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June 30, 2008, Alert No. 1,787.
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6th Circuit Upholds FCC's Video Franchising Rules

6/26. The U.S. Court of Appeals (6thCir) issued its opinion [20 pages in PDF] in Alliance for Community Media v. FCC, upholding the Federal Communications Commission's (FCC) 2006 video franchising order.

Local franchising authorities (LFAs), groups that represent LFAs, and the National Cable Telecommunications Association (NCTA) filed petitions for review, arguing that the FCC lacked statutory authority, that its interpretation is not entitled to deference, and the order is arbitrary and capricious.

The Court of Appeals denied the petitions, concluding that "the FCC acted well within its statutorily delineated authority in enacting the Order and that there exists sufficient record evidence to indicate that the FCC did not engage in arbitrary-and-capricious rulemaking activity."

Background. Both the Congress and the FCC, and states and their LFAs, are involved in regulating cable services. New entrants, including telecommunications companies deploying and offering video, broadband and voice services over fiber optic cable, complained that some LFAs' video franchising processes were outdated, and resulted in unreasonable delays and burdens for new entrants.

There were efforts in the 109th Congress to enact a comprehensive communications reform bill that included video franchising reform. The House passed a bill. The Senate Commerce Committee passed a different bill. However, the legislation progressed no further, and those bills lapsed at the end of the 109th Congress.

The FCC has certain statutory authority with respect to LFAs. Section 621 of the Communications Act of 1934, which was added by the Cable Television Consumer Protection and Competition Act of 1992, is codified at 47 U.S.C. § 541.

Subsection (a)(1) provides that "A franchising authority may award, in accordance with the provisions of this subchapter, 1 or more franchises within its jurisdiction; except that a franchising authority may not grant an exclusive franchise and may not unreasonably refuse to award an additional competitive franchise. Any applicant whose application for a second franchise has been denied by a final decision of the franchising authority may appeal such final decision pursuant to the provisions of section 555 of this title for failure to comply with this subsection."

In addition, the FCC sometimes functions in a manner that has attributes of legislative action. For example, it sometimes is urged by members of Congress to promulgate rules following failed efforts by the Congress to enact legislation. Promulgating FCC rules requires only three out of five votes on one occasion. In contrast, enacting legislation involves getting past votes in both the House and Senate, in addition to votes in committees, filabusters, and other obstacles. In the case of video franchising reform, the FCC picked up where the Congress left off.

The FCC concluded that process of getting franchises from some LFAs was unreasonably difficult, and amounted to unreasonable refusal to award a competitive franchise within the meaning of Section 621.

The FCC's order also adopted rules governing the local franchising process. It established timing requirements for the award of franchises, established limits on build out requirements, limited franchise fees, and placed limits on public, educational, or governmental (PEG) access mandates.

The FCC also preempted local laws, regulations, and requirements, to the extent they impose greater restrictions on market entry than the FCC's rules.

The FCC adopted this order on December 20, 2006. See, story titled "FCC Adopts Order Affecting Local Franchising Authorities" in TLJ Daily E-Mail Alert No. 1,510, December 27, 2006. The FCC released the text [109 pages in PDF] on March 5, 2007. See, story titled "FCC Releases Text of Video Franchising Order and Further NPRM" in TLJ Daily E-Mail Alert No. 1,548, March 7, 2007. The order is FCC 06-180 in MB Docket 05-311.

FCC Commissioner Jonathan Adelstein dissented from this original order. He wrote then that the FCC "goes out on a limb in asserting federal authority to preempt local governments, and then saws the limb off with a highly dubious legal and policy scheme that substitutes our judgment as to what is reasonable for that of local officials -- all in violation of the franchising framework established in the Communications Act." See, story titled "Adelstein Opposes Franchising Order" also in TLJ Daily E-Mail Alert No. 1,510, December 27, 2006.

FCC Commissioner Michael Copps also dissented. In contrast, the three Republicans voted for the report and order.

The FCC also adopted a Second Report and Order on October 31, 2007. See also, story titled "FCC Adopts 2nd Report and Order on Video Franchising" in TLJ Daily E-Mail Alert No. 1,668, November 2, 2007.

