Full opinion text
I. Background. .1364 II. Facts. .1366 .1366 A. History and Statutory Structure of Federal Cable Law. .1367 1. The Cable Communications Policy Act of 1984 . .1367 a. Statutory Provisions. .1368 b. A History of PEG. .1368 c. Legislative History of the Cable Act. .1370 2. PosH984 Cable Act Legislation.,. .1371 3. Other Uses of “Educational” in Telecommunications Law. “Public,” “Educational,” and “Governmental” in Practice: Nationally and in New York City.. rH t-CO tH 1. PEG Nationally. t*H t> CO irH 2. The History of Educational and Governmental Channels in New York zo to 3. Current Use of Educational and Governmental Channels: Crosswalks-1373 C. Time Warner’s New York Cable Systems.1374 D. Franchise Agreements Between Time Warner and the City Regarding PEG.1375 E. Facts Underlying the Current Dispute.1376 1. Time Warner’s Merger and Application to the City in Connection with the Merger.1376 2. DoITT and Time Warner Worked Together in the Ensuing Weeks-1377 3. Time Warner’s Choice of MSNBC.1377 4. The City’s Reaction to Time Warner’s Rejection of Fox.1379 5. The Aftermath of Time Warner’s Refusal to Carry Fox News .1381 6. Summary of Factual Conclusions.1383 III. Discussion.1384 A. Preliminary Injunction Standard.1384 B. The City’s Actions Violate the Cable Act..1385 1. The City’s Actions Are at Odds With the Broad Purposes of PEG and the Structure of the Cable Act.1385 The City’s Actions Violate the Governmental Use Provision of Section 531(a). 1386 2. The City’s Actions Violate the Franchise Agreements ...1389 3. The City’s Actions Violate Section 544(f)(1). 1391 4. The City’s Actions Violate Time Warner’s First Amendment Rights.1391 C. 1. First Amendment Jurisprudence ..1391 2. Applying the First Amendment. 1394 a. Time Warner’s First Amendment Rights in the PEG Channels.1394 b. Time Warner’s First Amendment Rights in the Commercial Channels..1396 i. Irreparable Harm.1396 ii. Likelihood of Success.1399 (a) Level of Scrutiny.1399 (b) Applying Strict Scrutiny.1401 IV. Conclusion.1403 OPINION COTE, District Judge: This case concerns the power of a city to influence, control, and even coerce the programming decisions of an operator of a cable television system. It therefore goes to the heart of First Amendment concerns. The pivotal event in this case occurred on October 1, 1996. On that date, the City of New York (“City”) proposed to Time Warner Entertainment Company, L.P. (“Time Warner”) — a group of cable operators that provide cable service pursuant to franchise agreements with the City — a plan that called for the City to abandon one of its cable channels designated for public, educational . and governmental use (“PEG”) if Time Warner would place the new Fox News program on one of Time Warner’s commercial cable channels. Time Warner refused to “swap” channels with the City in order to accommodate Fox News. Unwilling to accept Time Warner’s decision, a decision protected by the First Amendment and a. federal statute, the City raised the ante over the ensuing days in an effort to convince Time Warner to change its mind. This campaign culminated on October 10, 1996, when the City placed Bloomberg Information Television (“BIT”) on one of its;PEG channels — specifically, a channel set aside for educational or governmental use — and prepared to place Fox News on another PEG channel. This action, intended to compel Time Warner to capitulate, instead has brought the parties before this Court. So long as there remains a limitation on the number of cable channels, and intense competition over access to this valuable resource, there is a potential for a dispute of this nature to arise. Fortunately, however, the exercise of government power at issue here is without precedent. Given the irregularity of the City’s actions in this case, I need not definitively decide each of the difficult issues, including a fine determination about the appropriate use of PEG channels under the Cable Communications Policy Act of 1984 (“Cable Act”). Pub.L. No. 98-549, 98 Stat. 2779 (codified at 47 U.S.C. § 521 et seq.). Nonetheless, I do find that the City’s actions are far beyond acceptable PEG use, that the City acted in contravention of the legislative purposes of the Cable Act, and, specifically, violated the provisions relating to PEG use and the editorial autonomy of a cable operator. Most importantly, I find that by engaging in an effort to compel Time Warner to alter its constitutionally-protected editorial decision not to carry Fox News, the City has violated Time Warner’s First Amendment rights. I. Background Time Warner brought this action for preliminary injunction against the City on October 10, 1996. Defendant City is a municipal corporation organized under the laws of the State of New York. Defendant-intervenor Bloomberg L.P. (“Bloomberg”) intervened in the action on October 16, 1996. Bloomberg is a news service that specializes in covering financial news and produces BIT. Time Warner’s complaint alleges that the City’s actions violate the franchise agreements, the Cable Act, and the First Amendment. The complaint also alleges that if the City’s actions are allowed under the Cable Act, then the Act violates the First Amendment as applied. Finally, the complaint alleges that the City’s actions violate the Takings Clause of the Fifth Amendment, New York State law, the New York State Constitution, and the New York City Charter. On October 11, 1996, this Court held a hearing on Time Warner’s application for a temporary restraining order (“TRO”) enjoining the City from continuing to show BIT and from placing Fox News on the Crosswalks Network (“Crosswalks”), a group of cable channels set aside for educational and governmental use and supervised by the City. After hearing the parties, this Court granted Time Warner’s motion for a TRO. A hearing on Time Warner’s application for a preliminary injunction was set for October 23, 1996, and at the City’s request an extension was subsequently granted to October 28. The parties agreed, pursuant to this Court’s rules, to have the direct testimony of all witnesses presented by affidavit. Prior to the hearing, the parties were to designate which witnesses they wished to cross-examine in person. Time Warner submitted affidavits from Richard Aurelio, President of New York City Cable Group; Allan J. Arffa, outside counsel to Time Warner; Fred Dressier, Senior Vice President of Programming at Time Warner Cable; Spencer B. Hays, Vice President and Deputy General Counsel of Time Warner; Robert S. Jacobs, General Counsel of Time Warner’s New York City Cable Group; Stuart J. Lipson, an independent consultant specializing in developing competitive strategies, particularly in the cable industry; Gary McBride, President and CEO of GEMS International Television; Gregory Moore, Executive Director of Northwest Community Television; George William Nichols, President and CEO of Kaleidoscope Network, Inc.; Richard D. Parsons, President of Time Warner; Barry Rosenblum, President of Time Warner Cable of New York City; George C. Stoney, professor of film and television at NYU; and Lynn Yae-ger, Senior Vice President of Corporate Affairs for Time Warner Cable. Time Warner submitted deposition excerpts from Allan Arffa; Richard Aurelio;. Walter de la Cruz, Director of Cable Television Franchises and Policy at the City Department of Information Technology and Telecommunications (“DoITT”); Fred Dressier; Barry R. Forbes, Executive Director of the