saying that they had the authority to adopt whatever they wanted, that they thought would make the world a better place, and access was one of those things.
Markey made great fun of the Commission on that regard. He went on, and he said that the court wasn't really deciding the constitutional issues, but that it was going to discuss them because the constitutionality of the Commission's views affected the court's judgment in deciding that the rules exceeded the Commission's jurisdiction.
Part of what he's saying, is the court decided the case on jurisdiction in order to avoid having to decide First Amendment and due process issues. He then went ahead and had a discussion of those issues. He found that the rules violated the First Amendment and he found that they violated due process. I think that he found that they constituted an unlawful taking of the property of cable operators without just compensation.
PAGLIN: Another section of the Constitution.
SHAPIRO: The due process part had to do with the fact that cable operators could be held liable for libel, slander and other things that went on the access channel even though they had no authority to exercise censorship. Unless the Commission adopted a policy or regulation or something, it could not make them immune from that liability. It would be a due process violation similar to what was involved in the reasons why the Supreme Court in the late 1940s decided in the WDAY case...
PAGLIN: In the North Dakota case, political broadcasting, the Section 315 case.
SHAPIRO: Yes, that broadcasters were not liable for libel or slander on broadcasts by candidates for public office because they had no control over what was said.
PAGLIN: The equal time rule made it mandatory, so they couldn't say no to them.
SHAPIRO: I guess that I should mention, just for background, NCTA had filed an amicus curiae brief in the proceedings. I mention this because it's going to come up a little bit later, as we talk about the industry's First Amendment position and how it developed. NCTA's brief was essentially directed at leased access. The access rules had provided for four types of access‑‑public access, educational access, government access, and leased access. Leased access required the cable operator to lease channels for a commercial rate to commercial entities for any type of program that they wanted. NCTA, which was opposed to leased access for what were obviously political type reasons, indicated that it did not have a problem with public access.
I personally did not regard its amicus brief as being particularly helpful to our cause, because in my view, in some respects, I found it difficult to see why, if you could have public access, the issues of leased access just didn't go to the issue of compensation. It seemed to me that public access, legally, not politically, was easier to attack, because, aside from stripping cable operators of their editorial discretion, they took their property, there was no payment, and to me it was easier to attack public access. I had trouble seeing what principled distinction NCTA was able to draw between public and leased access, and thought that their brief was not helpful.
PAGLIN: Of course there was a certain inconsistency in principles.
SHAPIRO: Yes, that was certainly my view. Well, we won. The government applied for certiorari.
PAGLIN: They granted cert in October of '78.
SHAPIRO: They granted cert in October of '78, which term it was, I'm not sure. I was attending the Pacific Northwest Cable Show at the time and called back into the office to see whether the Supreme Court had granted cert and it had. I was actually a little surprised that it had, but it had. The briefs were prepared. Some of the shenanigans that went on with the briefs, you'd be a little amused at. First of all, NCTA was going to do another amicus curiae brief. Somehow or other, I don't remember the details of this, at this point another client that I had started working with, started to get involved, whose name was Dick Leghorn.
PAGLIN: Who is now a major benefactor of the Cable Museum.
SHAPIRO: Right. At this point he was on the board of the NCTA. We were at that point doing work for Leghorn. He owned a cable system out on Cape Cod. He at one point owned a cable system in Natick, Massachusetts. I don't remember whether he owned it at that time or not. Dick Leghorn was very interested in the First Amendment type matters. He was kind of giving me a bit of an idea about what was going on at the NCTA meeting. This is all hearsay from Dick, and there may be someone else who was at this meeting if anyone wants to pursue it who would be able to tell you firsthand what happened. The information that I was getting was that the NCTA brief was coming in again in support of public access and challenging leased access. Also, at the same time, I was under some pressure, because NCTA requested that I cede to it some of my oral argument time. Here I was, a young whipper snapper, not so young, but getting a little older at that point. They wanted me to give 10 minutes of my time in oral argument to Lee Loevinger.
PAGLIN: Great. No comment from me, but go on.
SHAPIRO: Lee Loevinger for the record was a distinguished lawyer who had been an attorney general in the state of Minnesota and a judge in Minnesota. He had been a Commissioner at the Federal Communications Commission, and I believe before that he was an Assistant Attorney General in charge of the Antitrust Division at the Department of Justice.
PAGLIN: That was in the early Kennedy years.
SHAPIRO: He was also a kind of irascible fellow.
PAGLIN: He was by that time with Hogan and Hartson. He had left the Commission.
SHAPIRO: The NCTA brief was essentially being drafted by Jay Ricks at Hogan and Hartson.
PAGLIN: What was your response to this request?
SHAPIRO: I'm not sure in which order it came, but let me talk first. My colleague Leghorn essentially made an issue at the NCTA board meeting about the inconsistency of NCTA's support of public but not leased access. I don't know all of the details of this, but ultimately he got the issue turned around. NCTA was going to file a brief in support of our overall position, which they did.
On the issue of oral argument, I said, "I don't argue first, I argue second," because we were the respondent. The petitioner was the government and the government went first in the Supreme Court. I said, "I'm going to be arguing second and I'm expecting that I'm going to have to spend at least half of my time on the facts, straightening out the facts and trying to get the court to understand the differences between this case and Midwest I.
By the time I get to the legal argument, if I'm lucky, I'll have 10 or 15 minutes. I'm not going to give up 10 minutes. George Morrell would have liked me to, but he respected my judgment on it. I did indicate that I would think about giving two or three or five minutes, but in some discussions with the clerk of the Supreme Court, both we and the clerk of the Court concluded that the Court was not likely to look on such a request with favor. They might have done it if we'd consider ten minutes, but the likelihood that they would want to split up and give someone just a couple minutes was...
PAGLIN: The Supreme Court doesn't like pro forma appearances.
SHAPIRO: At some personal risk, because you know what happens, if you make this kind of judgment and you win, it's fine, but if you make this judgment and lose, then you lose because you didn't give Lee Loevinger time. I just didn't see how we could do it. I thought it was important to have an opportunity to try to deal with the government's case.
PAGLIN: You went forward.
SHAPIRO: We went forward. The case was argued, if I remember correctly, it was January of 1979.
PAGLIN: I think I was there.
SHAPIRO: You may have been. There were a lot of people there. The Communications Bar turned out in full force.
PAGLIN: Yes, I do remember. Describe, if you would, how it went. Can you remember who from the Solicitor General's office argued?
SHAPIRO: Larry Wallace.
PAGLIN: Basically, what were the positions taken?
SHAPIRO: Larry Wallace spent his entire argument arguing essentially that this case was Midwest Video I all over again.
PAGLIN: It was their own opinion.
SHAPIRO: It was their own opinion that the case was Midwest Video I all over. They had already decided the case, and why were we here bothering the Court. So, when he sat down, I remember thinking to myself, "I'm glad I didn't give Loevinger this time."
PAGLIN: You had a big job ahead of you.
SHAPIRO: I began by saying something like, I'm going to spend a considerable portion of my time on the facts here, because we view the way these rules operate and their effect on cable systems quite differently from the way the government does. I went into a very familiar type of argument on how these are common carrier type obligations. Midwest Video I, while we weren't happy about it, at least it left us with editorial control, and these rules didn't. They were common carrier obligations.
There were a few funny little things that happened. I mentioned earlier, in our brief in this instance, we had changed from the chef analogy to the newspaper analogy. As we go along through these sessions I'll want to talk a little bit more about the newspaper analogy and how it's been developed, particularly since we were treating this as a content case. It seemed to be helpful. As far as I'm aware, this was the first instance, when you look at our brief, you'll see in the statement of facts part, a fairly elaborate effort to show the amount and scope of editorial discretion that was available to cable systems, and analogies to newspapers. I was worried all along, that the Court was going to jump on us for essentially supplementing the record before the Supreme Court because in some respects, that is what we were doing.
As sort of an aside, let me mention, that this First Amendment argument was one of the first if not the first effort to seriously develop a newspaper analogy. I was the lawyer, but my client Leghorn was the publicist. I believe that in this process, while he was discussing the NCTA brief he coined the term that subsequently became quite popular. He coined the term "video publisher." It developed, I believe from Leghorn, about the time that the briefing in the Supreme Court was going on.
Anyway, there were all these analogies and Justice Brennan, from out of nowhere says, "By the way, counsel, what is all of this programming I get from Atlanta when I'm watching cable TV?" I explained to him that it sounded to me like his cable system was probably receiving signals from WTBS, Ted Turner's station from Atlanta. Justice Rehnquist who was quite interested in the case, kept asking where the Commission got its authority to implement broadcast type regulations. I referred him to section 307(b), and some of the definitional sections that the Court had relied on in Midwest I.
PAGLIN: Was that 307 or 303?
SHAPIRO: Well 307(b) was one of several sections. 303(h) had the authority to implement and establish the zones and areas.
PAGLIN: Oh, the original Davies Amendment, so called.
SHAPIRO: Then we got into the argument. The Court seemed to understand the common carrier type of argument. By the time it got to the Supreme Court, we had developed a more sophisticated argument, not quite a delegation argument, but almost.
We had argued in response to the Justice Department's argument that, if the Commission's arguments were accepted, the Commission would have authority to do essentially what it wanted. We argued that if you took the Justice Department's position seriously, you would have such a broad delegation of power that under the, I believe, the Panama Refining Company vs. Ryan decision, it would be such a broad delegation without standards, that the whole statute would be unconstitutional.
We recognized that it had been a long time since the Court had turned down a case on unlawful delegation grounds, so we said, that's why the Court tries to tie the Commission's jurisdiction into provisions of the statute. The way to avoid an unlawful delegation problem is to tie it into the broadcast sections of the statute. That's why they found it ancillary in the Southwestern case, and that's why they can't go forward and now switch gears and go to common carrier.
I made a little bit of an argument about how different the common carrier's scheme of regulation was. The common carrier was rate regulated, which was true at that time, and broadcasting was not. In broadcasting there was editorial discretion. Common carriers couldn't regulate what went over their lines. They couldn't look at content. The point I made was that the Commission was saying that they should be able to draw from their broadcast authority one day and their common carrier authority the next day.
I was saying, that if that's the case, then there's no standard, because the two schemes of regulation are mutually exclusive. They are so different that if you could draw from one day, and another the next, the Commission can do whatever it wants.
PAGLIN: Section 3 of the Act says that broadcasting is not common carrier.
