MEMORANDUM OPINION

ELLIS, District Judge.

I. A.

Plaintiffs in this case, Chesapeake and Potomac Telephone Company of Virginia ("C P") and Bell Atlantic Video Services Company ("BVS"), both wholly-owned subsidiaries of Bell Atlantic Corporation, challenge the constitutionality under the First Amendment of certain provisions of the Cable Communications Policy Act of 1984 (the "1984 Cable Act"), 47 U.S.C. § 521, et seq. Specifically, plaintiffs challenge subsections (1) and (2) of 47 U.S.C. § 533(b) ("§ 533(b)"), which prohibit telephone companies, and their affiliates, from providing video programming to subscribers within their service areas.

C P provides local wireline telephone exchange and exchange access service in portions of Virginia, including the City of Alexandria. It is, without dispute, a common carrier subject to subchapter II of the Communications Act, and therefore subject to § 533(b). BVS is an affiliate of C P, incorporated in Virginia on September 24, 1992, for the purpose of providing video programming to the public. C P represents that, in the absence of § 533(b), it would enhance its telephone network in Alexandria to have the capability to carry video programming. See Affidavit of Richard A. Alston, C P's Vice President of Operations Engineering, at 1. The resulting network would have the capacity to provide several hundred channels of video programming to C P's telephone subscribers. Id. at 2. C P would make these facilities available to its affiliate, BVS, and to other video programmers under tariff on a common carrier basis. Id. The parties agree that existing fiber optic technology is capable of providing telephone service and transmitting video programming on an integrated basis directly to subscribers. Joint Stipulation of Facts ¶ 3.

In 1992, C P contacted the City of Alexandria government about the possibility of obtaining a cable television franchise to compete with the existing cable television operator, Jones Intercable. Alexandria's city attorney responded that, in light of § 533(b), the city would not "be in a position to grant any such franchise." Letter of Philip G. Sunderland, City Attorney, City of Alexandria, to J. Howard Middleton, Jr., Hazel Thomas (Feb. 17, 1993). The city attorney also stated that "the city would be in a position to process a franchise application from C P were the video programming prohibition in 47 U.S.C. § 533(b) removed." Id. Alexandria's mayor has submitted an affidavit indicating her support of C P's proposal, and indicating that, absent § 533(b), C P's application for a cable television franchise would receive the same consideration as would be accorded any other applicant. See Affidavit of Patricia S. Ticer at 2.

Plaintiffs filed the complaint in the instant action on December 17, 1992, challenging § 533(b) as violative of the First Amendment of the United States Constitution, both facially and as applied to their proposed provision of video programming in the City of Alexandria. Because this is a constitutional challenge to a federal statute, plaintiffs have named as defendants the United States of America, the Federal Communications Commission (the "Commission") and William P. Barr, in his official capacity as Attorney General of the United States (collectively, the "government"). On motion, the National Cable Television Association, Inc. ("NCTA") was permitted to intervene in support of the statute's constitutionality. NCTA accordingly participated in virtually every phase of the litigation, including submission of briefs, preparation of the stipulation of facts, and presentation of oral argument. Less extensive was the participation of thirty-three amici curiae, who were limited to submission of briefs.

After pursuing some formal discovery, the parties, at the Court's invitation, explored the possibility of submitting the matter to the Court on cross-motions for summary judgment by completing discovery informally and cooperatively and undertaking to prepare a joint stipulation of facts. The effort bore fruit. The matter is now before the Court on cross-motions for summary judgment based on a comprehensive stipulation of facts and a supporting record consisting of several thousand pages of affidavits, exhibits, and briefs. Indeed, it is difficult to imagine a more complete record, and it is hard to see how the Court's disposition of the dispute on this record can reasonably be labeled as "summary."

B.

Although § 533(b) was enacted as part of the 1984 Cable Act, telephone companies have been prohibited from providing cable television service since the early years of the cable television industry. Section 533(b) had its genesis in a similar restriction imposed by the Commission in 1970. At that time, the cable television industry was in its infancy and was referred to as community antenna television service ("CATV"). The then-existing technology entailed building large antennas in rural areas and other places unable to receive clear television signals over the air, and stringing cables, often on electric utility or telephone poles, from the central antenna to the CATV customers. In 1968, the Commission ruled that telephone companies must obtain certification pursuant to § 214 of the Communications Act, 47 U.S.C. § 214, prior to constructing, acquiring or operating facilities to provide "channel service" to cable television companies. Because the resulting § 214 applications revealed varying degrees of ownership affiliation between telephone companies and cable television operators, the Commission initiated a rule-making proceeding to ascertain whether telephone companies, either directly or through affiliates, should be permitted to provide cable television service to the public. As a result of this proceeding, the Commission concluded that telephone companies and their affiliates should be precluded, absent specific exemption, from providing cable television service within their local telephone service areas. The Commission based its ruling on a finding that the telephone companies had the potential to discriminate against independent CATV providers, in favor of telephone company affiliates, in granting access to telephone poles for attachment of the CATV cables.

In 1978, Congress passed the Pole Attachment Act, which authorized the Commission to "regulate the rates, terms, and conditions for pole attachments." 47 U.S.C. § 224(b)(1). Although this legislation addressed cable operators' fears of discriminatory pricing for pole attachments, the legislation is, by its terms, applicable only if access to poles is actually granted by the owner; it does not mandate such access. See FCC v. Florida Power Corp., 480 U.S. 245, 251, 107 S.Ct. 1107, 1111, 94 L.Ed.2d 282 (1987). Thus, the Pole Attachment Act only partially allayed the Commission's concerns regarding cable operators' access to telephone poles and conduit space.

In 1980, the Commission directed its staff to conduct a study of the Commission's cable television cross-ownership policies. This directive culminated in the issuance of a report by the FCC Office of Plans and Policy in November 1981, entitled FCC Policy on Cable Ownership, A Staff Report (the "OPP Report"). The OPP Report considered alternatives to the then-existing Commission policy against telephone company provision of cable television, but concluded by advising that the restriction "must be retained for the time being." OPP Report at 143. The report, while acknowledging that "the problem of pole access" would no longer "by itself" justify the restriction, id. at 162, found that additional concerns, noted but not relied upon by the Commission when it had originally implemented the ban, continued to militate against removing the restriction. Chief among these concerns was "cross-subsidization," namely the possibility that telephone companies operating cable television facilities would hide cable costs in their telephone rate bases. Such cross-subsidization "allow[s] a telephone company partially to avoid rate-of-return regulation on its telephone service . . . by attributing costs to the regulated telephone division and revenues to an unregulated cable division." Id. at 153. Unchecked, this practice would lead to higher telephone rates and supra-competitive profits for the telephone companies. Id. at 158. Such profits, in turn, could be used to underprice competing cable television operators, forcing them out of business, thereby enabling the telephone companies to leverage their regulated local exchange monopoly into an additional monopoly of video transmission services. The Commission took no formal action following release of the OPP Report either to approve or reject the report. The Commission's restriction on telephone companies' provision of cable television within their service areas was retained without modification.

In 1984, Congress passed the 1984 Cable Act, which includes the provisions at issue in this case. Section 533(b) was adapted directly from the regulations established by the Commission's 1970 Order, with the exception that where the Commission had prohibited telephone company provision of "CATV service," the new law prohibited provision of "video programming," defined as "programming provided by, or generally considered comparable to programming provided by, a television broadcast station." 47 U.S.C. § 522(19). Congress also included, as had the Commission's regulations, a rural exemption and waiver authority for the Commission. See 47 U.S.C. § 533(b)(3) and (4).

