and
No.
99-35609 US WEST INTERPRISE AMERICA, INC.; OREGON INTERNET SERVICE
D.C. No. PROVIDER ASSOCIATION; OGC
CV-99-00065-OMP TELECOMM, LTD., dba Integra
OPINION Telecom, Intervenors,
v.
CITY
OF PORTLAND;
MULTNOMAH COUNTY, Defendants-Appellees.
GTE
INTERNETWORKING, INC., Intervenor.
Appeal from the United
States District Court for the District of Oregon Owen M. Panner, Senior
District Judge, Presiding
Argued and Submitted November 1,
1999--Portland, Oregon
6747
Filed June 22, 2000
Before:
Edward Leavy, Ferdinand F. Fernandez and Sidney R. Thomas, Circuit
Judges.
David
W. Carpenter (argued), Sidley & Austin, Chicago, Illi- nois, for
plaintiffs-appellants AT&T Corp., Telecommunica- tions, Inc., TCI
Cablevision of Oregon, Inc., and TCI of Southern
Washington.
Terence L. Thatcher (argued), Deputy City Attorney,
Port- land, Oregon; Joseph Van Eaton, Miller & Van Eaton,
Wash- ington, D.C., for defendants-appellees City of Portland
and Multnomah County.
William T. Lake (argued) and William R.
Richardson, Jr., Wilmer, Cutler & Pickering, Washington, D.C.,
for intervenors-appellees US WEST Interprise America, Inc., GTE
Internetworking Inc., and OGC Telecomm, Ltd.
Janis C.
Kestenbaum, Jenner & Block, Washington, D.C., for intervenor-appellee
Oregon Internet Service Providers Asso- ciation.
David J.
Newburger, Newburger & Vossmeyer, St. Louis, Missouri, for amici curiae
American Council of the Blind, Missouri Association of the Deaf, Missouri
Council of the Blind, Oklahoma Able Tech, Paraquad, Inc., and National
Sil- ver Haired Congress.
Howard J. Symons, Mintz, Levin,
Cohn, Ferris, Glovsky and Popeo, Washington, D.C., for amicus curiae At Home
Corp.
Robert C. Fellmeth, University of San Diego School of
Law, San Diego, California, for amicus curiae Center for Public Interest
Law.
6752
Bruce J. Wecker, Furth, Fahrner & Mason, San
Francisco, California, for amici curiae Citizens' Utility Board of
Oregon, Consumer Action, Consumer Federation of America, The Utility
Reform Network, and Utility Consumers' Action
Net- work.
James M. Carr, Office of General Counsel,
Washington, D.C., for amicus curiae Federal Communications
Commission.
Christopher Wolf, Proskauer Rose, Washington, D.C.,
for amicus curiae Hands Off the Internet.
Bruce D. Sokler,
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, Washington, D.C., for amicus
curiae National Cable Television Association, California Cable Television
Associa- tion, Oregon Cable Telecommunications Association, and Washington
State Cable Communications Association.
Paul Mogin, Williams
& Connolly, Washington, D.C., for amicus curiae openNET
Coalition.
Jayne Chong-Soon Lee, Office of City Attorney, San
Fran- cisco, California, for amici curiae U.S. Conference of
Mayors, National Association of Counties, National League of
Cities, National Association of Telecommunications Officers
and Administrators, Jefferson County, King County, Montgomery County,
Michigan Coalition to Protect Public Rights of Way from Telecommunications
Encroachments, Sacramento Met- ropolitan Cable Television Commission, San
Mateo County Telecommunications Authority, Bell-Cudahy Cable Televi- sion
Authority, and the Cities of Arvada, Atlanta, Baltimore, Boston, Dearborn,
Los Angeles, New York, Rancho Palos Verdes, San Diego, San Francisco, San
Jose, and
Walnut Creek.
This appeal presents the question of whether a local
cable franchising authority may condition a transfer of a cable
fran- chise upon the cable operator's grant of unrestricted access to its
cable broadband transmission facilities for Internet service providers other
than the operator's proprietary service. We conclude that the Communications
Act prohibits a franchising authority from doing so and reverse the judgment
of the dis- trict court.