SHAPIRO: So, if the Commission doesn't like what its broadcasting authority lets it do one day, it can go with its carrier authority another day. It was a little hard to tell how things were going.
PAGLIN: In terms of the reaction of the Court.
SHAPIRO: At the end, I had just a little time for the First Amendment argument. I started to make it. As you know, sometimes when you start to make an argument, you get yourself into a little trouble, and Justice White kind of helped me out of trouble a little bit, he kind of fed me the question and the answer that I meant to give.
PAGLIN: When there's a judge up there favorable to you, he's going to help you out.
SHAPIRO: Nobody was favorable to me. Again, there were questions that were coming. I couldn't quite tell how things went. I did feel, again, that at least Justice White was listening. I wasn't quite sure about the others. It was kind of a nodding of the head when I made a point or something. I felt like at least White had understood the argument. I'm not sure there's much else that needs to be said about the argument.
PAGLIN: The interveners, the amicus or interveners, were they given time? I don't think they were given time.
SHAPIRO: No, just the two of us.
PAGLIN: So the decision came out the following...?
SHAPIRO: I believe it was in April.
PAGLIN: It came out so soon because the argument was in January, and the decision came out in April.
SHAPIRO: I believe it was April.
PAGLIN: By the way of footnote, if you can, we should really augment this with copies of the Eighth Circuit and the Supreme Court opinions. You might remember to get a hold of it.
PAGLIN: And the holdings, tell me what the opinion was like.
SHAPIRO: It was a 6‑3 decision. The majority opinion was written by Justice White.
PAGLIN: You were right when you thought he was listening.
SHAPIRO: You may have noticed that. I haven't been wrong when I thought they were listening. The majority essentially bought our argument on jurisdiction. It followed very much the argument that we had made in the brief and that I had made in the oral argument. I am convinced that had Judge Markey in the Eighth Circuit written the calm, dispassionate decision that Justice White wrote in the Supreme Court, the Supreme Court would have never granted cert. I think one of the reasons they granted cert was that when they read Judge Markey's opinion, it sounded so wild that they thought they had better take a look at this case and I'm sure you've heard the old saw that the Supreme Court does not grant cert to affirm the Court of Appeals. But in this case, the Supreme Court, after looking at what the Court of Appeals did, decided that it was right after all.
Let me note here that even the three dissenting Justices would not necessarily have upheld the FCC's access rules. The dissenter disagreed with the rest of the Justices on whether the FCC had jurisdiction to adopt access rules. But they would have remanded the case for decision on the constitutional issues we raised. In that regard, let me point out that, while the majority did not decide the constitutional issues, it did mention them in a footnote.
End of Tape 4 Side A
(Conversation began before tape.)
PAGLIN: Yes, there was a pregnant footnote at the end of the majority opinion.
SHAPIRO: The footnote said that because we decided this case on jurisdictional grounds, we don't reach the constitutional issues other than to note that Midwest Video's First Amendment arguments are not frivolous.
PAGLIN: That's why you call it a pregnant footnote.
SHAPIRO: Much has been made of that footnote in subsequent litigation. My own view of course is that any decision which turns on editorial discretion has very heavy First Amendment overtones whether it purports to be decided on statutory grounds or First Amendment grounds.
PAGLIN: This is where the footnote would be worth "a million dollars," so to speak.
SHAPIRO: I don't know if it was worth that much.
PAGLIN: It indicates that the Court in other milieu would have been very impressed had it come up on a grounds that they wanted to decide.
SHAPIRO: We certainly argued that was the case. That was the decision. Let me mention as a little personal note, on the decision. Just after the oral argument, a publication that has gone on to great fame and fortune, "The American Lawyer" came out with its first introductory issue.
PAGLIN: Oh really.
SHAPIRO: They have a section at the end of "The American Lawyer" they still have it, where they review Supreme Court oral arguments. In this first introductory issue, their first Supreme Court oral argument review was a review of Midwest Video.
PAGLIN: No kidding. I didn't know that. Was it a long article?
SHAPIRO: No, it was about two pages.
PAGLIN: Again, can you make that available?
SHAPIRO: Sure. You'll see that they make some snide remarks about my stature, how short I am.
PAGLIN: You're kidding? The stinkers.
SHAPIRO: That's O.K. The caption says something like, "Shapiro puts Justice Burger down without his even realizing it." For the most part it was very complimentary to me. The article indicated, particularly on the factual stuff at the beginning, how important it was to have a lawyer who understood the industry give the oral argument.
PAGLIN: Very good.
SHAPIRO: Then at the end it sort of indicated that when we got off into the nuts and bolts, legal arguments, it was kind of ho hum. Every reviewer has to take his potshots.
PAGLIN: Sure, otherwise, you're not a reviewer, because a reviewer he is supposed to be a critic.
SHAPIRO: Yes, but the reviewer was very favorable, even though the article has a nasty little cartoon of me as a bulldog having to stretch up to reach the podium.
PAGLIN: Did they go that far?
PAGLIN: You must have that framed. Did you get the originals?
SHAPIRO: Yes I have the originals.
PAGLIN: That's wonderful. That would make a great addition to this whole text.
SHAPIRO: Another thing that I have framed is...Cablevision had hired the lady who did the sketches for "Good Morning America" to do a sketch of the argument. This sketch was then the cover on Cablevision Magazine.
SHAPIRO: Yes. My colleagues got the original of the sketch for me.
PAGLIN: Did you get that signed?
SHAPIRO: I believe that that is signed by the author. Harry has a similar sketch by the same person of his argument in the Pacifica case.
PAGLIN: That one I heard too. There were a lot of great arguments that took place during these formative years. It depends on with what and when you were involved.
That's fine. Would you say this is a good breaking point.
SHAPIRO: Next time we will start with Home Box Office, cable stuff and we'll see how far we can get with it.
(End of Interview 3)
PAGLIN: Good Morning George. We're now again in the offices of Arent Fox to start session number four on your oral history. Today is April 11, 1989.
At the end of the last session, you indicated that you wanted to continue by talking about the HBO case, as you remember. Let's just start out. Tell us how the case started, its issues, what your participation was and the personalities involved and the like. The mike is yours.
SHAPIRO: The HBO case was a challenge to the FCC's pay cable rules, rules which applied the anti‑siphoning restrictions from broadcasting to pay cable programming.
PAGLIN: Could you define it just for the record?
SHAPIRO: Anti‑siphoning restrictions generally prohibited, with some limited exceptions, movies that were within two years of theatrical release from presentation on a pay cable service, and it prohibited for a period of approximately five years, live sports events that had previously been on broadcast television.
These rules had been adopted by the Commission I believe, going back to 1968 for broadcast stations. In approximately 1969, if I remember correctly, the FCC adopted the mandatory origination rule that we talked about that was the subject of Midwest I. They also, without much discussion, thought or anything, essentially carried over the broadcast anti‑siphoning rules to cable.
PAGLIN: Generally what was the rationale of the Commission first in applying the rules to broadcasting?
SHAPIRO: The rationale as applied to broadcasting was that there were numerous people who either could not afford pay‑television, who were located in rural areas or other areas where pay‑television was not available. It would be contrary to the public interest to siphon off the type of programming available on free broadcasting and have it available to only people who would pay for that programming.
While the Commission didn't really discuss the subject when it applied the anti‑siphoning rules to cable, I assume, and I guess everyone assumes that it was that same type of rationale. If there was a risk of siphoning that type of programming off of free broadcasting, there may also be a risk of siphoning it off of basic cable. As a result, the Commission carried the rules forward to cable.
PAGLIN: The idea being that even by this time, having accepted that there was a service that people would pay for in terms of the reception of television programming, apparently the Commission felt that the cable owners should not then deprive its subscribers of the better programming unless they were willing to pay more.
SHAPIRO: Yes, and I think it was not only cable subscribers, but also a concern with depriving the broadcast television viewer because if you had pay cable programming that broadcast television could also carry and provide a more lucrative return for the copyright owner or a sports team owner, it might get removed from broadcast television. I think it was both a concern about broadcast television and a concern about siphoning from basic to pay‑cable, although the concept of siphoning from basic to pay was never articulated.
As a sidelight Max, and it's kind of an interesting aspect to this, I don't remember the exact year, but it was probably around '74 or '75. We did some work for Madison Square Garden. Historically we've done work for Madison Square Garden over a long period of time. Not very much because there's really not very much FCC related work. At that time, Madison Square Garden was negotiating an arrangement with a company called Sterling Manhattan Cable Television which I believe at the time was headed by one Charles Dolan.
PAGLIN: Yes. Chuck Dolan, as commonly known.
SHAPIRO: To put some of the Knicks and Rangers games and certain events in the Garden...
PAGLIN: Basketball and hockey.
SHAPIRO: Basketball and hockey, but not only basketball and hockey, but things like the horse show, the NIT tournament, some college games. They were negotiating to put that type of programming on a pay‑cable package that Sterling Manhattan Cable Television was putting together. For the benefit of people reading this later, let me just indicate that Sterling Manhattan Cable Television was essentially the forerunner of Home Box Office. Within a year or two of the time that I'm talking about, it became Home Box Office. Sterling Manhattan was at that time, I believe, owned by Time.
PAGLIN: Yes, that's right.
SHAPIRO: This was sort of the beginning of putting together the Home Box Office package. Madison Square Garden's concern was that it wanted to do this deal with Sterling Manhattan, but it had some concern that if it put the Knicks and Rangers games on basic cable, anti-siphoning rules might be adopted that would preclude moving the games to pay cable later. At the time that this was going on, that is, the Sterling Manhattan Program Channel, the technology did not exist to charge extra for the channel, so it was essentially a basic cable channel at the time. Everybody thought that it was going to be changed to a pay channel as soon as possible. Initially when pay cable programming was presented, it wasn't even scrambled. It was just put in the midband, and all you needed was a converter to get it. This was at the point where Sterling Manhattan was just beginning to put together its program package, and it hadn't really even developed a delivery system with any security.
PAGLIN: Or the technology for a delivery system.
SHAPIRO: Yes. But Madison Square Garden's concern was that if it put these games on a Sterling Manhattan package, and that was on basic cable, would the Commission at some point extend the anti‑siphoning rules in a manner that would prohibit the Garden from at some point moving the games from a basic cable package to a pay cable package. The anti‑siphoning rules were specifically directed not to siphoning from basic cable to pay cable, but to siphoning from broadcast television to some form of a pay service. But we had this concern about siphoning. I don't know whether a copy of the contract is available anywhere, but it's kind of an amusing contract because the effort was to try and write the contract in such a way that it would look like this was a pay service even though it wasn't a pay service, so that in the event that there were ever anti‑siphoning regulations adopted, we would at least have some kind of an argument.
