In the UNITED STATES COURT OF APPEALS
for the Fifth Circuit
No. 98-50874
––––
CITY OF AUSTIN,
Plaintiff-Appellant,
v.
SOUTHWESTERN BELL VIDEO SERVICES, INC.,
Defendant-Appellee.
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Appeal from an Order of the United States District Court
for the Western District of Texas (Austin Division)
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BRIEF AMICI CURIÆ
on behalf of the Municipal Cable
Franchising Authorities,
Cable Access Proponents, and Cable
Franchisees
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Of counsel: Daniel L. Brenner Neal M. Goldberg David L. Nicoll NATIONAL CABLE TELEVISION ASS’N. 1724 Massachusetts Avenue, N.W. Washington, D.C. 20036-2604 (202) 775-3664 |
William Malone Nicholas P. Miller MILLER & VAN EATON, P.L.L.C. 1155 Connecticut Avenue, N.W. Suite 1000 Washington, D.C. 20036 (202) 785-0600 |
Counsel for Amici
(List of counsel continued inside
front cover)
January, 1999
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Kenneth S. Fellman, Esq. Kissinger & Fellman, P.C. Ptarmigan Place, Suite 900 3773 Cherry Creek North Drive Denver, CO 80209 (303) 320-6100 Counsel for Amicus Greater Metro Telecommunications Consortium (Denver) |
James N. Horwood Spiegel & McDiarmid 1350 New York Avenue, N.W. Suite 1100 Washington, D.C. 20005-4002 (202) 879-4002 Counsel for Amici ACD, ACM, and Chicago Access Corporation
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Corporate Disclosure Statement
(FRAppP 26.1; Cir. Rule 29.2)
The filing of this brief amici has been consented to by Appellant City of Austin and Appellee Southwestern Bell Video Services. It is being filed on behalf of the following municipal governments and other organizations: National Association of Telecommunications Officers and Advisors (NATOA), Texas Coalition of Cities on Franchised Utilities Issues (TCCFUI), Michigan Coalition to Protect Public Rights-of-Way from Telecommunications Encroachment (PROTEC), the Cities of the Cities of St. Louis, Dallas, Indianapolis, Lansing, Arlington, Irving, Tucson, and Yuma, Montgomery County, Maryland, the Alliance for Communications Democracy (ACD), the Alliance for Community Media (ACM), Chicago Access Corporation (CAC), the Greater Metro Telecommunications Consortium (Denver), and the National Cable Television Association (NCTA). The City of Austin is a fiscal agent for TCCFUI.
Amici are individual municipal franchising authorities within the meaning of Section 602(10) of the Cable Act of 1984, 47 U.S.C. § 522(10); operators and users of PEG access channels established by franchising authorities under Section 611 (Cable Channels for Public, Educational, or Governmental Use), 47 U.S.C. § 531; associations representing the foregoing; and an association of operators of cable television systems, franchised by local franchising authorities within the meaning of Sections 602(5)-(7) and 621(b), 47 U.S.C. § 522(5)-(7), and 541(b)(1). None of the foregoing entities has any securities in the hands of the public within the meaning of FRAppP 26.1, except that the members of the cable association have stock in the hands of the public, some of which is publicly traded.
The following law firms represent one or more of the amici: Miller & Van Eaton, P.L.L.C., Washington, D.C.; Spiegel & McDiamid, Washington, D.C.; and Kissinger & Fellman, P.C., Denver, Colorado.
