Document: Opposition Brief of Portland and Multnomah County in ATT v. Portland, 9/7/99.

Appeal Brief of Portland and Multnomah County.
Re: AT&T v. Portland (cable access case).
U.S. Court of Appeals, Ninth Circuit, Appeal No. 99-35609.
Date: September 7, 1999.
Source: Mt. Hood Cable Regulatory Commission web site. This brief is republished here with the persmission of the City of Portland. This document has been edited for HTML, but not for content.

No. 99-35609
_____________

IN THE UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
____________

AT&T CORP., TELECOMMUNICATIONS, INC.,
TCI CABLEVISION OF OREGON. INC. and
TCI OF SOUTHERN WASHINGTON,

U S WEST INTERPRISE AMERICA, INC.,
GTE INTERNETWORKING INCORPORATED,
OREGON INTERNET SERVICE PROVIDER
ASSOCIATION, and OGC TELECOMM, LTD. Dba
INTEGRA TELECOM,

On Appeal from the United States District Court
for the District of Oregon
Case No. CV 99-65 PA

TERENCE L. THATCHER, BENJAMIN E. WALTERS Office of the City Attorney 1221 SW Fourth Avenue, Suite 430 Portland, Oregon 97204 (503) 823-4047	JOSEPH VAN EATON Miller & Van Eaton, P.L.L.C. 1155 Connecticut Ave. N.W., Suite 1000 Washington, D.C. 20036 (202) 785-0600
THOMAS SPONSLER GERALD ITKIN Multnomah County Counsel 1120 SW Fifth Avenue, Suite 1530 Portland, Oregon 97204 (503) 248-3138	Attorneys for Appellees

This case is a straightforward express preemption case, though that is hard to tell from Appellants’ brief. Their brief (and those of supporting amici) rest to a significant degree on claims never pled, and facts never introduced, as though this were a trial court.

The goal is evidently to engage the Court in a policy debate over the merits of the challenged open access policy based on unsupported facts and new legal claims. To this end, Appellants claim that the City of Portland and Multnomah County are regulating the Internet, and that disaster will follow. The communities have done nothing of the sort, as the uncontested record shows. There is no detailed regulatory scheme here, much less a regulation of the Internet. Appellants control what they call a "gateway" to the Internet, not the Internet itself. The gateway is the equivalent of a terminal leading to a railway line. In terms of Internet access, it compares to traditional telephone lines much as formula racing cars compare to San Francisco’s cable cars. The City and County concluded that any such "terminal" built by Appellants using public property, under a public franchise, must be available for use by Appellants’ competitors on a non-discriminatory basis. That is the nub of the open access requirement. The requirement only affects operations in Portland and Multnomah County, as Appellants conceded below.

As the volume of original material submitted to this Court demonstrates, open access is a controversial topic of ongoing debate. However (as the district court rightly recognized), the merits of the policy are not at issue.

First, the Appellants did not challenge the merits of the policy in their Complaint. It is devoid of any contention that the City or County acted arbitrarily or capriciously, or otherwise lacked a basis for their actions. The County and City adopted the open access provision after conducting public hearings to provide all sides a full opportunity to participate. The record was clear that the condition was needed. Appellants did not introduce any meaningful evidence at the public hearings to question the condition’s necessity. They contended that the communities lacked authority to impose the condition.

Second, the resolution of the merits of the debate is, ultimately, a legislative matter. That this is an important debate is all the more reason for the Court to approach this case cautiously, and to decide it based on the claims and the record below, as urged by the Federal Communications Commission ("FCC").

The only issue before the Court is whether federal law prohibits the City and County from imposing the open access requirement to preserve competition and protect consumers. On that issue, the district court should be affirmed.

Appellees agree with Appellants Statement of Jurisdiction, although there is an alternative ground for dismissing the appeal, as there is no redressable injury here.

Appellants filed suit for declaratory relief on January 19, 1999. Appellants alleged that the open access requirement violated certain provisions of the Communications Act of 1934, as amended, violated the First Amendment and Commerce Clause of the U.S. Constitution, violated the terms of the City and County cable franchises with TCI, violated the "contract" clauses of the state and federal constitutions, and deprived them of rights secured by the federal constitution, in violation of 42 U.S.C. §1983. The claims were specific. Many claims that Appellants now assert on appeal were not raised. Among other things:

The Appellants’ Complaint did not allege that the City had acted without substantial evidence, or arbitrarily and capriciously.

The Appellants did not allege that the open access condition would be impossible to implement physically, that it would overburden cable system capacity, or that it would place an undue financial burden upon the Appellants.

Appellants did not allege that open access would affect their operations outside of Portland and Multnomah County.

