American Cable Television, Inc. v. Arizona Public Service Co.

• Court: Arizona Court of Appeals
• Writing for the Court: CONTRERAS
• Citation: American Cable Television, Inc. v. Arizona Public Service Co., 693 P.2d 928, 143 Ariz. 273 (Ariz. App. 1983)
• Decision Date: 01 December 1983
• Docket Number: Nos. 1,CA-CIV,s. 1
• Parties: AMERICAN CABLE TELEVISION, INC., an Arizona corporation; Cablecom-General, Inc., an Oklahoma corporation; and Arizona Cable Television Association, an Arizona non-profit corporation, Plaintiffs-Appellees, v. ARIZONA PUBLIC SERVICE COMPANY, Defendant-Appellant. AMERICAN CABLE TELEVISION, INC., an Arizona corporation; Cablecom-General, Inc., an Oklahoma corporation; and Arizona Cable Television Association, an Arizona non-profit corporation, Plaintiffs-Appellees, v. ARIZONA CORPORATION COMMISSION, B.L. "Bud" Tims, James Weeks, and Diane B. McCarthy, as Commissioners of and constituting the Arizona Corporation Commission, Defendants-Appellants. 6567, 1 6568.

Page 928

693 P.2d 928

143 Ariz. 273

AMERICAN CABLE TELEVISION, INC., an Arizona corporation; Cablecom-General, Inc., an Oklahoma corporation; and Arizona Cable Television Association, an Arizona non-profit corporation, Plaintiffs-Appellees, v. ARIZONA PUBLIC SERVICE COMPANY, Defendant-Appellant.

AMERICAN CABLE TELEVISION, INC., an Arizona corporation; Cablecom-General, Inc., an Oklahoma corporation; and Arizona Cable Television Association, an Arizona non-profit corporation, Plaintiffs-Appellees, v. ARIZONA CORPORATION COMMISSION, B.L. "Bud" Tims, James Weeks, and Diane B. McCarthy, as Commissioners of and constituting the Arizona Corporation Commission, Defendants-Appellants.

Nos. 1 CA-CIV 6567, 1 CA-CIV 6568.

Court of Appeals of Arizona Division 1, Department A.

Dec. 1, 1983.

Review Denied Feb. 2, 1984.

Martori, Meyer, Hendricks & Victor, P.A. by Randall C. Nelson, Ron Kilgard, Phoenix, Hogan & Hartson by Gary L. Christensen, Paul Glist, Washington, D.C., for plaintiff-appellee American Cable Television, Inc.

Brown & Bain, P.A. by Alan H. Blankenheimer, Casceil C. Medlin, Phoenix, for plaintiff-appellee Cablecom-General, Inc.

Ryley, Carlock & Ralston, P.A. by N. Warner Lee, Abigail Carson Berger, Phoenix, for plaintiff-appellee Arizona Cable Television Ass'n.

Wentworth & Lundin by John E. Lundin, Charles W. Herf, Phoenix, for defendant-appellant Arizona Public Service Co.

James M. Flenner, Chief Counsel, Legal Div., Phoenix, for defendant-appellants Arizona Corp. Com'n and members.

OPINION

CONTRERAS, Judge.

This is a consolidated appeal from the decision of the Superior Court, the Honorable Robert A. Hertzberg, declaring that the Arizona Corporation Commission (Commission) lacks the authority required under federal and state law to displace the jurisdiction of the Federal Communications Commission (FCC) over cable television pole attachment agreements. The dispute arose after plaintiffs-appellees challenged the Commission's action on July 22, 1981, in which it asserted that it would henceforth exercise such jurisdiction. Appellants also appeal from the award of attorneys fees. Pursuant to A.R.S. § 12-2101(A) and A.R.S. § 40-254 we have jurisdiction over this appeal. We affirm the order and judgment.

I. CABLE TELEVISION AND POLE ATTACHMENT AGREEMENTS.

In order to better understand the question of whether the Commission has jurisdiction over pole attachment agreements, a brief history concerning the development of cable television and the utilization of pole attachment agreements is set forth. Conventional television is broadcast from a transmission tower over the air to receiving antennas. Cable television was originally developed to bring television to areas which, because of their distance from metropolitan centers or isolation due to physical barriers, could not receive conventional television signals. The original cable companies received over-the-air signals from the nearest broadcast market and retransmitted them via coaxial cable to small towns and rural subscribers.

Today, cable television has matured to serve urban and rural subscribers alike with alternatives to ordinary over-the-air television. For example, a cable television subscriber in Phoenix can receive all the programming available over-the-air plus additional programming provided by the cable operator. A subscriber can receive programs from other cities such as New York, Chicago and Atlanta. In addition, a television subscriber can receive satellite services such as ESPN (Sports), CNN (24 hour news) and USA Cable Network which are considered to be basic cable services. For additional charges the subscriber may also receive services such as HBO and Showtime (movies and other forms of entertainment).

