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Amicus Curiae Brief of Hands Off the Internet.
Re: AT&T v. Portland (cable access case), U.S.C.A., Ninth Circuit, Appeal No. 99-35609.

Date: August 11, 1999.

Editor's Notes:
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  Copyright Tech Law Journal, 1999. All rights reserved.


No. 99-35609

UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT

AT&T CORP.; TELE-COMMUNICATIONS,
INC.; TCI CABLEVISION OF OREGON, INC.  
AND TCI OF SOUTHERN WASHINGTON,

Appellants,

v.

CITY OF PORTLAND; MULTNOMAH
COUNTY; U.S. WEST INTERPRISE
AMERICA, INC.; GTE INTERNET-
WORKING INC.; OREGON INTERNET
SERVICE PROVIDER ASSOC.; AND OGC
TELECOMM,

Appellees.

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)   Notice of Appeal filed
)   June 14, 1999
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Appeal from United States District Court
for the District of Oregon, No.
CV 99-65 PA

BRIEF OF AMICUS CURIAE "HANDS OFF THE INTERNET" IN SUPPORT OF
APPELLANTS' PETITION TO REVERSE THE DISTRICT COURT'S DECISION

Dated: August 11, 1999  

Christopher Wolf
Michael C. Hochman
PROSKAUER ROSE LLP
1233 Twentieth Street, N.W.
Suite 800
Washington, D.C. 20036
(202) 416-6800

Attorneys for Amicus,
Hands Off the Internet

[begin page 1]

UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT

AT&T CORP.; TELE-COMMUNICATIONS,
INC.; TCI CABLEVISION OF OREGON, INC.  
AND TCI OF SOUTHERN WASHINGTON,

Appellants,

v.

CITY OF PORTLAND; MULTNOMAH
COUNTY; U.S. WEST INTERPRISE
AMERICA, INC.; GTE INTERNET-
WORKING INC.; OREGON INTERNET
SERVICE PROVIDER ASSOC.; AND OGC
TELECOMM,

Appellees.

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)
)
)
)
)   No. 99-35609
)
)   Notice of Appeal filed
)   June 14, 1999
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)
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)

BRIEF OF AMICUS CURIAE IN SUPPORT OF APPELLANTS' PETITION TO
REVERSE THE DISTRICT COURT'S DECISION

PRELIMINARY STATEMENT

There is an established federal policy concerning the regulation of broadband access, and that policy is: "Hands Off the Internet." Federal regulators carefully have considered the issue, and have determined that no regulation of broadband access is necessary or desirable. It has been determined by the Federal Communications Commission ("FCC"), which has been charged with responsibility in the area that restrictions or controls on those offering broadband access to the Internet -- in particular, cable companies -- would hinder the vigorous growth of the Internet as [begin page 2] a medium of communication, entertainment and commerce. Thus, our national broadband policy is one of unregulation.

FOOTNOTES

1  Internet access providers, such as America Online ("AOL"), and others, have advanced the arguments for so-called "open access" in Oregon, seeking access for themselves to broadband networks without having to pay to develop them At the same time, AOL is investing billions of dollars in other means to provide broadband access which will compete with cable, such as satellite and DSL telephone service, See June 21, 1999 AOL Press Release "America Online and Hughes Electronics Form Strategic Alliance to Market Unparalleled Digital Entertainment and Internet Services," (http://www-db.aol.com/corp/news/ press/view?release=669&) and July 27, 1999 AOL Press Release "America Online and GTE Partner to Bring Broadband ADSL Service to AOL Members," (http://www-db.aol.com/corp/news/ press/view?release=708&). Thus, the sole interest of those companies advocating the Oregon regulations at issue here is in obtaining a competitive advantage in the delivery of broadband services. They are seeking protectionist intervention despite having chosen terminology -- "open access" -- that suggests the opposite. See "How to Forge a Faster Net: Competition," Business Week, August 2, 1999 ("AOL is in a particularly tough spot because it sold off virtually all of its network so it could focus on marketing and developing content. Now it has almost no infrastructure of its own, much less anything that can match the speeds of cable net access.")

