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Carlin Communications Inc. v. United States

decided: January 15, 1988; As amended April 4, 1988.

CARLIN COMMUNICATIONS, INC., SAPPHIRE OF ARIZONA, INC., JOY COMMUNICATIONS OF CALIFORNIA INC., LYNX COMMUNICATIONS OF CALIFORNIA INC., SABLE COMMUNICATIONS OF CALIFORNIA INC., SAPPHIRE OF COLORADO INC., SAPPHIRE COMMUNICATIONS OF FLORIDA, INC., SAPPHIRE OF GEORGIA INC., SAPPHIRE OF IOWA, INC., SAPPHIRE COMMUNICATIONS OF KENTUCKY INC., SAPPHIRE OF LOUISIANA INC., JOY COMMUNICATIONS OF MARYLAND INC., SAPPHIRE COMMUNICATIONS OF MARYLAND INC., JOY COMMUNICATIONS OF MICHIGAN INC., SAPPHIRE OF MICHIGAN INC., SAPPHIRE OF MINNESOTA INC., SAPPHIRE OF NEBRASKA INC., SAPPHIRE OF NEVADA INC., SAPPHIRE OF OREGON INC., JOY COMMUNICATIONS OF PENNSYLVANIA INC., SAPPHIRE COMMUNICATIONS OF PENNSYLVANIA INC., SAPPHIRE COMMUNICATIONS OF TEXAS INC., SAPPHIRE OF VIRGINIA INC., SAPPHIRE OF WASHINGTON INC., AND SAPPHIRE OF WASHINGTON D.C. INC., PETITIONERS
v.
FEDERAL COMMUNICATIONS COMMISSION AND THE UNITED STATES OF AMERICA, RESPONDENTS, AMERITECH OPERATING COMPANIES, AMERICAN TELEPHONE AND TELEGRAPH CO., BELLSOUTH CORPORATION, SOUTHERN BELL TELEPHONE AND TELEGRAPH CO. AND SOUTH CENTRAL BELL TELEPHONE CO. ("BELLSOUTH COMPANIES"), BELL ATLANTIC, AND PACIFIC BELL, INTERVENORS



Oakes and Kearse, Circuit Judges, and Bonsal, District Judge.*fn*

Author: Oakes

OAKES, Circuit Judge:

Petition was brought challenging Federal Communications Commission regulation establishing a defense to prosecution under 47 U.S.C. § 223(b) (Supp. I 1983) for providers of "dial-a-porn" services that limit their services to callers with access codes or credit card payment or that scramble their messages. Petition to review denied; mandate stayed for ninety days to permit parties and intervenors to comply with Commission regulations.

The Federal Communications Commission ("Commission" or "FCC") has once again issued regulations establishing a defense to prosecution under section 223(b) of the Federal Communications Commission Authorization Act of 1983, 47 U.S.C. 223(b) (Supp. I 1983), which regulates interstate "dial-a-porn" services. The Commission adopted the Third Report and Order, Enforcement of Prohibitions Against the Use of Common Carriers for the Transmission of Obscene Materials, FCC 87-143, 2 FCC Rcd 2714 (1987),*fn1 in response to this court's decisions in Carlin Communications, Inc. v. FCC, 749 F.2d 113 (2d Cir. 1984) ("Carlin I"), and Carlin Communications, Inc. v. FCC, 787 F.2d 846 (2d Cir. 1986) ("Carlin II"). The regulations in the Third Report and Order establish that providers of "obscene or indecent" messages ("the providers") have a defense to prosecution if they (1) require payment by credit card before transmission of the message; (2) require an access code before transmission of the message, issue the code by mail after reasonably ascertaining through receipt of a written application that the applicant is at least eighteen years old, and establish a procedure to cancel the code upon notice that it was lost, stolen, or used by a minor; or (3) scramble their messages so that they can be received intelligibly only by using a descrambling device. In addition, where a provider subscribes to mass announcement services ("MAS") tariffed at the Commission, prior to transmission of the message, it must request in writing that the carrier providing the service identify all adult telephone messages on consumers' bills. 52 Fed. Reg. 17,760, 17,761 (1987) (to be codified at 47 C.F.R. § 64.201). The issue presented here is whether this regulating scheme is a feasible and effective method for restricting minors' access to obscene telephone messages, without unreasonably interfering with the constitutional rights of the service provider to send, and adults to receive, such messages.

FACTUAL BACKGROUND

While we assume familiarity with our prior decisions in Carlin I and Carlin II, for ease of consideration here we briefly review the FCC's past efforts to regulate adult telephone message providers. In its First Report and Order, the Commission sought to restrict the operation of petitioner Carlin Communications, Inc. ("Carlin"), and other adult telephone message providers to the hours between 9:00 p.m. and 8:00 a.m., Eastern Time. 49 Fed. Reg. 24,996 (1984). We held those regulations both overinclusive and underinclusive; the time-channeling regulations denied adults access to dial-a-porn messages during daytime hours but did not prevent minors from calling the service during nighttime hours. Carlin I, 749 F.2d at 121. We concluded that the Commission had "failed adequately to demonstrate that the regulatory scheme [wa]s well tailored to its ends or that those ends could not be met by less drastic means." Id.

