GTE California, Inc. v. F.C.C.

• Decision Date: 31 October 1994
• Docket Number: No. 93-70924,93-70924
• Citation: 39 F.3d 940
• Parties: GTE CALIFORNIA, INC., Petitioner, Pacific Bell; Nevada Bell; National Cable Television Association, Inc. ("NCTA"); Pacific Telesis Group, Intervenors, v. FEDERAL COMMUNICATIONS COMMISSION; United States of America, Respondents, California Cable Television Association; National Cable Television Association, Inc., Respondents-Intervenors.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 940

39 F.3d 940

GTE CALIFORNIA, INC., Petitioner,

Pacific Bell; Nevada Bell; National Cable Television

Association, Inc. ("NCTA"); Pacific Telesis

Group, Intervenors, v. FEDERAL COMMUNICATIONS COMMISSION; United States of

America, Respondents,

California Cable Television Association; National Cable

Television Association, Inc., Respondents-Intervenors.

No. 93-70924.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted May 12, 1994.

Decided Oct. 31, 1994.

Roy T. Englert, Jr., Michael McConnell, Mayer, Brown & Platt, Washington, DC, for petitioner.

Douglas Letter, U.S. Dept. of Justice, Washington, DC, for respondents.

Michael K. Kellogg, Kellogg, Huber & Hansen, Washington, DC, for intervenors Pacific Telesis Group, Pacific Bell and Nevada Bell.

Michael S. Schooler, Dow, Lohnes & Alberson, and Bruce D. Sokler, Mintz, Levin, Cohn, Ferris, Glovsky & Popeo, Washington, DC, for respondent-intervenors California Cable Television Ass'n and Nat. Cable Television Ass'n, Inc.

Petition to Review a Decision of the Federal Communications Commission.

Before: FERGUSON, NOONAN, and T.G. NELSON, Circuit Judges.

Opinion by Judge T.G. NELSON; Dissent by Judge NOONAN.

T.G. NELSON, Circuit Judge:

I.

OVERVIEW

In 1970, the Federal Communications Commission (FCC or Commission) issued rules prohibiting local telephone common carriers from providing cable television service in the area in which they controlled the local exchange. ¹

In 1984, Congress amended the Communications Act by adopting what is now codified In this case, a local telephone carrier which had received a Commission waiver of the restrictions of the Commission's rules and Section 533(b) raises a facial and "as applied" constitutional challenge to Section 533(b) on the basis that preventing local telephone carriers from carrying television programming violates their First Amendment rights as a content-based regulation of speech. For the reasons stated in the opinion, we hold the case is moot and dismiss the petition for review of the FCC's order rescinding the waiver, which expired on July 17, 1994.

                in 47 U.S.C. Sec. 533(b).  This section was modeled after the FCC rules and prohibits a telephone company from "provid[ing] video programming directly to subscribers in its telephone service area."   Id.  Video programming is defined as "programming provided by, or generally considered comparable to programming provided by, a television broadcast station."  47 U.S.C. Sec. 522(19)
                

II.

FACTS AND PROCEDURAL HISTORY

In 1987, the City of Cerritos, California, awarded Apollo Cablevision, Inc. (Apollo) a fifteen-year franchise to construct, operate and maintain an underground cable television system within the City. Apollo's plan contemplated that GTE California, Inc. (GTECA), the local telephone common carrier, would construct and operate systems of coaxial cable and fiber optic cable, leasing half of the coaxial cable capacity to Apollo to provide cable service within the City. As a further element of the plan, the proposed fiber optic facilities and the other half of the coaxial facilities were to be leased to GTECA's affiliate, GTE Service Corporation, for testing the capabilities of the system to provide various elements of advanced service to consumers as well as comparative testing of technologies. The City selected Apollo's corporate parent, T.L. Robak, Inc. (Robak), to do the construction by contract with GTECA.

GTECA first took the coaxial application to the Commission for authority pursuant to Section 214 of the Communications Act of 1934. The application was considered by the Common Carrier Bureau of the Commission. 3 FCC Rcd 2317. The Bureau determined that the relationship among Robak, Apollo and GTECA violated the Commission's "affiliation" rules because it determined that GTECA's construction contract with Robak must be imputed to Apollo. ² Id. at 2319. However, the Bureau determined that a waiver was appropriate under the Act, finding that the City would not be able to acquire its cable video programming service unless provided by Apollo through affiliation with GTECA. Id. at 2323. GTECA's application was opposed before the Bureau by the California Cable Television Association (CCTA) and the National Cable Television Association, Inc. (NCTA), both of which participated throughout the administrative proceedings and have intervened in this court.

