City of Dallas, Tex. v. F.C.C.

• Decision Date: 18 January 1999
• Docket Number: Nos. 96-60502,96-60581 and 96-60844,s. 96-60502
• Citation: 165 F.3d 341
• Parties: 14 Communications Reg. (P&F) 1047 CITY OF DALLAS, TEXAS, Petitioner, v. FEDERAL COMMUNICATIONS COMMISSION and United States of America, Respondents. City of Dallas, Texas, Petitioner, v. Federal Communications Commission and United States of America, Respondents. National Cable Television Association, Inc., Petitioner, v. Federal Communications Commission and United States of America, Respondents. Bellsouth Telecommunications, Inc., Petitioner, v. Federal Communications Commission and United States of America, Respondents. United States Conference of Mayors and National Association of Telecommunications Officers and Advisors, Petitioners, v. Federal Communications Commission and United States of America, Respondents.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 341

165 F.3d 341

14 Communications Reg. (P&F) 1047

CITY OF DALLAS, TEXAS, Petitioner, v. FEDERAL COMMUNICATIONS COMMISSION and United States of

America, Respondents.

City of Dallas, Texas, Petitioner, v. Federal Communications Commission and United States of

America, Respondents.

National Cable Television Association, Inc., Petitioner, v. Federal Communications Commission and United States of

America, Respondents.

Bellsouth Telecommunications, Inc., Petitioner, v. Federal Communications Commission and United States of

America, Respondents.

United States Conference of Mayors and National Association

of Telecommunications Officers and Advisors, Petitioners, v. Federal Communications Commission and United States of

America, Respondents.

Nos. 96-60502, 96-60581 and 96-60844.

United States Court of Appeals, Fifth Circuit.

Jan. 18, 1999.

Rehearing and Rehearing En Banc Denied May 28, 1999.

Ronald D. Stutes, Dallas, TX, for City of Dallas, TX.

Matthew C. Ames, Miller & Van Eaton, Washington, DC, for City of Dallas, TX, and U.S. Conference of Mayors.

Laurence Nicholas Bourne, Daniel M. Armstrong, James Michael Carr, William E. Kennard, FCC, Washington, DC, for F.C.C Andrea V. Limmer, Nancy C. Garrison, Catherine G. O'Sullivan, Mark Samuel Popofsky, U.S. Dept. of Justice, Antitrust Div., Appellate Section, Washington, DC, for U.S.

Matthew Robert Sutherland, BellSouth Corp., Atlanta, GA, for BellSouth Corp. and BellSouth Telecommunications, Inc.

Leslie A. Vial, Michael E. Glover, Arlington, VA, for Bell Atlantic and Bell Atlantic Video Services Co.

Daniel Leslie Brenner, Neal Morse Goldberg, National Cable Television Ass'n, Washington, DC, for National Cable Television Ass'n, Inc.

Maureen E. Mahoney, James H. Barker, Gary M. Epstein, Latham & Watkins, Washington, DC, for BellSouth Telecommunications, Inc., U.S. Telephone Ass'n, Bell Atlantic, Bell Atlantic Video Services Co., GTE Serv. Corp. and GTE Media Ventures, Inc.

Michael Abbott Tanner, Bellsouth Corp., Atlanta, GA, for Bellsouth Telecommunications, Inc.

William Robert Malone, Joseph L. Van Eaton, Nicholas P. Miller, Frederick Edward Ellrod, III, Miller & Van Eaton, Washington, DC, for U.S. Conference of Mayors and National Ass'n of Telecommunications Officers and Advisors.

Jonathan Standish Massey, Washington, DC, Laurence Henry Tribe, Harvard Law School, Cambridge, MA, for Bellsouth Telecommunications, Inc., U.S. Telephone Ass'n, Bell Atlantic, Bell Atlantic Video Services Co., GTE Serv. Corp. and GTE Media Ventures, Inc.

Linda Lee Kent, Mary McDermott, Hance Haney, Washington, DC, for U.S. Telephone Ass'n.

John Francis Raposa, GTE Telephone Operations, Irving, TX, Gail Laurie Polivy, GTE Corp., Washington, DC, for GTE Serv. Corp. and GTE Media Ventures, Inc.

Robert B. McKenna, Denver, CO, for U.S. West Inc.

Jean Lynn Kiddoo, Warren Anthony Fitch, Antony Richard Petrilla, Don W. Blevins, Swidler & Berlin, Washington, DC, for Residential Communications Network of Massachusetts and MFS Communications Co., Inc.

James Ned Horwood, Washington, DC, for Alliance for Community Media, Alliance for Communications Democracy, Consumer Project on Technology, People for the American Way, Consumer Federation of America, and Office of Communication of the United Church of Christ.

Werner K. Hartenberger, Michael Stuart Schooler, Dow Lohnes & Albertson, Washington, DC, for Cox Communications, Inc.

Petitions for Review of Orders of the Federal Communications Commission.

Before SMITH, DUHE and WIENER, Circuit Judges.

JERRY E. SMITH, Circuit Judge:

The petitioners seek review of two orders of the Federal Communications Commission ("FCC" or "Commission") interpreting the open video system ("OVS") provisions of the Telecommunications Act of 1996 ("the Act"), Pub.L. No. 104-104, 110 Stat. 56 (1996). ¹ We grant the petitions for review and affirm in part and reverse in part the Commission's orders.

