Sixth Circuit Upholds FCC on LFA Limits: A Bad Decision and A Sad Day for Localism, With Possible Silver Lining for Ancillary Authority and Leased Access.

The Sixth Circuit has denied the Petitions for Review filed by local franchise authorities (LFAs) and PEG programmers challenging the FCC’s December 2006 Order limiting the ability of LFA’s to negotiate with telco video overbuilders. (You can read a copy of the decision here.)

I am rather disappointed with the decision, as readers might imagine. Not only do I think limiting the authority of LFA’s to protect their residents is a phenomenally bad idea, I think the court takes a very expansive view of FCC authority over LFAs given the legislative history and the statute in question.

On the other hand, the decision potentially provides a substantial boost both the FCC’s ancillary authority and to its leased access reform order, currently pending before the Sixth Circuit. While I find this rather cold and uncertain comfort at the moment, it’s the best I can do in the face of what has become an utter rout for LFAs and PEG programmers. God willing, a future FCC will conduct the inquiry into strengthening PEG programming Commissioners Adelstein and Copps have repeatedly urged.

Some further analysis of the decision and what it might mean below…

My chief issue with the Court’s analysis is that it focuses on a single element of the legislative history and — despite spending the first few pages on the history — ignores the relevance of the rest of the legislative history.

Certainly the Court is correct that prior to the 1984 Cable Act, the Commission preempted local franchising in certain areas and localities had a wide range of practices and policies for giving a franchise to access the public right of way. Also true that a major purpose of the 1984 Act was to (a) define clear roles for LFAs and the FCC, and (b) severely limit the ability of either to regulate cable, as Congress took its first bold and exciting step into the deregulatory world of Chicago School economics.

By 1992, however, Congress had recognized that this deregulatory approach had become an unmitigated disaster. Among many problems, Congress determined that limiting the ability of local franchising authorities to regulate cable systems produced poor quality, crappy service, and no recourse to consumers. Or, as the Congressional findings state:

The Cable Communications Act of 1984…limited the regulatory authority over cable operators. Franchising authorities are finding it difficult under the current regulatory scheme to deny renewals to cable systems that are not adequately serving cable subscribers.

1992 Cable Act; Section 2(a)(20).

But the court ignores all of this to focus on one thing, that Congress also took away the right of LFAs to grant exclusive franchises because Congress hoped to encourage the development of competition in the belief that competition would eliminate the need to regulate. So despite the overarching structure of Act being about dividing the responsibilities between the FCC and the LFAs, and ignoring not merely legislative history but explicit Congressional findings on the importance of the role of LFAs in protecting their residents, the court found that the FCC had regulatory authority over LFAs just as it did before Congress began regulating.

But this still wasn’t enough to get the FCC the authority it needed to regulate under the statute, so the court reached outside Title VI (the section on cable) and wondered over to Title II (the section regulating common carriers). Specifically, the court found that the broad language of Section 201(b) conferred general authority on the Commission to make rules that further the goals of the Communications Act and the introduction of competition into cable services. That’s quite a leap, given that not only have cable services never been regulated as Title II common carriers, the Surpreme Court found that the FCC could not on its own authority impose common carrier regulations under Title II. But nevertheless, the Sixth Circuit found that the FCC’s general authority under Section 201(b) provided general rulemaking authority to regulate the LFA franchising process.

Once past the authority hurdle, the rest followed rather naturally. The court deferred to the FCC’s findings that LFAs “unreasonably” delayed franchising for new entrants, without weighing the quality of the evidence to ascertain whether, as ACM and other Petitioners maintained, the evidence in the record amounted to mere hearsay rather than anything substantive to justify such sweeping regulations. Further, by assuming that Congress acted to limit LFA authority rather than consider the extent Congress expanded LFA authority in the 1992 Act (particularly with regard to PEG and iNets), the court had no trouble upholding the FCC for the specific limitations imposed on LFAs to assure that they do not “unreasonably” delay grant of a competing franchise — including not to impose such pesky things as universal buildout (despite, I must point out, universal buildout being a stated goal of the Communications Act in Section 1).

Alas, I fear only an act of Congress can straighten this out now, at least as far as resolving the ability of the FCC to regulate LFAs. On the other hand, the case does contain a few silver linings.

First, as I noted above, the Sixth Circuit acknowledges very broad powers for the Commission to regulate, particularly under Section 201(b). This enhances the Commission’s argument that it has broad general authority to regulate broadband and other services provided via cable to achieve the purpose of Section 201(b), that all practices and charge be “just and reasonable.” If Section 201(b) gives ancillary authority to regulate cable services and — even more broadly — the way in which local government entities regulate cable services, then directly regulating a Title I service as Title II is no challenge at all. So while I would not make too much of this, it being in one circuit and relating to other matters, it modestly strengthens our hand on the question of FCC authority to act on the pending complaint against Comcast over their “network management” practices.