When CCTA and NCTA petitioned the FCC for review of the Bureau's decision, the Commission consolidated the coaxial application with a separate application filed by GTECA to construct, operate and maintain the fiber optic portion of the project. The Commission approved both section 214 applications and granted a waiver of the cross-ownership restrictions contained in section 533(b) pursuant to the waiver authority granted in section 533(b)(4). 4 FCC Rcd 5693. The Commission found that the waiver was in the public interest given the totality of the circumstances, but imposed several conditions, including a five-year time limit, noting that GTECA would be free to seek another waiver if it was needed to continue testing. Id. at 5700. The Commission did not discuss the activities of Robak in conjunction with the finding of good cause for the waiver.

NCTA petitioned the D.C. Circuit to review the Commission order. That court focused on the participation by Robak and held that the Commission had failed to delineate the particular circumstances supporting the waiver, as required by 47 U.S.C. Sec. 533(b)(4). National Cable Television Ass'n v. FCC, 914 F.2d 285, 289 (D.C.Cir.1990). The court said, speaking of the Robak participation:

The Commission, however, has failed in its obligation to explain why the advantages to be derived from General's application cannot be realized in the absence of a waiver, because it has not indicated why the use of Robak for design and construction was necessary to the proposal. Obviously, absent such a reason, the choice of another unrelated contractor would have eliminated the General-Apollo affiliation, and, with it, the cross-ownership problem.

Id.

Apparently, the D.C. Circuit was under the impression that the only reason for a waiver was the participation by Robak. The fact that GTECA proposed to provide video programming within its service area, which comes within the ownership restrictions of Section 533(b), was not discussed by the D.C. Circuit.

On remand, the Commission worked informally with the parties in an attempt to settle the dispute but was ultimately unsuccessful. Therefore, it issued an order, pursuant to the mandate of the D.C. Circuit, in which it rescinded the waiver:

On the basis of the record before us, we simply are unable to find that Robak's participation satisfies the controlling standard as articulated by the court. We conclude that a waiver of the rules permitting Robak's involvement is not justified.

8 FCC Rcd 8181 (footnote omitted).

The Commission reaffirmed its original findings regarding the substantial public benefits to be gained from the technical and market trials in Cerritos. Id. at 8182. It held that justification of one aspect of the original waiver did not relieve GTECA of "its obligation to satisfy the governing legal standard with respect to all aspects of the waiver." Id. The Commission therefore rescinded "the temporary, conditional rule waiver and associated Section 214 authorizations" effective 120 days from the date of the decision. Id.

GTECA moved the Commission to stay the effect of its order pending a petition for review to this court and for the first time raised its claim that the statute excluding local telephone companies from engaging in video programming within their service area is a violation of the First Amendment as a content-based restriction on speech. The Commission denied the application for stay on December 3, 1993, and noted that the constitutional issue had not been raised in time for the Commission to address the constitutional issue in detail, but did state its view that the "telephone company/cable television cross-ownership prohibition constitutes structural regulation of the telecommunications marketplace that is fully consistent with the First Amendment."

GTECA petitioned this court for review. Pacific Telesis Group, Pacific Bell and Nevada Bell were permitted to intervene as petitioners pursuant to Fed.R.App.P. 15(d). This court entered an order staying the Commission's order of rescission.

III.

DISCUSSION

A. Scope of Authority Granted by FCC

There is a substantial question whether this case is moot, due to the expiration of the FCC waiver on July 17, 1994. GTECA contends that the case is not moot because it was granted "permanent section 214 authority" which was unaffected by the FCC's rescission of the waiver. Therefore, we must first address the scope of the FCC's grant of authority pursuant to section 214.

GTECA's first application to the Commission was for authority to construct and maintain the coaxial cable facilities in Cerritos. This was the subject of the Common Carrier Bureau's order of April 12, 1988, which granted a waiver from the Commission's rules due to the involvement of Robak. 3 FCC Rcd 2317.

The challenges to the Bureau order by representatives of the cable industry were consolidated before the FCC with GTECA's separate application to construct, operate and maintain the fiber optic system. This consolidated proceeding generated the order of July 17, 1989, which was appealed to the D.C. Circuit. 4 FCC Rcd 5693.

In the summary of its action, the Commission said, "We conclude that the totality of circumstances surrounding General's Cerritos project, including the public interest benefits of its coaxial cable, its fiber optic facility and its comparative technical and marketing testing program, constitutes good cause to waive the ... rules...." Id.

In describing the conditions it placed on its grant of authority, the FCC said, "[w]e limit our good cause...