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BROOKHAVEN CABLE TV INC. v. KELLY

March 9, 1977

BROOKHAVEN CABLE TV INC. et al., Plaintiffs, United States of America and Federal Communications Commission, Intervenors-Plaintiffs,
v.
Robert F. KELLY, Chairman, et al., Defendants, National Association of Regulatory Utility Commissioners, Intervenor-Defendant, City of New York, Amicus Curiae.



The opinion of the court was delivered by: PORT

MEMORANDUM - DECISION AND ORDER

PORT, Senior District Judge.

 The plaintiffs and defendants have both moved for summary judgment on the first claim for relief asserted in the complaint. That claim challenges the right of the defendants, Commissioners of the New York State Commission on Cable Television (State Commission), to regulate the charges for pay cable TV on the ground that the matter has been preempted by the Federal Communications Commission.

 The United States and the Federal Communications Commission were granted leave to intervene as parties plaintiff. The National Association of Regulatory Utility Commissioners was granted leave to intervene as a party defendant. The intervenors have joined in the motions for summary judgment. The City of New York was granted leave to appear as amicus curiae in support of the defendants' motions.

 The Parties

 Five of the original plaintiffs (Brookhaven, Capitol, Samson, Teleprompter and Warner) are corporations which operate cable television systems in New York State. National Cable Television Association, Inc. (NCTA) and New York State Cable Television Association (NYCTA) are, respectively, national and state trade associations of cable television systems. The remaining plaintiff, Home Box Office (HBO), is an enterprise which supplies pay cable programming to cable television systems both in New York and in other states. Plaintiff intervenors are the United States and the Federal Communications Commission (FCC).

 The defendants are the five members of the New York State Commission on Cable Television. See N.Y. Exec. Law § 814 (McKinney Supp. 1975). Defendant intervenor, the National Association of Regulatory Utility Commissioners (NARUC), is a quasi-governmental, nonprofit organization whose membership includes governmental and regulatory bodies throughout the United States. *fn1"

 Cable and Pay Cable TV

 Cable TV essentially operates by retransmitting television signals to home viewers by cable, rather than by over-the-air broadcasting. When it originated, cable TV performed two basic functions. It enhanced reception of local television broadcasts, and it also permitted the importation of signals from distant television stations beyond the range of local reception. *fn2" Today, however, cable TV systems may also originate their own programming, which is called "cablecasting", *fn3" or may make available certain "access channels" over which individuals may transmit programming to home viewers. *fn4" Generally, cable TV systems provide these services to their subscribers for a basic monthly fee. *fn5"

 Pay cable TV augments the basic cable service by providing the home viewer with additional programming for an additional monthly or other charge. The most common pay cable system provides the viewer with an additional channel for a flat monthly fee over the basic cable TV charge. The plaintiffs employ such a system. HBO supplies box-office type programming to local cable TV systems. This programming includes recent motion pictures, sports events not otherwise televised, and other entertainment, all shown without commercial interruption. *fn6" The local cable TV system then distributes this programming to pay cable home viewers over a channel which is accessible only to the pay cable subscribers. In order to receive HBO, the subscribers must pay a monthly fee in addition to the charge for their basic cable TV service.

 Other pay cable systems are also being developed. Some systems provide the viewer with different programming options, e.g., sports programs or recent films, at different prices. Some systems charge the viewer only for those programs actually watched. *fn7"

 The FCC's Actions

 By 1965, the FCC was involved in regulating the growing cable TV industry. *fn8" The agency's jurisdiction over this developing medium was first upheld by the Supreme Court in 1968. *fn9" In 1969, in an effort to encourage diversity of programming on cable TV, the FCC promulgated rules requiring cable TV systems having over a minimum number of subscribers to originate their own programming through cablecasting. *fn10" The Commission envisioned that some of this cablecasting would occur over leased access channels. *fn11" These are channels made available by the cable TV system, for a fee, to a third party who provides programming for home viewers. The FCC announced in 1971 that it had preempted the field of pay cable television cablecasting, *fn12" even though no comprehensive review of pay cable had yet been undertaken.

 Having developed a policy of dual jurisdiction over cable TV rate regulation, the FCC in 1972 decided to permit local regulation of the rates for basic cable TV services only. *fn13" These are the services which the cable system regularly supplies to all subscribers. However, because the FCC wanted to encourage experimentation in the new medium of pay cable TV, and because it feared that both federal and local regulation would be confusing and impracticable, the Commission at that time precluded local rate regulation for pay cable TV. *fn14" The FCC's position and its reasoning were stated much more clearly in a subsequent clarification in 1974.

 It remains our intent to keep [leased access] channels as free as possible from any regulation that might restrict or artificially alter their growth. This is particularly true in the area of rate regulation. We have pre-empted this area with the explicit purpose of allowing the market place to function freely.

 . . . . .

 We have intentionally and specifically limited rate regulation responsibilities to the area of regular subscriber service, and we will continue to do so. We have defined "regular subscriber service" as that service regularly provided to all subscribers. This would include all broadcast signal carriage and all our required access channels including origination programming. It does not include specialized programming for which a per-program or per-channel charge is made. The purpose of this rule was to clearly focus the regulatory responsibility for regular subscriber rates. It was not meant to promote rate regulation of any other kind.

 85. After considerable study of the emerging cable industry and its prospects for introducing new and innovative communications services, we have concluded that, at this time, there should be no regulation of rates for such services at all by any governmental level. Attempting to impose rate regulation on specialized services that have not yet developed would not only be premature but would in all likelihood have a chilling effect on the anticipated ...


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