CSC HOLDINGS v. WESTCHESTER TERRACE AT CRISFIELD

The opinion of the court was delivered by: McMAHON, District Judge.

Both sides in this case have moved for summary judgment. Most of the issues raised by the cross-motions are amenable to summary disposition. However, four claims remain, as well as one counterclaim. Thus, I cannot dispose of the case on motion.

ESSENTIAL BACKGROUND INFORMATION

The Parties

Plaintiff is the operator of "Cablevision". It holds a franchise from, inter alia, the City of Yonkers in Westchester County, to operate a "cable television system." A cable television system is defined, at Public Service Law § 212(2), as:

Westchester Terrace at Crisfield ("WT") is a three story, 60 unit condominium apartment building located in Yonkers, New York. Westchester Terrace at Crisfield Condominium Association ("WTA") is a voluntary association formed by WT's resident-owners and appointed as their agent to manage the common areas of the building. Richard Neuman is the President of WTA.

Defendant Digitech TV Corp., Inc., operates a satellite master antenna television (SMATV) service known as DirecTV. Unlike the traditional cable television system operated by plaintiff, which delivers video programming to a large community of subscribers though coaxial cables laid under city streets or along utility lines, DirecTV receives a signal from a satellite through a dish located on a rooftop, and then retransmits the signal by wire to units within a building or complex of buildings. FCC v. Beach Communications, Inc., 508 U.S. 307, 311, 113 S.Ct. 2096, 124 L.Ed.2d 211 (1993) (defining SMATV system). New York Public Service Law § 212(5) defines a "master antenna television system" as:

As noted above, a master antenna television system is not a cable television system within the meaning of the Public Service Law; indeed, the law expressly states that the two are mutually exclusive ("cable television system. . . . does not include . . . any master antenna television system"). As a result, Digitech is not required to obtain a franchise from a municipality prior to installing its equipment at a condominium complex like Westchester Terrace.

The Agreement at Issue

In 1995, WT entered into an Access Agreement ("Agreement") with Cablevision Systems Corporation (now known as CSC Holdings), authorizing CSC to install and update a telecommunications system for the use of occupants of the 66 Crisfield Street building. For that purpose, the Agreement granted CSC "the non-exclusive right to provide telecommunications services to the Premises by placing, maintaining, affixing, and attaching cables, wires, equipment, molding and appurtenant devices (hereinafter `Equipment') through, in or on the Premises." (Emphasis added) WT retained the right to approve plans for the installation, and CSC agreed to restore the premises following the installation. Per paragraph 2 of the Agreement, WT agreed to afford CSC reasonable access to the building from time to time for the purpose of installing, maintaining or removing the Equipment. Per Paragraph 8, the Equipment "shall remain the property of the Company, and nothing herein shall be deemed to create any property interest herein in" WT or anyone else. Paragraph 12 states, "[T]he parties each agree that this Agreement shall remain in full force and effect from the time the Premises is rewired and reactivated with the Company's signal until the termination of the Company's franchise with the City of Yonkers including any extensions or renewals thereof."

The Equipment

Pursuant to the parties' Agreement, CSC installed the Equipment at 66 Crisfield and has provided cable service to the building continuously from that day to this using that Equipment.

There is a utility closet on each floor of the building. Inside each utility closet is a lock box, known by the name Multiple Dwelling Unit Box, or MDU. The MDU's were installed by CSC and are under CSC's control. The MDU is the distribution point, transferring the signal from the main cable running into the building to the individual coaxial cables, each of which serves an apartment. Each MDU has inside it many "taps," and the cables that serve each individual apartment are connected to one of the taps inside the locked Box. These wires emerge from that box to enter a metal conduit affixed to the wall inside the utility closet. That conduit runs a short distance into a cavity inside the sheetrock hallway ceiling. Once the cable wiring is inside the ceiling cavity, the metal conduit ends. The wire servicing an individual subscriber runs inside the ceiling cavity to a point where it penetrates the sheetrock demising wall between the hallway and the apartment it serves. There are 21 apartments on each floor of the building, so there are a total of 63 points where the wire penetrates the sheetrock demising wall between the hallway and each of the apartments in the building.

