Guidry Cablevision v. City of Ballwin

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
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No. 96-2037
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Guidry Cablevision/Simul Vision *
Cable System, *
*
Plaintiff - Appellant, *
* Appeal from the United States
v. * District Court for the
* Eastern District of Missouri.
City of Ballwin, *
*
Defendant - Appellee. *
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Submitted: January 13, 1997
Filed: July 8, 1997
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Before LOKEN, BRIGHT, and MORRIS SHEPPARD ARNOLD, Circuit Judges.
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LOKEN, Circuit Judge.
The Cable Communications Policy Act of 1984, 47 U.S.C. §§ 521 et seq.
(the “Cable Act”), stabilized federal regulation of the cable television
industry by addressing issues that had vexed the Federal Communications
Commission for many years. One such issue is whether state and local
governments may franchise federally regulated cable operators. Congress
answered with a qualified yes, allowing local governments to franchise
“cable systems,” but placing limits on permissible franchise terms and also
defining cable systems to exclude so-called private cable systems. The
Commission in turn has invoked federal preemption to preclude local
governments from requiring that an exempt private cable operator obtain a
local franchise.
This case involves one type of private cable system, the satellite
master antenna television system, commonly referred to as “SMATV.” SMATV
systems use antennae or receivers to capture over-the-air broadcast signals
and satellite-transmitted signals. SMATV operators then retransmit these
signals by wire to television subscribers within a single building or
complex of buildings. The statutory exemption does not apply to a private
cable system that “uses any public right-of-way.” 47 U.S.C. § 522(7)(B).
The issue before us is whether an SMATV system “uses” a public right-of-
way when its cables cross under a public street. We look for guidance to
the Supreme Court’s recent analysis of the word “use” in a different
statutory context in Bailey v. United States, 116 S. Ct. 501, 505 (1995).
Although some have assumed that simply crossing a public street is use, we
reach a contrary conclusion and hold that the City of Ballwin, Missouri,
is preempted from requiring Guidry Cablevision/Simul Vision Cable System
(“Guidry Cable”) to obtain a cable franchise. Accordingly, the district
court’s judgment awarding the City unpaid franchise fees must be reversed.
I.
Seven Trails West is an apartment complex in Ballwin consisting of
several commonly owned, multiple unit buildings. The complex includes
Seven Trails Drive, which was dedicated as a public street in 1977. Seven
Trails West owns the land under Seven Trails Drive, but the City maintains
the street as a public right-of-way. In 1984, Seven Trails West contracted
with Guidry Cable to build and operate an SMATV system. Because the SMATV
transmission lines must cross Seven Trails Drive to serve all apartments
in the complex, Guidry Cable obtained an excavation permit from the City
and placed its lines some seventeen to twenty inches under Seven Trails
Drive. All of the other SMATV equipment is located on
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property owned by Seven Trails West. No part of the system passes over or
touches the surface of Seven Trails Drive.
In June 1984, before passage of the Cable Act, the City granted
Guidry Cable a cable television franchise for its SMATV system at Seven
Trails West. Guidry Cable initially accepted the franchise but quit paying
franchise fees in July 1986. After five years of inaction, the City
revoked Guidry Cable’s franchise and threatened to remove its SMATV
equipment. Guidry Cable commenced this action seeking declaratory relief,
and the City counterclaimed for unpaid franchise fees. After the parties
submitted the case on stipulated facts, the district court entered judgment
dismissing Guidry Cable’s claims and awarding the City $65,214.32 on its
counterclaim. Guidry Cable appeals. The parties have briefed and argued
many issues, but the Cable Act preemption question is dispositive.
II.
For many years, the F.C.C. did not regulate cable television systems.
See generally Midwest Video Corp. v. FCC, 571 F.2d 1025, 1029-35 (8th Cir.
1978), aff’d, 440 U.S. 689 (1979). In the early 1970's, the Commission
adopted a regime of “deliberately structured dualism,” requiring cable
operators to obtain federal certificates of compliance while permitting
local governments (including States) to franchise cable operators
consistent with minimum federal standards. Local franchising was
appropriate, the Commission explained, “because cable makes use of streets
and ways” and because local authorities are better able “to parcel large
urban areas into cable districts” and “to follow up on service complaints.”
Cable Television Report & Order, 36 F.C.C.2d 143, at ¶¶ 177-78 (1972).
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As the market for cable television grew and new technologies emerged,
the F.C.C. exempted private cable systems such as SMATV from its cable
rules, usually over the vehement protest of regulated cable operators.