Appellants alleged that the provision of cable modem service to subscribers was a cable service, not a telecommunications service. No facts were presented to the contrary.

Appellants did not allege that the open access condition would require them to provide a "telecommunications facility" in violation of 47 U.S.C. §541(b)(3)(D). While Appellants pled a cause of action under that section of the law, the allegation was that the open access condition violated Section 541(b)(3)(D) because it required them to provide a "telecommunications service." Then, Appellants abandoned even that argument, for in identifying the Cable Act provisions that supposedly preempted "open access" in their final brief to the District Court, Appellants did not mention the section.

Appellants did not allege that the open access condition prohibited them from speaking. Instead, their Complaint limited their First Amendment claim to the assertion that the open access provision was unlawful because it required "AT&T and TCI distribute speech of another provider."

It was in this posture that the case was presented to the district judge on cross-motions for summary judgment. The district judge (foreshadowing the recommendations of the FCC as amicus) decided this case on narrow legal grounds, based on the record before him.

Summary judgment was granted in the City’s favor, and this appeal followed. On appeal, Appellants have dropped their state and federal constitutional contract clause claims; their claim that the City and County actions violated the cable franchise agreements held by Appellants; and (by virtue of their failure to raise the matter on initial brief) their claims under 42 U.S.C. §1988. In addition, Appellants have evidently abandoned (and have certainly not briefed) their arguments that the open access condition was subject to implied or conflict preemption under 47 U.S.C. §531-532, or that the City’s transfer decision violated 47 U.S.C. §537.

Appellants’ Statement of "Facts" attempts to show that under federal law, local governments have very limited authority over cable systems -- in Appellants’ words, localities’ authority extends "only over uses of public rights-of-way and related aspects of cable service." This effort, while having little to do with facts, is nonetheless central to Appellants’ case, because Appellants ask this Court to read the statutory provisions by which they claim preemption very broadly -- a reading that is not permitted under ordinary preemption doctrine. Such a theory of broad preemption, therefore, depends on the assumption that localities derive their authority over cable from federal law, and have very limited authority over cable to begin with.

Appellants’ description of cable regulation is fundamentally wrong. Local franchising authority does not derive from federal law; it predates it. Local governments franchised cable television pursuant to their traditionally broad sovereign powers over businesses who sought permission to occupy public rights-of-way to earn private profit. There was no federal statute governing cable television until 1984, when Congress amended the Communications Act of 1934 to add Title VI, the "Cable Act," 47 U.S.C. §521 et seq. When Congress finally did adopt cable regulation, it did not limit local government authority as Appellants suggest. Rather, as the Fifth Circuit well explained in City of Dallas v. FCC, 165 F.3d 341, 348 (5th Cir. 1999).

The City and County recognize that the federal law limits local authority in some respects (over cable rates, for example). But local authority explicitly identified in the Act is still quite broad. It includes the authority to establish cable facilities and equipment requirements, including, for example, requirements that relate to "channel capacity, system configuration and capacity...; headends and hubs...and any other facilities or equipment requirement which is related to the establishment and operation of a cable system." H.R. Rep. 98-934, reprinted in 1984 U.S.C.C.A.N. 4655, 4696 (1984). "The ability of a local government entity to require particular cable facilities (and enforce requirements in the franchise to enforce those facilities) is essential if cable systems are to be tailored to the needs of each community." Id. at 4663.

Even more important for this case, the 1984 Cable Act affirmed that local authority is not confined to that expressly provided in the Cable Act. That is most clearly reflected in Section 636 of the Cable Act, 47 U.S.C. §556:

These "anti-preemption" provisions have, if anything, been made stronger over the years. For example, several of the provisions relied upon by Appellants were adopted in 1996. At the same time those provisions were adopted, Congress reaffirmed that it did not intend broadly to preempt local authority over cable television. Under the heading, "FEDERAL, STATE, AND LOCAL LAW - No Implied Effect," Congress warned that "This Act and the amendments made by this Act shall not be construed to modify, impair, or supersede Federal, State, or local law unless expressly so provided...."

Congressional protection of local control extends to local control over cable franchise transfers. Prior to 1992, there was no federal law addressing franchise transfers. In 1992, the Cable Act was amended to establish a deadline for local decisions on applications for cable franchise transfers, 47 U.S.C. §537, and the FCC was directed to develop a transfer information form that, when filed, would trigger the running of the federal deadline. The law does not set federal standards for review or approval of transfers, or authorize the FCC to set them. That omission was intentional.

Further, at the same time it created transfer deadlines, Congress also amended Section 613(d) of the Cable Act, 47 U.S.C. §533(d), to clarify that local governments retained authority to deny a request for a franchise whenever the community determined that the grant could reduce competition in the provision of cable services. The amendment was added to overrule a federal court decision holding that only the FCC had authority to block a cable transfer for competitive reasons.