In order to provide this programming, cable companies physically connect coaxial cable from their reception and transmission equipment to the television sets of subscribers. Cable operators must therefore either (1) attach their cable to existing networks of utility poles, (2) lay their cable underground, or (3) build their own system of poles. For economic and aesthetic reasons, a very substantial amount of cable attachment has been accomplished by attaching cables to pre-existing utility poles. The cable company attaches its cable to the utility's pole pursuant to a private pole attachment agreement. Under the agreement, the utility whose poles are being utilized, issues a series of licenses for the use of poles as requested by the cable operator. The licenses are non-exclusive and revocable. The cable company receives the right to attach its cables and related equipment to the unoccupied space on the licensed pole but it acquires no property interest in the pole itself. The utility is free to demand the removal of the cable whenever it needs the space.

The agreement requires the cable company to pay the full costs of attaching the cable, satisfy all applicable safety requirements, and perform all of the tasks involved in making the pole ready for the cable to be attached. The agreement also requires the cable operator to pay an "annual attachment fee" for the use of the surplus pole space. From the record, it appears that there has been a substantial increase in these fees. A few years ago, the fees in Arizona were approximately $2.00-$3.00 per pole per year but more recently the fees have ranged from $8.00-$13.00 per pole per year.

II. JURISDICTION: FCC AND STATES.

In 1978, Congress added Section 224 to the Communications Act of 1934, 47 U.S.C. § 224, referred to as the Federal Pole Attachment Act. The Act requires the FCC to regulate the rates, terms, and conditions of pole attachments, and sets forth the basic guidelines the FCC is to use in setting rates. Pursuant to statutory guidelines, the FCC has developed a general formula for calculating pole attachment fees, which was upheld in Monongahela Power Co. v. FCC, 655 F.2d 1254 (D.C.Cir.1981). The FCC's formula is tied to the utility's rate of return and will take local conditions or other circumstances into account when appropriate. See e.g. Liberty TV Cable, Inc. v. Gulf States Util. Co PA-80-0011, 49 Rad.Reg.2d (P & F) 843, Mimeo 000765 (May 8, 1981). In August 1982, Congress amended the Federal Pole Attachment Act to make the formula a permanent feature of the Act. See, Communications Act Amendments of 1982, Pub.L. No. 97-259, § 106 (1982).

The FCC's jurisdiction over pole attachments is subject to reverse "preemption" by the State. It is the Commission's attempt at preemption which is at issue in this appeal. Section (c) of the Act permits displacement of FCC authority "with respect to rates, terms, and conditions for pole attachments in any case where such matters are regulated by a State," if state regulation meets specific federal prerequisites. In order to supplant FCC regulation, a state must certify to the FCC that it has the authority to regulate the "rates, terms and conditions" of pole attachments and "the authority to consider ... the interests of the subscribers of cable television services, as well as the interests of the consumers of the utility services."

In July 1981, the FCC was considering a number of complaints brought by cable operators against the pole attachment practices in Arizona of Arizona Public Service Company (APS) and Mountain Bell Telephone Company (Mountain Bell). In an opinion released on July 9, 1981, the FCC ruled (in PA-79-0031, Mimeo 001869) that the rates charged by APS and Mountain Bell were unreasonable and illegal and ordered an immediate rate reduction and refund of overcharges to the cable operators. Six days later, the Arizona Corporation Commission published an agenda for its next regular open meeting giving notice that it would consider "[p]ossible declaration to FCC concerning pole attachment regulation."

On July 22, 1981, the Commission declared that it would assume jurisdiction under existing state law to regulate the rates, terms and conditions of pole attachment disputes between cable television and public service corporations. The Commission did not proceed by formal notice-and-comment rule-making. It did not conduct a hearing nor make any findings. On July 23, 1981, the Commission sent a letter to the FCC purporting to certify that it regulated pole attachments pursuant to Section (c) of the Pole Attachment Act. The FCC rejected the certification for failure to cite any relevant authority. On August 12, 1981, the Commission filed a new certification relying on state statutes, especially A.R.S. §§ 40-285 and 40-361. Since the Pole Attachment Act does not permit the FCC to question the validity of the state agency's assertion of authority, the FCC thereupon ceased regulation of Arizona pole attachment disputes.

This suit was filed as a Special Action in superior court against the Commission and APS, one of the major owners of utility poles in Arizona, to nullify the Commission's assertion of jurisdiction. The superior court in its order and judgment held that the Commission lacked authority under state law to regulate pole attachments and to displace FCC regulation. The court declared that the purported letters of certification were null and void and directed that the FCC be so informed. The court also awarded plaintiffs-appellees a portion of their reasonable attorney's fees pursuant to A.R.S. § 12-348.

III. ISSUES PRESENTED FOR REVIEW.

1. The first question presented for review is whether the Commission has jurisdiction over cable television pole attachment agreements.

2. The second question is whether the award of attorney's fees was reasonable.

IV. DISCUSSION.

A. THE CORPORATION COMMISSION DOES NOT HAVE JURISDICTION TO REGULATE POLE ATTACHMENT AGREEMENTS.

1. The Commission May Not Regulate Cable Television Pole Attachment Agreements Under Its Authority To Regulate The Electric And Telephone Utilities.

Appellant APS contends that the Commission may regulate cable television pole attachment...