PAGLIN: For grandfathering it.
SHAPIRO: Well, that this was really a pay service and that we were doing everything that we could to make this look like and act like and seem like a pay service that the technology permitted and that the Garden should not be in any way penalized for having made these games available for what had to be basic service because of the technology. They did everything in light of the technology at the time that was humanly possible to do to have it look like a pay service.
PAGLIN: To make it look like a duck, sound like a duck, and so on.
SHAPIRO: Trying to do that knowing that no matter what we did, it wasn't going to be a duck.
PAGLIN: Right. In other words, later on, in '74,'75 with this situation with Madison Square Garden you came into this, but before that, around '68, '69...
SHAPIRO: I believe it was '69 that the Commission adopted the mandatory origination rule. Subsequently, the Commission was under considerable criticism from the cable industry, the motion picture industry, and others for having adopted and applied these broadcast anti‑siphoning rules to a different medium, cable. It was a situation where not everyone agreed that the same principles would apply. Also there was some concern that the anti‑siphoning rules were too strict. So the Commission commenced a new proceeding sometime around '73 or 1974.
I got into this initially because I was retained by NCTA to essentially make every argument that we could think of in order to preserve the possibility of a court challenge to the Commission's pay cable rules. We wrote massive comments for NCTA, making all kinds of arguments. The one that I recall the most and the one that we never really got much credit for although other people later made similar arguments...we essentially made the argument that if two private parties got together and entered into an agreement containing the types of restrictions that were contained in the pay cable rules, they would be hauled into court for violation of the anti‑trust laws.
PAGLIN: That's clever.
SHAPIRO: We went through a long discussion of how these rules if adopted between private parties would violate the anti‑trust laws. We essentially argued that the rules were anti‑competitive in effect--even though the government can adopt rules that private parties could not adopt, nevertheless they were anti‑competitive rules and there was no basis for them.
PAGLIN: You mean anti-competitive in the sense of industry vs. industry?
SHAPIRO: Yes, they prevented a new medium of communication namely pay‑television, particularly pay cable television, from developing, because there were restrictions on what could be done with movie and sports product that was designed to protect the existing broadcasting establishment.
PAGLIN: And the motion picture industry I guess.
SHAPIRO: Actually no, because the motion picture industry was really on the cable side.
PAGLIN: So, how did it proceed after that?
SHAPIRO: Aside from these anti‑competitive arguments, we made jurisdictional arguments, we made First Amendment arguments, we covered the whole waterfront. There was a good deal of lobbying going on at the time as well. By this time, Richard Wiley was at least a Commissioner.
PAGLIN: Was this in '74? When did you say this was?
SHAPIRO: The proceeding started in about '74 but by the time it came up to the Commission...
PAGLIN: Wiley would have been Chairman by that time.
SHAPIRO: I believe he was Chairman. When did Wiley become Chairman?
PAGLIN: It was about '73,'74. Dean Burch became Chairman in '69‑'70, that was when Dick Wiley became General Counsel. I was Executive Director and I left in '72 and Burch left at the end of '73, '74. So I think Dick became Chairman around '74.
SHAPIRO: There was a lot of lobbying with Wiley on these rules. I wasn't particularly involved in the lobbying aspect of it, but I know that Wiley essentially thought that by the time the rules were modified in about 1975 they had been relaxed considerably, and that the cable industry ought to appreciate the steps that he had taken and live with the new rules. If the cable industry thought they were still too restrictive, it should try to present a case for making other changes. That was certainly not the way the industry saw it when these rules came out. The thought was to launch a massive challenge to the pay‑cable rules. The group, the major parties in the cable industry, essentially got together and formed a consortium to pursue this appeal. Home Box Office was at least by designation, the named lead party, but they certainly did not call all the shots on this.
PAGLIN: Who were some of your parties?
SHAPIRO: Well, NCTA was a party, Viacom was a party, Warner was a party, I'm not quite sure who else was a party.
PAGLIN: Times Mirror?
SHAPIRO: No, I don't believe Times Mirror was a party to it.
SHAPIRO: I don't remember. The parties would all be listed in the litigation. As often happens, when you have a consortium, there was a big struggle about who was going to be counsel.
PAGLIN: Each has his own counsel.
SHAPIRO: Each has his own counsel and each has his own likes and dislikes...
PAGLIN: And HBO was your client.
SHAPIRO: No, actually we had not done any work for HBO at that point. Our client was: (1) we had done the comments for NCTA and (2) Viacom was our client. At that time, it was pronounced Viacom (pronounced Ve a com) subsequent to the leveraged buy out, whereby Mr. Redstone became the new owner of the company, he calls it (Vi a com).
PAGLIN: Even when Baruch was there I called it Viacom. (Vi a com)
SHAPIRO: Mr. Baruch called it Viacom (Ve a com) and when he was there it was (Ve a com) but now it's (Vi a com)
PAGLIN: Maybe that's why he turned me down when I addressed him in a conference we had trying to raise money for the Jubilee Commission as Viacom (Vi a com).
SHAPIRO: Maybe that was the reason.
PAGLIN: Harry should have warned me. Anyway, go on.
SHAPIRO: The way the parties were finally able to come together on counsel--and I was sort of an outsider on this--I don't know quite the whys or the wherefores--was that they were going to hire two law firms. The case would be argued in the Court of Appeals by Judge Simon Rifkind. Judge Rifkind, a senior partner in the law firm of Paul Weiss Rifkind Wharton and Garrison in New York, had a reputation at that point, of being essentially the most prominent lawyer in the country.
PAGLIN: Certainly in New York.
SHAPIRO: Certainly in New York.
PAGLIN: He was a well respected judge.
SHAPIRO: He was an extremely well respected judge, a fine New York law firm. For reasons that I'm not entirely sure about, our firm was co‑counsel. There was no question that the Paul Weiss firm was lead counsel, but for reasons not entirely clear to me, several of the parties to this consortium, also wanted us involved.
As time went on, I could see at least some of why we were to be involved because the Paul Weiss people wrote with what some people would call a flair. I consider some of the stuff in their early drafts to be some of the most overblown argumentation that I've ever seen. More important than that, they wanted to essentially cast the case almost entirely on the First Amendment. While I will yield to none on the First Amendment, I thought that there were some very significant jurisdictional questions as well. In any event, it's always good litigation strategy to give the court some basis to decide a case other than on a constitutional basis. Frequently the constitutional argument, if strong enough, induces the court to stretch a jurisdictional ruling. This was similar to what we did in Midwest Video II.
SHAPIRO: We made both the First Amendment and a jurisdictional argument. Anyway, the Paul Weiss people...every time we would write up a jurisdiction argument--we took the laboring oar on writing up the jurisdictional part of the brief-- and they took the laboring oar on writing up the First Amendment part of the brief. Every time the two pieces got put together, the First Amendment piece would come back about 27 pages long and the jurisdictional piece would come back about two pages long.
PAGLIN: Is it fair, to say, George, that certainly at this time, we're talking about '70?
SHAPIRO: Well, the case was decided in '77 so it would have been argued at about '76. I believe that the Commission's order came out in '75.
PAGLIN: But Paul Weiss wasn't particularly known in telecommunications field.
SHAPIRO: No, but they were in the entertainment field.
PAGLIN: Yes, they were because they represented a number of the entertainment companies and so on, but not in telecommunications.
SHAPIRO: They also had a strong First Amendment background. They have always been considered a leading firm in civil rights and civil liberties types of issues. It is a very good law firm.
PAGLIN: They had a top reputation in New York, as I remember being admitted to the bar and having practiced for a while in New York as a young lawyer, Paul Weiss was "God," so to speak. So now the briefs were prepared and this being a petition for review, Justice would have been a party, would they not?
SHAPIRO: The Justice Department was a party. This was a 402(a) appeal. That's an interesting question, Max. My recollection is that the Justice Department either took no position... I would need to double check on what the Justice Department did.
PAGLIN: That's interesting. If you raise the First Amendment and jurisdictional questions usually the Solicitor General gets involved in things like that.
SHAPIRO: This is the Court of Appeals level.
PAGLIN: But, Justice would because Justice is the lead party in 402(a) cases. This would be a petition for review of a rule making.
SHAPIRO: This would be a 402(a) appeal. Subsequently there was a cert petition. I would need to double check if I still have the records.
PAGLIN: It could have been that they just didn't think that this was something or they were busy with other things.
SHAPIRO: This was a big case.
PAGLIN: It would have to be. But anyway, it proceeds up to the Court of Appeals. Which circuit was it put in?
SHAPIRO: The D.C. Circuit. As a matter of fact, we went through the traditional race to the courthouse to try to get it into the D.C. Circuit, because we thought that would be a favorable circuit.
PAGLIN: Were there other petitioners independent from the consortium group that you can recall? I mean people like Bruce Merrill?
SHAPIRO: Not on the cable side...
SHAPIRO: I believe there were broadcasters who were...
PAGLIN: NAB and the like?
SHAPIRO: I think so and the motion picture people‑‑the MPAA. We were essentially allied with them, but my recollection is that the broadcasters were seeking to uphold the Commission's authority. Some of them were arguing that the Commission shouldn't have relaxed the rules to begin with. The rules were somewhat relaxed.
PAGLIN: During the course of the rulemaking?
SHAPIRO: Yes the 1975 order relaxed the anti‑siphoning restrictions from what they were prior to that time. I really don't remember the details of it anymore because the details fall into the category of ancient irrelevant history.
PAGLIN: Who argued the case?
SHAPIRO: Judge Rifkind.
PAGLIN: Judge Rifkind.
SHAPIRO: Yes, that was the deal.
PAGLIN: That's right, you did say that. Can you remember who the panel was?
SHAPIRO: There was Judge Skelly Wright, there was a district court judge from California.
PAGLIN: The printed opinion would show who the panel was.
SHAPIRO: Printed opinion would show who the panel was.
PAGLIN: Who was the other member of the circuit here?
SHAPIRO: I can't remember.
PAGLIN: Did Skelly Wright preside?
SHAPIRO: I believe Skelly Wright presided.
