GTE California, Inc. v. Federal Communications Commission

39 F.3d 940

Opinions

Opinion by Judge T.G. NELSON; Dissent by Judge NOONAN.

T.G. NELSON, Circuit Judge:

I.

OVERVIEW

In 1970, the Federal Communications Commission (FCC or Commission) issued rules prohibiting local telephone common carriers from providing cable television service in the area in which they controlled the local exchange.¹

In 1984, Congress amended the Communications Act by adopting what is now codified in 47 U.S.C. § 533(b). This section was modeled after the FCC rules and prohibits a telephone company from “provid[ing] video programming directly to subscribers in its telephone service area.” Id. Video programming is defined as “programming provided by, or generally considered comparable to programming provided by, a television broadcast station.” 47 U.S.C. § 522(19).

In this case, a local telephone carrier which had received a Commission waiver of the restrictions of the Commission’s rules and Section 533(b) raises a facial and “as applied” constitutional challenge to Section 533(b) on the basis that preventing local telephone carriers from carrying television programming violates their First Amendment rights as a content-based regulation of speech. For the reasons stated in the opinion, we hold the case is moot and dismiss the petition for review of the FCC’s order rescinding the waiver, which expired on July 17, 1994.

II.

FACTS AND PROCEDURAL HISTORY

In 1987, the City of Cerritos, California, awarded Apollo Cablevision, Inc. (Apollo) a fifteen-year franchise to construct, operate and maintain an underground cable television system within the City. Apollo’s plan contemplated that GTE California, Inc. (GTE-CA), the local telephone common carrier, would construct and operate systems of coaxial cable and fiber optic cable, leasing half of the coaxial cable capacity to Apollo to provide cable service within the City. As a further element of the plan, the proposed fiber optic facilities and the other half of the coaxial facilities were to be leased to GTE-CA’s affiliate, GTE Service Corporation, for testing the capabilities of the system to provide various elements of advanced service to consumers as well as comparative testing of technologies. The City selected Apollo’s corporate parent, T.L. Robak, Inc. (Robak), to do the construction by contract with GTECA.

GTECA first took the coaxial application to the Commission for authority pursuant to Section 214 of the Communications Act of 1934. The application was considered by the Common Carrier Bureau of the Commission. 3 FCC Red 2317. The Bureau determined that the relationship among Robak, Apollo and GTECA violated the Commission’s “affiliation” rules because it determined that GTECA’s construction contract with Robak must be imputed to Apollo.² Id. at 2319. However, the Bureau determined that a waiver was appropriate under the Act, finding that the City would not be able to acquire its cable video programming service unless provided by Apollo through affiliation with GTECA. Id. at 2323. GTECA’s application was opposed before the Bureau by the California Cable Television Association (CCTA) and the National Cable Television Association, Inc. (NCTA), both of which participated throughout the administrative proceedings and have intervened in this court.

When CCTA and NCTA petitioned the FCC for review of the Bureau’s decision, the Commission consolidated the coaxial application with a separate application filed by GTECA to construct, operate and maintain the fiber optic portion of the project. The Commission approved both section 214 applications and granted a waiver of the cross-ownership restrictions contained in section 533(b) pursuant to the waiver authority granted in section 533(b)(4). 4 FCC Red 5693. The Commission found that the waiver was in the public interest given the totality of the circumstances, but imposed several conditions, including a five-year time limit, noting that GTECA would be free to seek another waiver if it was needed to continue testing. Id. at 5700. The Commission did not discuss the activities of Robak in conjunction with the finding of good cause for the waiver.

NCTA petitioned the D.C. Circuit to review the Commission order. That court focused on the participation by Robak and held that the Commission had failed to delineate the particular circumstances supporting the waiver, as required by 47 U.S.C. § 533(b)(4). National Cable Television Ass’n v. FCC, 914 F.2d 285, 289 (D.C.Cir.1990). The court said, speaking of the Robak participation:

The Commission, however, has failed in its obligation to explain why the advantages to be derived from General’s application cannot be realized in the absence of a waiver, because it has not indicated why the use of Robak for design and construction was necessary to the proposal. Obviously, absent such a reason, the choice of another unrelated contractor would have eliminated the General-Apollo affiliation, and, with it, the cross-ownership problem.

Id.

Apparently, the D.C. Circuit was under the impression that the only reason for a waiver was the participation by Robak. The fact that GTECA proposed to provide video programming within its service area, which comes within the ownership restrictions of Section 533(b), was not discussed by the D.C. Circuit.