I
Distilled to its
essence, this is a struggle for control over access to cable broadband
technology. In broadband data transmission, a single medium carries multiple
communica- tions at high transmission speeds. The allure of
broadband technology is that it allows users to access the Internet
at speeds fifty to several hundred times faster than those avail- able
through conventional computer modems connected to what is commonly referenced
in the telecommunications industry as "plain old telephone service."
Broadband allows transmission, or "streaming," of live video and audio
commu- nications, as well as video and audio data files. To
satisfy consumer demand for broadband Internet access, cable televi- sion
operators have replaced coaxial wires with fiber-optic cable, telephone
companies have initiated high-frequency dig- ital subscriber line ("DSL")
services over standard twisted- pair copper wires, fixed wireless providers
have upgraded their microwave transmission capacities, satellite
providers have launched global two-way digital networks, and
research- ers have explored the use of quantum communication
meth- ods.
The race to acquire broadband transmission systems
has, in part, prompted a number of corporate mergers. This
appeal
6754
concerns the merger between AT&T, at the time
the nation's largest long distance telephone provider, and
Telecommunica- tions, Inc. ("TCI"), one of the nation's largest cable
television operators. In addition to providing traditional cable
television programming, TCI provided cable broadband Internet access to
consumers in certain geographic areas. Since acquiring TCI, AT&T has
continued to offer cable broadband access as part of its "@Home" service,
which bundles its cable conduit with Excite, an Internet service provider
("ISP") under an exclusive contract. Like many other ISPs, @Home
supple- ments its Internet access with user e-mail accounts and a
Web portal site, a default home page gateway offering Internet search
capabilities and proprietary content devoted to chat groups, interactive
gaming, shopping, finance, news, and other topics. @Home subscribers also may
"click-through" to other free Web portal sites, and may access other Internet
ser- vice providers if they are willing to pay for an additional
ISP; however, subscribers cannot purchase cable broadband
access separately from an unaffiliated ISP, and have no choice over terms
of Internet service such as content and
bandwidth restrictions.
The @Home cable broadband
infrastructure differs from that of most ISPs. A typical ISP connects with
the Internet via leased telecommuncations lines, which its consumers
access through "dial-up" connections over ordinary telephone lines. @Home
operates a proprietary national "backbone, " a high- speed network parallel
to the networks carrying most Internet traffic, which connects to those other
Internet conduits at mul- tiple network access points. This backbone serves
regional data hubs which manage the network and deliver Excite's online
content and services, including multimedia content that exploits broadband
transmission speeds. Each hub connects to local "headend" facilities, cable
system transmission plants that receive and deliver programming, where
"proxy" servers cache frequently requested Internet data, such as Web
sites, for local delivery. Each headend connects to cable nodes
in
6755
neighborhoods, each of which in turn connects via
coaxial cable to the user's cable modem and computer.
To
effect the merger, AT&T and TCI sought three types of regulatory
approval. The Department of Justice approved the merger on antitrust grounds,
subject to TCI's divestiture of its interest in Sprint PCS wireless services.
See United States v. AT&T Corp. and Tele-Communications Inc., No. CIV.
98 CV03170, 1999 WL 1211462 (D.D.C. Aug. 23, 1999) (final judgment). The
Federal Communications Commission ("FCC") approved the transfer of federal
licenses from TCI to AT&T, after addressing public interest concerns in
four ser- vice areas, including residential Internet access. See
Applica- tion for Consent to the Transfer of Licenses and Section
214 Authorizations from TCI to AT&T, 14 F.C.C.R. 3160
(1999) ("Transfer Order").
One of the issues that the FCC
considered forms the under- current of the present controversy: whether to
impose a requirement of open access to cable broadband facilities.
A variety of interest groups and competitors argued that allow- ing
AT&T to restrict cable broadband access to the propri- etary @Home
service would harm competition and reduce consumer choice. In its order
approving the license transfer, the FCC rejected any open access condition,
citing the emer- gence of competing methods of high-speed Internet
access, and @Home customers' "ability to access the Internet content or
portal of his or her choice." It found "that the equal access issues raised
by parties to this proceeding do not provide a basis for conditioning,
denying, or designating for hearing any of the requested transfers of
licenses and authorizations." Transfer Order at P 96. The FCC concluded that
"while the merger is unlikely to yield anti-competitive effects,
we believe it may yield public interest benefits to consumers in the form
of a quicker roll-out of high-speed Internet access services."