PAGLIN: What was the nature of the argument?
SHAPIRO: The argument was very unsatisfactory.
PAGLIN: It always is when you get outside counsel for argument, at least to us locals. (laughter)
SHAPIRO: Judge Rifkind gave a very florid argument about how pay cable was going to make the great wasteland bloom and talked about this wonderful diversity. At least those of us who were old Washington hands felt that he didn't really deal with the issues that the Court wanted to hear about. It was a very florid stage piece. It was like a stage presentation. My recollection is that the job of trying to educate the Court on the issues, at least on the side of the people challenging the rules, was left primarily to Art Scheiner, who was representing the motion picture people.
I don't have much of a recollection of the argument on the other side, but I do remember that while we thought the case was a winner, just on the law, that there was no great euphoria about the oral argument, unlike, the way I felt about the Midwest II argument in the Eighth Circuit which I have already talked about and which actually was a little bit later than this argument chronologically. There we walked out with this sense of euphoria and wondered only about just how big a win we were going to have.
PAGLIN: Because of the conduct of the judge?
SHAPIRO: Because of the conduct of the judges. In the Home Box Office case, while we generally thought we had a good case and we were going to win, we didn't quite have much sense of how the judges reacted to the argument. My recollection is that it took a long time to get a decision in this case. Ultimately when it came out it was a per curium decision. The name of the California judge has just come to me. I believe it was Weigel.
PAGLIN: Oh yes, I've seen his name.
SHAPIRO: The suspicion around town here was that Judge Weigel was assigned to write the decision and that either Judge Wright didn't like it or there was something that Wright didn't like about it, and that Wright took on the job of being the primary draftsman of this massive per curium opinion. It is not signed by Wright, but there's a general feeling around that Wright was the primary draftsman.
PAGLIN: And what other sense? No concurrences, just per curium.
SHAPIRO: Weigel had a very brief concurrence, about a page long. It was really a landmark opinion. It was of course of some interest to me that the case went off primarily on jurisdictional grounds.
PAGLIN: What basically was the holding?
SHAPIRO: The holding basically was that cable was different from broadcasting, that the types of restrictions that the Commission was able to apply to broadcasting did not automatically carry over to cable. The Commission had historically, going back to Southwestern Cable, regulated cable television as something that was ancillary to broadcasting and therefore in some way subordinate to it. There was no basis in the Communications Act for that, and that there was no reason why cable shouldn't be regulated as an equal member of the communications hierarchy or complex. If restrictions were to be adopted, those restrictions had to be supported by some showing in the record as to why restrictions were necessary.
PAGLIN: Which is very significant.
SHAPIRO: The Court went through in some detail the analysis that there was no record here supporting the need to restrict the programming. There was also a good deal of First Amendment analysis. The Court analogized cable systems to newspapers.
PAGLIN: They did? I guess I've forgotten that.
PAGLIN: Well that was, as you say, landmark for them to have said that for the first time.
SHAPIRO: In terms of First Amendment analysis, this was one of the easier cases because this was a strict content regulation case. Some of the later franchising cases...
PAGLIN: ...were a little more complex.
SHAPIRO: Content regulation is incidental to some other type of regulation. This and the indecency cases are content‑related. But the Court, in terms of looking at the regulations, saw no basis for treating cable systems different from newspapers. One of the interesting things about the case, on the First Amendment part, this did not go to jurisdiction, but the rules adopted by the Commission applied to both broadcast stations and cable systems. The Commission's jurisdiction to adopt rules as applied to broadcast stations, had already been affirmed in, I forget the name of the case.
PAGLIN: How far back?
SHAPIRO: It was 1968 or so. Anyway, the Commission's authority to regulate broadcast pay television had already been affirmed and there were some First Amendment challenges here, and the Court essentially said that because this was spectrum regulation, the Commission could adopt and apply these modified rules to broadcasting stations, but they couldn't apply them to cable systems. Subsequently by rule making, the Commission concluded that if it couldn't apply anti-siphoning rules to cable systems, it didn't want to apply them to broadcast stations either. So the discrepancy between treatment of broadcast and cable under these rules was ultimately eliminated by the Commission through rule making.
End of Tape 4, Side B
PAGLIN: This is a new tape for the interview on April 11.
SHAPIRO: I was saying that one of the sets of files that I have and that I believe that I will be able to donate, include the briefs in the D.C. Circuit, and also the subsequent petition for certiorari in the Supreme Court, but I also have probably 20 files for what is mainly, virtually all comments that were filed for the FCC in this proceeding. I don't know whether the Cable Museum would want to have those or not.
PAGLIN: I think that would be interesting, and you should make them available.
SHAPIRO: It has some historical interest because it shows the types of arguments that were being made by the various parties.
PAGLIN: Sure. If Penn State had a law school it would be even more valuable, but I don't think they have a law school.
SHAPIRO: For example, these comments that we did for NCTA are in there and there's just voluminous comments.
PAGLIN: I think that would be very helpful.
SHAPIRO: The point is that the court decision will be there.
PAGLIN: So that brings us up to around the '70s?
SHAPIRO: The decision of the Court of Appeals was in '77. Then certiorari was applied for. It is my recollection that certiorari was also denied in 1977. We have already discussed the Midwest Video II access litigation, which was a little bit later historically, than the HBO litigation, and that ended in the Supreme Court decision in '79.
PAGLIN: That is almost recent in terms of principal litigation. Were there any other cases later than that of the level of significance of Midwest II or HBO, in which you participated, either at the Commission or in the Courts.
SHAPIRO: I don't know whether you want to call these of the significance of HBO or not, but there were some in which we were involved on behalf of HBO. Maybe I should mention that some time, not too long after this, Time Inc. decided that it wanted to do a study of the First Amendment and its implications for cable.
PAGLIN: A "White Paper"?
SHAPIRO: Well I'm not sure that when they started they knew exactly what it was going to be. Different people within the organization had different ideas. Brian Conboy, the Washington vice president, wanted a well‑documented study that he could use on the Hill for his lobbying purposes. The general counsel of Home Box Office, John Redpath wanted a document that he could use to fight indecency legislation. Henry Gerken, the general counsel of ATC wanted kind of a desk handbook of how to deal with franchising type litigation.
PAGLIN: It was all to be based on First Amendment principles.
SHAPIRO: The company wanted a First Amendment study and it didn't quite know what it was going to do with it or how or why, but it thought that it wanted it. At least, I don't think that it had a firm conclusion about what they were going to do with it.
PAGLIN: In other words, a Bible.
SHAPIRO: They wanted a study and when they had the study in hand, they would figure out how to use it.
PAGLIN: In other words, they had a cure, but they didn't have a disease.
SHAPIRO: That's a little unfair. They knew they would be able to use it, but exactly how, would probably depend on what it was about. They went out and they interviewed. Their notion was that they wanted an academic, and they wanted a practicing lawyer to work together to produce this product.
PAGLIN: It makes sense.
SHAPIRO: I was greatly honored when I was called by Henry Gerken and he indicated that he'd like to interview me to see whether or not I'd be interested in working on this project; my thought being, it's nice to be asked to be considered in that crowd, but I'm certainly not going to get it, but it is nice to be asked.
PAGLIN: Yes, it's nice to be asked.
SHAPIRO: The academics that they were thinking of asking were Archibald Cox...
PAGLIN: Nothing but the best.
SHAPIRO: Phil Kurland and I'm not sure that I remember who the others were.
PAGLIN: From Chicago?
SHAPIRO: From the University of Chicago. Archibald Cox, at that time, was back at Harvard. He had been Solicitor General for the United States and as a matter of fact, was one of the first people fired in the "Saturday Night Massacre" at the time of Watergate.
PAGLIN: By this time he was back at Harvard.
SHAPIRO: Sure. There were several prominent lawyers and law firms that were being interviewed. I think one reason that I was interviewed was that I had been involved in a more significant way on several aspects of First Amendment litigation as it developed over the years.
Jokingly, the way I first got to know Henry Gerken was that Time bought several of my best cable clients. Every time the phone rang, and Henry Gerken called, I'd jokingly say, "C'mon Henry, leave me alone. Which of my clients are you going to take now?" One of them was Austin, Texas, which you remember the big 50% owned by Midwest Video. I think also the fact that we talked about the Home Box Office case and I think the fact that I had worked on that case helped. Hopefully they thought that I had contributed something to the victory, to the joint effort or what have you.
But anyway, the end result of which was that the academic they hired was Phil Kurland and I was the practicing attorney that was hired. I don't think there's any need to go into the details of how the paper was put together. I mentioned that one of my colleagues here, Jim Mercurio, did a good deal of work on it as well, as well as an associate who was with the firm at that time, Jerry Oberst. We ended up with this long paper. The then general counsel of Time was Gabe Perle.
PAGLIN: What was his name?
SHAPIRO: E. Gabriel Perle.
PAGLIN: I don't know him.
SHAPIRO: I'm surprised, Max. Anyway, part of the process was that as we did chapters, we would at least sit around and discuss them with this group of lawyers at Time, who certainly didn't have veto rights but they had extensive comment rights. They would go over the papers in detail and give us detailed comments, and then we would go back and try to take into account their comments.
Gabe Pearle, as the general counsel at this time, sat in on some of these meetings, and at one point, he said, "We really ought to get this thing published and I think I know who should do it and who I think would be interested in doing it." He was referring of course to Steve and Lynn Glasser who ran Law and Business Inc., which at that point was a subsidiary of Harcourt, Brace, Jovanovich. I mention all of this because I am not sure at what point a pioneer's history ends and you get into current events.
PAGLIN: Even though the original structure was from the late forties into the early seventies, we've actually found that there is a continuum and you can't cut it off and say, "'75 was the end and I don't want to hear any more about it," which is quite silly. So carry on.
SHAPIRO: The reason that I mentioned the book was that as a result of our work on the book, we subsequently handled for Time two challenges to State and Municipal indecency ordinances and at least initially got involved with Time in some filings in the Ninth Circuit in what I called the "Preferred" litigation which involved the City of Los Angeles franchising case. The Preferred litigation is still ongoing.
PAGLIN: Harold Farrow argued it.
