Preemption of Local Zoning Regulation of Satellite Earth Stations and Restrictions on Over-the-Air Reception Devices: Television Broadcast, Direct Broadcast Satellite and Multichannel Multipoint Distribution Services

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 1

[CS Docket No. 96-83; FCC 98-273]

Preemption of Local Zoning Regulation of Satellite Earth Stations

and Restrictions on Over-the-Air Reception Devices: Television

Broadcast, Direct Broadcast Satellite and Multichannel Multipoint

Distribution Services

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: This Second Report and Order amends the Over-the-Air Reception

Devices Rule, which prohibits governmental and non-governmental

restrictions that impair a viewer's ability to receive video

programming through devices designed for over-the-air reception of DBS,

MDS, or television broadcast signals. This Order concludes that the

rule will be expanded to apply to antenna restrictions on rental

property where the viewer has exclusive use or control. This Order also

concludes that antenna restrictions that apply to common or restricted

access areas are beyond the scope of the statutory authority for this

rule, and that the rule, therefore, cannot apply to antenna

restrictions on common or restricted access.

EFFECTIVE DATES: January 22, 1999.

FOR FURTHER INFORMATION CONTACT: Eloise Gore at (202) 418-1066 or via

internet at [email protected] or Darryl Cooper at (202) 418-1039 or via

internet at [email protected].

SUPPLEMENTARY INFORMATION: This is a synopsis of the Commission's

Second Report and Order, CS Docket No. 96-83, adopted October 14, 1998

and released November 20, 1998. This Order is in response to the

Further Notice of Proposed Rulemaking (CS Docket No. 96-83, FCC 96-328,

61 FR 46557). The full text of this decision is available for

inspection and copying during normal business hours in the FCC

Reference Center (Room 239), 1919 M Street, NW, Washington, D.C. 20554,

or may be purchased from the Commission's copy contractor,

International Transcription Service (``ITS''), (202) 857-3800, 1231

20th Street, NW, Washington, D.C. 20036, or may be reviewed via

internet at http://www.fcc.gov/Bureaus/Cable/WWW/csb.html. For copies

in alternative formats, such as braille, audio cassette or large print,

please contact Sheila Ray at ITS.

Paperwork Reduction Act: This Second Report and Order contains

information collection requirements for which the Commission already

has clearance from the Office of Management and Budget (``OMB''). The

Commission submitted these information collection requirements to OMB

for clearance under OMB control number 3060-0707 upon the August 6,

1996 release of the Report and Order. OMB subsequently issued its

clearance to sponsor these requirements by means of a Notice of Action

dated October 14, 1996.

OMB Approval Number: 3060-0707.

Title: Over-the-Air Reception Devices.

SYNOPSIS OF ORDER ON RECONSIDERATION

Introductory Background

1. This Second Report and Order resolves the issues regarding

Section 207 of the Telecommunications Act of 1996 (``1996 Act'') (Pub.

L. No. 104-104, 110 Stat. 114 (1996)), on which the Commission sought

further comment in its Report and Order, Memorandum Opinion and Order,

and Further Notice of Proposed Rulemaking (``Report and Order'' and

``Further Notice''). Based on the Commission's review of the comments

filed in response to the Further Notice, the Commission adopts an

amendment to Section 1.4000 of the rules, 47 CFR 1.4000 (``Section 207

rules''), that prohibits restrictions on over-the-air reception devices

covered by Section 207 (``Section 207 reception devices'') on rental

property subject to the other terms and conditions of the Section 207

rules. Section 207 expressly covers over-the-air reception devices used

to receive television broadcast signals, multichannel multipoint

distribution service (``MMDS''), and direct broadcast satellite

services (``DBS''). In the Report and Order, the Commission concluded

that the rules implementing Section 207 should cover: (1) any type of

multipoint distribution service, including not only MMDS but also

instructional television fixed service (``ITFS'') and local multipoint

distribution service (``LMDS'') provided the antenna is one meter or

less in diameter or diagonal measurement; (2) medium-power satellite

services using antennas of one meter or less, even though such services

may not be technically defined as DBS elsewhere in the Commission's

rules; (3) DBS antennas that are one meter or less in diameter or over

one meter in Alaska (smaller DBS antennas do not work in Alaska); and

television (``TVBS'') antennas without size limitation.

2. This amendment to the rules serves two federal objectives of

promoting competition among multichannel video

[[Page 71028]]

providers and of providing viewers with access to multiple choices for

video programming. The new amendment strikes a balance between the

interests of tenants, who desire access to more video programming

services, and the interests of landlords, who seek to control access to

and use of their property. This Second Report and Order does not amend

the rules to cover common property and restricted access property, as

defined below, because Section 207 does not authorize the Commission to

do so.

3. In practice, under the amendment to the rules, renters will be

able, subject to the terms of the Section 207 rules, to install Section

207 reception devices wherever they rent space outside of a building,

such as balconies, balcony railings, patios, yards, gardens or any

other similar areas. Moreover, for renters who have not leased outside

rental space where a Section 207 reception device could be installed,

the new rules permit the installation of Section 207 devices inside

rental units and anticipate the development of future technology that

will create devices capable of receiving video programming signals

inside buildings. One such device, LMDS, is already capable of

receiving signals inside buildings. This amendment to the rules

provides video programming alternatives to as many viewers as possible

within the boundaries of Section 207's language.

4. Section 207 directs the Commission to remove restrictions on

Section 207 reception devices:

Within 180 days after the date of enactment of this Act, the

Commission shall, pursuant to section 303 of the Communications Act

of 1934, promulgate regulations to prohibit restrictions that impair

a viewer's ability to receive video programming services through

devices designed for over-the-air reception of television broadcast

signals, multichannel multipoint distribution service, or direct

broadcast satellite services.

5. Among other things, the Report and Order adopted rules that

generally prohibit both governmental and nongovernmental restrictions

that impair the installation, maintenance or use of Section 207

reception devices, unless the restriction serves a legitimate safety or

historic preservation objective in a non-discriminatory manner that is

no more burdensome than necessary to achieve the objective. In

addition, the Section 207 rules adopted in the Report and Order applied

only to property within the exclusive use or control of the viewer

where the viewer has a direct or indirect ownership interest in the

property.

6. In the Further Notice, the Commission sought comment on the

question of whether the antenna restriction preemption rules should be

extended to the placement of antennas on rental and other property not

within the exclusive use or control of a person with an ownership

interest. This includes, for instance, the question of whether Section

207 authorizes extending the Section 207 rules to (1) rental housing

(e.g., apartment buildings and single family dwellings) where viewers

would have possession and exclusive use of the leasehold in which

Section 207 reception equipment would be placed; (2) common property--

e.g., common property within condominiums, cooperatives, rental

complexes or manufactured housing parks--where viewers may have access

to, but not possession of and exclusive rights to use or control, the

areas where Section 207 reception equipment would be placed; and (3)

areas of a building to which viewers generally do not have access or

possession, such as the rooftop, on which Section 207 reception

equipment would be placed (``restricted access'' property). With regard

to condominiums, the term ``common property'' herein refers to the

common elements in which the condominium owner owns an interest with

other condominium owners but over which the owner does not exercise

exclusive use or control. The Section 207 rules already cover

condominium balconies, decks, patios and similar areas over which the

condominium unit owner exercises exclusive use and has a direct or

indirect property interest even if he or she does not own 100% of that

area.

7. In particular, the Further Notice sought comment on the impact

of Loretto v. TelePrompter Manhattan CATV Corp., 458 U.S. 419 (1982)

and Bell Atlantic Telephone Co. v. FCC, 24 F.3d 1441 (D.C. Cir. 1994)

on any such extensions of the rules. The Further Notice also invited

commenters to ``address technical and/or practical problems or any

other considerations they believe the Commission should take into

account in deciding whether to adopt such a rule and, if so, the form

such a rule should take.''

8. After analyzing the statute and the comments filed in response

to the Further Notice, the Commission concludes that, in Section 207,

Congress did not direct the Commission to impose affirmative duties on

other parties to install Section 207 devices or to grant access to

restricted areas to permit the installation of Section 207 reception

devices, and in particular, Congress did not direct the Commission to

require property owners to subject property to a Fifth Amendment

taking. In addition, Congress gave the Commission the discretion to

devise rules that would not create serious practical problems in their

implementation. Section 207 obliges the Commission to prohibit

restrictions on viewers who wish to install, maintain or use a Section

207 reception device within their leasehold because this does not

impose an affirmative duty on property owners, is not a taking of

private property, and does not present serious practical problems.

9. To effect the above changes, 47 CFR 1.4000 of the rules is

amended as follows (new language underlined):

(a) Any restriction, including but not limited to any state or

local law or regulation, including zoning, land-use, or building

regulations, or any private covenant, contract provision, lease

provision, homeowners' association rule or similar restriction, on

property within the exclusive use or control of the antenna user

where the user has a direct or indirect ownership or leasehold

interest in the property that impairs the installation, maintenance,

or use of: * * *

10. We also revise the rule to provide the new Commission street

address for purposes of filing petitions for waiver or declaratory

ruling:

(g) All allegations of fact contained in petitions and related

pleadings before the Commission must be supported by affidavit of a

person or persons with actual knowledge thereof. An original and two

copies of all petitions and pleadings should be addressed to the

Office of the Secretary, Federal Communications Commission, 445 12th

St. S.W., Washington, D.C. 20554, Attention: Cable Services Bureau.