Legislative materials relating to § 533(b) are sparse. No legislative findings of fact accompanied the provisions. The sole specific reference to § 533(b) in the legislative history of the 1984 Cable Act is a passage in the House Committee Report, which indicates that the intent of the provision was "to codify current FCC rules concerning the provision of video programming over cable systems by common carriers. . . ." H.R. Rep. No. 934, 98th Cong., 2d Sess. 56 (1984), U.S. Code Cong. Admin.News 1984, pp. 4655, 4693. The report indicates that § 533 as a whole, which also includes a prohibition on cross-ownership between television stations and cable systems in the same geographical area (and, in the version of the bill reported by the House of Representatives but not in the final version of the statute, a provision preventing cross-ownership between daily newspapers and cable systems in the same geographical area) was intended "to prevent the development of local media monopolies, and to encourage a diversity of ownership of communications outlets." Id. at 55, U.S. Code Cong. Admin.News 1984, p. 4692.

In August 1986, less than two years after Congress enacted § 533(b), the Commission directed its Common Carrier Bureau to prepare a notice of inquiry "on the question of the restriction on cable ownership placed on local exchange telephone companies." 1 FCC Rcd. 864, 897 (1986). A formal Notice of Inquiry was issued a year later, In re Telephone Company — Cable Television Cross-Ownership Rules (Notice of Inquiry), 2 FCC Rcd. 5092 (1987), and was followed by a Further Notice of Inquiry and Notice of Proposed Rulemaking released in September 1988. In re Telephone Company — Cable Television Cross-Ownership Rules (Further Notice of Inquiry and Notice of Proposed Rulemaking) (the "FNOI"), 3 FCC Rcd. 5849 (1988). In the FNOI, the Commission tentatively concluded that it should recommend to Congress that § 533(b) be eliminated.

In August 1992, after soliciting a further round of comments, the Commission finally acted on its tentative conclusion, recommending formally to Congress "that it amend the Cable Act to permit the local telephone companies to provide video programming directly to subscribers in their telephone service areas, subject to appropriate safeguards." In re Telephone Company — Cable Television Cross-Ownership Rules (Second Report and Order, Recommendation to Congress, and Second Further Notice of Proposed Rule-making) (the "Video Dialtone Order"), 7 FCC Rcd. 5781, 5847 (1992). The Commission concluded that "the risks of anticompetitive conduct by the local telephone companies in connection with the direct provision of video programming have been attenuated by the enormous growth of the cable industry," with the result that "any remaining risk of anticompetitive conduct by the local telephone companies is outweighed by the potential public interest benefits their entry would bring." Id. at 5848-49. As a consequence, the Commission found that elimination of § 533(b) would "promote our overarching goals in this proceeding by increasing competition in the video marketplace, spurring the investment necessary to deploy an advanced infrastructure, and increasing the diversity of services available to the public." Id. at 5847.

Throughout the period the Commission was considering the issue of telephone company entry into the cable television business, Congress itself was devoting extensive attention to the matter. Repeal of § 533(b) has been considered in numerous Congressional hearings, and proposals to eliminate the statute have appeared in six separate bills since 1989. To date, Congress has declined to modify the provision, despite the recommendation of the Commission, and despite the interim passage of the Cable Television Consumer Protection and Competition Act of 1992 (the "1992 Cable Act"), which comprehensively revised regulation of the cable television industry. The Senate Report accompanying the 1992 Cable Act expressly affirmed the Committee's belief that the § 533(b) ban "enhance[d] competition." See S.Rep. No. 92, 102d Cong., 1st Sess. 18 (1991), U.S. Code Cong. Admin.News 1992, pp. 1133, 1150.

C.

Cable television has changed dramatically since the Commission originally banned telephone companies from participation in the industry in 1970. At that time, CATV reached only approximately 9% of all homes and mainly consisted of small, limited capacity systems in remote communities. See Video Dialtone Order, 7 FCC Rcd. at 5848; Joint Stipulation of Facts ¶ 17. Now, cable television is available to over 96% of the nation's homes, and approximately 60% of the television households subscribe. Id.

Cable systems carry both the programming of broadcast television stations and programming made by or directly marketed to cable operators. In recent years, the amount of non-broadcast video programming has increased markedly. As of 1992, there were 78 national cable networks, up from only four in 1976. Joint Stipulation of Facts ¶ 9. Cable systems nationwide currently have an average capacity of about 40 channels. Id. at ¶ 20. As the parties have stipulated, "the supply of available video programming exceeds the available channel capacity of almost all cable systems." Id. at ¶ 19.

Companies operating cable television systems have grown rapidly, commensurate with the growth of the industry. According to the Census Bureau, annual cable operator revenues were $345 million in 1970. Id. at ¶ 27. By 1992, annual revenues of the industry topped $21 billion. Id. Many cable systems serving individual communities are owned by large, national or regional chains known as multiple system operators ("MSOs"). The five largest MSOs combined to serve over 40% of all cable subscribers. Id. at ¶ 29. The largest MSO, Tele-Communications, Inc., served 9.6 million cable subscribers in 1991 and had revenues of $3.8 billion. The second largest, Time Warner, had 6.8 million subscribers and total revenue from all sources of $12 billion. Id. at ¶ 31.

Despite Congressional efforts to promote competition in the cable industry, the provision of cable television has remained a monopoly service in virtually every community. In 1991, cable system operators faced competition from another operator in less than 1% of the localities served by cable. Id. at ¶ 28.

In Alexandria, the sole provider of cable television service is Jones Intercable, the country's eighth largest MSO. Id. at ¶ 32. Cable service is available to over 90% of all television households in Alexandria, and 57% of television households subscribe. Id. at ¶ 18. The system deployed in Alexandria has a capacity of 51 channels, and, as of April 1993, Jones Intercable offered a programming package of 44 channels for $24.65 per month. Id. at ¶¶ 21, 34. Plaintiffs note that in nearby Anne Arundel County, Maryland, where Jones Intercable faces competition from another cable service, the company charges only $21.20 per month for a comparable programming package; cable subscribership in Anne Arundel County is over 70%. Id. at ¶¶ 34-35.

II.

As a preliminary matter, the government disputes plaintiffs' standing to bring a challenge to § 533(b). Specifically, the government argues that plaintiffs' injury, the inability to provide cable television service within C P's service area, is neither "traceable" to § 533(b) nor "likely to be redressed" by a decision invalidating § 533(b). This contention is meritless.

In order to establish standing, at an "irreducible constitutional minimum," plaintiffs must show three elements:

First, the plaintiff must have suffered an "injury in fact" — an invasion of a legally-protected interest which is (a) concrete and particularized . . .; and (b) "actual or imminent, not 'conjectural' or 'hypothetical,'" . . . . Second, there must be a causal connection between the injury and the conduct complained of — the injury has to be "fairly trace[able] to the challenged action of the defendant, and not . . . th[e] result [of] the independent action of some third party not before the court." . . . . Third, it must be "likely," as opposed to merely "speculative," that the injury will be "redressed by a favorable decision."

