GENERAL TELEPHONE COMPANY OF the SOUTHWEST et al., Petitioners,
v.
UNITED STATES of America and Federal Communications Commission, Respondents,
National Cable Television Association, Inc., et al., Intervenors.
No. 29246.
United States Court of Appeals, Fifth Circuit.
September 14, 1971.
COPYRIGHT MATERIAL OMITTED COPYRIGHT MATERIAL OMITTED COPYRIGHT MATERIAL OMITTED William Malone, Washington, D. C., William R. Brown, Houston, Tex., Irwin Schneiderman, Raymond L. Falls, Jr., New York City, for Continental Telephone System.
Ward W. Wueste, Jr., Hubert M. Preston, San Angelo, Tex., Theodore F. Brophy, New York City, for General Telephone System.
M. Truman Woodward, Jr., New Orleans, La., Thomas J. O'Reilly, Washington, D. C., for U. S. Telephone Assn.
Gary L. Christensen, Charles S. Walsh, Washington, D. C., for National Cable Television Assn., Inc.
William I. Aitken, Bert L. Overcash, Richard W. Smith, Gilbert G. Lundstrom, Lincoln, Neb., for T-V Transmission, Inc. and Lincoln Telephone and Telegraph Co.
Arthur Stambler, Washington, D. C., Harold Farrow, Oakland, Cal., for Cal. Community Television Assn.
Michael L. Tomaino, Rochester, N. Y., for Rochester Telephone Corp.
James L. White, Denver, Colo., for United Telephone Co. of Kan., Inc.
Hayward D. Fisk, Merriam, Kan., Harry B. Kelleher, New Orleans, La., for United Telephone System Companies.
Lloyd D. Young, Washington, D. C., for United Utilities, Inc. and United Telephone System.
John N. Mitchell, U. S. Atty. Gen., Erwin N. Griswold, Sol. Gen., U. S. Dept. of Justice, Harry Geller, Gen. Counsel, John H. Conlin, Associate Gen. Counsel, Stuart F. Feldstein, Atty., F.C.C., Howard E. Shapiro, Chief, Appellate Section, Seymour H. Dussman, Atty., Dept. of Justice, Washington, D. C., for respondents.
Before TUTTLE, THORNBERRY and INGRAHAM, Circuit Judges.
TUTTLE, Circuit Judge:
This case involves consolidated petitions to review certain orders of the Federal Communications Commission. The disputed rules prohibit telephone companies (hereafter carriers) from furnishing CATV service in their telephone service areas, either directly or through affiliates, and disallows construction by them of cable facilities for independent CATV operators unless the carrier first offers to such operators the option of placing their own cables on the carriers' poles. We affirm the Commission's orders.
BACKGROUND
A community antenna television system (CATV) is a facility which receives television and FM radio signals by means of high antennas or by microwave transmission, amplifies them, and distributes them by coaxial cable to the premises of its subscribers who pay a fee for the service. There are three essential components to the system:
1. Reception facilities which extract the broadcast signal from the air or microwave transmission;
2. the head-end (in-put) equipment which converts and amplifies the signals thus received; and
3. the distribution system which consists of feeder or trunk lines originating at the head-end, smaller distribution cables which carry the signal to the immediate vicinity of the subscriber, and the drop wires which carry the signal from the distribution cable into the subscriber's home. Distribution is accomplished either over circuits constructed by and leased from common carriers, such as telephone companies, by the CATV operator (channel service) or by the CATV operator's stringing its own cables from utilitiy poles or through utilities' ducts (pole attachment). A third and generally unfeasible method is for the CATV operator to construct his own system in its entirety.
