City of New York v. F.C.C., 85-1841

Decision Date20 March 1987
Docket NumberNo. 85-1841,85-1841
Parties, 13 Media L. Rep. 2320 CITY OF NEW YORK, Petitioner, v. FEDERAL COMMUNICATIONS COMMISSION and United States of America, Respondents, National Cable Television Association, Inc., TeleCable Corporation, Viacom International, Inc., Gill Industries, National Association of Broadcasters, Association of Maximum Service Telecasters, Inc., New York Citizens' Committee for Responsible Media, National League of Cities, City of Miami, Florida, City of Wheaton, Illinois, Post-Newsweek Cable, Inc., City of Dallas, Texas, et al., Intervenors.
CourtU.S. Court of Appeals — District of Columbia Circuit

Petition for Review of an Order of the Federal Communications commission.

Robert Allan Garrett, with whom Paul S. Ryerson, Patrick J. Grant, Donald G. Frankel, Washington, D.C., for petitioner, City of New York and intervenors, City of Miami, Fla. and City of Wheaton, Ill., Cynthia Pols and Edward J. Walsh, Wheaton, Ill., for intervenor, National League of Cities, John J. Gunther, Washington, D.C., and Edward J. Perez, Los Angeles, Cal., for amici curiae, U.S. Conference of Mayors and the City of Los Angeles urging reversal.

Gregory M. Christopher, Counsel, F.C.C., with whom Jack D. Smith, Gen. Counsel and Daniel M. Armstrong, Associate Gen. Counsel, F.C.C., Washington, D.C., were on brief, for respondents. John J. Powers, III and Robert J. Wiggers, Attys., Dept. of Justice, Washington, D.C., entered appearances for respondents.

Brenda L. Fox and Seth A. Davidson, Washington, D.C., for intervenor, National Cable Television Ass'n, Inc., Lisa A. Hook, New York City, for intervenor, Viacom Intern., Inc., and Paul Glist, Washington, D.C., for intervenor, TeleCable Corp., were on joint brief for intervenors, National Cable Television Ass'n, Inc., Viacom Intern., Inc., and Telecable Corp.

David G. Rozzelle and Kathryn Riley Dole, Washington, D.C., were on brief, for intervenor, Gill Industries, Inc.

Nicholas P. Miller, W. Randolph Young and Larrine S. Holbrooke, Washington, D.C., were on brief, for intervenors, City of Dallas, Tex., et al.

Robert T. Perry, New York City, was on brief, for intervenor, New York Citizens' Committee for Responsible Media.

Henry L. Baumann and Julian L. Shepard, Washington, D.C., entered appearances for intervenor, Nat. Ass'n of Broadcasters.

Gregory M. Schmidt and Paul G. Gaston, Washington, D.C., entered appearances for intervenor, Ass'n of Maximum Service Telecasters, Inc.

Mitchell Lazarus and David R. Anderson, Washington, D.C., entered appearances for intervenor, Post-Newsweek Cable, Inc.

Before MIKVA, RUTH BADER GINSBURG and SILBERMAN, Circuit Judges.

Opinion for the Court filed by Circuit Judge SILBERMAN.

Opinion concurring in part and dissenting in part filed by Circuit Judge MIKVA.

SILBERMAN, Circuit Judge:

This petition calls upon us to consider the authority of the Federal Communications Commission (FCC or Commission) to prohibit states and municipalities (franchisors or franchising authorities) from imposing upon cable television system operators technical requirements governing cable television signal quality. In October, 1985, the FCC promulgated a rule that both established federal technical standards for cable signal quality and forbade local cable franchising authorities from imposing standards of their own. Petitioner City of New York and various intervenors contend this rule exceeds the preemption authority granted the FCC by the Cable Communications Policy Act of 1984, Pub.L. No. 98-549, 98 Stat. 2779 (1984) (codified at 47 U.S.C. Secs. 521-559 (Supp. II 1984)) (hereinafter "Cable Act"). Petitioner also contends the FCC's failure to address certain objections made during the rulemaking process by several states and municipalities was arbitrary and capricious. For the reasons stated below, we hold the FCC's preemption of local technical standards for one particular class of cable channels falls within the Commission's statutory authority. However, because the FCC failed to consider the effect of the Cable Act's franchise renewal requirements on the propriety of its preemption of such standards for the other classes of cable channels, the FCC's rulemaking here was, within the meaning of the Administrative Procedure Act, 5 U.S.C. Sec. 551 et seq. (1982), arbitrary and capricious.

I.

