Community Communications v. City of Boulder

• Citation: 485 F. Supp. 1035
• Decision Date: 17 March 1980
• Docket Number: Civ. A. No. 80-M-62.
• Parties: COMMUNITY COMMUNICATIONS COMPANY, INC., a Colorado Corporation, doing business as Boulder Cable T.V., Plaintiff, v. CITY OF BOULDER, COLORADO, a Municipal Corporation, Boulder Communications Co., a partnership, Thomas Cross, Jack Kerner, Michael Thompson, Donald Passalaqua, Barry Telleen, and Dennis DuBe, Defendants.
• Court: U.S. District Court — District of Colorado

485 F. Supp. 1035

COMMUNITY COMMUNICATIONS COMPANY, INC., a Colorado Corporation, doing business as Boulder Cable T.V., Plaintiff, v. CITY OF BOULDER, COLORADO, a Municipal Corporation, Boulder Communications Co., a partnership, Thomas Cross, Jack Kerner, Michael Thompson, Donald Passalaqua, Barry Telleen, and Dennis DuBe, Defendants.

Civ. A. No. 80-M-62.

United States District Court, D. Colorado.

March 17, 1980.

Stephen M. Brett, Robert E. Youle, Dawson, Nagel, Sherman & Howard, Denver, Colo., Harold R. Farrow, Thomas A. Seaton, H. Wayne Goodroe, Megan Tootell, Farrow, Schildhause & Wilson, Oakland, Cal., for plaintiff.

Joseph N. de Raismes, Alan E. Boles, Jr., City of Boulder, Boulder, Colo., for defendant City of Boulder.

John A. Purvis, Steve C. Briggs, Hutchinson, Black, Hill, Buchanan & Cook, Boulder, Colo., for other defendants.

MEMORANDUM OPINION AND ORDER

MATSCH, District Judge.

The plaintiff, Community Communications Company, Inc. (CCC), moved for a preliminary injunction to prevent the City of Boulder from restricting or revoking the rights which it claims from a revocable, nonexclusive permit granted to a predecessor company in 1964. That permit was issued in the form of an ordinance enacted by the Boulder City Council, as a franchise to use public ways in that city to string cables for a community antenna system, or cable television. The geographical area involved was the entire City of Boulder and the permitted use of public ways was for a period of twenty years, with the power to terminate reserved in the following language:

SECTION 2. That the right, permit and privilege herein granted is subject to revocation by the City Council, at its pleasure, at any time . . . (Plaintiff's Exhibit No. 22)

Under that ordinance, CCC has provided cable television service to the University Hill area of Boulder, an area comprising approximately 20% of the City's residential units and blocked off from normal reception of Denver television stations. Up to February 1980, CCC provided basically only retransmission of television signals from Denver and from one station in Cheyenne, Wyoming. In February 1980, CCC established an earth station for the reception of remote channels via satellite. The result is a greatly increased access to a variety of programming, including movies, sports, and channels from distant major cities.

Up to late 1975, cable television throughout the country was concerned primarily with retransmission of television signals to areas which did not have normal reception, with some special local weather and news services originated by the cable operators. During the late 1970's however, satellite technology impacted the industry and prompted a rapid, almost geometric rise in its growth. As earth stations became less expensive, and "Home Box Office" companies developed, the public response to cable television greatly increased the market demand for such expanded services.

The "state of the art" presently allows for more than 35 channels, including movies, sports, FM radio, and educational, children's, and religious programming. The institutional uses for cable television are fast increasing, with technology for two-way service capability. Future potential for cable television is referred to as "blue sky", indicating that virtually unlimited technological improvements are still expected.

In May 1979, CCC wrote to the Mayor of Boulder advising her of its plans to expand cable television service to other areas of the City and to establish an earth station for satellite pick-up. To expand to new areas, CCC must contract with the public utilities for the use of their poles. Many such poles are jointly owned by the Public Service Co. and Mountain Bell Telephone Co., and a certain amount of "communications space" is left available by them for use by cable companies. The utilities grant a license to the company, under which it must make advance payments if rearrangement of the poles is necessary to make room for the cables. This "pole rearrangement" is done by the utility company, after which CCC is free to string its cables. Contracts and pole rearrangements were being negotiated by CCC from May through the end of 1979.