Second, and of greater relevance, the decision does seem to have positive relevance for the pending cable leased access litigation. Again, I would hesitate to draw too much from this case. Other factors, such as whether the Sixth Circuit gives greater credence to the First Amendment arguments raised by cable and telco-video operators in the leased access litigation than to the concerns of LFAs remains to be seen. But the court here establishes that the FCC has broad general powers to regulate cable services to effectuate the purposes of the 1992 Cable Act (which explicitly directed the FCC to make leased access more effective) and gave broad deference to the FCC’s analysis of the record — refusing to second guess the agency as to the veracity of the comments and simply finding that the extensive inquiry conducted by the agency justified its conclusions. As the leased access litigation is in the Sixth Circuit, this case has direct precedential value.

Finally, I have to say that while I know things are a bit tense over in FCC-land as we stumble toward a new administration, I did think Martin’s statement in response to the Sixth Circuit ruling, which amounted to “In yo’ face Adelstein! Not enough of a record to support the rule my [censored for indecency]! Whose your daddy now, huh?” was a shade over the top. Mind, I think Martin is still a bit peeved over Adelstein’s accusation that Martin tried to cook the books on the cable stuff last November. But given that there’s still a long way to go before January 21, 2009, and a lot of work to get done, I hope folks up on the 8th floor figure out how to get along for another 6 months without throwing furniture or bringing everything to a bloody standstill.

So, to conclude, a sad day for localism and local accountability, sacrificed on the alter of “competition” by deregulation. But perhaps some good will come of it in the end. Always remember, when life hands you lemons CRUSH THEM, SQUEEZE OUT THE LIFE-GIVING JUICES, CAST ASIDE THE DESCICATED HUSKS, then mix with water and sugar to make a refreshing beverage. (From Chicken Soup For Evil Geniuses)

Stay tuned . . . .

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3 Comments

  1. publius says:

    This is one reason why I think I’m more skeptical of an expansive ancillary authority view. I guess the real question is how expansive would we want it to be from behind the veil so to speak.

    For instance, I know Susan Crawford was anti-ancillary (i.e., anti a broad view) b/c she wanted info services to have few legacy regulations. at other times, title i has been used to protect incumbents (SW Cable) or to evade statutory schemes (Midwest II).

    Also, on an aside, have you seen the Merrill argument that the Title I rulemaking grant of authority should be seen primarily as a housekeeping/internal procedure provision. The argument is that is makes the Title II and Title III grants of authority superfluous. I realize that COURTS haven’t adopted that view, but it’s another strike against an expansive reading i think

    as always, excellent post

  2. Harold says:

    Publius:

    As always, thanks for the kind words. I have not seen the Merrill analysis and would be interested in seeing it.

    I agree that, if I were writing on a blank slate, I would not be so thrilled with the idea of ancillary authority as a blank check, although I don’t think I would go so far as limiting merely to “housekeeping.” Rather, it seems to me that the underlying analysis of the Supreme Court in Southwestern is correct: Ancillary authority is a broad default for where Congress hasn’t addressed the specific issue but it clearly falls into the broad category of “communication by radio or wire.” In 1968, CATV (as cable was then called) was clearly as much a communication technology as television. In an era when the courts viewed delegation and administrative oversight as positive and therefore read them expansively as a matter of subject matter delegation, rather than seeking to narrow the scope of federal oversight as much as possible, it seemed fairly obvious to the Court that cable was exactly the kind of thing Congress wanted its expert agency to handle — a new technology for communication that remained to nascent for Congress to make broad policy judgments. (After all, it took another 16 years from the affirmation of the FCC’s ancillary authority to Congress’ determination on how to regulate cable).

    My problem here is that the Sixth Circuit has gone beyond this and moved to an area where Congress has clearly spoken. In this case, ancillary authority becomes a way to route around what I believe was a clear delineation by Congress between federal authority and local authority.

    But, given that, once the court has made its opinion, it becomes applicable to all. I would find it unconscionable to see a rule that says “well, ancillary authority is o.k. for screwing you, but off limits for public interest regulation.” This was my primary concern with Susan’s analysis back in the day. I wanted broadband firmly in Title II. But if we lost Title II, I was prepared to argue Title I ancillary, because there is a difference between pushing Title I into someplace new and using it once it’s already established that it goes this far.

  3. publius says:

    That makes sense.

    The Merrill article is (as I recall) a 2002 Harvard Law Review piece titled “Agency Rules with the Force of Law” or something like that.

    There’s a brief 2-3 page discussion about halfway through about 4(i). (I just saw it b/c i’m doing some research on this topic as we speak).

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