Copies of the petitions and related pleadings will be available for

public inspection in the Cable Reference Room in Washington, D.C.

Copies will be available for purchase from the Commission's contract

copy center, and Commission decisions will be available on the

Internet.

11. In light of the decision to allow a tenant to install a Section

207 device within a leasehold without the landlord's permission, 47 CFR

1.4000 is further amended to delete paragraph (h) which required that

the landlord consent to such an installation. The tenant's installation

is subject to the terms of the Section 207 rules.

Application of the Section 207 Rules to Rental Property

Scope of Section 207

12. The starting point of the analysis is the statute. If Congress

has directly spoken to the precise question at issue ``that is the end

of the matter,'' and the Commission must give ``effect to the

unambiguously expressed intent of Congress.'' (See Chevron, U.S.A.,

Inc. v.

[[Page 71029]]

NRDC, 467 U.S. 837, 842-43 (1984).) If, however, Congress has not

spoken to the precise question at hand--i.e., if ``the statute is

silent or ambiguous with respect to the specific issue''--the

Commission may exercise its reasonable discretion in construing the

statute.

13. As an initial matter, we agree with those commenters that argue

that Section 207 applies on its face to all viewers, and that the

Commission should not create different classes of ``viewers'' depending

upon their status as property owners. For instance, if a local

government imposed a zoning restriction that prohibited a landlord from

installing a master antenna system for his tenants to receive over-the-

air broadcast signals, such a restriction would be preempted,

notwithstanding the fact that the viewers in that situation are

renters.

14. Section 207 expressly directs the Commission only to ``prohibit

restrictions'' that impair a viewer's ability to receive covered video

programming; Section 207 does not grant the Commission the authority to

require property owners or third parties to take affirmative steps to

enable a viewer to receive such video programming. Accordingly, the

Commission may prohibit restrictions that a property owner or third

party may impose upon a viewer (e.g., local zoning ordinances or

community association rules), but may not impose affirmative

requirements on a property owner or a third party, such as a duty to

install Section 207 reception devices for a viewer or give a viewer or

video provider possession of restricted access areas or common areas

for an installation. (``Community associations'' includes homeowners''

associations, townhome or townhouse associations, condominium

associations, cooperative associations, planned unit development

associations and similar associations and entities.) This distinction

between prohibiting restrictions and imposing affirmative duties is

consistent with Section 207's legislative history, which states that

``[e]xisting regulations, including but not limited to, zoning laws,

ordinances, restrictive covenants or homeowners' association rules,

shall be unenforceable to the extent contrary to this section.''

15. Removing a restriction on installing an antenna within a

leasehold does not impose a duty on the landlord to relinquish property

because the landlord has already voluntarily relinquished possession of

the leasehold by virtue of the lease; therefore, the language of

Section 207 permits the Commission to prohibit lease and other

restrictions on a viewer's installation, maintenance or use of a

Section 207 device within a leasehold subject to the terms and

conditions of the Section 207 rules.

Constitutional Considerations

16. Under Bell Atlantic, where an agency authorizes ``an

identifiable class of cases in which the application of a statute will

necessarily constitute a taking,'' its authority is construed narrowly

to defeat such an interpretation unless the statute grants express or

implied authority to the agency to effect the taking. According to the

Bell Atlantic court, implied authority may be found only where `` `the

grant [of authority] itself would be defeated unless [takings] power

were implied.' '' Section 207 does not expressly authorize the

Commission to permit the taking of private property, and we do not

believe that it is necessary to authorize a taking of private property

in order to comply with Congress' direction that we prohibit

restrictions that impair a viewer's ability to exercise his or her

rights under Section 207. The ``takings'' clause of the Fifth Amendment

provides: ``[N]or shall private property be taken for public use,

without just compensation.'' In general, there are two types of Fifth

Amendment takings: ``per se'' takings and ``regulatory'' takings. (See

generally Yee v. City of Escondido, 503 U.S. 519, 522-23 (1992).) Where

the government authorizes the permanent physical occupation of property

it constitutes a per se taking. Under Loretto, a permanent physical

occupation of property is a taking without regard to the public

interest that it may serve, the size of the occupation, or the economic

impact on the property owner.

17. Where the government does not authorize a physical occupation

of property but merely regulates its use, a court will examine the

following factors identified in Penn Central Transportation Co. v. City

of New York, 438 U.S. 104, 124 (1978) to determine whether a regulatory

taking has occurred: (1) the character of the governmental action; (2)

its economic impact; and (3) its interference with reasonable

investment-backed expectations. Moreover, where the private property

owner voluntarily agrees to the possession of its property by another,

the government can regulate the terms and conditions of that possession

without effecting a per se taking. In FCC v. Florida Power Corp., 480

U.S. 245, 252 (1987), the utility company voluntarily agreed to the

physical occupation of its poles by a cable operator's wires at certain

lease rates; the utility claimed that a subsequent rate reduction

ordered by the Commission for the occupation of its poles constituted a

per se taking under Loretto. Rather, such regulations are analyzed

under the Penn Central multifactor inquiry. As the Florida Power Court

stated:

[I]t is the invitation, not the rent, that makes the difference.

The line which separates these cases from Loretto is the unambiguous

distinction between a commercial lessee and an interloper with a

government license.

18. Applying the above framework to the property at issue here, we

agree with DIRECTV that a per se takings analysis would not apply to an

expansion of the Section 207 rules to a leasehold where a landlord has

invited a tenant to physically occupy and possess the property. In

Loretto, the Court identified three rights ``to possess, use, and

dispose of'' property that are destroyed by an uninvited permanent

physical occupation of the property. However, by leasing his or her

property to a tenant, the property owner voluntarily relinquishes the

rights to possess and use the property and retains the right to dispose

of the property. First, within his or her leasehold a tenant is an

invitee with a possessory estate interest in the property, not ``an

interloper with a government license.'' Second, to a large extent, the

property owner relinquishes its right to control the use of its

property when it leases the property. For example, tenants have the

right to ``make changes in the physical condition of the leased

property which are reasonably necessary in order for the tenant to use

the leased property in a manner that is reasonable under all

circumstances.'' Third, the property owner may retain the right to sell

the property even if the property is leased. Thus, none of the property

rights that Loretto held were ``effectively destroyed'' by a permanent

physical occupation of property would be compromised by expanding the

Section 207 rules to leased property, because the landlord voluntarily

relinquishes two of those rights (possessing and using) and is free to

retain the third right (disposing of the property) when entering into a

lease. In contrast, in Loretto, the physical possession was on the

building roof, possession of which was not leased to anyone but was

retained by the property owner, Ms. Loretto.

19. Accordingly, it does not constitute a per se taking to prohibit

lease restrictions that would impair a tenant's ability to install,

maintain or use a Section 207 reception device within the leasehold.

Indeed, prohibiting restrictions on the installation of a

[[Page 71030]]

satellite dish or other Section 207 device is not distinguishable in a

constitutional sense from prohibiting restrictions on the installation

of ``rabbit ears''--a Section 207 reception device--on the top of a

television set. The Loretto Court recognized that its per se rule would

not apply to regulations affecting a landlord-tenant relationship that

did not require the occupation of the landlord's property by a third

party; the Court acknowledged that such regulations would be analyzed

under the Penn Central regulatory takings standard.

20. Contrary to the argument set forth in the dissent, the limits

of the per se takings doctrine described in Florida Power are clearly

applicable here. Under that doctrine, any permanent, physical

occupation of property, no matter how small, constitutes a per se

taking. But the right to assert a per se taking is easily lost: once a

property owner voluntarily consents to the physical occupation of its

property by a third party, any government regulation affecting the

terms and conditions of that occupation is no longer subject to the

bright-line per se test, but must be analyzed under the multi-factor

inquiry reserved for nonpossessory government activity. In Florida

Power, for instance, the utility company was not required to lease pole

space to cable operators, but once it voluntarily did so, the

government could regulate the terms and conditions of that physical

occupation (i.e., the rates that the utility company could charge for

the pole space) without effecting a per se taking.

21. The dissent attempts to muddy this clear dichotomy by arguing

that a landlord retains the right to assert a per se taking claim

whenever the government modifies the terms and conditions set forth in

its lease. But this is the very argument that the Supreme Court

squarely rejected in Florida Power, where it was argued that the

utility company's consent to occupation of its pole space was based on

the payment of a certain lease rate. Whether the terms and conditions

of occupation relate to a lease rate (as in Florida Power) or to the

ability to place a Section 207 reception device within the leasehold

(as here), once a property owner voluntarily consents to the occupation

of its property it can no longer claim a per se taking if government

action merely affects the terms and conditions of that occupation. In

other words, the per se takings doctrine protects a property owner's

right to exclude all others from its property, but it does not protect

a property owner's desire to impose conditions on the use of property

that it has voluntarily invited others to occupy.

22. The dissent again confuses this crucial distinction by

asserting that if the terms of a lease help explain why we are not

giving tenants the right to place reception equipment on common and

restricted access property, the lease should likewise inform our

analysis within the leasehold itself. For takings purposes, the lease

is relevant in defining the physical area of consensual occupation

(e.g., the apartment but not the roof or exterior walls). Outside of

such areas of consensual occupation, the property owner may retain its

per se right to prohibit permanent occupation by third parties. Within

the area of consensual occupation, however, the terms of the lease are

no longer relevant to a per se analysis. As the Florida Power Court put

it, it is ``the invitation [i.e. whether the occupation is voluntary],

not the rent [i.e., the terms and conditions of that voluntary

occupation], that makes the difference.''