As the common carriers began to assume a larger role in the explosive growth of the CATV business, new and complex regulatory problems arose. Starting in 1966 the Commission began affirmatively to assert its control over telephone company practices with respect to CATV systems. Several complaints were filed by CATV interests alleging, inter alia, that the carriers favored their subsidiary CATV companies over the independents in a variety of ways and that independents were often required to lease channel service rather than being permitted to rent pole space. Subsequently the Commission determined that the provision of channel service by telephone companies for CATV required certification under Section 214 of the Communications Act. The granting of a certificate was to be predicated on several factors including the degree of affiliation between the telephone carrier and the CATV operator. The Commission was of the opinion that by reason of their control over utility poles or conduits, the telephone companies were in a position to preclude or substantially delay an unaffiliated CATV system from commencing service and thereby eliminate competition. General Telephone Company of California,
THE PRESENT PROCEEDING
Thereafter several telephone companies, including petitioners here, filed applications for certification under Section 214. All proposed to serve CATV systems with which they were affiliated in some manner, thus raising directly the problem of the anticompetitive potential of a telephone company-CATV system affiliation. The Commission decided to deal with this and related issues through rule-making and in April, 1969 it issued a Notice of Inquiry and Notice of Proposed Rulemaking in Docket No. 18,509. Foremost among the issues to be considered was whether telephone companies should be permitted to engage in furnishing CATV service to the public at all, either directly or through affiliates, and, if so, what conditions should be imposed on Section 214 certification. The Commission, upon review of the various comments filed in response to the Notice, identified the central problem as being the anomalous competitive situation between affiliated CATV systems and those which are not affiliated, but which have to rely on the telephone companies for either construction and lease of channel facilities or for the use of poles for the construction of their own facilities. Additionally the Commission felt that if this made likely the telephone companies' preemption of CATV service in a community the effect would be to extend, without justification, the companies' monopoly position to broadband cable services.1 To rectify this situation the Commission promulgated the rules here in dispute. With explanatory provisions not here relevant omitted, the rules are as follows:
Section 74.1101 of the Rules and Regulations of the FCC:
Definitions
(a) Community antenna television system. The term "community antenna television system" ("CATV system") means any facility which, in whole or in part, receives directly or indirectly over the air and amplifies or otherwise modifies the signals transmitting programs broadcast by one or more television stations and distributes such signals by wire or cable to subscribing members of the public who pay for such service.
Sections 63.54-63.57 of the Rules and Regulations of the FCC, effective May 1, 1970:
Section 63.54. Applications by telephone common carriers for authority to construct or operate distribution facilities for channel service to community antenna television (CATV) systems in their service areas shall include a showing that applicant is unrelated and unaffiliated, directly or indirectly, with the proposed CATV customer or customers. Applications which do not contain the showing required by this section will be returned as unacceptable for filing, subject to the provisions of § 63.56.
Section 63.55 Waivers.
(a) In those communities where CATV service demonstrably could not exist except through a CATV system related to or affiliated with the local telephone common carrier or upon other showing of good cause, the provisions of § 63.54 may be waived, on the Commission's own motion or on petition for waiver, if the Commission finds that public interest, convenience and necessity would be served thereby.
Section 63.56. Temporary authorizations under Section 214(a) during period allowed for discontinuance of CATV service by telephone common carriers directly or through affiliates.
All telephone common carriers are required to discontinue providing CATV service directly or through their telephone service areas within 4 years from March 16, 1970; Provided, however, that during the said 4 year period temporary authorizations may be granted under Section 214(a) of the Act, to cover existing telephone common carrier CATV channel services furnished to an affiliated or related CATV system.
Section 63.57 Availability of pole (conduit) rights to CATV customer.
Applications by telephone common carriers for authority to construct or operate distribution facilities for channel service to CATV systems shall include a showing (in addition to the conditions set forth in the above sections) that the independent CATV system proposed to be served, had available, at its option, and within the limitations of technical feasibility, pole attachment rights (or conduit space, as the case may be), at reasonable charges and without undue restrictions on the uses that may be made of the channel by the customer. The availability must exist not only at the time of the authorization but also prior to the customer's decision to seek an award of a local franchise, if such is required, and that such policy of the applicant is made known to the local franchising authority. Separate documents, attesting the above conditions, by the CATV customer and, where applicable, by the appropriate local franchising authority, must be annexed to the application.
Section 64.601. Furnishing of facilities for CATV service to the viewing public.
(a) No telephone common carrier subject in whole or in part to the Communications Act of 1934, as amended, shall directly or indirectly through an affiliate owned or controlled by or under common control with said telephone communications common carrier, engage in the furnishing of CATV service to the viewing public in its telephone service area.
