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A court had originally found the FCC's policies to be arbitrary and tossed them out. The Supreme Court, in a related but different case (focusing on the fleeting expletives), ruled extremely narrowly that the FCC was allowed to change its policies, but did not rule on the constitutionality of the policy itself. The Second Circuit appeals court then ruled that even if the rule change was allowed, it still violated the First Amendment. From that, the court then asked - if such rules on fleeting expletives are not allowed - does that also cover fleeting nudity - but that involved a separate case involving a scene of a bare rear end on NYPD Blue. But, of course, the Janet Jackson case, in the Third Circuit, also is relevant here as well.
Which brings us mostly up-to-date, other than the latest news in the Janet Jackson case, which is that the FCC is now trying to claim that broadcasters give up some of their First Amendment rights when they get a government license to broadcast over public airwaves. This seems like a huge stretch as a legal interpretation, which would have serious implications for anyone using public airwaves. I don't recall the First Amendment saying "Congress shall make no law... except if it involves public airwaves." Either way, as the article linked above notes, this will all be going back to the Supreme Court eventually.
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