23. Given the conclusion that this expansion of the Section 207

rules does not constitute a per se taking, we therefore turn to whether

such an expansion of Section 207 rights would constitute a regulatory

taking under the Penn Central factors: the character of the

governmental action, its economic impact, and its interference with

reasonable investment-backed expectations. Because the expansion of the

Section 207 rules to leased property would not create an identifiable

class of per se takings, Bell Atlantic's narrowing construction of the

statutory authority does not apply to this situation. First, Section

207 promotes the substantial governmental interests of choice and

competition in the video programming marketplace. See Turner

Broadcasting System, Inc. v. FCC, 117 S.Ct. 1174, 1181 (1997)

(reaffirming important governmental interest in promoting fair

competition in the market for television programming). The specific

governmental action that we take today--the expansion of the rules to

leased property--will bring that choice and competition to an

additional segment of the population. Further, the expansion of the

rules will promote the important governmental interest in enhancing

viewers' access to ``social, political, esthetic, moral and other

ideas.'' The Supreme Court has ``identified a * * * `governmental

purpose of the highest order' in ensuring public access to `a

multiplicity of information sources.' ''

24. Second, there is no evidence in the record that the economic

impact on property owners will be significant. Generally, the amount of

money that property owners may derive from restricting the video

programming options of their residents is minimal in relation to their

other income. Indeed, some commenters argue that a rule prohibiting

restrictions on antenna usage enhances the value of the homeowner's

property to prospective purchasers who want access to video programming

services competitive with cable. Given property owners' ability to

continue to use their property to generate rental income, extension of

the Section 207 rules to restrictions on tenants' use of their

leasehold would not deprive property owners of ``all economically

beneficial or productive use'' of their property. Third, there is no

evidence in the record that the expansion of the rules will interfere

with reasonable investment-backed expectations.

25. Moreover, the government has broad power to regulate interests

in land that interfere with valid federal objectives. In Seniors Civil

Liberties Ass'n v. Kemp, 761 F. Supp. 1528 (M.D. Fla. 1991), aff'd, 965

F.2d 1030 (11th Cir. 1992), the court found no taking in an

implementation of the Fair Housing Amendments Act (``FHAA'') that

declared unlawful age-based restrictive covenants, thereby abrogating

the homeowners' association's rules requiring that at least one

resident of each home be at least 55 years of age and forbidding

permanent residence to children under the age of 16. The court found

that the FHAA provisions nullifying the restrictive covenants

constituted a ``public program adjusting the benefits and burdens of

economic life to promote the common good,'' and not a taking subject to

compensation.

26. Finally, with regard to the argument of some commenters that

this rule will impair exclusive contracts between MDU owners and cable

companies, even assuming that this were the case, as we stated in the

Report and Order with regard to homeowners' associations, condominium

associations, and cooperative associations, Congress can change

contractual relationships between private parties through the exercise

of its constitutional powers, including the Commerce Clause (U.S.

CONST. art. I, Sec. 8, cl. 3). In Connolly v. Pension Benefit Guaranty

Corp., 475 U.S. 211 (1986), the Court stated:

Contracts, however express, cannot fetter the constitutional

authority of Congress. Contracts may create rights in property, but

when contracts deal with a subject matter which lies within the

control of Congress, they have a congenital infirmity. Parties

cannot remove their transactions from the

[[Page 71031]]

reach of dominant constitutional power by making contracts about

them.

If a regulatory statute is otherwise within the powers of

Congress, therefore, its application may not be defeated by private

contractual provisions. For the same reason, the fact that

legislation disregards or destroys existing contractual rights, does

not always transform the regulation into an illegal taking.

27. Accordingly, we conclude that interpreting Section 207 to reach

rental property, i.e. property within a leasehold over which a tenant

has possession, does not constitute an impermissible taking of private

property. This rule will prohibit lease or other restrictions (subject

to the other provisions of 47 CFR 1.4000, including the safety and

historic preservation exceptions) on leased property under the

exclusive use or control of the viewer. Typically, for apartments, this

new ruling will include balconies, balcony railings, and terraces; for

rented single family homes or manufactured homes which sit on rented

property, it will typically include patios, yards or gardens within the

leasehold. Generally, the lease of a house includes the land on which

the house is situated and the surrounding real estate necessarily

incident to its use as a home. This conclusion is similar to the

current application of the Section 207 rules to condominiums,

cooperatives and manufactured homes. In addition, while restrictions on

placement of antennas on manufactured homes are already covered by the

current rules, this new rule expands protection of the Section 207

rules to the leased property on which the manufactured home sits.

28. Because the record does not contain evidence that a university

has the same relationship to a dormitory resident as a landlord to a

tenant, that a dormitory room is a leasehold, that landlord-tenant law

applies equally to dormitories, or that the practical problems

associated with extending the rules to leaseholds can be similarly

resolved with respect to dormitories, the Section 207 rules will not

apply to college dormitories at this time. Where, however, the

relationship between a university and a viewer bears sufficient

attributes of a commercial landlord-tenant relationship (e.g., where a

university leases a single family home to a faculty member), the

Section 207 rules will apply. In addition, in response to commenters

who requested an exception to the rule for commercial lessees, note

that Section 207 does not provide an exception for commercial

properties.

29. While some commenters have requested that the Commission

preempt exclusive contracts between building owners and cable

companies, this issue will be addressed in In re Telecommunications

Services Inside Wiring, CS Docket No. 95-184. Exclusive contracts are

already unenforceable to the extent that they impermissibly impair a

viewer's rights under the currently effective Section 207 rules, and

will be further unenforceable to the extent that they impermissibly

impair a viewer's Section 207 rights upon the effective date of the

revised rules adopted herein.

Practical Considerations

30. The practical concerns with respect to installation within the

leasehold can be resolved under the current Section 207 rules, which

permit the enforcement of restrictions that address legitimate safety

objectives. In addition, unlike common areas, the leasehold (e.g., an

apartment including a balcony or terrace) generally is under the

exclusive use or control of one party (i.e., the lessee), thus enabling

that party to address liability concerns. Moreover, state landlord-

tenant law can address liability issues that may arise from incidents

arising on leased property.

31. The current rules resolve concerns regarding damage to the

building caused by installation. The rules prohibit restrictions that

unreasonably delay or prevent installation. A restriction barring

damage to the structure of the leasehold (e.g., the balcony to an

apartment or the roof of a rented house) is likely to be a reasonable

restriction on installation under 47 CFR 1.4000(a). Thus, for example,

tenants could be prohibited from drilling holes through the exterior

walls of their apartments. In addition, tenants could be prohibited

from piercing the roof of a rented house in any manner given the risk

of serious damage, and there are methods of installing a Section 207

device on a roof that do not require piercing; e.g, securing it to a

chimney or using ballast as a non-penetrating roof mount. On the other

hand, it would likely not be a reasonable restriction to prohibit an

installation that merely caused ordinary wear and tear (e.g., marks,

scratches, and minor damage to carpets, walls and draperies) to the

leasehold. We also note that the Order on Reconsideration clarifies

that a landlord or community association may restrict installation of

individual antennas based on the availability of a central or common

antenna, provided the restriction does not impose unreasonable delay,

unreasonable expense, or preclude reception of an acceptable quality

signal, including the particular programming service chosen by the

viewer.

Application of the Section 207 Rules to Common and Restricted Access

Areas

Scope of Section 207

32. Section 207 does not authorize the Commission to permit a

viewer to install a Section 207 device on common or restricted access

property over the property owner's objection or to require a landlord

to provide video programming reception equipment to tenants. As

discussed, Section 207 authorizes the Commission to remove

restrictions; Section 207 does not authorize the Commission to impose

independent affirmative obligations on a property owner or a third

party to enable the viewer to use a Section 207 device. Interpreting

Section 207 to grant viewers a right of access to possess common or

restricted access property for the installation of the viewer's Section

207 device would impose on the landlord or community association a duty

to relinquish possession of property. Just as the plain language of the

statute does not require a property owner to permit his or her neighbor

to install a Section 207 reception device on the owner's property

(e.g., if the neighbor were unable to receive an acceptable signal on

his or her own property), we do not believe the statute requires a

landlord or community association to relinquish possession of common or

restricted access property. There is no distinction in this regard

between a neighbor's property and a landlord's property that the

landlord has not leased to a tenant: both situations would impose

affirmative duties not intended by the statute.

33. Likewise, we disagree with commenters that the Commission can

require landlords to provide video programming reception equipment to

their residents. Requiring property owners to purchase and install

reception equipment for their residents' benefit does not remove a

restriction, but rather imposes an affirmative duty which is outside

the mandate of Section 207. Therefore, under the language of Section

207, the Commission cannot extend the Section 207 rules to reach common

and restricted access property.

Constitutional Considerations

34. As discussed above, Section 207 does not expressly authorize

the Commission to permit a taking in order to enable a viewer to

install Section 207 reception devices. In the context of common and

restricted access property, we do not believe that the statutory

directive to prohibit restrictions implies

[[Page 71032]]

a takings authority given that a taking requires the Commission to

impose affirmative duties on third parties which, as discussed above,

is not contemplated by Section 207.

