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Reply Brief of AT&T.
Re: AT&T v. City of Portland, U.S.C.A for the 9th Circuit, Appeal No. 99-35609.

Date Filed: September 14, 1999.
Source: Sidley and Austin.

Editor's Notes:
  This document was created by converting a word processor file into HTML.
  Sidley & Austin kindly provided the word processor version.
  It has been edited for HTML, but not for content.
  Footnotes have been converted into endnotes, and two way hyperlinked.
  Paragraph indentations and double spacing have been eliminated.
  Page numbers in the table of contents and table of authorities have been omitted.
  Copyright 1999 Tech Law Journal. All rights reserved.


No. 99-35609
_______________

IN THE UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
_______________

AT&T CORP., TELECOMMUNICATIONS, INC.,
TCI CABLEVISION OF OREGON, INC., and
TCI OF SOUTHERN WASHINGTON,
Appellants,

v.

CITY OF PORTLAND, et al.,
Appellees.
_______________

On Appeal from the United States District Court
for the District of Oregon

Case No. CV 99-65 PA

REPLY BRIEF OF APPELLANTS

Mark C. Rosenblum
Laura Kaster
AT&T Corp.
295 North Maple Avenue
Basking Ridge, N.J. 07920
David W. Carpenter*
Peter D. Keisler
David L. Lawson
Sidley & Austin
One First National Plaza
Chicago, IL 60603
Daniel M. Waggoner
Duane A. Bosworth
Davis Wright & Tremaine LLP
2600 Century Square
1501 Fourth Avenue
Seattle, WA 98101
*Counsel of Record

Attorneys for Appellants

September 14, 1999.

TABLE OF CONTENTS

INTRODUCTION
ARGUMENT
I.  PORTLAND'S FORCED ACCESS REQUIREMENTS ARE PREEMPTED
A.  There Is No Presumption Against Preemption In This Case And Any Doubts Must Be Resolved In Favor Of Preemption
B.  Portland's Ordinances Are Preempted by Four Different Provisions
II.  THE ORDINANCES VIOLATE THE FIRST AMENDMENT
CONCLUSION

TABLE OF AUTHORITIES

FEDERAL CASES

 
Arcara v. Cloud Books, Inc., 478 U.S. 697 (1986)
CSX Transportation, Inc. v. Easterwood, 507 U.S. 658 (1993)
California Federal Savings & Loan Ass'n v. Guerra, 479 U.S. 272 (1987)
California v. FCC, 905 F.2d 1217 (9th Cir. 1990)
Edward J. DeBartolo Corp. v. Florida Gulf Coast Bldg & Constr. Trades Council, 485 U.S. 568 (1988)
FCC v. Midwest Video Corp., 440 U.S. 689 (1979)
Jones v. Rath Packing Co., 430 U.S. 519 (1977)
Kirshner v. Uniden Corp., 842 F.2d 1074 (9th Cir. 1988)
Maryland v. Louisiana, 451 U.S. 725 (1981)
National Ass'n of Theatre Owners v. FCC, 420 F.2d 194 (D.C. Cir. 1969)
Schwarzschild v. Tse, 58 F.3d 430 (9th Cir. 1995)
Self Directed Placement Corp. v. Control Data Corp., 908 F.2d 462 (9th Cir. 1990)
Storer Cable Communications v. City of Montgomery, 806 F. Supp. 1518 (M.D. Ala. 1992)
Terminal Taxi v. Kutz, 241 U.S. 252 (1916)
Turner Broadcoasting System, Inc. v. FCC ("Turner I"), 512 U.S. 622 (1994)
Turner Broadcoasting System, Inc. v. FCC ("Turner II"), 520 U.S. 180 (1997)
United Video, Inc. v. FCC, 890 F.2d 1173 (D.C. Cir. 1989)
Williams v. Babbitt, 115 F.3d 657 (9th Cir. 1997)

FEDERAL STATUTES

47 U.S.C. 153(20)
47 U.S.C. 153(43)
47 U.S.C. 201(a)
47 U.S.C. 522(6)
47 U.S.C. 531-32
47 U.S.C. 532(b)(3)
47 U.S.C. 533(d)(2)
47 U.S.C. 541(b)(3)(B)
47 U.S.C. 541(b)(3)(D)
47 U.S.C. 541(c)
47 U.S.C. 544(e)
47 U.S.C. 544(f)(1)
47 U.S.C. 556(a)
47 U.S.C. 556(c)

OTHER AUTHORITIES

Amendment of Section 64.702 of the Commission's Rules and Regulations (Third Computer Inquiry); and Policy and Rules Concerning Rates for Competitive Common Carrie Services and Facilities Authorizations Thereof Communications Protocols under Section 64.702 of the Commission's Rules and Regulations ("Third Computer Inquiry"), 104 F.C.C.2d 958 (1986)
Applications for Consent to the Transfer of Control of Licenses and Section 214 Authorizations form Tele-Communications, Inc., Transferor, To AT&T Corp., Transferee ("Transfer Order"), 14 F.C.C. Rcd. 3160 (1999)
Commission Order dated April 6, 1999, Requiring Common Carriers to File Tariffs with Commission for Local Distributon Channels Furnished for Use in CATV Systems ("Common Carrier Tariffs for CATV Systems"), 4 F.C.C.2d 257 (1966)
Implementation of Cable Act Reform Provisions of the Telecommunications Act of 1996 ("Cable Act Reform"), 14 F.C.C. Rcd. 5296 (1999)
In re Application of the Chesapeake and Potomac Telephone Company for authority pursuant to section  214 of the Communicatons Act of 1934, and 63.01 and 63.57 of the commission's rules and regulations, to construct and maintain broadband transport facilities in the District of Columbia ("Channel Service Offerings of Chesapeake and Potomac Tel. Co."), 57 Rad. Reg. 2d 1003 (1985)
TCI Cablevision of Oakland County, Inc., 12 F.C.C. Rcd 21396 (1997)
H.R. Rep. No. 98-934 (1984)
H.R. Rep. No. 104-204 (1995)
H.R. Rep. No. 104-458 (1996)


