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FILED

MICHAE; POA: < °

IN THE ioe, » CLERK

Supreme Court of the United States

OCTOBER TERM, 1978

ere @7-1845

ROBERT E. KELLY, Chairman; JERRY A. DANZIG, Vice-Chairman;

MICHAEL H. PRENDERGAST; ELI WAGER; and EDWARD J.

WEGMAN, Commissioners of the New York State Commission on Cable

Television,

Petitioners,

agemst

BROOKHAVEN CABLE TV, INC. CAPITOL CABLEVISION, INC.;

SAMSON CABLEVISION CORP., TELEPROMPTER ELECTRON-

ICS CORPORATION; WARNER CABLE OF OLEAN, INC.; NA-

TIONAL CABLE TELEVISION ASSOCIATION, INC.; NEW

YORK STATE CABLE TELEVISION ASSOCIATION ; and HOME

BOX OFFICE, INC.,

and

UNITED STATES OF AMERICA and FEDERAL COMMUNICATIONS

COMMISSION,

Respondents.

Petition For A Writ oF CERTIORARI TO THE UNITED STATES CourRT OF

APPEALS FOR THE SECOND CIRCUIT

BRIEF FOR PETITIONERS

LOUIS J. LEFKOWITZ

Attorney General of the

State of New York

Attorney for Petitioners

Office & P.O. Address

Two World Trade Center

New York, New York 10047

Tel. No. (212) 488-3444

SAMUEL A. HIRSHOWITZ

First Assistant Attorney General

CHARLES A. BRADLEY

Assistant Attorney General

of Counsel

TABLE OF CONTENTS

PAGE

I I sa Be ee ee ee ee acbebat 2

Jurisdiction ........... o s als MME Leen sb eebaces

is es a ee wh ed ncduden 2

NN Ss i Ed cules eedidnces 3

OR RE CRRA been ere 3

B. The Nature of Cable Television ............ 3

C. Regulation of Cable Television by the FCC .. 4

D. Regulation of Cable Television by New York

uel ele ois. eli teviubwededte dsee 7

E. The Asserted Preemption of Pay Cable Rate

DEE s6bcGhapkivecsdias chet séeuees’ 9

Ce ne | 10

Reasons for Granting the Writ:

Pornt I —Tue Feperat Communications Com-

MISSION EXCEEDED ITS JURISDICTION IN

PURPORTING TO PREEMPT STATE AND

LOCAL PRICE REGULATION OF PAY CABLE

I btns Glee nka veel eneces ees 12

Pours Il —TuHe Fepera, Communications Com-

‘ MISSION FAILED TO ADOPT THF PUR-

PORTED PREEMPTION IN A PROCEDURALLY

CE go cc ccekduweeees’.s 17

ii TABLE OF CONTENTS

Pornt I1I—Tue runes oF THE Unirep States

Court oF APPEALS FOR THE SECOND

Crrcurir on THE FCC’s CABLE TELE-

VISION JURISDICTION ARE IN CONFLICT

WITH THOSE OF THE District oF Co-

LUMBIA AND EicutH Crircuir Courts

er MED on 6casev-cbedebnes Seeees

NOR ees eee ee td Uacddads «tee 4

Appendix A—Decision of the United States Court of

Appeals for the Second Circuit ......

Appendix B—Decision of the United States District

Court for the Northern District of New

el et is eek sb yee dé <4 ke

Appendix C—Judgment of the United States District

Court for the Northern District of New

RERENSS aT gR ngalt ot ty 62 SIR ie a

Appendix D—Statement of Policy, In Re Rates

Charged by Cable Television Com-

panies for Subscription Programming

dated October 19, 1973 ..............

Appendix E—Clarification of Commission Policy, /n

re Rates Charged by Cable Television

Companies for “Auxiliary” Program-

ming, Docket No. 90010 (Commission

on Cable Television 1976) ...........

Appendix F—Statutes Involved ..................

PAGE

32a

TABLE UF AUTHORITIES iii

TABLE OF AUTHORITIES

PAGE

Burlington Truck Lines, Inc. v. United States, 371

EE, acy habs keen oe whet mab beienkat 18

Citizens to Preserve Overton Park v. Volpe, 401 U.S.

i vide dalik's peta in icp ween eens ena 18

City of Chicago v. Federal Power Commission, 458

F. 2d 731 (D.C. Cir., 1971), cert. den. 405 U.S.

TI al ae Oh i Pe i a a 18

Head v. New Mexico Board, 374 U.S. 424 (1963) ..... 16

Home Box Office, Inc. v. F.C.C., 567 F. 24 9 (D.C. Cir.,

DE Guava besa dh oukdendshs ohehvaoks 6, 11, 15, 18, 21

Midwest Video Corp. v. F.C.C., —— F. 2d ——, Slip

op. No. 76-1496 (8th Cir., February 21, 1978), pet.

for cert. filed 46 U.S.L.W. 3710 .............. 6, 11, 13

National Association of Regulatory Utility Com-

missioners v. F.C.C., 533 F. 2d 601 (D.C. Cir.,

EE <4 wk uae howe Haden Cae esis Kans ooes 6 6, 11, 15

National Association of Theatre Owners v. F.C.C., 420

F. 2d 194 (D.C. Cir., 1969), cert. den. 397 U.S.

i rocks dh dbabevedediceueccbiconee belkin 11, 13

New York State Commission on Cable Television v.

F.C.C., —— F. 2d ——, Slip op. No. >

(2d Cir., January 25, 1978), pet. for cert.

a ee cee becbawkb ens oeeboer 19

United States v. Midwest Video Corp., 406 U.S. 157

SE <GiGiaeE hd Meee ei seeder de e's ~ 9, 6, 10, 12, 13, 14

United States v. Southwestern Cable Co., 392 U.S.

EE oa des onenh GueRa oes ed 2, 4, 6, 10, 12, 14, 15

iv TAB! E OF AUTHORITIES

STaTUTES

Federal Statutes PAGE

» § OB nee ses dchsntenses eee 18

GT UBC. 9GEb nn cevecccsccosesevevisessecseeees 7,12

3 Ppeeperrerrrrrr rr er 4

>) | Perr rere een oe Fe 10

2. Pere eee 13

GRRE wecny.cvck de tv enckueweneeeeeee 13

J res pe ns! ar Se 6

Public Law 94-553, 90 Stat. 2541 ............. 6

CU-S06, CB BORE. FD nic cvcvenccsves 6

New York Statutes

New York Executive Law §811 ................ 7

SOOP 200s cendnaeedens 7

OM cic pcaerecuice 3,7

Pua ivideusebeh cna 3,7

OTHER AUTHORITIES

Federal Regulations

Gi CPR, fovmner past TS ovis ivsictevnadeueee +

4? CPR. 47008 2.5.55. ee ee 8,9,17

Federal Communication Commission Orders

20 FOL, SU ...s0cscneceedy cede. 5

Be Pere 5

4B POR. BBW . os cscececensen cee 9,18

BED, occcveest eben sie 18

TABLE OF AUTHORITIES v

New York Codes, Rules and Regulations PAGE

EL 8

Staff of Subcommittee on Communications Commis-

sion on Interstate and Foreign Commerce ...... 5

New York State Commission on Cable Television

EE 9, 10

Clarification of Commission Policy ............. 10, 17

3h f fs s

S oe

4 ~ s ;

are sees ie Soe

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_* - 7

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Pie

As *

IN THE

Supreme Court of the United States

OCTOBER TERM, 1978

ROBERT E. KELLY, Chairman; JERRY A. DANZIG, Vice-Chairman;

MICHAEL H. PRENDERGAST; ELI WAGER; and EDWARD J.

WEGMAN, Commissioners of the New York State Commission on Cable

Television,

Petitioners,

against

BROOKHAVEN CABLE TV, INC. CAPITOL CABLEVISION, INC.;

SAMSON CABLEVISION CORP., TELEPROMPTER ELECTRON-

ICS CORPORATION; WARNER CABLE OF OLEAN, INC.; NA-

TIONAL CABLE TELEVISION ASSOCIATION, INC.; NEW

YORK STATE CABLE TELEVISION ASSOCIATION; ard HOME

BOX OFFICE, INC., ‘eal

UNITED STATES OF AMERICA and FEDERAL COMMUNICATIONS

COMMISSION,

Respondents.

Peririon For A Writ or CERTIORARI TO THE UNITED States Court or

APPEALS FOR THE SECOND CIRCUIT

BRIEF FOR PETITIONERS

To the Honorable Chief Justice of the United States and

the Associate Justices of the Supreme Court of the United

States :

Petitioners, the Commissioners of the New York State

Commission on Cable Television, pray for a writ of certior-

ari to review the decision of the United States Court of

Appeals for the Second Circuit entered on March 29, 1978.

Decisions Below

The decision of the Second Cireuit Court of Appeals,

not yet reported, is reproduced in the Appendix A. The

decision of the District Court, 428 F. Supp. 1216 (N.D.N.Y.,

1977), which was affirmed by the Court of Appeals, is re-

produced in Appendix B. The Final Judgment of the

District Court is reproduced in Appendix C.

Jurisdiction

This Court’s jurisdiction is invoked pursuant to Title 28

United States Code, § 1254(1). The decision of the Court

of Appeals was entered on March 29, 1978.

Questions Presented

1. Whether the United States Court of Appeals for the

Second Circuit erred in ruling that the Federal Communi-

cations Commission has jurisdiction to preempt State reg-

ulation of rates charged for pay cable television, where

this Court’s consistent construction of Section 2(a) of the

Communications Act of 1934 (47 U.S.C. §$152[a]) limits

FCC jurisdiction over cable television to actions ‘‘reason-

ably ancillary to the effective performance of the Com-

mission’s various responsibilities for the regulation of

television broadeasting.’’ (United States v. Southwestern

Cable Co., 392 U.S. 157, 178 [1968]).

2. Whether the United States Court of Appeals for the

Second Circuit was correct in holding that the Federal

Communications Commission has, in fact, validly exercised

a preemption of State regulation of pay cable television

rates by the mere utterance of statements to that effect

without any procedures for rule making, inquiry or the

consideration of comments on this issue.

Statement of the Case

A. Introduction

This action was originally commenced in the United

States District Court for the Northern District of New

York. Respondents are five cable television companies

with operations in New York, two trade associations and a

service corporation which provides entertainment program-

ming to cable television systems. The petitioners are the

Commissioners of the New York State Commission on

Cable Television, an agency of the State of New York

created by Article 28 of the New York Executive Law.

With the permission of the District Court, respondents

were joined by the United States of America and the Fed-

eral Communications Commission (‘‘FCC’’ or ‘‘Commis-

sion’’), as intervenors, and petitioners were joined by the

National Association of Regulatory Utility Commissions

(NARUC), as intervenor.

Respondents alleged that actions of the New York State

Commission on Cable Television, in an attempt to enforce

New York statutory law which requires municipal and

State approval of all rates charged to cable television sub-

seribers, Executive Law, §§ 822 and 825, should be en-

joined as violative of a valid federal preemption expressed

by the FCC which prohibits State and local regulation of

the rates charged for ‘‘pay cable’? services (those pro-

grams sold for additional charges on a per-program or

per-channe] basis).

B. The Nature of Cable Television

“Cable Television” (or CATV) is a means of transmitting

or delivering signals by wire or cable from an origination

point to a receiving terminal, i.e., the subscriber’s television

set. The services that may be provided by cable television

are virtually limitless and include the retransmission of

over-the-air radio and television broadeast signals, the

transmission of locally originated video programming, com-

puter data and a variety of other information and pro-

gramming. At the present time, the majority of cable tele-

sion companies in the State of New York provide a service

package for a fixed amount which includes local and distant

television and radio broadcast signals, and in certain cases,

various channels dedicated to use by the local governments,

the local school district and the public generally. In addi-

tion to the above service package, many cable television com-

panies, including respondent-companies, provide non-broad-

cast programming or services for an additional per pro-

gram or per channel charge. Such programming is gen-

erally referred to as “pay cable” or “premium pro-

gramming.” However, regardless of the type of services

provided, it is the mode of transmission which makes cable

television a distinctive communications medium and estab-

lishes the basis for State jurisdiction.

C. Regulation of Cable Television by the FCC

Direct regulation of cable television services by the FCC

began in 1966 with the adoption of rules limiting the tele-

vision broadcast signals that could be carried on cable tele-

vision systems (former part 74 of the FCC’s regulations).

The FCC’s jurisdiction to impose such signal carriage

limitations was challenged and upheld by this Court in

United States v. Southwestern Cable Co., 392 U.S. 157

(1968). The Court in Southwestern found that the FCC’s

jurisdiction over cable television services could not be de-

rived from any direct statutory language, but was a neces-

sary complement to the express jurisdiction provided over

radio services (including television broadeast stations) by

the Communciations Act of 1934 (47 U.S.C. $4 151, et seq.).

The FCC’s cable television jurisdiction was therefore

limited to those actions “reasonably ancillary to the effec-

tive performance of the Commission’s various responsi-

bilities for the regulation of television broadcasting.” 392

USS. at 178.