On the basis of unsupported arguments that cable holds, or threatens, a monopoly on broadband access, Appellees chose to override the national policy of unregulation, and imposed access regulations on Appellants that are completely inconsistent with federal law and policy.1 The decision below, upholding Appellees' actions, must be reversed on the basis of federal preemption, among other reasons.

At issue in this dispute is whether a merger between AT&T Corporation ("AT&T") and Tele-Communications, Inc. ("TCI"), which the FCC and DOJ have reviewed and approved, can be blocked by the unlawful acts of the City of Portland, Oregon ("City") and Multnomah County ("County"). As a condition to merger approval, the City and County demanded that AT&T and TCl provide access to TCI's cable facilities for all providers of Internet and online services.

Amicus, Hands Off the Internet ("HOTI"), believes that the Cable Communications Policy Act of 1984 ("Cable Act"), 47 U.S.C. 521 et seq., precludes the City and County from requiring [begin page 3] AT&T and TO to open their cable system to all online providers and ISPs. Thus, Amicus believes that the District Court erred in its decision finding that the City's and County's open access requirement did not abrogate the preemption clause of the Cable Act and in refusing to defer to the national policy of unregulation of broadband access. Amicus has moved to submit this brief by leave of the Court pursuant to Federal Rule of Appellate Procedure 29(a).

1.  INTEREST OF AMICUS -- A COALITION OF INTERNET USERS

Amicus, a non-profit corporation, is a coalition of Internet users united in the belief that the Internet's phenomenal growth stems from the ability of entrepreneurs to expand consumer choices and opportunities without unnecessary government regulation. Amicus supports an unregulated approach to Internet access in which consumers, not government, choose the method that is best for accessing the Internet. Amicus believes that consumers throughout America enjoy the results of this unregulated approach through such benefits as expanded distance education opportunities, improved access to information, on-line commerce, and a new, inexpensive way to communicate with family and colleagues. To that end, Amicus supports public policies that ensure the broadest possible range of choices for consumers and businesses using the Internet. The Internet has succeeded because of the minimal legislative and regulatory intrusion. This has led to expanded consumer choices and greater capital investment.

This is precisely why Amicus seeks to participate in this appeal. Amicus believes that the best way to avoid burdensome and unnecessary regulation and mandates is to ensure that market forces deliver the benefits that fair competition bring to the American consumer -- maximizing the number of Internet service providers, content, and technology. The City and County's mandatory access provision is anathema to this process. Currently, companies are racing to [begin page 4] develop a variety of high-speed Internet access systems, including cable, DSL, and wireless. The AT&T/TCI cable broadband services are one part of this competitive landscape.

Inevitably, if regulations like those in Portland are left to stand, regulation by other jurisdictions may follow. The result may well be that some communities will have competition in broadband services, including cable, and some communities (those imposing access obligations on cable systems) will not have such competition. Cable companies will have far less incentive to upgrade their systems to provide broadband access -- upgrades which cost in the many millions of dollars -- if they fear that they will have to share the benefits but not the costs of their investment with competitors. The resulting absence of competition in areas around the country will be distinctly at odds with the national policy to encourage broadband access development through unregulation, and will not be in our national interest of a growing Internet benefitting a growing number of people.

II.  ARGUMENT

1.  The Preemption Issue Is Not Academic As The Oregon Regulators Are Interfering With Federal Policy.

1.  The Issue Before the Court is Not a Theoretical Question of Federal Power.

The preemption issue before the Court is not an abstract or academic issue. Federal regulators have made clear their policy of not interfering with the marketplace for broadband services, based on a finding that regulation will harm consumers, and will interfere with the further growth of the Internet. Disparate state regulation of the Internet, as proposed by Appellees, poses a real threat to the current federal policy. Thus, it is important to consider the [begin page 5] policy context within which this dispute is being considered. The decision here has profound consequences for the future of the Internet.