On remand, the Commission worked informally with the parties in an attempt to settle the dispute but was ultimately unsuccessful. Therefore, it issued an order, pursuant to the mandate of the D.C. Circuit, in which it rescinded the waiver:

On the basis of the record before us, we simply are unable to find that Robak’s participation satisfies the controlling standard as articulated by the court. We conclude that a waiver of the rules permitting Robak’s involvement is not justified.

8 FCC Red 8181 (footnote omitted).

The Commission reaffirmed its original findings regarding the substantial public benefits to be gained from the technical and market trials in Cerritos. Id. at 8182. It held that justification of one aspect of the original waiver did not reheve GTECA of “its obligation to satisfy the governing legal standard with respect to all aspects of the waiver.” Id. The Commission therefore rescinded “the temporary, conditional rule waiver and associated Section 214 authorizations” effective 120 days from the date of the decision. Id.

GTECA moved the Commission to stay the effect of its order pending a petition for review to this court and for the first time raised its claim that the statute excluding local telephone companies from engaging in video programming within their service area is a violation of the First Amendment as a content-based restriction on speech. The Commission denied the application for stay on December 3, 1993, and noted that the constitutional issue had not been raised in time for the Commission to address the constitutional issue in detail, but did state its view that the “telephone company/eable television cross-ownership prohibition constitutes structural regulation of the telecommunications marketplace that is fully consistent with the First Amendment.”

GTECA petitioned this court for review. Pacific Telesis Group, Pacific Bell and Nevada Bell were permitted to intervene as petitioners pursuant to Fed.R.App.P. 15(d). This court entered an order staying the Commission’s order of rescission.

III.

DISCUSSION

A. Scope of Authority Granted by FCC

There is a substantial question whether this ease is moot, due to the expiration of the FCC waiver on July 17, 1994. GTECA contends that the case is not moot because it was granted “permanent section 214 authority” which was unaffected by the FCC’s rescission of the waiver. Therefore, we must first address the scope of the FCC’s grant of authority pursuant to section 214.

GTECA’s first application to the Commission was for authority to construct and maintain the coaxial cable facilities in Cerritos. This was the subject of the Common Carrier Bureau’s order of April 12, 1988, which granted a waiver from the Commission’s rules due to the involvement of Robak. 3 FCC Red 2317.

The challenges to the Burean order by representatives of the cable industry were consolidated before the FCC with GTECA’s separate application to construct, operate and maintain the fiber optic system. This consolidated proceeding generated the order of July 17, 1989, which was appealed to the D.C. Circuit. 4 FCC Red 5693.

In the summary of its action, the Commission said, “We conclude that the totality of circumstances surrounding General’s Cerri-tos project, including the public interest benefits of its coaxial cable, its fiber optic facility and its comparative technical and marketing testing program, constitutes good cause to waive the ... rules_” Id.

In describing the conditions it placed on its grant of authority, the FCC said, “[w]e limit our good cause waiver for General’s Cerritos project to a five-year period_ At the end of that time, General’s waiver will expire, but General would be free to seek another waiver if it needs to continue testing.” Id. at 5700 (footnote omitted). GTECA had told the Bureau that if it did not gain approval of the coaxial system, it would not construct the fiber optic system. 3 FCC Red at 2320. Thus, both GTECA and the Commission understood “General’s Cerritos project” to be the entirety of the facilities to be built and operated by GTECA in Cerritos. The unitary purpose was acknowledged by the Commission when it said: “The grant of a waiver for good cause permits us to grant the Section 214 coaxial cable and fiber optic cable applications for General’s Cerritos project.” 4 FCC Red at 5700 (footnote omitted).

GTECA argues in its supplemental brief that it received two authorizations — one a grant of section 214 authority, and the other “a waiver of the rules prohibiting telephone companies (or their affiliates) from engaging in video programming.” Only the waiver was to expire in five years, and therefore, GTECA contends, the section 214 authority must continue.

GTECA’s argument points out the limits of the decision we must make. It is the provisions of the Act restricting local telephone companies from engaging in video programming which GTECA challenges here.³ The provisions of the Act which permit those companies to carry signals for others, such as Apollo, are not challenged here. More to the point is the fact that GTECA needed no waiver of the restrictions on engaging in video programming in order to carry Apollo’s signals. Because the “permanent” authority, if there is any, to carry signals for Apollo is not an issue here, we need not decide if any such authority exists. We need only determine whether the authority for which the waiver was required, i.e., video programming, expired with the waiver.