Appellants’ "history" of cable regulation relies upon Capital Cities Cable, Inc. v. Crisp, 467 U.S. 691, 702 (1984), but that decision does not support the story they tell. The decision involved a pre-Cable Act challenge to a state regulation of broadcast signal carriage. The challenged state regulation intruded into an area where the FCC has undoubted authority to act and where the "FCC has unambiguously expressed its intent to preempt any state or local regulation." Id. at 701. The case does not tell us anything about the general scope of local governmental authority when the FCC has not explicitly preempted local action. Indeed, at the time Crisp was decided local franchise agencies regularly exercised substantial authority over their local cable systems, among other things establishing requirements for public, educational and governmental use of the cable system by third parties. See, e.g., Time Warner Entertainment, L.P. v. F.C.C., 93 F.3d at 972 (recognizing that even before passage of the Cable Act in 1984 and in the absence of federal permission franchise agreements contained access requirements). Crisp is better understood as a standard pre-Cable Act agency preemption case.

In short, local authority over cable, and particularly cable transfers, is broad. In the absence of some clear federal prohibition, the City and County were free to act to protect competition. That is what they did.

Appellee City of Portland is a charter City incorporated under the laws of the State of Oregon (SER301). Multnomah County is a home rule County formed under the laws of the State of Oregon (SER302). Under federal law, the law of Oregon, and long standing municipal practice, any private party wishing to construct and operate a cable television system in the City or County must obtain a franchise. Appellants Cablevision of Oregon, Inc. and TCI of Southern Washington have for several years held franchises to provide cable service in the City and County. Those franchises require prior approval by the City and County of any franchise "transfer" or "change in control." Thus when AT&T proposed to assume control of TCI, the parent company of the two franchisees, the companies had to seek permission of the local governments (SER3-4).

As the first step in the franchise transfer review, the AT&T application was referred to the Mount Hood Cable Regulatory Commission. The MHCRC is an intergovernmental citizens board that administers cable affairs for several communities, including Portland and Multnomah County. Its job is to recommend action to the City and the County, whose elected officials retain final authority over cable franchises (SER340). The MHCRC conducted public hearings on the application. Individuals, consumer groups, representatives of Internet Service Providers and U.S. West testified (orally and in writing) that unless conditioned, the merger could reduce competition in the provision of Internet services, which both Appellants and the local governments agreed were cable services within the meaning of the law. The MHCRC recommended approval of the transfer, subject to AT&T’s acceptance of a cable modem platform "open access" condition, and certain other conditions. Under the condition, AT&T was required to allow competing providers of "Internet service" nondiscriminatory access to the cable modem platform, that is, the facilities owned by it that allow the television cables to be used as a "gateway" to the Internet (SER278). The condition was imposed to protect consumers and competition, as described in detail below.

The matter then came directly before the elected officials of the City of Portland and Multnomah County. Based on the information before them, on December 17, 1998, the City and County voted to approve the transfer, subject to the open access condition, which provided that:

The condition is quite limited. It did not force the Franchisees to provide any services or any facilities. It merely required that if Appellants provided a cable modem platform, competing Internet access and online service providers must be permitted to use that cable modem platform to provide services to their customers. The condition left Appellants free to bundle or sell separately its traditional cable television service and its own affiliated proprietary Internet access and content service.

Nothing in the City and County open access condition forced Appellants to carry signals or Internet communications that it did not otherwise intend or that it was not otherwise willing and able to carry. The district court record (confirmed by AT&T in its opening brief) established that the Appellants’ cable modem service could and will be used to receive "any available content on the Web," including the content offered by service providers that may want to take advantage of Portland’s open access condition (SER2). AT&T and TCI have told the FCC that, while they will not provide non-discriminatory access to the cable modem platform to third party Internet service providers, "customers of @Home… can still access" those third parties indirectly.

The record shows that the difference between the City and County’s condition and what Appellants promised otherwise to do was this: under the Appellants’ model, a subscriber must buy the duplicative access services offered by @Home in order to buy services from a provider of his or her choice. In other words, @Home’s competitors will be limited to customers who are willing to pay twice for similar services. Under the City and County condition, the customers of third party Internet service providers could obtain direct access to their provider of choice without having to pay the full @Home retail rate. The subscriber’s service provider would pay AT&T an amount comparable to the amount effectively paid by AT&T’s affiliate @Home for access to AT&T’s facilities (ER278). Thus, the City and County condition only affected the economic arrangements under which local cable subscribers can access the Internet.