Table of Contents
Corporate Disclosure Statement (FRAppP 26.1; Cir. Rule 29.2)) i
Statement of Interest of Amici 1
Table of Authorities iv
Amici’s Restatement of the Question Presented 1
Statutes and Regulations 3
Argument 3
I. SBVS IS A "CABLE OPERTOR" BECAUSE IT PROVIDES CABLE SERVICE OVER A CABLE SYSTEM OWNED BY IT DIRECTLY OR THROUGH A CORPORATE AFFILIATE. 4
II. CONGRESS DID NOT INTEND THE SMATV EXCEPTION TO EXEMPT TELEPHONE COMPANIES’ CABLE OPERATIONS FROM REGULATION UNDER TITLE VI OF THE ACT. . 8
III. THE SUPPOSED ABSENCE OF CONTROL BY SBVS, RELIED ON BY THE TRIAL COURT, IS TEXTUALLY IRRELEVANT. 10
IV. THE TRIAL COURT’S RELIANCE ON THE FCC’s DECISION IN ECI IS MISPLACED. 11
Conclusion 12
Addendum: Statutes and Regulations A-1
Certificate of Service
Counsel’s Certificate of Compliance (Cir. Rule 32.2.7[c])
Table of Authorities
Cases:
City of Ames v. Heritage Communications, 861 F.2 185 (8th Cir. 1988) 11
FCC v. Beach Communications, 508 U.S. 307 (1993) 2, 9, 10
General Telephone Co. v. FCC, 134 U.S. App. D.C. 116, 413 F.2d
390 (1969)
cert. denied, 396 U.S. 888 (1969) 8
General Telephone Co. v. U.S., 449 F.2d 846 (5th Cir. 1971) 8
NCTA v. FCC, 308 U.S.App.D.C. 221, 33 F.3d 66 (1994) 7, 8, 12
Time-Warner v. FCC, 320 U.S.App.D.C. 294, 93 F.3d 957
(1996) (per curiam) 7
Statutes:
Communications Act of 1934, as amended, 47 U.S.C., ch. 5:
Title I – General Provisions
Section 3, 47 U.S.C. ' 153 (Definitions) 2, 5, A-1
Title II - Common Carriers
Section 214, 47 U.S.C. ' 214 (Line Extension) 7
Title VI – Cable Communications
Section 601, 47 U.S.C. § 521 (Purposes) 3, A-1
Section 602, 47 U.S.C. ' 522 (Definitions) passim
Section 611, 47 U.S.C. ' 531 (Cable Channels for Public, Educational,
or
Governmental Use.) i, A-3
Section 612, 47 U.S.C. ' 532 (Cable Channels for Commercial Use.) 1, A-4
Section 613, 47 U.S.C. ' 533 (Ownership Restrictions) 5, 9, A-4
Section 614, 47 U.S.C. ' 534 (Carriage of Local Commercial Television Signals) 1, A-5
Section 615, 47 U.S.C. ' 535 (Carriage of Noncommercial Educational Television) 1, A-5
Section 616, 47 U.S.C. ' 536 (Regulation of Carriage Agreements) A-5
Section 617, 47 U.S.C. ' 537 (Sales of Cable Systems) A-6
Section 621, 47 U.S.C. ' 541 (General Franchising
Requirements) ii, 1, 3, 4, 8, 10, A-6
Section 622, 47 U.S.C. ' 542 (Franchise Fees) A-6
Section 623, 47 U.S.C. ' 543 (Regulation of Rates) A-7
Section 624, 47 U.S.C. ' 544 (Regulation of Services, Facilities, and Equipment) A-8
Section 628, 47 U.S.C. ' 548 (Development of Competition and Diversity in Video Programming Distribution) A-9
Section 631, 47 U.S.C. ' 551 (Protection of Subscriber Privacy) A-9
Section 632, 47 U.S.C. ' 552 (Consumer Protection and Customer
Service) 1, A-10
Section 634, 47 U.S.C. ' 554 (Equal Employment Opportunity) 8, A-11
Section 636, 47 U.S.C. ' 556 (Coordination of Federal, State, and Local Authority) A-11
Section 639, 47 U.S.C. ' 559 (Obscene Programming) A-11
Section 651, 47 U.S.C. ' 571 (Regulatory Treatment of Video Programming Services) 6, 7, 8, A-12
Section 653, 47 U.S.C. ' 573 9
Texas Civil Statutes:
Art. 1175 (Enumerated powers) (Vernon’s 1998 ed.) 7, A-13
Agency Decisions:
Cable Act Reform, 11 F.C.C. Rcd 5937 (1996) 5
Definition of a Cable System, 5 F.C.C. Rec 7638, 68 P&F R.R. 864 (1990) 8
Entertainment Connections, Inc., 13 F.C.C.
