New York State Com'n on Cable Television v. F.C.C.

• Decision Date: 07 January 1982
• Docket Number: D,No. 296,296
• Citation: 669 F.2d 58
• Parties: 7 Media L. Rep. 2562 NEW YORK STATE COMMISSION ON CABLE TELEVISION, Petitioner, v. FEDERAL COMMUNICATIONS COMMISSION and United States of America, Respondents, Teleprompter Corporation and WWHT Corporation, Intervenors. ocket 80-4253.
• Court: U.S. Court of Appeals — Second Circuit

Page 58

669 F.2d 58

7 Media L. Rep. 2562

NEW YORK STATE COMMISSION ON CABLE TELEVISION, Petitioner, v. FEDERAL COMMUNICATIONS COMMISSION and United States of

America, Respondents,

Teleprompter Corporation and WWHT Corporation, Intervenors.

No. 296, Docket 80-4253.

United States Court of Appeals, Second Circuit.

Argued Oct. 29, 1981.

Decided Jan. 7, 1982.

Franklin K. Breselor, Asst. Atty. Gen. of State of New York, Albany, N.Y. (Robert Abrams, Atty. Gen. of State of New York, William J. Kogan, Asst. Sol. Gen. of State of New York, Albany, N.Y., of Counsel), for petitioner.

Lisa B. Margolis, Counsel, F.C.C., Washington, D.C. (Stephen A. Sharp, Gen. Counsel, F.C.C., Daniel M. Armstrong, Associate Gen. Counsel, F.C.C., John E. Ingle, Deputy Associate Gen. Counsel, F.C.C., William F. Baxter, Asst. Atty. Gen. of U.S., Barry M. Grossman, Atty. U.S. Dept. of Justice, Washington, D.C., of counsel), for respondents.

Gardner F. Gillespie, Washington, D.C. (Hogan & Hartson, Jay E. Ricks, Paul C. Skelly, Washington, D.C., and Barry P. Simon, New York City, of counsel), for intervenor Teleprompter Corp.

N. Frank Wiggins, Washington, D.C. (Cohn & Marks, Washington, D.C.), for intervenor WWHT Corp.

Before FEINBERG, Chief Judge, FRIENDLY, Circuit Judge, and PIERCE, Circuit Judge. ^*

PIERCE, Circuit Judge:

Since the inception of the American television era, various ideas, technologies, and services have been developed to enhance the reception of locally-broadcast video signals and to substantially broaden the programming alternatives available to viewers. This case raises the issue of whether the Federal Communications Commission ("FCC") lawfully preempted New York State's regulation of one of those services.

Background

Among the several options available to some television viewers in New York State are programs delivered by master antenna television ("MATV") systems, by community antenna television ("CATV") systems, and by Multipoint Distribution Service ("MDS").

A MATV system, normally installed in multi-unit dwellings such as apartment houses, consists of a rooftop antenna attached to a network of wires which extend into each living unit of the building. The rooftop antenna receives locally broadcast VHF and UHF signals and relays them to the viewers. Reception is normally improved because of the absence of obstructions and the height of the antenna.

In a CATV or cable television system, broadcast signals are initially received at the CATV station. Distant signals are transmitted to the station via satellite and microwave. The signals are amplified and "cleaned" at the station, and then transmitted to the consumer by cable or wire. See FCC v. Midwest Video Corp., 440 U.S. 689, 697 n.6, 99 S.Ct. 1435, 1440 n.6, 59 L.Ed.2d 692 (1979); United States v. Southwestern Cable Co., 392 U.S. 157, 161-64, 88 S.Ct. 1994, 1996-98, 20 L.Ed.2d 1001 (1968).

A common carrier system in the MDS consists of a fixed station which transmits high frequency signals omnidirectionally to fixed receivers with directional antennas. The signal is intercepted by a parabolic antenna, converted from microwave frequency to a selected lower frequency by a downconverter, passed through a decoder which activates only the intended receivers, and, finally, is displayed on an unused channel on the viewer's television set. ¹ Again, in a multi-unit dwelling, a network of wires is utilized to deliver the signal to each unit.

Atop the Empire State Building in New York City is station WQQ-79, which operates under a license granted to Microband Corporation of America ("Microband") by the FCC. It transmits MDS signals to receivers within a 35 mile radius, including points in New York, New Jersey, and Connecticut. Among WQQ-79's customers, for which it transmits programming, is Home Box Office, Inc. ("HBO"), a company which supplies entertainment programs to the viewing public for a fee. WQQ-79 transmits HBO's programming to some 233 MATV and CATV reception points serving an estimated 110,950 subscribers. Like any other customer of a MDS station, HBO provides the programming and specifies the receive points and time of transmission. HBO, however, does not itself market the programming. Instead, it engages the services of middlement, such as Orth-O-Vision, Inc. ("Orth-O-Vision"), to market its services to apartment dwellers. In order to reach an apartment resident, WQQ-79 typically sends the video material provided by HBO to a rooftop antenna connected to the necessary downconverter and decoder. The signal is then delivered to the customer's home television set through the wires of a MATV system.