Court of Appeals Opinion. The opinion first contains a long summary of the history of regulation of the cable industry. It then reviews the FCC's rule making process in this proceeding, and the content of the report and order.

Section 621(a)(1) bars unreasonable refusals to award additional franchises, but says nothing about the FCC.

The Court rejected the petitions' argument that the FCC lacked statutory authority under Section 621. It wrote that the petitioners are "correct in noting that, while the text expressly references franchising authorities, it is silent as to the agency’s role in the process of awarding cable franchises. Where petitioners’ argument falls short, however, is in equating the omission of the agency from section 621(a)(1) with an absence of rulemaking authority."

The Court noted that the last sentence of 47 U.S.C. § 201(b) provides that the FCC has authority to "may prescribe such rules and regulations as may be necessary in the public interest to carry out the provisions" of the Communications Act. And, Section 621 is a part of this.

It therefore wrote that "we are bound by this plain meaning and thereby conclude that, pursuant to section 201(b), the FCC possesses clear jurisdictional authority to formulate rules and regulations interpreting the contours of section 621(a)(1)."

The Court also noted that Section 621 provides a judicial remedy. It then concluded that "the availability of a judicial remedy for unreasonable denials of competitive franchise applications does not foreclose the agency’s rulemaking authority over section 621(a)(1)."

Next, the Court concluded that the FCC's conclusions are entitled to judicial deference under the Supreme Court's 1984 opinion in Chevron USA v. Natural Resources Defense Council, 467 U.S. 837, as to all challenged rules.

Finally, the Court rejected the petitioners' arbitrary and capricious argument.

Reaction. FCC Chairman Kevin Martin stated in a release that "I am pleased that the Court recognized and unanimously supported the Commission's authority and our rules. Over the last ten years, cable rates have more than doubled. Consumers need greater choice and more competition to help address the soaring price of cable television. This ruling helps ensure that new competitors to cable are not subjected to unreasonable delays, build-out requirements and fees when trying to compete with the incumbent cable operators."

Kevin MartinMartin (at right) also wrote that "when we adopted this item Dissenting Commissioner Adelstein publicly criticized the Bureau for having insufficient record evidence. I am particularly pleased that the Court directly addressed his claims, unanimously finding that there exists sufficient record evidence to indicate that 'the administrative record fully supported the agency's rulemaking and belies any claims of arbitrary or capricious regulatory activity'."

FCC Commissioner Robert McDowell, who also voted for the original order, wrote in a release that "I am pleased that the U.S. Court of Appeals for the Sixth Circuit upheld the Commission’s legal authority to encourage fair and full competition among video service providers. No governmental entities, including those of us at the FCC, should have any thumb on the scale to give a regulatory advantage to any competitor. Providing regulatory certainty to all market players is the best way to enhance video competition, accelerate broadband deployment and produce lower rates for consumers."

Joe Savage, head of the Fiber to the Home Council, stated in a release that this opinion "will help expand competition in video and broadband services in areas where, currently, companies that want to compete with established cable TV operators are forced to contend with the onerous process of obtaining individual franchises from each city or county. The more streamlined process envisioned in the FCC order, and supported today by the Court, will mean more choices for consumers in their video and broadband services, thereby keeping prices fair and services robust as providers upgrade their networks to compete."

Deborah Vinsel, head of the Alliance for Community Media, stated in the ACM web site that "We are very disappointed with the court’s decision which represents a loss for the public interest served by PEG and local franchising. We will be consulting with our allies in the proceeding to determine what next steps may be advisable."

She added that "There are a couple of relatively small bright spots in the decision, however. While the decision affirms the FCC’s finding that capital costs required by a franchise to be paid for PEG access facilities are exempted from the definition of franchise fees (as to which a maximum 5% of gross revenues can permissibly be charged), the court makes clear that such capital costs are not limited to the construction of facilities but may also include equipment. The court’s decision also makes clear that nothing in the FCC’s order prevents local franchise authorities from increasing PEG obligations upon renewal of incumbent franchises." (Parentheses in original.)