The MDU and all the wiring that runs out of it is "Equipment" within the meaning of the contract and is the property of plaintiff.

Home Run Wiring vs. Home Wiring

The Federal Communications Commission (FCC) has established rules that govern the use and disposition of wiring inside multiple dwelling buildings such as WT. The FCC divides the wire that runs from the MDU into an individual apartment into two segments. The wire running from the MDU (which is where the cable becomes dedicated to an individual unit within the building) to a point known as the "demarcation point" is categorized as "home run wiring." 47 C.F.R. § 76.800(d). From the demarcation point to the back of the resident's television set, the wire is categorized as "home wiring." 47 C.F.R. § 76.76.5(II). A somewhat crude way of explaining the difference between home and home run wiring is that home run wiring is the cabling located in the common areas of the building, whereas home wiring is located primarily within the subscriber's apartment or in the common area immediately adjacent thereto.*fn1

Under the rules, the demarcation point is presumptively located at a point that is twelve inches outside the point where the wire enters the apartment. 4 C.F.R. § 76.5(mm)(2). However, if that point is "physically inaccessible" — which means that obtaining access to the wiring at that point would require "significant" modification or damage to "existing structural elements" and would add "significantly" to the "physical difficulty or cost of accessing a subscriber's home wiring," 47 C.F.R. § 76.5(mm)(4) — then the demarcation point moves to "the closest point at which the wiring becomes physically accessible that does not require access to the subscriber's unit." 47 C.F.R. § 76.5(mm)(5); see also Report and Order and Second Further Notice of Proposed Rulemaking, CS Dkt. No. 92-260, MM Dkt. No. 92260, FCC No. 97-376 (Oct. 17, 1997), (hereinafter "FCC Report"), ¶ 150. The FCC has determined that "wiring embedded in brick, metal conduit or cinder blocks with limited or without access openings would likely be `physically inaccessible,' wiring enclosed within hallway molding would not." Id.

The distinction between "home wiring" and "home run wiring" and the location of the demarcation point between the two is important. In 1996 and 97 the FCC issued a series of regulations (known as the Home Wiring Rules and the Home Run Wiring Rules) to govern the disposition and use of coaxial cable owned by a service provider (the incumbent service provider) that either has lost or is about to lose the legal right to service customers in a multi-family building.

The "home wiring" rules (which are found at 47 C.F.R. § 76.802(a)(2)) govern disposition of the "home wiring" when an individual customer within a multi-family building terminates its service with the incumbent provider in order to acquire service from a competitor. In such a case, before a cable operator can remove existing wiring it owns, the customer must be given an opportunity to purchase the "home wiring" from the incumbent (in this case, CSC) at "replacement cost," so that the competing vendors can access its premises without unduly impacting the condition of their homes. If the customer declines to purchase the home wiring, the incumbent service provider must remove it within seven days. The "home wiring" rules recognize the installer's ownership rights in the coaxial cables it installed and offer compensation whenever an individual consumer wishes to use those cables to obtain alternative service.

By their terms, the home wiring rules apply only when there is a "voluntary termination of cable service by an individual subscriber in a multiple-unit installation." FCC Report ¶¶ 122-123. Since residents of multiple-family dwellings ordinarily obtain and cancel their own cable service, a condominium association or coop board cannot ordinarily exercise the subscriber's right to terminate service; that right is reserved to the individual customer. Indeed, the FCC specifically declined to adopt a proposed rule that would have permitted building owners and condominium associations (like WTA) to act as tenants' agents in providing notice of intent to change service providers for their individual units. FCC Report at ¶ 50.

The "home run wiring" rules, 47 C.F.R. § 76.804, as the name suggests, govern the disposition of home run wiring when an incumbent provider is about to be ejected from a building. There are two different types of home run wiring rules: rules that govern disposition of cabling on a building-wide basis ("Building-by Building Disposition") and separate rules that govern disposition of home run wires on an individual subscriber basis ("Unit-by-Unit Disposition").

