General Telephone Co. of Southwest v. United States

Decision Date14 September 1971
Docket NumberNo. 29246.,29246.
PartiesGENERAL TELEPHONE COMPANY OF the SOUTHWEST et al., Petitioners, v. UNITED STATES of America and Federal Communications Commission, Respondents, National Cable Television Association, Inc., et al., Intervenors.
CourtU.S. Court of Appeals — Fifth Circuit

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William Malone, Washington, D. C., William R. Brown, Houston, Tex., Irwin Schneiderman, Raymond L. Falls, Jr., New York City, for Continental Telephone System.

Ward W. Wueste, Jr., Hubert M. Preston, San Angelo, Tex., Theodore F. Brophy, New York City, for General Telephone System.

M. Truman Woodward, Jr., New Orleans, La., Thomas J. O'Reilly, Washington, D. C., for U. S. Telephone Assn.

Gary L. Christensen, Charles S. Walsh, Washington, D. C., for National Cable Television Assn., Inc.

William I. Aitken, Bert L. Overcash, Richard W. Smith, Gilbert G. Lundstrom, Lincoln, Neb., for T-V Transmission, Inc. and Lincoln Telephone and Telegraph Co.

Arthur Stambler, Washington, D. C., Harold Farrow, Oakland, Cal., for Cal. Community Television Assn.

Michael L. Tomaino, Rochester, N. Y., for Rochester Telephone Corp.

James L. White, Denver, Colo., for United Telephone Co. of Kan., Inc.

Hayward D. Fisk, Merriam, Kan., Harry B. Kelleher, New Orleans, La., for United Telephone System Companies.

Lloyd D. Young, Washington, D. C., for United Utilities, Inc. and United Telephone System.

John N. Mitchell, U. S. Atty. Gen., Erwin N. Griswold, Sol. Gen., U. S. Dept. of Justice, Harry Geller, Gen. Counsel, John H. Conlin, Associate Gen. Counsel, Stuart F. Feldstein, Atty., F.C.C., Howard E. Shapiro, Chief, Appellate Section, Seymour H. Dussman, Atty., Dept. of Justice, Washington, D. C., for respondents.

Before TUTTLE, THORNBERRY and INGRAHAM, Circuit Judges.

TUTTLE, Circuit Judge:

This case involves consolidated petitions to review certain orders of the Federal Communications Commission. The disputed rules prohibit telephone companies (hereafter carriers) from furnishing CATV service in their telephone service areas, either directly or through affiliates, and disallows construction by them of cable facilities for independent CATV operators unless the carrier first offers to such operators the option of placing their own cables on the carriers' poles. We affirm the Commission's orders.

BACKGROUND

A community antenna television system (CATV) is a facility which receives television and FM radio signals by means of high antennas or by microwave transmission, amplifies them, and distributes them by coaxial cable to the premises of its subscribers who pay a fee for the service. There are three essential components to the system:

1. Reception facilities which extract the broadcast signal from the air or microwave transmission;

2. the head-end (in-put) equipment which converts and amplifies the signals thus received; and

3. the distribution system which consists of feeder or trunk lines originating at the head-end, smaller distribution cables which carry the signal to the immediate vicinity of the subscriber, and the drop wires which carry the signal from the distribution cable into the subscriber's home. Distribution is accomplished either over circuits constructed by and leased from common carriers, such as telephone companies, by the CATV operator (channel service) or by the CATV operator's stringing its own cables from utilitiy poles or through utilities' ducts (pole attachment). A third and generally unfeasible method is for the CATV operator to construct his own system in its entirety.

As the common carriers began to assume a larger role in the explosive growth of the CATV business, new and complex regulatory problems arose. Starting in 1966 the Commission began affirmatively to assert its control over telephone company practices with respect to CATV systems. Several complaints were filed by CATV interests alleging, inter alia, that the carriers favored their subsidiary CATV companies over the independents in a variety of ways and that independents were often required to lease channel service rather than being permitted to rent pole space. Subsequently the Commission determined that the provision of channel service by telephone companies for CATV required certification under Section 214 of the Communications Act. The granting of a certificate was to be predicated on several factors including the degree of affiliation between the telephone carrier and the CATV operator. The Commission was of the opinion that by reason of their control over utility poles or conduits, the telephone companies were in a position to preclude or substantially delay an unaffiliated CATV system from commencing service and thereby eliminate competition. General Telephone Company of California, 13 FCC 2d 448 (1968). The Commission was upheld on appeal in General Telephone Company of California v. FCC, 134 U.S.App.D.C. 116, 413 F.2d 390 (1969), cert. denied, 396 U.S. 888, 90 S.Ct. 173, 24 L.Ed.2d 163.