This case is Alliance for Community Media, et al. v. FCC, petitions for review of a final order of the FCC, App. Ct. Nos. 07-3391, 3569, 3570, 3571, 3572, 3573, 3574, 3673, 3674, 3675, 3676, 3677, and 3824. Judge Guy Cole wrote the opinion of the Court of Appeals, in which Judges Gibbons and Suhrheinrich joined.

7th Circuit Advocates Judicial Modesty and Deference in National Security Cases

6/26. The U.S. Court of Appeals (7thCir) issued its opinion in Rahman v. Chertoff, reversing the District Court's certification of two classes in a constitutional challenge to the delay of US citizens when entering the US because they are on watch lists maintained by the Department of Homeland Security (DHS).

Akifur Rahman and others filed a complaint in U.S. District Court (NDIll) against Michael Chertoff, the Secretary of Homeland Security, and others, alleging violation of their Constitutional rights. They seek class action status to represent persons who assert that they should not be on the lists, persons who are not on lists but are nevertheless stopped because of similarity or identicality of names, and persons who are on lists and contend that they should have low risk classifications.

The District Court certified two classes, and denied the government's motion to dismiss. The government brought the present appeal. However, the only issue on appeal is class certification.

The Court of Appeals reversed. However, it wrote an opinion that treads beyond the issue on appeal.

The Court of Appeals wrote that the underlying merits of the action are not at issue in this appeal because the denial of the motion to dismiss was interlocutory and non-appealable.

Nevertheless, the Court engaged in a sweeping discussion of national security, border security, false negative identifications, and false positive identifications. It also articulated a very narrow role for the judiciary in Constitutional challenges when national security is involved.

Judge Frank EasterbrookJudge Frank Easterbrook (at right) wrote the opinion of the Court of Appeals, in which Judges Michael Kanne and John Tinder joined.

Judge Easterbrook wrote that "modesty is the best posture for the branch that knows the least about protecting the nation's security and that lacks the full kit of tools possessed by the legislative and executive branches. Presidents, Cabinet officers, and Members of Congress can be dismissed by the people if they strike an unwise balance between false positives and false negatives, between inconvenience today and mayhem tomorrow; judges are immune from that supervision and must permit those who bear the blame for errors (in either direction) to assume the responsibility for management." (Parentheses in original.)

The plaintiffs argue that the government has violated their Constitutional rights. The Constitution is the law. And, as former Chief Justice John Marshall wrote, "It is emphatically the province and duty of the judicial department to say what the law is." See, the Supreme Court's 1803 opinion in Marbury v. Madison, 5 U.S. 137.

To defer to the government in this case on the basis that this matter is best left to the executive or legislative branches would be to depart from the Constitutional function that was envisioned by Marshall, and that is now a foundational principle of the judiciary.

Easterbrook did not elaborate on his statement on "modesty" and deference to other branches of government. Perhaps the gist of his statement is that the courts should only refrain from reviewing the Constitutionality of statutes and executive actions in matters involving "the nation's security". If courts were to defer in all Constitutional challenges, there were be few challenges left, because Constitutional protections limit governmental action.

And, perhaps he is also suggesting that the courts should restrict themselves to judicial review of statutes and regulations, and refrain from oversight of lesser administrative actions, such as practices of customs officials.

This case is Akifur Rahman, et al. v. Michael Chertoff, et al., U.S. Court of Appeals for the 7th Circuit, App. Ct. No. 07-3430, an appeal from the U.S. District Court for the Northern District of Illinois, Eastern Division, D.C. No. 05 C 3761, Judge Ronald Guzmán presiding.

Judges Easterbrook and Kanne were appointed to the Court of Appeals by former President Reagan. Judge Tinder was appointed to the District Court by Reagan, and elevated to the Court of Appeals by President Bush in 2007. Judge Guzman, whose judgment is reversed, was appointed to the District Court by former President Clinton.

Washington Tech Calendar
New items are highlighted in red.
Monday, June 30

The House will begin its July 4th recess. See, Rep. Hoyer's 2008 calendar [4.25 MB PDF].

The Senate will begin its July 4th recess. See, Senate 2008 calendar.