At the heart of the government's standing argument is the observation that if § 533(b) were lifted, plaintiffs would not instantly be in a position to provide cable television. In support, the government notes that plaintiffs have obtained neither approval from the Virginia State Corporation Commission nor a franchise from the City of Alexandria to operate a cable television system. Thus, the government contends, plaintiffs' inability to provide cable television is not traceable solely to § 533(b), and invalidation of § 533(b) would not necessarily redress the purported injury that plaintiffs have suffered.

The fallacy of this argument is that it is not an essential precondition of plaintiffs' standing that the challenged statute be the sole obstacle to plaintiffs' achievement of their ultimate goal. The fact that § 533(b) stands as an "absolute barrier" to plaintiffs' efforts to operate a cable television service is sufficient, by itself, to satisfy the traceability requirement. See Arlington Heights, 429 U.S. at 261, 97 S.Ct. at 561. Similarly, plaintiffs satisfy the requirement that their injury would be "redressed by a favorable decision," simply because invalidation of the statute would allow plaintiffs to pursue regulatory approval and a municipal franchise on the same footing as any other applicant. See Regents of University of California v. Bakke, 438 U.S. 265, 281 n. 14, 98 S.Ct. 2733, 2743 n. 14, 57 L.Ed.2d 750 (1978) (standing exists for plaintiff unconstitutionally deprived of opportunity to compete for a benefit, without proof that, in the absence of the challenged program, plaintiff necessarily would have received the benefit).

It would be both formalistic and wasteful of governmental and societal resources to require, as the government suggests is necessary, that plaintiffs engage in a doomed effort to obtain a municipal franchise and state regulatory approval for their venture, even in the face of a federal statute that expressly forbids them from engaging in the activity in question. The futility of any such undertaking is underscored by the predictable response of the Alexandria city government, which refused, in light of § 533(b), to consider C P's preliminary efforts to obtain a municipal franchise. See Letter of Philip G. Sunderland, City Attorney, City of Alexandria, to J. Howard Middleton, Jr., Hazel Thomas (Feb. 17, 1993).

In essence, it is the government's position that C P, a local telephone company, does not have standing to challenge a statute that expressly and exclusively restricts the activities of local telephone companies. Such a contention is manifestly against the thrust of the Supreme Court's decisions on standing, and is therefore rejected. Plaintiffs have proper standing to bring this action.

III. A.

The fundamental constitutional question that must be addressed in relation to plaintiffs' First Amendment claim is the appropriate level of judicial scrutiny to be applied to § 533(b). Generally, regulations that are alleged to infringe upon speech protected under the First Amendment are subjected to one of two levels of scrutiny. First, the "strict scrutiny" standard is applicable to content-based regulations. This is the most stringent standard, for "[t]he First Amendment generally prevents government from proscribing speech, or even expressive conduct, because of disapproval of the ideas expressed." R.A.V. v. City of St. Paul, ___ U.S. ___, ___, 112 S.Ct. 2538, 2542, 120 L.Ed.2d 305 (1992) (internal citations omitted). As a result, "content-based regulations are presumptively invalid." Id. A content-based regulation can survive only if the government "'show[s] that its regulation is necessary to serve a compelling state interest and is narrowly drawn to achieve that end.'" Simon Schuster, Inc. v. Members of New York State Crime Victims Board, ___ U.S. ___, ___, 112 S.Ct. 501, 509, 116 L.Ed.2d 476 (1991) (quoting Arkansas Writers' Project, Inc. v. Ragland, 481 U.S. 221, 231, 107 S.Ct. 1722, 1728, 95 L.Ed.2d 209 (1987)).

Regulations that are not content-based, but which still infringe upon protected speech may be accorded a lower, "intermediate" level of scrutiny. Thus, the government may, "impose reasonable restrictions on the time, place, or manner of protected speech" without triggering strict scrutiny, provided, inter alia, that such restrictions are content-neutral. Ward v. Rock Against Racism, 491 U.S. 781, 789-90, 109 S.Ct. 2746, 2753, 105 L.Ed.2d 661 (1989). Similarly, the government may regulate conduct, even when such conduct has an expressive element, provided that it does not "proscribe particular conduct because it has expressive elements." Texas v. Johnson, 491 U.S. 397, 406, 109 S.Ct. 2533, 2540, 105 L.Ed.2d 342 (1989). The Supreme Court has ruled that either type of content-neutral regulation will survive scrutiny under the First Amendment if the provisions in question pass the test first enunciated in United States v. O'Brien, 391 U.S. 367, 377, 88 S.Ct. 1673, 1679, 20 L.Ed.2d 672 (1968), and refined in later decisions, namely, that the provisions "'are justified without reference to the content of the regulated speech, that they are narrowly tailored to serve a significant governmental interest, and that they leave open ample alternative channels for communication of the information.'" Ward, 491 U.S. at 791, 109 S.Ct. at 2753 (quoting Clark v. Community for Creative Non-Violence, 468 U.S. 288, 293, 104 S.Ct. 3065, 3069, 82 L.Ed.2d 221 (1984)); see also Community for Creative Non-Violence, 468 U.S. at 298, 104 S.Ct. at 3071 (indicating that the constitutional test for the validity of time, place, or manner restrictions is "in the last analysis . . . little, if any, different from" the test for restrictions on expressive conduct).

Defendants in this matter forcefully contend that the provisions in question should not be subjected to either of the two forms of heightened review applicable in the First Amendment context. Instead, defendants argue that § 533(b) is an example of "structural" economic regulation, only tangentially related to the First Amendment and, therefore, that § 533(b) should be subjected only to rationality review, that is, that this Court must uphold the provision if it is rationally related to a legitimate government objective. At most, defendants argue, the provision places only an incidental burden on the plaintiffs' First Amendment rights and therefore should be subjected to intermediate scrutiny under the O'Brien test.

Plaintiffs reject this view and argue instead that § 533(b) is a direct infringement on their right to speak in a particular forum, thereby directly implicating First Amendment considerations. Moreover, plaintiffs contend that § 533(b) is a content-based restriction on speech and therefore, under Supreme Court precedent, is subject to strict scrutiny. At the least, plaintiffs contend, even if § 533(b) is found to be content-neutral, the incidental burden on plaintiffs' speech necessitates review of the statute under the O'Brien test.

Plaintiffs' argument is correct in an important respect; the provision in question must be subjected to a higher standard than mere "rationality review." Section 533(b) directly abridges the plaintiffs' right to express ideas by means of a particular, and significant, mode of communication — video programming. Video programming, as offered by cable operators, has been recognized by the Supreme Court as a form of speech protectible under the First Amendment. See Leathers v. Medlock, 499 U.S. 439, ___, 111 S.Ct. 1438, 1442, 113 L.Ed.2d 494 (1991) ("Cable television . . . is engaged in 'speech' under the First Amendment"); City of Los Angeles v. Preferred Communications, Inc., 476 U.S. 488, 494, 106 S. Ct. 2034, 2037, 90 L.Ed.2d 480 (1986) ("[T]hrough original programming or by exercising editorial discretion over which stations or programs to include in its repertoire, [a cable television operator] seeks to communicate messages on a wide variety of topics and in a wide variety of formats."). As such, a statute that directly abridges the right to engage in this form of speech must be evaluated under the heightened standards that have evolved under the Supreme Court's First Amendment decisions. This is true even when the abridgement is an incidental effect of a statute directed at non-speech activity, such as "structural" economic regulation, if such a statute disproportionately impacts entities engaged in speech protected by the First Amendment. See, e.g., Arcara v. Cloud Books, Inc., 478 U.S. 697, 704, 106 S.Ct. 3172, 3176, 92 L.Ed.2d 568 (1986).