INTRODUCTION

Appellees' briefs offer no substantial defense of the Portland Ordinances.  Instead, they attempt to defend Portland's prohibitions on speech by advancing "conjectural" claims that are both foreclosed by the Communications Act and insufficient to satisfy even "intermediate scrutiny."  Turner I, 512 U.S. 622, 662-668 (1994).

The pertinent facts are simple.  TCI is a "cable operator" and provides the "cable services" of "transmitting" "video programming or other programming" to subscribers in Portland and a number of other cities.  47 U.S.C.  522(6).  The Portland Ordinances prohibit TCI from providing online cable modem service unless and until TCI "unbundles" its service into separate programming and transmission components and allows Internet Service Providers (ISPs) to use the transmission components (the so-called "cable modem platform") for their own online services.

It is undisputed that if TCI offered @Home in Portland today, it would be a new entrant in a mature market dominated by AOL and other online services that are provided over ordinary telephone lines and other media.  Appellees' justification for the Ordinances is that cable systems are capable of providing much faster access connections than ordinary telephone lines and that it is uncertain when there would be broadband alternatives to TCI in Portland.  It follows, in their view, that requiring TCI to provide access to all ISPs on regulatorily prescribed terms is necessary to prevent "abuses" of a prospective cable "monopoly" that could drive ISPs out of business and deprive consumers of efficient and reasonably priced high-speed access to the information services they want.

But these justifications rest on allegations that the Federal Communications Commission has determined to be "conjectural" and unfounded.  Appellees' attempts to claim otherwise are unsupported in the record and rest on assertions that are self-contradictory and fatally at odds with the undisputed facts. Although these allegations are palpably insufficient to satisfy the First Amendment, there is no need for this Court to reach this constitutional issue.  Congress has adopted numerous separate provisions in the Communications Act that each bar local franchising authorities ("LFAs") from imposing access requirements on these or any other grounds.

These prohibitions all rest on a single overarching Congressional judgment. Notwithstanding claims that cable operators are monopolies, Congress determined that it will promote the availability of the widest possible sources of information at the lowest possible costs if cable operators -- not government regulators -- determine the programming that will be carried over cable systems. Congress recognized that even in areas with only one cable system, cable services create and enhance competition with the programming provided over broadcast TV, direct broadcast satellite service, local monopoly telephone facilities, wireless cable systems, videocassette players, and other media.  Because Congress also prohibited any restrictions on the returns cable operators could earn from investments that upgrade their facilities,  Congress further recognized that the sole incentive of cable operators would be to make investments that would allow the broadest array of information to be provided over their systems.

Conversely, forcing cable operators to carry particular programming on regulatorily-prescribed terms imposes the immense costs of regulation and can impede investment not just by cable operators, but also by owners of media with which cable operators compete.  Not coincidentally, these are the reasons the FCC has determined that the imposition of forced access requirements on cable modem platforms would now be bad public policy even if it were authorized by the Act.

Congress thus expressly prohibited forced access requirements, with only narrow exceptions not here relevant.  In particular, after authorizing LFAs to require their franchised cable operators to transmit public, educational, and governmental programs over specific numbers of channels (47 U.S.C.  531-32), Congress prohibited LFAs from requiring cable operators to "designate" any additional channels for "any [other] use" in local franchise or franchise renewal proceedings.   532(b)(3).  More pertinently, Congress enacted at least four other prohibitions that, under the Act's express preemption clause, preempt any attempts by local authorities to impose additional forced access requirements in these or any other proceedings.

Two of these prohibitions ( 541(b)(3)(D) & 544(e)) do not apply to the FCC and do not require the Court to address or decide the purportedly open question whether all cable modem services are "cable services" within the meaning of Title VI.  Thus, the Court can readily satisfy the FCC's request for a decision of this case on "narrow" grounds that do not implicate the FCC's authority.  See FCC Amicus Br. 29-31.  Appellees' briefs have no genuine answer to either the prohibitions that apply only to LFAs or to those that also apply to the FCC.

ARGUMENT

I.  PORTLAND'S FORCED ACCESS REQUIREMENT IS PREEMPTED

A.  There Is No Presumption Against Preemption In This Case, And Any Doubts Must Be Resolved In Favor Of Preemption.

Appellees' principal argument on appeal is that these four prohibitions must be given a "narrow" construction and denied their ordinary meaning because there is a "presumption against preemption."  Port. Br. 25-26; US WEST Br. 21. While there is no possible construction of these prohibitions that would permit the Portland Ordinances to stand, appellees' claims are wrong for two additional reasons.

First, in determining whether a federal law preempts a state's historic police powers, a court's "sole task is to ascertain the intent of Congress."  California Federal Savings & Loan Ass'n v. Guerra, 479 U.S. 272, 280 (1987).  Here, Congress' intent to preempt is unmistakable.  Because Congress expressly prohibited municipalities and other local authorities from imposing forced access requirements, these measures would be invalid under principles of "conflict preemption" even if Congress had not enacted an express preemption provision.  Maryland v. Louisiana, 451 U.S. 725, 747 (1981).