Section 64.602 provides for waiver of Section 64.601 in terms identical to Section 63.55. The full text of the rules can be found at 47 CFR 63.54-63.57 and 64.601-64.602.
ISSUES
The following issues are raised on this appeal:
(1) Whether the Commission had statutory authority to adopt these rules and whether it properly relied on antitrust concepts as a basis for its orders;
(2) Whether the rules deprive the telephone companies of rights in violation of the Constitution; and
(3) Whether the Commissioner's rules lack an adequate basis in fact or are otherwise arbitrary, capricious, and an abuse of discretion.
We consider each of these issues, infra.
I. STATUTORY AUTHORITY
At the outset petitioners contend that the Commission is without statutory authority to issue the rules here in question. They argue that the order goes beyond any specific grant of authority in the Communications Act of 1934 and must therefore be invalidated. We reject this argument.
The jurisdictional questions raised here are not altogether new; the explosive growth of CATV has understandably caused the Commission a great deal of concern, and it has undertaken, little by little, to assert its control over the industry. In the past, where similar, if not identical, objections to the Commission's authority over CATV systems have been advanced, the courts have held for the Commission.2
The Communications Act was designed to endow the Commission with sufficiently elastic powers such that it could readily accommodate dynamic new developments in the field of communications. In FCC v. Pottsville Broadcasting Co. the Supreme Court said that "(u)nderlying the whole (Communications Act) is recognition of the rapidly fluctuating factors characteristic of the evolution of broadcasting and of the corresponding requirement that the administrative process possess sufficient flexibility to adjust itself to these factors."
The Supreme Court has recently had occasion to review the Commission's status vis a vis CATV3 and has concluded that Section 2(a) of the Communications Act4 alone is sufficient to support the Commission's assertion of jurisdiction over CATV systems. In response to the contention that CATV systems fall beyond the Commission's regulatory ambit since they are neither common carriers within the meaning of Title II of the Act nor broadcasters within Title III, the Court said,
"Nothing in the language of § 152(a), in the surrounding language, or in the Act's history or purposes limits the Commission's authority to those activities and forms of communication that are specifically described by the Act's other provisions. The section itself states merely that the `provisions of (the Act) shall apply to all interstate and foreign communication by wire or radio * * *.' Similarly, the legislative history indicates that the Commission was given `regulatory power over all forms of electrical communication * * *.'" United States v. Southwestern Cable Co., supra,
Although the holding expressly limited the Commission's authority under § 2(a) to that "reasonably ancillary to the effective performance of the Commission's various responsibilities for the regulation of television broadcasting," the Court declined to rule on what powers, if any, the Commission would have with respect to CATV under other circumstances. Id. at 178,
We need not here decide the full scope of the Commission's authority over CATV under § 2(a) since we are of the opinion that that section together with Secton 1 (47 U.S.C. Sec. 151) and Section 214 provide ample jurisdiction for the Commission's orders. Section 214 provides in pertinent part that "no carrier shall undertake the construction of a new line * * * or shall acquire or operate any line * * * unless and until there shall first have been obtained from the Commission a certificate that the present or future public convenience and necessity require or will require the construction, or operation, or construction and operation, of such additional or extended line." A "line" is defined as "any channel of communication established by the use of appropriate equipment." Additionally the Commission is empowered to "attach to the issuance of the certificate such terms and conditions as in its judgment the public convenience and necessity may require." This specific authorization with respect to Section 214 certification is supplemented by Section 4(i) of the Act (47 U.S.C. § 154(i)) which permits the agency to "make such rules and regulations, and issue such orders, not inconsistent with this chapter, as may be necessary in the execution of its functions."
That a common carrier must obtain a Section 214 certificate of "public convenience and necessity" in order to provide channel service to an independent CATV operator is not here questioned. General Telephone Co. of California v. FCC, supra. We have no doubt that the same requirement must apply where a common carrier proposes to construct or operate CATV channel service for its own commercial use. However, the petitioners would have us hold that where an affiliate of a common carrier proposes to operate such a facility, certification cannot be required since § 214 applies only to carriers, and CATV companies, affiliated or otherwise, are not carriers. Although this reasoning is persuasive, we cannot agree.