35. The commenters raise serious concerns that the extension of the

Section 207 rules to common and restricted access property would

constitute a taking and assert that the Commission should interpret the

statute so as to avoid constitutional issues. While by virtue of a

lease a landlord invites a tenant to take possession of property within

the leasehold, the landlord does not invite the tenant to take

possession of common and restricted access property. If the Commission

were to extend the Section 207 rules to permit a tenant to have

exclusive possession of a portion of the common or restricted access

property where a lease has not invited a tenant to do so, the tenant

would possess that property as an ``interloper with a government

license'' thereby presenting facts analogous to those presented in

Loretto. Similarly in a community association, home and unit owners are

not invited to possess restricted access areas, such as the roof or

exterior walls, and are not granted exclusive or permanent possession

of common areas.

36. Under these circumstances, we agree with those commenters that

argue that the permanent physical occupation found to constitute a per

se taking in Loretto appears comparable to the physical occupation of

the common and restricted access areas at issue here. In Loretto, the

physical occupation of the landlord's property consisted of the direct

attachment of cable television equipment to the landlord's property,

occupying the space immediately above and upon the roof and along the

building's exterior. Likewise, the physical occupation here would

involve the direct attachment of video reception devices to common

areas such as hallways or recreation areas, or to restricted areas such

as building rooftops.

37. Loretto is not distinguishable on the grounds asserted by the

commenters. First, we disagree that the potential occupation in this

instance would be temporary, not permanent. In Loretto, the Court found

that the cable operator's occupation was ``permanent'' because so long

as the property remained residential and a cable company wished to

retain the installation, the landlord must permit it. The occupation

here would be similarly ``permanent'' because so long as an individual

viewer wished to receive one of the services covered by Section 207,

the property owner would be forced to accept the installation of the

necessary reception devices.

38. Second, we are not persuaded by those who contend that as long

as the entitlement under Section 207 belongs to the tenant and not to a

``stranger,'' Loretto does not apply. In advancing this argument,

commenters rely primarily upon the following statement in footnote 19

in Loretto:

If [the New York statute] required landlords to provide cable

installation if a tenant so desires, the statute might present a

different question from the question before us, since the landlord

would own the installation. Ownership would give the landlord rights

to the placement, manner, use, and possibly the disposition of the

installation.

39. This argument overlooks a critical aspect of footnote 19: that

ownership of the property (i.e., the hypothetically required cable

equipment) must rest with the landlord. So long as a tenant owns the

reception device placed in a common or restricted access area, and the

terms of the tenant's lease, the community association's bylaws, or

other agreement do not give the tenant the right to exclusively possess

any portion of this property, the landlord's or association's property

would be subjected to an uninvited permanent physical occupation. As

the Loretto Court stated: ``[T]he power to exclude has traditionally

been considered one of the most treasured strands in an owner's bundle

of property rights.'' This type of ``required acquiescence is at the

heart of the concept of occupation.'' Even giving the property owner

control over the installation and maintenance of the equipment, the

property owner would still lose the right to possess that space for its

benefit or the benefit of its other residents, and would lose the

ability to exclude others from that space. In contrast, where the

viewer has exclusive use of the property or it is within the viewer's

leasehold, the community association or landlord is already excluded

from the space and does not have the right to possess or use it.

40. Thus, because there is a strong argument that modifying the

Section 207 rules to cover common and prohibited access property would

create an identifiable class of per se takings, and there is no

compensation mechanism authorized by the statute, the Commission

concludes that Section 207 does not authorize us to make such a

modification.

41. Nor is Florida Power on point. In Florida Power, the Court

assumed the utility company had voluntarily agreed to the cable

company's physical occupation; thus, the Court found that the

Commission's subsequent rate regulation did not effect a per se taking

but merely regulated the terms and conditions of the agreed-upon

occupation. Here, the agreed-upon scope of the physical possession is

set forth in the lease or other controlling document; individual

residents generally do not have the right to possess and use the common

areas for their exclusive benefit over the property owner's objection.

While the tenant may have been invited to use the common property for

certain purposes (e.g., ingress, egress, use of the exercise room),

these rights are voluntary and temporary; the proposal here, by

contrast, would be involuntary and--so long as the tenant wished to

keep his or her property in the common areas--permanent. In any event,

there can be no argument that the resident has been invited in any

manner to possess and use restricted access areas, such as rooftops.

Practical Considerations

42. We believe that commenters have raised several practical

concerns suggesting that, even in the absence of the Constitutional

takings issue, it may not serve the public convenience, interest and

necessity to extend the Section 207 rules to common and restricted

access property. First, it is difficult to discern what limits could be

set, if any, on the number of reception devices that a viewer could

install and maintain on common property. For instance, not only would

every tenant have the right to run wiring through the hallways and on

the roof of their apartment building in order to install reception

devices, but they would have the right to install the particular device

of their service provider (or providers) of choice. With potentially

hundreds of separate wires and antennas being installed in a single

building, we believe that space constraints could limit the number of

residents that would be able to install Section 207 devices, and

involve the Commission and local courts in countless disputes about the

feasibility of installing additional reception devices in a building.

Moreover, it would be difficult to determine whether any limit could be

set on how often a viewer could reasonably switch service providers and

require the property owner to suffer another disruption of the common

or restricted access areas. Any limits on these rights, such as

DIRECTV's proposal to require property owners to accommodate only two

MVPDs on the property, seem arbitrary and unsupported by the statutory

language.

43. These difficulties would not be solved by relying on the common

[[Page 71033]]

antenna option originally proposed by CAI. As clarified in the Order on

Reconsideration, a landlord or community association may prohibit

residents from installing individual antennas as long as this

prohibition does not impose unreasonable delay, unreasonable expense or

preclude reception of an acceptable quality signal, including the

programming an individual could obtain with an individual antenna. The

common antenna option is purely voluntary; a landlord or community

association could choose not to establish a common antenna and simply

permit any resident who wished to receive a Section 207 service to

install an individual antenna on the resident's own property. Giving

residents the right to use the common or restricted access areas, by

contrast, could require the association to maintain as many separate

antennas as there are service providers, without the option of simply

requiring the resident to install individual reception equipment on his

or her own property.

44. We are also concerned about the potential for structural damage

and injuries to third parties. It is not clear from the record that an

individual tenant could obtain liability insurance for common or

restricted access areas, and, even if it were possible, that such

insurance would be affordable. Further, not all of these issues can be

resolved by devising a rule that would indemnify the owner and place

liability on the tenant for injury or damage caused by the installation

of a Section 207 reception device.

45. In the context of a statutory provision that simply provides

for elimination of restrictions, the practical difficulties inherent in

giving viewers the right to install Section 207 reception devices on

common or restricted access property weigh heavily against an extension

of the rules to cover such property.

First Amendment and Equal Protection Claims

First Amendment

46. As discussed, the Supreme Court has found that ``assuring that

the public has access to a multiplicity of information sources is a

governmental purpose of the highest order, for it promotes values

central to the First Amendment.'' Turner Broadcasting System, 114 S.Ct.

at 2470. Additional sources of information enhance a viewer's access to

``social, political, esthetic, moral and other ideas.'' See Time

Warner, 93 F.3d at 975 (quoting Red Lion Broadcasting Co. v. FCC, 395

U.S. 367, 389 (1969)). Based in part on these important government

purposes, the Commission extended the Section 207 rules to prohibit

certain restrictions, subject to the terms and exceptions of the

Section 207 rules, on the placement of Section 207 devices within

rental property.

47. Despite our regard for these important government purposes, we

are not persuaded by the record that the First Amendment compels us to

interpret Section 207 without regard to the impact on third parties'

property rights, the creation of affirmative duties not intended by

Section 207, and the legitimate and serious practical concerns. To the

contrary, as noted above, Loretto held that a permanent physical

occupation of property is a taking without regard to the public

interest that it may serve.

48. We disagree with the argument that Red Lion requires the

Commission to interpret Section 207 in such a way as to guarantee

viewers' access to the video programming service of their choice. Red

Lion does not require the Commission to promulgate regulations to

ensure that every viewer has access to every available video

programming service regardless of the constitutional and practical

burdens imposed on third parties.

49. Likewise, we disagree that Pruneyard Shopping Center v. Robins,

447 U.S. 74 (1980) provides authority that would permit the Commission

to issue a rule superseding a property owner's property rights.

Pruneyard was a 21-acre shopping center in which a group of students,

acting under color of a California state constitutional provision

providing access to shopping centers, placed a card table and began

soliciting petition signatures. Performing a Penn Central takings

analysis, the Court held that because the center was ``open to the

public at large'' and could adopt time, place and manner restrictions

to minimize any interference with the center's operations, Pruneyard's

property rights had not been unconstitutionally infringed: ``In these

circumstances, the fact that [the students] may have `physically

invaded' appellants' property cannot be viewed as determinative.'' The

Loretto Court explicitly distinguished Pruneyard from the permanent

occupation in Loretto by noting that ``the invasion [of the shopping

center] was temporary and limited in nature, and * * * the owner had

not exhibited an interest in excluding all persons from his property.''

Likewise, Pruneyard is distinguishable here because the evidence in the

record does not persuade us that rental buildings have taken on a

``public forum'' character, that the owners have invited an occupation

of their common property, or that the occupation would be temporary

instead of permanent.