2.  The FCC Has Established That Unregulation Of Internet Broadband Access Is In The Best National Interest.

1.  "Hands Off the Internet" is Our National Policy.

As recently as July 20, 1999, the Chairman of the FCC, William E. Kennard, made clear that the current federal policy with respect to regulating broadband access to the Internet is one of "intentional restraint." Remarks by FCC Chairman William E. Kennard before the Federal Communications Bar, Northern California Chapter, San Francisco, CA, July 20, 1999 ("FCC Policy Speech"). The FCC Chairman has made clear that "the FCC has taken a hands-off, deregulatory approach to the broadband market" and he has explained in detail why that is our established national policy. Id.

2  The backdrop against which this federal regulatory "hands off' policy was developed is [begin page 6] the "past 30 years [in which] the FCC has created a deregulatory environment in which the Internet could flourish." FCC Policy Speech.

Recognizing that "[b]roadband is the future of the Internet," Chairman Kennard observed that the broadband market "is fertile but still undeveloped." Id. With "at least four or five facilities-based competitors offering this [broadband] service: from DSL to cable, from terrestrial to wireless and even satellite," there is no monopoly requiring regulation, nor even a duopoly "We have a 'no-opoly[,]'" according to the FCC Chairman. Id. "There is no sign that consumers do not have other avenues to get broadband connections if they don't want to use cable. And finally, it is not clear that the perceived benefits of mandating open access outweigh their apparent economic and technological costs." Id. As a result, the federal policy is "to let the market forces churn" while the FCC "carefully monitor[s] the situation." Id.2

[begin page 7]

Thus, the federal agency with the greatest expertise in the area -- and the federal agency charged with regulatory responsibility -- has established clearly that regulation of broadband services over cable is distinctly against our national interests. Only with unfettered competition will cable companies have the incentive to invest in the facilities to provide broadband services, and only with unfettered competition can we expect broadband alternatives to cable (DSL, wireless, satellite) to be thoroughly developed. Competitors who are not given a free ride on cable systems developed by others will be incentivized to invest in and to develop their own alternatives. As the FCC has found, alternatives benefit consumers.

b.  Disparate Local Broadband Regulation Threatens Federal Policy.

HOTI anticipates that the FCC will inform this Court on its own of its displeasure with the decision below, but we note that the FCC publicly has objected to the actions of the Oregon authorities here, because of the effect that the actions of local franchising authorities could have on the national deregulatory policy concerning broadband deployment. FCC Policy Speech. Further, the FCC is not alone in its concern that without one national approach to Internet regulation, there could be a patchwork crazy quilt of regulation by tens of thousands of potential local regulators. On the issue of Internet taxation, Steven Case, Chairman and CEO of AOL observed, "It would be a big mistake to have 30,000 taxing jurisdictions impose their own laws, rules and rates on the Internet." Remarks of Steven Case at Upside Technology Summit, as reported by Cox News Service, September 17, 1998, "High Tech industry Frets As Issues Languish in Capital;" see also Remarks by FCC Chairman William E. Kennard before the National Cable Television Association, Chicago, IL, June 15, 1999 ("There are 30,000 local franchising authorities in the United States. If each and everyone of them decided on their own technical [begin page 8] standards for two-way communications on the cable infrastructure, there would be chaos. . . . [T]he Information Superhighway will not work if there are 30,000 different technical standards and 30,000 different regulatory structures for broadband.")

Unlike with the case of taxation, where new legislation was required to impose a now-temporary moratorium on Internet taxation at the local level -- to avoid mass and conflicting regulation, see Internet Tax Freedom Act, 47 U.S.C. 151, note (1999), there is a permanent moratorium on local regulation of cable broadband access. The recent pronouncements by Chairman Kennard make clear why one national policy is required. The policy decisions have already been made by Congress, and the special pleading addressed to the local franchising authorities and the court below cannot hold sway in the face of the contrary Congressional dictate to maintain a free market.

c.  The importance Of An Undisturbed National "Hands Off" Internet Policy Is Well-Established.