In the 1960s, the FCC began to address the various regulatory problems created by the rapid development of cable television services. The Commission decided that cable television was best regulated by a "deliberately structured dualism" whereby state and local authorities would grant franchises to cable operators within their communities, while the FCC would retain exclusive authority over all technical and operational aspects of cable communication. See Cable Television Report and Order, 36 F.C.C.2d 141, 207-210 (1972). Pursuant to that approach, the FCC in 1972 defined four categories of cable television service:

Class I--Cable channels devoted to delivering standard broadcast television signals;

Class II--Cable channels used for delivering non-encoded "cablecast" programming such as Cable News Network, ESPN, and public, educational, and governmental access programming;

Class III--Cable channels used for delivering encoded cablecast programming such as Home Box Office and other pay channels;

Class IV--Cable channels with two-way transmission capability allowing subscribers to return information to the control point.

See Cable Television Report and Order, 36 F.C.C.2d at 198-99. The FCC established minimum technical standards of signal quality only for Class I channels, leaving the signal quality of Class II, III, and IV channels unregulated. Id. at 200, 204. Shortly thereafter, however, local franchisors began imposing their own, more rigorous, technical standards as a condition of granting franchises to cable operators. After observing this experiment in local technical regulation for several years, the FCC concluded that allowing local jurisdictions to impose non-uniform technical standards was undesirable because, by subjecting cable operators to divergent and sometimes unworkable demands, this regime undermined the FCC's goal of promoting an efficient and innovative communications service. The Commission, therefore, promulgated a rule denying franchisors the power to impose technical standards more stringent than the FCC's standards. See Report and Order, 49 F.C.C.2d 470, 477-480 (1974). This regulatory scheme, including the preemption provision, was upheld in later years by the courts, see Capital Cities Cable, Inc. v. Crisp, 467 U.S. 691, 104 S.Ct. 2694, 81 L.Ed.2d 580 (1984); New York State Comm. on Cable Television v. FCC, 749 F.2d 804 (D.C.Cir.1984).

Against this backdrop, Congress enacted the Cable Communications Policy Act of 1984 to "clarif[y] the current system of local, state, and Federal regulation of cable television." H.R.Rep. No. 934, 98th Cong., 2d Sess. 19 (1984), U.S.Code Cong. & Admin.News 1984, p. 4655 (hereinafter "House Report "). The Cable Act sought to balance two conflicting goals: "preserv[ing] the critical role of municipal governments in the franchise process," House Report at 19, U.S.Code Cong. & Admin.News 1984, p. 4656, while affirming the FCC's "exclusive jurisdiction over cable service, and overall facilities which relate to such service...." House Report at 95, U.S.Code Cong. & Admin.News 1984, p. 4732. So, for example, the Cable Act allows local franchising authorities to continue selecting cable franchisees, Cable Act Sec. 621, 47 U.S.C. Sec. 541, 1 and to specify the facilities and equipment cable operators must make available, Cable Act Sec. 624(b), 47 U.S.C. Sec. 544(b). Yet the Act also circumscribes franchisors' regulatory authority: franchisors are prevented from regulating the services, facilities, and equipment provided by cable operators "except to the extent consistent with [the Cable Act]." Cable Act Sec. 624(a), 47 U.S.C. Sec. 544(a).

After the Cable Act's passage, the FCC reexamined its cable regulations. The Commission issued a notice of proposed rulemaking, 50 Fed.Reg. 7801 (1985), suggesting that its 1974 mandatory technical standards be reformulated as "guidelines" that local franchisors could choose to include in franchise agreements. The notice also proposed continuing the FCC's policy of preempting local technical standards that exceed federal standards. Id. at 7802. Approximately 120 comments and letters were generated by the notice, many of them from franchising authorities urging the FCC to either adopt a comprehensive set of mandatory technical standards or give franchisors the authority to enact such standards. The franchising authorities also argued the FCC's preemption policy was no longer permissible because it was inconsistent with the Cable Act. Other comments, primarily from cable operators, generally supported the FCC's proposal. On October 31, 1985, the FCC adopted its final Report and Order, Technical and Operational Requirements of Part 76 Cable Television, 50 Fed.Reg. 52,462 (1985) (hereinafter Report and Order ), relabelling its mandatory technical "rules" for Class I cable channels as "standards," 2 which franchisors were authorized to include in franchise agreements, but prohibiting franchisors from imposing technical requirements that exceed those FCC standards. The Commission left Class II, III, and IV cable channels completely unregulated and prohibited franchisors from filling this gap, reasoning that competitive forces would encourage cable operators to provide adequate signal quality.

This petition followed. Petitioner City of New York and various intervenors (the National League of Cities, the City of Miami, and the City of Wheaton) raise numerous objections to the rule. Of these objections, we think two merit extended discussion. 3 First, petitioner argues that the manner in which the FCC...

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