Following Carlin I, the Commission adopted a Second Report and Order on October 10, 1985 (published October 22, 1985, 50 Fed. Reg. 42,699). In the Second Report and Order, the Commission rejected all network blocking by which outgoing calls are impeded at telephone company central offices. It found exchange (three- or four- digit) blocking constitutionally flawed because it blocked all "dial-it" messages and ineffective since MAS numbers are not legally or technically required to be assigned to 976 exchanges. It rejected line number (seven-digit) blocking as inadequate to handle the large number of adult message providers currently in operation. The Commission also rejected message scrambling. Although scrambling is technologically feasible and relatively simple, the Commission concluded that it misallocated the burdens by requiring adults who desire to hear the messages to install descrambling devices at a cost of $15 or $20 each. 50 Fed. Reg. at 42,704 paras. 21, 22. The Commission concluded in the Second Report that the most effective means of restricting minors' access to dial-a-porn services, while at the same time minimizing restrictions on adults, was to require providers to send messages only to adults who first obtained an access code or paid by credit card. Id. at 42,707 para. 32.

In Carlin II, we found that the Commission's findings relative to network blocking were fully supported by the evidence and clearly not arbitrary and capricious. However, we held that the Commission did not adequately consider customer premises blocking and, in particular, the feasibility of shifting the cost of blocking to message providers. See 787 F.2d at 855-56. This failure was particularly troubling because access codes were feasible only with two-way transmission. We therefore set aside the regulation as to the one-way, New York Telephone MAS network. Id. at 857. In neither Carlin I nor Carlin II was it necessary to or did we pass on the constitutionality of section 223(b).

The Commission released its Third Notice of Proposed Rulemaking on July 18, 1986, some three months after our decision in Carlin II.*fn2 The Commission first observed that total calling volume to the New York Telephone and New England Telephone and Telegraph Companies' ("NYNEX") "dial-it" system had declined from 471 million calls in 1984 (1.29 million per day) to 159 million calls in the months of January to April 1985 (435,000 per day). Of these, 97 million were made to "adult entertainment numbers" in 1984 (266,000 per day), while 26 million (72,000 per day) were made to such numbers between January and April 1985. In fact, NYNEX had reported that, during the first four months of 1985, total MAS calling volume had risen to 1.32 million calls per day while adult entertainment calls had dropped to 218,000 per day.

Next, the Commission briefly reviewed ways to restrict minors' access to these messages. It noted that New York Telephone Co. ("NYT") planned to install a separate, dedicated one-way system with screening capability. The so-called Varick Cut-Thru System would permit the dial-a-porn operator to implement an access code verification procedure. A screening mechanism at the telephone company's central office would send dial-a-porn calls to the providers' offices where access codes could be verified and the adult messages transmitted directly to the caller. The Commission noted that the Varick system would have a capability of 30,000 calls per hour, sufficient to handle the 9,089 calls per hour made to adult programming during early 1985. The Notice also discussed the costs and problems associated with customer blocking devices and scrambling. Finally, to comply with Carlin II, the Commission sought public comment on the feasibility, the costs and cost allocation, the benefits, and the efficacy of access codes, blocking equipment and scrambling in the region served by NYT. In particular, the Commission sought comment concerning the feasibility of implementing access codes in one-way systems such as NYNEX; the status of the proposed Varick system, and the ability of subscribers to obtain the identity, address, and number of adult telephone message providers.

In response to the Third Notice, the Commission received numerous comments and reply comments. Comments from the following entities are included in our record: Carlin; American Telephone and Telegraph Co. ("AT&T"); Ameritech Operating Companies; Bell Atlantic Telephone Companies; NYNEX; Pacific Bell; Phone Programs, Inc.; the Public Service Commission of the District of Columbia; Southwestern Bell Telephone Co.; Telecommunications Technology Corp.; American Civil Liberties Union ("ACLU"); BellSouth Corp.; United States Telephone Association; and the Media Law Clinic.

Carlin's comments disputed the Commission's conclusion that access codes were the least restrictive alternative. It argued that they are impermissibly overbroad and vague, that any written application procedure would chill expression and would violate individual rights of privacy, and that any requirement that access codes be cancelled on misuse or loss would be impracticable and ineffective. Carlin also contended that screening or blocking is not technically feasible. Noting that this court had already found limitations upon operational hours unconstitutional, Carlin argued that the only constitutionally permissible regulations were disclaimers and limitations on advertising.

AT&T commented that effective screening could be achieved in conjunction with one-way mass announcement services by connecting interactive access lines to each AT&T 900 service mass distribution center. However, the costs of such screening would be significant. AT&T concluded therefore that message scrambling is a cost-effective and simple alternative within non-interactive networks. It commented that, contrary to the Commission's earlier understanding of descrambling devices, e.g., Second Report, 50 Fed. Reg. at 42,704 para. 22, scrambling technology is not unduly cumbersome. AT&T reported that battery-operated portable descramblers are available at little cost. AT&T commented that customer-premises blocking would be both ineffective and unduly burdensome on persons wishing to restrict access. It also contended that message providers, not common carriers, should bear the costs of the screening procedures. AT&T noted that information concerning message providers may be disclosed pursuant to administrative subpoenas. They added that disclosure of identification information upon request could be a condition of tariff arrangements between telephone companies and message providers.