But Congress went further.  It enacted an "express pre-emption clause . . . which necessarily contains the best evidence of Congress' pre-emptive intent" (CSX Transportation, Inc. v. Easterwood, 507 U.S. 658, 664 (1993)) and which forecloses any claim that Congress intended to limit Title VI's preemptive effect to local laws that violate narrow constructions of the Act's express prohibitions. To the contrary,  556 declares that any local ordinance or state law that is "inconsistent" with any provision of Title VI is "preempted."  47 U.S.C.  556(c).  This provision requires courts to preempt any local measure that "stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress," for that is the settled meaning of the term "inconsistent" for purposes of preemption.  Jones v. Rath Packing Co., 430 U.S. 519, 526 (1977).

By contrast,  556 prohibits broad constructions of the Act only when that would impair the authority of LFAs that is "consistent with the express provisions of [the Act]" ( 556(a)): e.g., their explicit statutory authority under  531-32 to require cable operators to carry public, educational, and governmental programs.  There is no such provision relevant to this case.

Second, because forced access requirements present "serious constitutional problems" under the First Amendment, the Court must "construe" the Act to resolve any doubts in favor of preemption unless that is "plainly contrary to the intent of Congress." Edward J. DeBartolo Corp. v. Florida Gulf Coast Bldg & Constr. Trades Council, 485 U.S. 568, 575 (1988). As this Court has stated, "we will not presume from ambiguous language that Congress intended to authorize any agency . . . to push the constitutional envelope." Williams v. Babbitt, 115 F.3d 657, 661-62 (9th Cir. 1997).

B.  Portland's Ordinances Are Preempted By Four Different Provisions.

Appellees' briefs confirm that Portland's forced access requirement is "inconsistent" with and preempted by at least four separate provisions of Title VI.

 541(b)(3)(D).  This section expressly prohibits LFAs (but not the FCC) from "condition[ing]" approval of the transfer of TCI's franchise on a "require[ment]" that the "cable operator" provide "telecommunications service or facilities" to any third party.  Because TCI is concededly a "cable operator" and because Portland's forced access requirement is a "condition" of the transfer of control of TCI's franchise to AT&T, Portland's Ordinances violate  541(b)(3)(D) if they require TCI to provide "telecommunications services or facilities."

Appellees concede that the Portland Ordinances impose a "facilities" requirement on TCI (Portland Br. 22) and that they require TCI to provide a communications "pipe" to any requesting ISP (ORISPA Br. 25).   But they contend that the "facilities" that they have required TCI to provide are "cable facilities," not "telecommunications facilities."

This claim proceeds from appellees' agreement that TCI@Home and other cable modem services are "cable services" and that TCI would be using its transmission facilities to provide a cable service if it offers @Home.  It follows, in appellees' view, that the ISPs who access TCI's "cable modem platform" will also be using the transmission facilities to provide "cable services."  On this basis, appellees claim, these ISPs must be obtaining "cable" facilities and not "telecommunications" facilities from TCI.  See Portland Br. 27-31; US WEST Br. 27-28.

This is simply wrong.  The relevant question under  541(b) is not whether the services that ISPs want to offer to their subscribers are "cable services," "information services," or some other kind of service.  The statutory question is whether the "services or facilities" that TCI will be required to provide to ISPs are "telecommunications."   In characterizing a service or product, the focus is on what would be sold to the customer or user -- here the ISPs.  Yet appellees refuse to focus on the fact that the Portland Ordinances require TCI to provide ISPs a "transmission" facility without any programming and that this "pipe" is all ISPs want to buy.[1]  Under the Act, the provision of transmission without content is "telecommunications."

The fallacy of appellees' argument is demonstrated by US WEST's assertion (p. 27) that AT&T "cannot explain" why TCI's facilities are "telecommunications" when only transmission is provided to unaffiliated ISPs but are components of a "cable service" when TCI offers @Home.  The "explanation" is the statutory definitions of these terms.  A "cable service" is the "transmission to subscribers" of "video programming or other programming."  47 U.S.C.  522(6).  In short, it is transmission plus programming.  "Telecommunications," by contrast, is defined as "transmission, between or among points specified by the user, of information of the user's choosing, without change in the form or content of the information as sent and received."  See 47 U.S.C.  153(43).  It is transmission alone, without content (because any content is supplied by the "user").  The term "transmission" plainly means the same thing in each definition.  Thus, by mandating that TCI "unbundle" @Home into transmission and programming and then provide ISPs with transmission facilities stripped of @Home's programming, Portland has required the offering of "telecommunications facilities" to ISPs.

Other terms of the Act independently establish that a requirement that a cable operator carry a third party's programming is a requirement that the cable operator provide a "telecommunications service or facility" to that third party.  For example,  531 and 532 authorize LFAs to require cable operators to carry public, educational, or governmental programming and to provide "institutional networks" to government.  The first clause of  541(b)(3)(D) expressly exempts the carriage requirements of  531 and 532 from the ban on local requirements that cable operators provide "telecommunications services or facilities."  This exemption was necessary only because Congress recognized that requiring a cable operator to provide transmission facilities to a third party is "telecommunications."

Indeed, it has long been settled that it is "telecommunications" for a firm to lease out transmission facilities to entities that will use the facilities to provide "cable services" or other "information services."  For example, local telephone companies have offered a "channel service" that transmits programming for firms who want to provide cable services but do not want to build their own systems, and these services were regulated as "telecommunications."[2]  It was irrelevant that the purchasers of the transmission facilities used them to provide "cable services."