As noted above the Supreme Court has held that even though CATV systems are neither common carriers nor broadcasters, they do not, by that fact alone, fall beyond the purview of the Act. While the Commission is specifically charged with the regulation of common carriers under Title II and broadcasters under Title III, it nonetheless has the additional and overriding responsibility, as enunciated in Section 1 (47 U.S.C. § 151), to "make available, so far as possible, to all the people of the United States a rapid, efficient, Nation-wide and world-wide wire and radio communication service with adequate facilities at reasonable charges * * *." The development of CATV services is a part of this broader purpose. The Commission is obliged to discharge its responsibilities in this area as best it can and it has chosen in this instance to implement the national policy by limiting the involvement of common carriers, over which the Commission has unquestioned jurisdiction, in CATV operations.
Under these circumstances the activities of the non-common carrier affiliates may be imputed to the common carrier parent. To hold otherwise would balk the Commission in the execution of its statutory duties. The anticompetitive practices, real and potential, which the Commission sought to eradicate through its rules are effected through the instrumentality of an affiliated CATV company. Where the statutory purpose could thus be easily frustrated through the use of separate corporate entities, the Commission is entitled to look through corporate form and treat the separate entities as one and the same for purposes of regulation. Mansfield Journal Co. v. FCC,
Several of the telephone companies argue that since they are "connecting carriers" within the meaning of § 2(b) (2) of the Act [47 U.S.C. § 152 (b) (2)], they cannot be made subject to the requirements of § 214. Section 2(b) (2) provides that the Commission has no jurisdiction with respect to "any carrier engaged in interstate or foreign communication solely through physical connection with the facilities of another carrier not directly or indirectly controlling or controlled by, or under direct or indirect common control with such carrier." (emphasis supplied). This argument was considered and rejected by the D.C. Circuit Court of Appeals in General Telephone Co. of California v. FCC, supra. We agree with the reasoning of our sister circuit which was, inter alia, that "(t)he exclusion embodied in Section 2(b) (2) was meant to protect State jurisdiction over local telephone facilities which could place interstate calls through their connection with major toll lines; this interstate facet of the company's operation was incidental to its primary local service,"
Having ascertained that the construction and/or operation of channel services for CATV systems by carriers or their affiliates requires prior certification by the Commission under Section 214, we turn now to the question of whether the Commission has improperly utilized antitrust standards in promulgating these rules. We hold that it has not.
Initially it is urged that the public convenience and necessity standard of Section 214 must be interpreted in the same manner as Section 1(18) of the Interstate Commerce Act from which the language of Section 214 was drawn. While the similarities between the two sections are unquestionable, it must be emphasized that the functions of the Interstate Commerce Commission, as outlined in the National Transportation Policy (49 U.S.C. Sec. 1), are of an entirely different nature than those of the Federal Communications Commission. The former is required to weigh variables which are foreign to the mandates of the Communications Act.6
In view of the differing demands placed upon the two agencies the question of public injury in the communications field need not and, in some instances cannot, be approached in the same manner as the question of injury in the transportation field. Carter Mountain Transmission Corp. v. FCC,
A second objection is that the Commission's reliance solely on antitrust considerations in formulating these rules is beyond the ken of its authority. We disagree.
A review of the record in this case reveals that in initiating its inquiry into telephone company affiliations with CATV systems the Commission was concerned not only with the anticompetitive implications of such affiliation, but with a variety of other factors as well.7 However, these other factors did not have controlling weight in the ultimate decision. The Commission noted that "in view of our conclusions restricting telephone company-CATV affiliations in the service areas of the telephone companies, the cause for concern over potential discriminatory practices (against regular telephone service subscribers) will be considerably decreased." Final Report and Order in Docket No. 18,509 (A. 647). It is clear that the Commission did take into account factors other than antitrust issues, although it found that the latter were of such overwhelming importance that rules could be predicated on that basis alone.