The local governments’ justification for adopting the open access condition is clear and was not controverted by Appellants, either in the local hearings or in the district court. As the district court record shows, Appellants have given their proprietary Internet service, @Home, the exclusive right to provide high-speed Internet services over the Appellants’ cable systems (SER77). The acquisition of TCI by AT&T, together with the commencement of this closed Internet service system, brings together assets in a way that will, as AT&T has put it, "redefine the communications industry landscape." As the record demonstrated, the City and County had substantial reason to believe that residential users in their communities who desire high-speed access to the Internet could only do so in the foreseeable future through a cable system. The record below contained information showing that standard telephone lines do not provide a satisfactory alternative to cable for high-speed access; cable modems may have the capability to receive information at speeds at least 100 times faster than a 28.8 modem, and substantially faster than the speeds achieved using various "high speed" telephone lines or any other comparably priced service. Indeed, it appeared that "high-speed" telephone connections -- so-called "DSL" lines -- would not be as widely available as the cable modem platform. Because of the exclusivity agreement with @Home, there was a real risk that company could become the sole gateway to high-speed residential Internet access. Members of the public, spokespeople for US West, and representatives of other Internet service providers all attested to the anticompetitive impact of this arrangement. The record thus was more than sufficient to show that the effect of the unconditioned merger would be to limit competition in the provision of a service that AT&T stated was a cable service.

The City and County believed, as does AT&T evidently, that access to the Internet is critical for the future of commerce, education, and growth in the City and County. They concluded that the bottleneck created by AT&T’s control of the high-speed gateway to the Internet threatened competition and consumer choice, and was inconsistent with the vibrant, open, innovative character of the Internet. @Home’s own SEC filings affirmed that there were reasons for the City to be concerned. @Home characterized itself as having exclusive access to a majority of the houses in the United States and described its exclusivity arrangement in ways that left little doubt as to their potential for limiting competition and innovation.

This is not to say that the wisdom of an open access policy is not subject to debate. However, for purposes of this proceeding, the critical and undisputed facts are:

AT&T describes in some detail the process whereby the FCC and the Department of Justice ("DOJ") reviewed and ultimately "approved" its acquisition of TCI. This is all legally irrelevant, as the FCC amicus brief makes clear. But three clarifying points are worth making.

1. The FCC and DOJ reviews of the merger ran concurrently with the City’s and County’s. The local governments, however, took final action to condition their approval before the federal agencies acted.

2. The DOJ review focused on the effect of the merger on the market for cellular mobile services. DOJ’s concern was assuaged through the July 15,1999, entry of a stipulated final judgment in a federal Clayton Act lawsuit filed against Appellants. The DOJ did not address the open access issue.

3. The issue before the FCC was whether to approve the change of control of certain radio station licenses and international resale authorizations held by TCI to AT&T, and whether to authorize the extension of common carrier lines by the merged entity. The FCC Order was issued on February 18, 1999, a month after the complaint was filed in this case. While open access issues were raised before the FCC, the agency did not assert jurisdiction or preempt local action on the open access issue. See FCC Order at ¶12. Although the FCC did not impose a national open access condition, the record before the FCC provided ample basis for imposition of the open access condition. The FCC itself declared: "This merger, although ultimately we judge it permissible, is not so simple. Parties have raised non-frivolous issues about whether this merger creates incentives or opportunities" for the merged company to violate Commission rules and policies. FCC Order at ¶16.

Appellants’ description of the standard of review is generally correct but incomplete.

Review of facts is confined to the record that was before the district court at the time of its decision. Lippi v. City Bank, 955 F.2d 599, 604 (9th Cir. 1992). This Court has characterized as "a basic tenet of appellate jurisprudence" the rule that "parties may not unilaterally supplement the record on appeal with evidence not reviewed by the court below." Tonry v. Security Experts, Inc., 20 F.3d 967, 974 (9th Cir. 1994).

The Court considers new legal theories raised for the first time on appeal only in exceptional circumstances, and never where there are any factual issues associated with them, or if any party would be prejudiced thereby. Bolker v. Comm’r of Internal Revenue, 760 F.2d 1039, 1042 (9th Cir. 1985); United States v. Carlson, 900 F.2d 1346, 1349-1350 (9th Cir. 1990). The party seeking to argue new issues must show that it falls within one of the "narrow exceptions" to the general rule against raising an issue for the first time on appeal. Sofamar Danele Group, Inc. v. Brown, 124 F.3d 1179 (9th Cir. 1997).

Several of the claims made and facts proffered on appeal were never raised below, much less preserved, contrary to Appellants’ claim. See Statement of the Case, infra, pp. 3-4.

Our system of government is one of dual sovereignty. For this reason, while Congress acting in its proper sphere, may preempt State powers, preemption is not lightly presumed and historic police powers of the States are "not to be superseded by [a federal act] ... unless that was the clear and manifest purpose of Congress." Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 230 (1947).