I. Introduction.

Consistent with the Act's primary goal of encouraging competition in networked communication industries, the OVS provisions--chiefly § 653 of the Act, 47 U.S.C. § 573--aim to encourage local exchange carriers ("LEC's") to enter the market for video programming delivery as OVS service providers. OVS's, which are designed to compete with traditional cable television service, resemble both common carriers and cable systems: Like common carriers, they must share carriage capacity with unaffiliated programming providers, but they may provide some programming of their own, as cable companies may do. See 47 U.S.C. § 573(b)(1)(A).

To hasten the development of OVS's, Congress directed the FCC to "complete all actions necessary (including any reconsideration) to prescribe regulations" governing OVS's "[w]ithin 6 months after" February 8, 1996, "the date of enactment of the [1996 Act]." 47 U.S.C. § 573(b)(1). Pursuant to this command, the agency promulgated the orders under review.

Five petitioners challenge various aspects of the orders. The challenges fall into three categories. The National Association of Telecommunications Advisors and Officers ("NATOA"), the City of Dallas, and the U.S. Conference of Mayors (collectively, the "Cities") complain of the impact of the Commission's OVS rules on local governments. The National Cable Television Association ("NCTA") challenges the agency's treatment of cable operators under the OVS rules. Finally, BellSouth, a LEC, attacks the requirement that OVS operators obtain FCC approval of their certifications before commencing construction related to their OVS's.

Agreeing with the Cities that the FCC exceeded its statutory authority in granting OVS operators an enforceable right of access to local rights-of-way, we reverse the rule preempting local franchise requirements for OVS's. While we do not decide the issue of what additional fees localities may charge OVS operators, we affirm the limitations on fees localities may charge pursuant to § 653(c)(2)(B) of the Act, 47 U.S.C. § 573(c)(2)(B). We also affirm the FCC's decision not to authorize local governments to require OVS operators to provide institutional networks.

As for NCTA's claims, we reverse the agency's determination that LEC's who are also cable operators may not provide OVS service in the absence of effective competition. We invalidate and remand the Commission's rules generally prohibiting in-region cable operators from providing video programming on unaffiliated OVS systems but permitting OVS operators to waive this prohibition. We affirm, however, the rule prohibiting non-LEC cable operators who do not face effective competition from operating OVS systems, and the rule imposing the effective competition requirement on cable operators whose franchises have expired. As BellSouth urges, we reverse the requirement that carriers obtain the Commission's approval before constructing new physical plants needed to operate OVS systems.

II. Historical Background of the OVS Provisions.

We begin by tracing the history of cable regulation and considering how OVS service differs--both in how it operates and in how it is regulated--from traditional cable service and from common carriers. Cable television first became publicly available in the 1950's. For more than a decade, the FCC refrained from regulating the new service, believing it lacked authority to do so under either the common carrier provisions of title II of the Communications Act or the radio transmission provisions of title III.

By the mid-1960's, however, the FCC had concluded that it could not effectively discharge its statutory duty to regulate broadcasting in the public interest without regulating cable, whose proliferation could significantly affect broadcasting. The Supreme Court upheld the agency's authority to adopt cable regulations that were "reasonably ancillary to the effective performance of the Commission's various responsibilities for the regulation of television broadcasting." United States v. Southwestern Cable Co., 392 U.S. 157, 178, 88 S.Ct. 1994, 20 L.Ed.2d 1001 (1968). In 1970, the Commission, concerned with preventing the expansion of local monopolies, adopted rules prohibiting telephone companies from providing cable service in their telephone service areas (the "cable-telephone company cross-ownership ban").

Almost twenty years after the FCC began regulating cable, Congress weighed in for the first time, enacting the Cable Communications Policy Act of 1984, which added title VI provisions governing cable operators to the Communications Act. To preserve the role of municipalities in cable regulation, title VI provided that, with limited exceptions, "a cable operator may not provide cable service without a franchise." 47 U.S.C. § 541(b)(1). Title VI also codified the cable-telephone company cross-ownership ban. ²

The robust growth of the cable industry in the 1980's caused the FCC to reassess the need for the cable-telephone company cross-ownership ban, and in 1992 the Commission recommended that Congress lift the ban. When Congress did not immediately do so, the FCC amended its rules to permit the provision of "video dialtone," a new service that would offer video programming over telephone company facilities without violating the cross-ownership restriction.

The Commission planned to regulate video dialtone under title II--the common carrier provisions of the Communications Act. Despite the Commission's good intentions, the video dialtone policy failed to provide any significant competition for cable systems. Meanwhile, incumbent cable operators largely maintained their monopoly positions.

Faced with this situation, Congress, in enacting the Telecommunications Act of 1996, sought to introduce competition into the market for video programming delivery. Most significantly, the statute repealed § 613(b), 47 U.S.C. § 533(b), the cable-telephone company cross-ownership ban. See 1996 Act, § 302(b)(1). In addition, § 653 of the 1996 Act, 47 U.S.C. § 573, created a new...