Brian T. Grogan
(612)
347-0340
E-Mail:
GroganB@moss-barnett.com
Timothy L. Gustin
(612)
347-0409
E-Mail: GustinT@moss-barnett.com
To: Moss & Barnett Clients and
Interested Parties
From: Brian T. Grogan and Timothy L.
Gustin
Date: June 9, 2000
I.
Franchising Authorities May Receive
Compensation for Use of Rights-of-Way
Franchising
authorities received goods news on May 15, 2000 when the United States Court of
Appeals for the 4th Circuit confirmed that franchising authorities may receive
compensation, and not just cost-based fees, for the use of rights-of-way! The court of appeals vacated and remanded the
district court’s decision which held that a telecommunications ordinance had
violated Section 253 of the Telecommunications Act of 1996. In this case, Bell Atlantic Maryland, Inc.
v. Prince George’s County, Maryland, 2000 WL 620283 (4th Cir.
May 15, 2000), the court of appeals held that the district court should never
have reached the federal law issues without first analyzing state law
issues. Therefore, the case was remanded
back to district court for consideration of the state law issues. The district court’s decision can be found at
49 F. Supp. 2d 805 (D. Md 1999).
As
stated, the case is significant because the district court held that the county
was only entitled to reasonable cost-based fees as opposed to compensation for
the use of rights-of-way. The district
court decision has been widely cited by telecommunications providers across the
country as authority to reject any compensation for the use of rights-of-way as
unreasonable. Furthermore, many state
and federal regulators have relied on the Prince George district court
decision to address similar issues before them.
As a result of the 4th Circuit’s decision, there are no longer any
federal district court opinions that support the argument that compensation
must be limited to cost-based fees as opposed to a franchise fee or a per
linear foot charge. There have been
several state court decisions that have addressed this issue and those should
be reviewed within your jurisdiction for further clarification.
Franchising
authorities also obtained a favorable decision in TCG Detroit v. City of
Dearborn, 206 F.3d 618 (6th Cir. 2000), where the 6th
Circuit upheld a district court decision (16. F. Supp. 2d 785 (E.D. Mich.
1998)) finding that a 4% franchise fee was permissible under Section 253. The Dearborn decision supports the
argument that cities are not limited to recovering only their “costs” but
rather may impose reasonable “rent” or compensation for the use of
rights-of-way. Furthermore, the Dearborn
decision helps to clarify the requirement in Section 253 mandating
“non-discriminatory” treatment. In this
case Ameritech operated under 100 year old authorization that predated state
franchising. TCG, a competitive access
provider, argued that a 4% franchise fee was discriminatory because such fee
was not also imposed upon Ameritech. The
6th Circuit held that TCG did not have to be charged the same fee as
Ameritech and therefore upheld the imposition of the 4% franchise fee.
II.
FCC’s Report on Competition
On
January 14, 2000, the FCC released its 6th Annual Report on
Competition and Video Markets. The
report contains many interesting statistics regarding the cable television and
telecommunication industry which may perhaps explain some of the emerging
trends occurring in the year 2000.
Below, we have outlined several of the more interesting statistics for
your review.
Multichannel
Video Programming Distributor (“MVPD”) subscribers (i.e. cable, DBS, MMDS,
SMATV, etc.) were up 5.5% in 1999 to a total of 81 million subscribers. Of that total, 66.7 million were cable
television subscribers, which represented a 2% increase from 1998. Direct broadcast satellite had 10 million subscribers
in 1999 or 12.5% of all MVPD subscribers. The seven largest cable television
operators now control 90% of the cable television subscribers in the United
States. In addition, over 40 million
subscribers are now served by regional clusters.
There were
245 satellite delivered programming channels available in 1998 which increased
to 283 channels available in 1999. This
represents a 16% increase in satellite delivered programming. Despite this fact, the four major networks
still control a 52% share of the viewing audience. The top six cable television
operators own all or a part of 101 programming services. Of the 75 regional programming networks, 26
are sports channels and 30 are news channels.
With respect to home computer use, the FCC estimates there are 50
million computer homes in 1999 and over 100 million Internet users. The increase in demand for high-speed
Internet access is encouraging new start-up companies to consider overbuilding
cable operators, and several industry trade groups have estimated that the
demand for residential high-speed Internet services will increase nearly
five-fold by 2004. In the year 2000, it
is estimated that nearly 3.3 million subscribers will take advantage of cable
television high-speed modems. This
number is anticipated to increase to 16.6 million subscribers by the year 2004.
The FCC
concluded that the total revenue from all MVPD’s as well as local telephone and
long distance telephone was $334 billion.
Of this total, cable television fees amounted to 12.3% of that total or
approximately $40 billion. Cable television rates increased 3.8% in 1999 while
the CPI during that same period was 2%.
However, the FCC estimates that cable operators increased the capital
spent on system upgrades by 13%, license fees increased 14.6%, and programming
costs increased by 16.3%. The labor
costs for the cable and telecom industry also increased an additional 2% over
all other industries.
The main
emphasis of the FCC’s report was on the presence of competition throughout the United
States, and the report found that competition is slowly emerging. Ameritech now has 111 franchises serving
250,000 subscribers. Bell South has 21
franchises and passes approximately 1.4 million homes. GTE, SNET, and USWest also are providing cable
television services. Open Video Systems
(OVS) have not been as wide spread with only 13 certified providers in 28
areas. While the FCC’s report on
competition demonstrates that subscribers in certain areas are now afforded a
choice of cable television operators, it is apparent that the total number of
cable operators in the country is shrinking with the largest operators such as
Time Warner, AT&T, and Charter acquiring a larger percentage of the total
subscriber base.