SHAPIRO: Time filed an amicus curiae brief in the Ninth Circuit in support of Harold Farrow's position. It subsequently filed a brief in the Supreme Court when the case reached the Supreme Court, but by that point, the filing became essentially a consortium filing with Time and TCI, and I think there may have been some other people. That consortium brief was finally was done in by Cravath, Swain and Moore, who was representing TCI in other litigation. While we did the first Time filing on franchising issues in the Ninth Circuit, we have not been involved subsequently. We did handle the two indecency cases, one was Cruz vs. Ferre.
PAGLIN: Were these in Miami?
SHAPIRO: The first case was the Miami case. Cruz vs. Ferre. Ferre was the mayor of Miami. F‑E‑R‑R‑E. I think it's pronounced (Fair)
PAGLIN: I see.
SHAPIRO: ...where initially the Federal District Court in Miami threw out an indecency provision in the Miami Cable Television franchise. Then the case was appealed to the Eleventh Circuit. We were not involved with the District Court, but I argued the case for HBO in the Eleventh Circuit. The Eleventh Circuit affirmed the District Court.
The other case was the challenge to the State of Utah indecency ordinance, in a case called Community Television of Utah vs. Wilkinson. David Wilkinson was the attorney general of Utah. The Federal District Court there threw out the Utah indecency ordinance. I represented Home Box Office there, in the District Court. TCI was represented in the District Court and there were some subscribers who were represented by an ACLU attorney, all in the District Court. We were all working together.
That case went on to the Tenth Circuit. By then, the name of the case had changed to Jones vs. Wilkinson. Jones was one of the individual plaintiffs represented by the ACLU. The Tenth Circuit upheld the Federal District Court and the case was then appealed, a direct appeal, to the Supreme Court, by the State of Utah. At that point, HBO decided to have Floyd Abrams take the lead on the Supreme Court briefing. We participated with him, but Floyd Abrams took the laboring oar, and the case was decided on the papers. The case was summarily affirmed.
PAGLIN: Never argued.
SHAPIRO: It was summarily affirmed, which is not an unusual procedure in direct appeals to the Supreme Court.
PAGLIN: You say a direct appeal went through to the Tenth Circuit didn't it?
SHAPIRO: Yes, but it was a case where the State statute was upheld invalid on the basis of the federal Constitution. The law has been changed, but at that time, the State did not need to petition for certiorari and had a direct appeal to the Supreme Court. As a practical matter, the Supreme Court doesn't hear full argument on direct appeals unless it also does something called "noting probable jurisdiction." When it notes probable jurisdiction, it sets the case for a full argument. In our case, it had at least three other alternatives, one is to reverse summarily, two is to dismiss for want of a substantial federal question and the third is to do what they did in our case, which was to summarily affirm.
PAGLIN: On the briefs?
SHAPIRO: On the briefs, and the decisions, which is what they did.
PAGLIN: That would have been about when?
SHAPIRO: That was in 1987 or '88.
PAGLIN: That late.
SHAPIRO: So, the point of all this is that I think probably the indecency cases, while important, and the franchising litigation, while ongoing, are probably beyond the scope of your oral history because they are really current.
PAGLIN: Except for what I would say anyway, in terms of history being an ongoing continuum, and in terms now for example, the whole question of porn legislation and the like.
SHAPIRO: There's going to be a porn case argued in the Supreme Court in the spring, later this month.
SHAPIRO: It's one of the dial‑a‑porn cases.
SHAPIRO: From the Ninth Circuit.
PAGLIN: That's right, I did read about it.
SHAPIRO: Actually I have a great deal of concern about that case because while the official industry position is that there is no relationship between dial‑a‑porn and pay‑cable, nevertheless, the argument that's being made in this case is that dial‑a‑porn is invited into the home‑‑you have to dial it and request it.
PAGLIN: You begin to see similarities.
SHAPIRO: Yes, you begin to see similarities. Secondly, there is no frequency used, it's not subject to the Pacifica Foundation type of considerations. Actually in one of the earlier dial‑a‑porn cases, when the first dial‑a‑porn case was appealed to the Second Circuit about four years ago, we did an amicus curiae brief on behalf of Home Box Office, essentially taking the position that if the material presented over dial‑a‑porn was obscene under the test of Miller vs. California, it should be prosecuted. We didn't challenge the Miller standard, but there was no basis, under the Constitution for the Court to apply any indecency standards. Home Box Office subsequently did not participate in later appeals, but the whole issue of the indecency, whether the Congress can reach indecency as opposed to obscenity in the dial‑a‑porn area, is going to be argued before the Supreme Court later this month.
So, these are ongoing. I kind of regard my book, 'CableSpeech' as pulling together all of the relevant First Amendment principles applicable to cable. If memory serves me correctly, in our very first talk, I commented to you that I was a little perturbed that the Cable Museum had published something saying that a publication of theirs was the first major publication on the First Amendment in cable, and I indicated that somebody there didn't know about 'CableSpeech'...
PAGLIN: Go ahead.
SHAPIRO: I kind of regard 'CableSpeech' as pulling together the strands that we have been talking about from what was going on in the sixties and seventies and highlighting the nature of the changes in the cable industry. These strands permitted a First Amendment stance to be taken.
PAGLIN: That's like a Bible actually, in terms of its application.
SHAPIRO: That's not for me to say. That's probably gilding the lily a little bit.
PAGLIN: How about a text?
SHAPIRO: It's a text, and for me, it's also a transition between what's history and what's current. We have some chapters in the book on indecency, we thought that was over with the Supreme Court affirming Jones vs. Wilkinson, but now with the dial‑a‑porn case, and with the new personnel on the Court, it may not be over.
PAGLIN: I was about to comment that with the new personnel on the Court, and particularly on today's Washington Post, the front page speaks of Kennedy being far more conservative than any other justices.
SHAPIRO: I sure hope that they're wrong about Justice Kennedy. I think that I may have mentioned before that he was a law school classmate of mine. I hope that the jury's still out, but certainly the initial indications are that he is extremely conservative, although at least in the First Amendment area, Max, the conservative/liberal analysis doesn't always come out the way you think it's going to.
PAGLIN: Look what Scalia did in the recent case.
SHAPIRO: Well, look what conservative judges did in the cable First Amendment cases. Judge Howard Markey, who wrote the Midwest Video II decision is a very conservative judge. The judge who wrote the Preferred decision in the Ninth Circuit, Joseph Sneed, is the only Nixon appointment left in the Ninth Circuit, one of the more conservative judges. The panels in the Tenth and Eleventh Circuit which upheld the lower courts on indecency were both conservative panels. The District Court judge in Utah who wrote the indecency decision in Utah was an elder of the Mormon Church. The First Amendment cases that have been decided in the cable area are not just the result of a bunch of liberal judges going off on their own. You might say that Judge Wright fell into that category although I have a lot of respect for Judge Wright, but these are not just Judge Wrights, these are very conservative judges who have an antipathy to regulation.
PAGLIN: And any incursion on the basic constitutional right.
SHAPIRO: They are more likely to say that the First Amendment is intended to protect a medium of communication from government regulation, and be less likely to support so-called public interest regulation.
PAGLIN: That's very interesting. As you say, at first glance, one would expect that it would be somewhat different and yet when you start saying it the way you did, obviously, they feel that the basic rights protected by the Constitution are to be protected and not subject to a municipal ordinance which seems to violate it.
SHAPIRO: And there's a suspicion of government. If the answer is that government should regulate it and decide what's good for us, your more conservative judges are the ones who are more likely to bridle at that type of thing. It's liberal judges who think that government has the capacity to "do good for the world."
PAGLIN: And the responsibility.
SHAPIRO: And the "responsibility to do good for the world." There have been a couple of cases out in California, and these are follow‑ons to the Preferred case where they described the approach of franchising authorities as paternalistic to think that the government should take a role in structuring the communications media, and structuring it so that it will provide what some government official regards as a better communication system. Their view is that that is paternalistic and that the purpose of the First Amendment is to keep the government out of structuring communications systems and let the communicators structure them.
PAGLIN: And yet the earlier thinking, back in the thirties and early forties, when the whole communications system was, in effect, if not being designed but certainly in its early development, the thinking of the Supreme Court in the broadcasting cases and the like, was that "yes, there is a role for regulation, making sure that this new, fantastic service will, in fact, serve the public for which Congress intended it to do."
SHAPIRO: At least they had a peg for doing that, Max. That peg was spectrum scarcity.
PAGLIN: It was spectrum scarcity, right.
SHAPIRO: They never went so far as to say that government could help improve newspaper publication.
PAGLIN: No, that's so, but actually the argument currently, obviously, is that the advance in technology, the development and the diversity of media and means of providing information and entertainment, and so on is far broader than what it used to be. So, the Supreme Court is hinting at maybe they want to look at this whole spectrum scarcity argument again, which is what they've done.
SHAPIRO: Yes, and it's very important. People have tried to argue that cable can be regulated similar to broadcasting, and that cable shouldn't be treated like a newspaper because cable didn't exist at the time that the First Amendment was adopted and it wasn't something that the founders had in mind, and therefore you can't apply newspaper type analogies to cable. How that type of an issue comes out, is very important in the future of communications, because we seem to be moving more and more in the direction of electronic communications. Our newspapers may, in the not too distant future, be essentially delivered electronically. If the First Amendment is not applied to new forms of technology, then as our technology develops we lose the benefits of the First Amendment.
PAGLIN: That's something that we will get to near the end, when we talk about your views on what the future will look like in terms of cable as a part of the communications complex. To wind up the litigation aspect, was there anything else, that you feel would be of interest in terms of your participation in litigation, which turned out to be important in the whole development of cable?
SHAPIRO: Max, I think we've pretty well covered it.
PAGLIN: Yes, I would say so, I was just kind of tying it up.
SHAPIRO: It's about time to wrap it up here today.
PAGLIN: Again as usual, we thank you. This as I said before, is not only valuable but because it is unique because we have not heretofore gotten into this as a lawyer and a litigation lawyer, the importance of some of these cases in the development of the industry and how it has affected the expansion of the industry as well as what's coming in the future. We haven't had that yet. As it will be, and you have indicated that it would be enhanced by the documents themselves which someone who is interested in developing will be able to refer to the pleadings and the briefs which is absolutely invaluable. So again I thank you and we will set up another date.
PAGLIN: Good morning, again. It is now April 18, 1989, and I am in the offices of George Shapiro of the law firm of Arent Fox Kitner Plotkin & Kahn in Washington, D.C., and we are about to start session number five of the oral history. George Shapiro is one of the cable television pioneers, and I am Max Paglin, the executive director of the Golden Jubilee Commission. What we want to do this morning, is to briefly cover local government regulatory policy. I think you indicated that you really didn't get involved in that.