The same principle applies to other information services.  When AT&T provides its WorldNet Internet access service to subscribers over AT&T's own long distance facilities, it is providing an "enhanced service" within the meaning of the FCC's regulations and an "information service" within the meaning of 153(20) of the Communications Act -- not "telecommunications."  But when other ISPs subscribe to AT&T's telephone lines to carry their own information services, AT&T is providing them telecommunications facilities.[3]

For these reasons, the terms of the Act refute Portland's assertions that accepting appellants' position would mean that "[t]here could be no such thing as a cable system or cable system facilities," for cable systems purportedly would be engaged in "telecommunications" whenever they distribute their own programming to their subscribers.  Portland Br. 30.  Under  522 of the Act, firms that build or lease transmission facilities and use them to provide "video or other programming" to customers provide "cable services."

Because of the clarity of the statutory language, appellees also claim that the Act's legislative history somehow establishes that  541(b)(3)(D) does not mean what it plainly says.  They assert that the legislative history shows that Congress was seeking only to prevent LFAs from regulating the telecommunications services of cable operators that enter the local telephone market -- and not to prohibit local authorities from requiring cable operators to offer telecommunications services or facilities in order to promote "competition."  See US WEST Br. 25-27; Portland Br. 26-27.  Portland asserts that there is "no support" in the legislative history for the proposition that  541(b)(3)(D) prohibits requirements that cable operators "provide transmission facilities to third parties."  Portland Br. 26.

The short answer to this claim is that legislative history cannot override the plain terms of a statute.  But appellees are also wrong.  The Conference Report states that, under the terms of 541(b)(3)(D), "[f]ranchising authorities are prohibited from ordering a cable operator . . . to provide telecommunications services or facilities as a condition of initial grant of franchise, franchise renewal, or transfer of a franchise."  See H.R. Rep. No. 104-458 at 179 (1996).  By contrast, it is a different subsection ( 541(b)(3)(B)) that was enacted to prohibit local regulation of those telecommunications services that cable systems voluntarily offer.

In short, by conditioning its approval of the transfer of TCI's cable franchise on a forced access requirement, Portland did precisely what  541(b)(3)(D) expressly prohibits.  Yet appellees claim that this Court should ignore this statutory violation because appellants purportedly did not raise this claim in the District Court.  Portland Br.  4; US WEST Br. 23-25.  Although Portland could not avoid this express limitation on its jurisdiction in any event, appellees' claims are wrong.

They contend the only claim appellants raised below was that Portland's Ordinances unlawfully required the provision of "telecommunications services" under  541(b)(3)(D) and that appellants did not claim that the Ordinances required the provision of  a "telecommunications facility."  This claim is both irrelevant and erroneous.  It is irrelevant because Portland has conceded on appeal (as it did below) that its Ordinances are a "facilities" requirement.  Portland Br. 22.  The only contested issue is purely legal -- whether the "services or facilities" constitute "telecommunications."

In any event, there was no waiver.  Appellants relied both on the facilities and services bans of  541(b)(3).  The preemption count in their complaint quoted  541(b)(3)(D)'s ban on requiring the provision of "telecommunications service or facilities"  (E.R. 8,  14 (emphasis added)) and contended that Portland's Ordinances were inconsistent with these and other provisions and expressly preempted under  556(c) (E.R. 10,  24).  This unequivocally placed appellees on notice of the claim based on  541(b)(3)(D)'s facilities ban, and the complaint, by itself, was more than sufficient to preserve all issues under  541(b)(3)(D).  Self Directed Placement Corp. v. Control Data Corp., 908 F.2d 462, 466 (9th Cir. 1990) (complaint need not raise a particular "explicit claim" so long it as "falls under the umbrella" of the "general claims" set forth in complaint).

Further, in its memorandum opposing appellees' motion for summary judgment and in support of its own cross-motion, AT&T argued that the "The Cable Act Preempts the City and County From Requiring Mandatory Access to AT&T and TCI's Cable Modem Platform," by stating, inter alia:

Separately, Section 621(b)(3)(D) prohibits any local franchising authority condition on a franchise grant, renewal, or transfer that would "require a cable operator to provide any telecommunications services or facilities."  47 U.S.C.  541(b)(3)(D).

S.E.R. 400 (emphasis added).

Appellees next assert that AT&T "abandoned" 541(b)(3)(D) by not citing it in its post-hearing brief.  US WEST Br. 24.  But even apart from the fact that the omission of a claim from a single brief can scarcely constitute a waiver, the post-hearing brief was a "supplemental" brief expressly limited to "five issues raised by the Court and other parties at oral argument."  Appellants' Supplemental Reply Excerpts of Record at 1 ("S.R.E.R.").  Moreover, this post-hearing brief contended that the Act prohibits LFAs from imposing any forced access requirements other than the limited public, educational, and governmental programs authorized by  531-32 (which are the sole exceptions to the ban of  541(b)(3)(D)).  S.R.E.R. 4-5 (discussing  532(b)(3)).

Finally, even if  the issue of the preemptive effect of 541(b)(3)(D) had not been discussed below, this Court can and should decide it.  The issue is "purely one of law" and there are no material disputed or undeveloped facts.  See, e.g., Schwarzschild v. Tse, 58 F.3d 430, 433 & n.3 (9th Cir. 1995).  Moreover, the issue is one of growing national importance, and the same pressing considerations that led the Court to expedite the appeal should dictate the decision of all the issues raised by LFAs' attempts to require cable systems to carry the online services of ISPs.