The Ameritech Operating Companies urged the Commission to focus on requirements for the providers, rather than the telephone companies. It endorsed a multiple-choice defense approach permitting providers to select the most feasible and economical defense for their particular operation and location. It suggested that permissible defenses include the use of credit cards, access codes, or scrambling; the provision of customer-premises blocking devices capable of seven- or ten-digit programming; and the furnishing of information identifying the names and telephone numbers of dial-a-porn services, coupled with billing notification. Ameritech reported the results of a survey conducted on its behalf assessing interest in customer premises blocking devices among randomly selected households with children under eighteen years of age. When price was not mentioned between 70.2 % and 73.6 % of households were interested in a device or service that would block dial-a-porn calls. However, only 3.3 % to 5.4 % indicated they would definitely purchase such a device or service if it cost only seventy-five cents per month. Similarly, at a one-time charge of $20, only 2.2 % to 4.5 % of households indicated they would definitely purchase the product or service.

Bell Atlantic Telephone Companies also endorsed a "menu" of alternative defenses but emphasized that the provider be required to implement the most effective means feasible given the characteristics of its operation. It urged that access codes be the preferred alternative. Bell Atlantic has already developed a billing system to prevent charging persons who call providers but lack an access code. Under its system, a caller is not charged for an audiotext call unless he or she remains on the line for more than ten or twenty seconds. Bell Atlantic requires all providers to notify callers that they are subject to a charge if they remain on the line. The Chesapeake and Potomac Telephone Co. of Maryland offers a similar service for intrastate calls. Bell Atlantic suggested, however, that billing notification be an alternative defense only where providers lack a two-way connection with the caller and the exchange carrier cannot accommodate an access code system. Bell Atlantic commented that several customer premises blocking devices are currently available. One such device, retailing at $89.95, permits callers to program and block up to ten different telephone numbers. Bell Atlantic was not aware of any service listing the telephone numbers of dial-a-porn providers. It stressed that providers must be responsible for administering and financing any customer premises blocking program.

NYNEX also supported a multiple-choice defense. It reported that NYT planned to replace its one-way mass announcement system with a state-of-the-art two-way system by mid-1988. Providing access code capability on NYT's existing 976 mass announcement system would cost over $21 million. However, NYNEX noted that the Varick system, which provides mass announcement capability to providers with telephone numbers beginning with the prefix 970, could be modified using the Varick Cut-Thru Approach to provide two-way connections. NYNEX noted that to acquire fifty to one hundred circuits, providers would incur one-time costs of approximately $36,000 to $73,000 and recurring monthly charges of $6,000 to $12,000. Installation would take one to three months. The Varick system accommodates 30,000 calls per hour. NYNEX observed that "if all adult channels on both New York Telephone systems were put onto the Varick system and retained their current calling volumes, this capacity limitation would be exceeded." However, it noted that "compliance with the Commission's access code approach will undoubtedly reduce calling volumes."

NYNEX endorsed the use of customer premises blocking devices noting that such devices are available and not difficult to install, maintain, or program. NYNEX noted that allocating the cost of such devices presented difficult administrative and policy problems. While arguing that the telephone companies should not be required to subsidize the cost of such devices, NYNEX suggested that providers that provide such subsidies should have a defense to prosecution under section 223(b). NYNEX reported that NYT will provide the names and addresses of providers using its MAS system to assist those using customer premises blocking devices.

NYNEX also urged that a defense be available to providers that scramble their messages or request that NYT and AT&T block all incoming calls to their numbers, noting that both practices are effective and inexpensive means to restrict minors' access to dial-a-porn messages. Finally, NYNEX reported that adult entertainment calls on NYT had dropped from over 14 million a month in 1983 to below 5 million a month in 1986 and that they constituted 12.9 % of all MAS calls, a decrease from 37.6 % in 1983.

Pacific Bell commented that the access code and credit card payment requirements were the least restrictive, yet feasible and effective means to restrict minors' access to dial-a-porn. Pacific Bell noted that although it had announced plans to offer a customer premises blocking device to subscribers in earlier submissions to the Commission, it had since concluded that no device existed which could accommodate the total number of dial-a-porn services. Pacific Bell concurred with the Commission's Second Report that message scrambling was not well-tailored to the ends of the regulatory scheme because (I) it was impossible to enforce an age requirement for purchasing a descrambler; (2) such a requirement would not prevent minors from activating decoders purchased by adults; and (3) scrambling would prevent adults from obtaining access to dial-a-porn messages from pay telephones which are not equipped with descramblers.

Phone Programs, Inc., a provider of over sixty dial-it non-adult entertainment programs, also submitted comments. It expressed concern that the Commission might require cessation of all dial-it services, a resolution Phone Programs found unconstitutionally overbroad. It argued that neither the providers of non-obscene, non-indecent programming nor their ...


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