The national "hands off" Internet policy is a carefully-considered and well-documented one, adding even greater importance to the enforcement of federal law which requires reversal of the decision below on grounds of preemption.

In July of this year, the FCC Office of Plans and Policy issued a report entitled "The FCC and the Unregulation of the Internet" (OPP Working Paper No. 31) ("FCC Report"), which amplifies and documents Chairman Kennard's earlier remarks on our national Internet regulatory policy.

Observing that "[t]he Internet is becoming the most important Communications medium in history[,]" and that "[t]he Internet Economy generated over $300 billion in revenue in the U.S. [begin page 9] last year and is rapidly changing the way America does business[,]" the report establishes that "[t]he success of the Internet has not been an accidental development. Market forces have driven the Internet's growth, and the FCC has had an important role to play in creating a deregulatory environment in which the Internet could flourish." FCC Report (emphasis added).

With specific reference to fostering competitive broadband deployment, the FCC Report details how the FCC has built upon three decades of federal policy to make numerous decisions that foster the further growth and development of the Internet. "[T]he FCC has met the introduction of new communications technologies with the right attitude: let the marketplace, not the government, pick the winners and losers among new services." In short, the FCC Report concludes that "the Commission's three decades of hands-off deregulatory action towards data networks" has worked in the national interest, and has allowed the Internet to flourish.

The conclusions of the FCC on the merits of unregulation of broadband access are shared by others. See, e.g., City of Los Angeles Information Technology Agency, Broadband Access Report, June 1999 at 45-46 ("The future of broadband technology is wide open. Given the increase in the number of competing parties and competing technologies, each of which provides a viable high-speed on-ramp to the Internet, it does not appear at this time that regulatory intervention on the magnitude of open access is either prudent or advisable.") But unanimity or even consensus on the policy rationales employed by the FCC is not relevant to this Court's determination that regulation of broadband access via cable is uniquely a federal concern, and one that preempts the Oregon authorities from acting as they have here.

The Internet is progressing faster than anyone could possibly have foreseen, and premature regulation may trammel this extraordinary evolution. An example illustrates the point: [begin page 10] In 1995, the federal government threatened the Microsoft Corporation ("Microsoft") with an antitrust challenge over the company's marketing plans for its Microsoft Network ("MSN") online service, which was then perceived to be a threat to AOL and similar ISPs. However, MSN never evolved into the anti-competitive threat that those pushing for regulatory action feared, and the determination not to pursue legal action against Microsoft was the right decision (as exemplified by AOL's extreme dominance over MSN). See "USA Industry: America (And Everyone) Online," The Economist, September 13, 1997. Regulation of online service competition was unnecessary in 1995, and, similarly in 1999, the FCC's policy of "intentional restraint" toward broadband cable -- not premature regulation -- is the prudent course.

B.  The Cable Act Preempts The City And County From Requiring Mandatory Access To Appellants' Cable System.

With this background, we now proceed to show that the law requires that the Oregon actions be invalidated for violation of the preemption provisions of the Cable Act. In 1984, Congress passed the Cable Act to establish "a national policy concerning cable communications" and to generate "guidelines for the exercise of Federal, State, and local authority with respect to the regulation of cable systems." 47 U.S.C. 521(1), (3). "The Cable Act sought to balance two conflicting goals: 'preserv[ing] the critical role of municipal governments in the franchise process,' [citation omitted] while affirming the FCC's exclusive jurisdiction over cable service, and over [the] facilities which relate to such service. . . . [citation omitted].'" City of N.Y. v. FCC, 814 F.2d 720, 723 (D.C. Cir. 1987) (quoting H.R. Rep. No. 98-934, at 19, 95 (1984), reprinted in 1984 U.S.C.C.A.N. 4655, 4656, and 4732) (emphasis added), aff'd, 486 U.S. 57 (1988).