Briefly stated, the agency's response to the problem confronting it was as follows: Since the telephone companies have a natural monopoly over the means required to conduct a CATV operation, i. e., the poles or conduits, they are in a position to pre-empt the market for this important service. CATV service is the initial practical application of broadband cable technology; whether broadband cable services should evolve in a common carrier mode or some other structure is an issue more properly reserved for future consideration. However, at present CATV is one important gateway to entering the broadband market and it is the Commission's obligation to eliminate any arbitrary blockage of this gateway There is no reason to deny independent operators the opportunity to participate in broadband cable development, yet without adequate regulation the power to deny entry would reside in the telephone companies. Thus, in order to prevent unnecessary concentration of communications media, these rules were promulgated. Final Report and Order in Docket No. 18509 (A. 619).
We note that the Commission's approach is based on its own expert analysis of the needs of the broadband cable market. Although it does not yet know how broadband cable services will or should develop, it is unwilling at this point to allow the telephone companies to pre-empt the field simply by virtue of their control over means. It is settled that "practices which present realistic dangers of competitive restraint are a proper consideration for the Commission in determining the `public interest, convenience, and necessity,' (Citations omitted)" and the elimination of this danger is consistent with the Commission's broad duties under the Communications Act. Metropolitan Television Co. v. F.C.C.,
This approach, as embodied in the rules before us, is fully in conformity with the standard enunciated in FCC v. RCA Communications, Inc.,
The case stands for the proposition that competition is not always in the public interest, as evidenced by the various regulated industries such as public utilities where competition would indeed be potentially harmful. However, that competition may be in the public interest is clear. National Broadcasting Co. v. United States, supra; United States v. Radio Corporation of America,
It is true that the Commission does not know or even pretend to know what the future of broadband cable will be. However, we do not feel that the Commission should thereby be estopped to respond to the obvious problems posed by telephone company affiliation with CATV operations. Clearly the development of CATV services is a legitimate concern for the Commission. United States v. Southwestern Cable Co., supra. Here it has determined that the public convenience and necessity would best be served by keeping the gateway to broadband cable open. This is a conclusion based "on the Commission's own judgment" not on "the unjustified assumption that it was Congress' judgment" that competition in the broadband cable market must be fostered. FCC v. RCA Communications, Inc., supra,
We feel that the "public convenience and necessity" standard of Section 214 is sufficiently broad to permit the Commission to issue these rules. That standard is to be construed so as to secure for the public the broad aims of the Communications Act. Western Union Division, etc. v. United States,
Additionally we note that not only is the Commission permitted to consider the anticompetitive potential of activities which fall within the purview of its jurisdiction, but that in some instances it is obliged to consider them. McLean Trucking Co. v. United States, supra; Northern Natural Gas Co. v. FPC,
However, it is argued that the areas in which the Commission may enforce the antitrust laws are circumscribed by statute and that the agency is not here acting pursuant to such specific authority.8 We note that the specific provisions alluded to are in addition to and distinct from the Commission's general obligations under the Act to ensure the public convenience and necessity. Here the Commission has not directed its attention to findings of substantive violations of antitrust law, but rather considers anticompetitive potential in the context of its overriding responsibility to satisfy the public interest.
Petitioners urge that, notwithstanding the above, the Commission's rules are unsupported by concrete factual data demonstrating the beneficial effects of the rules, and that, in fact, the rules would stifle rather than enhance competition. We do not here consider the sufficiency of the Commission's findings in detail. See, infra. It is enough to note that "(t)he Commission is not required to make specific findings of tangible benefit. It is not required to grant authorizations only if there is a demonstration of facts indicating immediate benefit to the public. * * * In the nature of things, the possible benefits of competition do not lend themselves to detailed forecast, cf. [National] Labor [Relations] Board v. Seven-Up Co.,
As to the question of whether or not the proposed rules would enhance competition in the broadband cable market, we intimate no views. It is well-established law that it is not for the court to decide the wisdom of an agency's policies. If the rules prove to be unworkable or have an adverse effect on competition in the CATV industry the Commission can be expected to revise them in order to meet the exigencies of the competitive situation.