From the beginning of the Republic, courts have recognized that the protection of competition and consumers falls within those historic police powers. The City and County’s open access condition was designed precisely to this end. Appellants ask this Court to conclude nonetheless that Congress has, through four provisions of the Cable Communications Policy Act of 1984 ("Cable Act") "expressly preempted" local authority to impose such a condition. None support Appellants’ claim.

47 U.S.C. §541(b)(3)(D) prohibits a franchising authority from requiring a cable operator "to provide ... any telecommunications facilities" subject to certain exceptions. Appellants never raised a "telecommunications facilities" claim in the district court and should not be allowed to raise it on appeal. The argument is wrongheaded in any event. Appellants have always contended that their cable modem service is a cable service provided over a cable system. Third party provision of similar service on the same system does not transform cable facilities into telecommunications facilities.

47 U.S.C. §544(e) states that a franchising authority may not "prohibit, condition, or restrict" a cable system’s use of "any transmission technology." Appellants read this so broadly that it would literally preempt any regulation that could in any respect affect the equipment and facilities used by a franchisee. However, this statutory provision has been narrowly interpreted, extending only to requirements, for example, that a system use "coaxial" versus "optical" fibers. The open access condition does not mandate the use of any particular transmission technology; it does not violate 47 U.S.C. §544(e).

47 U.S.C. §541(c) prohibits the regulation of a cable system as a common carrier by reason of the provision of cable service. Appellants argue requiring open access to facilities is by definition common carrier regulation. However, to protect consumers and promote competition, companies that are not common carriers have been required to open their facilities to competitors (the cable industry, for example, has sought and obtained "open access" to apartment buildings). The Portland open access condition, like those requirements, has nothing to do with common carriage and everything to do with protecting competition.

47 U.S.C. §544(f) prohibits the imposition of "requirements regarding the provision or content of cable services...." Every court interpreting this section has read it narrowly to prohibit only requirements that are aimed at controlling the content of cable services. The open access condition does not require the provision of any particular content, by the Appellants, or by anyone else.

Appellants fail to demonstrate a "clear and manifest" Congressional intent to preempt through the cited provisions. They cannot do so in light of the specific "anti-preemption" provision of the Cable Act, 47 U.S.C. §556, Section 601(c) of the Telecommunications Act of 1996, and in light of 47 U.S.C. §533(b)(2), which was adopted to prevent preemption of local efforts to promote cable competition.

Appellants’ constitutional arguments must also fail. The open access condition does not violate the First Amendment because it does not burden Appellants’ speech. The condition does not offend the Commerce Clause, for Congress has identified appropriate limits on local regulation of cable television and has left localities free to impose the open access condition. Moreover, Appellants admit the condition would affect only their system in Portland and Multnomah County.

Our system of government establishes "two orders of government, each with its own direct relationship, its own privity, and its own set of mutual rights and obligations to the people who sustain it and are governed by it." New York v. United States, 505 U.S. 144, 161-166 (1992); Gregory v. Ashcroft, 501 U.S. 452, 458 (1991). Under that system, States (and their subordinate agencies) retain a "residuary and inviolable sovereignty" whose existence is implicit in the Constitution’s conferral upon Congress not of all governmental powers, but only discrete, enumerated ones. Printz v. United States, 521 U.S. 898, 918 (1997).

From the beginning of the Republic courts have held that local police power includes the right to act to preserve competition and to prevent those who use public resources and operate under public franchises from exploiting their economic position to the public’s detriment. See, e.g., Charles River Bridge v. Warren Bridge, 11 Pet. (36 U.S.) 420, 547-548 (1837). While Congress may, through the exercise of authority in its proper sphere, preempt State powers, the historic police powers of the States are "not to be superseded by [a federal act] ... unless that was the clear and manifest purpose of Congress." Rice, supra; Hillsborough County v. Automated Medical Laboratories, Inc., 471 U.S. 707, 715-716 (1985).

The Supreme Court’s rule that local authority to act is preempted only if congressional intent is "absolutely certain" and "unmistakably clear," Gregory, 501 U.S. at 464; City of Dallas, 165 F.3d at 347-348, has been described as "super-strong." The rule requires that even where a provision of law expressly preempts, the provision is to be read narrowly, not broadly. Cipollone v. Liggett Group, Inc., 505 U.S. at 516 (1992) ( "we must construe these provisions in light of the presumption against the pre-emption of state police power regulations."); Medtronic, Inc. v. Lohr, 518 U.S. 470, 485 (1996).