In its order of December 6, 1993, denying GTECA’s motion for stay of its November 9, 1993 order, the Commission noted an earlier warning by the Bureau in denying a stay of its order, that a reversal of the Bureau’s order could require dismantling of the partly constructed facilities. The Commission noted GTECA’s acceptance of this risk in its order of July 17, 1989. 4 FCG Red at 5696. If permanent video programming authority had been contemplated by the parties, including GTECA, there would have been no necessity of dismantling the facilities encompassed by that authority.

There is the further factor that the statutory provisions which prohibited GTECA from engaging in video programming would continue to exist at the end of the five-year period, so far as anyone knew in 1989. Absent the FCC waiver, there would have been no video programming authority at all. GTECA’s argument attempts to convert the five-year waiver into a permanent waiver and is simply not tenable, given the structure of the statute and the Commission’s language in its 1989 order.

Therefore, we hold that GTECA was not granted permanent section 214 authority to engage in video programming by the FCC. All of its video programming authority was subject to the five-year term of the waiver, and none survived expiration of waiver on July 17, 1994. We express no opinion on whether GTECA had or has permanent section 214 authority to carry Apollo’s signals, as no issues relating to that question are properly before us.

During the pendency of this appeal, GTE-CA transmitted two tariffs to the FCC encompassing its Cerritos operations. The Common Carrier Bureau addressed the transmittals in an order dated July 14, 1994. GTECA contends that the Bureau’s July 14 order extended the waiver until at least September 12, 1994. We disagree.

The Bureau’s July 14 order granted interim section 214 authority to provide video channel service and also to provide service to its affiliate. It then granted “a limited'waiver of the cross-ownership waiver and Section 214 authorization for a period of 60 days_” It also rejected the City’s request to extend GTECA’s 1989 waiver. It is clear that the July 14 waiver is a stand-alone action of the Bureau, not an extension of the original waiver.

B. Mootness

If the FCC decision to rescind the waiver had not intervened, then the waiver and GTECA’s section 214 video programming authority would have ceased to exist by its own terms on July 17,1994. GTECA had not applied for an extension prior to the Commission’s action; nor has it applied for a new waiver. Under these circumstances, there is no substantial question now before us. Our stay order only addressed the Commission’s order of rescission. It did not extend the life of the waiver, nor has this court or the FCC been asked to do so.

The jurisdiction of federal courts depends on the existence of a “ease or controversy” under Article III of the Constitution. “To satisfy the Article III case-or-controversy requirement, a litigant must have suffered some actual injury that can be redressed by a favorable judicial decision.” Iron Arrow Honor Soc’y v. Heckler, 464 U.S. 67, 70, 104 S.Ct. 373, 375, 78 L.Ed.2d 58 (1983) (per curiam); see also Pomerantz v. County of Los Angeles, 674 F.2d 1288, 1291 (9th Cir.1982) (“The only constitutional mootness question is whether a live controversy remains at the time this court reviews the ease.” (internal quotations and brackets omitted).) ‘Where events have occurred that prevent us from granting effective relief, we lack jurisdiction and must dismiss the appeal.” Enrico’s, Inc. v. Rice, 730 F.2d 1250, 1254 (9th Cir.1984); see also United States v. Alder Creek Water Co., 823 F.2d 343, 345 (9th Cir.1987).

The conditions of the original waiver ultimately terminated GTECA’s rights, not the Commission’s order rescinding the authority granted. Thus, we have no way to give GTECA relief from the real cause of its “injury,” which was the five-year waiver term. Simply vacating the Commission’s December, 1993 order would not give GTECA any relief because the waiver has expired.