Transfer Order at P 94.
The last regulatory hurdle that AT&T
and TCI faced was the approval of local franchising authorities where
required by
6756
local franchising agreements. See 47 U.S.C.S 537
(permitting franchising authority approval of cable system sales when
the franchise agreement so requires). TCI's franchises with Port- land and
Multnomah County (collectively, "Portland") per- mitted the city to
"condition any Transfer upon such conditions, related to the technical,
legal, and financial quali- fications of the prospective party to perform
according to the terms of the Franchise, as it deems appropriate. " This
lan- guage parallels the text of 47 U.S.C. S 541(a)(4)(C), which describes
the conditions a locality may impose on a franchise.
Portland
referred the transfer application for recommenda- tion by the Mount Hood
Cable Regulatory Commission, an intergovernmental agency overseeing cable
affairs in the Port- land region. In response to Portland's preliminary
questions, AT&T confirmed that TCI was in the process of upgrading
its cable system to support @Home over cable broadband, and maintained
that @Home was a proprietary product "not sub- ject to common carrier
obligations." At public hearings, the incumbent local telephone exchange
carrier US WEST and the Oregon Internet Service Providers Association called
for open access to TCI's cable broadband network, citing--in addition to
consumer welfare--the need for "a level playing field" with US WEST's common
carrier obligations and a "very real potential that consumer [Internet ]
access businesses could go out of business." The Mount Hood Commission
rec- ommended that the city and county approve the transfer of franchise
control subject to an open access requirement.
On December 17,
1998, Portland and Multnomah County voted to approve the transfer, subject to
an open access condi- tion expressed in a written
acceptance:
Non-discriminatory access to
cable modem platform. Transferee shall provide, and
cause the Franchisees to provide, non-discriminatory
access to the Fran- chisees' cable modem platform for
providers of Internet and on-line services, whether or
not such
6757
providers are affiliated
with the Transferee or the Franchisees, unless otherwise
required by applicable law. So long as cable modem
services are deemed to be "cable services," as provided
under Title VI of the Communications Act of 1934, as
amended, Trans- feree and the Franchisees shall comply
with all requirements regarding such services, including
but not limited to, the inclusion of revenues from
cable modem services and access within the gross
reve- nues of the Franchisees' cable franchises, and
com- mercial leased access
requirements.
AT&T refused the condition, which resulted in
a denial of the request to transfer the franchises. AT&T then brought
this action, seeking declarations that the open access condition violated
the Communications Act of 1934, as amended by the Telecommunications Act of
1996, Pub. L. No. 104-104, 110 Stat. 56 (1996), codified at 47 U.S.C. S 151,
et seq. (collec- tively, the "Communications Act"), the franchise
agreements, and the Constitution's Commerce Clause, Contract Clause, and
First Amendment. The district court rejected all of AT&T's claims and
granted summary judgment to Portland. See AT&T Corp. v. City of Portland,
43 F. Supp.2d 1146 (D. Or. 1999). We review de novo a grant of summary
judgment; there being no disputed factual issues, we face only a
question of statutory interpretation. See Fort Belknap Indian Commu- nity
v. Mazurek, 43 F.3d 428, 432 (9th Cir.
1994).
II
The parties, and numerous amici,
forcefully urge us to con- sider what our national policy should be
concerning open access to the Internet. However, that is not our task, and
in our quicksilver technological environment it doubtless would be an idle
exercise. The history of the Internet is a chronicle of innovation by
improvisation, from its genesis as a national defense research network, to a
medium of academic exchange, to a hacker cyber-subculture, to the
commercial
6758
engine for the so-called "New Economy." Like
Heraclitus at the river, we address the Internet aware that courts are
ill- suited to fix its flow; instead, we draw our bearings from the legal
landscape, and chart a course by the law's words. To that end, "we look first
to the plain language of the statute, construing the provisions of the entire
law, including its object and policy." United States v. Mohrbacher, 182
F.3d 1041, 1048 (9th Cir. 1999) (citation omitted). We note at the outset
that the FCC has declined, both in its regulatory capac- ity and as amicus
curiae, to address the issue before us. Thus, we are not presented with a
case involving potential deference to an administrative agency's statutory
construction pursuant to the Chevron doctrine. See Food and Drug
Administration v. Brown & Williamson Tobacco Corp., 120 S.Ct.