The Supreme Court has recognized three types of preemption—conflict preemption, field preemption, and express preemption. Cippolone, supra. On appeal, Appellants raise only an "express preemption" claim, and argue that four specific provisions of the Act "expressly prohibit" Portland’s open access requirement. ATT Brief at 1. In each case, however, Appellants’ argument

depends on a fundamental error: they would have this Court read each provision to preempt broadly rather than narrowly. For that reason alone, Appellants’ arguments fail.

Appellants first argue that the open access condition is preempted by 47 U.S.C. §541(b)(3)(D) which provides

Appellants assert that in adopting this section, Congress intended broadly to "preclude local franchising authorities from requiring cable systems to provide transmission facilities to third parties." One can search the legislative history cited for this proposition long and hard, and find no support for it. The legislative history indicates that the Congress (which was allowing cable companies to enter the telephone business, and vice versa) simply did not want municipalities using their Cable Act franchising authority to regulate such traditional telecommunications services. So understood, the provision has no bearing on this case, for AT&T has alleged and the City and County agree that cable Internet access is a "cable service" provided over AT&T’s cable facilities. In any case, on its face the open access condition does not "require" provision of a facility, but instead takes effect only after AT&T itself builds and installs the cable modem platform.

On appeal, Appellants present a remarkable new argument, bolstered by various factual assertions never before heard in this case. They now contend that whenever a competitor uses their cable facilities, those facilities are somehow transformed into telecommunications facilities; thus, requiring "access" is barred by 47 U.S.C. §541(b)(3)(D). This claim does not stand up to scrutiny.

Appellants begin (as they must, given their legal position throughout the case) with the proposition that when AT&T and its affiliate @Home provides cable modem service to home subscribers, it is a cable service; and the facilities being used are cable facilities. When, however, (Appellants assert) the same facilities are being used by a third party, the service being provided is not a cable service, and the cable facilities are suddenly transformed into telecommunications facilities. This is a nifty shift, and it is accomplished by a simple change in perspective. When looking at the service they choose to provide, Appellants examine it from the perspective of the subscriber. When characterizing the service being provided by third parties, the subscriber is ignored, and instead Appellants define the service in terms of their relationship with the third party. ATT Brief at 28.

The Cable Act’s legislative history makes clear that in determining whether or not a service is a cable service, the proper course is to examine the matter from the perspective of the cable subscriber, without regard to whether the service at issue will be provided by the operator or by a third party. "[T]he provision of information over a cable system by a channel lessee or by the cable operator through a joint venture or other commercial arrangement would be a cable service if it met all the other criteria for being a cable service." Third parties who take advantage of the open access condition will be providing the same type of service to subscribers that Appellants propose to provide; Appellants themselves have conceded that this service is a cable service and is provided over the cable system.

Appellants’ argument fails for another reason: it requires the Court to adopt a strained definition of the term "telecommunications facilities" and to make unsupported factual assumptions.

The term "telecommunications facility" is not defined in the Communications Act. Appellants presume that a "telecommunications facility" is any facility that is used for telecommunications. Telecommunications is defined as the "transmission" of information of the "users’ choosing" without change "in the form or content of the information as sent and received." Appellants argue that the "user" in this definition would be the entity providing service to subscribers, and argues that because the third party lessee would be able to provide the service it desires to its subscribers, "telecommunications" is involved, and ipso facto the facilities used are telecommunications facilities. This definitional path leads to absurd results: Appellants themselves distribute information of their own choosing to subscribers, so that, under Appellants’ argument, the company is engaged in "telecommunications" and the facilities that the Appellants are using would be "telecommunications facilities." There could be no such thing as a cable system or cable system facilities. The entirety of the Cable Act would disappear. That is not an intelligible reading of 47 U.S.C. §541(b)(3)(D).

Appellants themselves recognized this below: there, they insisted that "cable Internet access is not ‘telecommunications’ within the precise terms of the Communications Act ...." Plaintiff’s Supplemental Memorandum, p. 15, quoting In the Matter of Inquiry Concerning the Deployment of Advanced Telecommunications Capability to All Americans in a Reasonable and Timely Fashion, CC Docket No. 98-146, 14 F.CC. Rcd. 2398, ¶24 (1999). As Appellants’ district court briefs suggested, the term "telecommunications" is a highly technical term. With Appellants (a) having conceded that cable Internet access is not "telecommunications," and (b) having never presented the facts to show the statutory definition of telecommunications could be satisfied, there is no ground for this Court to conclude that the open access requirement transforms the cable system into a telecommunications facility.

The second provision relied upon by Appellants is 47 U.S.C. §544(e). This section, added in 1996, provides that "[n]o State or franchising authority may prohibit, condition, or restrict a cable system’s use of...any transmission technology." Appellants argue that they would be required to change the equipment located at their headend, and make other changes to their network to provide access to the cable modem platform. Appellants maintain that any local condition that requires a cable operator to modify its system is preempted by 47 U.S.C. §544(e). That is (according to Appellants), requirements that affect cable network facilities and equipment choices as well as requirements that directly specify a particular transmission technology are prohibited. ATT Brief at 30.