Alliance for Community Media; James Honiotes, Vice President of Distribution for Jones Education Company, the producer of Knowledge TV; Robert S. Jacobs; David B. Klasfeld, Chief of Staff to Fran Reiter; Gary S. Lutzker, Telecommunications Counsel at DoITT; Randy Mastro, Deputy Mayor for Operations; Gary McBride; John T. McCormick, Assistant Commissioner of DoITT; Gregory Moore; Craig Muraskin, Special Assistant to Fran Reiter; George William Nichols; Alex Quinn, Executive Director and President of Manhattan Neighborhood Network; Bruce Regal, an attorney in the New York City Law Department; Elaine S. Reiss, General Counsel of DoITT; Fran Reiter, Deputy Mayor for Economic Development and Planning; Ted Turner, Vice Chairman of Time Warner; Salvador C. Uy, former Assistant Commissioner for Cable Television and Telecommunications Policy for DoITT; and Lynn Yaeger. The City submitted affidavits or affirmations from, Paul A Crotty, Corporation Counsel for the City; David B. Klasfeld; Craig Muraskin; Burt Neubome, professor of constitutional law at NYU; Elaine S. Reiss; Frán Reiter; and Salvador C. Uy. The City submitted deposition excerpts from Richard Aurelio, Walter de la Cruz, Fred Dressier, Spencer B. Hays, Robert S. Jacobs, Gary S. Lutzker, Randy Mastro, John T. McCormick, Craig Muraskin, Bruce Regal, Elaine Reiss, Fran Reiter, Barry Rosenblum, Ted Turner, Salvador C. Uy, and Lynn Yaeger; Bloomberg submitted affidavits from Michael R. Bloomberg, President of Bloomberg L.P.; Leon Friedman, constitutional law professor at Hofstra Láw School; Joseph D. LaRocco, Television and Cable Services Manager for television station KACT in Aurora, Colorado; Michael I. Meyerson, communications law professor at the University of Baltimore School of Law; and Dean Smits, Director of the Office of Telecommunications for the City and County of Denver, Colorado. Bloomberg submitted deposition excerpts from Richard Aurelio, Walter de la Cruz, Fred Dressier, Barry Forbes, James Honi-otes,. Robert S. Jacobs, David B. Klasfeld, Gary S. Lutzker, Gary. McBride, John T. McCormick, Gregory Moore, George William Nichols, Elaine S. Reiss, Bruce Regal, Barry Rosenblum, Dean Smits, Ted Turner,, and Lynn Yaeger. The Court received several amicus curiae briefs. The following organizations and individuals submitted briefs which were supportive — though not always entirely — of Time Warner’s position: Cablevision of New York City; Mark Green, Public Advocate of the City of New York, Ruth Messinger, Manhattan Borough President, and Fernando Ferrer, Bronx Borough President; Media Access New York (“MANY”); National Cable Satellite Corporation (“C-SPAN”); and National Cable Television Association, Inc. (“NCTA”). Fox News Network submitted a brief supportive of the City’s position. The Alliance for Community Media and the New York Civil Liberties Union filed briefs which were supportive in some respects of the positions of Time Warner, the City, and Bloomberg. The hearing on the preliminary injunction took place from October 28 to 30,1996. The parties chose not to call any witnesses for cross examination. Based on the testimony and the exhibits admitted into evidence, I make the following findings of fact and conclusions of law. II. Facts A. History and Statutory Structure of Federal Cable Law Cable television systems were first built in the late 1940s to carry broadcast television signals to remote or mountainous areas. Turner Broadcasting Sys., Inc. v. FCC, 512 U.S. 622, -, 114 S.Ct. 2445, 2451, 129 L.Ed.2d 497 (1994). The intent of these systems — called community antenna television (CATV) systems — was to extend the range of television services, not compete with them. Id. By the 1970s, however, cable television systems began developing and carrying their own programming in addition to broadcast channels. H.R.Rep. No. 98-934, at 20-21 (1984), reprinted in 1984 U.S.C.C.A.N. 4655, 4658. In contrast to broadcast television, which relies on electromagnetic signals transmitted from a central antenna and received by individual antennas in consumers’ homes, cable systems rely on a physical connection: a signal is carried through a conventional or optical fiber cable that functions much like a telephone line. Time Warner Entertainment Co. v. FCC, 93 F.3d 957, 962 (D.C.Cir.1996). Indeed, cable television lines must be laid in the ground and attached to poles in the same manner as telephone lines. To lay these cables, operators must obtain rights-of-way and easements from local governments. Id. at 962. As a result of these physical exigencies, cable television is regulated at the local level. Operators negotiate franchise agreements with local governments — “franchising authorities” in the telecommunications lexicon — to obtain the rights-of-way necessary to lay the cable wires. H.R.Rep. No. 98-934 sUpra, at 19, reprinted in 1984 U.S.C.C.A.N. at 4656. While the regulatory landscape of the cable industry changed with the advent of federal legislation in 1984 — amended by two subsequent acts in 1992 and 1996 — local franchise agreements still determine much of the delivery of cable services, subject to these federal laws which define and limit local governments’ authority. Id. at 19, reprinted in 1984 U.S.C.C.A.N. at 4656. Currently, the industry is comprised of cable operators, who own the physical assets and franchises and transmit the signals, and cable programmers, who produce programs and sell them to the operators: Operators and programmers often have ownership interests in the other and are. thus “vertically integrated” entities. Time Warner, 93 F.3d at 963. A cable operator offers programming that is made up of local and distant television broadcast signals, along with local, regional and national cable channels (such as CNN, ESPN, and the Weather Channel). Cable operators contract with each cable programmer individually. Cable programmers earn money by selling advertising space on their programs and charging cable operators a set fee per subscriber, per month. Not all programs function this way: some do not sell advertising (such as HBO and C-SPAN) and some do not charge on a per subscriber, per month basis (such as the TV Food Network). Cable operators earn money by collecting fees from subscribers. Cable operators attempt to provide a selection of programs that will be attractive to subscribers. 1. The Cable Communications Policy Act of 198k The Cable Act establishes national policy for the federal, state, and local regulation of the cable industry. The stated purposes of the law include the establishment of franchise procedures and standards to encourage ■ the growth and development of cable systems and to assure that cable systems are responsive to the needs and interests of the local community, 47 U.S.C. § 521(2); the establishment of guidelines for the exercise of federal, state, and local authority with respect to the regulation of cable systems, 47 U.S.C. § 521(3); and the assurance that cable systems will provide the widest possible diversity of information sources and services to the public, 47 U.S.C. § 521(4). a. Statutory Provisions The Cable Act establishes who, in addition to the operator, may have access to a cable system. To assure a cable system provides programming that is responsive to the needs of the local community, the Cable Act authorizes franchising authorities to require operators to set aside an undetermined number of channels for “public, educational and governmental use.” 47 