Shortly after CCC's letter to the Mayor, a newly formed business organization, Boulder Communications Company (BCC), codefendant herein, expressed an interest in obtaining a permit and competing with CCC. In a letter to the City Manager, BCC outlined a proposal for a new system, acknowledging the presence of CCC in Boulder but stating that "(w)hatever action the City takes in regard to TCI, it is the plan of BCC to begin building its system as soon as feasible after the City grants BCC its permit." (Plaintiff's Exhibit 9)

The Boulder City Manager and City Council reacted to this development by initiating a review and reconsideration of cable television in view of the many changes in the industry since the 1964 ordinance. Accordingly, they hired a consultant, Robert Sample, and held a number of study meetings to develop a governmental response to these changes. The primary thrust of Sample's advice was that the City should be concerned about the tendency of a cable system to become a natural monopoly. Much discussion in the City Council centered around a supposed unfair advantage that CCC had because it was already operating in Boulder. Members of the Council, and the City Manager, expressed fears that CCC may not be the best cable operator for Boulder, but would nonetheless be the only operator because of its head start in the area. The Council wanted to create a situation in which other cable companies could make offers and not be hampered by the possibility that CCC would build out the whole area before they even arrived.

The result of this process was enactment of an "emergency" ordinance on December 19, 1979 (Ordinance No. 4473), unilaterally amending the 1964 Ordinance under which CCC had been operating, by restricting CCC from expanding its area of service for a period of three months. On the same day, the Council enacted Ordinance No. 4472, which revoked the 1964 Ordinance and reenacted it to include the same three month restriction. Both ordinances expressly stated that the purpose of this moratorium on construction was to give other cable companies an opportunity to make proposals to provide service to the City. The Boulder Council had accepted the view that such a restriction was necessary to prevent CCC from obtaining a competitive advantage by connecting up to new customers during the proposal and negotiation process. Additionally, while the Boulder Council was persuaded that it had some responsibility to regulate cable television, it had received legal advice which cast doubt upon its authority and which particularly cautioned about the possibility of violations of antitrust laws.

Apparently upon the view that any lack of regulatory authority could be finessed by the use of a contract approach, the City included the following language in Ordinance No. 4472:

SECTION 12. The grantee shall signify its acceptance of the terms hereof by continuing to provide service to any customers presently served by the grantee . . . (Plaintiff's Exhibit No. 27)

As a part of the process of soliciting applications from interested cable companies, the City drafted a proposed model ordinance and submitted it to the cable television industry with the request that those who wished to make proposals to enter the Boulder market should give their comments on that draft. The objective of the total process was to select those applications meeting the City's criteria, apparently including acceptance of regulatory powers, and then enter into a period of negotiation culminating in an agreed ordinance which could not later be attacked by the permittee.

The plaintiff claims that the revocation of its permit and the enactment of the new ordinance, with the moratorium, have adversely affected its business in ways which generate several claims for relief. The contention which is of primary importance for this motion for preliminary injunction is that the City has violated Section 1 of the Sherman Act (15 U.S.C. § 1). The plaintiff asserts that Boulder and BCC are engaged in a conspiracy to restrict competition by replacing the plaintiff with BCC. While the plaintiff has gathered some circumstantial evidence which might indicate such a conspiracy, that evidence is insufficient to establish a probability that the plaintiff will prevail on this claim.

What CCC has shown is that to influence competition Boulder unilaterally prevented further expansion of the geographical area of the plaintiff's business. Whether the intent is to promote new competition by assuring other cable companies that most of Boulder will remain available to them for possible first service, and then to permit competing companies to overbuild in the same geographical areas, or whether there is a more insidious motive to supplant CCC with a de facto monopoly, the motion for injunctive relief requires consideration of the impact on CCC. Is Boulder's action in...