This is a strange reading of the law. It would mean that a locality could not require a cable system upgrade and could not require any standards for the upgrade: for example, a locality could not require a cable system to be two-way activated, because that would prevent the use of one-way equipment. A community could not establish minimum capacity requirements, because those requirements would prevent an operator from building a system that lacked that capacity. The effect, in other words, would be to eliminate the provisions of the Cable Act -- including the other provisions of 47 U.S.C. §544 -- that specifically permit localities to establish and enforce facilities and equipment requirements, as well as the provisions of 47 U.S.C. §546, which ensure a community can require a cable system that meets the community’s cable-related needs and interests.

Appellants’ argument has been rejected by the FCC. The FCC has read the term "transmission technology" narrowly, to refer to the medium of transport, and the format (digital or analog) in which signals are transmitted. Report and Order: In the Matter of Implementation of Cable Act Reform Provisions of the Telecommunications Act of 1996, CS Docket No. 96-85, 14 F.C.C. Rcd. 5296, ¶141-142 (March 29, 1999) (appeal pending). The FCC concluded that Section 544(e) only prohibits local efforts to mandate the use of a specific transmission technology, for example, efforts to control "whether a cable operator uses digital or analog transmissions [or to] determine whether its transmission plant is composed

of coaxial cable, fiber optic cable or microwave radio facilities ...." Id. In contrast, the FCC confirmed that franchising authorities may require an operator to modify its cable system to meet the cable-related needs and interests of the community:

Moreover, a condition aimed at services to be provided over cable system facilities does not implicate 47 U.S.C. §544(e). TCI Cablevision of Oakland County, Inc., 12 F.C.C. Rcd 21396, 21441 (1997).

The fact that the "open access" requirement may require modifications to the AT&T system is thus irrelevant. To run afoul of Section 544, at the very least a prohibited condition must be aimed at transmission technology, narrowly defined; and must mandate use of a particular technology. Here, the City and County are utterly indifferent to the technology used to provide nondiscriminatory access to the cable modem platform. The "open access" provision does not mandate the use of any particular technology, much less a transmission technology.

Appellants say that local governments may not impose an open access condition because to do so would violate 47 U.S.C. §541(c). That provision prohibits both local and federal authorities (including the FCC) from imposing on a cable company "regulation as a common carrier or utility by reason of providing any cable service." It is worth noting at the outset that the FCC does not agree that an open access requirement is common carrier regulation. While it has not yet addressed open access issues, the FCC plainly does not believe that it is foreclosed from imposing an open access condition in the future, as it would be if Appellants were correct.

Appellants’ argument proceeds from the assertion that any requirement for non-discriminatory access to a facility is a common carriage requirement, and therefore prohibited. That is not the case, as the district judge recognized.

The open access condition is a facilities requirement, the type of condition commonly imposed to mitigate the competitive consequences of control of essential facilities. A trucking company, the archetypal common carrier, is not necessarily a monopoly or properly regulated as such. At the same time, a near monopoly, like the sole cable company in a community, need not be regulated as a common carrier in order to address the potential anti-competitive effects of its market power. See, e.g., Morrison v. Viacom, Inc., 52 Cal.App.4th 1514, 61 Cal. Rprt. 2d 544 (Cal. App. 1997)(rejecting the argument that claims under the anti-tying provisions of California’s antitrust law amount to unlawful rate regulation in violation of Communications Act). See also, Total TV v. Palmer Communications, Inc., 69 F.3d 298 (9th Cir. 1995).

Non-discriminatory access to facilities is not necessarily a concomitant of common carrier status. MCI Communications Corp. v. American Telephone and Telegraph Co., 708 F.2d 1081, 1100-1101 (7th Cir. 1982) (MCI v. AT&T) cert den. 464 U.S. 891 (1983). More to the point, access to communications facilities can be required outside of common carriage. MCI v. AT&T, supra, 708 F.2d at 1103.

Indeed, under the "essential facilities" doctrine, open access has been required for facilities ranging from football stadiums to ski resorts, none of which are common carriers. United States v. Terminal Railroad Association, 224 U.S. 383 (1912) (railroad terminal); Otter Tail Power Co. v. United States, 410 U.S. 366 (1973) (electric facilities); Associated Press v. United States, 326 U.S. 1 (1945) (news service). The requirement that a company make its facilities available to competitors has been applied even when it is clear that the company could not be required to operate as a common carrier. In Midland Telecasting Company v. Midessa Television Company, Inc., 617 F. 2d 1141 (5th Cir. 1980), an antitrust suit was brought by a television station against a cable company for refusal to carry plaintiff’s UHF signal. The Fifth Circuit held that the cable operator was subject to antitrust remedies for failure to provide access to the cable system, in part because it was not subject to common carrier regulation. Associated Press, supra, allowed competitors to gain access to Associated Press resources and rejected the argument that to do so would turn the newspapers into utilities.