Accelerated deadline to submit initial comments to the Federal Communications Commission (FCC) in response to its notice of proposed rulemaking (NPRM) regarding small, minority owned and women owned businesses in broadcasting. See, original notice in the Federal Register, May 16, 2008, Vol. 73, No. 96, at Page 28400-28407, and notice accelerating comment deadlines in the Federal Register, May 29, 2008, Vol. 73, No. 104, at Page 30875. The FCC adopted this NPRM on December 18, 2007, and released the text on March 5, 2008. See, NPRM [70 pages in PDF], first corrections [2 pages in PDF] and second correction [2 pages in PDF]. This NPRM is FCC 07-217 in MB Docket Nos. 07-294, 06-121, 02-277, and 04-228, and MM Docket Nos. 01-235, 01-317, and 00-244.

Tuesday, July 1

The House will not meet.

The Senate will not meet.

9:00 - 10:30 AM. The American Constitution Society will host a panel discussion on the just completed Supreme Court term. Location: National Press Club, 13th floor, 529 14th St., NW.

9:00 AM - 4:00 PM. The The National Institute of Standards and Technology (NIST) will hold a public workshop regarding the establishment of a laboratory accreditation program for laboratories performing inoperability, performance, and conformance biometrics testing on Personal Identification Verification equipment. The Department of Homeland Security (DHS) requested that the NIST establish such a program. See, notice in the Federal Register, June 13, 2008, Vol. 73, No. 115, at Pages 33806-33807. Location: NIST, Green Auditorium, Gaithersburg, MD.

2:00 - 3:30 PM. The American Enterprise Institute (AEI) will host a book forum. The speakers will be Mark Krikorian (Center for Immigration Studies), author of the book [Amazon] titled "The New Case Against Immigration: Both Legal and Illegal", Jason Richwine (AEI), Fred Siegel (Progressive Policy Institute), and David Frum (AEI). See, notice. Location: AEI, 1150 17th St., NW.

Wednesday, July 2

The House will not meet.

The Senate will not meet.

12:00 NOON. The Cato Institute will host a discussion of the book [Amazon] titled "India: The Emerging Giant", by Arvind Panagariya (Columbia University). The speakers will be Panagariya and Swaminathan Aiyar (Cato). See, notice and registration page. Lunch will follow the program. Location: Cato, 1000 Massachusetts Ave., NW.

Deadline for transmittal of applications for awards for Fiscal Year 2009 from the Department of Education's (DOE) Technology and Media Services for Individuals with Disabilities program. This program provides awards to "support educational media services activities designed to be of educational value in the classroom setting to children with disabilities" and to "provide support for captioning and video description of educational materials that are appropriate for use in the classroom setting". See, notice in the Federal Register, June 2, 2008, Vol. 73, No. 106, at Pages 31442-31448.

Thursday, July 3

The House will not meet.

The Senate will not meet.

Deadline to submit comments to the National Institute of Standards and Technology's(NIST) Computer Security Division (CSD) regarding its NIST IR 7502 [24 pages in PDF] titled "The Common Configuration Scoring System".

Deadline to submit comments to the U.S. Patent and Trademark Office (USPTO) in response to its notice of proposed rulemaking regarding adjusting certain patent fee amounts for Fiscal Year 2009 to reflect change in the Consumer Price Index (CPI). See, notice in the Federal Register, June 3, 2008, Vol. 73, No. 107, at Pages 31655-31663.

Friday, July 4

Independence Day. See, Office of Personnel Management's (OPM) list of 2008 federal holidays.

The House will not meet.

The Senate will not meet.

Monday, July 7

The House will return from it July 4th recess.

The Senate will return from it July 4th recess. It will meet at 2:00 PM for morning business. At 3:00 PM, it will resume consideration of the House message to accompany HR 3221 [LOC | WW], the "American Housing Rescue and Foreclosure Prevention Act of 2008".

10:00 AM. The U.S. Court of Appeals (FedCir) will hear oral argument in Lucent v. Gateway, App. Ct. No. 2007-1546. Location: Courtroom 201, 717 Madison Place, NW.