[begin page 11]

The legislative history of the Cable Act also reflects Congressional intent to restrict local governments' power over cable television:

H.R. 4103 establishes a national policy that clarifies the current system of local, state and Federal regulation of cable television. This policy continues reliance on the local franchising process as the primary means of cable television regulation, while defining and limiting the authority that a franchising authority may exercise through the franchising process.

H.R. Rep. No. 98-934 at 19 (emphasis added).

Section 636(c) of the Cable Act reflects Congressional intent to preempt "any provision of law of any State, political subdivision, or agency thereof, or franchising authority, or any provision of any franchise granted by such authority, which is inconsistent with this Act." 47 U.S.C. 556(c). Regulation that is inconsistent with either specific provisions or the overall structure of the Cable Act is impermissible. See Time Warner Entertainment Co., L.P. v. FCC, 56 F.3d 151, 196-97 (D.C. Cir. 1995). Congress included several provisions in the Cable Act that bolster this basic premise.

3  According to H.R. Rep. No, 98-934, with regard to Section 624, Congress "intended to provide procedures for and impose limitations on a franchising authority regarding the establishment of requirements related to services, facility, and equipment provided by a cable operator." H.R. Rep. No. 98-934 at 68 (emphasis added).

First, Section 624(a) provides, ,[a]ny franchising authority may not regulate the services, facilities, and equipment provided by a cable operator except to the extent consistent with this title." 47 U.S.C. 544(a).3 Congress fortified this section with the language of Section [begin page 12] 624(f)(1): "[a]ny Federal agency, State, or franchising authority may not impose requirements regarding the provision or content of cable services, except as expressly provided in this title." 47 U.S.C. 544(f)(1). Further, Section 624(b)(1) provides that a franchising authority may not "establish requirements for video programming or other information services." 47 U.S.C. 544(b)(1). In addition, Section 621(b)(3)(D) precludes local franchising authorities from imposing a condition on a franchise grant that would "require a cable operator to provide any telecommunications service or facilities . . . as a condition of . . . a transfer of a [cable] franchise." 47 U.S.C. 541(b)(3)(D).

1.  The City's and County's Mandatory Access Requirement Treats Appellants' Cable System As A Common Carrier And Therefore Is Preempted By The Cable Act.

Section 621(c) of the Cable Act prohibits local authorities from mandating access to cable systems. The Supreme Court has held that a requirement that cable operators provide open access for purposes that regulators dictate does impose common-carrier obligations on cable operators. FCC v. Midwest Video, 440 U.S. 689, 699-702 (1979). Nevertheless, the City and County have ignored the explicit Congressional mandate in Section 621(c) and have imposed common carrier duties on Appellants via the nondiscriminatory access provision. In disregard of Congress' explicit reservation of this power, the City and Council have usurped Congressional authority in contravention of the law. See, eg., Midwest Video, 440 U.S. at 708-09.

[begin page 13]

2.  The City's and County's Mandatory Access Requirement Impermissibly Imposes Technical Conditions On Appellants' Cable System And Therefore Is Preempted By The Cable Act.

Under 47 U. S.C. 544(e), "[n]o State or franchising authority may prohibit, condition, or restrict a cable system's use of any type of subscriber equipment or any transmission technology." According to the legislative history, this preemption applies to local regulation of all "technical standards," in addition to the black-letter inclusion of "subscriber equipment" and "transmission technology." See H.R. Rep. No. 104-458, at 168 (1996); see also City of N. Y. v. FCC, 486 U.S. 57, 69-70 (1988). Again, the City and County have disregarded Congress' preemption in this arena by impermissibly requiring Appellants to open their cable system to all online and Internet service providers. While the requirement does not dictate the specific method for compliance, it directly bears on transmission technology.

3.  The City's and County's Mandatory Access Requirement Impermissibly Imposes Requirements Regarding The Appellants' Provision Of Cable Services.

