National Cable Television Ass'n, Inc. v. F. C. C.

Decision Date16 December 1976
Docket NumberNos. 75-1053 and 75-1132,s. 75-1053 and 75-1132
Citation554 F.2d 1094,180 U.S.App.D.C. 235
Parties, 2 Media L. Rep. 1142 NATIONAL CABLE TELEVISION ASSOCIATION, INC., Petitioner, v. FEDERAL COMMUNICATIONS COMMISSION and United States of America, Respondents. LAMB COMMUNICATIONS, INC., Liberty Communications, Inc. and Summit Communications, Inc., Petitioners, v. FEDERAL COMMUNICATIONS COMMISSION and United States of America, Respondents.
CourtU.S. Court of Appeals — District of Columbia Circuit

Charles S. Walsh, Washington, D.C., with whom Stuart F. Feldstein, John V. Kenny and Samuel Cooper, III, Washington, D.C., were on the brief for petitioner in No. 75-1053, also argued for petitioners in No. 75-1132.

Jack David Smith, Counsel, F.C.C., Washington, D.C., with whom Ashton R. Hardy, Gen. Counsel, Daniel M. Armstrong, Acting Associate Gen. Counsel, C. Grey Pash, Jr., Counsel, F.C.C., Robert B. Nicholson and Laurence K. Gustafson, Attys., Dept. of Justice, Washington, D.C., were on the brief for respondents. Joseph A. Marino, Associate Gen. Counsel, F.C.C., Washington, D.C., at the time the record was filed, and Howard E. Shapiro, Dept. of Justice, Washington, D.C., also entered appearances for respondents.

Herbert M. Schulkind, James K. Edmundson, Benito Gaguine and Arthur G. House, Washington, D.C., entered appearances for petitioner in No. 75-1132.

Before MacKINNON and ROBB, Circuit Judges, and BRODERICK, * United States District Judge for the Eastern District of Pennsylvania.

Opinion for the court filed by MacKINNON, Circuit Judge.

MacKINNON, Circuit Judge:

Petitioners, an association of cable television operators and two individual operators, seek review of two orders of the Federal Communications Commission (FCC) which (1) promulgate a schedule of annual fees to be collected from all cable television operators, 1 and (2) determine that these fees, with certain modifications, be collected retroactively to March 29, 1974, when collections under a previous fee schedule were suspended. 2 Because we find that the annual fees assessed by the first order do not meet tests established by the Supreme Court under the relevant statute, and thus that the first order is invalid, we do not reach the challenge to the second order.


The statutory authority and direction for the FCC to assess fees against members of the industries it regulates is the Independent Offices Appropriation Act of 1952 (IOAA). 3 That Act provides:

It is the sense of the Congress that any work, service, publication, report, document, benefit, privilege, authority, use, franchise, license, permit, certificate, registration, or similar thing of value or utility performed, furnished, provided, granted, prepared, or issued by any Federal agency (including wholly owned Government corporations as defined in the Government Corporation Control Act of 1945) to or for any person (including groups, associations, organizations, partnerships, corporations, or businesses), except those engaged in the transaction of official business of the Government, shall be self-sustaining to the full extent possible, and the head of each Federal agency is authorized by regulation (which, in the case of agencies in the executive branch, shall be as uniform as practicable and subject to such policies as the President may prescribe) to prescribe therefor such fee, charge, or price, if any, as he shall determine, in case none exists, or redetermine, in case of an existing one, to be fair and equitable taking into consideration direct and indirect cost to the Government, value to the recipient, public policy or interest served, and other pertinent facts, and any amount so determined or redetermined shall be collected and paid into the Treasury as miscellaneous receipts. . . .

31 U.S.C. § 483a (1970). The FCC first established fee schedules pursuant to this statute in 1963, 4 initially making only nominal charges for filings with the agency that produced revenue equivalent to approximately 25 percent of the Commission's annual appropriation. 5 No fees were assessed against the cable television industry by the 1963 fee schedule. In 1970, responding to pressure by various authorities 6 to adopt higher fees which would make the agency more self-sustaining, the FCC amended its fee schedules and for the first time imposed filing fees and an annual fee of 30 cents per subscriber upon cable television operators. 7