II. CONSTITUTIONAL ISSUES
(1) Section 64.601 directly and Section 63.54 indirectly bar the telephone companies and their affiliates from engaging in CATV operations in the carriers' service areas. To this extent, it is argued, the rules deprive them of their lawful right to engage in the CATV business.9 The issue here is whether the rules comport with the requirements of substantive due process. It is, of course, clear that the courts are without power to substitute their judgment for that of the legislative (or administrative) body whose responsibility it is, in the first instance, to decide policy questions. The wisdom or expediency of a given law or regulation is not open to question in the courts. Nebbia v. New York,
It is argued here that the rules bear no reasonable relation to the evil sought to be remedied. Chief reliance by the petitioners is put on Louis K. Liggett Co. v. Baldridge,
Petitioners rely additionally on the rationale of Stahlman v. FCC,
(2) Section 63.57 of the new rules provides that certificates under Section 214 for CATV channel service facilities will not be granted unless the applicant first offers the CATV operator space on its telephone poles or conduits for the operator's private purposes. This, it is argued, deprives the telephone companies of space on their poles without due process of law.10 Again we do not agree.
Initially it ought to be emphasized that the rules are limited in their application to the construction and operation of facilities for use by CATV systems. Although the Commission expressed its concern for the development of the entire broadband spectrum, it specifically limited the application of its rules to one facet of broadband cable usage, CATV.11
Thus the telephone companies would appear to be free to construct and operate broadband cable facilities for non-CATV uses without prior certification under Section 214. (Whether certification might otherwise be required is not here relevant.) The companies are, of course, prohibited from providing CATV service, either directly or indirectly through affiliates, in their service areas, but this we have determined is a reasonable regulation designed to effectuate the national communications policy. The rules themselves do not require the telephone companies to furnish CATV facilities to independent operators. In fact under the rules they are free not to provide such service.
Under these circumstances the pole space requirement is not a deprivation of property since the companies need be engaged in furnishing facilities for CATV only on a volitional basis. Viewed in that light the pole space requirement is simply a condition to entry into the CATV business. We do not think it unreasonable. Cf. United States v. Baltimore and Ohio Railroad Co.,
There is a further aspect to this issue which requires comment. The Government in its brief suggests that the pole space requirement is dictated by the rationale of United States v. Terminal Railway Association of St. Louis,
Petitioners agree that if they must furnish service to independent CATV interests, they should do so on equal and non-discriminatory terms. They argue, however, that the pole space requirement goes far beyond what is reasonably necessary to ensure that such terms are satisfied.13 The alternative to the pole space rule is the so-called "leaseback" arrangement whereby a CATV operator rents a portion of an existing cable owned and operated by the telephone companies.
This alternative was deemed unsatisfactory to the Commission. Its broad concern was the development of the entire broadband spectrum, and the telephone companies could effectively thwart that purpose by restricting cable use by CATV lessees to CATV transmissions. Clearly this would have had the effect of perpetuating telephone company control over the development of the broadband. In fashioning its remedy the Commission was guided by antitrust doctrine (see n. 13, supra). We note that a regulatory agency should give consideration to objectives expressed by Congress in other legislation, provided they can be related to the objectives of the statute administered by the agency. City of Chicago v. FPC, 128 U.S.App. D.C. 107,
Where as here the rule is reasonable, in accordance with antitrust doctrines, bears a rational relation to regulatory policy, and may be waived for good cause, it does not violate due process.14
III. REVIEW OF THE RULES
(1) The rules here in issue were promulgated by the Commission pursuant to the rule-making provision of the Administrative Procedure Act (Section 4, 5 U.S.C. Sec. 553). Petitioners contend that the rules are not supported by adequate evidence in the record and for that reason are invalid. This contention calls for an analysis of the appropriate standard to be applied to the adequacy of the findings in rule-making proceedings.
It is clear that the findings required of an agency in its rule-making capacity are of a different nature from those required in adjudication (5 U.S.C. Secs. 556 and 557). E. g., California Citizens Band Ass'n v. United States,
The Commission received a large number of comments from interested parties and in fact has summarized their content in its Final Report and Order. It was aware of the history of complaints against carriers by private CATV operators and had previously had occasion to consider the problem in an adjudicatory context. Manatee Cablevision Corp.,
(2) Petitioners argue that the rule, which requires discontinuance of CATV service directly or through affiliates within four years (Sec. 63.56) is unjustifiably retroactive in that it compels divestiture of systems acquired prior to promulgation of the rules.16 Although we find the argument appealing, we nonetheless uphold the Commission on this point.