Under the Building by Building rules, should the owner of the building (in this case, defendant WTA) wish to use the existing home run wiring to provide all the residents in the building with service from another provider, it must give the incumbent 90 days' notice that the incumbent's access to the building will be terminated. The incumbent must then elect to do one of the following: (1) remove its wiring and restore the building to its original condition (within a certain number of days); (2) abandon the wiring without disabling it at the end of the 90 day notice period; or (3) sell the wiring at a privately negotiated price, either to the building owner or to the alternative service provider. 47 C.F.R. § 76.804(a).

As an alternative to contracting with a new provider for the entire building, the building owner may permit a variety of service providers to compete for the right to serve individual units. In that case, upon sixty days' written notice, the incumbent (which will no longer be servicing anyone in the building) may choose to (1) remove the wiring and restore the premises; (2) abandon the wiring without disabling it; or (3) sell it to the building's owner. This is the "Unit by Unit" approach. 47 C.F.R. § 76.804(b).

Under either scenario, if the parties are unable to agree on a price, the incumbent must either remove the wiring, abandon it, or submit the issue of price to binding arbitration.

Before EITHER the Building by Building or Unit by Unit Home Run Wiring rules can be invoked, the incumbent service provider must have lost, or be about to lose, its right to remain on the premises against the wishes of the building's owner (or the condominium association). If the incumbent retains the right to service so much as one customer in the building, these rules simply do not apply. The FCC Report makes this crystal clear at ¶ 69, which states:

Furthermore, only when the owner or the condominium association elects to dispose of the incumbent's entire stock of home run wiring under the Building by Building Disposition rules can an entity like WTA exercise home wiring rights on behalf of a building's residents. In such a case, 47 C.F.R. § 76.804(a)(4) of the home run wiring rules permits the building owner or condominium association to acquire the home wiring on behalf of all of the building's residents. This permits an owner or condo association to end the incumbent's access to and service within the entire building via a single procedure. However, should the building owner (a) have the right to invoke the home run wiring rules and (b) choose the unit by unit method, then each individual subscriber must take care of its own home wiring under the home wiring rules. The FCC took care to state that it was not creating "any new right of MDU owners and alternative providers to act on behalf of subscribers in terminating service." FCC Report ¶ 50.

The procedures set forth in the home run wiring rules apply in every case where the rules are properly invoked unless and until the incumbent provider obtains a court ruling or an injunction "enjoining its displacement" within forty-five days following the initial notice "of eviction." 47 C.F.R. § 76.804(c). Thus, if an incumbent believes that the building owner has no right to force it to leave the premises, it has ample time, following invocation of the rules, to obtain a court order adjudicating its right to continue providing service on the premises. That the only type of injunction contemplated by the rules is an injunction against the "displacement" (i.e., eviction) of the incumbent provider from the premises is evident from the FCC Report, which states, "an incumbent's failure to obtain a state court injunction justifies a presumption that the incumbent no longer has an enforceable legal right to remain on the premises." FCC Report at ¶ 77.

Both the "home run" and the "home" wiring rules balance the economic rights of the cable companies with the consumer's right to the benefits of free an open competition for telecommunications services.

Laws Relevant to Cable TV Franchise Operation in New York State

To operate a cable television franchise within a municipality in New York State, a cable system must have a franchise granted by that municipality and approved by the Public Service Commission (PSC). Pub. Serv. Law (PSL) §§ 215(d)(5), 219(1), 221(1). An application to renew a franchise must be directed in the first instance to the municipality, which holds hearings and makes a public determination whether to grant the renewal. 9 NYCRR § 591.3(c)(1). The PSC must also approve any renewal. PSL § 221(1). To prevent a municipality from unfairly denying renewal of a franchise for political reasons, Congress requires local franchising authorities to consider certain issues on a prescribed timetable and limits the reasons why a franchise cannot be renewed. 47 U.S.C. § 546(c)(1) and (3). However, "A franchise shall terminate at the expiration of its term or otherwise in accordance with the provisions thereof, unless, prior thereto, the commission otherwise orders." PSL § 227(1). The same section of the PSL provides that the PSC may enter such an order (i.e., an order that a franchise shall not terminate at the expiration of its term or otherwise in accordance with its provisions) only if it makes certain types of findings after notice and a public hearing. No such hearing has ever been held with respect to CSC's operation in Yonkers and no such findings were ever made by the PSC relative to this particular franchise,