SHAPIRO: In thinking about that, the one thing that I was very heavily involved in, were some federal preemption issues involving local regulation. They dealt particularly with regulation of rates for pay‑cable services and for extra tier services. I appeared on behalf of Time...
PAGLIN: This was about when, just to get it chronologically?
SHAPIRO: It would have been about 1982 or 1983 because it was not too long before the passage of the Cable Act.
PAGLIN: Which was '84?
SHAPIRO: Which was '84.
PAGLIN: You were saying that you represented Time.
SHAPIRO: No. I appeared before the Nevada Public Service Commission on behalf of Community Cable TV, Inc. That was a company that was 50% owned by Times Mirror, one of my cable clients.
PAGLIN: What was the company's name again?
SHAPIRO: I think it was Community Cable. It was 50% owned by Times Mirror and 50% owned by the Greenspun interests in Las Vegas.
PAGLIN: Oh, it was from Nevada.
SHAPIRO: Yes. Hank Greenspun was a newspaper publisher in Las Vegas. He's very well known.
PAGLIN: And a very controversial guy.
SHAPIRO: He's very controversial. He had a long relationship with Howard Hughes. He's a very well known figure. The State of Nevada was trying to regulate rates. I believe it had to do with either pay‑cable rates or the rates for a second tier of service above the basic service. That was a tier of service that did not include the carriage of broadcast signals. We felt that even prior to the Cable Act, the Commission had preempted state and municipal regulation of rates other than basic rates or any tier of service on which broadcast signals were carried.
I testified before the Nevada Public Service Commission which ultimately ruled that the State of Nevada did have authority to regulate rates for tiers of service without broadcast signals. We then filed a petition for a declaratory ruling before the Commission which led to what was generally called "The Nevada case," a ruling by the Commission supporting preemption. At the same time, the Commission also ruled on some other preemption issues, I believe that came from New Jersey.
PAGLIN: At about the same time?
SHAPIRO: They were ruled on in essentially one document. It's my recollection that the appeals from that were pending at the time the Cable Act passed, but the Cable Act mooted the appeals because the Cable Act extended preemption. Other than that, the mix of work that I got from my clients, and I was very appreciative and thankful for all of the federal work and particularly the appellate work that I got from them was mainly Federal. One of my disappointments was for the most part they did their state and local work in-house themselves. I personally got very little involved in state and local regulatory issues unless they also overlapped with some federal issues.
PAGLIN: In other words you didn't get involved in the franchising process except as it may be involved with the Commission certificate procedures or pole attachments type things, Council hearings, I guess you did not.
SHAPIRO: Only in a very, very limited way. I did appear once, I don't know whether we discussed the work that we did for TelePrompTer during that period of time.
PAGLIN: In what connection?
SHAPIRO: We did the FCC work for TelePrompTer.
PAGLIN: I know, I know. We're missing it.
SHAPIRO: One of my few appearances before a municipal body was before the Trenton City Council, when it was considering whether or not to revoke the Trenton franchise as a result of the alleged attempted bribery.
SHAPIRO: Well, Johnstown and Trenton.
PAGLIN: Was Trenton involved in this?
SHAPIRO: Yes, Trenton and Johnstown.
PAGLIN: I always thought of it only as Johnstown. Was it a joint proceeding or the franchise covered both?
SHAPIRO: The Commission's was a single proceeding involving both issues, but there were separate situations involving Johnstown.
PAGLIN: That had not come up before in these discussions.
SHAPIRO: Well, I had a one day appearance at the City Counsel and it was fairly pro-forma. My recollection was that they did not revoke the franchise, but the Commission declined to certify it later but like I said, that's an example of one or two city council appearances. For the most part, the clients that I worked with, aside from Midwest Video who fortunately chose its franchises in areas that don't have much local regulation, involved federal issues.
PAGLIN: Good old George Morrell.
SHAPIRO: Good old George Morrell, but most of my larger clients had strong in-house legal staffs, and the local franchising work was done either by the in-house legal staffs or the government relations departments of the clients.
PAGLIN: Backing up, there were allegations that there was that same kind of activity in Trenton too?
SHAPIRO: My recollection is that that was part of what Irving Kahn was convicted for and served time for.
PAGLIN: Also Trenton?
PAGLIN: I see. I guess that hadn't come out before. I don't know why. I guess because everybody thought of Johnstown. Not in our discussions but in previous discussions. I don't know why.
SHAPIRO: I don't know why either, but as a matter of fact, my recollection is that the problems were probably more blatant in Trenton than they were in Johnstown.
PAGLIN: Isn't that funny how it sticks in people's minds. Johnstown always sticks in people's minds. Well then, following on...
SHAPIRO: You asked about telephone poles, again while we filed an occasional pole attachment complaint on telephone matters, we have not taken a leadership role in pioneering the development of the law on pole attachment. That was done primarily by Jay Ricks and NCTA.
End of Tape 5, Side A
(conversation began before tape)
PAGLIN: Were there any other situations in which you were involved or which at least in your assessment represent something which has governed or had an effect upon some of the problems that we have today in this field?
SHAPIRO: Well, I have mentioned the preemption area, Max, and I think also, you know, how do you put it, the jurisdictional type of arguments that are less relevant now that the Cable Act has passed. When the Commission regulates under its ancillary authority, it has to be implementing some statutory goal, and it can't just say we have ancillary authority and therefore we can do what we want. It has to be in furtherance of some goal that it's authorized to implement in its statute. It was really on that basis that we won the access case.
I think the First Amendment area and preemption are the two that are of most significance. Preemption has been pretty well written into the law now by the Cable Act.
PAGLIN: And, you know it is not, for example, in some of the other oral histories that we are doing and that Penn State is doing in which they're interviewing the Bill Daniels, the Marty Malarkeys, the Bob Tarltons, and Ed Parsons and so on, those are historic in the sense that these are the guys that built the industry. But to me as a lawyer as you have just illustrated, the courts in development of the industry in a regulatory sense have been governed by people like yourself and the other people I've interviewed.
SHAPIRO: Yes, but the First Amendment is an excellent example of how what happened in the industry affected the legal structure. I mean I think that when we first started talking about some of the early First Amendment cases, I pointed out that in the late '60s and early '70s it was difficult to make a First Amendment argument with a straight face. Because cable when it was really simply almost entirely a retransmitter of broadcast television it was a little hard to--the reception service--it was hard to convince anybody that that was a function that should be protected from regulation.
With the development of the satellite, where first of all even though individual cable companies may not have become the same type of speaker that a newspaper publisher or many radio or television stations are, the cable industry created a plethora of programs that it provided to itself. The selection and choices of channels that were available for presentation on cable often outran the channel capacity of the cable systems involved. Cable companies had to make selections and choices, exercise editorial judgment about what materials to present and how to put together attractive programming for their subscribers. So the development of the industry that the Bob Tarltons and the Bill Daniels were doing had an effect on the types of legal arguments that people were making.
PAGLIN: So you couldn't say which was the chicken and which was the egg in that sense. One kind of led to the other is what you're saying.
SHAPIRO: Well, I think that the thing that came first was the development of the industries to a position where you could make the First Amendment arguments with some credibility and then you made them.
PAGLIN: Yes, the advancement of the technology.
SHAPIRO: Yes, I believe so.
PAGLIN: As I said in the early days of '64, '65, '66--let's see I was representing George Morrell and Strat Smith, for example, wanted to make the First Amendment argument as his principal argument, in the First Report and Order I guess it was, and I said I thought there was no basis for it whatsoever.
SHAPIRO: Well, you remember when we talked about the appeal from the Second Report and Order, I told you that there was a First Amendment argument but it was based on the rights of the viewers not on the right of the cable operator.
PAGLIN: That's right, and that, you know, is an interesting development that doesn't often come out. It gets kind of lost in the business aspect of it and yet its absolutely essential to understand how it developed. And so were there others of that kind where there was either an interaction of the technology and the legal arguments or vice versa?
SHAPIRO: Well, none come readily to mind, Max. I think that there probably were some but they don't come readily to mind.
PAGLIN: Now, okay, so that makes an interesting recitation of how these things have developed and their interaction.
SHAPIRO: Before we go on, Max, let me just put one anecdote in the record if I haven't already done it. It occurred to me the other night and I don't remember whether or not I described what I thought was one of the humorous things in my little career here. But, stop me if I've already told this story.
PAGLIN: I never will.
SHAPIRO: In 1966, I think it was '66, shortly after Sol Schildhause was appointed Chief of the Cable Television Task Force.
PAGLIN: Yes, I was then Executive Director and Rosel Hyde was chairman and he called me in and wanted something done about cable so I created a task force. Sol became the first Chief. He was then a Hearing Examiner, I think.
SHAPIRO: I believe that's right. Sol had never seen a cable system so he called Harry Plotkin because he knew Harry represented, at that time, the largest cable company--H&B American. H&B American had some cable systems up on the Jersey Shore in Ventnor. I don't think they had one in Wildwood at that point.
PAGLIN: Yes, I think there was a system there.
SHAPIRO: So, Sol wanted to visit a cable system and Harry called Harold Sugarman, who was then the head of H&B to see if he could arrange it and, of course, Harold was very excited about the prospect of having the new chief of the regulatory branch from the Commission come up there. The first thing he said was great, I'll have Bob Beisswenger who was the head of Jerrold, meet us and we'll go out for a ride in Bob's boat. Well, as soon as Harry heard that, he thought he'd better send a chaperone along because it recalled to Harry's mind the days, not too far in the distance, when former FCC Chairman John Doerfer went out in the Storer yacht and that led to his resignation, there was an awful, awful situation. So I was delegated to go with Sol, and I believe Jack Mayer went, too. We drove up to where you get the ferry in Delaware over to Cape May--Lewes, Delaware. We took the ferry over to Cape May and there waiting for us were Harold Sugarman and Bob Beisswenger. I had told Harold beforehand, let's take Sol out to dinner, treat him nice, do everything, but let's stay off of the boat. We hadn't been onshore two minutes when Harold and Beisswenger started talking about going out on the boat.
PAGLIN: What happened?
SHAPIRO: I was the big stick-in-the-mud. That's why I was there.
PAGLIN: To keep them off the boat.
SHAPIRO: We didn't go out on the boat and they were all mad at me. I thought it was kind of funny.