Rcd 14277, 12 P&F C.R. 800
(1998), appeals pending sub nom. City of Chicago, et al. v. FCC,
7th Cir. Nos. 98-2729, et al. 2,
6, 7, 11, 12
TeleCable Corp., 19 F.C.C.2d 574, 17 P&F R.R. 2d 281 (1969), appeal dismissed, D.C. Cir. No. 23, 455 (1971) 8
Agency Regulations
FCC Rules:
Section 63.54 (Facilities for provision of video programming by a telephone common carrier in its telephone service area), 47 C.F.R. ' 63.54 (Deleted) 5
Section 76.5(z) (affiliate), 47 C.F.R. ' 76.5 (z) 5
Section 76.5(bb)(significant interest), 47 C.F.R. ' 76.5(bb) 4
Section 76.51, 47 C.F.R. ' ' 76.51-70 1
Section 76.92, 47 C.F.R. ' ' 76.92-163 1
Section 76.309, 47 C.F.R. ' 76.309 1
Section 76.501 (Cross-ownership), 47 C.F.R. § 76.501 1, 2, 4, 5, A-14
Section 76.503(f), 47 .CF.R. ' 76.503(f) 5
Section 76.601-630, 47 C.F.R. ' ' 76.601-630 1
Section 76.970-977, 47 C.F.R. ' ' 76.970-977 1
Section 76.983-984, 47 C.F.R. ' ' 76.983-984 1
Section 76.1000(b), 47 C.F.R. ' 76.1000(b) 5
Other Authorities:
H. Conf. Rpt. No. 104-458 (1996). 7, 9
H. Rpt. No. 98-934 (1984) 10
Statement of Interest of Amici
Amici appear to defend the public interest in the continued viability of local cable franchising and the evenhandedness of regulation among competing video programming providers. Section 621(b) of the 1984 Cable Act, 47 U.S.C. § 541(b), imposes a federal requirement that cable operators obtain cable franchises from the local franchising authorities. Under other sections of the Cable Act, 47 U.S.C., ch. 5(V-A), such franchised cable systems also –
– are subject to an anti-red-lining requirement and may be required to serve all households in the community, irrespective of economic characteristics (Section 621[a][3], 47 U.S.C. § 541[a][3]; 47 C.F.R. ' ' 76.983 - .984; cf. id. § 76.501[d]);
– provide PEG (public, educational, and government) access in accordance with terms of franchise (Section 621, 47 U.S.C. ' 541);
– provide leased access channels to independent programmers (Section 612, 47 U.S.C. ' 532; 47 C.F.R. ' ' 76.970 - .977);
– comply with technical standards (Section 624, 47 U.S.C. ' 544; 47 C.F.R. ' ' 76.601 - .630);
– comply with consumer protection and customer service requirements (Section 632, 47 U.S.C. ' 552; 47 C.F.R. ' 76.309);
– provide carriage of local commercial and educational television signals (Sections 614-15, 47 U.S.C. ' ' 534-35; 47 C.F.R. ' 76.51-.70); and
– afford non-duplication and syndicated exclusivity for local television broadcast programs (Section 614[b][5], 47 U.S.C. ' 534[b][5]; 47 C.F.R. ' ' 76.92 - .163).
Only "cable operators" are required to obtain cable franchises and to comply with the other Title VI requirements. See Entertainment Connections, Inc., 13 F.C.C. Rcd 14277, 14306, 12 P&F C.R. 800, 818 (1998), appeals pending sub nom. City of Chicago, et al. v. FCC, 7th Cir. No. 98-2729.