By 1969 the FCC had broadened its regulatory program

for cable television services to require cable television sys-

tems with 3500 or more subscribers to initiate program

origination.* This regulatory requirement was challenged,

and eventuaily upheld by this Court in United States v. Mid-

west Video Corp., 406 U.S. 157 (1972). In that case, a

plurality of this Court found that the standard expressed

in Southwestern had been met and that the new rules were

“reasonably ancillary” to the FCC’s television broadcast

responsibilities. However, the concurring opinion of the

Chief Justice expressed caution on the issue of FCC juris-

diction:

‘‘Candor requires acknowledgement, for me at least,

that the Commission’s position strains the outer limits

of even the open-ended and pervasive jurisdiction that

has evolved by decisions of the Commission and the

eourts.’’ 406 U.S. at 676.*

In 1972, the FCC adopted a comprehensive new regula-

tory program for cable television services (47 C.F.R. part

76, effective March 31, 1972). Cable Television Report

and Order, 36 F.C.C. 2d 143, affirmed on reconsideration,

36 F.C.C. 2d 326 (1972). At that time it imposed limita-

tions and requirements in areas not before addressed

(e.g., an obligation to obtain federal certification prior to

operation—subpart B; mandatory standards for municipal

franchises—subpart C; an obligation to protect the pro-

gram exclusivity of local broadcast stations—subpart F;

limitations on the types of programming that may be sold

for additional charges—subpart G, section 76.225, and a

* First Report and Order in Docket No. 18397, 20 F.C.C. 201

(1969).

* See, also, Staff of Subecomm. on Communications, Comm. on

Interstate and Foreign Commerce, Cable Television: Promise

versus Regulatory Performance, 80-83 (1976) (Subeomm. Print)

wherein it is stated (at page 80) that FCC authority to require

“eablecasting” is not authority to regulate all aspects of cable TV.

requirement to provide access channels to the public and

minimmm channel capacity—subpar G, section 76.251).

Several of these regulations were subsequently found to

be violative of the jurisdictional limits imposed upon

the FCC by the Southwestern standard: Nationai As-

sociation of Regulatory Utility Commissioners v. F.C.C.,

533 F. 2d 601 (D.C. Cir., 1976), invalidating the pur-

ported FCC preemption of State regulation of cable tele-

vision services providing two-way, poin-to-point, non-

video, intrastate programming; Home Box Office, Inc.

v. F.C.C., 567 F.2d 9 (D.C. Cir., 1977), invalidating FCC

regulations purporting to limit the programs that could

be sold for additional charges; and Midwest Video Corp.

v. F.C.C., —— F. 2d ——. Slip op. No. 76-1496 (8th

Cir., February 21, 1978), pet. for cert. filed 46 U.S.L.W.

3710, invalidating FCC rules requiring access channels and

minimum channel capacity. These cases are discussed

more fully below.

During the past twenty years various proposals have

been submitted to Congress for the adoption of direct stat-

utory federal jurisdiction over cable television services.

With two exeeptions, none of these proposals have yet

been enacted. The two instances in which Congress has

passed legislation regarding cable television regulation

occurred within the last two years. On October 19, 1976 a

new copyright law was enacted (Pub. L. 94-553, 90 Stat.

2541, Title 17 U.S.C. ) which provided for the first

time for copyright liability for cable television transmis-

sions of broadcast signals. This statute provided no new

regulatory authority for the FCC. On February 21, 1978

several amendments to the Communications Act of 1934

were enacted (Pub. L. 95-234, 92 Stat. 33), which for the

first time provided reference to cable television regulation

in that statute. However, these amendments were limited

to the creation of an FCC forfeiture power over cable tele-

vision operations (47 U.S.C. §503[b]) and to the creation

of FCC jurisdiction over the conditions of utility pole

attachments by cable television system (47 U.S.C. § 224).

Even here, the FCC’s jurisdiction over pole attachments is

not preemptive of State regulation but, rather, would be

effective only in the absence of comparable State standards.

To date, Congress has failed to adopt express FCC regu-

latory authority over cable television services which would

be preemptive of State or municipal jurisdiction.

D. Regulation of Cable Television by New York State

Cable television services have traditionally been subject

to local government controls through means of contractual

franchise provisions executed with local municipalities as a

necessary requirement to operations in local public streets

and rights of way. On May 24, 1972, the State of New York

approved an act for the regulation of cable television serv-

ices and the creation of a State Commission on Cable Tele-

vision. Laws of New York, 1972, Chapter 466 (effective

January 1, 1973); Exeeutive Law, Art. 28, §§ 811, et seq.

This act was expressly designed to coordinate with the

newly adoptéd cable television regulations of the FCC, and

was drafted in consultation with FCC staff.

The New York cable television statutory scheme provides

for the primary regulation of this service to continue on

the municipal level as a part of the negotiated franchise

privileges of the operator. Executive Law, $825. The

Commission on Cable Television is authorized to promul-

gate state-wide standards and provide guidance and regu-

latory oversight. Consistent with this approach, subscriber

rates are negotiated between the company and the munici-

pality as a condition of the franchise, and amendments of

the franchise (including rate modifications) are submitted

to the State Commission for ultimate approval. Executive

Law, § 822. In addition, pursuant to statutory direction

(Executive Law, § 815), the State Commission on Cable

Television has promulgated regulations which include mini-

mum standards for municipal franchise agreements (9 New

York Codes, Rules and Regulations, part 595) requiring,

among other things, the specification of rates for subserip-

tion channels. 9 N.Y.C.R.R. § 595.1(e).

At the time the New York cable television law and regula-

tions were adopted they were not inconsistent with any

federal standards or expressed policy. In fact, the regula-

tions adopted by the FCC in 1972 (47 C.F.R. § 76.31[a] [4]

required that all subscriber rates be subject to the approval

of the franchising authority.* This mandate was expressed

without condition or exception:

Section 76.31 Franchise standards.

(a) In order to obtain a certificate of compliance, a

proposed or existing cable television system shall have

a franchise or other appropriate authorization that

contains recitations and provisions consistent with

the following requirements:

(4) The franchising authority has specified or ap-

proved the initial rates that the franchisee charges sub-

scribers for installation of equipment and regular sub-

seriber services. No increases in rates charged to

subscribers shall be made except as authorized by the

franchising authority after an appropriate public pro-

ceeding affording due process;

* Subdivision (4) of section 76.31(a) of the FCC’s regula-

tions was deleted by order in Docket No. 20681, effective Sep-

tember 23, 1976. Report and Order, 60 FCC 2d, 671, 38 Pike

& Fischer RR 2d 110 (1976). Section 76.31(a) was eliminated

in its entirety by Report and Order in Docket No. 21002, 66 FCC

2d 380, 41 RR 2d 885 (September 30, 1977). Unfortunately,

neither of these actions eliminated the issue in dispute in this

case.

E. The Asserted Preemption of Pay Cable Rate Regulations

It is not surprising that the regulations of the FCC did

not make provision for pay cable services in 1972, because

such services could best be described as in a pre-natal stage

of development at that time. Subsequently, with the

dramatic development of commercial markets for these new

services, the FCC tried to do what it had not the foresight

to do earlier.

Not until 1974 did the FCC make specific reference to its

claimed preemption. Clarification of the Cable Television

Rules and Notice of Proposed Rule Making and Inquiry in

Docket Nos. 20018 et al., 46 F.C.C. 2d 175 (1974). The

alleged preemption was discussed as an accomplished fact.

46 F.C.C. 2d 199-200. This action was not described as a

proposed preemption, although it was, in fact, a significant

amendment of the then-effective section 76.31(a)(4). No

attempt was ever made in this proceeding, or in any subse-

quent proceeding, to invite comments on this action. The

1974 Clarification, and all later FCC proceedings in which

this preemption was discussed, dealt directly with other

matters upon which comment was invited.

In New York, the State Commission on Cable Television

acted as early as 1973 to insure that the rates for pay cable

services were subject to municipal approval in accordance

with State statutory requirements and consistent with the

standards of the FCC at that time. On October 1, 1973, the

State Commission obtained an Order from the Albany

County Supreme Court restraining TelePrompter County

Cable TV from imposing such charges in the City of Mount

Vernon without municipal and State approval. This action

was followed by an application for such approval submitted

by this company and approved by the State Commission on

October 19, 1973. On the same day, the State Commission

issued a Statement of Policy regarding the “Rates Charged

By Cable Television Companies for Subscription Pro-

gramming,” which indicaied the State’s intention to enforce

its statutory mandates and require approval of all such pay

cable rates.*

On March 1, 1976, the State Commission issued its

Clarification of Commission Policy, which reiterated its

position of 1973.** It was in response to this action by the

State Commission, and the proposed enforcement of State

law described therein, that the respondents herein initiated

the instant litigation.

The Decisions Below

The District Court (Port, J.) granted summary judgment

to the respondents and declared that the FCC had pre-

empted the regulation of rates charged for pay cable tele-

vision. (Appendix B). An injunction was issued prohibit-

ing the New York State Commission on Cable Television

from regulating pay cable rates or from requiring cable

television companies to specify pay cable rates in franchises

granted by municipalities within the State of New York.

(Appendix C).

The District Court’s ruling accepted the arguments of

the respondents that the FCC’s jurisdiction over cable tele-

vision services is broad and general and is supported by

the general purposes section of the Communications Act

of 1934 (47 U.S.C.C. §152[a]), as confirmed by the Su-

preme Court in United States v. Southwestern Cable Co.,

392 U.S. 157 (1968), and United States v. Midwest Video

Corp., 406 U.S. 649 (1972). The Court concluded that the

alleged preemption was jurisdictionally valid and had been

imposed by FCC.

Upon appeal, the Second Cireuit Court of Appeals af-

firmed the decision of the District Court on both the juris-

* Appendix D.

** Appendix E.

dictional and procedural issues. The Second Circuit again

cited this Court’s decisions in the Southwestern and Mid-

west Video cases, and concluded that, ‘‘It follows that the

FCC may regulate cable TV if its regulation will further

a goal which it is entitled to pursue in the broadcast area.’’

(Appendix A at p. 4a). The Court then applied this

standard:

‘*A decision to delay all price regulations of special

pay cable meets that test; a policy of permitting devel-

opment free of price restraints at every level is rea-

sonably ancillary to the objective of increasing pro-

gram diversity, and far less intrusive than the manda-

tory origination rules approved in Midwest Video.’’

(Appendix A at p. 4a).

It summarily distinguished the holdings of the District of

Columbia Cireuit and the Eighth Cireuit Courts of Ap-

peals on these issues (National Ass’n. of Reg. Util. Com’rs.

v. F.C.C., 533 F. 2d 601 [D.C. Cir., 1976]; Home Box Office,

Inc. y. F.C.C., 567 F. 2d 9 [D.C. Cir., 1977]; and Midwest

Video Corp. v. F.C.C., —— F. 2d ——, [8th Cir., 1978], pet.

for cert. filed, 46 U.S.L.W. 3710) as factually unrelated.

(Appendix A at pp. 45a). On the procedural issue, the

Second Cireuit Court traced the alleged preemption back

to the FCC’s 1974 Clarification, supra, and concluded as

follows:

‘‘That the FCC has, in fact, sought to preempt state

and local price regulation of special pay cable program-

ming is evident from a survey of FCC pronouncements

in the area since 1974...

“Finally, we do not believe that the FCC’s choice to pro-

ceed by means of policy statements and interpretations

rather than formal regulations vitiates its attempt to

preempt. The policy to preempt has been shouted

from the rooftops, see Scawartz v. Texas, 344 U.S.

199, 202-3 (1952), and the FCC has explicitly indicated

its intent that there be no price regulation whatever

of the relevant area, see Bethlehem Steel Co. v. New

York State Labor Relations Board, 330 U.S. 767, 773-

74 (1947).’’ (Appendix A at p. 6a).

Reasons for Granting the Writ

POINT |

The Federal Communications Commission exceeded

its jurisdiction in purporting to preempt state and

local price regulation of pay cable services.

The standard for FCC jurisdiction over cable television

services is defined by the decisions of this Court in United

States v. Southwestern Cable Co., 392 U.S. 157 (1968),

and United States v. Midwest Video Corp., 406 U.S. 649

(1972). In the absence of express statutory authority in

this field, these decisions represent the sole bases for deter-

mining the limits of appropriate FCC regulatory actions.

In the Southwestern case, this Court concluded, without

expressing any view ‘‘as to the Commission’s authority,

if any, to regulate CATV under any other circumstances or

for any other purposes,’’ that the Commission does have

jurisdiction over cable television ‘‘reasonably ancillary to

the effective performance of [its] various responsibilities

for the regulation of television broadeasting . . .’’ 392

U.S. at 178.

The FCC’s alleged preemption of pay cable rate regula-

tion in the context of municipal franchising is clearly be-

yond the scope of this Court’s standard. No broadcast

regulatory goal could be used to justify such an intrusion

upon the otherwise undisputed rights of local governments

to control the use of their streets. Furthermore, the FCC

has never attempted to interfere with the continuation of

State and local rate regulation for the retransmission of

broadcast signais by cable television systems, an area di-

rectly related to broadcasting. Thus, only aspects of cable

television which have little to do with broadcasting are

regulated by the FCC’s claimed preemption.

Even the liberal jurisdictional approach taken by this

Court in the 1972 Midwest Video decision cannot justify the

FCC’s claimed preemption of local government rights.