1291, 1300-01 (2000).
A
Because Portland
premised its open access condition on its position that @Home is a "cable
service" governed by the franchise, we begin with the question of whether the
@Home service truly is a "cable service" as Congress defined it in
the Communications Act. We conclude that it is not.
[1]
Subject to limited exceptions, the Communications Act provides that "a cable
operator may not provide cable service without a franchise." 47 U.S.C. S
541(b)(1). The Act defines "cable service" as "(A) the one-way transmission
to subscrib- ers of (i) video programming, or (ii) other programming
ser- vice, and (B) subscriber interaction, if any, which is required for
the selection or use of such video programming or other programming service."
47 U.S.C. S 522(6). For the purposes of this definition, "video programming"
means "programming provided by, or generally considered comparable to
program- ming provided by, a television broadcast station, " 47 U.S.C. S
522(20), and "other programming service " means "informa- tion that a cable
operator makes available to all subscribers generally." 47 U.S.C. S 522(14).
The essence of cable service,
6759
therefore, is one-way transmission of programming
to sub- scribers generally.
[2] This definition does not fit
@Home. Internet access is not one-way and general, but interactive and
individual beyond the "subscriber interaction" contemplated by the
stat- ute. Accessing Web pages, navigating the Web's hypertext links,
corresponding via e-mail, and participating in live chat groups involve
two-way communication and information exchange unmatched by the act of
electing to receive a one- way transmission of cable or pay-per-view
television pro- gramming. And unlike transmission of a cable television
sig- nal, communication with a Web site involves a series of connections
involving two-way information exchange and storage, even when a user views
seemingly static content. Thus, the communication concepts are distinct in
both a prac- tical and a technical sense. Surfing cable channels is
one thing; surfing the Internet over a cable broadband connection is quite
another.
Further, applying the carefully tailored scheme of
cable television regulation to cable broadband Internet access would lead
to absurd results, inconsistent with the statutory structure. For example,
cable operators like AT&T may be required by a franchising authority to
set aside cable channels for public, educational or governmental use, see 47
U.S.C. S 531, must designate some of their channels for commercial use by
per- sons unaffiliated with the operator, see 47 U.S.C. S 532, and must
carry the signals of local commercial and non- commercial educational
television stations, see 47 U.S.C. SS 534 & 535. We cannot
rationally apply these cable televi- sion regulations to a non-broadcast
interactive medium such as the Internet. As our sister circuit concluded in
the context of the abortive "video dialtone" common carrier
television technology, regulating @Home as a cable service "simply makes
no sense in any respect, and would be infeasible in many respects." National
Cable Television Ass'n. v. FCC, 33 F.3d 66, 75 (D.C. Cir.
1994).
6760
[3] Thus, because the Internet services AT&T
provides through @Home cable modem access are not "cable services" under
the Communications Act, Portland may not directly regulate them through its
franchising authority.
B
Although we conclude
that a cable operator may provide cable broadband Internet access without a
cable service fran- chise, we must also determine whether Portland may
condi- tion AT&T's provision of standard cable service upon
its opening access to the cable broadband network for competing ISPs. To
do so, we must determine how the Communications Act defines
@Home.
[4] Under the statute, Internet access for most users
consists of two separate services. A conventional dial-up ISP provides its
subscribers access to the Internet at a "point of presence" assigned a unique
Internet address, to which the subscribers connect through telephone lines.
The telephone service link- ing the user and the ISP is classic
"telecommunications," which the Communications Act defines as "the
transmission, between or among points specified by the user, of
information of the user's choosing, without change in the form or
content of the information as sent and received." 47 U.S.C. S 153(43). A
provider of telecommunications services is a "telecommu- nications carrier,"
which the Act treats as a common carrier to the extent that it provides
telecommunications to the public, "regardless of the facilities used." 47
U.S.C.S 153(44) & (46).