GTECA says in its reply brief that “[t]he constitutionality of Section 533(b) is an important question, which should be resolved.” We assume that GTECA is referring to the exception to the mootness doctrine which permits courts to review discontinued or expired official conduct on the basis that the acts are “capable of repetition, yet evading review.” Southern Pac. Terminal Co. v. ICC, 219 U.S. 498, 515, 31 S.Ct. 279, 283, 55 L.Ed. 310 (1911). This exception applies only “in exceptional circumstances, such as where the challenged action is too brief ever to be fully litigated prior to its cessation and where it can be shown that there is a reasonable expectation that plaintiff will again be subjected to the allegedly wrongful activity.” Enrico’s, Inc., 730 F.2d at 1254 (citing City of Los Angeles v. Lyons, 461 U.S. 95, 109, 103 S.Ct. 1660, 1669, 75 L.Ed.2d 675 (1983)); see also Weinstein v. Bradford, 423 U.S. 147, 149, 96 S.Ct. 347, 348-49, 46 L.Ed.2d 350 (1975) (per curiam); Headwaters, Inc. v. Bureau of Land Management, 893 F.2d 1012, 1016 (9th Cir.1989). “That other persons may litigate a similar claim does not save a case from mootness.” ⁴ Funbus Sys., Inc. v. State of Cal. Public Utils. Comm’n, 801 F.2d 1120, 1131 (9th Cir.1986).

Because the Commission has no power to declare Section 533(b) unconstitutional (see Johnson v. Robison, 415 U.S. 361, 368, 94 S.Ct. 1160, 1166, 39 L.Ed.2d 389 (1974)) wé can assume it will continue to require telephone companies to comply with it. But it is not necessarily a reasonable expectation that GTECA would again be subjected to the same allegedly wrongful action. See Weinstein, 423 U.S. at 149, 96 S.Ct. at 349 (discussing Southern Pac. Terminal Co., 219 U.S. 498, 31 S.Ct. 279, and observing that “the same party would in all probability be subject to the same kind of order in the future”).

This case also presents a serious question of exhaustion because GTECA did not present the constitutional issue to the Commission at a point in the proceedings where it could have tried to obviate the constitutional question by granting discretionary relief, such as a permanent waiver. Our decision that the case is moot means we need not reach that issue. But our review of the question left us with the distinct impression that the Commission is very receptive to the value to the public of what GTECA has been doing in Cerritos. It would not necessarily have been futile for GTECA to raise the constitutional issue before the Commission, and may not be futile for GTECA to try again.⁵

Whether prudential or constitutional, mootness analysis must be addressed to the case before the court. “The basic question is whether there exists a present controversy as to which effective relief can be granted.” People of Village of Gambell v. Babbitt, 999 F.2d 403, 406 (9th Cir.1993) (internal quotation omitted). Here, we simply can give GTECA no relief, and there is no need to use this case as a vehicle for review of the FCC action. GTECA has filed tariffs with the Commission to enable it to continue the operation of the Cerritos facilities. The Commission’s response to these filings will furnish GTECA a direct opportunity to challenge the constitutionality of the statute.⁶ This opportunity is sufficient to warrant our abstaining from deciding a moot case. See American Horse Protection Ass’n, Inc. v. Watt, 679 F.2d 150, 151 (9th Cir.1982); see also Headwaters, Inc., 893 F.2d at 1016. Thus, even assuming a repetition, it would not evade review. See id. Therefore, we are not presented with the exceptional situation sufficient to avoid mootness. See Headwaters, 893 F.2d at 1016 (not exceptional situation); cf. Greenpeace Action v. Franklin, 14 F.3d 1324, 1329-30 (9th Cir.1992) (extraordinary case capable of repetition, yet evading review).

We do not agree with intervenors Pacific Telesis Group, Pacific Bell and Nevada Bell that their arguments obviate the mootness problem in this case. Although “there are instances when an intervenor’s claim does not rise and fall with the claim of the original party,” United States Steel v. Environmental Protection Agency, 614 F.2d 843, 845 (3d Cir.1979),-this is not one of them. The intervenors’ brief, filed “in support of’ GTECA, explains that they sought leave to participate because “resolution of the First Amendment issues raised by GTECA may delimit the future boundaries of the marketplace of ideas in all California and Nevada.” Intervenors sought to protect their interests to the extent that the First Amendment issues were resolved. However, GTECA’s case is moot, and as intervenors said in their moving papers, this case remains “an ordinary application for a discrete statutory waiver that would inure solely to the benefit of GTECA in the City of Cerritos.” We will not convert the intervenors’ attempt to protect their interests in the event that this case turned on the First Amendment issues into a broad-based First Amendment challenge to section 533(b).