Previous cases before this Court were brought by private

parties resisting federal regulation of their activities. In

this case, petitioners make no effort to deny federal au-

thority over broadcast related cable television activities, but

rather to ask confirmation that such federal authority can-

not, without further statutory support, usurp traditional

franchise powers. That congress intended to protect the

Constitutional rights of States and local governments to

control their own streets is evident from the express limita-

tions placed on FCC authority by the recently enacted

amendments to the Communications Act relating to “pole

attachments” (47 U.S.C. § 224), and from the more limited

jurisdiction afforded to the FCC over non-broadcast

carriers (compare, 47 U.S.C. § 152[b] and 47 U.S.C. § 301).

The fact that the FCC has the jurisdiction to regulate or

authorize the operations of subscription television services

providing similar programming, or to preempt and refrain

from rate regulation of this broadcast service (National

Assoc. of Theatre Owners v. FCC, 420 F. 2d 194 [D.C. Cir.,

1969], cert. den. 397 U.S. 922 [1970]), can no more justify

intrusion upon local rate regulation of franchised cable

services than it could justify similar intrusion upon local

rate regulation of any other non-broadcast entertainiment

service with a possible effect upon the market of subscrip-

tion TV.

The mere goals, however laudatory, of program diversity

or the growth of communications outlets are not sufficient

to meet the test of broadcast television relevance set down

in Southwestern. This was expressed clearly by the Eighth

Cireuit Court of Appeals in Midwest Video Corp. v. F.C.C.,

— F. 2d —,, Slip op. No. 76-1496 (8th Cir., February 27,

1978). pet. for cert. filed, 46 U.S.L.W. 3710. There, the

Cireuit Court, in ruling invalid the FCC’s rules requiring

aecess channels, stated as follows:

“The standard established by the Supreme Court is

‘reasonably ancillary;’ not merely ‘ancillary. The

standard is already broad, and the term ‘reasonably,’

requiring some nexus with the Commission’s statutory

responsibility, must not be read out of it. Nor can there

be deleted what the Court said cable actions must be

- ‘reasonably ancillary’ to, i.e., ‘the effective performance

of the Commission’s various responsibilities for the

regulation of television broadcasting.’ 392 U.S. at 178

(emphasis added).

“Though neither Southwestern nor Midwest Video sup-

ports jurisdiction here, it is a ‘reasonably ancillary’

standard we apply, and it is the 1976 Report rules we

review. Each regulation of cable television must in-

dividually stand or fall, not on legal precedent concern-

ing other regulations, but on whether or not the regula-

tion under the review meets the standard established

by the Court. The Commission reliance on Southwest-

ern and Midwest Video ignores the indications in those

eases that it has no sweeping jurisdiction over cable

television, that whatever jurisdiction it may have is

contingent upon its delegated powers, and that each

attempt to regulate cable systems must be individually

justified. Nat’l. Ass’n. of Reg. Util. Comm'rs. v. FCC,

533 F. 2d 601, 612 (D.C. Cir., 1976).” Slip op. No. 76-

1946, pp. 25, 26.

A similar conclusion should be reached with regard to

the preemption at issue in the instant case. To conclude

otherwise would be to allow the FCC unfettered authority

over any form of non-broadcast entertainment on the

grounds that ‘‘outlets for expression’’ were involved.

The District of Columbia Court of Appeals has also

expressed its view that FCC regulation of cable television

is limited in nature. In Home Box Office, Inc. v. FCC, 567

F. 2d 9 (D.C. Cir., 1977), cert. den. 46 U.S.L.W. 3216 (Octo-

ber 3, 1977), the cireuit court invalidated FCC regulations

limiting the types of programs on pay cable services, rest-

ing its decision in large part upon the jurisdictional limits

of the FCC. There, the Court stated, in part, as follows:

‘*. . . and if judicial review is to be effective in keep-

ing the Commission within that boundary, we think the

Commission must either demonstrate specific support

for its actions in the language of the Communications

Act or at least be able to ground them in ea well-

understood and consistently held policy developed in

the Commission’s regulation of broadcast television,

cf. Greater Boston Television Corp. v. FCC, 143 U.S.

App. D.C. 383, 394, 444 F. 2d 841, 852 (1970), cert. den.

403 U.S. 923 (1971).’’ 567 F. 2d at 28.

The decision of the District of Columbia Cireuit Court in

National Ass’n. of Regulatory Utility Comm’rs. v. FCC,

533 F. 2d 601 (D.C. Cir., 1976) is particularly relevant here

because it involved an attempted FCC preemption of state

regulation over cable television services. There the D.C.

Cireuit struck down the preemption and found that tbe

FCC had no authority to regulate two-way, non-video,

point-to-point, intra-state services. Although this decision

dealt with cable television services that were clearly intra-

state in nature, the jurisdictional comments of the Court

are pertinent:

‘“We are not persuaded that either the statute on its

face or the construction which it has been given in

Southwestern and Midwest supports the Commission’s

argument that it has a blanket jurisdiction over all

activities which cable systems may carry on .

The statute’s introductory secticn is made a locus for

powers which must of necessity be recognized if the

purposes set out in the broadcasting sections are to

receive their fullest realizations. The Court thus was

not recognizing any sweeping authority over the entity

as a whole, but was commanding that each and every

assertion of jurisdiction over cable television must be

independently justified as reasonably ancillary to the

Commission’s power over broadcasting.’”’ 533 F. 2d

at 612.

In discussing preemption under the Communications Act

of 1934, this Court has stated:

‘* | . In areas of the law not inherently requiring

national uniformity, our decisions are clear in requir-

ing that state statutes, otherwise valid, must be upheld

unless there is found ‘such actual conflict between

the two schemes of regulation that both cannot stand

in the same area, [or] evidence of a Congressional

design to preempt the field.’ Florida Avocado Grow-

ers v. Pawl, 373 U.S. 132, 134.’’ Head v. New Mexico

Board, 374 U.S. 424, 430 (1963).

In the area of pay cable, where the service provided is

furnished to areas completely independent of each other

physically and geographically by completely independent

cable TV companies, a requirement of national rate uni-

formity is unrealistic. Regulation by local franchising,

with the oversight of a state commission, is both logical

and a recogntion of the legitimate interests that local gov-

ernments have in their franchises.

The control of ‘‘pay cable’’ rates along with the basic

rates was deemed necessary in order to avoid a variety

of evils; e.g., it had been found that cable television com-

panies had used ‘‘pay’’ rates to overcome adverse munici-

pal action or basic rates. Clarification of Commission

Policy, supra, Appendix E at p. 4la. Moreover, with

the increasing complexity of cable television program

marketing arrangements, it has become impossible to

clearly distinguish between those services once these serv-

ices are identified as ‘‘pay’’ and ‘‘basic,’’ respectively.

POINT II

The Federal Communications Commission failed to

adopt the purported preemption in a procedurally

proper manner.

The FCC’s alleged preemption of State and local rate

regulation of pay cable services can be found no earlier

than its 1974 Clarification of the Cable Television Rules

and Notice of Proposed Rule Making and Inquiry in Docket

Nos. 20018 et al., supra. No prior notice was given of the

FCC’s intention to adopt this preemption, nor did that

agency solicit comments on this action (although comments

were invited on other actions, interpretations or proposed

rule makings discussed in prospective terms in the same

proceeding). These defects were not cured in any subse-

quent proceeding in which this preemption was discussed.

The adoption of this preemption should have been gov-

erned by the procedural standards of the Administrative

Procedure Act, 5 U.S.C. $553. Pursuant to §553(b)(A),

notice in the Federal Register need not be published for

‘interpretive rules’’ or ‘‘general statements of policy.’’

However, the creation of the alleged preemption was

neither merely interpretive nor a general statement of

policy, but the making of a new rule of the first magnitude.

In fact, this action also constituted a significant amend-

ment of the existing rule, section 76.31(a)(4), requiring

local approval for all regular subscriber rates. By adopt-

ing the preemption, the FCC redefined ‘‘regular’’ sub-

seriber rates (as used in Section 76.31[a][4]) to mean

something never previously supposed, and it ignored its

own broad requirement, imposed by that section, that ‘‘No

increases in rates charged to subscribers shall be made

except as authorized by the franchising authority after an

appropriate public proceeding affording due process.’’

Clearly a major new regulatory action was taken, but the

method of its adoption was unconscionably unorthodox.

Although it is not alleged that the purported preemption,

if jurisdictionally valid, necessarily had to be adopted by

a formal amendment of the Code of Federal Regulations,

some adequate notice and some opportunity for comment

were required. Home Box Office, Inc. v. F.C.C., supra.

Because the FCC held no hearings, nor took any evidence,

prior to its decision to adopt its asserted preemption,

the standard of review herein is whether this action was

‘‘arbitrary, capricious, an abuse of discretion, or otherwise

not in accordance with law.’”’ 5 U.S.C. §706(2)(A). It is

not relevant to consider merely if the FCC’s decision to

preempt was ‘‘supported by substantial evidence,’’ 5 U.S.C.

§ 706(2)(E). Considered by this standard, the FCC’s ac-

tion must fall, if only because it made no effort to deter-

mine factually whether the reasons for the proposed pre-

emption were in any way justified. Vague references to

“eonsiderable study of the emerging cable industry and

its prospects for introducing new and innovative communi-

cations services’’ (Clarification in Docket Nos. 20018 et al.,

46 F.C.C. 2d 175, 199-200 [1974] are not sufficient to dem-

onstrate a record of regulatory inquiry sufficient to justify

an action of preemption. Without such an inquiry and

such a record, the FCC’s haphazard preemptive statements

are procedurally defective and fatally so. Home Box Office

v. F.C.C., swpra; Burlington Truck Lines, Inc. v. United

States, 371 U.S. 156 (1962); Citizens to Preserve Overton

Park v. Volpe, 401 U.S. 402 (1971); City of Chicago v.

Federal Power Commission, 458 F.. 2d 731 (D.C. Cir., 1971),

cert. den. 405 U.S. 1074 (1972).

As indicated above, the FCC has never provided a direct

opportunity for the petitioners or any other parties to raise

these objections, because no proceeding was ever addressed

to this issue.

POINT III

The Rulings of the United States Court of Appeals

for the Second Circuit on the FCC’s cable television

jurisdiction are in conflict with those of the District

of Columbia and Eighth Circuit Courts of Appeals.

The United States Court of Appeals for the Second Cir-

cuit has held in this case that the jurisdiction of the Federal

Communications Commission over the field of cable televi-

sion is broad and lawful. In another case brought before

that court by the petitioner, New York State Commission

on Cable Television v. F.C.C., —— F. 2d ——, Slip op. No.

» P. (2d Cir., January 25, 1978), pet. for cert.

filed 46 U.S.L.W. 86, an FCC limitation on the amount of

fees or regulatory assessments that may be collected from

franchised cable television operations by states and

municipalities was upheld. The Petition for Certiorari to

review this decision raises issues of FCC jurisdiction as

well as regulatory process and interpretation.

As indicated, supra, p. 11, the Courts of Appeals for the

District of Columbia Circuit and the Eighth Circuit have

both issued rulings on the FCC cable jurisdiction which im-

pose a much stricter standard than that adopted by the

Second Circuit.

In consideration of the fact that FCC cable television

jurisdiction rests entirely on the interpretive rulings of this

Court, and in consideration of the substantial diversity of

opinion amongst the federal courts and various govern-

mental agencies, regarding the current implications of these

rulings upon specific actions of the FOC, and in order to

avoid a genuine conflict of federal law, as interpreted by

various Circuit Courts, it is respectfully suggested that this

honorable Court clarify the jurisdictional limits of the

Federal Communications Commission in the field of cable

television regulation.

CONCLUSION

For the foregoing reasons, the petition for a Writ of

Certiorari should be granted.

Dated: New York, New York

June 27, 1978

Respectfully submitted,

Louis J. LerKowITz

Attorney General of the

State of New York

Attorney for Petitioners

Samvue. A. HirsHowiTz

First Assistant Attorney General

Cuarues A. BrapLey

Assistant Attorney General

of Counsel

APPENDIX A—Decision of the United States Court

of Appeals for the Second Circuit.

UNITED STATES COURT OF APPEALS

For THE Seconp Circuit

Nos. 458, 482 September Term, 1977

Argued: March 8, 1978 Decided: March 29, 1978

Docket Nos. 77-6156, 77-6157

Brookuaven Caste TV, Inc.; Caprrou Castevision, Inc.;

Samson CaBieviston Corp.; TELEPRomPTER ELECTRONICS

Corporation; WarNeR CaBLe oF OxeaNn, Inc.; NaTIONAL

Caste ‘TeLEviston Association, Inc.; New York State

Caste TeLevision Association; and Home Box Orrics,

INc.,

Plaintiffs-Appellees,

Unrrep States or AMEricA and FeperaL CoMMUNICATIONS

CoMMISSION,

Plaintiffs-Intervenors-Appellees,

— :

Rosert F. Keiiy, Chairman; Jerry A. Danzic, Vice Chair-

man; Micuare. H. Penpercast; Ext WacNner; and Epwarp

J. Wecman, Commissioners of the New York State Com-

MISSION ON CaBLE TELEVISION,

Defendants-Appellants,

NaTIONAL AssociaTION oF ReauLatory Urmiry

CoMMISSIONERS,

Defendants-Intervenor-A ppellant.