U.S.C. § 531(a). These stations are known as PEG channels or PEG access. The statutory provision does not further explain this use, but Congress’s meaning and intent is apparent from the legislative history of the Cable Act, discussed below. Importantly, the statute does not require cable operators to cany such channels. Indeed, as of 1990, only sixteen percent of all cable systems nationwide had public access, thirteen percent had educational access, and eleven percent had governmental access. The Cable Act does, however, give a franchising authority the power to require an operator to provide PEG channels. A franchise agreement gives life to Section 531(a), but Section 531(a) also establishes a framework for these franchise agreements: that the channels be set aside for public, educational, and governmental use. Another provision makes clear that a different group of voices will be heard. Section 532 requires an operator with more than 36 channels (including PEG channels, but excluding the local commercial television stations that a cable operator must provide to subscribers pursuant to a 1992 amendment codified at 47 U.S.C. § 534) to set aside a percentage of those channels for use by entities unaffiliated with the operator. 47 U.S.C. § 532. The stated purpose of this provision is to “assure that the widest possible diversity of information sources are made available to the public.” 47 U.S.C. § 532(a). Under this provision, a cable programmer can “lease” a cable channel from a cable operator. While the Act terms this access “commercial use,” 47 U.S.C. § 532, and it is popularly referred to as “leased access,” the “commercial” in the statute refers to the nature of the lease, not the content of the programming or intent of the programmer. Section 532(b)(5) states that “the term ‘commercial use’ means the provision of video programming, whether or not for profit.” Indeed, a nonprofit entity may lease a channel under this provision. 47 U.S.C. § 532(b)(5)(B). The statute also safeguards the editorial autonomy of operators, programmers, and PEG users. The programming decisions of cable operators are protected under 47 U.S.C. § 544(f)(1), which provides that “[a]ny federal agency, State, or franchising authority may not impose requirements regarding the provision or content of cable services, except as expressly provided in this subchap-ter.” Likewise, a cable operator has no editorial control over PEG channels pursuant to 47 U.S.C. § 531(e), which states that “a cable operator shall not exercise any editorial control over any public, educational, or governmental use of channel capacity provided pur-, suant to [the PEG provision].” Under 47 U.S.C. § 532(c)(2) a cable operator “shall not exercise any editorial control over any video programming offered” under leased access, b. A History of PEG The PEG provisions of the Cable Act did not introduce a new practice to the cable industry. Since the 1960s local governments had conditioned franchise grants on the provision of PEG access. This was done in an effort to “create a more direct right of access to the video media.” Daniel L. Brenner et ah, Cable Television and Other Nonbroad-cast Video: Law and Policy § 6.04[1], at 6-34 (1996). Communities saw cable as “the next public forum,” akin to “public parks, libraries, theaters, and other public fora [that] ... encourage, or at least permit speech.” Id. New York City has required PEG channels on cable systems since 1971. Id. § 6.04[2], at 6-34.1. Nor was the Cable Act the first time the federal government regulated PEG practices. In 1968, the Federal Communications Commission (“FCC”) initiated rule-making proceedings that ultimately led to cable regulations adopted in 1972. James N. Horwood, Public, Educational, and Governmental Access on Cable Television: A Model to Assure Reasonable Access to the Information Superhighway for All People in Fulfillment of the First Amendment Guarantee of Free Speech, 25 Seton Hall L.Rev. 1413, 1414 (1995). These regulations, among other provisions, required cable operators in the largest 100 markets to set aside three channels for free use by public, educational, and governmental bodies. Cable Television Report and Order, 36 F.C.C.2d 143, 190-91, affd on recon., 36 F.C.C.2d 326 (1972). In introducing the regulations, the FCC stated that the “fundamental goals of a national communications structure” would be furthered with the opening of new outlets for local expression, the promotion of diversity in television programming, the advancement of educational and instructional television, and increased informational services of local governments. Id. at 190. The regulations described “public” as an access channel “available without charge on a first-come, first-served nondiscriminatory basis.” Id. The FCC defined “educational” as a channel that “local educational authorities” have access to for “instructional programming and other educational purposes.” Id. at 191. The regulation stated that “the potential uses of the educational channel are varied. An important benefit promises to be greater community involvement in school affairs.” Id. Finally, the FCC defined “governmental” as an access channel “designed to give maximum latitude for use by local governments.” Id. The regulations were not long-lived, however, because the Supreme Court ultimately found them to be outside the scope of the FCC’s delegated authority under the Communications Act of 1934 (which established the FCC and defined the scope of its regulatory authority). FCC v. Midwest Video Corp., 440 U.S. 689, 708-09, 99 S.Ct. 1435, 1445-46, 59 L.Ed.2d 692 (1979). Despite the rise and fall of federal regulations, the practice of including PEG channels in franchise agreements continued. The Cable Act, then, was intended to “reeognize[ ] and endorse[ ] the preexisting practice of local franchise authorities conditioning their cable franchises on the granting of PEG channel access.” Time Warner, 93 F.3d at 972. See also H.R.Rep. No. 98-934, supra, at 30, reprinted in 1984 U.S.C.C.A.N. at 4667. As explained by the D.C. Circuit, the PEG provisions merely ensure that states will not prohibit the practice, and preclude federal preemption challenges to such requirements. Time Warner, 93 F.3d at 972-73. c. Legislative History of the Cable Act While the legislative history of the Cable Act is not abundant — a House Report and few Senate floor statements — the House Report addressed many of the issues in this case. The House Report stated that one goal of the law was to “provide the widest possible diversity of information services and sources to the public, consistent with the First Amendment’s goal of a robust marketplace of ideas.” H.R.Rep. No. 98-934, supra, at 19, reprinted in 1984 U.S.C.C.A.N. at 4656. The House Report stated that [e]able television offers the public an abundance of channels, with the potential to present a wide variety of perspectives from many different types of program providers. Local governments, schools systems, and community groups, for instance, will have ample opportunity to reach the public under [the Act’s] grant of authority to cities to require public, educational, and governmental (PEG) access channels. Id. The House Report noted that leased access also would promote a diversity of views. Id. at 20, reprinted in 1984 U.S.C.C.A.N. at 4657. In a section describing the PEG provisions, the House Report noted that [o]ne of the greatest challenges over, the years in