Defendants' authorities in support of rationality review are all distinguishable. With one exception, the cases cited in support of this position deal with regulations directed at the broadcast media. See FCC v. National Citizens Committee for Broadcasting, 436 U.S. 775, 98 S.Ct. 2096, 56 L.Ed.2d 697 (1978); United States v. Midwest Video Corp., 406 U.S. 649, 92 S.Ct. 1860, 32 L.Ed.2d 390 (1972); National Broadcasting Co. v. United States, 319 U.S. 190, 63 S.Ct. 997, 87 L.Ed. 1344 (1943). In each of these cases, the Supreme Court explicitly premised its ruling on the fact that there is a physical scarcity of electromagnetic frequencies available for utilization by prospective broadcasters. See, e.g., National Broadcasting Co., 319 U.S. at 226, 63 S.Ct. at 1014 ("Unlike other modes of expression, radio inherently is not available to all. That is its unique characteristic, and that is why, unlike other modes of expression, it is subject to governmental regulation."); see also Red Lion Broadcasting Co. v. FCC, 395 U.S. 367, 89 S.Ct. 1794, 23 L.Ed.2d 371 (1969). In light of the physical scarcity of electromagnetic frequencies, the Supreme Court has accorded Congress greater latitude under the First Amendment to regulate broadcasters than other forms of communication media, to ensure that the "public interest" is served. See, e.g., National Citizens Committee, 436 U.S. at 795, 98 S.Ct. at 2112.

Of course, viewing only the end product, cable television is largely indistinguishable from broadcast television. Yet enormous differences in the technology used to convey the respective forms of communication clearly warrant different treatment of cable television under the First Amendment. See, e.g., Southeastern Promotions Ltd. v. Conrad, 420 U.S. 546, 557, 95 S.Ct. 1239, 1246, 43 L.Ed.2d 448 (1975) ("Each medium of expression . . . must be assessed for First Amendment purposes by standards suited to it, for each may present its own problems."). As the parties have stipulated, "There are no absolute physical barriers to the construction of competing multichannel cable services attributable to the physical scarcity of the electromagnetic spectrum." Joint Stipulations of Fact, ¶ 37. Moreover, while there may, at some point, exist an absolute physical constraint on the number of cables that could be strung along existing utility rights-of-way in order to service individual households, the number of cable operators that could simultaneously service a household is so large as to be infinite for purposes of First Amendment analysis.

The only scarcity argument that defendants could legitimately advance to make the broadcasting cases apposite is that the cable television industry is a natural monopoly and, therefore, that certain economic factors conspire to create a condition of scarcity in the market for cable television analogous to the scarcity imposed on broadcasting by the physical properties of the electromagnetic spectrum. This argument has been foreclosed, however, by the Supreme Court's decision in Miami Herald Publishing Co. v. Tornillo, 418 U.S. 241, 94 S.Ct. 2831, 41 L.Ed.2d 730 (1974). There, the Supreme Court struck down a state statute requiring a newspaper, under certain circumstances, to publish an editorial reply by a candidate who had been assailed in the newspaper. The statute in question was similar, in its requirement of mandated access, to the Commission's "fairness doctrine," applicable to radio broadcasters, which had been upheld in Red Lion. 395 U.S. at 367, 89 S.Ct. at 1794. Significantly, the Supreme Court struck down the statute despite accepting the assumption that there had evolved a "monopoly of the means of communication" and citing a study finding that "'[o]ne-newspaper towns have become the rule, with effective competition operating in only 4 percent of our large cities.'" Tornillo, 418 U.S. at 249-50 n. 13, 94 S.Ct. at 2835-36 n. 13. The clear implication of Tornillo is that the principle that allows an increased level of government intervention under conditions of physical scarcity is inapplicable when scarcity results from purely economic forces. As a result, an assertion that the cable television industry is a natural monopoly is insufficient to bring the present case within the ambit of the broadcast cases.

While defendants cannot argue scarcity, they make a related argument, namely that, as beneficiaries of a government-sanctioned monopoly for the provision of local wireline telephone exchange services, plaintiffs may have their right to continued status as a monopoly subjected to certain conditions imposed by the government. It is permissible, defendants contend, that among those conditions the government require that the plaintiffs refrain from providing video programming to customers within their service areas. Defendants argue that, in effect, plaintiffs have a choice: in any given area, they may provide video programming or local telephone service; they may not do both. Thus, § 533(b) does not absolutely preclude plaintiffs from offering video programming — if they wish to do so, they simply must abandon their local wireline exchange monopoly.

It is unnecessary, in the context of this litigation, to reach the thorny legal question of when, and under what circumstances, the government may condition a benefit upon the beneficiary's relinquishment of a constitutional right. Section 533(b) is simply not part of a quid pro quo exchange in which the telephone companies were offered the opportunity to operate a monopoly service in return for accepting restrictions on their First Amendment rights. To be sure, "the BOCs [Bell Operating Companies] have monopolies over local telephone exchange service in their respective service areas." United States v. Western Electric Co., 993 F.2d 1572, 1578 (D.C. Cir. 1993). Similarly, there is no question that in this jurisdiction, as in most others, the state government has taken actions to preserve the local exchange monopoly of the BOC. Even so, defendants' quid pro quo argument is unpersuasive.

First, the sovereign which purportedly provided the benefit to the plaintiffs is not the same sovereign that placed the condition on the benefit. As noted above, it is the Commonwealth of Virginia that has legislated in support of the plaintiffs' local exchange monopoly. In no way can defendants persuasively argue that the federal government has sanctioned plaintiffs' monopoly. Far from it, the record reflects vigorous steps by the federal government to minimize the anticompetitive consequences of the local exchange monopoly. Having provided no benefit to plaintiffs, the federal government cannot be heard to argue that, by restricting the plaintiffs' First Amendment rights, it has merely placed a condition on a benefit it has granted. C.f. First National Bank of Boston v. Bellotti, 435 U.S. 765, 778-79 n. 14, 98 S.Ct. 1407, 1416-17 n. 14, 55 L.Ed.2d 707 (1978) (restriction imposed by one sovereign cannot be justified by grant of benefit by different sovereign).

Nor was § 533(b) a condition of plaintiffs accepting the local exchange monopoly. The state government sanctioned plaintiffs regulated monopoly long before, and for reasons unrelated to, the federal government's passage of § 533(b). In no way is there a quid pro quo relationship between § 533(b) and the local exchange monopoly.