Along with this federal exemption, the Commission preempted local
governments from franchising private cable systems. In the case of SMATV,
the Commission concluded that preemption was necessary because SMATV
systems are the customers of interstate satellite transmissions, and local
licensing that restricts the growth of SMATV receivers would be
inconsistent with the federal policy of fostering “open entry in the
satellite field for the purpose of creating a more diverse and competitive
telecommunications environment.” In re Earth Satellite Commun., Inc., 95
F.C.C.2d 1223, 1231 (1983), aff’d sub nom. New York State Comm’n on Cable
Television v. FCC, 749 F.2d 804 (D.C. Cir. 1984).1
The Cable Act retained this dual regulatory framework. Local
governments may franchise “cable systems” consistent with federal standards
regarding issues such as franchise fees, renewal procedures, and ownership
restrictions. See 47 U.S.C. §§ 541-547; H.R. Rep. No. 98-934, 98th Cong.,
2d Sess. 44 (1984), reprinted in 1984 U.S.C.C.A.N. 4655, 4656-64. Congress
enacted a private cable exemption in § 522(7)(B), commenting that this
exemption is directed at SMATV systems, and left the F.C.C.’s franchising
preemption decisions in place in § 541(e). See H.R. Rep. No. 98-934, 1984
U.S.C.C.A.N. at 4681, 4700. The Supreme Court rejected a due process
challenge to § 522(7)(B) in FCC v. Beach Commun., Inc., 508 U.S. 307
(1993).
2
See also In re Orth-O-Vision, Inc., 69 F.C.C.2d 657 (1978),
recon. denied, 82 F.C.C.2d 178 (1980) (preempting franchising of
MATV systems), aff’d sub nom. New York State Comm’n on Cable
Television v. FCC, 669 F.2d 58 (2d Cir. 1982).
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III.
Guidry Cable argues that its SMATV system is exempt from Cable Act
regulation, and therefore the City may not require a cable franchise.
Section 522(7)(B) defines an exempt private system as:
a facility that serves only subscribers in 1 or more multiple
unit dwellings under common ownership, control, or management,
unless such a facility or facilities uses any public right-of-
way.
Because Seven Trails West is admittedly a commonly owned group of multiple
unit dwellings, the issue is whether Guidry Cable “uses a public right-of-
way" because its transmission lines cross underneath Seven Trails Drive,
a public street. The Cable Act does not define the term “use,” and the
published committee report simply repeats the statutory language. See 1984
U.S.C.C.A.N. at 4681. In Bailey, the Supreme Court explained that “the
word ‘use’ poses some interpretational difficulties because of the
different meanings attributable to it.” The word “draws meaning from its
context,” and a court must consider “not only the bare meaning of the word
but also its placement and purpose in the statutory scheme.” 116 S. Ct.
at 505-06. Therefore, “use” in § 522(7)(B) must be construed in the
context of the Cable Act and the F.C.C.’s prior regulation of the cable
television industry.
Traditional cable systems deliver programming throughout a
municipality by means of cables laid under city streets or along utility
lines. They thereby make extensive use of public rights-of-way, avoiding
the need to negotiate easements with countless private property owners.
This is “use” consistent with the word’s ordinary meaning -- “to employ,
to avail oneself of, and to carry out a purpose or action by means of.”
Bailey, 116 S. Ct. at 506 (quotations omitted); see 43A WORDS AND PHRASES,
Use; Used at 252
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(West 1969). This active interaction between cable operators and local
governments is also the reason for the F.C.C.’s long-standing tolerance of
local cable franchising. “The dual federal-local jurisdictional approach
to regulating cable systems is largely premised on the fact that cable
systems necessarily involve extensive physical facilities and substantial
construction upon and use of public rights-of-way in the communities they
serve.” In re Definition of a Cable Television System, 5 F.C.C.R. 7638,
7639 (1990).