50. The facts are altogether different regarding leaseholds. In

Pruneyard, because the students were invited to the shopping center,

the California constitution could require the shopping center to allow

the students to bring a card table with them for the duration of their

visit without infringing the shopping center's Fifth Amendment property

rights. Similarly, when a landlord invites a tenant to possess a

leasehold for the duration of the lease, permitting the tenant to have

a Section 207 device within the leasehold during the lease term does

not infringe the landlord's Fifth Amendment property rights.

Equal Protection

51. Because Section 207 does not provide access rights to common

and restricted access property, renters whose individual leaseholds

cannot accommodate a Section 207 device will be unable to gain access

to the full range of video programming providers. As a result, Section

207 may unintentionally have a disproportionate effect upon low income

and minority viewers, to the extent they may comprise a

disproportionate percentage of renters. However, the amended rule

eliminates any per se distinction between viewers who own and those who

rent and that many renters may avail themselves of the Section 207

rules by either installing a Section 207 reception device on a balcony

or any other outside area included in their leasehold or installing an

LMDS-type device inside their dwelling. While we are sympathetic

towards those renters who are unable to take advantage of the Section

207 rules, no Fifth Amendment equal protection violation results from

applying Section 207 according to its terms and not extending its

coverage to common and restricted access property.

52. A statutory classification that does not proceed along

``suspect lines'' or infringe upon a fundamental right will receive a

``strong presumption of validity'' and will be examined under a

``rational basis'' equal protection analysis. Heller v. Doe, 509 U.S.

312, 319 (1993); FCC v. Beach Communications, Inc., 508 U.S. 307, 314

(1993). Commenters have not adduced any authority that recognizes

renters or MDU residents as a protected class. Moreover, even if

minorities, who are a protected class, comprise a significant portion

of MDU residents, in a case alleging that a protected class is

[[Page 71034]]

harmed by the disparate impact of a facially neutral regulation, the

regulation will not be examined under strict scrutiny unless it can be

shown that the disparate impact was intentional. We do not believe that

such an intent has been alleged or demonstrated here. As noted above,

the distinctions made in this Second Report and Order were not made

based on race, but on the limitations on the authority granted by

Section 207. Moreover, any disparate impact on renters has been

mitigated by the new rules permitting renters to install Section 207

reception devices within their leaseholds.

53. Under the rational basis equal protection scrutiny, a

classification need only be rationally related to a legitimate

governmental interest. We believe that the Section 207 rules clearly

satisfy this standard because the language of Section 207 supports the

conclusion not to extend our rules to cover common and restricted

access property.

FINAL REGULATORY FLEXIBILITY ANALYSIS

54. As required by the Regulatory Flexibility Act (``FRA'') (5

U.S.C. 603), an Initial Regulatory Flexibility Analysis (IRFA) was

incorporated in the Further Notice. The Commission sought written

public comment on the proposals in the Further Notice, including

comment on the IRFA. The comments received are discussed below. This

Final Regulatory Flexibility Analysis (``FRFA'') conforms to the RFA.

Need for, and Objectives of, This Second Report and Order

55. The rulemaking implements Section 207 of the Telecommunications

Act of 1996, Pub. L. 104-104, 110 Stat. 56. Section 207 directs the

Commission to promulgate regulations to prohibit restrictions that

impair a viewer's ability to receive video programming services through

certain devices designed for over-the-air reception, including MMDS,

LMDS, DBS, TVBS and ITFS (``Section 207 devices''). This action is

authorized under the Communications Act of 1934 Sec. 1, as amended, 47

U.S.C. 151, pursuant to the Communications Act of 1934 Sec. 303, as

amended, 47 U.S.C. 303, and by Section 207 of the Telecommunications

Act of 1996.

56. On August 6, 1996, the Commission implemented part of Congress'

directive by releasing rules set forth in 47 CFR 1.4000 (``Section 207

rules'') that prohibit restrictions that impair a viewer's ability to

install, maintain and use devices designed for over-the-air reception

of video programming through Section 207 devices on property within the

exclusive use or control of the viewer in which the viewer has a direct

or indirect ownership interest. The rule exempts regulations and

restrictions which are clearly and specifically designed to preserve

safety or historic districts, allowing for the enforcement of such

restrictions even if they impair a viewer's ability to install,

maintain or use a reception device.

57. The rule adopted in this Second Report and Order prohibits the

same types of restrictions on a viewer who desires to place Section 207

devices on property that the viewer has leased and is within the

exclusive use or control of the viewer. The same exemptions applicable

to the initial Section 207 rules apply to this rule.

Summary of Significant Issues Raised by Public Comments in Response

to the IRFA

58. The Commission, in its Report and Order, invited comment on the

IRFA and the potential economic impact the proposed rules would have on

small entities. The only comment submitted was a joint response filed

by the National Apartment Association, et al. (collectively ``NAA'').

NAA argues that removing restrictions on a viewer's use of a Section

207 device in the viewer's leased dwelling constitutes a Fifth

Amendment taking of the property owners' rights. In addition, NAA

argues that, due to the small staffs and limited resources of small

businesses, the rules would interfere with the ability of small

businesses to ensure compliance with safety codes, to protect the

safety of other tenants, and to prevent damage to the building.

Finally, NAA argues that Congress did not intend for Section 207 to

preempt lease restrictions.

59. The Commission has taken the arguments and views of NAA into

account in this Second Report and Order. NAA's comments on behalf of

small businesses in response to the IRFA essentially track its

objections to the rule overall, which we have already fully addressed.

As analyzed in the Second Report and Order, the rules removing use

restrictions on Section 207 devices from leases do not constitute a

taking under the Fifth Amendment. Removing the use restrictions does

not constitute a per se possessory taking under Loretto because the

landlord has voluntarily entered into a commercial relationship with

the tenant and has given the tenant possession of the leased property.

Furthermore, removing restrictions on the use of leased property does

not constitute a Penn Central regulatory taking, given, as discussed

above, the character of the government action, the minimal economic

impact on the landlord, and the minimal impact on the landlord's

reasonable investment-backed expectations.

60. Regarding the practical concerns of small businesses, as set

forth in the Second Report and Order, these practical concerns may be

addressed under the current rules. For example, safety restrictions are

permitted exceptions to the Section 207 rules. Likewise, a restriction

barring substantial damage to the building would likely be a reasonable

restriction under 47 CFR 1.4000.

61. Finally, we disagree with NAA's last argument that Congress did

not intend for Section 207 to cover lease restrictions. The express

language of Section 207 contains no such limitation. Moreover, the

legislative history of Section 207 demonstrates that Congress

acknowledged that there might be restrictions that would be covered by

Section 207 that it had not considered when adopting Section 207 into

law.

62. Although local governments did not file comments on the IRFA

contained in the Further Notice, they did file joint comments in

response to the IRFA's contained in International Bureau (IB) Docket

No. 95-59 (DBS Order and Further Notice) and in Cable Services Bureau

(CS) Docket No. 96-83 (TVBS-MMDS Notice), and we will consider those

comments with respect to the new rule. National League of Cities

(``NLC'') commented that the proposed preemption of restrictions on

property where the viewer had a direct or indirect property interest

and over which the viewer exercised exclusive use or control would have

a ``substantial economic and administrative impact'' on over 37,000

small local governments. NLC states that the proposed rule would

require ``local governments to amend their laws and to file petitions

at the FCC * * * for permission to enforce those laws.''

63. In the Report and Order, we addressed these concerns:

The Commission has modified its proposed rule and has addressed

the concerns raised by NLC by providing greater certainty regarding

the application of the rule, and by clarifying that local

regulations need not be rewritten or amended. The Commission

recognizes that some regulations are integral to local governments'

ability to protect the safety of its citizens. The rule that we

adopt exempts restrictions clearly defined as necessary to ensure

safety, and permits enforcement of safety restrictions during the

pendency of any challenges. In addition, limiting the rule's scope

to regulations that ``impair,'' rather than the proposed preemption

of regulations that ``affect,'' will minimize the impact on small

local

[[Page 71035]]

governments, while effectively implementing Congress' directive.

Finally, the inclusion in the Report and Order of examples of

permissible and prohibited restrictions will minimize the need for

local governments to submit waiver or declaratory ruling petitions

to the Commission, decreasing the potential economic burden.

We do not believe that preempting government restrictions on viewers

residing on rental property will have any greater impact than

preempting government restrictions on viewers residing on property that

they own.

64. The Commission also notes the positive economic impact the new

rule will have on many small businesses. The new rule will allow small

businesses that use video programming services to select from a broader

range of providers, which could result in significant economic savings;

because providers will be competing for customers, more services will

be available at lower prices. In addition, small business video

programming providers will be faced with fewer entry hurdles, and will

thus be able to develop their markets and compete more effectively,

achieving one of the purposes of Section 207.

Description and Estimate of the Number of Small Entities To Which

Rules Will Apply

65. The Regulatory Flexibility Act defines the term ``small

entity'' as having the same meaning as the terms ``small business,''

``small organization,'' and ``small governmental jurisdiction,'' and

``the same meaning as the term `small business concern' under Section 3

of the Small Business Act.'' The rule applies to small organizations,

small governmental jurisdictions, and small businesses.

66. The term ``small governmental jurisdiction'' is defined as

``governments of * * * districts, with a population of less than fifty

thousand.'' There are 85,006 governmental entities in the United

States. This number includes such entities as states, counties, cities,

utility districts and school districts. We note that restrictions

concerning antenna installation are usually promulgated by cities,

towns and counties, not school or utility districts. Of the 85,006

governmental entities, 38,978 are counties, cities and towns; and of

those, 37,566, or 96%, have populations of fewer than 50,000. One

commenter estimates that there are 37,000 ``small governmental

jurisdictions'' that may be affected by the proposed rule.