In the Cable Act Congress intended federal regulation to extend to all cable systems, except only those so localized that they did not have to cross public rights-of-way with their cables. See FCC v. Beach Communications, 508 U.S. 307, 309 (1993). This Court’s affirmance of Senior Judge Bunton’s decision below would exempt by definitional exclusion vast numbers of large-scale, functionally equivalent cable operations from federal regulation. SBVS and similarly structured cable systems would be thereby excused from all of the public interest requirements of the Cable Act, including particularly those enumerated above. More generally, his decision would provide a roadmap for any present or future cable operator to avoid such public interest requirements simply by distributing its cable programming over what the trial court below found to be functionally equivalent transmission services obtained from a common carrier – even if the two were affiliated within the meaning of Sections 3(1) and 602(2) (affiliate) of the Act, 47 U.S.C. §§ 153(1) and 522(2), and 47 C.F.R. § 76.501 (notes). (R. 199) Such a wholesale exemption of large-scale cable systems under the Section 602(7)(B) exception would frustrate Congress’ intent in the 1996 Act "promote competition in cable communications" by providing a technology- and market-neutral level-playing field among competing, functionally equivalent video programming providers. See Section 601(6) (purposes).
Amici’s Restatement of the
Question Presented
Whether a cable system that serves dispersed multiple-dwelling units (MDUs) may exempt itself from regulation under the Cable Act of 1984, as amended, by using video transmission service obtained from a corporate affiliate to carry its video programming through the public streets to the individual MDUs.
Statutes and Regulations
The relevant statutes and regulations are printed in an addendum to this brief.
Argument
The Section 602(7)(B) exception does not exempt SBVS from regulation as a cable operator. SBVS is a "cable operator" subject to Section 621(b)(1)’s franchising requirement because it undeniably provides "cable service." (R. 193) It provides that cable service over a cable system that it, directly or through a corporate affiliate, wholly owns. Because the system serves subscribers by use of cables in the public rights-of-way, SBVS is not exempt from the federal requirement for a local franchise.
The SMATV exception does not require the result reached by the District Court, because SBVS is a cable operator and thus is required by federal law to obtain a local franchise. SBVS is a "cable operator" within the meaning of Section 621(b)(1)’s requirement because it provides cable service over a cable system that it owns "directly or through one or more affiliates" within the meaning of Section 602(5).
SBVS indisputably provides cable service over a "cable system" as defined in the first sentence of Section 602(7), viz., "a facility … that is designed to provide cable service … to multiple subscribers within a community…." To be a "cable operator," as defined in Section 602(5), SBVS need only "own[] a significant interest" in that facility. SBVS does so, because it owns outright that portion of the facility that is on private property. As to the transmission cables that are in the public rights-of-way, they are owned by SWBT, and this ownership is attributable to SBVS by virtue of its corporate affiliation. This total ownership is "significant" in anybody’s book. Cf. 47 C.F.R. § 76.5(bb) ("significant interest"), cross-referencing 47 C.F.R. § 76.501. Under Note 2(a) of Section 76.501, a five percent ownership interest is "cognizable," and therefore "significant."
SWBT is an affiliate of SBVS within the meaning of both Sections 602(2) and 3(1) (affiliate) of the Act, 47 U.S.C. §§ 522(2) and 153(1), printed in the statutory addendum to this brief at A-1 and -2 and of Section 76.5(z) (affiliate) of the FCC’s cable rules, 47 C.F.R. § 76.5(z). The two statutory definitions are substantively identical in all respects material here, in that ownership is imputed among sister subsidiaries, such as SWBT and SBVS, which are wholly owned subsidiaries of SBC. (R. 201; Stip. 2-3, Appellant’s Record Excerpts at Tab 4) SWBT’s ownership is indisputably an "attributable interest" within the meaning of the FCC’s cross-ownership rules, 47 C.F.R. § 76.501 (Notes 1 and 2). The Commission uses these attributions for all purposes under its cable service rules. See, e.g., 47 C.F.R. § 76.1000(b) restricting cross-ownership between cable systems and cable programs delivered via satellite and 47 C.F.R. § 76.503(f) limiting a cable operator’s aggregate number of subscribers nationwide.