[5] By contrast, the FCC
considers ISP itself as providing "information services" under the Act,
defined as "the offering of a capability for generating, acquiring, storing,
transform- ing, processing, retrieving, utilizing, or making
available information via telecommunications." 47 U.S.C.S 153(20) (1996).
As the definition suggests, ISPs are themselves users of telecommunications
when they lease lines to transport data
6761
on their own networks and beyond on the
Internet backbone. However, in relation to their subscribers, who are the
"public" in terms of the statutory definition of telecommunications
ser- vice, they provide "information services," and therefore are not
subject to regulation as telecommunications carriers. See Federal-State Joint
Board on Universal Service, 13 F.C.C.R. 11501, PP BM, CB (1998) (report to
Congress); cf. Child Online Protection Act, Pub. L. No. 105-277, S
1403(e)(4), 112 Stat. 2681 (1998) (codified at 47 U.S.C. S 231(e)(4))
& Internet Tax Freedom Act, Pub. L. No. 105-277, S 1101(e), 112 Stat.
2681 (1998) (reproduced at note to 47 U.S.C. S 151(e) (1998)) (defining
Internet access services as: "a ser- vice that enables users to access
content, information, elec- tronic mail, or other services offered over the
Internet, and may also include access to proprietary content,
information, and other services as part of a package of services offered
to consumers. Such term does not include
telecommunications services."). Indeed, "information services"--the
codified term for what the FCC first called "enhanced
services"--have never been subject to regulation under the
Communications Act. See Howard v. America Online, Inc., 208 F.3d 741,
752- 53 (9th Cir. 2000); see also 47 C.F.R. S 64.702(a); California v.
FCC, 905 F.2d 1217, 1223-25 (9th Cir. 1990) (discussing history of "enhanced
services" non-regulation).
[6] Like other ISPs, @Home consists
of two elements: a "pipeline" (cable broadband instead of telephone lines),
and the Internet service transmitted through that pipeline. How- ever,
unlike other ISPs, @Home controls all of the transmis- sion facilities
between its subscribers and the Internet. To the extent @Home is a
conventional ISP, its activities are one of an information service. However,
to the extent that @Home provides its subscribers Internet transmission over
its cable broadband facility, it is providing a telecommunications
ser- vice as defined in the Communications Act.
[7] Under
this taxonomy, the Communications Act bars Portland from conditioning the
franchise transfer upon
6762
AT&T's provision of the @Home transmission
element that constitutes telecommunications:
(3)(A) If a cable operator or affiliate thereof is
engaged in the provision of telecommunications
services--
(i) such cable operator or
affiliate shall not be required to obtain a franchise
under this title for the provision of
telecommuni- cations services;
and
(ii) the provisions of this title shall
not apply to such cable operator or affiliate
for the provision of telecommunications ser-
vices.
(B) A
franchising authority may not impose any requirement
under this title that has the purpose or effect of
prohibiting, limiting, restricting, or condi- tioning
the provision of a telecommunications ser- vice by a
cable operator or an affiliate thereof.
(C) A franchising authority may not order a cable
operator or affiliate thereof--
(i) to
discontinue the provision of a tele- communications
service, or
(ii) to discontinue the
operation of a cable system, to the extent such cable
sys- tem is used for the provision of a
telecom- munications service, by reason of the
failure of such cable operator or affiliate
thereof to obtain a franchise or franchise
renewal under this title with respect to the provision
of such telecommunications ser-
vice.
6763
(D) Except as
otherwise permitted by sections 611 and 612, a
franchising authority may not require a cable operator
to provide any telecommunications service or facilities,
other than institutional networks, as a condition of the
initial grant of a franchise, a franchise renewal, or a
transfer of a franchise.
Pub. L. No. 104-104, S 303(a), 110
Stat. 56, 124-25 (1996), codified at 47 U.S.C. S 541(b)(3); see also S
101(a), 110 Stat. at 70, codified at 47 U.S.C. S 253(a) ("No State or local
stat- ute or regulation, or other State or local legal requirement, may
prohibit or have the effect of prohibiting the ability of any entity to
provide any interstate or intrastate telecommuni- cations service.").
Subsection 541(b)(3) expresses both an awareness that cable operators could
provide telecommunica- tions services, and an intention that those
telecommunications services be regulated as such, rather than as cable
services.
