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Brookhaven Cable TV Inc. v. Kelley

decided: March 29, 1978.

BROOKHAVEN CABLE TV, INC.; CAPITOL CABLEVISION, INC.; SAMSON CABLEVISION CORP.; TELEPROMPTER ELECTRONICS CORPORATION; WARNER CABLE OF OLEAN, INC.; NATIONAL CABLE TELEVISION ASSOCIATION, INC.; NEW YORK STATE CABLE TELEVISION ASSOCIATION; AND HOME BOX OFFICE, INC., PLAINTIFFS-APPELLEES, UNITED STATES OF AMERICA AND FEDERAL COMMUNICATIONS COMMISSION, PLAINTIFFS-INTERVENORS-APPELLEES,
v.
ROBERT F. KELLEY, CHAIRMAN; JERRY A. DANZIG, VICE CHAIRMAN; MICHAEL H. PENDERGAST; ELI WAGNER; AND EDWARD J. WEGMAN, COMMISSIONERS OF THE NEW YORK STATE COMMISSION ON CABLE TELEVISION, DEFENDANTS-APPELLANTS, NATIONAL ASSOCIATION OF REGULATORY UTILITY COMMISSIONERS, DEFENDANTS-INTERVENOR-APPELLANT



Appeal from declaration by the Northern District of New York, Port, J ., that New York State Commission on Cable Television's attempt to regulate rates charged for specialized pay cable programming was improper in light of FCC preemption, and from injunction against such regulation.

Lumbard and Oakes, Circuit Judges, and Wyzanski, District Judge.*fn*

Author: Lumbard

LUMBARD, Circuit Judge

This appeal raises two questions: whether the Federal Communications Commission has the authority to preempt state and local price regulation of one aspect of cable television -- specialized programming for which a per-program or per-channel charge is made -- and if so, whether the FCC has adequately and effectively exercised that authority. The Northern District of New York, Port, J ., finding that the FCC both possessed and had asserted the requisite authority, granted summary judgment to the plaintiffs herein, declaring that the action of the New York State Commission on Cable Television ["Commission"] seeking to impose price regulation on specialized pay cable was invalid, and enjoining defendants from attempting such regulation in the future. We affirm.

I

Plaintiffs are five cable television operators, two trade associations and Home Box Office, a supplier of special pay cable programming. In addition, Judge Port permitted the FCC and the United States to intervene as parties plaintiffs. The Commission and its members were joined as defendants by intervenor National Association of Regulatory Utility Commissioners ["NARUC"].

This action was commenced in response to New York's scheme for regulating cable TV, N.Y.Exec. Law ยงยง 811-831 (McKinney's 1972-1977 Supp.) (article 28). The relevant portions of article 28 are set forth in the margin.*fn1 The provisions in dispute here concern the setting of rates by the state and local franchising authorities.

The sections concerning rates generated considerable confusion when promulgated in 1972, particularly with regard to special programming on cable systems. Accordingly, on March 1, 1976, the Commission issued a "Clarification of Commission Policy,"*fn2 which indicated (1) that no exemption or exclusion from franchising and rate approval requirements was intended for "pay," "auxiliary" or "subscription" cable services -- the specialized programming at issue here; (2) that companies already providing pay cable services would not be required to amend their franchises immediately, but would have to give notice within two months to the appropriate authorities of their current rates, or face "appropriate sanctions"; and (3) that "active enforcement" of these policies would be undertaken.

Plaintiffs sought a declaration that the policies expressed in the Clarification violated the supremacy clause of the United States Constitution-- because of alleged FCC preemption--as well as the first, fifth and fourteenth amendments. The district court granted summary judgment on the supremacy clause claim, and this appeal followed.

II

We hold that the FCC has the authority to preempt state and local price regulation of special pay cable programming; that it has exercised this authority; and that the means it has chosen to preempt state regulation are adequate and effective.

In United States v. Southwestern Cable Co ., 392 U.S. 157, 178, 20 L. Ed. 2d 1001, 88 S. Ct. 1994 (1968), the Supreme Court upheld the FCC's jurisdiction to regulate cable TV to the extent that such regulation is "reasonably ancillary to the effective performance of the Commission's various responsibilities for the regulation of television broadcasting."

The Court elaborated on and expanded this standard in United States v. Midwest Video Corp ., 406 U.S. 649, 667-69, 32 L. Ed. 2d 390, 92 S. Ct. 1860 (1972), in which it approved the FCC's mandatory cable origination rules as "reasonably ancillary" to "the achievement of long-established regulatory goals in the field of television broadcasting by increasing the number of outlets for community self-expression and augmenting the public's choice of programs and type of service." It follows that the FCC may regulate cable TV if its regulation will further a goal which it is entitled to pursue in the broadcast area.

A decision to delay all price regulation of special pay cable meets that test; a policy of permitting development free of price restraints at every level is reasonably ancillary to the objective of increasing program diversity, and far less intrusive than the mandatory origination rules approved in Midwest Video, supra. Cf. National Association of Theatre Owners v. FCC, 136 U.S. App. D.C. 352, 420 F.2d 194, 203 (1969), cert. denied, 397 U.S. 922, 90 S. Ct. 914, 25 L. Ed. ...


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