PAGLIN: Now, how do you think this whole thing started? Because, I having been in cable realizing that the people on the staff, when I was Executive Director--I came back in '66--and I realized that there wasn't a staff member there who knew what the hell a headend even looked like and when we got Sol headed up I said to the Chairman, "I want these people to go out and look at a cable system, touch it, smell it, taste it," before they come back. That's how that whole thing started.
PAGLIN: Because, you know, I had always been a guy who felt you really don't know what it's about unless you go out on the ground and talk to the guy and touch the thing. But you know I never heard that story of what happened afterwards.
SHAPIRO: You know, he looked at the cable system, he probably looked at it a bit harder and longer as a result of the fact that we didn't go out on the boat, but they would have at least given it a quick look-see but I was the stick-in-the-mud.
PAGLIN: Well, that's a great anecdote and to me it's interesting because I've never heard that side of it until after I paid for them to go up there. All right, let us go on. Give me some of your thoughts and predictions/assessments of what you think, personally, is the future role of the cable in the development of the telecommunications complex. You know, are you a blue sky guy or what do you think will be the future role and next we'll get into the kind of technology. Or if you want to merge them together. You know, what I then want to talk about is what you think of ... no let's keep them separate because the next section is what you see is the future course of the regulatory policy in cable as it interacts with broadcasting, telephone, you know in view of satellites, copyrights, DBS, and everything else.
SHAPIRO: Well, I don't know if I can keep them separate but I'll try.
PAGLIN: As I say it, I realize that maybe you can't. So let me articulate. It would be, as I say, your views on the future role of cable and what you think the future course of cable technology and its regulation would be in terms of its participation in the industry in the years ahead--copyright, must carry, DBS, telco ownership, you know the issues that are up on the burners right now. What do you foresee would be the next whatever?
SHAPIRO: Let me ramble for a little while. Keep track of what I miss. If I miss something, we'll come back to it. You know, I don't think I have any monopoly on what's happening. It seems to me that we're seeing more and more of our communications systems being transferred from over the air to the wire. In part that's because the Commission has allowed more in the way of pollution of the radio frequency spectrum than some of us would have liked to have seen as we went along. You know, it's kind of combining with the development of communications, data communications, voice communications and the type of hooking up with computers, the use of facsimile. I think we're moving in the direction of having more and more of our communications reaching the home by wire. We may in the not-that-distant future even have our newspapers delivered to us by FAX or some type of a wire service.
I'm not sure that I see the type of blue sky ordering/shopping type of things that people have been trying to sell in the cable industry for the last 20 or 30 years. People are still doing experiments with them and they're still not making any money on them. But there seems to be, notwithstanding the more blue sky things--there's still blue sky and little progress has been made in 30 years or 20 years in moving them out of the sky.
PAGLIN: Now you were discussing before the telephone call your views on the fact that you think that most of telecommunication services will ultimately end up being carried to the consumer by wire.
SHAPIRO: Well that's the way things seem to be moving now. In my mind that makes some of the First Amendment issues very important. It cuts several different ways but one of the types of arguments that's used in arguing to limit cable's First Amendment positions has been that cable systems are essentially a new medium that don't have the long tradition of freedom of the press, that the press and even broadcasting have and that, therefore, they're subject to some different type of regulation. Well, if I'm correct that we're going to see over a period of time an increasing migration of communications and even newspaper expression and distribution to cable, if that were to reduce the First Amendment protections accorded to the people who communicate by means of cable, it could have a very disastrous and serious effect on the extent to which our media are protected by the First Amendment.
PAGLIN: Other forms of media.
SHAPIRO: Yes, because if in fact everything uses cable as a distribution mode and cable is subject to a different type of protection, maybe we're going to lose some of the protection that the more traditional media have had. Now from the point of view of the more traditional type cable operators who have been distributing programming of various types, I have felt really since the time of Midwest Video II that obtaining First Amendment protection was a matter of some importance but that First Amendment protection is something that doesn't just come to somebody. If they don't use the protection they get, they tend to lose it. It's my recollection that right after the Midwest Video II decision I wrote a guest editorial in Cablevision or at least a guest opinion piece, and I took the position then, and it's something that I still think is correct today, that it's important for cable operators, if they want to maintain the First Amendment protection for their activities, and that's a big if--I'll come back to that if--but if they want to maintain that protection they have to take a more active role in being speakers as well as editors. I think the extent to which cable systems are functioning as editors now is quite extensive and maybe that's enough to preserve their First Amendment protections. But I think that they'd be much more secure if you had more in the way of cable systems originating programming, and particularly public affairs, news, and that type of event. Some of this is presently going on.
PAGLIN: In the access channels and the like.
SHAPIRO: Well I'm thinking of it less in the access channels because if you'll recall I think the access channel requirements are unconstitutional.
PAGLIN: But I mean there are cable systems providing that now aren't there?
SHAPIRO: Yes, my understanding is that Cablevision, Mr. Dolan's company, on several of its operations has quite an extensive news channel. I know that at least for a period of time, I'm not sure if they still do, that the ATC systems tried to run some public affairs oriented local programming. There are a number of cable systems which do have their own local origination type of efforts. Some of those are mainly access type of operations but the cable operator does retain overall control. It's a little difficult to decide whether it's enough. I mean take C-SPAN. C-SPAN is a creature of the cable industry. It presents a type of programming that is unique--that you can't get on broadcasting and you can't get it in the newspaper. The only way you can get it would be if you subscribed to the Congressional Record. Who wants to do that. And that is cable industry presented programming. Is enough industry wide programming enough? I don't know.
I think it would be desirable for the industry, aside from public relations and public policy dividends that would fall out, it would be desirable if the industry were to engage in essentially a fair amount of local programming, some of it public affairs oriented but it doesn't all need to be public affairs oriented. The First Amendment issue now has been complicated for cable systems because it has gotten tied into the issue of whether there should be multiple cable systems in a community or whether there should be only one cable system or whether the franchising authority should have the discretion to decide that there should only be one cable system.
PAGLIN: Referred to usually as over build.
SHAPIRO: Over building is the term that's used to describe the construction of a second system that is authorized by a municipality. That is a nasty word in the cable industry these days.
PAGLIN: Did you say that the First Amendment issue becomes complicated because of the possibility of the multiple systems?
SHAPIRO: Yes. It seems to me, and Max you see this in the book--the 'CableSpeech' book that we wrote, it is hard to argue for broad First Amendment rights for cable operators and at the same time argue on a First Amendment basis that access to public rights-of-way, poles, streets, ducts should be limited.
PAGLIN: That's a utility concept.
SHAPIRO: Well, it's a utility concept, yes. At least historically in many, many instances cable may very well be a natural monopoly and the economics of the situation may not permit more than one cable system to operate. At least initially when the First Amendment arguments were being made some of the larger cable operators who were supporting those arguments essentially felt that they could take care of themselves on the poles. They could handle competition. That it would be difficult for an over builder to come in and successfully operate against at least a good cable operator. Not a poor one. A poor one could easily be over built. And some cable operators were, therefore, willing to take the risks that a certain amount of overbuilding might occur and felt that the benefits of eliminating the residue of state and municipal and federal regulation that went with a strong First Amendment position outweighed the detriments of the potential for overbuilds. As time went along, there became a increasing number of the so-called blackmail situations. There was a feeling that people were starting to overbuild not so much because the overbuild made sense, but because they wanted to get bought out by the existing operator at a premium price. And there was concern about the telephone companies because telephone companies were the overbuilder of last resort. Maybe of first resort.
PAGLIN: He's there and he's got the facility.
SHAPIRO: Well, he's there and he's got the facilities. Of course, Max, he's always been there and he's always had the facilities and he's always been able to--or at least until the passage of the Cable Act--he's been able to build a second system and lease it to a second cable operator. The economics of the situation have been such that this simply hasn't happened. The Cable Act has made it a little harder because right now in order to do that second cable operator using the telephone lease back facility, he probably needs a franchise. Which wasn't so clear before the Cable Act passed. I'll come back to this in a minute, but it gets us into the issue of telephone companies.
PAGLIN: Yes, that's what I was just about to introduce-- telco ownership.
SHAPIRO: Telco ownership. Currently a hot issue before the NCTA. It breaks down into two parts. One is what's wrong with telco ownership outside the telco service area. Second is what's wrong with telco ownership inside the service area. Let's take inside the service area first. The problem is, in my view, that the advantage that a telephone company has in the competitive race to provide service to customers as a result of its control of access to its poles is important. Secondly, the potential for telephone companies to cross subsidize their competitive services, like cable, with revenues from their noncompetitive telephone services gives telephone companies a second advantage. And the third advantage is that both of those are extremely difficult to detect. Particularly in this age of deregulation where the regulators don't have either the staff or apparently the ability to detect these things.
PAGLIN: Or desire?
SHAPIRO: Or desire. The Commission is relying on some broad based concepts about open network architecture and comparably efficient interconnection where the telephone companies are still filing their plans and the plans have very large-scale provisions that may be of some help. It will still be difficult to detect cross-subsidization and preferences resulting from the control of pole and duct space. Those factors were the types of factors that led the Commission to prohibit telephone cross ownership in 1970, I believe. They were reaffirmed by the Congress in 1984 when it passed the Cable Act. They are now under challenge by the telephone companies on, of all things, First Amendment grounds.
PAGLIN: Articulate that a little. That's always been a weird argument as far as I'm concerned.
SHAPIRO: It's not so weird, Max. The telephone companies say this is not a common carrier service. Telephone companies are speakers, too.
PAGLIN: Having been an old common carrier guy, I must say I don't see that. To me they have always been a conduit but go ahead. So continue.
SHAPIRO: They were entitled to speak. The argument was just--the D.C. Circuit just turned down an opportunity to rule on that argument because it was not properly raised.
PAGLIN: What case was that?
SHAPIRO: The NITCO case. Northern Indiana Telephone Company. It just came out last week.
PAGLIN: I guess I missed that. I've got to get a copy of that.
SHAPIRO: So do I. I was at the oral argument.
PAGLIN: Oh, I see. How did the issue arise? On the principle that you're now discussing?
SHAPIRO: The Commission held that because of some affiliations between a family that between them owned a cable system and a telephone company that there was a violation of the cross ownership rules and they had to divest. Then they remanded and the First Amendment issue was not raised until on appeal after the remand. Which is, I believe, the reason why the court would not consider it. The argument against the telephone companies on this issue is essentially that it's an O'Brien argument. It's an argument that the purpose of the cross ownership rules is not to regulate speech but to regulate the potential for any competitive conduct.