 544(e).  Section 544(e) prohibits any local regulations that "prohibit, condition, or restrict a cable system's use of any type of . . . transmission technology," regardless of whether the FCC has entered a preemptive order.

Here, it is undisputed on the record before this Court that the transmission technology that TCI uses today, and plans to use in the future, cannot accommodate access by multiple ISPs and that "new . . . technical solutions" will be necessary before TCI could do so. See AT&T Br. 30 (citing GTE affidavit).  This single fact establishes that the Ordinances violate  544(e).  The Ordinances will "prohibit" "use" of TCI's existing technology if it decides to provide a cable modem service and will "condition" and "restrict" TCI's "use" of this "type" of technology by banning TCI's offering of online services over it.

Portland claims (p. 33) that the Ordinances do not violate  544(e) because they do not "mandate use of a particular technology."  See also US WEST Br. 29.  But  544(e)'s ban is not limited to local requirements of a particular technology.  Congress barred local measures that "prohibit, condition, or restrict" "uses" of any "type" of transmission technology because "a patchwork" of "disjointed local regulation" that had these effects could thwart the efficient nationwide engineering and operation of cable systems.[4]

Contrary to appellees' misstatements, the FCC has held that  544(e) prohibits localities from regulating "in the area[]" of transmission technology,[5] and that  544(e) "eliminates the authority of franchising authorities to interfere with a cable operator's choice of the . . . transmission technology to be used in its cable system."[6]  Thus, the FCC has patently not "recognized [that] section 544(e) merely prohibits LFAs from 'dictating the use of transmission technologies.'"  US WEST Br. 30, citing 14 FCC Rcd. at 5357.  The only way intervenors can claim otherwise is by adding the word "merely" to the FCC's statement that these are one example of what  544(e) bans.

Portland also claims that the Ordinances do not affect the use of "transmission technology."  Appellees assert that this term applies only to the particular transmission medium and communications format of a cable system and not to its use of types of transmission technology that allow transmission of the online services of multiple ISPs to be accommodated on 6 MHz of spectrum.  Appellees' sole support for this construction, however, is an FCC decision that stated that the term "transmission technology" "include[s]" issues of medium and format as "example[s]" and that "clarif[ies]" the term "only to some extent."  See Cable Act Reform, 14 FCC Rcd. 5356-58.  Portland miscites this decision (p. 32) as holding that  544(e) "only" applies to these matters.[7] Whether a cable system is technically capable of transmitting online services from multiple sources is a matter of "transmission technology" under any plausible construction of these terms.

Finally, it is irrelevant that LFA used their  544(b) authority over equipment or facilities to impose service requirements that had the effect of requiring installation of new technology before the 544(e) prohibition was enacted in 1996.  See Portland Br. 31-32.  Because the LFA's authority under 544(b) is limited to requirements that are "consistent" with the Act, 544(b) no longer permits any local regulations that affect a cable operator's use of types of transmission technology because that is now prohibited by 544(e).  Cable Act Reform, 14 FCC Rcd. 5356-57.

 541(c).  Section 541(c) prohibits local, state, or federal bodies from subjecting cable systems to "regulation as a common carrier or utility by reason of providing any cable service."  It was enacted, among other reasons, to exempt cable systems from "the traditional common carrier requirement of servicing all customers indifferently upon request."  H.R. Rep. No. 98-934 at 60 (1984).  The stated purpose of the Portland Ordinances was to impose this very common carrier regulation on TCI.  See AT&T Br. 33-34.

Portland claims (pp. 38-39) that its forced access requirement is not "common carriage" because it allegedly does not require TCI to serve all "potential" users of its "cable modem platform." Portland Br. 38-39, citing NARUC v. FCC, 533 F.2d 601 (D.C. Cir. 1976).  That is wrong.  The only potential users of a "cable modem platform" are providers of Internet access and online services.   It is also irrelevant.  The Supreme Court has held it is common carriage if a firm is obligated indiscriminately to serve any class of the public.  Terminal Taxi v. Kutz, 241 U.S. 252, 255 (1916).  ISPs are such a class.

Intervenors attempt (p. 32) to avoid  541(c)'s prohibition by urging a distinction between "common carrier" regulation, which they concede is prohibited, and "common carrier-like" regulation, which they claim is permissible.  In particular, they argue that forced access requirements must be a permissible "common carrier-like" regulation because other provisions of the Cable Act require cable operators to carry particular programming. See US WEST Br. 32-37. But both before and after the enactment of the Cable Act in 1984, courts held that it was prohibited common carriage to require a firm indiscriminately to carry the signals of particular third parties.  AT&T Br. 34-35 & n.45.  This does not make the Cable Act "self-contradictory."  US WEST Br. 34.  These rulings demonstrate only that the Act's authorization of specific, narrowly defined access requirements cannot override  541(c)'s prohibition on common carrier regulations that the Act does not explicitly permit.  Congress intended to prohibit  common carriage requirements "except as provided in Title VI."  H.R. Rep. No. 98-934 at 60.

Appellees also contend that the Ordinances do not impose common carrier requirements but represent "targeted" "essential facilities" regulation instead.  This is a non sequitur.  Appellees do not dispute that the Ordinances satisfy the definition of common carriage, for they deprive TCI of the right to "make individualized decisions, in particular cases, whether and on what terms to deal. "  FCC v. Midwest Video, 440 U.S. 689, 701 (1979).  There is no basis in law, history, or logic for their notion that measures that impose impermissible common carrier regulations are lawful if based on a regulatory body's finding that the entity controls an essential facility or presents another "identified competitive problem."  Portland Br. 36-37.