Appendiz A.

Before: Lumparp and Oakes, Circuit Judges, and

WyzanskI, District Judge.*

Appeal from declaration by the Northern District of New

York, Port, J., that New York State Commission on Cable

Television’s attempt to regulate rates charged for spe-

cialized pay cable programming was improper in light of

FCC preemption, and from injunction against such regula-

tion.

Affirmed.

Lumsarp, Circuit Judge:

This appeal raises two questions: whether the Federal

Communications Commission has the authority to preempt

state and local price regulation of one aspect of cable tele-

vision—specialized programming for which a per-program

or per-channel charge is made—and if so, whether the FCC

has adequately and effectively exercised that authority.

The Northern District of New York, Port, J., finding that

the FCC both possessed and had asserted the requisite au-

thority, granted summary judgment to the plaintiffs herein,

declaring that the action of the New York State Commission

on Cable Television [“Commission”] seeking to impose

price regulation on specialized pay cable was invalid, and

enjoining defendants from attempting such regulation in

the future. We affirm.

Plaintiffs are five cable television operators, two trade

associations and Home Box Office, a supplier of special pay

cable programming. In addition, Judge Port permitted the

FCC and the United States to intervene as parties. The

Commission and its members were joined as defendants by

intervenor National Association of Regulatory Utility Com-

missioners [“NARUC”}].

* Sitting by design«cion.

Appendia A.

This action was commenced in response to New York’s

scheme for regulating cable TV, N.Y. Exec. Law §§ 811-831

(McKinney’s 1972-1977 Supp.) (article 28). The relevant

portions of article 28 are set forth in the margin.’ The

provisions in dispute here concern the setting of rates by

the state and local franchising authorities.

The sections concerning rates generated considerable con-

fusion when promulgated in 1972, particularly with regard

to special programming on cable systems. Accordingly,

on March 1, 1976, the Commission issued a “Clarification of

Commission Policy,”* which indicated (1) that no exemp-

tion or exclusion from franchising and rate approval re-

quirements was intended for “pay,” “auxiliary” or “sub-

scription” cable services—the specialized programming at

issue here; (2) that companies already providing pay cable

services would not be required to amend their franchises

immediately, but would have to give notice within two

months to the appropriate authorities of their current rates,

or face “appropriate sanctions”; and (3) that “active en-

forcement” of these policies would be undertaken.

Plaintiffs sought a declaration that the policies expressed

in the Clarification violated the supremacy clause of the

United States Constitution—because of alleged FCC pre-

emption—as well as the first, fifth and fourteenth amend-

ments. The district court granted summary judgment on

the supremacy clause claim, and this appeal followed.

We hold that the FCC has the authority to preempt state

and local price regulation of special pay cable pro-

gramming; that it has exercised this authority; and that the

means it has chosen to preempt state regulation are ade-

quate and effective.

In United States v. Southwestern Cable Co., 392 U.S. 157,

178 (1968), the Supreme Court upheld the FCC’s jurisdic-

tion to regulate cable TV to the extent that such regulation

Appendix A.

is “reasonably ancillary to the effective performance of the

Commission’s various responsibilities for the regulation of

television broadcasting.”’

The Court elaborated on and expanded this standard

in United States v. Midwest Video Corp., 406 U.S. 649,

667-69 (1972), in which it approved the FCC’s mandatory

cable origination rules as “reasonably ancillary” to “the

achievement of long-established regulatory goals in the

field of television broadcasting by increasing the number

of outlets for community self-expression and augmenting

the public’s choice of programs and type of service.’’ It

follows that the FCC may regulate cable TV if its regula-

tion will further a goal which it is entitled to pursue in

the broadcast area.

A decision to delay all price regulation of special pay

cable meets that test; a policy of permitting development

free of price restraints at every level is reasonably ancil-

lary to the objective of increasing program diversity, and

far less intrusive than the mandatory origination rules

approved in Midwest Video, supra. Cf. National Associa-

tion of Theater Owners v. FCC, 420 F.2d 194, 203 (D.C.

Cir. 1969), cert. denied, 397 U.S. 922 (1970) (upholding

FCC’s non-regulation policy in subscription television field

pending accumulation of expertise.)

Cases relied on by NARUC and the Commission are

readily distinguished. In NARUC v. FCC, 533 F.2d 601

(D.C. Cir. 1976), the court ruled that there was no nexus

shown between FCC preemption of regulation of two-way

non-video leased access cable channels (used for such pur-

poses as burglar alarms) and the goal of increasing pro-

gram diversity. Here a connection has been shown.

Home Box Office, Ine. v. FCC, No. 76-1280 (D.C. Cir.

March 25, 1977), cert. denied, 46 U.S.L.W. 3216 (U.S. Oct.

3, 1977) (Dkt. Nos. 76-1841 and -1842), overturned FCC

anti-siphoning rules because of failure to demonstrate a

genuine problem of siphoning broadcast programming.

Appendix A.

The FCO's regulatory goal in HBO was not program diver-

sity, as here, but decreased competition.

Finally, Midwest Video Corp. v. FCC, No. 76-1496 (8th

Cir. Feb. 27, 1978), held that the FCC’s imposition of mini-

mum public access and channel capacity standards on cable

systems was improper. The court ruled that this was an

attempt to do in the cable field something the FCC was

specifically prohibited from doing in the broadcast area—

imposing the burdens of common carriers. The far less

intrusive ‘regulation’ proposed in the instant case is one

which plainly eludes any attempt to analogize the regula-

tion itself—rather than the underlying policy—to the

broadcast area.

That the FCC has, in fact, sought to preempt state and

local price regulation of special pay cable programming

is evident from a survey of FCC pronouncements in the

area since 1974:

In Section 76.31(a)(4) [of 47 C.F.R.] we require

that cable systems, in order to receive a certificate of

compliance, must have a franchise providing for

franchisor approval of initial charges for installation

and regular subsecriver service. We have intentionally

and specifically limited rate regulation responsibilities

to the area of regular subscriber service, and we will

continue to do so. We have defined ‘‘regular sub-

seriber service’’ as that service regularly provided to

all subseribers. This would include all broadcast

signal carriage and all our required access channels

including origination programming. It does not in-

clude specialized programming for which a_per-

program or per-channel charge is made. The purpose

of this rule was to clearly focus (sic) the regulatory

responsibility for regular subscriber rates. It was not

meant to promote rate regulation of any kind.

After considerable study of the emerging cable in-

dustry and its prospects for introducing new and in-

Appendiz A.

novative communications services, we have concluded

that, at this time, there should be no regulation of

rates for such services at all by any governmental

level. Attempting to impose rate regulation on special-

ized services that have not yet developed would not

only be premature but would in all likelihood have a

chilling effect on the anticipated development.

Clarification of the Cable Television Rules and Notice of

Proposed Rulemaking and Inquiry in Docket Nos. 20018

et al., 46 F.C.C.2d 175, 199-200 (1974). See First Report

and Order in Docket No. 19554, 52 F.C.C.2d 1, 68 (1975)

(‘‘Although we have not ourselves undertaken the regula-

tion of rates for the sale of subscription programming, we

regard our prior statements concerning the regulation of

subscription operations as preempting local regulation of

rates as well as program content.’’); Notice of Inquiry in

Docket No. 20767, 58 F.C.C.2d 915 (1976).

Finally, we do not believe that the FCC’s choice to pro-

ceed by means of policy statements and interpretations

rather than formal regulations vitiates its attempt to pre-

empt. The policy to preempt has been shouted from the

rooftops, see Schwartz v. Texas, 344 U.S. 199, 202-03

(1952), and the FCC has explicitly indicated its intent that

there be no price regulation whatever of the relevant area,

see Bethlehem Steel Co. v. New York State Labor Rela-

tions Board, 330 U.S. 767, 773-74 (1947). The Commission

and NARUC both participated in the 1974 proceedings

cited above, and had ample opportunities to attempt to

persuade the FCC to their point of view—which they did

—and to take an appeal when they failed—which they

did not.

Accordingly, we are satisfied that FCC preemption has

rendered invalid New York’s attempt to impose price regu-

lation on special pay cable programming, and that the

injunction was properly issued.

Affirmed.

Appendix A.

FooTNOTES

§ 815. Duties of the commission

The commission shall :

(1) Develop and maintain a statewide plan for develop-

ment of cable television services, setting forth the objectives

which the commission deems to be of regional and state

concern;

(2) to the extent permitted by, and not contrary to ap-

plicable federal law, rules and regulations:

(a) prescribe standards for procedures and practices

which municipalities shall follow in granting franchises. . . .

(b) prescribe minimum standards for inclusion in fran-

chises. .. .

§ 819. Franchise requirement

1. Notwithstanding any other law, no cable television sys-

tem, whether or not it is deemed to occupy or use a public

thoroughfare, may commence operations or expand the area

it serves after April first, nineteen hundred seventy-three

unless it has been franchised by each municipality in which

it proposes to provide or extend service.

2. A municipality shall have the power to require a fran-

chise of any cable television system providing service within

the municipality, notwithstanding that said cable television

system does not occupy, use or in any way traverse a public

street. The provision of any municipal charter or other law

authorizing a municipality to require and grant franchises

is hereby enlarged and expanded, to the extent necessary, to

authorize such franchises.

3. Nothing in this article shal! Le construed to prevent

franchise requirements in excess of .uose prescribed by the

commission, unless such requirement is inconsistent with

this article or any regulation, policy or procedure of the

commission.

§ 825. Rates

1. Except as otherwise provided in this section, the rates

charged by a cable television company shall be those specified

in the franchise which may establish, or provide for the es-

tablishment of reasonable classifications of service and cate-

gories of subscribers, or charge different rates for differing

services or for subscribers in different categories.

Appendia A.

2. Such rates may not be changed except by amendment

of the franchise.

5. In addition to other powers, the commission may, after

public notice and opportunity for hearing, prescribe rates

for cable television service. —

2In re Rates Charged by Cable Television Companies for

“Auxiliary” Programming, Docket No. 90010 (Commission on

Cable Television 1976).

APPENDIX B—Decision of the United States District

Court for the Northern District of New York.

BrooxHaven Casale TV Inc. et al., Plaintiffs,

United States of America and Federal

Communications Commission,

Intervenors-Plaintiffs,

Robert F. Ketry, Chairman, et al., Defendants,

National Association of Regulatory Utility

Commissioners, Intervenor-Defendant,

City of New York, Amicus Curiae.

No. 76-CV-154.

United States District Court, N. D. New York.

March 9, 1977.

MEMORANDUM-DECISION AND ORDER

Port, Senior District Judge.

The plaintiffs and defendants have both moved for sum-

mary judgment on the first claim for relief asserted in the

complaint. That claim challenges the right of the defend-

ants, Commissioners of the New York State Commission

on Cable Television (State Commission), to regulate the

charges for pay cable TV on the ground that the matter

has been preempted by the Federal Communications

Commission.

The United States and the Federal Communications

Commission were granted leave to intervene as parties

plaintiff. The National Association of Regulatory Utility

Commissioners was granted leave to intervene as a party

defendant. The intervenors have joined in the motions

10a

Appendiz B.

for summary judgment. The City of New York was

granted leave to appear as amicus curiae in support of

the defendants’ motions.

The Parties

Five of the original plaintiffs (Brookhaven, Capitol,

Samson, Teleprompter and Warner) are corporations

which operate cable television systems in New York State.

National Cable Television Association, Inc. (NCTA) and

New York State Cable Television Association (NYCTA)

are, respectively, national and state trade associations of

cable television systems. The remaining plaintiff, Home

Box Office (HBO), is an enterpirse which supplies pay

cable programming to cable television systems both in

New York and in other states. Plaintiff intervenors are

the United States and the Federal Communications Com-

mission (FCC).

The defendants are the five members of the New York

State Commission on Cable Television. See N.Y. Exec.

Law § 814 (McKinney Supp. 1975). Defendant intervenor,

the National Association of Regulatory Utility Commis-

sioners (NARUC), is a quasi-governmental, nonprofit or-

ganization whose membership includes governmental and

regulatory bodies throughout the United States.’

Cable and Pay Cable TV

Cable TV essentially operates by retransmitting tele-

vision signals to home viewers by cable, rather than by

over-the-air broadcasting. When it originated, cable TV

performed two basic functions. It enhanced reception of

local television broadcasts, and it also permitted the im-

*The City of New York, appearing as amicus curiae, has

briefed the court in support of the defendants’ position that the

FCC lacks jurisdiction to preempt pay cable TV.

lla

Appendix B.

portation of signals from distant television stations be-

yond the range of local reception.* Today, however, cable

TV systems may also originate their own »rogramming,

which is called ‘‘eablecasting’’,*’ or may make available

certain ‘‘access channels’’ over which individuals may

transmit programming to home viewers.‘ Generally, cable

TV systems provide these services to their subscribers for

a basic monthly fee.*

Pay cable TV augments the basic cable service by pro-

viding the home viewer with additional programming for

an additional monthly or other charge. The most common

pay cable system provides the viewer with an additional

channel for a flat monthly fee over the basic cable TV

charge. The plaintiffs employ such a system. HBO sup-

plies box-office type programming to local cable TV sys-

tems. This programming includes recent motion pictures,

sports events not otherwise televised, and other entertain-

ment, all shown without commercial interruption.’ The

local cable TV system then distributes this programming

to pay cable home viewers over a channel which is accessible

only to the pay cable subscribers. In order to receive HBO,

the subscribers must pay a monthly fee in addition to the

charge for their basic cable TV service.