Besides, the Supreme Court has given no indication that any government's grant of monopoly status to an entity is sufficient to allow it to restrict that entity's First Amendment rights. Indeed, its decisions suggest the contrary. See Central Hudson Gas Electric Corp. v. Public Service Commission of New York, 447 U.S. 557, 568, 100 S.Ct. 2343, 2352, 65 L.Ed.2d 341 (1980) ("appellant's monopoly position does not alter the First Amendment's protection for its commercial speech"); Consolidated Edison Co. v. Public Service Commission of New York, 447 U.S. 530, 534 n. 1, 100 S.Ct. 2326, 2331 n. 1, 65 L.Ed.2d 319 (1980) ("Nor does [appellant's] status as a privately owned but government regulated monopoly preclude its assertion of First Amendment rights."). Taken to its logical extreme, defendants' argument would mean that because state governments have chosen to confer certain advantages on businesses that opt to incorporate, any corporate speaker is, as a beneficiary of those advantages, subject to having conditions placed on its right to free speech. This proposition has flatly been rejected by the Supreme Court. See Bellotti, 435 U.S. at 778-79 n. 14, 98 S.Ct. at 1416-17 n. 14. Accordingly, this Court rejects defendants' argument that § 533(b) may be characterized as a quid pro quo exchange of monopoly benefits in return for acceptance of First Amendment restrictions and, therefore, that the provision need only be accorded rationality review.

The last case defendants cite in support of rationality review is Associated Press v. United States, 326 U.S. 1, 65 S.Ct. 1416, 89 L.Ed. 2013 (1945). In that case, the Supreme Court upheld the application of the antitrust laws to enjoin members of the Associated Press from a concerted refusal to deal with non-members of the organization. In addressing the First Amendment implications of the decision, the Supreme Court declined to apply any heightened form of scrutiny to the application of the antitrust statutes, despite the fact that the decision compelled the members of the Associated Press to share access to their news stories and thus, arguably, to "speak" in a manner contrary to their wishes. Id. at 19-20, 65 S.Ct. at 1424-25.

Associated Press stands only for the proposition, confirmed in numerous other decisions, that the media may be subjected to economic regulations that are generally applicable to all industries without triggering heightened review of such regulations under the First Amendment. See, e.g., Oklahoma Press Publishing Co. v, Walling, 327 U.S. 186, 192-93, 66 S.Ct. 494, 497, 90 L.Ed. 614 (1946) (application of Fair Labor Standards Act); Associated Press v. NLRB, 301 U.S. 103, 132-33, 57 S.Ct. 650, 655-56, 81 L.Ed. 953 (1937) (application of National Labor Relations Act). The Supreme Court has made clear, however, that this line of cases does not mean that economic regulation is subject only to rationality review regardless of the degree to which the regulation impinges on an entity's First Amendment activity. To the contrary, O'Brien and its progeny have plainly held that heightened scrutiny will be applied to those governmental actions that have a significant, disproportionate, impact on expressive conduct, even if such impact is only an incidental effect of the statute. See, e.g., Minneapolis Star Tribune Co. v. Minnesota Commissioner of Revenue, 460 U.S. 575, 585, 103 S.Ct. 1365, 1371-72, 75 L.Ed.2d 295 (1983) ("differential treatment . . . of the press" implicates the First Amendment and is "presumptively unconstitutional").

Section 533(b) is not a generally applicable statute; it applies to a sharply limited number of entities — companies providing local telephone exchange services. Moreover, § 533(b) achieves its aim by means of a direct abridgement of the telephone companies' right to participate in a protected form of speech. This is centrally significant, for the Supreme Court has never accorded mere rationality review to a statute, even a "structural" economic regulation, that, on its face, prohibited a specific category of speakers from engaging in a protected form of speech. C.f. Arcara, 478 U.S. at 697, 106 S.Ct. at 3172 (refusing to apply heightened First Amendment review to statute that incidentally burdened First Amendment rights but was not expressly "directed" at communicative activity). In light of O'Brien and its progeny, § 533(b) must plainly be evaluated on a standard higher than mere "rationality" review.

B.

At first glance, it would appear virtually certain that a statute restricting telephone companies from providing video programming to customers within their service areas would fall within one of the two content-neutral categories, either as: (1) a time, place, and manner restriction on the form of the telephone companies' speech or (2) an economic regulation directed at non-speech conduct, but inflicting a substantial, and disproportionate, incidental effect on the telephone companies' right to engage in expressive activity. After all, had Congress chosen to prohibit telephone companies from transmitting any visual image, the resulting statute would almost certainly be content-neutral, and there would be no persuasive argument that such a statute would be subject to strict scrutiny. Yet, analysis cannot end here for § 533(b), as written and enacted, requires reference to the content of the relevant message in order to determine whether a particular visual image qualifies under the statutory definition of "video programming." This circumstance substantially complicates the analysis concerning whether § 533(b) is a content-based or content-neutral regulation.

The 1984 Cable Act defines "video programming" as "programming provided by, or generally considered comparable to programming provided by, a television broadcast station." 47 U.S.C. § 522(19). The parties do not dispute that § 533(b) permits the telephone companies to transmit visual images such as the face of a clock reflecting the current time, or the image of a person speaking to the viewer by picture-phone. Such images are permissible under the statute because they are not comparable to programming that was provided by a television broadcast station in 1984. A moment's reflection makes it readily apparent that the cognitive process necessary to apply the video programming definition cannot be accomplished without comparing the content of the image being tested with the content of 1984 broadcast television programming. Despite defendants' protestations to the contrary, there is simply no way that § 533(b), incorporating as it does the § 522(19) definition, can be applied without reference to the content of the message being conveyed.

The line between permissible visual images and impermissible "video programming" has become increasingly blurred with the advance of technology. This is nowhere more evident than in the Commission's most recent interpretation regarding the scope of the § 533(b) ban, the Video Dialtone Order. See 7 FCC Rcd. at 5781. In that action, the Commission modified its rules to allow telephone companies to provide a package of video services known as "video dialtone." The Commission found that its action did not violate § 533(b) because the video services included within the video dialtone package did not meet the statutory definition of "video programming." In "clarifying" its interpretation of the scope of § 533(b), the Commission presented the following example:

We . . . conclude that programming that includes multimedia graphics and information services that incorporate video images generally would not be video programming because the video images are not severable from the program service. . . . For instance, an educational multimedia presentation which may contain video images would be permissible under our interpretation. . . . We do not contemplate, however, that the simple inclusion of some textual information, for example, could transform a severable video program into a permissible multimedia program.

Video Dialtone Order, 7 FCC Rcd. at 5822 n. 196. Fortunately, the Court is not called upon to interpret or apply this language. Apparently, the Commission will allow telephone companies to transmit presentations that are primarily textual, and include some video segments, but will prohibit presentations that are primarily video, and include some textual segments. Irrespective of whether this is a workable line of demarcation, the example is noteworthy because it shows that the Commission's interpretation is inescapably premised on the content of the relevant transmission.

Notwithstanding the fact that application of § 533(b) depends on the content of the telephone companies' proposed message, the section cannot, under recent Supreme Court precedent, be considered a content-based restriction. Recent decisions have made clear that "strict scrutiny" is not triggered because application of a speech restriction is dependent on the content of the speech. Rather, "[g]overnment regulation of expressive activity is content-neutral [and therefore not subject to strict scrutiny] so long as it is ' justified without reference to the content of the regulated speech.'" Ward, 491 U.S. at 791, 109 S.Ct. at 2754 (quoting Community for Creative Non-Violence, 468 U.S. at 293, 104 S.Ct. at 3069) (emphasis added by the Ward opinion). "The government's purpose is the controlling consideration." Ward, 491 U.S. at 791, 109 S.Ct. at 2754.