Guidry Cable’s involvement with the City’s public right-of-way is far
less substantial. Though Guidry Cable’s system must cross Seven Trails
Drive, this public street is an obstacle that must be overcome to serve the
entire, commonly owned Seven Trails complex, not an asset in serving a
myriad of independent subscribers. The City has provided no service or
benefit to Guidry Cable’s system, and Guidry Cable paid for the initial
cost and disruption of crossing under the City’s street when it obtained
an excavation permit. Thus, in the most practical sense, Guidry Cable has
not “used” the City’s public right-of-way.2
Other reasons why the F.C.C. has supported local franchising of
federally regulated cable operators also do not apply to Guidry Cable’s
SMATV system at Seven Trails West. Local governments are better able “to
parcel large urban areas into cable districts,” 36
2
It also seems significant that Seven Trails West, not the
City, owns the land underlying Seven Trails Drive. However, we
doubt whether the extent of federal regulatory preemption should
depend upon who owns the land beneath a public right-of-way. If
federal telecommunications law preempts the City from requiring a
cable franchise, that does not affect its authority to otherwise
regulate use of land beneath a public street. In general, non-
disruptive uses by abutting property owners are permitted. See
McQuillin, MUNICIPAL CORPORATIONS § 30.85 (3d ed. 1990).
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F.C.C.2d at ¶ 177, but districting is not necessary when the boundaries of
a commonly owned apartment complex define the SMATV system. Franchising
regulation also protects individual consumers from the market power a
traditional cable operator may enjoy once its system is installed, whereas
an apartment complex owner has countervailing bargaining power because it
represents numerous potential subscribers.
In In re Definition of a Cable Television Sys., 5 F.C.C.R. 7638
(1990), the F.C.C. considered whether MATV and SMATV systems “use” a public
right-of-way if they transmit signals over a public street by radio or
infrared transmission. The Commission concluded that this would not
deprive a system of the § 522(7)(B) exemption:
Congress did not intend to include within the meaning of the
term “use” of a public right-of-way the mere passing over of
such a right-of-way by electromagnetic radiation. . . .
[R]adio waves may cross a public right-of-way but do not use
it.
5 F.C.C.R. at 7642. Thus, the Commission has expressly recognized that
crossing is distinct from using. Of course, crossing a public street by
burying cables underneath it is a more physical interaction with city
property than crossing over the street with infrared transmissions. That
may be why the Commission’s Report and Order did not address whether
crossing a public right-of-way by buried cable is “use” for purposes of
§ 522(7)(B). We conclude that both forms of crossing are not “use,” either
in the natural meaning of that word, or by applying the contextual analysis
mandated in Bailey. Accordingly, we disagree with the contrary dicta in
two district court decisions. See Liberty Cable Co. v. City of New York,
893 F. Supp. 191, 195 (S.D.N.Y.), aff’d, 60 F.3d 961 (2d Cir. 1995), cert.
denied, 116 S. Ct. 1262 (1996); Channel
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One Systems, Inc. v. Connecticut Dep't of Pub. Util. Control, 639 F. Supp.
188, 199 (D. Conn. 1986).
Through its private cable preemption decisions, the F.C.C. has
adopted a policy of allowing competition to regulate the development of
SMATV so as to encourage the development of satellite transmission of
television programming. Congress in the Cable Act endorsed this policy.
In § 522(7)(B), it defined the cable systems entitled to a private system
exemption from federal regulation, and in § 541(e), it left the Commission
free to develop an appropriate preemption policy for exempt facilities.
We are unwilling to thwart this policy by broadly and unrealistically
construing the word “use” in the exception to the statutory exemption,
thereby reducing the competitive role of SMATV and other emerging delivery
systems in these fast-changing telecommunications markets. As Justice
Stevens observed in his concurring opinion in Beach Communications, 508
U.S. at 320, “Regulation is sometimes necessary, but it is always
burdensome. A decision not to regulate the way in which an owner chooses
to enjoy the benefits of an improvement to his own property is adequately
justified by a presumption in favor of freedom.”
The judgment of the district court is reversed and the case is
remanded for further proceedings consistent with this opinion.
BRIGHT, Circuit Judge, dissenting.
I respectfully dissent. I believe that Guidry Cable used the public
right-of-way by digging under the street to lay its cable.
When a “statute is silent or ambiguous with respect to the specific
issue, the question for the court is whether the agency’s
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answer is based on a permissible construction of the statute.” Chevron
U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 843
(1984). In applying that standard, the FCC’s interpretation of the Cable
Act and what constitutes “use of a public right-of-way” is entitled to
“considerable weight” and this court’s deference. See id. at 844.
The FCC interpreted the Cable Act and addressed what constitutes a
cable system under the Act in In re Definition of a Cable Television
System, 5 F.C.C.R. 7638 (1990). The FCC stated that Congress never
intended the Cable Act to include systems that transmit their signals
through radio waves instead of through physical cables or wires. Id. at
7639. The FCC’s discussion relies extensively on the notion that radio
transmissions fall outside the scope and ordinary meaning of “cable.” See
generally id. The FCC described the difference between services using
radio waves and wires or cables as a “sharp contrast.” Id.