That rules of general application, though prospective in form, may ascribe consequences to events which occurred prior to their issuance does not, on that basis alone, invalidate them. See, e. g., Atlas Tack Corp. v. New York Stock Exchange,
In a complex and dynamic industry such as the communications field, it cannot be expected that the agency charged with its regulation will have perfect clairvoyance. Indeed as Justice Cardozo once said, "Hardship must at times result from postponement of the rule of action till a time when action is complete. It is one of the consequences of the limitations of the human intellect and of the denial to legislators and judges of infinite prevision." Cardozo, The Nature of the Judicial Process 145 (1921). The Commission, thus, must be afforded some leeway in developing policies and rules to fit the exigencies of the burgeoning CATV industry. Where the on-rushing course of events have outpaced the regulatory process, the Commission should be enabled to remedy the problems of undue concentration of control over communications media by retroactive adjustments, provided they are reasonable. Pikes Peak Broadcasting Co. v. FCC,
Admittedly the rule here at issue has an effect on activities embarked upon prior to the issuance of the Commission's Final Order and Report. Nonetheless the announcement of a new policy will inevitably have retroactive consequences. NLRB v. Majestic Weaving Co.,
Our decision that the disputed rule is reasonable is facilitated by a finding that reliance by the carriers on the Commission's putative acquiescence in their CATV involvements should not have been great.18 That such a rule might eventually come into being was signaled as far back as 1956 when a consent decree was entered against the Bell Telephone systems prohibiting affiliation with CATV systems. United States v. Western Electric Co., Civ.Action No. 1749 (D.C.N.J.1956). The issues began to sharpen in 1966 when the Commission directed a group of operating telephone companies to file tariffs covering their CATV channel service offerings. Common Carrier Tariffs for CATV Systems,
(3) Finally it is urged that the Commission abused its discretion by failing to show why a lesser remedy ought not to have been applied. In view of our prior finding that the rules are adequately supported we must reject this argument. Particularly where the choice of remedy is involved the courts must pay special deference to the administrative agency's expertise. Our inquiry is limited to ascertaining whether on the basis of the evidence before it, the Commission promulgated rules reasonably calculated to effectuate the policies of the Communications Act. United Steelworkers of America v. NLRB,
For the foregoing reasons the order of the Commission is hereby affirmed.
Notes:
Notes
The broadband cable is composed of numerous channels or communications paths of varying frequencies capable of transmitting electrical communications. Because of the wide range of frequencies available for data transmission, a single cable can carry a variety of signals for different uses. Among the present uses of broadband cable are CATV transmissions, reproduction of documents and photographs, telegraph, telephoto, remote metering, and the like. See American Trucking Associations, Inc. v. FCC,
E. g., United States v. Southwestern Cable Co.,
United States v. Southwestern Cable Co., supra
(47 U.S.C. § 152(a) "The provisions of this chapter shall apply to all interstate and foreign communication by wire or radio and all interstate and foreign transmission of energy by radio, which originates and/or is received within the United States, and to all persons engaged within the United States in such communication * * *")
Petitioner Rochester Telephone Corp. (Rochester) argues that it should be exempt under Section 2(b) (1), [47 U.S.C. § 152(b) (1)] which pertains to "charges, classifications, practices, services, facilities, or regulations for or in connection withintrastate communication service by wire or radio of any carrier." (Emphasis supplied). In view of the Supreme Court's holding that CATV systems are engaged in interstate communication, we cannot agree. Nor as Intervenor Lincoln Telephone and Telegraph Company (Lincoln) suggests does Section 221(b) apply. That section exempts from Commission regulation facilities "for or in connection with * * * telephone exchange service" which is defined in Section 3(r) of the Act [47 U.S.C. § 153(r)] as: "service within a telephone exchange, or within a connected system of telephone exchanges within the same exchange area operated to furnish to subscribers intercommunicating service of the character ordinarily furnished by a single exchange, and which is covered by the exchange service charge." Clearly CATV channel distribution does not fit within that definition.
