Picture a world where each episode of Sesame Street is brought to you by a letter, a number and a candidate for public office.  

Thanks to a recent appellate court decision, some spending on campaign advertising soon may be directed to an unexpected source: noncommercial broadcasters, such as public radio and TV stations.  In addition, a recent FCC decision has paved the way toward requiring these broadcasters to post online their local public file information about such advertising.  Unless the decisions are significantly modified or stricken, expect these rules to resonate through a political process that relies heavily on broadcast advertising.

A three-judge panel of the U.S. Court of Appeals for the 9th Circuit decided 2-1 to strike federal laws banning the airing of public issue and political advertisements on noncommercial broadcasting stations.  The statute in question, 47 U.S.C. Section 399b, prohibits noncommercial educational stations from broadcasting any of the following: 1) advertisements for goods and services on behalf of for-profit entities, 2) advertisements regarding "issues of public importance" and 3) political advertisements.  The decision invalidates the ban with respect to the last two categories, but not the first. Accordingly, advertisements for goods and services on behalf of for-profit entities remain impermissible.

The appellant, Minority Television Project, Inc. is a noncommercial broadcaster. The FCC had fined MTP $10,000 for "willfully and repeatedly" violating Section 399b by airing paid promotional messages from for-profit companies.  MTP alleged that it had declined to broadcast public issue and political advertisements out of concern of potential FCC fines and forfeitures arising from Section 399b. 

MTP argued that Section 399b violated the First Amendment because the "restriction on advertising was not narrowly tailored to the government's interest in preserving the educational programs on public broadcast stations."  The government countered that the restrictions on advertising were necessary to "preserve the educational nature of public interest broadcasting." Specifically, the government argued that making public stations dependent on advertising would result in stations replacing "their niche educational programs with more popular programs which have greater mass-market appeal, thus endangering the broadcast of the educational programs for which public broadcast stations exist."  

The court considered whether the government’s “broccoli is good for you” rationale passed constitutional muster. The panel rejected MTP’s call to hold the government to the “strict scrutiny” standard of First Amendment justification that applies to other media. Instead, the panel applied the "intermediate scrutiny" standard, and the government was required to prove that Section 399b was “narrowly tailored to further a substantial government interest.” The opinion noted that in a pending case before the U.S. Supreme Court, major broadcasters have challenged the continued application of “intermediate scrutiny” analysis to broadcast speech. The response: “just as golfers must play the ball as it lies, so too we must apply the law of broadcast regulation as it stands today.” According to the panel, the government’s case failed intermediate scrutiny with respect to the bans on issues of public importance and the bans on political advertisements.

Many questions remain as a result of the ruling:

Will noncommercial broadcasters begin accepting political announcements?  Even if a noncommercial station decides to begin accepting political announcements, there are legal risks.  First, the ruling is not yet final because it is subject to further judicial proceedings.  The FCC has a limited period to seek rehearing of the panel's decision. Often, but not always, the full appellate court affirms the decision of a three-judge panel of the same court. The U.S. Supreme Court case may also affect the timing of a decision on rehearing, particularly in the event of a change in the applicable legal standards (such as intermediate scrutiny) upon which the 9th Circuit panel relied.   Also, the ruling applies only to states in the 9th Circuit: Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon and Washington. Noncommercial broadcasters in other states may find that courts in their jurisdictions would determine that they are not bound by the 9th Circuit’s decision.

Will Congress react to the court ruling and change the law? In effect, the panel invited Congress to revisit the law and to provide more evidence to demonstrate that the law is constitutional.  It seems unlikely that Congress would enact such legislation in an election year, assuming that a change in the law is a legislative priority.  Moreover, Congress likely would not intervene while the judicial process is ongoing.

How would the decision impact other rules? The ruling does not address other laws that relate to candidate appearances and advertising on broadcast stations.  For example, federal candidates have statutory rights of “reasonable access” to commercial broadcast stations, but noncommercial broadcast stations are exempt from this statute.  Stations that choose to accept an advertisement from a candidate for any public office are required to give "equal opportunities" to other candidates for the same office, and, unlike the case of the “reasonable access” rules, noncommercial stations have no statutory exemption.  A commercial broadcaster is obligated to provide a candidate the “lowest unit charge” of the station for the same class and amount of time for a given period prior to an election or primary.  If the ruling stands, the FCC would have to adopt rule changes to clarify how these rules would apply to noncommercial stations, which rely on public contributions, underwriting and similar sources of funds for station operations. 

Also noteworthy: last Friday, the FCC adopted new rules requiring broadcasters to post portions of their local public inspection file online.  Some of these requirements will apply to noncommercial television broadcasters effective July 1, 2014, including a requirement to place “any new political file material” on the Commission’s website.  At present, the new rules would not apply to noncommercial radio stations. While the FCC’s new rules don’t explicitly reference the MTP case, they ultimately may expand the scope of the materials that must be kept in the file and made available to the public.

If it’s true that “all politics is local,” then by extension local broadcast stations play an important role in the political process.  As the 2012 election year revs into high gear, many expect significant increases in political ad spending for the broadcast airwaves.

For many noncommercial broadcasters, it’s not easy being “green” or, in this economy, “nonprofit.” Many noncommercial stations may find that their local viewers are valuable targets for political advertisements. In light of funding challenges for such stations and the potential for new revenue sources, these recent legal developments may result in dramatic changes to the political landscape.