establishing communications policy has been assuring access to the electronic media by people other than the licensees or owners of those media. ■ The development of cable television, with its abundance of channels, can provide the public and program providers the meaningful access that, up until now, has been difficult to obtain. Id. at 30, reprinted in 1984 U.S.C.C.A.N. at 4667. The section also stated that [a]lmost all recent franchise agreements provide for access by local governments, schools, and non-profit and community groups over [PEG] channels. Public access channels are often the video equivalent of the speaker’s soap box or the electronic parallel to the printed leaflet. They provide groups and individuals who generally have not had access to the electronic media with the opportunity to become sources of information in the electronic marketplace of ideas. PEG channels also contribute to an informed citizenry by bringing local schools into the home, and by showing the public local government at work. . Id. While the House Report did not expand on the three prongs of PEG, a 1991 Senate Report leading up to the 1992 amendments of the Cable Act discussed the different types of use. The Senate Report concluded that public access would allow “individuals and groups to communicate their message to the general public;” educational access would allow “local schools to supplement classroom learning and to reach out to teach those who are beyond school age or unable to attend classes;”- and the governmental channel would • allow “for a local ‘mini-C-SPAN.’ ” S.Rep. No. 102-92, at 52-53 (1991), reprinted in 1992 U.S.C.C.A.N. 1133,1185-86. While the PEG channels were not an innovation of the Cable Act, Congress did create a new type of access through the leased access provision. The House Report stated that leased access complements PEG access by assuring that sufficient' channels are available for commercial program suppliers with program services which compete with existing cable offerings, or which are otherwise not offered by the cable operator (for political reasons, for instance). H.R.Rep. No. 98-934, supra, at 30, reprinted in 1984 U.S.C.C.A.N. at 4667. The House Report made clear that the key to leased access was not the commercial nature of the programming or the producer, instead it was the commercial aspect of the lease: a.programmer buys space on this channel, as opposed to the free access available under PEG. The House Report stated that “commercial use” means the provision of video programming, whether or not the third party providing the program service is a profit or nonprofit entity. The term commercial use is employed to distinguish from public access uses which are generally afforded free to the access user, whereas third party leased access envisioned by this section will result from a commercial arrangement between the cable operator and the programmer with respect to the rates, terms and conditions of the access use. Id. at 48, reprinted in 1984 U.S.C.C.A.N. at 4685. In addition to striking a balance between types of access for third parties — PEG and leased — the Cable Act also sought to protect the First Amendment rights of each type of user, as well as the cable operator. The House Report acknowledged that access provisions can'raise First Amendment concerns, but contended that these provisions “establish a form of content-neutral structural regulation which will foster the availability of a ‘diversity of viewpoints.’ ” Id. at 31, reprinted in 1984 U.S.C.C.A.N. at 4668. The House Report also noted that the PEG and leased access provisions would not restrain a cable operator to a great degree since a local cable company may provide information in which it has a financial or proprietary interest on the vast majority of its channels, as long as it sets limited channel capacity aside for use by others. Id. at 33, reprinted in 1984 U.S.C.C.A.N. at 4670. The House Report added to, and reiterated, this point: [t]he access channel requirements of [the Cable Act] are narrowly drawn structural regulations that will ensure a diversity of information sources without governmental intrusion into the content of programming carried on the cable system. Id. at 35, reprinted in 1984 U.S.C.C.A.N. at 4672 (emphasis in original). The House Report then addressed each constituency’s concerns. Addressing PEG access, the House Report stated it is integral to the concept of the use of PEG channels that such use be free from any editorial control or supervision by the cable operator.:.. There is no limitation imposed on a franchising authority’s or other governmental entity’s editorial control over or use of channel capacity set-aside for governmental purposes. However, the Committee does not intend that franchising authorities lease governmental channels to third parties for uses unrelated to the provision of governmental access. ... Id. at 47, reprinted in 1984 U.S.C.C.A.N. at 4684. Protecting the cable operators’ First Amendment rights, the House Report stated [w]ith regard to the access requirement, cable operators act as a conduit. They do not exercise their editorial discretion over the programming; nor are they prevented or chilled in any way from presenting their own views and programming on the vast majority of channels otherwise available to them. Id. at 35, reprinted in 1984 U.S.C.C.A.N. at 4672. Later statements by Congress also evidence an intent to curb franchising authorities’ control over cable operators. In the 1992 amendments to the Cable Act, Congress found that “[t]he Cable Communications Policy Act of 1984, in its amendments to the Communications Act of 1934, limited the regulatory authority of franchising authorities over cable operators.” Cable Television Consumer Protection and Competition Act of 1992, Pub.L. No. 102-385, § 2(a)(20), 106 Stat. 1460,1463 (1992) (“1992 Act”). 2. Post-198k. Cable Act Legislation The cable industry grew dramatically after the 1984 Cable Act. Congress conducted a two-year study of the expanding industry which ultimately led to the passage of the 1992 Act. Time Warner, 93 F.3d at 963. The 1992 Act revised some provisions of the 1984 Cable Act, left others intact, and added still others. In response to congressional studies that concluded cable rates were excessive due to a lack of competition, the 1992 Act granted the FCC and local authorities the power to regulate prices. Primarily, the 1992 Act imposed rate regulations on the industry and required operators to carry television broadcast stations. While the 1992 Act did not amend the 1984 Cable Act PEG provisions, it did add several provisions related to PEG. First, it required that cable operators provide a basic tier service, a set of channels that include PEG channels. 47 U.S.C. § 543(b)(7)(A)(ii). Second, it allowed franchise authorities to require cable operators to provide “adequate assurance that the cable operator will provide adequate public, education, and governmental access channel capacity, facilities, or financial support.” 47 U.S.C. § 541(a)(4). Finally, the 1992 Act enacted censorship provisions for indecent programming on PEG channels. 