For instance the Commerce Commission has the difficult task of balancing one form of transportation against another in order to "preserve the inherent advantages" of each and "to foster sound economic conditions in transportation"; additionally it is charged with responsibility for safety in the industry, fair wages and working conditions, and cooperation with state regulatory agencies. None of these requirements appears in the Communications Act
For instance the Commission inquired into such diverse matters as the possibility and ramifications of common carriers acting as program originators, the effects of CATV affiliation upon regular telephone service consumers, the role of state and local authorities in CATV franchising, and the incentives for independent CATV operators to operate also as common carriers
Petitioners point to Section 7 of the Clayton Act (15 U.S.C. Sec. 18) and Sections 212, 215 and 314 of the Communications Act
Intervenor Lincoln asserts that the Commission cannot regulate or prohibit a common carrier's entry into a noncarrier business, i. e., CATV. It is true, as Lincoln suggests, that CATV is not a common carrier service. Philadelphia Television Broadcasting Co. v. FCC, 123 U.S. App.D.C. 298,
Alternatively, Intervenor Lincoln asserts that the pole space requirement forces it to supply a competitor with the means of competition. This is simply a different perspective on the issue raised by petitioners. Both advance the proposition that the pole space rule unlawfully requires the telephone companies to surrender their private property to someone else, i. e., independent CATV operators. The same analysis, therefore, suffices for both
Careful analysis of the rules, confirms that this is so:
1) The definition of CATV is confined to facilities which transmit programs broadcast by one or more television stations. (Sec. 74.1101)
2) Section 63.54 deals with applications by telephone companies for authority "to construct or operate distribution facilities for channel service to CATV systems in their service areas." The key words here are "to CATV systems". That phrase modifies the meaning of the preceding words and clearly indicates that the rule applies only to facilities intended to serve CATV purposes.
3) Section 63.57 is couched in terms substantially identical to those of Section 63.54. Additionally this rule avers to "the independent CATV system proposed to be served * * *." Thus if the telephone company does not propose to operate a CATV system itself (or through an affiliate) or to serve an independent CATV operator the rule has no application.
4) Section 64.601 prohibits the "furnishing of CATV service to the viewing public" in the telephone company's service area. Clearly the rule has no application to other broadband uses.
E. g. Associated Press v. United States,
Petitioners appear to argue that the pole space requirement is more stringent than the comparable remedies applied in the Terminal case and others cited n. 11, supra. Even if that were conceded the remedy selected here is entirely consistent with United Shoe Machinery Corp. v. United States,
Petitioners argue additionally that the rules deprive them of the benefits of their local franchises. By this we do not understand them to mean that their franchise contracts have been unlawfully modified for it is well settled that contract rights in regulated industries are subject to reasonable modifications. American Airlines, Inc. v. CAB,
Petitioners suggest that they should have been granted a hearing. We cannot agree. The decision to proceed by rule-making rather than by ad hoc adjudication is one "that lies primarily in the informed discretion of the administrative agency. SEC v. Chenery Corp.,
Intervenor Lincoln asserts that the Commission should have grandfathered existing facilities. However, had it done so, it would have been obliged to constantly supervise the grandfathered facilities in order to insure that abuses had not and would not develop. It was precisely this sort of burdensome ad hoc administion that the Commission sought to avoid by promulgating prohibitory rules of general application. If a telephone company can demonstrate that the operation of a CATV system by it or an affiliate in its service area would serve the public convenience and necessity, the new rules provide for waiver of the prohibition. (Secs. 63.55 and 64.602. The Commission is obliged to give full consideration to meritorious applications. WAIT Radio v. FCC,
Petitioners contend that these rules represent a reversal of prior policy. We cannot accept that interpretation. The Commission has, of course, consistently recognized and encouraged the role of state and local governments in choosing who is to be a CATV operator, but it has not deviated from that position here. While the rules have an indirect effect on local franchising power, they are simply the expression of a new policy with respect to CATV ownership in conformity with the developing standard of public convenience and necessity
However, even where reliance is strong, regulations may be altered retroactively. See Dixon v. United States,
Intervenor Lincoln suggests that the rules are an abuse of discretion because they catch the innocent as well as the guilty. This overlooks the fact that the rules represent a policy choice, not a rectification of specific past evils. That the guiltless may be affected by administrative regulation is too well settled to require further comment. See FCC v. WOKO, supra