Other pay cable systems are also being developed. Some

systems provide the viewer with different programming op-

tions, e.g., sports programs or recent films, at different

2 See United States v. Southwestern Cable Co., 392 U.S. 157,

163, 88 S.Ct. 1994, 20 L.Ed.2d 1001 (1968).

* See United States v. Midwest Video Corp., 406 U.S. 649,

92 S.Ct. 1860, 32 L.Ed.2d 390 (1972).

*See American Civil Liberties Union v. FCC, 523 F.2d 1344

(9th Cir. 1975).

5 See Affidavit of Gerald M. Levin, § 2 (dated April 29, 1976).

* Id. JJ 3-5.

12a

Appendia B.

prices. Some systems charge the viewer only for those pro-

grams actually watched.’

The FCC’S Actions

By 1965, the FCC was involved in regulating the growing

cable TV industry." The agency’s jurisdiction over this

developing medium was first upheld by the Supreme Court

in 1968.° In 1969, in an effort to encourage diversity of

programming on cable TV, the FCC promulgated rules re-

quiring cable TV systems having over a minimum number

of subscribers to originate their own programming through

cablecasting.*° The Commission envisioned that some of this

eablecasting would occur over leased access channels."

These are channels made available by the cable TV system,

for a fee, to a third party who provides programming for

home viewers. The FCC announced in 1971 that it had pre-

empted the field of pay cable television cablecasting,” even

though no comprehensive review of pay cable had yet been

undertaken.

Having developed a policy of dual jurisdiction over cable

TV rate regulation, the FOC in 1972 decided to permit local

* See Affidavit of James R. Hobson, § 3 (dated June 4, 1976).

8 See Id. 9 7.

*United States v. Southwestern Cable Co., 392 U.S. 157, 88

S.Ct. 1994, 20 L.Ed.2d 1001 (1968).

*° See First Report and Order in Docket No. 18397, 20 F.C.C.2d

201 (October 20, 1969). These regulations were subsequently

upheld by the Supreme Court in United States v. Midwest Video

Corp., 406 U.S. 649, 92 S.Ct. 1860, 32 L.Ed.2d 390 (1972).

“ See First Report and Order in Docket No. 18397, 20 F.C.C.2d

201, 214 (October 24, 1969).

# “(T]he Commission has pre-empted the field of pay television

cablecasting so that local franchise terms are inoperative and no

further affirmative authorization is required.” Request by Time-

Life Broadcast, Ine., 31 F.C.C.2d 747 (September 8, 1971).

13a

Appendiz B.

regulation of the rates for basic cable TV services only.”

These are the services which the cable system regularly sap-

plies to all subscribers. However, because the FCC wanted

to encourage experimentation in the new medium of pay

cable TV, and because it feared that both federal and local

regulation would be confusing and impracticable, the Com

mission at that time precluded local rate regulation for pay

cable TV.** The FCC’s position and its reasoning were

stated much more clearly in a subsequent clarification in

1974.

It remains our intent to keep [leased access] channels

as free as possible from any regulation that might re-

strict or artificially alter their growth. This is par-

ticularly true in the area of rate regulation. We have

pre-empted this area with the explicit purpose of allow-

ing the market place to function freely.

We have intentionally and specifically limited rate

regulation responsibilities to the area of regular sub-

scriber service, and we will continue to do so. We have

defined “regular subscriber service” as that service

regularly provided to all subscribers. This would in-

clude all broadcast signal carriage and all our required

access channels including origination programming. It

does not include specialized programming for which a

per-program or per-channel charge is made. The pur-

pose of this rule was to clearly focus the regulatory re-

sponsibility for regular subscriber rates. It was not

meant to promote rate regulation of any other kind.

85. After considerable study of the emerging cable

industry and its prospects for introducing new and in-

18 Cable Television Report and Order, Docket Nos. 18397 et al.,

36 F.C.C.2d 143, 209 (February 3, 1972).

Td. at 193.

l4a

Appendix B.

novative communications services, we have concluded

that, at this time, there should be no regulation of rates

for such services at all by any governmental level. At-

tempting to impose rate regulation on specialized serv-

ices that have not yet developed would not only be pre-

mature but would in all likelihood have a chilling effect

on the anticipated development. This is precisely what

we are trying to avoid.”

Noting that conventional TV’s dependence on advertising

and its limited broadcast spectrum confined its program-

ming to mass appeal, the FCC in 1975 further explicated

the need for its policy.

Since conventional television often cannot, because of

its nature, cater to minority tastes and interests, we

encourage the development of new technologies which

promise viewing diversity. Subscription television

promises to bring both diversity of programming and

diversity of format to those who are willing to pay a

direct charge for the service. Neither STV nor cable

television must attract advertiser support with pro-

gramming having a broad mass appeal. Cable televi-

sion, with its abundant channel capacity, is particularly

able to program for audiences with specialized inter-

ests. Subscription television’s potential to expand the

public’s program choices, to supplement the pro-

gramming now provided by conventional television,

gives it an important role to play in our national com-

munications structure.”

* Clarification of the Cable Television Rules and Notice of

Proposed Rulemaking and Inquiry, 46 F.C.C.2d 175, 185, 199-200

(April 17, 1974).

** First Report and Order in Docket Nos. 19554 and 18893,

52 F.C.C.2d 1, 43 (April 4, 1975).

15a

Appendiz B.

Once again, in the spring of 1976, the FCC emphasized its

position. “[{T]he Commission has not only declined to regu-

late the rates for these services [including pay cable] but

has preempted their regulation by state and local au-

thorities.’’”’

The State’s Actions

In 1972, the New York State Commission on Cable Tele-

vision (State Commission) was created. N.Y. Exec. Law

§§ 811-31 (McKinney Supp. 1975). The State Commission

was given rather broad powers to regulate cable TV within

New York, see e.g., Id. §§ 816, 824, including the power to

regulate the rates charged by cable TV systems. I/d. §§ 822,

825. Nowhere within the State Commission’s enabling legis-

lation is any distinction drawn between basic cable TV serv-

ice and pay cable TV. The state statutes require that rates

charged by a cable TV company be specified in the com-

pany’s franchise, Jd. § 825(1), and that rates not be changed

except by amendment of the franchise. Jd. §825(2).

Furthermore, any franchise amendment requires the ap-

proval of the State Commission. Jd. §822(1). Thus, any

change in the rates charged for cable TV service requires

the State Commission’s approval.

In March of 1976, the State Commission issued a Clarifi-

eation of Commission Policy, Rates Charged by Cable Tele-

vision ‘Companies for “Auxiliary” Programming, Docket

No. 90010 (March 1, 1976) (Clarification).** In its Clarifica-

tion, the State Commission asserted its authority to regu-

late the rates charged for pay cable TV. It disputed the

FCC’s jurisdiction over such regulation and further dis-

17 Notice of Inquiry in Docket No. 20767, F.C.C. 76-314, ——

F.C.C.2d —— (April 2, 1976) at 2.

“18 The Clarification has been attached to the state defendants’

motion papers. Affidavit of Kenneth J. Connolly, Exh. 1 (dated

May 5, 1976).

l6a

Appendiz B.

puted the FCC’s contention that pay cable rate regulation

had, in fact, been federally preempted. The State Commis-

sion expressed concern that, due to the FCC’s position,

many New York cable TV companies were not complying

with the requirements of the New York Executive Law. In

particular, they were allegedly refusing to file their rates

for pay cable TV, although they did so for basic cable TV.

Many companies supposedly instituted HBO service with-

out specifying the rates charged in their franchise. The

State Commission also claimed that various abuses were oc-

curring concerning the fees charged for pay cable TV.

The Clarification concluded with a specific ruling that pay

cable TV services were not exempt from the requirements

of Section 825 of the Executive Law. In lieu of formal

amendment of their charters “at this time’’, the State Com-

mission required all cable TV companies providing pay

cable services to file a notice of the nature of their pay

cable services along with the rates charged, or else face

appropriate sanction. Finally, the State Commission states

that active enforcement of all these policies will be under-

taken.

[1] Plaintiffs then commenced this action, claiming that

the State’s Clarification violates orders of the FCC in an

area specifically preempted by the FCC. Plaintiffs request

a judgment declaring the State’s attempt to regulate pay

cable TV void and enjoining such regulation.”

* For example, the State Commission alleges that some com-

panies, when refused rate increases for basic cable TV services,

have unilaterally raised their pay cable TV fees.

*° Plaintiffs’ complaint alleges federal jurisdiction under a va-

riety of statutes: 28 U.S.C. §§ 1331, 1337, 1343(3), 2201; 47

U.S.C. §401(b). It seems abundantly clear that this suit arises

under the Federal Communications Act, 47 U.S.C. § 151 et seq.

Jurisdiction is, therefore, based on 28 U.S.C. § 1337. See Post

(footnote continued on following page)

17a

Appendiz B.

Contentions

The plaintiffs simply contend that the State Commis-

sion’s Clarification constitutes price regulation of pay cable

TV which has been prohibited and preempted by the FCC.

Defendants take the position that the State Commission’s

action does not attempt to regulate the charges for pay

cable, that the FCC’s action does not effect preemption,

and the FCC lacks jurisdiction to preempt.

In addition, the defendants seek judgment in their favor

because of an asserted lack of a case or controversy, be-

cause of mootness, and plaintiffs’ lack of standing.

Because these last claims are without substance, and

because the FCC has the power and has preempted the

right to control pay cable charges, judgment should be

granted in favor of the plaintiffs.

Issue

[2] The real issue simmers down to: Whether juris-

diction over pay cable rates is ‘‘reasonably ancillary to the

effective performance of the Commission’s various re-

sponsibilities for the regulation of television broadcast-

ing’? United States v. Southwestern Cable Co., 392 U.S.

157, 178, 88 S.Ct. 1994, 2005, 20 L.Ed.2d 1001 (1968).

Power to Regulate Cable TV

The FCC’s authority to regulate cable TV has been up-

held by the Supreme Court on two occasions. The first

case arose out of an agency rule which forbade a cable

(footnote continued from preceding page)

v. Payton, 323 F.Supp. 799 (E.D.N.Y.1971). The per se inter

interstate nature of cable TV has been noted elsewhere. National

Association of Regulatory Utility Commissioners v. FCC, 174

U.S.App.D.C. 374, 533 F.2d 601, 621 (1976) (Lumbard, J., con-

curring). There is no need to consider the other alleged juris-

dictional grounds.

18a

Appendix B.

TV system from importing distant television signals into

any of the nation’s 100 largest television markets. South-

western Cable Company sought to bring distant (Los An-

geles) signals to its cable subscribers in San Diego, one

of the 100 largest markets. At the request of a third

party, the FCC ordered Southwestern to halt this proposed

expansion of its services. The Supreme Court upheld the

Commission’s authority. United States v. Southwestern

Cable Co., 392 U.S. 157, 88 S.Ct. 1994, 20 L.Ed.2d 1001

(1968). The Court found this authority in the general

language and purpose of the Federal Communications Act.

47 U.S.C. §$§ 151, 152(a). However, without specifically

detailing the limits of the FCC’s power, the Court noted

that such authority is ‘‘restricted to that reasonably ancil-

lary to the effective performance of the Commission's

various responsibilities for the regulation of television

broadceasting.’’ United States v. Southwestern Cable Co.,

392 U.S. 157, 178, 88 S.Ct. 1994, 2005, 20 L.Ed.2d 1001

(1968).

Four years later, the Court further illuminated the

contours of its ‘‘reasonably ancillary’’ test. The FCC had

promulgated rules requiring cable systems with a certain

minimum number of subscribers to originate some pro-

grams. A cable system subject to the new rules challenged

the FCC’s authority to issue them, and the agency’s power

was again upheld. United States vy. Midwest Video Corp.,

406 U.S. 649, 92 S.Ct. 1860, 32 L.Ed.2d 390 (1972). The

Court’s inquiry focused on whether the program-origina-

tion rules were ‘‘reasonably ancillary’’ to the performance

of the FCC’s responsibilities for regulating TV broadeast-

ing. Id. at 663, 92 S.Ct. 1860. Holding in the affirmative,

the Court noted that ‘‘the Commission’s legitimate concern

in the regulation of CATV [cable TV] is not limited to econ-

trolling the competitive impact CATV may have on broad-

cast services ... but extends also to requiring CATV affirm-

19a

Appendiz B.

atively to further statutory policies.’’ Id. at 664, 92 S.Ct.

at 1869.*° The Court also stated that, merely because the

cablecasts would be transmitted without use of the broad-

cast spectrum, the regulation was no less ancillary to the

FCC’s jurisdiction over broadcast services. Id. at 669, 92

S.Ct. 1860. Emphasis was placed on the rule’s effect of

providing home viewers with ‘‘suitably diversified pro-

gramming.’’ Jd. With the distinction between protection

and promotion and that between broadcasting and cable-

casting set aside, the Court’s inquiry became much simpler.