47 U.S.C. §§ 532(h), (j), and note following § 531. This was a major change from previous law which prohibited cable operators from exercising any editorial control over PEG channels. The Supreme Court recently struck down the censorship provisions on First Amendment grounds. Denver Area Educ. Telecomm. Consortium v. FCC, — U.S. -, -, 116 S.Ct. 2374, 2394, 135 L.Ed.2d 888 (1996). The 1992 Act also made changes to the leased access provision. Section 612 of the Act notes that leased access is rarely used. While the reasons for this are uncertain, Time Warner 93 F.3d at 968-69, the Senate Commerce, Science, and Transportation Committee attributed the lack of use to the fact that cable operators could set the terms and rates of the leases. Sen.R. No. 102-92, supra, at 30-32, reprinted in 1992 U.S.C.C.A.N. at 1163-65. The 1992 Act allows the FCC to establish maximum rates for leased access and regulate the terms and conditions of such leases. 47 U.S.C. § 532(c)(4)(A). The 1992 Act also adds to 47 U.S.C. § 532 (the leased access provision) by providing that a cable operator may designate leased access channels for qualified minority or educational programming. The 1992 Act defines educational programming as “programming that promotes public understanding of mathematics, the sciences, the humanities, and the arts.” 47 U.S.C. § 532(i)(3). One study that informed the 1992 Act discussed the importance of localism “as a fundamental policy in domestic broadcasting.” Dep’t of Commerce, Nat’l Telecomm. & InfoAdmin., Comprehensive Study on the Globalization of Mass Media Firms, 55 Fed. Reg. 5792, 5800 (Feb. 16, 1990). It stated that [w]hile this federal policy of “localism” is principally a part of broadcast regulation, cable television systems often have local programming requirements imposed on them pursuant to state or local franchises. The [Cable] Act authorized local franchising authorities to insert public, educational, or governmental access channel requirements in cable television franchises. Many local authorities have opted to establish such requirements. These access channels often provide programming to cable subscribers with a uniquely local orientation. Id. at 5801 (footnote omitted). Most recently, Congress enacted the Telecommunications Act of 1996 (“1996 Act”), Pub.L. No. 104-104, 110 Stat. 56, which deregulates the cable industry, phasing out by March 31, 1999, the rate requirements imposed by the 1992 Act. 47 U.S.C. §. 543(c)(3). In legislative debates leading up to the 1996 Act, a 1994 Senate committee report stated that PEG channels play an important role in cable services. It noted that [e]xisting telecommunication technologies have already permitted the development of diverse community-based. programming that has increased civic discourse and expanded access and services to informational, cultural, educational, and health related services. For instance, community use of public, educational, and governmental (PEG) aeeéss channels on cable systems has become a vital means of maintaining' an informed and involved citizenry. Community use of PEG access channels, has increased dramatically over the past 20 years. Over 20,000 hours of new programs are now produced each week, totalling over 1 million hours of new programs per year. This is greater than ABC, CBS, NBC, and PBS combined. S.Rep. No. 103-367, 103d Cong., 2d Sess. 15 (1994). 3. Other Uses of “Educational” in Telecommunications Law Wireless cable systems, which transmit television signals over microwave bands and are only accessible to persons with specialized' antennas and converters, do not fall ■within the ambit of the cable regulatory scheme. The FCC does, however, grant licenses for Instructional Television Fixed Service (ITFS) stations for use on these systems. These stations provide “educational, instructional, and cultural material to students participating in training programs and other educational television systems.” 47 C.F.R. § 74.931(a)-(d) (1993): Only educational institutions and nonprofit organizations with educational purposes are eligible for ITFS licenses. Id. § 74.932. B. “Public,” “Educational,” and “Governmental” in Practice: Nationally and in New York City 1. PEG Nationally While PEG use varies somewhat around the country, typically, the channels are used for similar purposes and in similar ways. Public channels are available to individuals and community groups on a first-come, first-served basis. Wally Mueller, Controversial Programming on Cable Television’s Public Access Channels: The Limits of Government Response, 38 DePaul L.Rev. 1051, 1060 (1989). These individuals or groups are producers, directors, writers, and actors. Robert S. Oringel & Sue M. Buske, The Access Manager’s Handbook: A Guide for Managing Community Television 10-11 (1987). This results in eclectic programming limited only by the users’ imagination and innovation. Educational institutions use the educational channels to extend classrooms into individual homes, reaching those who might not otherwise be able to attend classes. The channels are also used by educational institutions to disseminate news and information about school events. For instance, programming may inform the community about school news, update teacher training, publicize the school lunch menu, relay athletic event information, and provide instructional programming. Id. at 8, 11, 93. Municipalities use their governmental channels to disseminate information about governmental activities and to cover local government proceedings. Id. at 114. There is some variation in the use of governmental and educational channels. For example, Aurora, a Denver suburb, airs local news on its governmental channel, many cities air programming for the disabled, and still others air foreign-language programming. • These uses, however, arise from a determination that commercial television neglects the needs of certain audiences. The Aurora experience is instructive. In that case, the Aurora City Council decided that local news, which originates in Denver, did not adequately meet the needs of Aurora residents. Therefore, Aurora carries local news programming that does cover news from its community. Other cities reached similar conclusions about the need for foreign-language programming and programming focused on the needs of the disabled community. Although some of these programs contain commercials, to the knowledge of this Court, no city uses its PEG channels to compete with regular commercial channels. Rather, PEG programming that varies from a more traditional use stems from a desire to serve those communities that are not otherwise served, not a desire to enter the commercial fray of cable programming. 