The import of this distinction was made apparent in Renton v. Playtime Theatres, Inc., 475 U.S. 41, 106 S.Ct. 925, 89 L.Ed.2d 29 (1986), in which the Supreme Court was faced with a municipal ordinance imposing zoning limitations on the location of "adult theaters." The applicability of the ordinance in that case to any specific theater clearly turned on an evaluation of the content of the films exhibited at that theater. Nevertheless, the Court refused to apply strict scrutiny to the ordinance, holding that the ordinance had been justified as a means of preventing various "secondary effects" of adult theaters, such as crime, devaluation of adjacent properties, and alienation of retail establishments, and that such justification was "unrelated to the suppression of free expression." Id. 475 U.S. at 48, 106 S.Ct. at 929.

Similarly, the government in this case has advanced two justifications for the § 533(b) ban that are unrelated to the suppression of free expression: (1) protecting diversity of ownership of communications outlets and (2) promoting competition in the video programming market. Thus, in this case, as in Renton, a speech restriction that makes a facial distinction based on content is justified by the government on the basis of certain secondary effects of that speech. Here, as in Renton, the government admittedly seeks to restrict speech, on the ground that the prevention of these secondary effects will be advanced by the restriction. If applied here, Renton would allow § 533 to escape strict scrutiny and to be subject instead to the less rigorous "intermediate" level of scrutiny prescribed by O'Brien. Before proceeding with the analysis, an important objection to Renton must be addressed.

Renton signals a significant retreat from the traditional content-based/content-neutral distinction. The notion that a legislative act curtailing First Amendment rights is to be evaluated based on its justification rather than on its operation is more than a little troubling. The theoretical underpinning of the content-based/content-neutral distinction in First Amendment jurisprudence has been an awareness that content-based restrictions, whatever their ostensible justifications, afford legislatures increased opportunities to elevate one viewpoint over another. See Geoffrey R. Stone, Content-Neutral Restrictions, 54 U.Chi.L.Rev. 46 (1987). Moreover, the distinction is grounded in the notion that courts cannot consistently recognize when a content-based restriction will have the effect of fostering or penalizing a particular viewpoint, or when the legislature's asserted "secondary effect" justification is disingenuous. Thus, any speech restriction, the application of which depends on the message's content, has traditionally, and appropriately, been treated with suspicion by the courts as a potential vehicle for the conscious or unconscious prejudices of the legislature. See Boos v. Barry, 485 U.S. 312, 336-37, 108 S.Ct. 1157, 1171-72, 99 L.Ed.2d 333 (1988) (Brennan, J. concurring in the judgment) ("[T]he best protection against governmental attempts to squelch opposition has never lain in our ability to assess the purity of legislative motive but rather in the requirement that the government act through content-neutral means that restrict expression that government favors as well as expression it disfavors.").

The Supreme Court's recent reliance, in cases such as Renton, on a legislature's justification of a statute, rather than on the means by which the statute achieves its ends, preserves the form of the content-neutral/content-based distinction, but guts it of its potency. The Renton "secondary effects" doctrine abandons the healthy mistrust of the judiciary's ability to detect viewpoint distorting effects of content-based regulations in favor of a misplaced confidence that either: (a) legislatures will always acknowledge any viewpoint distortion likely to result from a regulation or (b) courts will consistently be able to predict which content-based regulations will be devoid of distorting effects. This approach is not likely to be adequately protective of First Amendment values. See id. 485 U.S. at 336, 108 S.Ct. at 1172 ("[T]he inherently ill-defined nature of the Renton analysis certainly exacerbates the risk that many laws designed to suppress disfavored speech will go undetected.").

Renton remains the only case to date in which a majority of the Supreme Court has found that the government's asserted content-neutral justification for a statute can overcome the fact that the statute, on its face, has drawn a content-based distinction. This lends some force to the plaintiffs' contention that Renton should be viewed as an isolated decision, applicable only in the context of sexually explicit speech.

The problem with this argument is that the Supreme Court, just last term, had an opportunity to limit Renton in such a fashion, and refused to do so. In City of Cincinnati v. Discovery Network Inc., ___ U.S. ___, 113 S.Ct. 1505, 123 L.Ed.2d 99 (1993), the Court was faced with a municipal ordinance that banned newsracks purveying commercial publications from being placed on public property. In Discovery Network, as in Renton and the present case, the applicability of the relevant ordinance turned on a content-based distinction — in that case, between commercial and non-commercial publications. Cincinnati attempted to rationalize its ordinance, as in Renton and the present case, with content-neutral justifications — in that case, safety and aesthetics. In striking down the ordinance, the Supreme Court distinguished Renton by stating, "In contrast to the speech at issue in Renton, there are no secondary effects attributable to respondent publishers' newsracks that distinguish them from the newsracks Cincinnati permits to remain on its sidewalks." Discovery Network, ___ U.S. at ___, 113 S.Ct. at 1517. Another section of the majority's opinion states, "[W]e do not reach the question whether, given certain facts and under certain circumstances, a community might be able to justify differential treatment of commercial and noncommercial newsracks. We simply hold that on this record Cincinnati has failed to make such a showing." Id. ___ U.S. at ___, 113 S.Ct. at 1516. Thus, the opinion invites the inference that, had the city placed in the record some showing of differing effects attributable to the commercial newsracks, i.e. that people were more prone to litter with the commercial publications or that the commercial newsracks were bigger, flashier, or in some way a greater eyesore, then the Renton analysis would have been applicable and the ordinance might have been upheld. Discovery Network is significant, therefore, as an indication that the Court does not view Renton as an aberrant decision or the "secondary effects" theory as a limited principle, applicable only to sexually explicit speech. See also Boos, 485 U.S. at 312, 108 S.Ct. at 1157-58 (plurality of justices indicate willingness to apply Renton analysis to political speech). This apparent general applicability of Renton compels the holding here that § 533(b) is a content-neutral restriction, despite the fact that the determination of whether the statute applies to any particular message may only be accomplished by reference to the content of that message. The two interests advanced by the government in support of § 533(b), diversity in the ownership of communications outlets and competition in the video programming market, are, in the same sense as the secondary effects in Renton, justifications which are made "without reference to the content of the regulated speech." Ward, 491 U.S. 781, 782, 109 S.Ct. 2746, 2748.

While plaintiffs argue that the statute achieves its ends only by the suppression of speech, and thus that the asserted "secondary effects" justification is itself impermissible, see Buckley, 424 U.S. at 48-49, 96 S.Ct. at 648-49 (government may not "restrict the speech of some elements of our society in order to enhance the relative voice of others"), this argument is, on closer scrutiny, tautological. Renton only applies to statutes that restrict speech. Thus any statute analyzed under the Renton-type analysis will necessarily achieve its goal of regulating "secondary effects" by means of the suppression of speech. To invalidate a statute simply because the regulation of "secondary effects" is achieved by restricting speech would lead to the result that every statute analyzed under Renton would invariably be struck down. Renton itself proves that is not the law.

For the foregoing reasons, it follows that, while § 533(b) must be subjected to heightened review as a restriction on plaintiffs' First Amendment rights, it does not warrant the strictest standard of review reserved for content-based restrictions on speech. The fact that § 533(b) is "justified" on grounds unrelated to the suppression of the speech means, notwithstanding this Court's misgivings about the Renton reasoning, that the statute must be classified as content-neutral and subjected to the intermediate level of scrutiny first articulated in O'Brien and applicable to both "time, place, and manner restrictions" and to incidental burdens on speech.

IV.