[8] The Communications Act includes cable
broadband transmission as one of the "telecommunications services" a cable
operator may provide over its cable system. Thus, AT&T need not obtain a
franchise to offer cable broadband, see 47 U.S.C. S 541(b)(3)(A); Portland
may not impose any requirement that has "the purpose or effect of
prohibiting, limiting, restricting or conditioning" AT&T's provision
of cable broadband, see 47 U.S.C. S 541(b)(3)(B); Portland may not order
AT&T to discontinue cable broadband, see 47 U.S.C. S 541(b)(3)(C); and
Portland may not require AT&T to provide cable broadband as a condition
of the franchise transfer, see 47 U.S.C. S 541(b)(3)(D). Therefore, under
the several provisions of S 541(b)(3), Portland may not
regulate AT&T's provision of @Home in its capacity as a
franchising authority, and the open access condition contained in the
fran- chise transfer agreement is
void.
C
Beyond the domain of cable-specific
regulation, the defini- tion of cable broadband as a telecommunications
service
6764
coheres with the overall structure of the
Communications Act as amended by the Telecommunications Act of 1996, and
the FCC's existing regulatory regime. Elsewhere, the Communi- cations Act
contemplates the provision of telecommunications services by cable operators
over cable systems. See, e.g., 47 U.S.C. S 224(d)(3) (authorizing FCC utility
pole attachment rate-setting "for any pole attachment used by a cable
system . . . to provide any telecommunications service."). In the
Tele- communications Act, Congress defined advanced telecommu- nications
capability "without regard to any transmission media or technology," in terms
that describe cable broadband: "high-speed, switched, broadband
telecommunications capa- bility that enables users to originate and receive
high-quality voice, data, graphics, and video telecommunications using any
technology." Pub. L. 104-104, S 706(c)(1), 110 Stat. 56, 153 (1996)
(reproduced at note under 47 U.S.C. S 157). Con- sistent with our view, the
FCC regulates DSL service, a high- speed competitor to cable
broadband, as an advanced tele- communications service subject to common
carrier obliga- tions. See GTE Operating Companies Tariff No. 1 ,
13 F.C.C.R. 22466 (1998).
Among its broad reforms, the
Telecommunications Act of 1996 enacted a competitive principle embodied by
the dual duties of nondiscrimination and interconnection. See 47 U.S.C. S
201(a) ("It shall be the duty of every common carrier engaged in interstate
or foreign communication by wire or radio to furnish such communication
service upon reasonable request therefor"); 47 U.S.C. S 251(a)(1) ("Each
telecommu- nications carrier has the duty . . . to interconnect directly
or indirectly with the facilities and equipment of other
telecom- munications carriers"). Together, these provisions mandate
a network architecture that prioritizes consumer choice, demon- strated by
vigorous competition among telecommunications carriers. As applied to the
Internet, Portland calls it "open access," while AT&T dysphemizes it as
"forced access." Under the Communications Act, this principle of
telecommu- nications common carriage governs cable broadband as
it
6765
does other means of Internet transmission such as
telephone service and DSL, "regardless of the facilities used." 47
U.S.C. S 153(46). The Internet's protocols themselves manifest a related
principle called "end-to-end": control lies at the ends of the network where
the users are, leaving a simple network that is neutral with respect to the
data it transmits, like any common carrier. On this rule of the Internet, the
codes of the legislator and the programmer agree.
[9] Thus
far, the FCC has not subjected cable broadband to any regulation, including
common carrier telecommunications regulation. We note that the FCC has broad
authority to for- bear from enforcing the telecommunications provisions if
it determines that such action is unnecessary to prevent discrim- ination
and protect consumers, and is consistent with the pub- lic interest. See 47
U.S.C. S 160(a). Congress has reposed the details of telecommunications
policy in the FCC, and we will not impinge on its authority over these
matters.
III
We hold that subsection 541(b)(3)
prohibits a franchising authority from regulating cable broadband Internet
access, because the transmission of Internet service to subscribers over
cable broadband facilities is a telecommunications ser- vice under the
Communications Act. Therefore, Portland may not condition the transfer of the
cable franchise on non- discriminatory access to AT&T's cable broadband
network. We need not reach AT&T's other statutory and
constitutional arguments.
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