56 F.3d 151 (D.C. Cir. 1995), 94-1432-94-1438, Time Warner Entertainment Co., L.P. v. F.C.C.

Docket Nº:94-1432-94-1438, 94-1440-94-1442, 94-1444, 94-1445 and 94-1448.
Citation:56 F.3d 151
Party Name:TIME WARNER ENTERTAINMENT CO., L.P., et al., Petitioners, v. FEDERAL COMMUNICATIONS COMMISSION; United States of America, Respondents, Nynex Corporation, et al., Intervenors. Nos. 93-1723, 93-1727, 93-1729, 93-1730, 94-1066, 94-1354, 94-1355, 94-1366, 94-1367, 94-1375-94-1378, 94-1380, 94-1382, 94-1400, 94-1401, 94-1407, 94-1408,
Case Date:June 06, 1995
Court:United States Courts of Appeals, Court of Appeals for the District of Columbia Circuit
 
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56 F.3d 151 (D.C. Cir. 1995)

TIME WARNER ENTERTAINMENT CO., L.P., et al., Petitioners,

v.

FEDERAL COMMUNICATIONS COMMISSION; United States of

America, Respondents,

Nynex Corporation, et al., Intervenors.

Nos. 93-1723, 93-1727, 93-1729, 93-1730, 94-1066, 94-1354,

94-1355, 94-1366, 94-1367, 94-1375-94-1378, 94-1380,

94-1382, 94-1400, 94-1401, 94-1407, 94-1408,

94-1432-94-1438, 94-1440-94-1442, 94-1444, 94-1445 and 94-1448.

United States Court of Appeals, District of Columbia Circuit

June 6, 1995

Argued Dec. 20, 1994.

Rehearing and Suggestion for Rehearing

In Banc Denied July 17, 1995.[*]

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Petitions for Review of Orders of the Federal Communications Commission.

H. Bartow Farr, III, argued the cause, for petitioner Nat. Cable Television Ass'n, Inc. With him on the briefs were Richard G. Taranto, Daniel L. Brenner, Neal M. Goldberg and Diane B. Burstein.

Stuart W. Gold, argued the cause, for petitioner Time Warner Entertainment Co., L.P. With him on the briefs were Robert D. Joffe, Edward J. Weiss, Eric H. Jaso, Brian Conboy, Theodore Case Whitehouse, Francis M. Buono, Aaron I. Fleischman, R. Bruce Beckner and Jill Kleppe McClelland. Arthur H. Harding entered an appearance for Time Warner Entertainment Co., L.P.

Frederick E. Ellrod, III, argued the cause, for petitioners City of Austin, TX, City of Dayton, OH, City of Dubuque, IA, King County, WA, Miami Valley Cable Council, Montgomery County, MD, St. Louis, MO and City of Wadsworth, OH. With him on the briefs was Joseph Van Eaton. Lisa S. Gelb and Nicholas P. Miller entered an appearance.

David O. Bickart, argued the cause, for petitioner Blade Communications, Inc. With him on the briefs were Terrence B. Adamson, Irving Gastfreund, Gary Thompson and Fritz Byers.

Brenda L. Fox and Michael S. Schooler were on the briefs, for petitioners Cable Telecommunications Ass'n, Comcast Cable Communications, Inc., Cox Cable Communications, Inc., Cablevision Industries Corp. and Newhouse Broadcasting Corp. J. Christopher Redding and Peter H. Feinberg entered appearances, for Comcast Corp. and Cablevision Industries Corp. Stephen R. Effros, James H. Ewalt and Robert Ungar were on the briefs, for petitioner Cable Telecommunications Ass'n. Frank W. Lloyd, III and Peter Kimm, Jr. entered appearances, for Cable Telecommunications Ass'n. Lex J. Smith, Joel Nomkin and Charles A. Blanchard were on the briefs, for petitioner Century Communications Corp. Stephen R. Ross and Kathryn A. Hutton were on the briefs, for petitioner Armstrong Holdings, Inc. John P. Cole, Jr., and Paul Glist were on the briefs, for petitioners Benchmark Communications, L.P., Columbia Associates, L.P., Daniels Cablevision, Inc., Greater Media, Inc., McDonald Investment Co., Inc., Prime Cable Corp., Telecable Corp., United Video Cablevision, Inc. and Western Communication. Gardner F. Gillespie, David G. Leitch and James J. Moor were on the briefs, for petitioners C-TEC Cable Systems, Inc., Horizon Cable I, L.P., Clinton Cable, L.P., Harron Communications Corp., the Coalition of Small System Operators, Prime Cable Corp., Douglas Communications Corp. II, Wometco Cable Corp., Georgia Cable Partners and Atlanta Cable Partners, L.P.

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Christopher J. Wright, Deputy Gen. Counsel, Daniel M. Armstrong, Associate Gen. Counsel, and Laurence N. Bourne, Counsel, F.C.C., argued the cause, for respondents. With them on the briefs were William E. Kennard, Gen. Counsel, Carl D. Lawson, C. Grey Pash, Jr., James M. Carr and Aliza F. Katz, Counsel, F.C.C., Anne K. Bingaman, Asst. Atty. Gen., Catherine G. O'Sullivan and Nancy C. Garrison, Attys., U.S. Dept. of Justice. Renee Licht, Counsel, F.C.C. entered an appearance. Robert B. Nicholson and Robert J. Wiggers, Attys., U.S. Dept. of Justice, entered appearances.