Ward teaches that a statute will pass the intermediate level of scrutiny if, in addition to being content neutral, it: (1) is narrowly tailored to serve a significant government interest and (2) leaves open ample alternative channels for communication. See Ward, 491 U.S. at 789, 109 S.Ct. at 2753. With respect to § 533(b), there is little doubt that the statute leaves open ample alternative channels for communication. As discussed above, plaintiffs remain unfettered in their ability to communicate by any means other than video programming. Moreover, plaintiffs may directly provide video programming to anyone residing outside their area of service. Finally, plaintiffs may communicate with subscribers inside their service area through video programming by producing such programming and marketing it to broadcasters and cable operators. Plaintiffs are by no means "silenced" by the operation of § 533(b).

Given this, the Court must determine whether § 533(b) is "narrowly tailored to serve a significant governmental interest." As the history of § 533(b) makes clear, the rapidly changing nature of the telecommunications field has caused the rationale supporting the statute to evolve over time. Congress' precise intent in passing § 533(b) in 1984 is made difficult to discern both by the paucity of legislative materials and by the fact that Congress' sole expression of intent — to "codify current FCC rules" — occurred at a time when the Commission's rationale for its own rules was in a state of flux. Compare 1970 Order, 21 F.C.C.2d at 324 (stressing pole access concerns) with OPP Report at 153-65 (emphasizing threat of cross-subsidization). It is not necessary to the present inquiry, however, to parse the record of Commission proceedings and concomitant Congressional statements in order to determine precisely which of the Commission's concerns Congress was seeking to vindicate by passage of § 533(b). For purposes of applying the O'Brien test, a reviewing court "must eschew altogether the 'guesswork' of speculating about the motives of lawmakers. . . . Rather, [the court] must look to the face of the regulation and the identifiable interests advanced to justify the regulation." 11126 Baltimore Blvd. v. Prince George's County, 886 F.2d 1415, 1426 (4th Cir. 1989), vacated on other grounds, 496 U.S. 901, 110 S.Ct. 2580, 110 L.Ed.2d 261 (1990); see also Hart Book Stores, Inc. v. Edmisten, 612 F.2d 821, 829 (4th Cir. 1979), cert. denied, 447 U.S. 929, 100 S.Ct. 3028, 65 L.Ed.2d 1124 (1980). As such, § 533(b)'s evolving rationale is non-problematical. Regardless of what rationale may have been offered for § 533(b) at the time of its passage, if, as conditions exist today, the government can assert a justification for the statute such that the statute is "narrowly tailored to serve a significant government interest," then the statute must be upheld.

The government contends that § 533(b) serves two separate, but related, interests: promoting competition in the video programming market and preserving diversity in the ownership of communications media. Upon reflection, however, these concerns can be seen to collapse into a single interest. Section 533(b) simply does not, in a direct fashion, promote competition in the video programming market. As the cable television industry currently exists in the United States, the transport of video programming is a monopoly service. See Joint Stipulation of Facts ¶ 28 ("Of the approximately 10,000 communities served by cable, as of 1991, 53 communities had more than one competing cable system in the same locality."). Section 533(b), which serves to bar entry into the market for video transport service by the one class of potential competitors that has exhibited an inclination to compete with the entrenched monopolists, clearly operates in the first instance to restrict competition in the market for video programming by limiting the number of outlets through which such programming can be distributed. Thus, on the most elemental level, § 533(b) actually reduces competition, both in the market for video transport services and the market for video programming.

It is only by concentrating on the government's other asserted justification, protecting diversity of ownership of communications outlets, that any pro-competitive consequences of § 533(b) can be discerned. In essence, the government contends that the telephone companies would be too successful if they were allowed to compete in the cable television market. According to the government, without a prophylactic rule keeping them out of the industry altogether, the telephone companies would face irresistible incentives to undertake anti-competitive actions to drive the cable operators out of business. If the telephone companies were allowed to succeed, the resulting situation would be worse for consumers than the status quo because rather than having two monopolists — one providing cable television and related services and one providing local telephone exchange service and related services — consumers would be faced with a single monopolist, the telephone company, providing all of their telecommunication services. In addition to its desire to preserve the economic benefit of competition between the monopolists for the provision of services outside their "core" monopoly service, the government is also justifiably concerned with the implications of having a single entity in control of all electronic communication sources entering an individual's home. Thus, the government asserts, to preserve diversity of ownership of communications outlets, telephone companies must be prevented from entry into the cable television industry. Without question, the preservation of diversity of ownership of communications outlets is a significant governmental interest. See NCCB, 436 U.S. at 801-02, 98 S.Ct. at 2115-16 (challenged regulations "are a reasonable means of promoting the public interest in diversified mass communications"); National Association of Broadcasters v. FCC, 740 F.2d 1190, 1206 (D.C. Cir. 1984) ("Traditionally, the FCC has considered diversification of media ownership to be an important objective of federal communications regulatory policy."). Thus, the sole remaining question under the O'Brien test is whether § 533(b) is narrowly tailored to serve that interest.

As the Ward decision makes clear, in the context of intermediate review under O'Brien, the remedy chosen by Congress "need not be the least-restrictive or least-intrusive means" of achieving Congress' goal. 491 U.S. at 796-99, 109 S.Ct. at 2757-58. "Rather, the requirement of narrow tailoring is satisfied 'so long as the . . . regulation promotes a substantial government interest that would be achieved less effectively absent the regulation.'" Id. 491 U.S. at 799, 109 S.Ct. at 2758 (quoting United States v. Albertini, 472 U.S. 675, 689, 105 S.Ct. 2897, 2906-07, 86 L.Ed.2d 536 (1985)). The regulation in question may not, however, "burden substantially more speech than is necessary to further the government's legitimate interests." Id. As the Court explained in Discovery Network:

A regulation need not be "absolutely the least severe that will achieve the desired end," but if there are numerous and obvious less-burdensome alternatives to the restriction . . . that is certainly a relevant consideration in determining whether the "fit" between ends and means is reasonable.

___ U.S. at ___, n. 13, 113 S.Ct. at 1510 n. 13 (quoting Board of Trustees of State University of New York v. Fox, 492 U.S. 469, 480, 109 S.Ct. 3028, 3034-35, 106 L.Ed.2d 388 (1989)) (internal citation omitted).

There is no more draconian approach to solving the problem of potential anti-competitive practices by telephone companies in the cable television industry than a complete bar on their entry into that industry. In theory, at least, there are a wide range of less restrictive alternatives that Congress and the Commission could have chosen to pursue that would have allowed telephone companies to enter the cable television market, while constraining, through specific legislation or regulatory scrutiny, their power to drive other cable operators out of the industry. If a number of such alternatives are found to be effective means of eliminating the threats at which § 533(b) is targeted, then the statute certainly is not "narrowly tailored." In short, if there exists a range of regulatory strategies that would effectively eliminate the threat of anti-competitive conduct by the telephone companies in the cable television industry, then § 533(b) would "burden substantially more speech than is necessary to further the government's legitimate interests," and would therefore violate the First Amendment.