III.
Local Governments Lose Their Last Hope of
Controlling the Siting of Communications Facilities Based on Radio Frequency
Two recent court decisions further restrict local
governments from regulating communications facilities based on radio
frequency. In the first, Cellular
Phone Taskforce v. FCC, No. 97-4328(L) (2nd Cir. Feb. 18, 2000), the court
held that federal law preempts a local government from regulating not only the
placement, construction, or modification of a personal wireless service
facility based on radio frequency emissions, but also the operation of it. In the second, Freeman v. Burlington
Broadcasters, Inc., No. 97-9141 (2nd Cir. Feb. 23, 2000), the court held
that federal law preempts a local zoning board from conditioning a permit to
construct and use a communications tower on a requirement to eliminate radio
frequency interference with appliances and devices in nearby homes.
With
the Telecommunications Act of 1996 (“Act”), local governments have limited
regulatory authority over the health and environmental effects from radio
frequency emissions. See 47
U.S.C. Section 332(c)(7)(B)(iv). The Cellular
Phone decision expands such limitations beyond the plain language of the
Act. The Freeman decision states
that the entire field of radio frequency interference regulation is preempted
by federal law because federal law is so pervasive. Taken together, these cases suggest that
local governments should be wary to regulate communications facilities based on
the environmental or health effects of radio frequency or any interference resulting
therefrom. A closer analysis of each
decision follows.
Cellular
Phone Taskforce v. FCC
In
this case, the petitioners appealed two final opinions and orders in which the
FCC adopted guidelines for human exposure to radio frequency radiation from FCC-regulated
transmitters and facilities. Of the many
claims raised by the petitioners, the one of most significant impact to local
governments centers on the interpretation of 47 U.S.C. Section 332(c)(7)(B)(iv)
of the Telecommunications Act of 1996.
The pertinent language states in part:
No
State or local government or instrumentality thereof may regulate the
placement, construction, and modification of personal wireless service
facilities on the basis of the environmental effects of radio frequency emissions
to the extent that such facilities comply with the Commission’s [FCC’s]
regulations concerning such emissions.
On
its face, the statute clearly prohibits a state or local government from
regulating the “placement, construction, and modification” of communications
facilities based on radio frequency emissions.
What was at issue in this case, though, was not the placement,
construction, or modification of such facilities, but the operations of them. The petitioners argued that the absence of
the word “operations” from the statute preserves the rights of local
governments to regulate the radio frequency emissions produced by the
operations of communications facilities.
Despite the legislative history supporting the petitioners’ argument,
the court disagreed, reasoning that deference is afforded to an agency’s
interpretation of a statute which the agency is charged with administering, a
well-settled principle of administrative law.
Freeman v.
Burlington Broadcasters, Inc.
In
this case, homeowners adjacent to a communications tower sought enforcement of
a local permit condition that required the communications company to remedy any
radio frequency interference from tower signals with appliances and devices in
neighboring homes. The local zoning
board found that federal law preempted enforcement of the permit
condition. Believing the communications
company to be sluggish in responding to complaints, the homeowners removed the
case to federal district court and argued that there was state or local
jurisdiction over claims of fraud, deceit, or misrepresentation. The district court dismissed the case for
lack of subject matter jurisdiction.
On
appeal, the circuit court concluded that federal law preempts the field of
radio frequency interference because its regulations are so pervasive. The court, however, did note that homeowners
such as the appellants are not without a remedy. Federal regulations impose a continuing duty
on communications companies to provide technical assistance to residents within
the blanketing interference area to resolve radio frequency interference
problems. Within the first year of
operation, the transmitting station must satisfy all complaints of blanketing
interference with most common devices at no cost to the complainant. Landowners may also file an informal request
for action with the FCC, and they may ask the FCC to deny renewal of the
license on the grounds that the interference is so severe that it violates the
public interest.
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Brian T. Grogan is a shareholder with the
Minneapolis law firm of Moss & Barnett.
Brian represents entities throughout the country on franchise renewals,
transfers of ownership, telecommunications planning, right-of-way issues, First
Amendment issues, litigation and other related communication matters. Brian is a frequent presenter at state and
national conferences regarding communications law. He is a member of the American Bar
Association (Forum Committee on Communications Law), National Association of
Telecommunications Officers and Advisors, International Municipal Lawyers
Association, and is the past Chair of the Communications Law Section of the
Minnesota State Bar Association.
Timothy L. Gustin is an associate with the
Minneapolis law firm of Moss & Barnett and practices in the areas of cable
communications, telecommunications, and real estate. He represents entities on cable television
franchise renewals, transfers of ownership, right-of-way regulation, wireless
tower siting and zoning, and various telecommunications issues. Tim is involved in the preparation of cable
communication franchises, regulatory ordinances, resolutions, transfer reports,
and related documents. He is a member of
the American Bar Association and is the Secretary of the Communications Law
Section of the Minnesota State Bar Association.
For further information on Moss & Barnett’s cable communications
practice, please see the firm’s website at www.moss-barnett.com.
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The materials in this Communications Law Update have been complied
from a variety of sources and address only a portion of the relevant issues
contained within hundreds of pages of regulations and decisions. We have not addressed many important points
which may apply to your situation. You
should consult with legal counsel before taking any action on matters covered
by this Communications Law Update.
Please send your name and/or address corrections to:
Terri Hammer
Moss & Barnett
Fax: (612) 339-6686
E-mail: hammert@moss-barnett.com
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