That potential, if you go back to 1970, was not only a potential but there were a number of instances of actual anti-competitive conduct. The incidental effect of that regulation is to affect the speech of telephone companies but applying an O'Brien test weighs the strengths of the government interest against the alternatives, whether there are other alternatives available and there are Supreme Court cases that say the antitrust laws are the Magna Carta of business and have virtually the same stature as the First Amendment. And the statement that a telephone company can't operate a cable system is not a statement that the telephone company can't speak. I mean it can lease channels from a cable television system and speak. It can put out its own brochure, its own newspaper, it just that it can't operate that medium.
The arguments in support of keeping the telephone companies out, at least in their service areas, are quite strong. It's hard for me to predict how they're going to come out ultimately. But in my mind they're quite strong. The area where they're not so strong in my mind is when you get outside of the service area of the telephone companies. I will say that I have some pause and hesitation about the fact that Bell Atlantic might be able to buy the cable system in Los Angeles and Pacific Telesis might be able to buy the cable system in Washington, D.C., and then you kind of worry about whether they're kind of scratching each others backs. But the reasons why cable cross-ownership is a problem in the same area--that is the control of the poles and the potential for cross-subsidization--in my mind don't exist in the same degree outside those areas. Maybe the telephone companies will still be able to cross-subsidize cable operations outside their telephone service areas by using their profits from the operation of their telephone operations. I mean that's no different than General Motors using its profits from the production of cars to build a cable system. I'm just not sure that there's anything wrong with that. So I don't know where we're going to come out. I suspect that in the not too long run we're going to have telephone companies permitted to acquire systems outside their service areas. As a matter of fact, they are now except for the former Bell operating companies.
PAGLIN: The independents?
SHAPIRO: The independents are right now permitted to.
PAGLIN: Staying on this subject what in your view, George, is the telco's motivation to get in this deal? Is it a matter of technology, the development of fiber optic cables. Why do you think they would want to get into this deal?
SHAPIRO: Well, first of all I think they think they can provide this service more cheaply and efficiently using their existing facilities. I think they feel that it's a related business. It's a business that they would have an easier time understanding and relating to than building widgets. Historically, it's been a very profitable business. And a couple of companies seem to like to be in communications-type businesses.
PAGLIN: Do you think they view it as just another one of the different kinds of communications services which telco has always provided?
SHAPIRO: If they do it would be a great boon for the cable industry because that means they're viewing it as a hardware industry and I think many of us think of it these days as much more of a software industry.
PAGLIN: Yes, that's right. But as you say they see it as related to what they've always done.
SHAPIRO: Well, and you know they're trying to justify the cost of installing these new fiber optic cables. You know, to make a voice telephone call who needs a fiber optic cable. As a matter of fact, one of the things that the Commission's own Office of Plans and Policies has pointed out in the paper that Bob Pepper published, I think it was last November just before comments in the cable cross-ownership proceedings were due, was that in fact who needs fiber optics for about 85 or 90 percent of the types of uses that are being discussed for all these futuristic services except video. But one of the things that being able to provide cable does would be to increase the fill factor on fiber optic cable and, therefore, help to justify some of the costs of increasing fiber optics. I understand it.
Let me get back a little bit to the First Amendment. There are telco and competing cable systems. My initial feeling right now is that a cable industry position that depends upon being able to preserve the ability to keep other competing services by cable out is probably short-lived. I don't think that the cable industry is going to be able to do that. I do not know how the economics of the situation is going to shake out--whether, when we do get fiber optics systems installed, the telephone companies or others might be able to lease bandwidth to two or three or four multiple channel cable systems or single channel programmers or how that will all fall out. But I don't think in the long run the cable industry can successfully preserve the ability of the municipality to prevent more than one cable television operator from providing service. The municipalities themselves may well not desire to do that in the future.
So it seems to me that, to the extent that the cable industry's reluctance to rely on First Amendment arguments now turns on its desire to eliminate the possibility of second franchises. That is a benefit that is going to be short-lived. I don't know whether we are talking about five years or fifteen years but it's not going to last very long. It concerns me that part of what the cable industry is doing is agreeing to submit itself to regulations raising First Amendment questions as a trade-off against more stringent regulations. Some in the industry have, for example, been willing to accept some additional forms of municipal regulation that has no relationship to municipal interests in preserving public rights of way, and the cable industry's trade associations have agreed to or acquiesced in proposals to restore must-carry requirements.
End of Tape 5, Side B
PAGLIN: We're now on a new tape, and you were saying. You were talking about the problem of the cable industry apparently agreeing to increased regulations by municipalities such as must carry and the impact.
SHAPIRO: Yes, must carry. If it's O.K. to have a little regulation that helps television broadcasting because it's effect is minimal and broadcasting needs a little help, then it's probably O.K. to have an access channel regulation requirement because the opportunity for people to get on and speak is a good thing. This approach introduces a type of public interest regulation into cable, and once you have that, it's very hard to draw the line as to where it should stop. I think that is not in cable's long-run best interests. So I have felt that some of the positions that are being taken on First Amendment issues in cable currently by many cable operators are short‑sighted. I suppose that we'll have to wait and let a little time pass and see whether that proves to be right or not.
PAGLIN: An interesting sidebar of the same type of concern is being voiced in the broadcast industry with regard to the apparent concession by some of the broadcasters and leading broadcasters to permit themselves to become "slightly pregnant" vis a vis regulations provided that the renewal process would be enhanced for them. Right?
SHAPIRO: Yes, and you're talking about whether they should withdraw their opposition to the Fairness Doctrine.
PAGLIN: Amongst other things.
SHAPIRO: Yes, amongst other things. Part of it is the historical difference. Broadcasting has always been regulated as subject to a unique type of public interest regulation. Maybe the scarcity doctrine is not enough. I think we're moving in the direction of a real test again of whether the scarcity doctrine will support that type of broadcast regulation, but I think the broadcasters are seeing the same sort of thing. I just read in the press this morning that someone has introduced legislation to require broadcasters to provide more time to politicians at lower rates.
SHAPIRO: To provide more time at lower rates. The broadcasters fought long and hard to get the Fairness Doctrine thrown out and if they swallow this one in order to get some relief on renewals, I'm not sure where regulation will end again. Maybe the approach the broadcasters should take should involve questioning whether the current provisions of the Communications Act relating to renewals don't raise some First Amendment issues about the extent to which the voice of a broadcaster can be shut down.
PAGLIN: I can just see some of the old‑timers turning in their graves because of that last statement, as to whether the Communications Act itself constitutes a violation of the First Amendment, Section 326 to the contrary notwithstanding.
SHAPIRO: I'm not sure that there's a First Amendment problem with revoking a broadcaster's license because of technical violations or many things, but not because of programming, or because somebody else thinks they can do a better job.
PAGLIN: It's really a fascinating historical development. As in other fields, when the new technology came along, the government, the industry, the public, just assumed that this has to be regulated. Something new is being given to the commercial world for a certain purpose so of course it needs to be regulated.
SHAPIRO: Those are people who are not students of the First Amendment. The purpose of the First Amendment is not for government to create the communications structure, but to keep government out of communications.
PAGLIN: What I'm saying is that as you become accustomed to it, as the technology develops, as it becomes a part of life, you suddenly realize, wait a minute, there are other considerations involved here. When you read the early history or some of the earlier debates on the legislative history, of course it had to be done this way. How else could it be done. And the licensing structure was, of course the key, right?
SHAPIRO: Max, just as cable developed and First Amendment theories developed, I think much the same thing is happening here. When the Communications Act passed, there were many fewer media of communications. If you look around now, the number of outlets and the number of different types of outlets are so broad that maybe we should get rid of most forms of regulation other than that needed to control technical situations, and to prevent violations of laws preventing fraud, gambling, and that type of situation‑‑back to the "traffic cop" concept.
SHAPIRO: Maybe we don't need anything more than that now. Traffic has increased to such a point that I don't know if we need government to help us get a better communications system.
PAGLIN: And to what you're saying, just to fill in, what I was about to say was exactly that. In the Chain Broadcasting case the Supreme Court's opinion said that the argument is being made that all the Commission should be is a "traffic cop." That is, regulate frequencies to prevent interference. But the Supreme Court said, of course not, they've got to be more. The content of the broadcasting is part of the whole licensing thing. But that was history. Now where are you?
SHAPIRO: One of the principles I learned in law school was that when the facts change, the law changes as well. Maybe it's time to look and see whether the facts have changed.
PAGLIN: When the reason for the rule disappears, the rule disappears.
SHAPIRO: You're right.
PAGLIN: Well, I think that's a very, very profound statement and attitude‑‑that things have changed, and perhaps even as an old regulator...
SHAPIRO: It doesn't mean that you were wrong back then, it means that the facts have changed.
PAGLIN: I wasn't wrong back then, but things are different.
Well, we've got to get out of here. I think that we've had a very, very good series of discussions. I would have liked, perhaps to continue in this vein, but I think we've got enough.
SHAPIRO: I think I've really said everything there is to say.
PAGLIN: As a wrap‑up, let me just make mention that my notes show, and I can show you at another time, the kinds of things that you've offered to provide us with.
SHAPIRO: I can give you some of them after we are finished.
PAGLIN: Yes. The Markey opinions that you spoke of, the Supreme Court opinion, the American Lawyer article on your Supreme Court argument, the "White Paper" on the First Amendment, your biographical sketch, the promotional piece for Arent Fox, the new one, I don't know if there was anything else.
SHAPIRO: Nothing other than the fact that I'm going to go over with you the files that I am planning to donate.
PAGLIN: The briefs and the pleadings.
SHAPIRO: And writing materials.
PAGLIN: One thing that came up just earlier, the Cablevision guest article, was that the issue where you had your picture on the front page?
SHAPIRO: No. My picture was on the front page just after the argument. This was after the decision. Do you want a copy of the Cablevision editorial?
PAGLIN: Yes, and I will get you the NCTA thing that you talked about at Penn State.
Thank you again. Again, many thanks on behalf of the Jubilee Commission and the National Cable Television Center and Museum. It's been a pleasure.
SHAPIRO: It's been my pleasure, Max. Thank you.
PAGLIN: Thank you again.
End of Tape 6, Side A