67. Section 601(4) of the Regulatory Flexibility Act defines

``small organization'' as ``any not-for-profit enterprise which is

independently owned and operated and is not dominant in its field.''

This definition includes homeowner and condominium associations that

operate as not-for-profit organizations. An industry association

estimates that there were 150,000 associations in 1993. Given the

nature of a neighborhood association, we assume for the purposes of

this FRFA that all 150,000 associations are small organizations.

68. A small business concern is one which: (1) is independently

owned and operated; (2) is not dominant in its field of operation; and

(3) satisfies any additional criteria established by the Small Business

Administration (SBA). Industry sources estimate that the following SIC

codes apply to this industry: SIC Codes 6512 (operators of

nonresidential buildings), 6513 (operators of apartment buildings), and

6514 (operators of dwellings other than apartment buildings). The SBA

defines a small entity in each of these codes as one with less than

$5,000,000 in gross annual revenues. Based on census data that lists

businesses according to these SIC codes and their total revenue,

industry sources state that there are 28,089 operators of

nonresidential buildings and 39,903 operators of apartment buildings.

Industry sources state the Bureau of Census includes operators of

dwellings other than apartment buildings in the same category as other

types of businesses, but states that the figures for this category as a

whole show that the number of operators of dwellings other than

apartment buildings are similar to the numbers of operators covered by

SIC codes 6512 and 6513.

Description of Projected Reporting, Recordkeeping, and Other

Compliance Requirements

69. The rules adopted will result in no changes to reporting,

recordkeeping, or other compliance requirements beyond those already

required under the Section 207 rules.

Steps Taken To Minimize Significant Economic Impact on Small

Entities, and Significant Alternatives Rejected

70. In the Report and Order, the Commission analyzed steps to

minimize the impact on small entities, and because the steps the

Commission took in the Report and Order also minimize the impact on the

small entities impacted by the new rule, we reiterate here the steps

taken in the Report and Order:

The Commission considered various alternatives that would have

impacted small entities to varying extents. These included a

rebuttable presumption approach, the use of the term ``affect'' in

the rule, and a rule that allowed for adjudicatory proceedings in

courts of competent jurisdiction, all of which were adopted in the

DBS Order and Further Notice and proposed in the TVBS-MMDS Notice.

The rule we adopt today replaces the rebuttable presumption with a

simpler preemption approach, adheres to the statutory language by

using the term ``impair'' rather than ``affect'' in the rule, and

allows for adjudication at the Commission. * * * We believe that we

have effectively minimized the rule's economic impact on small

entities.

In the DBS Order and Further Notice and the TVBS-MMDS Notice, we

adopted and proposed, respectively, a rebuttable presumption

approach to governmental regulations, and proposed strict preemption

of nongovernmental restrictions. We acknowledged in the DBS Order

and Further Notice that a rule relying on a presumptive approach

would be more difficult to administer than a rule based upon a per

se prohibition, and we sought comment in the TVBS-MMDS Notice on

less burdensome approaches. Under the rebuttable presumption

approach, local governments would have been required to request a

declaratory ruling from the Commission every time they sought to

enforce or enact a restriction; and neighborhood associations would

not have been able to enforce or enact any restrictions that

impaired a viewer's ability to receive the signals in question. The

rebuttable presumption approach was adopted to ensure the protection

of local interests, including local governments. Based on the

record, the Commission recognizes that the burden of rebutting a

presumption could strain the resources of local authorities. The

Commission has rejected the rebuttable presumption approach for a

less burdensome preemption approach. In addition we have provided

recourse for both neighborhood associations and municipalities. The

rule we adopt today provides for a per se prohibition of

restrictions that impair a viewer's ability to install, maintain or

use devices designed for over-the-air reception of video programming

services. The Report and Order provides examples of reasonable

regulations that can be enforced without a waiver application. The

Commission believes that the Report and Order provides such clarity

as will make the enforcement of the rule the most efficient and

least burdensome for local governments, neighborhood associations,

and this Commission.

In adopting the new rule, the Commission rejected the

alternative of preempting all restrictions that ``affect'' the

reception of video programming services through devices designed for

over-the-air reception of TVBS, MMDS and DBS services. The new rule

prohibits only those local restrictions that ``impair'' a viewer's

ability to receive these signals and exempts restrictions necessary

to ensure safety or to preserve historic districts. In defining the

term ``impair'' we reject the interpretation that impair means

prevent because that definition would not properly implement

Congress' objective of promoting competition. We find that a

restriction impairs a viewer's ability to receive over-the-

[[Page 71036]]

air video programming signals, if it (a) unreasonably delays or

prevents installation, maintenance or use of a device used for the

reception of over-the-air video programming signals by DBS, TVBS, or

MMDS; (b) unreasonably increases the cost of installation,

maintenance or use of such devices; (c) precludes reception of an

acceptable quality signal. The use of the term impair will decrease

the burden on small entities while implementing Congress' objective.

* * *

Waiver proceedings will be paper hearings, allowing the

Commission to alleviate the negative potential economic impact from

costly litigation. Further, any regulations necessary to the

safeguarding of safety will remain enforceable pending the

Commission's resolution of waiver requests. The Commission believes

that the rule we adopt today effectively implements Congress' intent

while minimizing any significant economic impact on small entities.

Report to Congress: The Commission will send a copy of this Second

Report and Order, including this FRFA, in a report to Congress pursuant

to the Small Business Regulatory Enforcement Fairness Act of 1996, 5

U.S.C. 801(a)(1)(A).

Ordering Clauses

71. Accordingly, it is ordered that, pursuant to authority found in

Sections 4(i) and 303 of the Communications Act of 1934, as amended, 47

U.S.C. 154(i), and 303, and Section 207 of the Telecommunications Act

of 1996, that the amendments to 47 CFR 1.4000 discussed in this Second

Report and Order are adopted. These amendments shall become effective

30 days after publication in the Federal Register.

72. It is further ordered that the Commission's Office of Public

Affairs, Reference Operations Division, shall send a copy of this

Second Report and Order, including the Final Regulatory Flexibility

Analysis, to the Chief Counsel for Advocacy of the Small Business

Administration in accordance with paragraph 603(a) of the Regulatory

Flexibility Act, Pub. L. No. 96-354, 94 Stat. 1164, 5 U.S.C. 601 et.

seq.

List of Subjects in 47 CFR Part 1

Antenna, Satellite, Telecommunications, Television.

Federal Communications Commission.

Magalie Roman Salas,

Secretary.

Rule Changes

Part 1 of Title 47 of the Code of Federal Regulations is amended to

read as follows:

PART 1--PRACTICE AND PROCEDURE

1. The authority citation for Part 1 is revised to read as follows:

Authority: 47 U.S.C. 151, 154(i), 154(j), 155, 225, 303(r), 309.

2. Section 1.4000 is revised to read as follows:

Sec. 1.4000 Restrictions impairing reception of television broadcast

signals, direct broadcast satellite services or multichannel multipoint

distribution services.

(a)(1) Any restriction, including but not limited to any state or

local law or regulation, including zoning, land-use, or building

regulations, or any private covenant, contract provision, lease

provision, homeowners' association rule or similar restriction, on

property within the exclusive use or control of the antenna user where

the user has a direct or indirect ownership or leasehold interest in

the property that impairs the installation, maintenance, or use of:

(i) An antenna that is designed to receive direct broadcast

satellite service, including direct-to-home satellite services, that is

one meter or less in diameter or is located in Alaska;

(ii) An antenna that is designed to receive video programming

services via multipoint distribution services, including multichannel

multipoint distribution services, instructional television fixed

services, and local multipoint distribution services, and that is one

meter or less in diameter or diagonal measurement;

(iii) An antenna that is designed to receive television broadcast

signals; or

(iv) A mast supporting an antenna described in paragraphs

(a)(1)(i), (a)(1)(ii) or (a)(1)(iii) of this section;

is prohibited to the extent it so impairs, subject to paragraph (b)

of this section.

(2) For purposes of this section, a law, regulation or restriction

impairs installation, maintenance or use of an antenna if it:

(i) Unreasonably delays or prevents installation, maintenance or

use,

(ii) Unreasonably increases the cost of installation, maintenance

or use, or

(iii) Precludes reception of an acceptable quality signal.

(3) Any fee or cost imposed on a viewer by a rule, law, regulation

or restriction must be reasonable in light of the cost of the equipment

or services and the rule, law, regulation or restriction's treatment of

comparable devices. No civil, criminal, administrative, or other legal

action of any kind shall be taken to enforce any restriction or

regulation prohibited by this section except pursuant to paragraph (c)

or (d) of this section. In addition, except with respect to

restrictions pertaining to safety and historic preservation as

described in paragraph (b) of this section, if a proceeding is

initiated pursuant to paragraph (c) or (d) of this section, the entity

seeking to enforce the antenna restrictions in question must suspend

all enforcement efforts pending completion of review. No attorney's

fees shall be collected or assessed and no fine or other penalties

shall accrue against an antenna user while a proceeding is pending to

determine the validity of any restriction. If a ruling is issued

adverse to a viewer, the viewer shall be granted at least a 21-day

grace period in which to comply with the adverse ruling; and neither a

fine nor a penalty may be collected from the viewer if the viewer

complies with the adverse ruling during this grace period, unless the

proponent of the restriction demonstrates, in the same proceeding which

resulted in the adverse ruling, that the viewer's claim in the

proceeding was frivolous.