It is important to note that, in inquiring into the existence of feasible less restrictive alternatives, courts must not substitute their judgment on policy matters for that of Congress. C.f. Community for Creative Non-Violence, 468 U.S. at 299, 104 S.Ct. at 3072 (reversing Court of Appeals for disagreeing with Park Service over existence of less speech-restrictive alternatives). Certainly, any findings of fact made by Congress concerning the potential effectiveness of Commission regulation of the pole access and cross-subsidization problems would be entitled to substantial deference from the courts. See Columbia Broadcasting System, Inc. v. Democratic National Committee, 412 U.S. 94, 103, 93 S.Ct. 2080, 2087, 36 L.Ed.2d 772 (1973). Yet, nowhere in the legislative materials is there any indication that Congress reached a conclusion concerning the effectiveness of less restrictive regulatory measures to combat the potential for anti-competitive practices by the telephone companies in the cable television market. Committee findings are limited to expressions of opinion on the effectiveness of § 533(b), not on the effectiveness of any less restrictive alternatives. Thus, a House Committee Report indicated that § 533(b) would "encourage a diversity of ownership of communications outlets" (H.R. Rep. 934, 98th Cong., 2d Sess. 56 (1984) U.S. Code Cong. Admin.News 1984, p. 4693), and a more recent Senate Committee Report opined that the § 533(b) ban "enhance[s] competition" (S.Rep. No. 92, 102d Cong., 1st Sess. 18 (1991) U.S. Code Cong. Admin.News 1992, p. 1150). Yet, no Congressional finding has ever been made concerning whether these goals could be accomplished by means of a less intrusive measure than a complete prophylactic ban.

Defendants contend, in light of the extensive Congressional attention devoted to this issue, that it is appropriate to impute to Congress a finding that all less restrictive alternatives were infeasible. The Court declines this invitation. It cannot be law that, whenever Congress passes a statute infringing on the right to free expression, it will be inferred by reviewing courts that Congress considered and rejected the effectiveness of all less restrictive alternatives. Such a proposition would reduce the "narrowly tailored" prong of the O'Brien test to a nullity. Rather, this court must undertake its own review of the record to determine whether Congress "reasonably could have" found that a prophylactic ban was necessary to effectively accomplish Congress' purposes. See San Francisco Arts Athletics, Inc. v. United States Olympic Committee, 483 U.S. 522, 539, 107 S.Ct. 2971, 2982, 97 L.Ed.2d 427 (1987) (emphasis added).

In assessing whether § 533(b) is indeed necessary, it is essential to carefully examine precisely what the statute prevents. Section 533(b) prohibits a telephone company from directly providing video programming to subscribers in its service area. Significantly, the statute has not been interpreted to prohibit a local telephone company from providing video transport services. Thus, a telephone company is permitted to run a cable into a subscriber's home and then to lease channels of communications on that cable to unaffiliated entities, such as cable operators. See Joint Stipulation of Facts, ¶¶ 5, 74; see also Video Dialtone Order, 7 FCC Rcd. at 5787 n. 21. The telephone company only runs afoul of the statute by exercising control or discretion over the programming transported over its facilities.

The fact that telephone companies are not precluded under existing law from competing in the market for video transport services is of paramount significance to the outcome of this case. The government's asserted justification for § 533(b), preservation of diversity in the ownership of media outlets, is premised on the fear that telephone companies will engage in pole access discrimination and cross-subsidization in an attempt to monopolize the video transport market. Surprisingly, however, § 533(b) is irrelevant to the telephone companies' ability to undertake such practices. Put another way, the ban imposed by § 533(b) does not fit with its asserted justification.

Defendants attempt to finesse the mismatch between the effect of § 533(b) and its asserted justification by submitting an affidavit by Bruce M. Owen, former Chief Economist of the Antitrust Division of the United States Department of Justice. In his affidavit, Owen concedes that the telephone companies are already in a position to cross-subsidize video transmission service. But he goes on to argue that:

telephone companies' incentive to engage in that cross-subsidization is greatly enhanced if telephone companies are also allowed to exploit monopoly control of video transmission by earning excess profits in video programming. Simply put, the removal of § 533(b) would make a video transmission monopoly more valuable to a telephone company.

Reply Affidavit of Bruce M. Owen at 2-3. As is apparent from Owen's affidavit, it is the concern that telephone companies will act anti-competitively in the video programming market, not the video transport market, that ultimately must provide the justification for § 533(b). Yet all the evidence adduced regarding the difficulty of regulating anti-competitive conduct of the telephone companies relates to difficulties in monitoring their conduct in the video transport business. There is no contention that the telephone companies possess any inherent advantage that would allow them successfully to evade regulation of anti-competitive behavior in the video programming market. Even under the government's worst case scenario, in which the telephone companies succeed in driving out all competition for the provision of video transport service, the telephone companies would be in no better position to act anti-competitively in the video programming market than are the current monopolists in the video transport market, the existing cable operators.

In fact, the potential for telephone companies to act anti-competitively in the video programming market can be reduced to a level significantly below the level of risk currently tolerated in relation to the cable operators. To the extent that the existing legislative and regulatory framework may be viewed as ineffective in curbing anti-competitive actions in the video programming market, more restrictive conditions may be placed on the provision of video programming by telephone companies. For example, the Commission's current recommendation to Congress for repeal of § 533(b) includes a requirement limiting the telephone company's direct provision of video programming to a specified percentage of the channel capacity made available by the company's video transport facilities. Video Dialtone Order, 7 FCC Red. at 5850. The balance of the channel capacity would be required to be leased on a common carrier basis, and the system would be required to have the capability to accommodate multiple video programmers. Id. Such restrictions would eliminate any possibility that a telephone company could extract monopoly profits from the video programming market (even if it succeeded in monopolizing the video transport market) by artificially restricting the aggregate quantity of video programming, thereby inflating the market share of the telephone company's programming affiliate. See also Communications Competitiveness and Infrastructure Modernization Act of 1991, S. 1200, H.R. 2546, 102d Cong., 1st Sess., § 653 (1991) (proposing repeal of § 533(b) and 25% capacity limit upon local telephone company provision of video programming).

In sum, this Court need not determine whether the Commission is correct in its assertion that its "existing safeguards . . . are sufficient at this time to protect against cross-subsidization. . . ." Video Dialtone Order, 7 FCC Rcd. at 5828. The Court accepts, arguendo, the proposition that cross-subsidization is uncontrollable by means of regulatory oversight. The essential point is that telephone companies may already, under existing law, compete in the video transport market, and if it were possible for them to reap supra-competitive profits in that market through cross-subsidization, the telephone companies could do so irrespective of § 533(b). The only argument defendants can advance to give relevance to § 533(b) as a deterrent of anti-competitive behavior is to contend that the prospect of additional supra-competitive profits from the video programming market may give the telephone companies the needed additional incentive to monopolize the video transport market. This argument fails because there is neither evidence in the record nor any convincing argument to suggest that standard methods of regulation would be ineffective to control anti-competitive activities by the telephone companies in the video programming market. Telephone companies enter the video programming market, unlike the video transport market, with no inherent advantage that would enable them to evade effective regulation. The federal agencies charged with enforcement of the antitrust laws stand ready to guard against anti-competitive behavior in the video programming market, just as in any other industry.

In light of the fact that effective alternatives exist that would allow telephone companies to enter the cable television market, yet prevent the evils allegedly targeted by § 533(b), the Court finds that § 533(b) is not "narrowly tailored to serve a significant governmental interest," but instead, that the statute "burden[s] substantially more speech than is necessary to further the government's legitimate interests." The statute therefore fails the test articulated by the Supreme Court in United States v. O'Brien.

V.