2. The History of Educational and Governmental Channels in New York City New York City broke the path for PEG access, negotiating for municipal channels almost since the beginning of cable services in the City. Cable franchises awarded in 1970 provided for two “City Channels.” See, e.g., Contract Between City of New York and Sterling Information Services, Ltd. (Aug. 18, 1970) at §§ l(n), 4(b). Amendments to these franchise agreements four years later increased the number of City Channels to four. See, e.g., Contract Between City of New York and Teleprompter Corp. (Feb. 28, 1974) at 5. Only two of the channels were used — one for educational programming and the other for governmental programming such as the broadcasting of City Council meetings. By the early 1980s, the government channel had become “a forum for City officials, municipal agencies, non-profit organizations and community boards to speak directly to New York citizens.” Manhattan Cable TV, Community Programming Handbook 7 (1982). The types of programs run- on the government channel included “East Side Report” hosted by two assemblymen, “Community Board 3,” and “Social Security and You,” a call-in program where callers posed and received answers to their questions about social security. See id. at 7. In the late 1980s the location of the channel was relocated (from Channel L to Channel 25), but the use remained the same, offering such programs as call-in shows where participants debated policy issues with public officials. Id. 3. Current Use of Educational and Governmental Channels: Crosswalks In February 1992, the City launched Crosswalks. This network is owned and operated by the City of New York and is administered by DoITT. The network operates five channels (numbers 71-75) which are available to all cable subscribers. Crosswalks reaches four million viewers in 1.4 million households. When the City launched the network, the Commissioner of the Department of Telecommunications and Energy (“DTE”), William F. Squadron, stated that the goal of Crosswalks was to “use the cable technology to bring educational, governmental, and public information to the people.” William F. Squadron, New York City’s Cable Television Network: Statement by the Commissioner. He said Crosswalks would have programs devoted to enhancing the quality of life for young people and for senior citizens. It will have job training shows and employment listings. It will offer public safety tips on subjects like crime and fire prevention. It will provide health information to help people identify and respond to illness. It will display a bulletin board of government, educational, and cultural activities throughout New York. And, in time, it will cablecast the proceedings of the City Council and the City Planning Commission. Id. He stated that Crosswalks was “not a commercial enterprise” and viewers “should not expect glossy network productions.” Id. Another stated goal was to “realize the potential of [cable] to improve communication between government and the public.” Id. The initial 1992 Programming Policy and Operational Procedures for Crosswalks idén-tified the goals of Crosswalks: to (1) “enhance public awareness and understanding of the structure and functions of City government services, resources, and activities”; (2) “increase access to City government for the City’s residential and business communities”; (3) “provide various educational services to the City’s diverse communities”; and (4) “disseminate information about the services and programs provided by City agencies and other government offices.” Crosswalks Television Network, Dep’t of Telecomm. & Energy, Programming Policy & Operational Procedures 1 (1992). Crosswalks’ 1995 Policies and Procedures manual states that Crosswalks produces its own programs and co-produces programs with other government agencies. The guidelines state that programs may come from non-governmental agencies but only if “endorsed by a government agency and in con-' nection with programs containing subject matter directly or indirectly related to the functions of such agency.” Crosswalks Television Network, Dep’t of Info.Tech. & Tele-comm., Policies and Procedures 9 (1995). When first launched, the DTE said that each of the five Crosswalks channels would have a distinct character. The different identities would be (1) public interest — consumer-oriented information about government requirements such as building permits; cultural programs; and public safety; (2) government in action — government proceedings such as City Council and City Planning Commission; (3) adult education and training — offering basic adult education, English language classes, and a bulletin board for jobs and training programs; (4) youth — programming by' and for children; and (5) health, science, and the environment — programs about community and personal health, and alternative energy sources. ■ Current Crosswalks programming mirrors these categories. A June 1, 1995 DoITT manual for Crosswalks describes the programming on the five Crosswalks channels. For example, Channel 71- shows Off-Track Betting (“OTB”) and program listings. Channel 72, called the “Opportunity Channel,” airs educational and employment-oriented programs such as English and Spanish GED classes, other basic skills programs, and job listings. Channel 73 lists announcements of government services, hotline numbers, cultural and educational activities around the City, and a number of ethnic programs. Channel 74 is called “A Window Into Government.” Among other things, it telecasts City Council meetings, programs about health and safety, taxes, and senior citizens. Channel 75 is known as “CÜNY-TV” and is funded and operated by the City University of New York. It carries educational programming such as “Multiculturalism: Cross Cultural Communication”; “Alge-' bra: Exponents and Radicals”; and “The Chinese: Overview of Chinese History.” Channel 74, the “Window Into Government,” is of particular importance to this case. As one of the proposed homes for Fox News, Channel 74 has several self-proclaimed goals: (1) to “serve as a window into the workings of government”; (2) to serve as a medium for expression and debate of public, issues”; (3) to “give prominence to information, ideas and viewpoints that might not otherwise be seen or heard”; and (4) to “build constituency support and recognition among city officials, community groups and the public at large.” DoITT’s 1995 annual report touts Crosswalks’ achievements. It notes that [f]or over three years, Crosswalks has been enhancing public awareness of government activities and services via noncommercial, non-partisan, municipal programming, while providing literacy and employment training for adults. Dep’t of Info. Tech. & Telecomm., Annual Report- FY1995, at 29. Crosswalks’ Mission Statement describes its mission as one to “provide educational programming and to enhance public awareness of government activities and services through its five basic cable channels via strictly non-commercial and non-partisan television.” Crosswalks did not air commercial programming until July 1996. At that time the City asked Time Warner for permission to use a government channel for advertiser-supported foreign language and ethnic programming. These programs had lost their space on WNYC, a public television station, when the City sold that station. At the City’s request, Time Warner agreed to waive its right to block such programming. C. Time Warner’s New York Cable Systems Time Warner runs two cable systems in New York City, with 77 channels in Manhattan, and 76 in the outer boroughs. On both systems, nine stations are set aside for PEG use and eleven for leased access. In addition, the Manhattan and Staten Island systems air fifteen local broadcast stations, pursuant to the federal must-carry law, and the Brooklyn and Queens systems air fourteen such stations. Therefore, Time Warner has programming control over forty-one to forty-three stations, depending on the borough. Of the nine PEG channels in Manhattan, four are designated for public access use and are administered by the Manhattan Neighborhood Network, a non-profit entity independent of the City. These stations are not at issue in this controversy. The remaining five channels represent the “EG” in PEG and are administered by a City agency. D. Franchise Agreements Between Time Warner and the City Regarding PEG There are two franchise agreements relevant to this case, both of which are still in effect: a 1983 franchise agreement (“1983 Agreement”) between New York City and Time Warner for the provision of cable services in Brooklyn, Queens, and Staten Island, and a 1990 franchise agreement (“1990 Agreement”) between the City and Time Warner to provide cable services to northern and southern Manhattan. Both agreements provide for PEG channels. The 1983 Agreement states that the “Municipal Channels” will be used “for the purpose of distributing noncommercial services by the City or for any other lawful governmental purpose.” 