To qualify as a "cable operator" an entity need not hold the nominal title to all the facilities used to provide video programming to subscribers. To the contrary, the definition requires only a significant interest directly or indirectly. That test is satisfied here. Total ownership of the cable facilities has not been a sine qua non for a cable operator since Congress deleted the "common ownership" requirement of the Commission’s former rules in the 1984 Act. See ECI, supra, at 14303-304, 12 P&F C.R. at 816. A cable operator taking "channel service" from a common carrier, without having ownership of the transmission facilities, is none the less a cable operator.
Nor does the common carrier exception in Section 602(7)(C) apply. Paragraph (C) of Section 602(7) makes it clear that a common carrier facility "shall be considered a cable system … to the extent such facility is used in the transmission of video programming directly to subscribers…."
Congress reinforced of this classification in the last sentence of Section 651(a)(2), which is the pivotal provision in Part V–Video Programming Services Provided by Telephone Companies. Subsection (a)(2) deals with channel service by telephone companies and specifically provides that "common carriage of video traffic … shall not affect the treatment under Section 602(7)(C) of a facility of a common carrier as a cable system." Section 602(7)(C) is the provision of the 1984 Cable Act that exempts a common carrier providing channel service under tariff from itself being required to obtain a local cable franchise, since the telephone company provides channel service to the operator but does not provide cable service directly to subscribers. See Section 602(5)(A) ("cable service" is the one-way transmission of video programming to subscribers). If there were any doubt, Section 651(a)(2), added by the 1996 Act, removed it, making it clear that telephone companies are not subject to Cable Act requirements "merely by engaging in common carrier transport of video programming." H. Conf. Rpt. No. 104-458 at 185 (1996).
SBVS’ ownership of its cable system thus satisfies the definition in Section 602(5), making it a cable operator subject to the local franchising requirement in federal law. The issue of whether SBVS requires a franchise under state law, independent of Section 621(b)(1), is a question not before the Court. Cf. ECI, supra, at 14308-09, 12 P&F C.R. at 819. The definition of "franchising authority" in Section 602(10), 47 U.S.C. § 522(10), clearly shows that Congress intended local franchising to continue following the passage of the 1984 Act. See also Time-Warner v. FCC, 320 U.S.App.D.C. 294, 300, 93 F.3d 957, 963 (1996) (per curiam). To the extent Vernon’s Article 1175, cited by the District Court at 7 (R. 192), applies, Section 636 (Coordination of Federal, State, and Local Authority), 47 U.S.C. § 556, would save state law. Section 621(e) ante forecloses any contention for implied federal preemption of franchising authority under state law.
That the transmission cables owned by SWBT "use" the public rights-of-way has been accepted, both historically, In re Definition of a Cable System, 5 F.C.C. Rec 7638, 7638, 68 P&F R.R. 2d 864, 864-865 (1990).
Judicially extending the SMATV exemption beyond the confines of apartment buildings and other MDUs bounded by public rights-of-way is clearly not the result intended by the language Congress used in the 1996 Telecommunications Act. The modes of participation in cable television to be permitted telephone companies and their affiliates has long been a subject of controversy. In Part V (Video Programming Services Provided by Telephone Companies), of the 1996 Telecommunications Act, 47 U.S.C. ch. 5(V), Congress intended to settle this controversy by allowing the telephone companies to provide cable services in four ways, viz., wireless cable (§ 651[a][1] [radio-based systems]), common carriage of video traffic § 651[a][2]), open video systems (§ 653 [Establishment of Open Video Systems]), and cable television systems (§ 651[a][3]). See H. Conf. Rpt. No. 104-458 at 172-73 (1996). That was the basis on which Congress repealed the cross-ownership rule embodied in subsection (b) of Section 613 of the 1984 Cable Act, 47 U.S.C. § 533(b). H.Conf. Rpt., supra (' 302[b][1][Repeal]).
SWBT has attempted an end-run around the Congressionally established structure of cable regulation by attempting to operate what is in reality a cable system under the so-called SMATV (satellite master antenna system) exception in Section 602(7)(B). Cf. FCC v. Beach Communications, supra. Judge Bunton’s rationale would allow city-wide operation, serving single-family residence as well as MDUs. SWBV is conducting cable operations far beyond the exception to federal regulation in the public interest that was contemplated by Congress in 602(7)(B).
