Coastal Communications Service v. City of New York
| Decision Date | 30 September 2009 |
| Docket Number | No. 02-CV-2300 (ENV)(SMG).,02-CV-2300 (ENV)(SMG). |
| Citation | 658 F.Supp.2d 425 |
| Parties | COASTAL COMMUNICATIONS SERVICE, INC. and Telebeam Telecommunications Corporation, Plaintiffs, v. The CITY OF NEW YORK, and New York City Department of Information Technology and Telecommunications, Defendants. |
| Court | U.S. District Court — Eastern District of New York |
David Elliot Jacoby, Schiff Hardin LLP, Robert Michael Brill, Law Office of Robert M. Brill, LLC, Stuart A. Summit, Phillips Nizer LLP, New York, NY, Robert G. Scott, Jr., Cole, Raywid & Braverman, LLP, Washington, DC, for Plaintiffs.
Michelle Goldberg-Cahn, Jerald Horowitz, The City of New York Law Department, Office of Corporation Counsel, New York, NY, for Defendants.
DECISION AND ORDER
In the 1978 film Superman, the renowned hero approaches a phone booth only to learn that the local telephone company had switched from the full, private booths of the era in which the comic book hero debuted to the more modern open kiosk—a style unsuited to his patented wardrobe changes. Not even Superman can roll back the tide of technology. Today, the Court confronts a number of aesthetically subtler but ultimately more critical changes within the marketplace of public telephone service. Plaintiffs Coastal Communications Service ("Coastal") and Telebeam Telecommunications ("Telebeam"), operators of public pay telephone ("PPT") services in the City of New York ("the City"), have moved for partial summary judgment on their federal law claims relating to the City's regulations which affect public pay telephone service.
These claims spring from a new marketplace delimited by pancaked layers of lawmaking. In the mid 1990s, legislation both on the national and local levels—most notably the 1996 Amendments to the federal Telecommunications Act of 1934 (the "TCA)"—served to deregulate the telecommunications industry, opening up telephone markets to competition where "the phone company" had reigned unchallenged for decades. Plaintiffs' chief claim, brought pursuant to the TCA, is that the City, specifically the New York City Department of Information Technology and Telecommunications ("DoITT"),1 systematically and unlawfully hampered plaintiffs' efforts to gain access to the market through a prolix and capricious process for (a) determining franchises and (b) approving PPT permit applications, fueled by unabashed favoritism of the incumbent service provider, now Verizon, and also as a result of various acts of retaliation against plaintiffs for their seeking redress in the legal system.
Deregulation may have come a day late and a dollar short. A darker spectre was soon to haunt the fledgling PPT companies like Coastal and Telebeam. As opportunities to provide PPT service opened up as a matter of law, PPT service itself plummeted in popularity as a matter of reality. The emergence of mobile phone technologies gutted the demand for telephone booth service, forcing such companies to rely principally on revenue from advertisements placed on the sides of their booths. Defendants stake their opposition to plaintiffs' motion and support their own cross-motion for judgment largely on the notion that this development removes plaintiffs' business from the ambit of the TCA. Their essential argument is that telephone booth service is a figment of history, that the "market" in the City for PPT telecommunications services has hit a prolonged downturn with no foreseeable possibility of uplift, that plaintiffs' true business is in billboards rather than telecommunications and that the TCA is thus inapplicable.
Yet, the fact that the marketplace has withered does not warrant either its obituary or defendants' salient theme that Congress did not intend to regulate a withered market. Neither caselaw nor legislative history supports such a narrow interpretation of Congress's intent in enacting the TCA. For the reasons that follow, plaintiffs' motion is granted in part and denied in part, as is the City's cross motion.
A brief overview of the PPT industry and its regulatory framework is offered for context. First, a note on the New York City marketplace. PPTs in the City may be installed in one of three locations: (1) on private property—inside office buildings, for example, (2) on the building side of public sidewalks (called "on the building line", in industry parlance), or (3) on the curb side of sidewalks ("on the curb line"). DoITT (previously known as the Department of Telecommunications and Energy), currently requires, and at all relevant times required, a permit for the installation of sidewalk PPTs, which includes building line and curb line installations.