[T]he critical question in this case is whether the

Commission has reasonably determined that its orig-

ination rule will ‘‘further the achievement of long-

established regulatory goals in the field of television

broadcasting by increasing the number of outlets for

community self-expression and augmenting the public’s

choice of programs and types of services . . .’’ (cita-

tion omitted) We find that it has.

Id. at 667-68, 92 S.Ct. at 1870.

Reasonably Ancillary?

[3] The FCC has found that pay cable TV increases

programming diversity,” an objective which has specifically

been held to be reasonably ancillary to the FCC’s respon-

sibilities over broadcasting. United States v. Midwest

Video Corp., supra, 406 U.S. at 667-68, 92 S.Ct. 1860, 32

L.Ed.2d 390. Pay cable TV’s capability to satisfy minority

21In short, the regulatory authority asserted by the Commis-

sion in 1966 and generally sustained by this Court in Southwestern

was authority to regulate CATV with a view not merely to pro-

tect but to promote the objectives for which the Commission had

been assigned jurisdiction over broadcasting. United States v.

nN Video Corp., 406 U.S. 649, 667, 92 S.Ct. 1860, 1870

( ;

22 See note 16 and accompanying text supra.

20a

Appendia B.

tastes which are ordinarily overlooked by conventional tele-

vision® enhances and fortifies this objective.

In furtherance of program diversification and applying

the ‘‘reasonably ancillary’ test, the Ninth Circuit has up-

held the FCC’s power to regulate access channels, including

leased access channels. American Civil Liberties Union

v. FCC, 523 F.2d 1344 (9th Cir. 1975).

Defendants rely heavily on National Association of

Regulatory Utility Commissioners v. FCC, 174 U.S. App.

D.C. 374, 533 F.2d 601 (1976) (NARUC), which limited the

FCC’s reasonably ancillary powers. NARUC held that

the FCC could not preempt state regulation of the use of

cable TV leased access channels for two-way non-video

communications such as surveys and burglar alarms. The

NARUC court reached its result in spite of defining ‘‘an-

cillary to broadcasting’’ broadly.

Midwest, without question, takes a giant step beyond

Southwestern, in relaxing the nature of the ancillari-

ness necessary to support an assertion of Commission

power over cable. As we read the case, it turns upon

a determination that ‘ancillary to broadecasting’’

means not only ‘‘for the protection of broadcasting,’’

but also embodies any regulation of cable which in its

own right serves the purposes pursued by broadcast

regulation. Since a prime purpose in the area of

broadcast regulation is the assurance of variety in

what appears on the home viewer’s screen, the Court

concluded that an origination requirement aimed at

providing ‘‘suitably diversified programming,’’ is with-

in the ancillariness standard.

*8 Td.

** National Association of Regulatory Utility Commissioners vy.

FCC, 174 U.S.App.D.C. 374, 533 F.2d 601, 610 n. 44 (1976)

(NARUC).

2la

Appendia B.

Id. at 615 (footnotes omitted). NARUC concluded that

non-video return signals*’ from the viewer to the cable TV

system had no relation to the FCC’s power over broad-

casting. These signals were private in nature and, in fact,

had nothing to do with broadcasting. The court con-

trasted cable prograins which, to the home viewer, are

indistinguishable from broadcasts, even though they are

transmitted by cable and not over the air. Jd. at 615-16.

Although NARUC did limit the FCC’s powers, that limit

was placed well beyond the FCC’s present attempts to

regulate pay cable TV.”

The nexus between broadcasting purposes and “leased

access channels for two-way, point-to-point, non-video com-

munications’”” which was found to be so patently missing in

NARUC is obviously present in pay cable TV.

The FCC has determined that rates for pay cable TV

should be set by marketplace forces and not regulated by

state or local authorities. The rationale behind this deci-

sion is simply that rate regulation can be expected to chill

development of the new medium, whereas a free market en-

vironment should enable it to grow. Since the FCC has

also determined that pay cable TV will increase pro-

gramming diversity, it follows that efforts to nurture and

28 The court specifically limited its consideration to “non-video

return transmissions’, and did not consider return video signals

because of the latter’s present economic and technological un-

feasibility. NARUC, supra, at 605 n.1.

26 Judge Wilkey’s opinion for the court ruled on an alternative

ground—that these systems were really carriers and, because they

were intrastate as well, they were specifically excluded from the

FCC’s purview by 47 U.S.C. § 152(b). However, NARUC was

decided by a 2-1 vote, with Judge Lumbard of the Second Cir-

cuit concurring, and Judge Skelly Wright dissenting. Judge

Lumbard’s opinion deals only with the “reasonably ancillary”

question and does not reach the issue raised by 47 U.S.C. § 152(b).

27 NARUC, supra, at 605.

22a

Appendia B.

protect this infant medium will, likewise, result in an in-

crease in programming variety. This same rationale sup-

ported an earlier decision of the FCC to preclude rate regu-

lation of another infant medium, subscription television

(STV).** National Association of Theatre Owners v. FCC,

136 U.S.App.D.C. 352, 420 F.2d 194 (D.C.Cir.1969), cert.

denied, 397 U.S. 922, 90 S.Ct. 914, 25 L.Ed.2d 102 (1970)

(NATO). NATO upheld the FCC’s jurisdiction over rate

regulation for STV. More recently, the Ninth Circuit has

affirmed the FCC’s jurisdiction to regulate the rates for

cable TV access channels, including those for leased access

channels. American Civil Liberties Union v. FCC, 523 F.2d

1344 (9th Cir. 1975).

Defendants argue that rate regulation of pay cable TV

transcends the limits of the FCC’s “ancillary” jurisdiction.

In Midwest Video, the Supreme Court upheld the FCC’s

cablecasting requirements by a 5-4 vote, with Chief Justice

Burger casting the deciding vote. In his concurring opinion,

the Chief Justice stated his belief that “the Commission’s

position strains the outer limits of even the open-ended and

pervasive jurisdiction that has evolved by decisions of the

Commission and the courts.” United States v. Midwest

Video Corp., 406 U.S. 649, 676, 92 S.Ct. 1860, 1874, 32

L.Ed.2d 390 (1972) (Burger, C. J., concurring). Relying on

the language of the Chief Justice, defendants argue that the

present attempt to rate regulate pay cable TV exceeds these

“outer limits”. However, if a cable TV system can be

“drafted against [its] will to become a broadcaster” 406

US. at 680, 92 S.Ct. at 1876 (Douglas, J., dissenting), and

still be within the “outer limits”, it is hard to see how per-

mitting free play in the great variety of pay TV programs

can be outside those limits.

Head v. New Mexico Board of Examiners, 374 U.S. 424,

83 S.Ct. 1759, 10 L.Ed.2d 983 (1963) and TV Piz, Ine. v.

** STV is pay over-the-air television.

23a

Appendix B.

Taylor, 304 F.Supp. 459 (D.Nev. 1968), aff’d, 396 U.S. 556,

90 S.Ct. 749, 24 L.Ed.2d 746 (1970), cited by defendants are

inapposite. On an analysis of the facts in those cases, the

Court merely found that the Commission had not, in fact,

exercised its power to preempt. In this case, the preemption

or, as stated by the defendants’ clarification, the “purported

preemption of the field’’, is virtually conceded. The defend-

ants, however, “fail to agree with the legality of the FCC’s

preemptive policy”.

The state defendants argue that their actions are merely

concerned with franchising. Since the power to franchise is

a state power, delegable to localities, the PCC allegedly

cannot preempt this area.** Defendants have overstated

their case. The FCC has developed a policy of dual juris-

diction over cable TV, with responsibilities divided between

the Commission and state and local governments. See Na-

tional Cable Television Association v. United States, 415

US. 336, 339, 94 S.Ct. 1146, 39 L.Ed.2d 370 (1974). Specifi-

eally, the FCC has concluded that local franchising of cable

TV systems is preferable to a scheme of federal licensing.”

Also, rate regulation of basic cable TV services has been

delegated to the states. On the other hand, the FCC has

consistently precluded local rate regulation of pay cable

2°In support of this assertion, the state defendants cite two

old Supreme Court cases. Russell v. Sebastian, 233 U.S. 195, 34

§.Ct. 517, 58 L.Ed. 912 (1914); City of Owensboro v. Cumberland

Telephone & Telegraph Co., 230 U.S. 58, 33 S.Ct. 988, 57 L.Ed.

1389 (1913). However, neither of these cases deal with federal

preemption nor do they involve problems of conflicting state and

federal powers. They concern the protection of property rights

acquired by utility companies prior to the development of fran-

chising systems.

3° Commission Proposals for Regulation of Cable Television, 31

F.C.C.2d 115, 136 (August 5, 1971); see 47 C.F.R. § 76.31 (1975).

31 See notes 13 to 15 and accompanying text, supra.

24a

Appendiz B.

TV.” The state defendants’ present actions go beyond mere

franchising; they attempt to regulate the rates charged for

pay cable TV in clear conflict with federal policy. Although

defendants argue that their actions are authorized by their

enabling legislation, N.Y. Exec. Law §§ 811-31 (McKinney

Supp.1975), this very statute contradicts their assertion of

authority independent of the FCC. One of the enumerated

legislative findings therein is a need “to promote the rapid

development of the cable television industry responsive to

community and public interest and consonant with policies,

regulations and statutes of the federal government... .”

Id. § 811 (emphasis added).

Ripeness, Mootness, Standing

The defendants’ claims of ripeness, mootness and stand-

ing can be disposed of with little discussion.

[4-6] The defendants’ Clarification®® of Commission

policy makes it abundantly clear that it is the Commission’s

policy to require cable TV companies in New York to

specify in the franchise the rates for “auxiliary program-

ming’’ as well as “rates for . . . regular subscriber serv-

ices”. The Clarification further recognizes the “growing

popularity of the ‘home box office’ programming service”.

The Clarification then acknowledges that cable TV services

have failed to file the rates for cable pay TV, « practice

which was “attributable to the Federal Communications

** Notice of Inquiry in Docket No. 20767, FCC 76-314, ——

F.C.C.2d —— (April 2, 1976); First Report and Order in Docket

Nos. 19554 and 18893, 52 F.C.C.2d 1 (April 4, 1975); Clarifica-

tion of the Cable Television Rules and Notice of Proposed Rule-

making and Inquiry, 46 F.C.C.2d 175 (April 17, 1974); Cable

Television Report and Order, Docket Nos. 18397, et al., 36 F.C.C.2d

143 (February 3, 1972); Request by Time-Life Broadcast, Inc.,

31 F.C.C.2d 747 (September 8, 1971).

** See note 18 supra.

25a

Appendix B.

Commission’s position that state and local governments

may not involve thémselves in the regulation of subscriber

rates for cable television services other than those described

above as ‘regular’ or ‘basic’.”* The Clarification then goes

on to state that, because the preemption policy of the Com-

mission has not been tested in a court, it will insist on the

filing as required under its Clarification. Thus, although

inviting a court test, it now, given the opportunity, seeks to

avoid it.** For noncompliance, it threatens enforcement. In

short, it prefers the threat to the test.

Although it has not required the plaintiffs presently sup-

plying pay cable TV service to amend their charter, “at this

time”, no assurance is given of when such amendment might

be required. The necessary long term and substantial com-

mitments required for the development of pay cable TV are

not likely to be undertaken while “waiting for the other shoe

to drop”.

Under these circumstances, the test for ripeness is met.

Abbott Laboratories v. Gardner, 387 U.S. 136, 87 S.Ct.

1507, 18 L.Ed.2d 681 (1967).

Abbott Laboratories, swpra, established a two-part test

for determining the ripeness of an action. The test re-

quires the district courts to ‘‘evaluate both the fitness of

the issues for judicial decision and the hardship to the

parties of withholding court consideration.’’ Abbott

Laboratories v. Gardner, 387 U.S. 136, 149, 87 S.Ct. 1507,

1515, 18 L.Ed.2d 681 (1967). The factors which led the

Court to find that case fit for judicial decision are all

present here. First, this action involves purely legal ques-

tions, essentially whether the FCC has jurisdiction to pre-

34 Td.

85 Tt should be noted that New York could have contested the

FCC’s preemption of pay cable TV rate regulation without forcing

plaintiffs to bring this suit. The FCC’s decision was reviewable

in the Courts of Appeals pursuant to 28 U.S.C. § 2342.

26a

Appendiz B.

empt pay cable TV rate regulation. Secondly, the Clarifica-

tion issued by the State Commission possesses the requisite

finality. It is not an informal statement, nor is it the rul-

ing of a subordinate administrative officer. Rather, it is

a ruling by the five-member state commission which has

jurisdiction to regulate cable TV in New York. Finally,

the Clarification is effective upon publication. Tt demands

compliance within two months, threatens sanctions, and

promises active enforcement of its rulings.