(b) Any restriction otherwise prohibited by paragraph (a) of this

section is permitted if:

(1) It is necessary to accomplish a clearly defined, legitimate

safety objective that is either stated in the text, preamble or

legislative history of the restriction or described as applying to that

restriction in a document that is readily available to antenna users,

and would be applied to the extent practicable in a non-discriminatory

manner to other appurtenances, devices, or fixtures that are comparable

in size and weight and pose a similar or greater safety risk as these

antennas and to which local regulation would normally apply; or

(2) It is necessary to preserve a prehistoric or historic district,

site, building, structure or object included in, or eligible for

inclusion on, the National Register of Historic Places, as set forth in

the National Historic Preservation Act of 1966, as amended, 16 U.S.C.

470, and imposes no greater restrictions on antennas covered by this

rule than are imposed on the installation, maintenance or use of other

modern appurtenances, devices or fixtures that are comparable in size,

weight, and appearance to these antennas; and

(3) It is no more burdensome to affected antenna users than is

necessary to achieve the objectives described in paragraph (b)(1) or

(b) (2) of this section.

(c) Local governments or associations may apply to the Commission

for a waiver of this section under Sec. 1.3. Waiver requests must

comply with the

[[Page 71037]]

procedures in paragraphs (e) and (g) of this section and will be put on

public notice. The Commission may grant a waiver upon a showing by the

applicant of local concerns of a highly specialized or unusual nature.

No petition for waiver shall be considered unless it specifies the

restriction at issue. Waivers granted in accordance with this section

shall not apply to restrictions amended or enacted after the waiver is

granted. Any responsive pleadings must be served on all parties and

filed within 30 days after release of a public notice that such

petition has been filed. Any replies must be filed within 15 days

thereafter.

(d) Parties may petition the Commission for a declaratory ruling

under Sec. 1.2, or a court of competent jurisdiction, to determine

whether a particular restriction is permissible or prohibited under

this section. Petitions to the Commission must comply with the

procedures in paragraphs (e) and (g) of this section and will be put on

public notice. Any responsive pleadings in a Commission proceeding must

be served on all parties and filed within 30 days after release of a

public notice that such petition has been filed. Any replies in a

Commission proceeding must be served on all parties and filed within 15

days thereafter.

(e) Copies of petitions for declaratory rulings and waivers must be

served on interested parties, including parties against whom the

petitioner seeks to enforce the restriction or parties whose

restrictions the petitioner seeks to prohibit. A certificate of service

stating on whom the petition was served must be filed with the

petition. In addition, in a Commission proceeding brought by an

association or a local government, constructive notice of the

proceeding must be given to members of the association or to the

citizens under the local government's jurisdiction. In a court

proceeding brought by an association, an association must give

constructive notice of the proceeding to its members. Where

constructive notice is required, the petitioner or plaintiff must file

with the Commission or the court overseeing the proceeding a copy of

the constructive notice with a statement explaining where the notice

was placed and why such placement was reasonable.

(f) In any proceeding regarding the scope or interpretation of any

provision of this section, the burden of demonstrating that a

particular governmental or nongovernmental restriction complies with

this section and does not impair the installation, maintenance or use

of devices designed for over-the-air reception of video programming

services shall be on the party that seeks to impose or maintain the

restriction.

(g) All allegations of fact contained in petitions and related

pleadings before the Commission must be supported by affidavit of a

person or persons with actual knowledge thereof. An original and two

copies of all petitions and pleadings should be addressed to the

Secretary, Federal Communications Commission, 445 12th St. S.W.,

Washington, D.C. 20554, Attention: Cable Services Bureau. Copies of the

petitions and related pleadings will be available for public inspection

in the Cable Reference Room in Washington, D.C. Copies will be

available for purchase from the Commission's contract copy center, and

Commission decisions will be available on the Internet.

Note: The following statements will not appear in the Code of

Federal Regulations:

Separate Statement of Chairman William E. Kennard

In the Matter of Implementation of Section 207 of the

Telecommunications Act of 1996:

Preempting Restrictions on Over-the-Air Reception Devices

Today we complete our proceeding to remove restrictions on

consumers' ability to access video programming offered by means

other than cable. I am proud of the Commission's work to expand the

Over-the-Air Reception Devices rule up to the limits of the

authority Congress gave us in Section 207 of the Telecommunications

Act of 1996.

As a result of Section 207 and our rules, thousands of consumers

now are able to receive television programming through small

satellite dishes, wireless cable or traditional ``stick'' antennas.

The action we take today extends that ability to consumers who rent

their homes or apartments and have a place within their rental

property to install an antenna. Our rule brings choice to renters

who live in high-rise buildings and have a balcony on which to

install an antenna, just as owners of condominium units may install

an antenna on their balconies and owners or renters of townhouses

may have an antenna on their patios. The Commission has thus

eliminated the have-and-have-not distinction that gave homeowners

access to the competitive video market but denied it to all

apartment dwellers.

I am disappointed that Section 207 did not permit us to go as

far as we might have to promote competition and eliminate barriers

for all consumers. In my view, it is vitally important that all

consumers have the ability to select the video programmer of their

choice. However, Section 207 directed us only to ``prohibit

restrictions'' on the receipt of video programming and, as this

Second Report and Order describes, prohibiting restrictions can only

take us part of the way. Section 207 does not authorize the

Commission to impose an affirmative duty on landlords to provide

access for competitive video providers, and the statute does not

clearly address the Constitutional requirement for ``just

compensation'' that may be necessary to give consumers access to the

roof or common areas of the landlord's property. Nonetheless, I am

committed to working toward a complete solution to this problem.

When we released the Fourth Annual Competition Report at the

beginning of this year, I mentioned my hope that Congress and the

Commission would work together to evaluate statutory proposals to

eliminate barriers to competition. I am especially interested in

working with Congress to find ways to provide access to competitive

video services for more consumers.

Statement of Commissioner Harold Furchtgott-Roth, Dissenting in Part In

the Matter of Implementation of Section 207 of the Telecommunications

Act of 1996, Restrictions on Over-the-Air Reception Devices: Television

Broadcast Service and Multichannel Multipoint Distribution Service, CS

Docket No. 96-83

I fully concur in the Commission's excellent decision not to

extend our section 207 rules to cover common and restricted access

property. I also join in the conclusions reached with respect to the

Equal Protection Clause and First Amendment. For the well-

articulated reasons that such property should not be governed by

these rules, however, neither should rental property. I therefore

respectfully dissent from that part of today's Report & Order

(``R&O'') which subjects leased property to regulation under section

207.

In deciding that application of our over-the-air reception

device (``OTARD'') regulations to common and restricted access

property would raise grave questions under the Takings Clause, the

R&O reasons that, as in Loretto v. Teleprompter Manhattan CATV Corp,

458 U.S. 419 (1982), ``the physical occupation here would involve

the direct attachment of video reception devices to'' the property.

Supra at para. 36. Such an attachment, the R&O continues, would

constitute a ``permanent physical occupation'' and consequently a

per se taking. Id. But the very same ``direct attachment of video

reception devices'' to property would occur in the rental property

context. Thus, the attachment of reception devices to rental

property is as much a ``permanent physical occupation'' within the

meaning of the Takings Clause as the attachment of such devices to

common and restricted access property.

Nevertheless, the R&O concludes that extension of the OTARD

rules to rental property would occasion no per se taking. For this

conclusion, the R&O relies on the proposition that when ``the

private property owner voluntarily agrees to the possession of its

property by another, the government can regulate the terms and

conditions of that possession without effecting a per se taking.''

Supra at para. 17 (citing FCC v. Florida Power, 480 U.S. 245

(1987)). Although the Commission attempts to frame this rule in

terms of ``possession,'' Florida Power clearly speaks in terms of

the ``occupation'' of the relevant property. See 480 U.S. at 252;

see also Yee v. Escondido, 503 U.S. 519, 527

[[Page 71038]]

(1992). Thus, the Commission's emphasis on possession does not exist

in the relevant case law. It is the occupation, i.e., the ``required

acquiescence,'' Florida Power, 480 U.S. at 252, that counts under

the Takings Clause. It is that act that could theoretically slice

through an owner's bundle of property rights--rights that include

the ability not just to possess, but also to use and dispose of

property. See Loretto, 458 U.S. at 435.

I must doubt the applicability of Florida Power, however, and

for this fundamental reason: the particular occupation to which the

landlord has ``voluntarily agree[d]'' is necessarily defined by the

terms of the lease. That legal document is the primary determinant

of the property rights that have, or have not been, transferred from

owner to tenant, and there are myriad allocations of property rights

to which landlords and tenants might agree. For this reason, I think

the R&O goes too far when it states that ``[t]ypically, for

apartments, [leased property under the exclusive possession of the

viewer] will include balconies, balcony railings and terraces'' and

that for ``rented single family homes or manufactured homes which

sit on rented property, it will typically include patios, yards or

gardens within the leasehold.'' Supra. We cannot prescribe general

federalized lease terms (although I fear that may be the logical

implication of this decision), and the very nature of contracts is

that their terms can be customized to suit the particular

circumstances in which the parties find themselves. Where a landlord

has expressly included lease provisions prohibiting the attachment

of certain equipment to rental property, it cannot be said that he

has consented to such an occupation of his property.