To the contrary, common carriage has often been imposed on firms that control essential facilities in order to prevent monopoly abuses.  See California v. FCC, 905 F.2d 1217, 1224 (9th Cir. 1998).  Indeed, the imposition of common carriage obligations has often been the quid pro quo for the government's conferral of a monopoly franchise.  National Ass'n of Theatre Owners v. FCC, 420 F.2d 194, 202-203 (D.C. Cir. 1969).  Accordingly, that an access requirement is imposed on a firm because it is found to control an essential facility cannot take the regulation out of the realm of common carriage.

Nor is it significant that football stadiums, ski resorts, and other firms that are not "common carriers" have been found to control essential facilities and subjected to requirements that they grant third parties access to the sites they own. See Portland Br. 35; US WEST Br. 39-40.  These firms could never be "common carriers" for the simple reason that they are not "carriers." [8]  Prior to the adoption of the Portland Ordinances, TCI, too, did not operate as a "carrier." But the requirement that it indiscriminately carry the services of any requesting ISP would both make it a "carrier" and subject it to "regulation as a common carrier" in violation of  541(c).

 544(f).   Section 544(f)(1) provides that, except where the Act expressly provides otherwise, neither LFAs nor the FCC can adopt "requirements regarding the provision or content of cable services."  The Portland Ordinances are such a requirement under even the narrow interpretation of this prohibition that appellees urge.

In particular, appellees rely on United Video v. FCC, 890 F.2d 1173 (D.C. Cir. 1989), which upheld an FCC rule prohibiting cable systems from providing programs over which a TV station in that area had exclusive rights.  The Court held that Congress had adopted  544(f) for the sole purpose of barring LFAs from "specify[ing] the services that the [cable] operator must provide."  Id. 1188.  For example, the Court stated that, under  544(f), an LFA can neither "prohibit the carriage of HBO" nor "require carriage of HBO."  Id. 1188-89.  Conversely, the Court said that  544(f) does not prohibit "regulations of cable that are not based on the content of cable programming, and do not require that particular programs or types of programs be provided."  Id. 1189; accord Storer Cable Communications v. City of Montgomery, 806 F.Supp. 1518 (M.D. Ala. 1992) (following United Video).

Under United Video, an LFA patently cannot prohibit a cable operator from carrying ESPN unless it also offers to carry Sports Channel or all other comparable sports programs on "nondiscriminatory terms."   In this regard, it would not matter that the LFA had concluded that cable systems alone provide the picture quality that sports fans demand and that  producers of other sports programming would be harmed competitively if their shows were not also carried on cable systems.  Nor would it matter that the cable operator had an equity interest in ESPN.  Congress determined that marketplace forces -- not government regulations -- would maximize the value of cable service for consumers by allowing cable operators to select, pay for, and offer programs based on their relative value to cable subscribers and the cable operators' relative costs of offering them.

The Portland Ordinances violate  544(f) for the same reason.  They "prohibit" TCI from carrying a "particular type of program" (cable modem services) unless TCI also offers to carry "on nondiscriminatory terms" the services of all third party ISPs who offer competing on-line services.   Portland frankly concedes (p. 43) that the Ordinances are "triggered by [TCI's] provision of a certain kind of cable service (Internet access)."  In the words of United Video, the Portland Ordinances are thus not "content-neutral" even "[f]or First Amendment purposes" because the Portland Ordinances cannot be applied or "justified without reference to the content of the regulated speech."  890 F.2d at 1189 n.13, citing  Ward  v.  Rock Against Racism, 491 U.S. 781, 791 (1989).  Rather, they critically depend on Portland's belief that on-line services providing access to information from the public Internet have characteristics that justify a carriage requirement on TCI.

This fact establishes that the Portland Ordinances violate  544(f) both because they are based on the content of the programming and because they seek to prohibit or require the offering of particular programs or types of  programs.  And the Ordinances interfere with the purposes of  544(f) every bit as profoundly as would an ordinance requiring "equal access" for all producers of sports programs.  Just as different sports programs have vastly different appeals to subscribers, it is not the case that all ISP services are the same or have the same value to consumers.   While all provide access to the Internet, ISPs increasingly offer distinctive proprietary content and features that differentiate their services and make them more attractive than those of competitors.  By prohibiting TCI from offering any online cable services unless it offer to carry the services of all competing providers of this "particular type of programming" on nondiscriminatory terms, Portland has struck at the heart of Title VI.  It requires  that cable operators decide what programming they will offer and that the terms on which it will be both obtained from producers and provided to customers will be determined by marketplace forces not the requirements of regulators.

Finally, it is ironic that appellees defend the Portland Ordinances on the ground that they "merely" require "direct" access to information that TCI not only is willing to carry on its system, but also has made elaborate efforts to assure that its customers can easily and conveniently obtain through its TCI@Home service.  That TCI is willing to provide "indirect access" scarcely means that a "direct access" requirement is "content neutral" or does not have the effect of prohibiting or requiring the offering of particular programming.  As no appellee disputes, the costs and burdens of providing "direct access" to all ISPs are radically greater than the "indirect" access that TCI@Home offers.  So the effect of the Portland requirement would at a minimum be to delay (and conceivably to prevent) the offering of the cable modem services and their distinctive content and faster transmission speeds.  Moreover, as no appellee disputes, Portland's "direct access" requirement is the equivalent of making a newspaper publisher move a letter to the editor to the front page of the paper -- or turn over its printing presses and distribution system to a competitor.

