(Reuters) - A divided federal appeals court struck down a federal ban on political advertising on public TV and radio stations, a decision that could open the public airwaves to campaign ads for the November elections.

By a 2-1 vote, a panel of the 9th U.S. Circuit Court of Appeals in San Francisco said the Federal Communications Commission violated the First Amendment's free speech clause by blocking public broadcasters from running political and public issue ads.

The court said the ban was overly broad and that lifting it would not threaten to undermine the educational nature of public broadcast stations. It upheld a ban on ads for goods and services on behalf of for-profit companies.

Public issue and political speech in particular is at the very core of the First Amendment's protection, Judge Carlos Bea wrote in the main opinion.

Public issue and political advertisements pose no threat of ‘commercialization,' he continued. By definition, such advertisements do not encourage viewers to buy commercial goods and services. A ban on such advertising therefore cannot be narrowly tailored to serve the interest of preventing the 'commercialization' of broadcasting.

The Minority Television Project, a nonprofit that runs KMTP-TV in San Francisco, had challenged the FCC after being fined $10,000 for running paid ads from companies such as insurer State Farm and General Motors' Chevrolet division.

The FCC countered that the government has a significant interest in ensuring the airing of educational programming, many of which run on Public Broadcasting Service stations.

It said if public broadcasters became more dependent on ads, they might end up replacing Sesame Street with programming that may appeal to a wider range of viewers or listeners.

Walter Diercks, a lawyer representing the Minority Television Project, declined immediate comment. The FCC did not immediately respond to requests for comment. A PBS spokeswoman declined to comment.

IT SCARES ME TO DEATH

Norman Ornstein, resident scholar at the American Enterprise Institute, said the decision could fundamentally change the character of public television and radio by allowing deep-pocketed political and other organizations to begin swooping onto the public airwaves to air their messages.

I served on the board of PBS for six years and I know how much we struggled to get adequate funding, he said. This is just going to move us further away from what remains of a public square. ... To be truthful, it scares me to death.

The AEI is a conservative Washington think tank.

A federal district judge in San Francisco upheld the FCC restrictions in August 2009. Thursday's decision left the $10,000 fine intact. The 9th Circuit oversees cases in several Western states.

FUTURE AT STAKE

Concurring in Thursday's result, 9th Circuit Judge John Noonan said the rise of newer technologies for transmitting TV programs - such as cable, satellite, cell phones, the Internet and tablets - required a closer look at how the government regulates speech on broadcast television.

He also suggested that regulations may be inconsistent, referring to notices on behalf of financial services company Charles Schwab on the show PBS NewsHour.

I have seen announcements that to my mind are ads, he wrote. I have viewed Charles Schwab's message, 'Talk to Chuck' - it is not about Chuck's golf game.

Judge Richard Paez dissented.

For almost 60 years, commercial public broadcasters have been effectively insulated from the lure of paid advertising, he wrote. The court's judgment will disrupt this policy and could jeopardize the future of public broadcasting. I am not persuaded that the First Amendment mandates such an outcome.

Bea was appointed to the 9th Circuit by President George W. Bush; Noonan by President Ronald Reagan; and Paez by President Bill Clinton.

The case is Minority Television Project Inc v. FCC, 9th U.S. Circuit Court of Appeals, No. 09-17311.

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