In other words, if the landlord has not agreed to a certain

occupation or use of his property, there can be no theory of consent

with respect to the prohibited occupation or use that would prevent

application of the Takings Clause. Cf. Declaration of Charles M.

Haar in Support of Reply Comments of National Apartment Association

et al., at 24-25 (``The notion of implied consent to use the

property * * * is not applicable here where the owners are careful

to delineate the boundaries of the demised property to exclude areas

such as the roof and exterior walls.''). Admittedly, a tenant who

occupies property subject to certain contractual limitations is not

a complete stranger to the property, but as far as contractually

restricted uses of that property are concerned, the law does indeed

deem him ``an interloper.'' Florida Power, 480 U.S. at 252.

Indeed, the R&O repeatedly recognizes this very point--namely,

that the government can regulate property use only within the

boundaries of the property rights that have actually been conferred

upon the tenant--in the discussion of common and restricted access

property. For instance, in rejecting the argument that the

Commission could strike down lease provisions limiting tenant usage

of, or access to, common and other property, the R&O correctly

explains that ``[s]o long as a tenant owns the reception device

placed in a common or restricted access area, and the terms of the

tenant's lease * * * or other agreement do not give the tenant the

right to exclusively possess any portion of this property, the

landlord's * * * property would be subjected to an uninvited

permanent physical occupation.'' Supra at para. 39 (emphasis added).

If placement of a reception device on property such as a balcony or

exterior wall adjoining a tenant's apartment is barred by the rental

contract, however, then the landlord would be equally subject to an

``uninvited'' invasion of his property--the forced introduction of

the prohibited attachment--if the tenant nevertheless affixed a

device on that property. Just as ``the landlord does not invite the

tenant to take possession of common and restricted access

property,'' supra at para. 35, so too the landlord has not invited

the tenant to use the property for the attachment of reception

devices. Accordingly, to say that the attachment of devices to

rental property is like the attachment of ``rabbit ears'' to a

television set, see supra at para. 19, does not advance the ball in

this game: the critical question is whether the person who owns the

equipment is the same person who owns the property to which it is

permanently affixed, which the R&O makes clear in its section on

restricted access property. See supra at para. 39 (noting

``critical'' issue that ``ownership of the property (i.e., the

hypothetically required cable equipment) must rest with the

landlord''). And, if the rabbit ears are the property of some third

party and their placement is mandated by the government, that would

raise the issue of a per se Taking.

Similarly, in declining to rely on Florida Power in the context

of restricted and common property, the R&O notes that ``the agreed-

upon scope of the physical possession is set forth in the lease or

other controlling document.'' Supra at para. 41. As noted, supra, it

is the permanent, physical occupation of the owner's property (which

could be a number of different kinds of invasions), not just the

extent of the possession of the property (which is only one of

several kinds of property rights that might be adversely affected by

an occupation of the property), that triggers the Takings Clause. As

discussed above, the same is true in the rental property situation.

Location of a reception device on an exterior wall when such action

is barred by the lease is no more ``agreed-upon'' than placement of

a reception device on a rooftop when that particular action is

prohibited by the lease. In both cases, what matters is the

``agreed-upon scope'' of the tenant's legal rights with respect to

the property in question. Although the majority counters that

``[f]or takings purposes, the lease is [only] relevant in defining

the physical area of consensual occupation (e.g., the apartment but

not the roof or exterior walls),'' supra at para. 22, no support for

that assertion is provided.

Given the primacy of the lease agreement in defining the

respective property rights of landlords and tenants in leased

property, the standard adopted in this Order--namely, that tenants

can attach devices to property ``within their leasehold,'' supra at

para. 8--is entirely circular. The property rights that are ``within

a leasehold'' can only be ascertained by reference to the lease, but

this item prohibits any lease restrictions that impair attachments,

and so it is impossible to limit our regulation in this area to

property rights actually possessed by the leaseholder. Accordingly,

it is hard to see, as a matter of black letter contract law, what it

means for attachment to be authorized ``within a leasehold'' and yet

undertaken ``without the landlord's permission.'' Supra at 11.

I question the force of Florida Power in the context of this R&O

for another reason: that case was about what the Supreme Court

called ``economic regulation'' of commercial agreements. As the

Court explained, ``statutes regulating the economic relations of

landlords and tenants are not per se takings'' under Loretto. 480

U.S. at 252 (emphasis added). While it is certainly true that simple

price regulation would fall within this standard--and those were the

facts in Florida Power--this item, by contrast, does not involve the

regulation of the economic status of landlords with respect to

tenants. Rather, it involves the regulation of their respective

property rights; it transfers from the landlord to the tenant a

previously unpossessed and intentionally retained aspect of the

right to use the property. And it does so without providing for any

compensation to the landlord, much less ``just'' compensation. What

I question here, primarily, is the logic of the distinction that the

majority has drawn in concluding that the application of OTARD rules

presents a per se taking in one area where a tenant lacks the

necessary property rights but not in the other. Even if there is no

per se Taking in these situations, however, the extension of section

207 to rental property certainly creates a potential regulatory

taking. See Declaration of Charles M. Haar in Support of Reply

Comments of National Apartment Association et al., at 6-9 (arguing

that, under the factors set forth in Penn Central Transportation Co.

v. New York City, 438 U.S. 104 (1978), subjecting rental property to

OTARD regulation would occasion a regulatory taking).

If the foregoing does not create a Takings Clause problem, then

at least the circularity of the amendment adopted today indicates

that, as a structural matter, section 207 was probably never

intended to apply to viewers who had no ownership interest in the

relevant property. When section 207 is limited to governmental and

homeowners' association limits on reception devices, as opposed to

lease restrictions, this problem of circularity disappears.

Finally, I note that in erecting its distinction between the

legal significance of attaching devices to rental property and to

common/restricted access property, the R&O appears to assume that

just because a landlord has agreed to the exclusive possession of

certain property by a tenant, he has thereby transferred to the

tenant an absolute right to use that property. This is in error.

A landlord is not obliged to turn over to a tenant the entire

``use'' strand in his bundle of property rights. If he chooses, and

the tenant agrees, he can confer a limited right to use upon the

tenant. Even the language of the R&O belies this fundamental

premise. See, e.g., para. 18 (noting that ``to a large extent [but

not entirely, if contractual usage

[[Page 71039]]

limitations exist!], the property owner relinquishes its right to

control the use of its property when it leases the property''); id.

(noting ``that (absent a valid restriction) a tenant may put the

leased premises to whatever lawful purpose it so desires'')

(citation omitted). In fact, use restrictions on property that

tenants have the exclusive right to occupy and possess are

commonplace. For example, I may possess the exclusive right to

occupy the patio adjacent to my apartment, and I may also have an

exclusive right generally to use it. But the landlord can, by power

of private contract, restrict my use of the balcony: that is,

notwithstanding my exclusive right to occupy and generally use the

balcony, I may not be legally entitled to, say, hang laundry on its

rails or store my bicycle there. The landlord has chosen not to

bargain away those aspects of his right to use the property and thus

retains them.

I do not think that section 207 authorizes us to deprive

landlords of their right to retain aspects of the right to use their

property. Conversely, I do not think that section 207 authorizes us

to bestow new property rights upon tenants--here, the right to use

property for certain purposes--at the expense of landlords. Although

the item reasons that the statute does not ``direct the Commission

to impose affirmative duties on'' non-viewers ``to grant access to

restricted areas to permit the installation of'' reception devices,

supra, that is exactly what the rules governing rental property do.

They require landlords to transfer certain usage rights to tenants

in order to allow them to attach devices; that is surely an

affirmative act and, now, a federal obligation.

To be sure, the language of section 207 is exceedingly broad,

obliging us to adopt regulations ``to prohibit restrictions that

impair a viewer's ability to receive video programming services

through devices designed for over-the-air reception'' of services.

But we should always read these kinds of statutes against the

backdrop of the Takings Clause, as Bell Atlantic Co. v. FCC teaches.

See 24 F.3d 1441 (D.C. Cir. 1994). Because of the Takings issues

that are at least arguably raised here, I would stop short of

extending these rules to viewers who lack an ownership interest in

the property to which they wish to affix reception devices. There is

no question but that the Commission met its obligation under section

207 in the first R&O by outlawing governmental and homeowners'

association rules that impair viewers' abilities to employ reception

devices. There is no statutory need to go further and create

constitutional problems by extending the rules to property in which

viewers lack any ownership interest.

To sum up, it is not clear to me that there is a significant

difference, for purposes of Takings Clause analysis, between lease

provisions that prohibit the installation of reception devices in

common/restricted access areas and lease provisions that do so in

other rental property areas. Under Florida Power, the

constitutionality of the OTARD rules in either context turns on the

question of consent and, thus, on the terms of the particular

agreement between the landlord and the tenant. It seems to me that

if one of these situations presents Takings problems, as this item

concludes, then so does the other. Moreover, the circularity of the

standard adopted today suggests that section 207 was never meant to

apply outside the context of property in which the viewer has an

ownership interest. For these reasons, and because the decision to

extend OTARD rules to leased property is a generally unnecessary

incursion on private property rights, I respectfully dissent.

[FR Doc. 98-33869 Filed 12-22-98; 8:45 am]

BILLING CODE 6712-01-U