533(d).  Finally, appellees argue that the Ordinances can be upheld under  533(d)(2) even if Congress has generally prohibited LFAs from seeking to promote "competition" among ISPs by requiring cable operators to carry their services.  In appellees' view,  533(d)(2) establishes an exception from these general prohibitions for proceedings in which approval is sought for transfer of control of a cable franchise.

This claim is baseless.  As noted above,  541(b)(3)(D) specifically provides that LFAs cannot require cable systems to carry the programming of a third party as a "condition" of approval of the "transfer"of a franchise.  Section 533(d)(2) does not remotely establish an exception to the provisions of  541(b)(3) or any of the other prohibitions on which appellants rely.

To the contrary,  533(d)(2) establishes an exception to the first sentence of  533, which bans an LFA from denying an application for a cable franchise because of the applicant's "ownership or control" of any other media.  Section 533(d) provides that the prohibition of "this section" does not apply if (1) the applicant already owns or controls a cable system in the area such that the transfer would eliminate competing cable television systems ( 533(d)(1)) or (2) approval "may eliminate" other forms of actual or potential "competition in the delivery of cable service."  Section 533(d)(2) thus allows an LFA (subject to the other provisions of the Act) to disapprove an acquisition of a cable franchise by an applicant that does not own or operate a cable system in the area, but that owns other media interests that actually or potentially compete in delivery of cable services:  e.g., firms who use "channel service" of telephone companies to transmit programming.  See pp. 9-10, supra.

Here, Portland did not deny AT&T's application for control of TCI's franchise because of its "ownership of control" of any "media interests," much less of "media interests" that satisfy  533(d).  Instead, Portland imposed the forced access requirements that the four provisions of the Act forbid.

II.  THE ORDINANCES VIOLATE THE FIRST AMENDMENT.

Finally, the Ordinances would violate the First Amendment even if there were no Communications Act.

1. Contrary to appellee's claims, the Ordinances are not economic regulation that is constitutional if minimally rational. As the Supreme Court has held, laws that "single out" cable companies "are always subject to at least some degree of heightened First Amendment scrutiny," Turner I, 512 U.S. at 640-41.  Further, because the Ordinances are triggered by TCI's provision of protected speech, they would have to satisfy heightened scrutiny even if they did not single out cable operators. Arcara v. Cloud Books, Inc., 478 U.S. 697, 706-707 (1986).

Appellees nonetheless claim that minimum rationality review is required.  Portland relies (49-50) on two lower court decisions that do not involve cable regulations, that predate Turner, and that are otherwise inapposite.  ORISPA (at 13) contends that the "trigger" for the Ordinances is not speech, but "the availability of particular technology -- two-way high speed transmission through the cable wire."  But the obligation to offer "nondiscriminatory" access to a "cable modem platform" is meaningless unless TCI first offers an online service over that platform, so the obligation is triggered by TCI's decision to engage in speech.  Indeed, ORISPA later acknowledges this fact (p. 22) and Portland conceded it below.  E.R. 191.

Appellees also urge the Court to adopt a minimum rationality standard because the Portland Ordinances purportedly impose no or minimal  burdens on TCI.  But this claim would be legally irrelevant even if it were factually correct.  It is the link between the legal burden and the expressive activity, and not some judgment about the severity of the burden, that triggers heightened scrutiny. Heightened scrutiny applies because it is "conduct with a significant expressive element" -- TCI's decision to carry an online service -- that would "dr[a]w the legal remedy" that Portland has adopted.  Arcara, 478 U.S. at 706-707.

In all events, appellees' claims that there would be no burden are baseless.  Providing access to multiple ISPs takes time and money, will delay or prohibit speech, and alters the content of the @Home service.  See pp. 22-24, supra.  In addition, contrary to ORISPA's assertion (p. 42), it is not "undisputed" that providing access to multiple ISPs on a single shared 6MHz channel is "technically feasible" today.  The evidence in the District Court was precisely the opposite (see p. 16, supra) and the FCC has found that industry participants "disagree on [the] practicality and feasibility" of compliance with forced access.  Transfer Order, 14 FCC Rcd. 3160, 3202 (1999).

Further, ORISPA claims (pp. 23-24) -- as it did not below --  that speed of access and bandwidth requirements over TCI's system will not be adversely affected, regardless of how many ISPs provide service over the 6MHz of shared cable spectrum.  This assertion is meritless.  As ORISPA's only record citation confirms, it should attract more users to the shared cable facility if additional ISPs are allowed to share this spectrum, for each ISP will separately price and market its own services.  The record evidence is that the speed of access would decrease if additional ISPs "dramatically increased" usage.  S.E.R. 370.  As the sole provider over the shared facilities, TCI can enforce policies that prevent excessive uses (such as using the cable modem to watch "streaming" full-length motion pictures) by "bandwidth hogs" that would slow access for everyone.  But in a forced access regime in which each provider sets its own "rules of the road," increased congestion is inevitable.  As one "bandwidth hog" testified:  "I talked to @Home, and they are limited to 15 megs and I'm running like 50, so they said there would be no way to increase it, so I'm kind of out of luck," absent forced access.  S.E.R. 154.

2. The Ordinances cannot survive heightened scrutiny.  Portland simply did not support its claim that, absent forced access, AT&T's entry into the online services business will destroy AOL and other established competitors, much less harm consumers.  Even if Portland was "told that AT&T's plan posed a serious risk to the entire spectrum of Internet-related services," ORISPA at 33 (emphasis added), neither Portland nor the interested parties supported that prediction with the "reasonable inferences based on substantial evidence" that even intermediate scrutiny demands.  Turner II, 520 U.S. 180, 195 (1997).  They failed to show that the threatened harm was "real, not conjectural" or that the Ordinances would alleviate [the harm] in a material way."  Id.