The prequel differs. For decades, the laws of the City, like those of so many across the country, dictated that the only recipients of such permits for curb line PPTs would be the local, regulated monopoly telephone company. In New York, it was the appropriately named the New York Telephone Company. Antitrust concerns and corporate reorganizations brought a series of successors. The incumbent successor is Verizon, which holds licenses for many but, it is undisputed, not all of the PPTs on City sidewalks. In the mid 1980s, other companies unaffiliated with the monopoly phone company's genealogy, known as "independent" phone companies at the time, began to install payphones on the building line with the permission of the adjoining property owner. Dial tone service for such PPTs would be drawn from an existing telephone line to the building. Apparently, the City did little for decades to police these unlicensed building line PPTs, and a fledging independent industry developed against the exterior walls of New York's buildings. No independent companies were licensed to run curb line PPTs.
In the mid 1990s, the landscape changed radically. The New York City Council enacted Local Law 68 and adopted Resolution No. 439-A, subsequently amended by Resolution 2298, (together the "City PPT Law"), creating a system for the non-exclusive franchising, permitting and administration of sidewalk PPTs. When the City PPT Law took effect in January 1996, DoITT acquired the authority to manage payphones and related enclosures that were installed, maintained or operated on the streets of the City at either the building or curb line. Regulatory authority was exercised by requiring a permit and a franchise with the City that met certain conditions. The City PPT Law gave the municipality wide discretion over payphone applications, and also required that DoITT notify the Department of Transportation and the Landmarks Preservation Commission, the former an executive agency of the City and the latter a quasi-independent one, of new PPT applications and offering them time to comment.
When the City PPT Law was enacted, the City estimated that there were some 35,000 PPTs installed and operating on New York City sidewalks. Of these, Verizon operated 9,500, mostly at the curb line. Chief among the remainder were independent PPTs that had been installed on the building line—unlicensed but unmolested by the City.
The City PPT Law brought dramatic change. The curb line was essentially deregulated. No longer the exclusive domain of NYNEX, New York Telephone's progeny operating at the time, the City opened up the curb line to permit applications from independent companies, in part because it recognized the need to "promote competition in the public pay telephone industry." Resolution No. 439-A. By becoming subject to the same permit application process, the building line was, in essence, reined in. Like curb line phones, building line phones, including those already in existence, would now be required to undergo a licensing process by the City. Recognizing that the majority of PPTs in New York had operated for years without licenses, the City established something of an amnesty program for them. During an interim period between the enactment of the City PPT Law and the issuance of the new franchise agreements it required, existing independent payphones would be allowed to remain if (1) they were registered with the City on or before March 31, 1996, (2) interim occupancy fees were paid to the City, and (3) their continued existence was not objected to by the Commissioner of DoITT. These phones would be grandfathered into the regulated PPT system after the eventual issuance of a franchise to the independent company.
By May 1996, DoITT counted 32,679 registered PPTs owned by over 150 independent companies, including 1085 registered payphones of Telebeam and 79 of Coastal. The sheer scope of such a revolutionary operation suggested that not everything would go smoothly, and, indeed, little did. Somewhat predictably, independent companies launched a run on building line payphone locations in advance of and, defendants maintain, well after, the March 1996 deadline in an effort to get as many phones grandfathered as possible. Defendants maintain that the rushed applications subject of this suit include many post-deadline, and others that would be incapable of being installed and operational prior to the amnesty deadline. Defendants also represent that many of the applications from plaintiffs and other independent companies contained errors and omissions that prompted a correction period, during which Telebeam, among others, submitted several corrections and additional registry entries.
Advertising introduced yet another wrinkle in the complex inter-era transition in PPT management and oversight in New York City. Although the phone booths of Clark Kent's comic book day, through the infancy of television and on to his 70's movie were not plastered with advertisements for radio stations, injury lawyers, pimple removers and the like, such adornments became an important part of the industry in the mid-1980...
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