The City's and County's ordinances violate Section 624(f)(1) of the Cable Act by imposing requirements concerning the provision of content of Appellants' cable services. 47 U.S.C, 544(f)(1). As mentioned supra, Section 624(f)(1) states, "[a]ny Federal agency, State, or franchising authority may not impose requirements regarding the provision or content of cable services, except as expressly provided in this title." Appellees' ordinances require Appellants: (1) to provide a conduit between any ISP that requests it and that ISP's Portland subscribers; and (2) then to carry the ISPs proprietary content to its subscribers.

[begin page 14]

The District Court found that the City and County were not affecting content because the ordinances were content neutral. Regardless of the factual accuracy of this statement, on its face, 47 U. S.C. 544(f)(1) prohibits any requirements concerning the provision or content of cable services. Whether the contents are "neutral" or otherwise is of no moment.

In addition, Congress has articulated very narrow exceptions to cable operator control over access for programming: (1) "must-carry" rules for local television, (2) public, educational, and goverment channels; and (3) leased access. See 47 U.S.C. 534, 535; 47 U.S.C. 531; and 47 U.S.C. 532, respectfully. Congress recognized that these exceptions raised First Amendment concerns, and therefore, was deliberate in carving them out so narrowly. H.R. Rep. No. 98-934, at 31-36. The City's and County's ordinances requiring mandatory access to Appellants' cable system fit into none of these limited exceptions. The City and County have demanded unlimited mandatory access for ISPs to Appellants' cable system, which the Cable Act preempts under 47 U.S.C. 556(c) and 544(a).

C. The Mandatory Access Requirement Betrays Congressional Intent And Must Be Preempted.

"Where failure of . . . federal officials affirmatively to exercise their full authority takes on the character of a ruling that no such regulation is appropriate or approved pursuant to the policy of the statute," States are not permitted to use their police power to enact such a regulation.

Ray v. Atlantic Richfield Co., 435 U.S. 151, 177-78 (1978) (citation omitted); see also Freightliner Corp. v. Myrick, 514 U.S. 280, 286 (1995) (quoting Ray v. Atlantic Richfield Co., [begin page 15] 435 U.S. at 177-78). The Supreme Court's analysis in Ray applies to the facts of this case as well. Even if the Court were to find the preemption language of the Cable Act did not specifically preclude the actions of the City and County, the federal government has clearly articulated its approach to the Internet -- an unregulated approach -- and the Court should not countenance the City's and County's mandatory access requirements.

In addition, the Ninth Circuit has held that where "a federal statute occupies a field to the extent that state regulation, though not expressly proscribed, would arguably be inconsistent with the federal scheme[,] . . . the court must determine whether the state provision interferes with the federal scheme embodied in the Constitution." International Brotherhood of Elec. Wkrs. v. Public Ser. Comm'n, 614 F.2d 206, 210 (9th Cir. 1980) (quoting from San Diego Bldg. Trades Council v. Garmon, 359 U.S. 236, 239-40 (1959). This guidepost warrants a finding that the Cable Act preempts the City's and County's mandatory access ordinances.

Congress passed the Cable Act to establish "a national policy concerning cable communications" and to generate "guidelines for the exercise of Federal, State, and local authority with respect to the regulation of cable systems." 47 U.S.C. 521(l), (3). Such a clearly articulated motivation is "fundamental" to the Cable Act, and the City's and County's contravening ordinances must be struck.

III.  CONCLUSION

For the foregoing reasons, and for the reasons stated in the briefs of Appellants, Amicus urges this Court to reverse the decision below.

Dated: August 11, 1999 Respectfully submitted,

___________________
Christopher Wolf
Michael C. Hochman
PROSKAUER ROSE LLP
1233 Twentieth Street, N.W.
Suite 800

[begin page 16]

Washington, D.C. 20036
(202) 416-6800

Attorneys for Amicus Hands Off the Internet

 

 

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