1983 Agreement § 4.1.03. The 1990 Agreement states that the “Governmental Channels” will be used for distributing Services by the City or educational institutions for functions or projects related to governmental or educational purposes, including the generation of revenues by activities reasonably related to such uses and purposes. 1990 Agreement § 4.1.04. Both agreements state that the parties cannot amend the agreements except in writing. 1983 Agreement § 20.3; 1990 Agreement § 16.22. Both agreements also contain merger clauses. 1983 Agreement § 20.3; 1990 Agreement § 16.4. The differences in language between the agreements regarding the PEG stations has generated much discussion. The City maintains that the omission of the word “noncommercial” in the 1990 Agreement entitles it to place commercial programs on the channels. Time Warner uses parol evidence to demonstrate the parties’ intent in the 1990 Agreement. When negotiating the 1990 Agreement, the City proposed language regarding the “use of Governmental Channels” that would have opened the door for commercial programming. The proposed language read [t]he Governmental Channels shall be placed under the jurisdiction of the Mayor and used for any lawful purpose including, without limitation, any revenue generating use. Time Warner rejected this language and proposed that the provision be consistent with the 1983 Agreement. Time Warner also submitted written comments responding to the City’s proposal and explaining Time Warner’s proposed changes. In these comments, Time Warner stated that the provision had been “[mjodified to conform more closely to the [1983 Agreement].... In particular, such channels should not be used for commercial purposes.” Time Warner took this position because it believed noncommercial programming was mandated by the law. The City’s lawyers, including its cable expert Norman Sinel, an author of a treatise on cable law, also took the position that noncommercial programming on PEG stations was mandated by the law. ■ Both parties thus agreed that any commercial programming would be unlawful: The final version of the 1990 Agreement does not mention whether the channels may be used for commercial purposes, or are restricted to noncommercial purposes, but does limit the use of the channels to “governmental or educational purposes.” 1990 Agreement § 4.1.04. The City never aired commercial programming on the PEG channels under either agreement until July 1996. Between the signing of the 1990 Agreement and this dispute, the City has refused to air at least two programs with a strong public interest character specifically because of their commercial nature. First, in early 1995, GEMS, a Spanish-language cable programming network which offered educational, cultural and entertainment programming that emphasized Latina issues, was rejected for carriage on Crosswalks because GEMS was an advertiser-supported program. Second, in 1995, Kaleidoscope Network, Inc., a for-profit cable programmer that provided programs by, for, and about the disabled community, met with the City about placing its programs on Crosswalks. In these meetings the general manager of Crosswalks expressed concern about Kaleidoscope’s commercial nature, in particular that the network aired commercials and was a for-profit entity. The City apparently never made a final decision on whether to carry the Kaleidoscope network, but there have been no recent discussions. In support of its position, the City cites a number of examples of commercial programming prior to October 1996. For example, the City refers to the airing of Off-Track Betting programming. This program was designed to generate revenue for the City by promoting betting through the OTB. Moreover, it was carried with Time Warner’s express consent. The City also refers to a promotional program provided by Microsoft that gave instructions on the usage of Microsoft products, with the incidental effect of promoting those products. I find the difference between such programming and the programming at issue here too great to place any weight on the prior action of the City in these circumstances or to change my conclusion that the City believed the franchise agreements prevented commercial programming, including Fox News. E. Facts Underlying the Current Dispute 1. Time Warner’s Merger and Application to the City in Connection with the Merger On September 22, 1995, the Board of Directors of Time Warner Inc., the corporate parent of the franchisees, and the Board of Directors of Turner Broadcasting System, Inc. (“Turner”) approved the terms of an agreement providing for a merger involving the two companies. On May 30, 1996, Richard Aurelio, the President of Time Warner’s New York City Cable Group, wrote to inform DoITT of the merger and Time Warner’s view that the transaction involved no change of control of the franchisees or Time Warner, and, therefore, required no action on the City’s part. Under Time Warner’s franchise agreements with the City, Time Warner must seek the City’s approval of any change of control, which is defined as “actual working control,” of the franchisees or their franchises. There is a rebuttable presumption that a change in ownership exceeding five percent of a franchisee constitutes a change in control. The franchise agreements also prohibit anticom-petitive behavior, and allow the City to investigate and rectify such a situation. 1983 Agreement §§ 3.8.01-02; 1990 Agreement §§ 3.8.01-07. Over the years, the City has taken the position that a restructuring constitutes a change of control, but has in each instance approved the change provided the franchisees agreed to certain conditions. At a meeting on July 8,1996, DoITT asked Time Warner to submit a formal petition requesting a ruling from the City that the merger did not constitute a change of control. In response, Time Warner submitted such a petition on July 22, 1996. The petition requested the City to act by the end of August since the parties anticipated closing the transaction in September. The petition revealed that a change of ownership of five percent or more of Time Warner was being proposed, but argued that because the current franchisees and their existing management would remain in control of the franchises, and the actual working control of the franchisees would remain unchanged, that the change in ownership did not result in any change of control for purposes of the franchise agreements. The petition set out in detail the terms of the proposed transaction, including the fact that Ted Turner, the President and Chairman of Turner Broadcasting, was expected to receive approximately 11.3% of the shares of Time Warner, representing approximately eleven percent of the voting power; that he would be elected to the Time Warner Board of Directors as Vice-Chair, and would be permitted to nominate one additional director to the fifteen-member board. Ten of the fifteen board members would continue to be unaffiliated, outside directors. On July 30, 1996, DoITT’s Assistant Commissioner Salvador Uy wrote that the City believed that the proposed transaction did involve a change in control requiring City approval. However, based on the review done so far, DoITT believed that it “may be possible for DoITT to recommend approval of the merger to the City’s Franchise and Concession Review Committee” (“FCRC”) and that the City would do everything possible to accommodate Time Warner’s stated time frames. DoITT committed to work towards a schedule that would permit it to-make a presentation to FCRC at its September meeting. It asked to see the final agreement Time Warner had negotiated with the Federal Trade Commission (“FTC”) and a draft of the proxy statement that would be distributed to the shareholders. 