Laurence H. Tribe, Jonathan S. Massey, Edward D. Young, III and Michael E. Glover were on the briefs, for intervenor Bell Atlantic. John Thorne entered an appearance for intervenor Bell Atlantic. Ward W. Wueste, Jr. and John F. Raposa were on the briefs, for intervenor GTE Service Corp. James R. Hobson, Gail L. Polivy and Jeffrey O. Moreno entered appearances, for intervenor GTE Service Corp. Thomas J. Tallerico and Eric E. Breisach were on the briefs, for intervenor Small Cable Business Ass'n. Richard Blumenthal, William B. Gundling, Jane R. Rosenberg and Stephen R. Park were on the briefs, for intervenor Atty. Gen. of the State of Conn. Bradley Stillman was on the briefs, for intervenor Consumer Federation of America.

Shelley E. Harms entered an appearance, for intervenor Nynex Corp . Matthew R. Sutherland entered an appearance, for intervenor BellSouth Telecommunications, Inc. Gary M. Epstein entered an appearance, for intervenor DirecTv, Inc. Larry S. Solomon entered an appearance, for intervenor Liberty Cable Co., Inc. Robert A. Garrett entered an appearance, for intervenor Nat. Ass'n of Telecommunications Officers and Advisors. Howard J. Barr entered an appearance, for intervenor Service Electric Cable TV of New Jersey.

Before GINSBURG, RANDOLPH, and ROGERS, Circuit Judges.

Statement for the Court filed PER CURIAM.

Opinion for the Court filed by Circuit Judge GINSBURG.

Opinion for the Court filed by Circuit Judge RANDOLPH.

Opinion for the Court filed by Circuit Judge ROGERS.

Opinion dissenting in part filed by Circuit Judge RANDOLPH.

PER CURIAM.

In these consolidated cases, various cable companies and municipalities petition for review of several orders of the Federal Communications Commission implementing the Cable Television Consumer Protection And Competition Act of 1992, Pub.L. No. 102-385, 106 Stat. 1460 (codified in scattered sections of 47 U.S.C.). We are issuing three separate opinions, each addressing a distinct category of issues. In the opinion for the court authored by Judge GINSBURG, we address what the parties call the "rate issues," various challenges brought under the 1992 Cable Act and the Administrative Procedure Act to certain FCC decisions concerning the rates that regulated cable companies may charge. In the opinion for the court authored by Judge RANDOLPH, we consider the claim of various cable companies that the FCC, in implementing the Cable Act, violated the First Amendment to the United States Constitution. Finally, in the opinion for the court authored by Judge ROGERS we review what the parties call the "rules issues," various claims made by cable companies and a group of cities concerning the scope of the FCC's cable regulations and the role of local governments in regulating cable.

GINSBURG, Circuit Judge:

In addressing the "rate issues," we consider challenges made by a group of cable companies, by a group of cities, and by Blade Communications, Inc., an individual cable company. Put simply, the cable petitioners argue that the FCC's new ratemaking regime results in rates that are too low and that it should be set aside both because it violates the 1992 Cable Act and because it is arbitrary and capricious in violation of the Administrative Procedure Act. Blade Communications

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argues more specifically that the Commission's rules improperly penalize it for having had rates that were lower than those charged by most cable systems prior to the imposition of controls. The cities argue that other aspects of the ratemaking regime run afoul both of the 1992 Cable Act and of the APA; generally, they ask us to set aside those parts of the FCC's rules that they claim permit cable companies to charge unlawfully high rates.

We hold that, with one exception, the Commission struck an appropriate balance between the competing interests of the cable companies and their subscribers, in violation neither of the 1992 Cable Act nor of the APA. The one exception is the Commission's treatment of so-called gap-period external costs; on that issue, we grant the cable companies' petition and vacate the rule.

I. BACKGROUND

Under the Cable Act of 1992, any cable system that does not face "effective competition," as defined in the Act, is subject to rate regulation. 47 U.S.C. Sec. 543(a)(2). The definition of effective competition includes three types of situations, to wit:

(A) fewer than 30 percent of the households in the franchise area subscribe to the cable service of a cable system;

(B) the franchise area is--

(i) served by at least two unaffiliated multichannel video programming distributors each of which offers comparable video programming to at least 50 percent of the households in the franchise area; and

(ii) the number of households subscribing to programming services offered by multichannel video programming distributors other than the largest multichannel video programming distributor exceeds 15 percent of the households in the franchise area; or

(C) a multichannel video programming distributor operated by the franchising authority for that franchise area offers video programming to at least 50 percent of the households in that franchise area.

47 U.S.C. Sec. 543(l )(1). Only a cable system that finds itself in one of those three situations, which the Commission calls respectively a "low penetration system," an "overbuild," and a "municipal system," is exempt from rate regulation. 47 U.S.C. Sec. 543(a)(2).

The Act divides the cable services of a system that is subject to rate regulation into three categories: (1) the basic service tier; (2) cable programming service; and (3) video programming offered on a per channel or per program basis, which alone is not subject to rate regulation. 47 U.S.C. Secs. 543(a)(1), (l )(2). The basic...

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