Nevertheless, the majority in this case relies on the FCC’s comment
that “‘radio waves may cross a public right-of-way but do not use it,’” to
conclude that the FCC distinguished between “crossing” and “using” for
purposes of laying cable underneath a public street. Maj. Op. at 7
(quoting In re Definition of a Cable Television System, 5 F.C.C.R. at
7642). To the contrary, the FCC stated that if a facility employing
“closed transmission paths,” such as cable instead of radio waves,
“cross[es] a public right-of-way, it will be considered a cable system for
purposes of the Cable Act . . .” and, therefore, subject to local
regulation. In re Definition of a Cable Television System, 5 F.C.C.R. at
7642. The FCC made repeated references to “crossing a public right-of-way”
when explaining which systems fall outside the scope of the Cable Act’s
private cable system exemption. See, e.g., id. at 7641 ("'the exception
is not available unless . . . there is no crossing
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of a public right-of-way . . . .'" (internal citation omitted)).
Furthermore, parties brought the issue whether “use” and “cross” are
synonymous to the attention of the FCC and it regarded them as
interchangeable:
We . . . sought comment in the Notice “with respect to the
question of what constitutes a crossing of a public right-of-
way, . . . .” As noted by several parties, the specific
statutory language refers to “uses” of a public right-of-way
and our use of the term “crossing” was not meant to imply
anything different.
Id. at 7641-42.
Other court decisions demonstrate that the FCC’s interpretation of
“use” as synonymous with “cross” is a permissible construction of the
statute. Most notably, the Supreme Court described the FCC’s conclusion
that a video system “is subject to the franchise requirement if its
transmission lines . . . use or cross any public right-of-way” as
“[c]onsistent with the plain terms of the statutory exemption.” F.C.C. v.
Beach Communications, Inc., 113 S. Ct. 2096, 2100 (1993) (emphasis added).
Likewise, two district courts stated that crossing a public right-of-way
constitutes use. See Liberty Cable Co. v. City of New York, 893 F. Supp.
191, 195 (S.D.N.Y.), aff’d, 60 F.3d 961 (2d Cir. 1995), cert. denied, 116
S. Ct. 1262 (1996); Channel One Systems, Inc. v. Connecticut Dep’t of Pub.
Util. Control, 639 F. Supp. 188, 199 (D. Conn. 1986) (“a person providing
cable television service using public rights-of-way by cables crossing
under a public road . . . is a cable operator and must obtain a
franchise.”). The majority dismisses the aformentioned authority summarily
despite acknowledging that cable crossing underneath a public street “is
a . . . physical interaction with city property.” Maj. Op. at 7.
Instead, the majority relies on the Supreme Court’s interpretation
of “use” in a criminal statute. See id. (relying on Bailey v. United
States, 116 S. Ct. 501, 505 (1995)). I believe a criminal case stating
that a person is not “using” a gun locked in the trunk of a car, is clearly
distinguishable from a civil case
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deciding whether a company is “using” a public street by crossing
underneath it with a cable to reach more customers.
In addition, the majority regards the public street as “an obstacle
that [Guidry Cable] must overcome to serve the entire . . . complex” rather
than “an asset in serving a myriad of independent subscribers.” Maj. Op.
at 6. The majority neglects to consider, however, how Guidry Cable chose
to overcome this “obstacle.” According to the FCC, a “sharp contrast”
exists between facilities employing radio waves and those employing
physical cable. In re Definition of a Cable Television System, 5 F.C.C.R.
at 7639. By exempting facilities utilizing radio waves from local
regulation, Congress provided an incentive to such facilities over
facilities employing physical cables and wires.
Thus, Guidry Cable could have avoided “physical interaction” with
city property, and thereby the franchise fees, by employing radio waves
instead of physical cable to cross the city’s street. Guidry Cable instead
chose to rely on cable, thereby requiring an excavation permit from the
city and subjecting itself to the city’s franchise fees. The majority’s
opinion, however, undermines the Cable Act’s preference for facilities
employing radio waves rather than physical cables, allows Guidry Cable to
escape part of its obligation in return for the excavation permit and
denies the local government the ability to regulate industries which cross
public rights-of-way.
I believe the FCC provided a reasonable and usual construction of the
term “use.” Accordingly, I would affirm.
A true copy.
Attest:
CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT.
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