Title IV of the Federal Communications Act (as well as the franchising laws of states and localities) regulates “cable services” provided by a “cable operator.” A provider of video programming services is probably a regulated cable operator if it uses a “cable system” to distribute video signals to subscribers. Under Federal law (47 U.S.C. § 602(7)(B)), the term “cable system” means:
… a facility, consisting of a set of closed transmission paths and associated signal generation, reception, and control equipment that is designed to provide cable service which includes video programming and which is provided to multiple subscribers within a community, but such term does not include (A) a facility that serves only to retransmit the television signals of 1 or more television broadcast stations; (B) a facility that serves subscribers without using any public right-of-way; (C) a facility of a common carrier which is subject, in whole or in part, to the provisions of title II of this Act [47 USCS §§ 201 et seq.], except that such facility shall be considered a cable system (other than for purposes of section 621(c)) [47 USCS § 541(c)] to the extent such facility is used in the transmission of video programming directly to subscribers, unless the extent of such use is solely to provide interactive on-demand services; (D) an open video system that complies with section 653 of this title [47 USCS § 573] or (E) any facilities of any electric utility used solely for operating its electric utility systems.
For PCOs, the crucial language in that definition (the so-called “private cable exemption”) is its exclusion of “a facility that serves subscribers without using any public right-of-way.” To the extent a PCO does not “use” any public right-of-way, the PCO is not a “cable operator” and exempt from most regulations governing cable television.
Clearly, when a service provider strings cable across a road or other public way, it is using a public right-of-way. However, the issue is nuanced, and questions have arisen over the years concerning what constitutes “using” a public right-of-way. Some of those questions have been the subject of litigation.
The legal definition of “cable operator” is important for PCOs for several reasons. First, in sociological terms, the notion of a “private community” has in the past several decades expended far beyond traditional apartment and condominium complexes to encompass modes of real estate development that occupy a large gray area between “public” and private,” including planned unit developments, master planned communities and other forms of “gated” communities. To the extent such a “private” community includes public rights-of-way, a PCO providing service to the community runs the risk of “using” the rights-of-way, thus falling into the “cable operator” classification. A cable operator functioning without a franchise agreement may be liable to a cash-strapped local or State government for payment of retroactive cable franchise fees.
In addition, a PCO seeking to provide service to an expanded private/public community without obtaining a cable franchise may be able to find creative ways of avoiding the franchise obstacle by examining judicial and FCC analyses of the meaning of the term “cable operator.”
For example, in 1998 the FCC addressed the issue in resolving a dispute concerning a company called Entertainment Connections, Inc. (“ECI”). ECI was a SMATV provider serving MDU buildings in Michigan. ECI subscribed to a tariffed video service provided by the local telephone provider (Ameritech) to distribute its programming to various MDUs. ECI owned and controlled the head end and inside wiring facilities and exercised editorial control over the programming content. Ameritech owned and controlled the transmission facilities that used public rights-of-way. The City of East Lansing (the local franchise authority) sought to compel ECI to obtain a franchise agreement as a cable operator. ECI filed a petition with the FCC requesting a declaratory ruling that it was not a cable operator subject to local franchising requirements.
The Commission ruled that it was Ameritech, not ECI, that “uses” the public rights-of-way. Therefore, ECI satisfied the private cable exemption in Section 602(7)(B). The following factors were crucial to the FCC’s conclusion: (1) there was an absolute separation of ownership between ECI and Ameritech; their relationship was that of a carrier-user; (2) ECI’s facilities were located entirely on private property; (3) Ameritech provided service to ECI pursuant to a tariffed common carrier service; (4) Ameritech had no editorial control over the content of ECI’s programming; (5) the facilities primarily used by Ameritech to provide the service were not constructed at ECI’s request; (6) the Ameritech facilities had the capacity to serve several other programming providers; and (7) ECI had committed to make its drops available to other programming providers.
1. Entertainment Connections, Inc. ("ECI") filed a motion for declaratory ruling pursuant to Section 1.2 of the Commission's rules. ECI seeks a ruling that it is not a cable operator required to obtain a franchise under Section 621 of the Communications Act of 1934, as amended, ("Communications Act"). The Commission issued a public notice seeking comment on ECI's motion. Numerous parties filed comments and reply comments related to ECI's motion.
2. Section 602 of the Communications Act provides that "any person or group of persons (A) who provides cable service over a cable system and directly or through one or more affiliates owns a significant interest in such cable system, or (B) who otherwise controls or is responsible for, through any arrangement, the management and operation of such a cable system" is a cable operator. Section 621(b) provides that a cable operator providing cable service must obtain a franchise from an appropriate government entity. Section 651(a)(2) of the Communications Act as amended by the Telecommunications Act of 1996 ("1996 Act"), provides that a common carrier may transmit video programming without obtaining a cable franchise if it provides common carriage of video traffic. In its Motion, ECI asserts that it does not fall within the definition of either a cable operator or cable system that must obtain a franchise as established by the Communications Act and the Commission's decisions. ECI contends that to the degree its signal is transmitted over a public right of way, it does so through the facilities of a local exchange carrier ("LEC"), and that the law does not require it to obtain a franchise under these circumstances.
3. ECI limits the issue in its motion for a declaratory ruling to whether it is required to obtain a cable franchise. We note that the issue of ECI's status as a cable operator has significant additional consequences under the Communications Act and Commission's rules, inter alia, mandatory carriage of television broadcast signals, nonduplication protection and syndicated exclusivity, cable television access and technical standards, and equal employment opportunity requirements. In addressing ECI's Motion, we are cognizant that a finding that ECI is a cable operator would require ECI to comply with all of a cable operator's statutory obligations.
4. We grant ECI's Motion for a Declaratory Ruling. Because it neither owns an interest in the facility that transmits its programming over the public rights of way, nor controls, or is responsible for the management and operation of those facilities, we conclude that ECI is a not cable operator as defined by the Communications Act and is not obligated to comply with the requirements of Title VI of the Communications Act.
ECI was originally joined in its Motion by Telecommunications Services Corporation ("TSC"). By letter dated January 20, 1998, TSC withdrew from the proceeding.
Section 1.2 of the Commission's rules provides that "[t]he Commission may, in accordance with section 5(d) of the Administrative Procedure Act, on motion or on its own motion issue a declaratory ruling terminating a controversy or removing uncertainty." 47 C.F.R §1.2.
Communications Act §621(b)(1), 47 U.S.C. §541(b)(1).
Communications Act §602(5), 47 U.S.C. §522(5).
Communications Act §651, 47 U.S.C. §571.
See Communications Act §614, 47 U.S.C. §534 (carriage of local commercial television signals); 47 C.F.R. §76.51-70 (same); Communications Act §614(b)(5), 47 U.S.C. §534(b)(5) (nonduplication and syndicated exclusivity); 47 C.F.R. §76.92-163 (same); Communications Act §612, 47 U.S.C. §532 (leased access); 47 C.F.R. §76.701 (same); Communications Act §632, 47 U.S.C. §552 (consumer protection and customer service); 47 C.F.R. §76.309 (same); Communications Act §634; 47 U.S.C. §554 (equal employment opportunity); 47 C.F.R. §76.71-79; 47 C.F.R. §76.601-30 (technical standards).