THE PRESENT PROCEEDING

Thereafter several telephone companies, including petitioners here, filed applications for certification under Section 214. All proposed to serve CATV systems with which they were affiliated in some manner, thus raising directly the problem of the anticompetitive potential of a telephone company-CATV system affiliation. The Commission decided to deal with this and related issues through rule-making and in April, 1969 it issued a Notice of Inquiry and Notice of Proposed Rulemaking in Docket No. 18,509. Foremost among the issues to be considered was whether telephone companies should be permitted to engage in furnishing CATV service to the public at all, either directly or through affiliates, and, if so, what conditions should be imposed on Section 214 certification. The Commission, upon review of the various comments filed in response to the Notice, identified the central problem as being the anomalous competitive situation between affiliated CATV systems and those which are not affiliated, but which have to rely on the telephone companies for either construction and lease of channel facilities or for the use of poles for the construction of their own facilities. Additionally the Commission felt that if this made likely the telephone companies' preemption of CATV service in a community the effect would be to extend, without justification, the companies' monopoly position to broadband cable services.1 To rectify this situation the Commission promulgated the rules here in dispute. With explanatory provisions not here relevant omitted, the rules are as follows:

Section 74.1101 of the Rules and Regulations of the FCC:

Definitions

(a) Community antenna television system. The term "community antenna television system" ("CATV system") means any facility which, in whole or in part, receives directly or indirectly over the air and amplifies or otherwise modifies the signals transmitting programs broadcast by one or more television stations and distributes such signals by wire or cable to subscribing members of the public who pay for such service.

Sections 63.54-63.57 of the Rules and Regulations of the FCC, effective May 1, 1970:

Section 63.54. Applications by telephone common carriers for authority to construct or operate distribution facilities for channel service to community antenna television (CATV) systems in their service areas shall include a showing that applicant is unrelated and unaffiliated, directly or indirectly, with the proposed CATV customer or customers. Applications which do not contain the showing required by this section will be returned as unacceptable for filing, subject to the provisions of § 63.56.

Section 63.55 Waivers.

(a) In those communities where CATV service demonstrably could not exist except through a CATV system related to or affiliated with the local telephone common carrier or upon other showing of good cause, the provisions of § 63.54 may be waived, on the Commission's own motion or on petition for waiver, if the Commission finds that public interest, convenience and necessity would be served thereby.

Section 63.56. Temporary authorizations under Section 214(a) during period allowed for discontinuance of CATV service by telephone common carriers directly or through affiliates.

All telephone common carriers are required to discontinue providing CATV service directly or through their telephone service areas within 4 years from March 16, 1970; Provided, however, that during the said 4 year period temporary authorizations may be granted under Section 214(a) of the Act, to cover existing telephone common carrier CATV channel services furnished to an affiliated or related CATV system.

Section 63.57 Availability of pole (conduit) rights to CATV customer.

Applications by telephone common carriers for authority to construct or operate distribution facilities for channel service to CATV systems shall include a showing (in addition to the conditions set forth in the above sections) that the independent CATV system proposed to be served, had available, at its option, and within the limitations of technical feasibility, pole attachment rights (or conduit space, as the case may be), at reasonable charges and without undue restrictions on the uses that may be made of the channel by the customer. The availability must exist not only at the time of the authorization but also prior to the customer's decision to seek an award of a local franchise, if such is required, and that such policy of the applicant is made known to the local franchising authority. Separate documents, attesting the above conditions, by the CATV customer and, where applicable, by the appropriate local franchising authority, must be annexed to the application.

Section 64.601. Furnishing of facilities for CATV service to the viewing public.

(a) No telephone common carrier subject in whole or in part to the Communications Act of 1934, as...

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