The dominant intent in Section 602(7)(B) from the beginning was to exempt from federal regulation only those systems so small as to not be worth regulating federally. See H.Rpt. No. 98-934 at 44 (1984) ("SMATV" exception); FCC v. Beach Communications, supra. It left unchanged in 1996 the later provision in subsection (e) of Section 621 that expressly permitted the local governments to continue to license or otherwise regulate any facility or combination of facilities which serves only subscribers in one or more multiple unit dwellings under common ownership, control, or management and which does not use any public right-of-way.
The trial court’s reliance at R. 201-02 on a supposed absence of control by SBVS over SWBT’s facilities is irrelevant. Section 602(5)(A) literally requires only ownership C direct or indirect C to make SBVS a cable operator. It provides:
(5) the term "cable operator" means any person or group of persons (A) who provides cable service over a cable system and directly or through one or more affiliates owns … such cable system….
By reason of the statute’s use of the word "or," the control test in subsection (5)(B) is an alternative test and not a cumulative one. "Control" under subsection (5)(B), therefore, is immaterial, because SWBV satisfies the ownership test under subsection (5)(A). SBVS is a cable operator whether or not the control test in subsection (5)(B) is also met.
Here the trial court concluded quite correctly that SBVS does provide "cable service." (R. 193) As demonstrated above, that service is provided over a cable system directly or indirectly owned by SBVS. Despite the literal language of subsection 5(A)("directly or through one or more affiliates owns"), the trial judge concluded that affiliation without control was not enough. (R. 200-01). He then distinguishes City of Ames v. Heritage Communications, 861 F.2 185 (8th Cir. 1988), on the ground that it involved piercing the corporate veil. Had Congress intended to reach only control through the parent-subsidiary relationship, it would have used the term "subsidiary" instead of "affiliate" in Section 602(5)(A).
The trial court’s reliance on the Federal Communications Commission’s decision in Entertainment Connections, Inc., supra, is misplaced. In ECI it was undisputed that there was no affiliation between ECI and the serving carrier, Michigan Bell Telephone Co. The FCC specifically and repeatedly limited its holding and precedential effect to the particular facts there presented. ECI, supra, at 14311, 12 P&F C.R. at 821 ("expressly limited"). In paragraph 55 the Commission noted that "there is an absolute separation of ownership" of the two parts of the systems and that "the companies are in no way affiliated." Again, in paragraph 56, the Commission relied on the absence of any "affiliation whatever" between ECI and Michigan Bell. This is precisely a distinction that the D.C. Circuit relied on in concluding that a telephone company providing VDT service did not require a cable franchise in the absence of an attributable cross-ownership interest with a video programmer. See NCTA v. FCC, supra, at 229, 33 F.3d at 74. In citing NCTA at R. 196 n.5 the trial court’s decision ignored this predicate. ECI was simply a case where – unlike here – subsection (5)(A) was not dispositive.
Conclusion
The decision of the District Court should be reversed.
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Of counsel:
Daniel L. Brenner Neal M. Goldberg David L. Nicoll NATIONAL CABLE TELEVISION ASS’N. 1724 Massachusetts Avenue, N.W. Washington, D.C. 20036-2604 (202) 775-3664 |
__________________________ William Malone Nicholas P. Miller MILLER & VAN EATON, P.L.L.C. 1155 Connecticut Avenue, N.W. Suite 1000 Washington, D.C. 20036 (202) 785-0600 |
Counsel for Amici
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Kenneth S. Fellman, Esq. KISSINGER & FELLMAN, P.C. Ptarmigan Place, Suite 900 3773 Cherry Creek North Drive Denver, CO 80209 (303) 320-6100 Counsel for Amicus Greater Metro Telecommunications |
James N. Horwood SPIEGEL & MCDIARMID 1350 New York Avenue, N.W. Suite 1100 Washington, D.C. 20005-4002 (202) 879-4002 Counsel for Amici ACD, ACM, and Chicago Access |
January 1999