10:00 AM. The U.S. Court of Appeals (FedCir) will hear oral argument in Carnegie Melleon v. Hoffman-La Roche, App. Ct. Nos. 2007-1266 and 2007-1267. Location: Courtroom 201, 717 Madison Place, NW.

Deadline to submit initial comments to the Federal Communications Commission (FCC) in response to its Second Further Notice of Proposed Rulemaking regarding assignment of Educational Broadband Service (EBS) spectrum in the Gulf of Mexico. The FCC adopted this item on March 18, 2008, and released the text [111 pages in PDF] on March 20, 2008. This item is FCC 08-03 in WT Docket Nos. 03-66; 03-67, and 02-68, IB Docket No. 02-364, and ET Docket No. 00-258.

Deadline to submit reply comments to the Federal Communications Commission (FCC) in response to its Second Further Notice of Proposed Rulemaking (2ndFNPRM) regarding reauctioning the D block of the 700 MHz auction (Auction No. 73). The FCC adopted this item on May 14, 2008. See, story titled "FCC Announces NPRM for D Block Auction" in TLJ Daily E-Mail Alert No. 1,766, May 14, 2008. The FCC later released the text [101 pages in PDF]. It is FCC 08-128 in WT Docket No. 06-150 and PS Docket No. 06-229. See, notice in the Federal Register, May 21, 2008, Vol. 73, No. 99, at Pages 29581-29623.

Deadline to submit reply comments to the Federal Communications Commission (FCC) regarding Verizon's and Qwest's request that the FCC grant them the same forbearance that it granted to AT&T in its April 24, 2008, Memorandum Opinion and Order [31 pages in PDF]. That MOO is FCC 08-120 in WC Docket No. 07-21 and WC Docket No. 05-342. See, notice in the Federal Register, June 12, 2008, Vol. 73, No. 114, at Pages 33430-33431.

More News

6/26. The U.S. Court of Appeals (1stCir) issued its opinion in US v. Stoupis, affirming the sentence imposed by the District Court in a criminal case involving wire fraud and mail fraud case. The defendant, Nicholas Stoupis, worked for Northrup Grumman (NG), which purchased equipment directly from Cisco. Stoupis placed orders with Cisco, which he had delivered to himself, and then auctioned via eBay. He was caught, and pled guilty. However, he challenged the length of his sentence, which, under the U.S. Sentencing Commission's Sentencing Guidelines, were calculated as a function of the value of his theft. He argued that the District Court overvalued his theft, and therefore, imposed too long of a sentence. He offered several theories for valuing the theft, including either the replacement cost, or the total of his eBay auction receipts -- $515,000. Instead, the District Court estimated the value at $4,700,000, based upon Cisco's retail prices for large purchasers such as NG. This case is USA v. Nicholas Stoupis, U.S. Court of Appeals for the 1st Circuit, App. Ct. No. 07-1410, an appeal from the U.S. District Court for the District of Massachusetts, Judge Richard Stearns presiding.

6/26. The U.S. Court of Appeals (1stCir) issued its opinion in US v. Conley, affirming a conviction that was obtained following the introduction into evidence of recorded phone calls between the defendant, Christopher Conley, and another person. There was no court warrant for the intercepts. However, the second party, an incarcerated person, consented to monitoring and recording. The District Court denied Conley's motion to suppress this evidence. The federal wiretap act, which is codified at 18 U.S.C. § 2510, et seq., prohibits intercepts of wire, oral, or electronic communications without a warrant. However, § 2511 provides that "It shall not be unlawful under this chapter for a person acting under color of law to intercept a wire, oral, or electronic communication, where such person is a party to the communication or one of the parties to the communication has given prior consent to such interception." The courts held that consent arose from recorded messages stating that calls are subject to monitoring, signs on prison walls, and similar circumstances. Moreover, the Court or Appeals rejected the argument the evidence should be suppressed on the grounds that the purpose of the monitoring, prison security, was unrelated to Conley's criminal acts. This case is USA v. Christopher Conley, U.S. Court of Appeals for the 1st Circuit, App. Ct. No. 07-2587, an appeal from the U.S. District Court for the District of Maine, Judge Brock Hornby presiding.

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