Turner I is controlling.  There, the Court held that Congressional findings based on "three years of hearings on the structure and operation of the cable television industry" did not satisfy the burden of showing that "the threat to broadcast television is real enough" to justify forced carriage of local station's programs.  512 U.S. at 632, 667 (emphasis added).   It required a remand and another "18 months of factual development" and a record of over "tens of thousands of pages" to support this determination.  Turner II, 520 U.S. at 187.

Here, the inadequacies are far greater.  The FCC found (based on a massive record) that cable modem services do not pose any threat to third party ISPs that is real rather than conjectural.  Although appellants relied on these findings, appellees introduced no evidence below that remotely addressed the FCC's specific reasons for finding that there is no real threat now.  Nor did appellees offer any evidence of adverse effects on third party ISPs in the many areas where cable modem service is offered, much less the "evidence" of "bankruptcy" or "a serious reduction in operating revenues" that Turner I stated would be "significant."  512 U.S. at 667.

ORISPA is wrong in claiming that it can create the necessary record by now citing extra-record material.  Kirshner v. Uniden Corp., 842 F.2d 1074, 1077 (9th Cir. 1988).  In any event, the inferences ORISPA draws from its new "evidence" -- that other modes of accessing the Internet cannot compete with cable modem service -- are refuted by appellees themselves.  DSL service (unlike cable modem service) is already available in Portland.[9]  According to US WEST, where both services are available, "DSL is growing at a consistently faster pace than cable modem services," and US WEST claims that the service "is so easy to install that nearly 90 percent of subscribers do it themselves."[10] In addition to US WEST, 16 ISPs offer DSL service in Portland.[11] These admissions, and the fact that TCI does not have a single cable modem customer in Portland, confirm that even the record ORISPA impermissibly attempts to create on appeal would fall far short of the Turner standard.

The inadequacy of the record is confirmed by ORISPA's reliance on allegations that contradict one another.  ORISPA asserts that the "ordinances affect AT&T's ability to reap monopoly profits" (p. 22) but simultaneously states that the Ordinances allow AT&T to recover its "investments plus anything else the market will pay" as a result of its purported "monopoly over cable modem access" (p. 37).  This latter fact (if true) would mean both that the harms the Ordinances address are conjectural and that the Ordinances could not materially alleviate them.  For even if TCI faced no competition from other media, its sole incentive would be to assure that its subscribers can reach all online service providers over its cable modem platform in which ever way is most efficient.  And the evidence is that this is precisely what TCI@Home does.  It allows this "open access" with a single click of the mouse -- without any "pay twice" requirement.[12]  In short, nobody has shown that a forced access regime could reduce what a single customer pays for access to an ISP over a TCI system.  Nor has anyone shown that TCI would have a reason to deny an ISP's proposal for a different access arrangement that is commercially feasible, that would meet consumer demand, and that would adequately compensate TCI for the value of its investments and the costs it would incur.

CONCLUSION

For the reasons stated, the District Court's judgment should be reversed.

Respectfully submitted,


____________________
Mark C. Rosenblum
Laura Kaster
AT&T Corp.
295 North Maple Avenue
Basking Ridge, N.J. 07920
David W. Carpenter*
Peter D. Keisler
David L. Lawson
Sidley & Austin
One First National Plaza
Chicago, IL 60603
Daniel M. Waggoner
Duane A. Bosworth
Davis Wright & Tremaine LLP
2600 Century Square
1501 Fourth Avenue
Seattle, WA 98101
*Counsel of Record

Attorneys for Appellants

September 14, 1999


[1] It is thus appellees who are attempting a "nifty . . . change in perspective." Portland Br. 28.  They focus on the customer of the service when the question is whether the online service provided to cable subscribers are "cable services," but not when the question is what Portland has required TCI to provide to ISPs.

[2] See, e.g., Channel Service Offerings Of Chesapeake and Potomac Tel. Co., 57 Rad. Reg. 2d 1003,  15-17 (1985); Common Carrier Tariffs for CATV Systems, 4 F.C.C.2d 257 (1966).

[3] See Third Computer Inquiry, 104 F.C.C.2d 958, 968 (1986).

[4] See H.R. Rep. No. 104-204 at 110 (1995).

[5] See Cable Act Reform, 14 FCC Rcd. 5296, 5350-56 ( 126, 127, 132, 141 n.388) (1999).

[6] TCI Cablevision of Oakland County, Inc., 12 FCC Rcd. 21396, 21399 (1997) ("Oakland") (emphasis added).

[7] Similarly, contrary to US WEST's claim  (p. 31), TCI Cablevision held that Oakland's ban on TCI's provision of telecommunications services did not violate  544(e) only because it would not affect "TCI's choice and use within its cable system of . . . transmission technology."  12 FCC Rcd. 21432.

[8] A carrier is "[a]n individual or organization (such as a railroad or an airline) that transports passengers or goods for a fee."  Black's Law Dictionary 205 (7th ed. 1999).  Communications firms can be carriers too, under the law, insofar as they transmit (or "carry") the signals of others.  See 47 U.S.C. 201(a).

[9] See <www.uswest.com/products/data/dsl/faq.html>.

[10] See <www.uswest.com/news/081799.html>.

[11] See <www.uswest.com/products/data/dsl/isplist.html>.

[12] It is the choice of ISPs whether or how to charge customers that access their online services through cable modem services.  Some (Yahoo) charge nothing; others (AOL) charge a lower rate for customers who bring their "own access."  No customer ever need pay twice for access.

 

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