2. DoITT and Time Warner Worked Together in the Ensuing Weeks. At a meeting on August 16, 1996, Time Warner and its counsel gave DoITT a detailed explanation of the merger and responded to DoITT’s questions. This meeting was attended by, among others, the City’s outside counsel and expert on cable matters, Norman Sinel. There was no discussion about the diversity of programming on Time Warner. On August 20, Uy prepared a draft memorandum to the FCRC requesting approval of the merger. The draft memorandum requested that a public hearing be held by the FCRC on September 9,1996 and that the Committee consider an attached proposed resolution at its meeting of September 11, 1996. The proposed resolution approved the merger, provided that executed copies of merger documents that had been seen in draft were submitted and that the franchisees pay the costs of the review of the petition. As was customary, DoITT sent the draft memorandum and proposed resolution to Time Warner and thereafter assured Time Warner that its requested changes would be incorporated into the final resolutions. Due to a delay in the FTC approval process, the merger was not placed on the FCRC’s September 11 agenda. On September 12, 1996, Time Warner announced that the FTC had approved Time Warner’s merger with Turner. Time Warner immediately advised the City that the closing date for the merger was set for October 10. DoITT assured Time Warner on several occasions that there should be no difficulty in approving the merger before the October 10 closing date. DoITT’s review process for the merger was essentially completed by mid-September. On October 1, 1996, after a meeting described in some detail below, DoITT’s General Counsel Elaine Reiss called Aurelio to discuss preparations for the October 9 FCRC meeting, at which it was expected that the merger would be approved. That day she sent Aurelio a draft of the resolution and memorandum that DoITT planned to send to the FCRC. The memorandum requested a public hearing on October 7 and Committee approval on October 9. The proposed resolution was substantially unchanged from the August 20 draft. Reiss also enclosed a memorandum with a' list of the remaining outstanding issues, which would be discussed with Time Warner at a meeting on October 3. None of those issues related to Fox News or any other news programming. Through this time, there had been no mention of any news programming issue or Fox News in the discussions between DoITT and Time Warner concerning the FCRC approval of the merger. At a meeting on October 3 between DoITT and Time Warner, all but three of the outstanding issues were resolved. After the remaining issues were resolved in a telephone conversation between Reiss and Aurelio later that day, it appeared that there were no other obstacles that would prevent FCRC approval of the merger. At about this time, when Aurelio raised with Uy the need for a special meeting of the FCRC to approve the merger, Uy assured Aurelio that a special meeting was unnecessary and that everything was proceeding on track. 3. Time Warner’s Choice of MSNBC As a prerequisite to approving the merger, the FTC issued a consent decree that required Time Warner to carry on cable systems serving a specified number of subscribers one additional 24-hour news channel unaffiliated with either Time Warner or Turner. The consent decree did not require that a new news service be carried in New York City, but only that one be made available to fifty percent of Time Warner subscribers across the nation by July 2001. In anticipation that the consent decree would contain a provision of this nature, Time Warner had already entered into negotiations with Fox News and MSNBC, a joint venture between Microsoft and NBC, each of which had announced an intention to launch a full-time, all-news cable programming network. Bloomberg, another news provider, also approached Time Warner about carriage pursuant to the consent decree. Fox News is ultimately owned by Rupert Murdoch, the CEO. of News Corporation, a multinational network of companies. Murdoch’s holdings in New York City include The New York Post and WNYW-Channel 5. Murdoch also owns the Fox Broadcast Network. In Great Britain he owns, among other things, The Times, The Sun and SkyTV. In Australia he owns newspapers and a national television network. Fox News is a 24-hour news channel that was launched on October 7, 1996, and was described at that time as being available to 17 million cable television subscribers. In June 1996, the City and News America Publishing, the parent company of the Fox News Channel, had concluded negotiations which, according to the City, provide for the retention of 2,212 jobs and the creation of a projected 1,475 jobs. As part of the agreement, new studios for Fox News were to be located in midtown Manhattan. The City reports that it is projected that over 513 of the new jobs attributable to News America would be created through the operation of the Fox News channel. MSNBC planned to convert an existing cable programming service, the America’s Talking service, to an all-news format. America’s Talking was already being distributed to approximately 20 million cable subscribers, of whom about 3 million were Time Warner subscribers. Bloomberg operates a television news service that was created from the services provided by the Bloomberg terminal, a desktop provider of financial news and information. A ticker tape of current market and financial information important to investors appears on the television screen at all times during Bloomberg television programming. Bloomberg provides 24-hour news programming to approximately 2.5 million subscribers through direct to home satellite service. Approximately 10 million additional cable television subscribers receive Bloom-berg coverage on a part-time basis. Bloom-berg also has affiliation agreements with commercial independent television broadcast stations, which permit it to reach about 47 million households. Bloomberg seeks distribution on commercial channels and to raise revenue through the sale of advertising and subscriber payments. In New York City, Bloomberg is carried 24 hours a day on a Time Warner commercial network sold to hotels, restaurants and office buildings. Bloomberg has also provided twenty daily six-minute customized regional reports for Time Warner’s cable systems in New York City. Bloomberg sells up to 90 seconds of advertising during each of these six-minute segments. When BIT was shown on the Crosswalks channel, it was these six minute segments that were inserted to fill the fourteen minutes per hour in which advertising is normally seen. Time Warner did