The annual fees assessed against members of the cable television industry were struck down by the Supreme Court on March 4, 1974, in National Cable Television Assn. v. United States (NCTA), 415 U.S. 336, 94 S.Ct. 1146, 39 L.Ed.2d 370 (1974). That case and a companion case, FPC v. New England Power Co., 415 U.S. 345, 94 S.Ct. 1151, 39 L.Ed.2d 383 (1974), established standards which must be met by fees adopted by agencies under the IOAA. In NCTA, the Court found that the FCC assessment of 30 cents per subscriber was calculated to reimburse the total cost (direct and indirect) to the Commission of regulating the cable television industry, regardless of whether or not each individual operator had received any "special benefit" from that regulation. Holding in effect that it was the intent of the IOAA to require fees to be based on "value to the recipient" and not upon "public policy or interest served (or) other pertinent facts," 415 U.S. at 341, 342-343, 94 S.Ct. at 1150, the Court found that the FCC's failure to use this measure made the 30 cent assessment a tax, which the agency had no power to levy.

In the New England Power case, decided the same day as NCTA, the Court further declared that the "special benefit" concept requires some nexus between the agency and the person assessed other than the mere fact of regulation or the adoption of some practice of general benefit to the industry as a whole. Quoting with approval a Bureau of the Budget circular which interprets the IOAA, 8 the Court held that "no charge should be made for services rendered, 'when the identification of the ultimate beneficiary is obscure and the service can be primarily considered as benefitting broadly the general public.' " 415 U.S. at 350, 94 S.Ct. at 1154. These cases constitute the only Supreme Court interpretations of the IOAA, and taken together with the statute they set the standard against which we must measure the current FCC fees.

After the 1970 fee schedule had been invalidated by the Court, the FCC suspended collection of the annual fee for cable television systems, 9 stating that the appropriate annual fees for calendar year 1973 would be published after further proceedings. 10 On January 15, 1975, after the public had been afforded an opportunity to comment, 11 the Commission adopted the 1975 fee schedule.

The annual authorization fee found in the 1975 schedule, which is the fee at issue in this action, 12 is assessed in basically the same manner as was the 1970 annual fee. 13 Both fees were designed to recover the costs of cable regulation by dividing them up among the regulated operators. The difference between the two fees lies in the determination of what costs it was permissible to recover in this manner. In 1970, the Commission attempted to set rates for the services of its six basic bureaus 14 which would recover the agency's entire annual appropriation, including the costs of "general support" activities which were not related to any service or benefit rendered to the parties who were assessed the fees. 15

In 1975, on the other hand, the fee set for each of the basic bureaus was "devised to recover basically the costs associated with the processing of applications and tariff filings." 16 In order to do this, the Commission first calculated a figure representing the "total projected costs" of each bureau, composed of "all costs which can be attributed to the (particular bureau) including costs allocated from the administrative law judges, the Review Board, the Office of Opinions and Review, the Data Automation Division, and the Dockets Branch" 17 plus a pro rata share of certain indirect costs of the Executive Director's office. 18 Once the "total projected costs" figure had been thus calculated, it was multiplied by the "percentage of each activity that was devoted to application processing" to determine the cost of processing applications. 19 The record does not adequately explain how this percentage of 44.6% was determined. Finally, a portion of the cost of the Antenna Survey Program conducted by the Field Operations Bureau was added in to arrive at a "fee recoverable cost" for the particular bureau, and a fee was then set which would bring in revenue equal to that final figure. The actual rate at which the fee would be assessed was determined by scaling down the rates used in the 1970 fee schedule until it was estimated that revenue equal to the newly calculated "fee recoverable cost" for 1975 would be raised. 20 The resulting 1975 fee schedule assesses, inter alia, an annual authorization fee at a rate of 13 cents per subscriber, due on April 1, 1976.

Having adopted the 1975 fee schedule, the Commission shortly thereafter acted to collect fees for the period March 29, 1974, through the effective date of the new schedule, March 1, 1975. 21 Those fees, collection of which had been suspended shortly after the decision of the Supreme Court in NCTA, 22 were to be recalculated on the basis of a modified 1975 Fee Schedule. 23 As a result, cable television operators were assessed an annual authorization fee of 6 cents per subscriber for fiscal years 1973 and 1974. These fees were due on August 1, 1975.

On July 28, 1975, this court issued a partial stay pending appeal, "so that the Federal Communications Commission may collect fifty percent, but no more, of the fees which are due on August 1, 1975, and on April 1, 1976, until further order of this Court." In response to that order, and to lessen administrative burdens, the Commission...

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