The second prong of the ripeness test considers the harm

caused to the plaintiffs by withholding judicial review. In

Abbott Laboratories, supra, plaintiffs were forced to

comply or else to face civil and criminal sanctions. Here,

although the threat of sanction is not as ominous, and the

required filing not as onerous, the mere issuance of the

Clarification has adversely affected all plaintiffs. Because

cable TV is a capital intensive enterprise, cable systems

which want to begin pay cable operations have been de-

terred from doing so by the threat of rate regulation.”

Existing pay cable systems are deterred from expanding

geographically. Also, since the issuance of the Clarifica-

tion, HBO has been severely hampered in its efforts to ob-

tain new affiliates in New York State.** These facts are

unlike those in Daley v. Mathews, 536 F.2d 519 (2d Cir.

1976), cert. denied sub nom., Daley v. Califano, —~ U.S.

——, 97 S.Ct. 1548, 51 L.Ed.2d 773 (1977), where the See-

ond Cireuit recently affirmed a dismissal for want of ripe-

ness. In contrast to the “tentative possibility of future

inspection” Jd. at 528, present in Daley, swpra, the hard-

** See Affidavit of Stuart Feldstein, {2 (dated June 10, 1976).

See also affidavit of James R. Hobson, {| 12 (dated June 4, 1976).

* See Affidavit of Stuart Feldstein, 16 (dated June 10, 1976).

** Affidavit of Bruce P. Sawyer, 4 (dated June 11, 1976).

27a

Appendix B.

ship to the plaintiffs herein is present and real.** The

action is ripe for judicial review.

Mootness

[7] Little need be said concerning defendants’ claim of

mootness as to four of the plaintiff TV systems which have

filed with reference to pay cable TV. No claim is made

that the case has been mooted as to the fifth cable TV

plaintiff. In addition, the four filing plaintiffs filed under

protest. The threat of having to amend their franchises

and obtain the approval of the State Commission at any

time subject to sanctions for failure is bound to affect

adversely the stations filing under protest.** As indicated

previously, making long range plans is impractical while

‘‘waiting for the other shoe to drop’’. In addition, moot-

ness is not raised as to the intervening plaintiffs.

Standing

[8] Both NCTA and NYCTA, whose standing is at-

tacked, clearly represent members adversely affected by the

defendants’ action. They, as well as HBO, whose

pecuniary interest is clearly involved, have standing.”

8° Furthermore, the FCC has intervened as a party-plaintiff

in this action. That agency, which was created “to make avail-

able a rapid, efficient, Nation-wide, and world-wide wire and radio

communieation service”, 47 U.S.C. § 151, has a very real interest

in preventing New York from regulating areas within the sphere

of federal control.

*° See Begins v. Philbrook, 513 F.2d 19 (2d Cir. 1975).

1 “Tt is clear that an organization whose members are injured

may represent those members in a proceeding for judicial review.”

Sierra Club v. Morton, 405 U.S. 727, 739, 92 S.Ct. 1361, 1368, 31

L.Ed.2d 636 (1972). See also New York Public Interest Research

Group, Inc. v. Regents of the University of the State of New York,

(footnote continued on following page)

28a

Appendia B.

For the reasons herein, the motion of the plaintiffs for

summary judgment on the first claim in the complaint

should be granted. The plaintiffs are to prepare a judg-

ment to be agreed upon and submitted to me for signature.

If the parties are unable to agree, judgment may be settled

on three days notice.

SO ORDERED.

(footnote continued from preceding page)

516 F.2d 350 (2d Cir. 1975). In fact, one of these plaintiff or-

ganizations, NCTA, has represented its members in similar federal

litigation. See, e. g., National Cable Television Association, Inc.

‘1 “ States, 415 U.S. 336, 94 S.Ct. 1146, 39 L.Ed.2d 370

29a

APPENDIX C—Judgment of the United States Dis-

trict Court for the Northern District of New York.

UNITED STATES DISTRICT COURT

NortrHern District or New York

76-CV -154

FinaL JUDGMENT

. 4

BrookHaven Caste TV Inc.; Capiron Casievision Inc.;

Samson Cas.evision Corp.; TELEPROMPTER CaBLe Sys-

TEMS, Inc.; WARNER CaBLE OF OLEAN, INc.; NATIONAL

Caste TeLevision Association, Inc.; New York Strate

Caste Tevevision Association, and Home Box Orrice,

Inc.,

Plaintiffs,

Unrrep States or America and FEepeRaAL CoMMUNICATIONS

ComMISsION,

Intervenors-Plaintiffs,

—against—

Rosert F’. Ketty, Chairman; Jerry A. Danzic, Vice Chair-

man; MicuaeL H. Prenpercast; Exr1 Wacner; and

Epwarp J. Weeman, Commissioners of the New York

State Commission oN CaBLe TELEVISION,

Defendants,

NatTIonaL AssociaTION oF RecuLatory UTILITY

CoMMISSIONERS,

Intervenor-Defendant,

Ciry or New York,

-_—-- Amicus Curiae.

30a

Appendiz C.

Pursuant to the Memorandum Decision and Order of this

Court dated March 9, 1977, granting plaintiffs’ motion for

summary judgment on the first claim in the complaint:

A. It is hereby ordered, declared, adjudged and decreed:

1. The Federal Communications Commission (‘‘FCC’’)

has the authority and jurisdiction to preempt the regula-

tion of pay cable rates and to prohibit state and local gov-

ernments from regulating such rates ;*

2. The FCC has validly preempted the regulation of pay

cable rates and prohibited state and local governmental

regulation of such rates;

3. Neither the State of New York nor any instrumen-

tality thereof nor any locality therein has the authority to

regulate pay cable rates;

4. Attempts by the New York State Commission on

Cable Television (‘‘State Commission’’), including its

Clarification of Policy dated March 1, 1976, to require cable

television companies to file their pay cable rates and

changes therein with the State Commission other than for

purely informational purposes and to require such com-

panies to specify said rates and changes in their franchises

and to require such companies to obtain consent of the

franchising locality and the State Commission for such

rates and any changes therein are null and void; and

5. Pay cable rates may be determined and changed by

any cable television company without the consent of any

franchising locality or the State Commission.

* Pay cable rates refer to per-channel and per-program charges

for programs and services offered by cable television systems in

addition to basic cable television services (i.e., the carriage of

television signals and origination of access and other programs

for which there is no separate charge in addition to the regular

fee charged to all subscribers).

3la

Appendix C.

B. Defendants, their agents, employees and all persons

in active concert ond participation with them are hereby

permanently enjoined and restrained from directly or indi-

rectly:

1. Regulating or attempting to regulate pay cable rates

in any manner;

2. Requiring or attempting to require cable television

companies to specify their pay cable rates in their fran-

chises, or requiring or attempting to require approval of

such rates or changes by the State Commission or local

franchising authority; and

3. Commencing any judicial. administrative or other

proceedings or applying or threatening to apply any sanc-

tions against any plaintiff or any cable television company

for imposing or changing any pay cable rates without

specifying any such rates or changes in its franchise, or

without obtaining the approval of the State Commission or

of any local franchising authority.

C. It is further ordered, adjudged and decreed that

jurisdiction is retained by this Court for the purpose of

enabling any of the parties to apply for such further relief

as may be necessary or appropriate for the effectuation of

this Final Judgment, for the enforcement of compliance

therewith, and for the punishment of violations thereof.

D. The Clerk is directed to make entry of final judgment

in accordance with Rule 58 of the Federal Rules of Civil

Procedure.

Dated: May 11, 1977

Epmvunp Port

United States District Judge

32a

APPENDIX D—Statement of Commission Policy,

Rates Charged by Cable Television for Subscrip-

tion Programming.

STATE OF NEW YORK

CoMMISSION ON CaBLE TELEVISION

In the Matter of

Rates Charged By Cable Television Companies

for Subscription Programming

STATEMENT OF Po.icy

(Issued: October 19, 1973)

Subdivisions 1 and 2 of Section 825 of the Executive Law

provide as follows:

1. Except as otherwise provided in this section, the

rates charged by a cable television company shall be

those specified in the franchise which may establish,

or provide for the establishment of reasonable classi-

fications of service and categories of subscribers, or

charge different rates for differing services or for

subscribers in different categories.

2. Such rates may not be changed except by amend-

ment of the franchise.

Subdivision 1 of Section 822 of the Executive Law provides

as follows:

No. . . amendment of any franchise . . . shall be

effective without the prior approval of the commis-

We have this day issued an order granting an application

by TelePrompTer County Cable TV Corporation for ap-

33a

Appendix D.

proval of a franchise amendment setting forth the rate at

which subscription programming will be made available by

TelePrompTer in the City of Mt. Vernon. In the course of

our review of the TelePrompTer application, it has come

to our attention that other cable television companies in the

state are either presently offering subscription program-

ming for which a charge is made or intend to do so in the

near future. In a number of instances of which we are

aware, the franchises under which these companies operate

do not set forth the rate at which such programming is

being, or will be, made available. Apparently, many cable

television companies are either unaware of the require-

ments of Sections 822 and 825 or uncertain as to their

applicability to the rates for subscription programming.

We have made clear in the TelePrompTer case that we

believe this Commission’s jurisdiction under Sections 822

and 825 of the Executive Law extends to the rates for

subscription programming offered by cable television

companies.

In TelePrompTer, we sought and obtained a judicial

order prohibiting the company from charging for subscrip-

tion programming prior to Commission approval of a

franchise amendment specifying the rate for such service.

However, the circumstances of that case were, in our view,

quite unique,* and we have concluded that the public in-

*In TelePrompTer, we were faced with a situation in which

the company first applie@ for our approval of a franchise amend-

ment and then withd e application, claiming “pre-emption,”

when we failed to take #tion in accordance with the company’s

apparent timetable. In these circumstances, there could be no

basis for any claim that the company was unaware of the re-

quirements of the statute. And, having initially resolved any

uncertainty as to the applicability of these requirements in favor

of Commission jurisdiction, the company’s subsequent resort to

the pre-emption argument had a somewhat hollow ring.

34a

Appendix D.

terest would not be served by a similar approach in all

cases. Accordingly, we will not, as a general matter, insti-

tute legal proceedings to enjoin cable television companies

that are presently engaged in subscription programming,

or that are planning to engage in such programming prior

to December 1, 1973, from charging for such programming

if the cable television company notifies the Commission, in

writing by not later than October 29, 1973

(1) of the material facts concerning each such exist-

ing or proposed operation (including, at least, the

name of the program supplier, the municipalities to be

served, the rate for such service and the date service

commenced or will commence and

(2) that it will promptly, and with due diligence, take

whatever measures are necessary to satisfy the re-

quirements of Sections 822 and 825 of the Executive

Law.

Cable television companies who avail themselves of this

procedure will, of course, be expected to in fact use due

diligence to satisfy these regulatory requirements. The

Commission will review all Section 822 applications filed in

accordance with this policy statement, and our disposition

of those applications will be governed by the provisions of

that section.

Any cable television company intending to engage in

subscription programming as to which the notification pro-

cedure described above either is inapplicable or has not

been followed must comply with the requirements of Sec-

tions 822 and 825 prior to demanding, exacting, or collect-

ing any charge for such programming.

Commissioners participating: Robert F. Kelly, Chair-

man; Jerry A. Danzig, Vice Chairman; Eli Wager, Edward

Wegman, Michael H. Prendergast, Commissioners.

35a

APPENDIX E—Clarification of Commission Policy,

In Re Rates Charged by Cable Television Com-

panies for “Auxiliary” Programming.

STATE OF NEW YORK

CoMMISSION ON CaBLE TELEVISION

Docket No. 90010

In the Matter of

Rates Charged by Cable Television Companies for

‘‘ Auxiliary’’ Programming

CLARIFICATION OF Commission PoLicy

(Issued: March 1, 1976)

For the reasons hereafter described, we are today

clarifying our policy regarding the regulation of subscriber

rates for cable television services. In particular, we wish

to make clear that Article 28 of the Executive Law re-

quires that all rates charged to subscribers by cable

television companies in New York must be specified in the

cable television franchise held by the cable operator. This

requirement applies not only to rates for such regular

subscriber services as the transmission of television and

radio broadeast signals and non-broadecast access and

origination programming, but also to the rates for

auxiliary programming such as that provided for an addi-

tional per-channel charge.

LeGcaL ConTEXT

Section 825 of the Executive Law provides, in part, as

follows:

1. Except as otherwise provided in this section, the

rates charged by a cable television company shall be

” 36a

Appendiz E.

those specified in the franchise which may establish, or

provide for the establishment of reasonable classifica-

tions of service and categories of subscribers, or charge

different rates for differing services or for subscribers

in different categories.

2. Such rates may not be changed except by amend-

ment of the franchise.

Section 822 of the Executive Law provides, in part, as

follows:

1. No transfer, renewal or amendment of any

franchise . . . shall be effective without the prior

approval of the commission.

Although these provisions, by their terms, apply to all

rates charged by a cable television company, it has been

the practice of many cable television companies to comply

with Sections 822 and 825 with regard to their rates for

‘‘basic’’ subscriber services (i.e., the transmission of tele-

vision and radio broadcast signals and access and origina-

tion programming) while avoiding these same provisions

with regard to their rates for specialized programming

sold to their subseribers on a per-channel basis. The extent

of this practice is not now known with precision, but the

growing popularity of the ‘‘Home Box Office’’ pro-

gramming service has made the practice increasingly more

widespread in recent years.*

The view that rates for subscription programming are

excluded from the requirements of Section 825 is at-

*In March 1973 only 16,100 subseribers in New York State

received “pay cable” services. By November 1975 approximately

142,500 subseribers were receiving “pay” cable services. Of these

almost 139,000 were subscribers to the Home Box Office pro-

gramming package.