In 1972, the New York State legislature created the New York State Commission on Cable Television ("State Commission") and gave it regulatory jurisdiction over all "cable television systems." N.Y. Executive Law, Art. 28. By statute, a "cable television system" ² does not include a "master antenna television system." ³ In two orders entitled Clarification of Policy in Docket No. 90085 dated October 22, 1976 ("Clarification") and Further Clarification and Modification of Policy dated April 4, 1977 ("Further Clarification"), the State Commission ruled that the statutory definition of a MATV system did not encompass any MATV system which provides pay programming or which allows the reception of programming which could not be received from locally viewable off-the-air broadcast signals. Thus, a MATV system which delivered down converted and decoded MDS signals was not considered a "master antenna television system" under the statute and would be regulated as a "cable television system." Importantly, such a system could not operate without first obtaining a franchise from the local municipality pursuant to N.Y. Executive Law § 819. ⁴

By its "Petition for Expedited Relief" filed on March 11, 1977, Orth-O-Vision, a marketer of HBO's pay television service in the Borough of Queens, New York, requested the FCC to preclude the State Commission from regulating or prohibiting the reception of pay programming sold by Orth-O-Vision which was transmitted from WQQ-79 to MATV systems in multi-unit dwellings in Queens. On March 21, 1977, the FCC placed the petition on public notice ⁵ and solicited comments from interested parties. ⁶ In a decision released on September 22, 1978, the FCC, treating Orth-O-Vision's petition as a petition for a declaratory ruling, ruled that the State Commission's policies enunciated in its Clarification and Further Clarification were void as preempted "to the extent that their effect will be to prohibit the receipt of federally-authorized MDS transmissions of HBO's programming." In re Orth-O-Vision, Inc., 69 F.C.C.2d 657, 671 (1978) ("First Order"). In subsequently denying the State Commission's petition for reconsideration, the FCC made clear that its prior ruling was not limited to HBO programming, but applied to any MDS transmissions which were impeded by state regulation of MATV systems. In re Orth-O-Vision, Inc., 82 F.C.C.2d 178, 179, 185 (1980) ("Second Order"). ⁷

In the petition for review now before us, ⁸ the State Commission contends that the FCC incorrectly found that the State's regulation of MATV systems, as applied, impeded service in the MDS; that even if it did impede MDS service, the State's regulation only affected intrastate MDS transmissions, over which the FCC has no jurisdiction; and, finally, that the FCC's rulings were impermissibly vague. ⁹ For the reasons stated below, the State Commission's petition for review is denied.

Discussion

Under the Supremacy Clause of the Constitution, Art. VI, cl. 2, a federal law preempts state law when the state law "stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress." Hines v. Davidowitz, 312 U.S. 52, 67, 61 S.Ct. 399, 404, 85 L.Ed. 581 (1941); see Chicago & North Western Transportation Co. v. Kalo Brick & Tile Co., 450 U.S. 311, 317, 101 S.Ct. 1124, 1130, 67 L.Ed.2d 258 (1981); Florida Lime & Avocado Growers, Inc. v. Paul, 373 U.S. 132, 142, 83 S.Ct. 1210, 1217, 10 L.Ed.2d 248 (1963). Even in an area where Congress has not completely foreclosed state regulation, "a state statute is void to the extent that it actually conflicts with a valid federal statute." Ray v. Atlantic Richfield Co., 435 U.S. 151, 158, 98 S.Ct. 988, 994, 55 L.Ed.2d 179 (1978); Jones v. Rath Packing Co., 430 U.S. 519, 525-26, 97 S.Ct. 1305, 1309-10, 51 L.Ed.2d 604 (1977). The federal preemptive authority may be "explicitly stated in the (federal) statute's language or implicitly contained in its structure and purpose." Id. at 525, 97 S.Ct. at 1309. In determining whether it conflicts with the federal law, the Court must look to the effect, rather than the purpose of the state law. Perez v. Campbell, 402 U.S. 637, 652, 91 S.Ct. 1704, 1712, 29 L.Ed.2d 233 (1971). In a similar vein, the Supreme Court has instructed courts "to consider the relationship between state and federal laws as they are interpreted and applied, not merely as they are written." Jones, 430 U.S. at 526, 97 S.Ct. at 1310.

Pursuant to the foregoing guidelines, we will examine the effect of the State Commission's regulation, the FCC's regulatory authority, and finally, the conflict between the two regulatory schemes. Initially, however, we note that the scope of our review of the FCC's declaratory orders is prescribed by 5 U.S.C. § 706(2)(A)-(D). ¹⁰ Under those provisions, the Court must set aside "agency action, findings, and conclusions found to be arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law" or action which fails to meet constitutional, jurisdictional, or procedural requirements. See Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 413-14, 91 S.Ct. 814, 822, 28 L.Ed.2d 136 (1970). Under the "arbitrary or capricious" standard of review-a "narrow" standard, id. at 416, 91 S.Ct. at 823-the Court may only invalidate agency action that is ...