You are missing another major exception to this, something the Supreme Court has also ruled upon: Public versus private entities.
Free Speech only works in public discourse and does not apply to the private sector. The same Supreme Court that said Free Speech protects speech you hate also said that private entities can put limits to free speech whenever they want to.
Even though it allows the public to use their service, Microsoft not a public entity and is therefore excluded from any discussion of censoring what they want in their privately owned servers.
Now, if X-Box Live was owned and operated by the federal government, then yes, your statement would be accurate. The Supreme Court has said, on numerous occasions, that the government cannot censor speech in times of peace.
Like it or not, your justification does not apply to a privately owned entity like Microsoft.[/quote]
However, at the same time there have also been rulings to the contrary. Keep in mind that when the Federal Goverment went after Ted Turner for trying to create a media monopoly there were free speech issues attached to that and they managed to stop him.
Also it's not "whenever they want to", there are all kind of limitations on that to prevent discrimination and the like. Truthfully when someone already has said something, it becomes an entirely differant matter to censor it, rather than giving them a platform to begin with.
This is why there are so many criticisms on news agencies being slanted by choosing who to give the platform to, and who is going to represent each side of a given debate. Such as picking a well spoken liberal, and choosing a psychotic reverend from Utah to represent the other side... gee, who is going to see more reasonable there?
On the other hand, if the debate doesn't go the way they want it to, they can't just go "OMG we're going to censor this". They can choose not to broadcast, or re-broadcast it, but they can't for example omit parts of what one side is saying because they do not like it.
This is incidently why for a lot of debates, or even commentary, networks are careful to put up disclaimers on how "the opinions expressed here are theirs, and in no way represent our attitudes and beliefs".
See, the thing that a lot of people miss here is that the laws in the US are based on something called "precedent". Laws and Supreme Court rulings are interpeted by the people in lesser courts as they apply to certain cases, and then those rulings become the way the law is interpeted elsewhere in similar situations. This leads to precedents being based on other precedents and then laws turning out far differant from their intention. Perhaps the best example of this is what "Mapp Vs. Ohio" did to US Search and Seizure laws.
I mean you are right in the letter of the root law, but that's not what the laws are anymore. In part, because Supreme Court rulings aside, it would quash fundemental human rights, which is why so many courts have made rulings about it over the years.
To put it in cynical terms even if I generally agree with where this went, the US is a nation where a complex body of laws is being interpeted in the streets by goons with single digit IQs, and then re-interpeted again by minor judicial politicians with their own agendas and an axe to grind. The interpetations of those people being what decides how a law will actually function or what happens to it, not the intent of the people who made the laws to begin with (though people WILL claim the intent of the lawmakers to try and sell their own interpetations during the legal process)
We're getting far afield, but the point is that the exception your mentioning doesn't exist anymore, or at least not in the way it was probably intended. Ironically because I think a lot of people understand the issues of private ownership, but even most Judges think it's ridiculous for private citizens to have more power over other citizens than the goverment does. A point which keep it a major debate to this day.
... and this also means that even if "The Supreme Court" rules in the favor of the games industry in the current conflict, that the battle is NOT going to end. It will turn into precedent wars. Also the "gaming censorship" movement is going to attempt to work through private citizens and PACS to get things done, perhaps with sneaky ways of giving them under the table goverment funding.