37a

Appendiz E.

tributable to the Federal Communications Commission’s

position that state and local governments may not involve

themselves in the regulation of subseriber rates for cable

television services other than those described above as

‘‘regular’’ or ‘‘basic.’’ See, e.g., paragraph 84 of the

Clarification of Cable Television Rules, FCC 74-384, 46

FCC 2d 175, 29, RR 2d 1621 (1974); paragraph 216 of the

First Report and Order in Docket Nos. 19554 and 18893,

FCC 75-369, 52 FCC 2d 1, 33 RR 2d 367 (1975). The FCC

asserts that it has lawfully pre-empted all regulation in

this area pursuant to its authority under the supremacy

clause of the United States Constitution** and its mandate

to regulate broadcast communications under the Com-

munications Act.*** This preemption it is argued, nullifies

any law or franchise agreement to the contrary. The FCC’s

assertions in this matter have never been tested in a court

of law.**** However, as a result of the FCC’s position,

many cable television companies and many municipalities

in New York have been confused with regard to the au-

thority of local governments to deal with the rates of ‘‘pay

cable’’ services.

** “This Constitution, and the laws of the United States which

shall be made in pursuance thereof; and all treaties made, or which

shall be made, under the authority of the United States, shall be

the supreme law of the land; and the judges in every State shall!

be bound thereby, anything in the Constitution or laws of any

State to the conrary notwithstanding.” U.S. Const., art. VI, el. 2.

*** Communications Act of 1934, as amended.

*e** The United States Supreme Court has upheld the FCC’s au-

thority to regulate the field of cable television in a manner

“ancillary” to its regulation of broadcasting. United States v.

Midwest Video, 406 U.S. 649 (1972); United States v. South-

western Cable, 392 U.S. 157 (1968). Neither of these cases dealt

with the subject at hand and both pre-date the FCC’s current

eable regulations. In TV Piz, Inc. v. Taylor, 304 F. Supp. 459

(D.C. Nev., 1968), aff'd per curiam, 396 U.S. 556 (1969), the

FCC’s right of pre-emption was supported, but this case, too, did

not rule on the question of rate regulation.

38a

Appendiz E.

Ear_ty ComMMIssion ACTIVITY

The problem of “pay cable” regulation is not a new one.

In September, 1973, TelePrompTer County Cable TV Cor-

poration (“TPT”) attempted to establish subscriber rates

for Home Box Office service at Mount Vernon, New York.

Following applicable law, it sought to do so by means of an

amendment to its franchise and approval of that amend-

ment from us. TPT’s application was opposed by a number

of motion picture theatre associations in connection with

their requests for rule making in the general area of “pay”

programming.* TPT subsequently withdrew its applica-

tion, claiming that the FCC preemption relieved it of the

requirement of local or State approval of “pay cable” rates.

On October 1, 1973, we obtained an Order from the Su-

preme Court, Albany County, restraining TelePrompTer

from imposing any charge for subscription programming in

Mount Vernon until we had approved such charge in ac-

cordance with the requirements of Sections 822 and 825 of

the Executive Law. TelePrompTer thereafter requested

once again that we approve its “pay cable” rate, and, on

October 19, 1973 we granted such approval.**

On the day we issued our Order in TelePrompTer, Oc-

tober 19, 1973, we also issued a Statement of Policy regard-

ing “Rates charged by Cable Television Companies for

Subscription Programming.” In that statement, we indi-

eated our recognition of the problems presented in this

area and we reasserted our authority, pursuant to Sections

* Note petitions of National Association of Theatre Owners, Inc.

(NATO), the Metropolitan Motion Picture Theatre Association

and the New York Chapter of NATO.

** TelePrompTer County Cable TV, Order Approving Fran-

chise Amendment Subject to Conditions, October 19, 1973.

39a

Appendiz E.

822 and 825 of the Executive Law, to require franchise

amendments and our approval for the establishment or

modification of any subscriber rates. Although we did not

grant the theatre owners’ requests for strict regulation of

“pay cable” programming, we did require that all cable

television companies which engaged in or proposed to en-

gage in “pay” cable programming services notify us:

(1) of the material facts concerning each such exist-

ing or proposed operation . . . and

(2) that it will promptly, and with due diligence take

whatever measures are necessary to satisfy the re-

quirements of Sections 822 and 825 of the Executive

Law.

In early 1974, we adopted revised rules concerning fran-

chising procedures and franchise standards (9 NYCRR

Parts 594 and 595). Section 595.1(e) of our Rules states

that a franchise will be confirmed by the commission only if

it contains:

A provision setting forth with specificity all rates

to be charged by the franchise for any aspect of cable

television service, or a provision certifying that the

municipality and the franchisee are unable to agree

upon the rate or rates to be charged and specifying

that said rate(s) shall be determined by the Commis-

sion on Cable Television pursuant to section 825(5) (e)

of the Executive Law. (fn.)

[fn.]

Typically, rates are specified with respect to such mat-

ters as installation of first service connection; installa-

tion of additional connections on same premises; basic

monthly service for first connection; basic monthly

service for additional connections ; subscription channel

40a

Appendiz E.

or channels; converters; use of leased channel or chan-

nels; and bulk service to hotels, motels, and others

similarly situated. (emphasis added)

Recent DEVELOPMENTS

Despite the foregoing, no specific actions were taken on

our part to force “pay cable” services into the context of

local franchises. At that time the extent of “pay cable” in

New York was not great and, even with the TelePrompTer

(Mt. Vernon) decision, a policy of strict enforcement did

not appear necessary. We were sympathetic to the gener-

ally accepted policy of allowing the cable television industry

to develop its “auxiliary” services without hindrance, and

were, th«*efore, reluctant to impose the strict requirements

of Sections 822 and 825 upon cable operations and munici-

palities which had themselves established working under-

standings regarding the development of “pay cable”

services.

We remain sympathetic to the notion of free growth in

the field of “auxiliary” cable services. However, tho results

of such development since the initiation of pay cable, and

the failure of many cable operations to comply with our

filing requirements, have indicated that our jurisdiction in

this area, and the obligations of the Executive Law and our

Rules in this regard, must be reaffirmed with a new degree

of certainty.

It is now evident that the message contained in our Tele-

PrompTer Order of October 19, 1973 and our Statement of

Policy was not understood clearly by a large number of

cable television companies and municipalities in New York.

Moreover, the confusion and misapprehension expressed by

these companies and municipalities have not been resolved

in the time since those actions were taken. Late circum-

4la

Appendia E.

stances indicate that the implications of these developments

have become increasingly more serious.

Within the past year several cable television companies

have unilaterally raised their ‘‘pay’’ rates immediately

after they were denied similar increases in their ‘‘regular’’

rates by their respective franchisors.* Some companies

have used the institution of Home Box Office service as an

offer in negotiation, guid pro quo, for increases in their

regular rates.** It has been alleged in recent months ihat,

in some localities, cable television companies have refused

to initiate Home Box Office programming in punitive retali-

ation for the actions of their franchisors regarding ‘‘reg-

ular’’ rates.*** In other instances, companies have nego-

tiated with their franchisors regarding ‘‘pay cable’’ rates

and then have informed the Commission that resulting

franchise provisions have no effect due to FCC pre-emption

of subscription programming.****

As the provision of Home Box Office Service has become

increasingly widespread, many cable television companies

have instituted this service and established subscriber rates

therefor without specifying those rates in their local

franchises.

Discussion AND CONCLUSIONS

The position of this agency regarding the regulation of

subscriber rates for all types of cable television services

* Note, e.g.. Community Development Long Island Corporation

at Oyster Bay.

** Note, e.g., TelePrompTer Corporation at New Windsor and

Cornwall.

**® See letter from Pamela M. Farr, Supervisor Town of Big

Flats regarding TelePrompTer Cable TV, Inc.

#*e° Fg., People’s Cable at Pittsford.

42a

Appendia E.

should never have been doubted by cable operators or

municipal officials. The language of the Executive Law and

our Rules clearly require all subscriber rates to be estab-

lished or modified only through the local franchise and wi‘h

our approval. Our October 19, 1973 pronouncements re-

iterated this position and made it clear that “pay cable’’

services were not excluded.

The sole basis for any contrary conclusion is the FCC’s

purported pre-emption of the field. However, our actions

must be guided by our clear statutory mandate until such

time as a court of competent jurisdiction has ruled that the

FCC has, in fact, duly limited that statutory mandate.

No court has yet so ruled, and the actions of the State

Supreme Court in the TelePrompTer case, referenced

above, indicate support for our position.

Not only do we fail to agree with the legality of the

FCC’s pre-emptive policy; we also question its wisdom.

An examination of rate structures and developments in the

establishment of subscriber rates has made it evident that

a complicated nexus exists between those rates charged for

‘‘regular’’ cable services and those charged for ‘‘auxiliary’’

services. Municipalities are still unsure as to their juris-

diction concerning ‘‘pay cable’’. Moreover, clear instances

of abuse resulting from this uncertainty have become evi-

dent, as cited above. If the present trend continues,

municipalities will have less and less control over sub-

scriber rates as a result of unilateral increases in the pre-

mium programming rate rather than the basic rate. For

practical purposes, neither the locality nor the State would

have control over the price subscribers pay for any cable

television services.

The nature of per-channel or other types of specialized

cable programming charges may require a distinctive regu-

latory approach. It may not always be desirable or neces-

43a

Appendiz E.

sary to regulate ‘‘pay cable’’ subscriber rates without

regard to the nature of the locality involved. However,

whatever actions are appropriate or may be taken with

regard to the regulation of subscriber rates, the public

interest requires that all such rates must be approached on

an equal jurisdictional basis and that the requirements of

applicable statutory law be met.

In view of the above, we wish to make clear that the fol-

lowing policies are consistent with the public interest and

may be considered applicable in this matter.

1. All subscriber rates imposed by cable television com-

panies in New York must be authorized by the local fran-

chise held by such companies, as required by Section 825 of

the Executive Law.

2. No change in subscriber rates may be adopted without

an appropriate amendment of the governing franchise.

3. Any such franchise amendment must be approved by

this Commission before it may be effective, as provided in

Section 822 of the Executive Law.

4. No exclusion or exemption from the above is provided

by State law for rates for any “pay”, “auxiliary” or “sub-

scription’’ cable service.

5. Cable television companies that have already estab-

lished “pay cable” services without following the appropri-

ate legal requirements, as described above, will not be

required at this time to make immediate efforts to amend

their respective franchises. Such companies must however,

file a formal notice with their respective municipalities and

this Commission, within the next two months, describing

the nature of their “pay cable” services and the rates cur-

rently charged to subscribers for such services. Those cable

44a

Appendiz E.

television companies providing “pay cable” services and

not so on record with their respective municipalities and

this Commission by April 30, 1976, will face appropriate

sanctions.

6. Active enforcement of these policies will be under-

taken.

It should be noted that concern has been expressed re-

garding the effect of the above policies on various special

aspects of the “pay cable” market. At this time the market

is, by and large, limited to per-channel specialty services

providing a standard variety of home entertainment pro-

gramming (generally represented by the monthly packages

provided by Home Box Office). We will remain open to

applications for any appropriate modification of our poli-

cies, as expressed above, should the development of par-

ticular variations of “pay cable” services indicate such

modifications.

CoMMISSIONERS ParticipaTinG: Robert F. Kelly, Chairman;

Jerry A. Danzig, Vice-Chairman; Michael H. Prendergast,

Eli Wager, Edward J. Wegman, Commissioners.

45a

APPENDIX F—Statutes Involved.

New York Executive Law

Section 822. Transfer, renewal or amendment of

franchises and transfer of control over franchises and sys-

tem properties.

1. No transfer, renewal or amendment of any franchise,

or any transfer of control of a franchise or certificate of

confirmation or of facilities constituting a significant part

of any cable television system shall be effective without

the prior approval of the commission.

2. A person wishing to transfer, renew or amend a

franchise, or to transfer control of a franchise or of a

substantial part of the facilities thereof shall file with the

commission an application for approval of such change, in

such form and containing such information and supporting

documents as the commission may require.

3. The commission shall approve the application unless

it finds that the applicant, the proposed transferee or the

cable television system does not conform to the standards

embodied in the regulations promulgated by the commission

pursuant to section eight hundred fifteen or that approval

would be in violation of law, any regulation or standard

promulgated by the commission or the public interest:

provided, however, that a failure to conform to the

standards embodied in the regulations promulgated by the

commission shall not preclude approval of any such ap-

plication if the commission finds that such approval would

serve the public interest.

Section 825. Rates

1. Except as otherwise provided in this section, the

rates charged by a cable television company shall be those

46a

Appendia F.

specified in the franchise which may establish, or provide

for the establishment of reasonable classifications of

service and categories of subscribers, or charge different

rates for differing services or for subscribers in different

categories.

2. Such rates may not be changed except by amendment

of the franchise.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.