However, PSL § 216(1) empowers the PSC to issue and amend such orders as it finds necessary or appropriate to carry out the purposes behind the State's laws regulating cable television companies. The PSC has long followed the practice of issuing temporary orders of authority (TOA) in instances when a cable company's municipal franchise was about to expire but the local authority had not timely acted on the franchise renewal application. Each TOA indicates that the PSC "has determined that it would be in the public interest to grant Temporary Operating Authority so that the [operator] may continue to provide cable television services during the franchise renewal." (Ex. D to Plaintiffs Rule 56.1 Statement.) The TOAs require the cables operators to continue paying franchise fees to the municipal government and address issues of insurance indemnification and maintenance. According to Chad Hume, Deputy Director for Cable, Office of Communications at the PSC, the PSC issues hundreds of TOAs annually to cable system operators, and has done so for the past 20 years. Fully 80% of all existing franchises in the State of New York require one or more TOAs to continue in operation. DPS maintains a practice of monitoring franchise expiration dates and issuing TOAs to ensure that franchises do not lapse. This procedure has been followed for over twenty years, and has never been the subject of any legal challenge. (Hume Aff. ¶¶ 3-7)

Public Service Law § 228, New York's "cable access statute," provides in pertinent part as follows:

By its terms this law addresses one thing only: the installation of cable television facilities. It limits landlords (like WTA) from preventing a cable operator from coming into a dwelling in New York State, but permits the landlord to have reasonable requirements to prevent disruptions to the premises resulting from installation.

CSC's Yonkers Franchise: Current Status

The Franchise Agreement between CSC and the City of Yonkers was due to expire by its terms in December 1996. Since that time, CSC has provided cable television service to Yonkers residents pursuant to a series of TOAs issued by the PSC. These TOAs extend CSC's operating authority for six additional months on the terms and conditions that were in effect prior to December 1996. The City of Yonkers has taken no affirmative steps to prevent the PSC from issuing these TOAs, or to prevent CSC from sending its cable signals into Yonkers. Indeed, Yonkers has willingly accepted millions of dollars in franchise fees from CSC throughout the five and a half year period while CSC has been operating pursuant to TOAs. Similarly, the PSC has not threatened to stop issuing TOAs in order to goad Yonkers into taking action on CSC's renewal application. Doing business pursuant to TOA has become the modus operandi for CSC in Yonkers — as it is elsewhere in the State. (Affidavit of Chad G. Hume, Deputy Director for Cable, Office of Communications, New York State Department of Public Service)

THE DISPUTE THAT GIVES RISE TO THIS ACTION

Direct TV Comes to 66 Crisfield

On or about April 23, 2001, WTA, by counsel, advised CSC that Digitech, a satellite television service provider affiliated with DirectTV would be providing video programming to WT residents. In the same letter, counsel for WTA further advised CSC that Digitech planned to use CSC's Equipment — specifically identified as its "home run wiring" — to provide service to residents of WT. The letter served notice "that the Association hereby invokes the procedures set forth in 47 C.F.R. § 76.804(b) for the `unit by unit' disposition of home run wiring in the Property."

The defect in this letter is obvious. The letter nowhere asserts that CSC has lost, or is about to lose, its right to provide cable service to WT residents. Indeed, the letter specifically states that Digitech will only be using the home run wiring (which it refers to as "cable drops," a term that nowhere appears in the FCC's rules) "that are not actually in use to serve any of your customers." Thus, the letter concedes that CSC had a legally enforceable right to continue servicing WT residents. That being the case, the home run wiring rules had no applicability, and their invocation was a nullity.

Nonetheless, CSC had only a non-exclusive license to provide telecommunications services at 66 Crisfield. It was, therefore, in no position to object to Digitech's arrival as a competitor on the premises. And it did not do so. However, CSC strongly objected to Digitech's proposed use of CSC's Equipment (which CSC continued to own, per the Agreement) to carry its signal from the satellite to the apartments of its new subscribers. In other words, CSC objected to co-location.

By letter dated May 22, 2001, CSC protested that the "home run wiring rules" invoked by WTA did not apply to CSC, for the obvious reason that it still had the right to provide service in the building, under the Access Agreement and under New York State Law ...