Benavidez v. Fong Eu, 34 F.3d 825 (9th Cir.1994), which involved alleged violations of the 1965 Voting Rights Act, does not compel a contrary result. Benavidez held that an intervening party may continue to litigate after the original party has been dismissed, where an independent basis for jurisdiction exists and unnecessary delay would otherwise result. 34 F.3d at 830-31. “[A] court has discretion to treat the pleading of an intervenor as a separate action in order that it might adjudicate the claims raised by the intervenor.” Id. at 830 (quoting Fuller v. Volk, 351 F.2d 323, 328-29 (3d Cir.1965)). It is easy to see why such a rule would be adopted in a case in which the intervenors had filed a motion to intervene and a complaint in intervention in the district court and in which the district court did not identify the basis for dismissal of the complaint in intervention. See id. at 828, 828-29, 830, 830-31. It is not so easy to see why we should adjudicate the intervenors’ First Amendment claims in this review proceeding, where those intervenors did not participate in the FCC proceedings and the original participant’s petition is now moot.

The fact that the U.S. District Court for the Northern District of California stayed the proceeding in Pacific Telesis Group’s action against the United States does not affect the outcome of this case. The government quite properly represented to the district court that resolution of the First Amendment issue in this review proceeding would likely control the district court action. However, as we have explained, the First Amendment question is not properly before us. Pacific Telesis Group will have its day in court, as its district court case is still pending, even though stayed. As for Pacific Bell and Nevada Bell, there is no question about the ultimate review of this constitutional question. See supra p. 13194 n. 4.

The point of the exercise throughout has been to get cable television service to the residents of the City of Cerritos, with added benefits of technical and marketing studies to GTECA and the industry. Perhaps the old drawings are the place to begin anew.

PETITION FOR REVIEW DISMISSED.

1

. Final Report and Order, In re Applications of Tel. Cos. for Section 214 Certificates, 21 FCC 2d 307, 330-31 (1970), modified, 22 FCC 2d 746.

2

. The Commission’s rules and 47 U.S.C. § 533(b) are parallel to some degree. However, 47 C.F.R. § 63.54 in defining "affiliate” and "control" says the terms “bar any financial or business relationship whatsoever by contract or otherwise, directly or indirectly between the carrier and the customer, except only the carrier-user relationship.” By contrast, section 533(b) prohibits a carrier from providing video programming "directly or indirectly through an affiliate owned by, operated by, controlled by, or under common control with the common carrier.” In this case, the Commission’s rules proscribed the use of Robak to build the system, but the statute did not.

3

. GTECA states the issue on this appeal is "[w]hether 47 U.S.C. § 533(b) and 47 C.F.R. § 63.54, which ban telephone common carriers from providing 'video programming' to subscribers in their telephone service areas, directly or indirectly through an 'affiliate,' violate the First Amendment, on their face or as applied."

4

. In this regard, we note that the United States District Court of the Eastern District of Virginia has held Section 533(b) unconstitutional on a facial challenge by a local telephone carrier. Chesapeake and Potomac Tel. Co. v. United States, 830 F.Supp. 909 (E.D.Va.1993). The case has been argued and is currently pending on appeal. The United States District Court for the Western District of Washington recently held Section 533(b) unconstitutional and granted the telephone carrier-plaintiff summary judgment. US West, Inc. v. United States, 855 F.Supp. 1184 (W.D.Wash.1994). In addition, a case pending in the Northern District of California in which the constitutionality of Section 533(b) was raised was stayed waiting for our decision here. Pacific Telesis Group v. United States, No. CV93-20915-JW (N.D.Cal. April 15, 1994), appeal docketed, No. 94-16064 (9th Cir. June 21, 1994). So there is no question about the ultimate review of the important constitutional question GTECA belatedly attempts to raise here.

5

. Since the participation of Robak in the project is long since finished, GTECA will not need a waiver of the Commission's affiliation rules which led to the remand by the D.C. Circuit. If GTECA does apply for a new waiver, the Commission will not be bound by the terms of the D.C. Circuit's mandate.

6

. The "capable of repetition, yet evading review" exception was applied in the recent case of Miller v. California Pac. Medical Ctr., 19 F.3d 449 (9th Cir.1994), which involved an injunction under Section 10(j) (29 U.S.C. § 160(j)) of the National Labor Relations Act pending action on an unfair labor practice charge by the Board. Although the Board's resolution of the unfair labor practice complaint rendered the 10(j) proceeding moot, the fact that the ordinary course of such proceedings would make it impossible for any court to effectively review the injunction put the case within the exception to mootness. Id. at 454. Here, the Commission's actions on GTE-CA's tariff filing can be reviewed in the ordinary course of appellate review, which distinguishes this case from Miller.