Even FCC v. Midwest Video Corp., 440 U.S. 689 (1971), a case relied on by Appellants, makes the same point. In that case, the Court distinguished a regulation that required the cable operator to provide the facilities so that any member of the public could produce an access program, from pro-competitive regulations that required cable operators to carry programming from all local broadcast stations, cable’s competitors. The broadcast rules were not treated as common carriage requirements. It does not follow, therefore, that open access is common carriage; its genesis lies in the regulation of competition, which is entirely separate.

Appellants have never really addressed this fundamental distinction between rules to protect competition and rules requiring general common carriage. They simply argue that their cable system is not an "essential facility" within the traditional law of antitrust remedies. That is irrelevant, however, because the open access condition is a legislative remedy to an identified competitive problem. It does not have to be identical to the "essential facilities" antitrust remedy. "A fundamental principle of legislation is that Congress is under no obligation to wait until the entire harm occurs but may act to prevent it." Turner Broadcasting System v. FCC, 520 U.S. 180 at 212 (1997) ("Turner II"). The same holds true for local governments.

The only question here is whether Congress "clearly and manifestly" meant to foreclose local actions designed to promote competition. Appellants have not shown that it did. Not only does §541(c) not expressly preempt local regulation, other provisions of the law evince congressional intent to protect local efforts to promote competition. In 1992 Congress amended various provisions of the Cable Act including Sections 612, 621 and 624 (relied upon by Appellants to establish preemption). Section 27 of the 1992 Act expressly provided: "Nothing in this Act or the amendments made by this Act shall be construed to alter or restrict in any manner the applicability of any Federal or State antitrust law." 47 U.S.C. § 521 note, 106 Stat. 1503. See also 47 U.S.C. §552 (local authority to establish

consumer protection laws ); and 47 U.S.C. §533(d) (localities may prohibit ownership of cable system by a person where locality determines it could reduce competition in the provision of cable service).

This is enough to dismiss Appellants’ "common carrier" argument, but the claim also fails for another reason: the open access condition does not require "common carriage." As the district court correctly held below, "the open access requirement applies only to competing ISPs, so it does not impose ‘a duty to hold out facilities indifferently for public use and thus [does] not compel cable operators to function as common carriers.’" ER203. Appellants, quoting from National Association of Regulatory Utility Comm’rs v. FCC ("NARUC"), 533 F.2d 601 (D.C. Cir. 1976) suggest that the district judge mistakenly believed that to be a common carrier one must serve the entire public. Instead, they say, a carrier "whose service is of possible use to only a fraction of the population" is still a "common carrier if he holds himself out to serve indifferently all potential users" and does not "make individualized decision in particular cases whether and on what terms to serve."

Appellants, not the District Court, misunderstand NARUC. First, the "open access" condition does not require AT&T to provide its facilities to the entire subset of the public who might wish to use that capacity to provide video or non-video services to themselves, or to others. Rather than reaching "all potential users," the condition only applies to certain companies competing with AT&T in the provision of Internet access. The NARUC "common carrier" test set out by AT&T is not satisfied. Second, the majority of the NARUC Court actually was unwilling to adopt that test to find that requiring a cable system to lease capacity to third parties to provide two-way services is "common carriage." NARUC, supra, 533 F.2d. at 621 (Lumbard, C.J. concurring); 533 F.2d at 634 (Wright, C.J. dissenting). Finally, and most critically, NARUC does not stand for the proposition that any time a company is required to open its facilities to its competitors, it is transformed into a common carrier, and the requirement imposing the obligation is a "common carrier" regulation; that is clear from the case’s dissent and concurrence. Yet, to prevail, Appellants must show that every open access condition would necessarily be a "common carrier" regulation. That Appellants cannot do.

In the end NARUC supports the District Court’s ruling. The Court struck down the FCC’s attempt to preempt state and local regulation of two-way point-to-point non-video services provided over cable systems. That result is of course patently inconsistent with Appellants’ suggestion that the open access condition goes into areas traditionally beyond the control of local governments.

First, they argue that Section 541(c) expressly prevents local authorities from imposing any third party access requirements other than as specified in the PEG access, commercial use and must-carry provisions of the Cable Act, 47 U.S.C. §§531-532, 534-535. Section 541(c) says nothing of the sort and the proposition urged is contradicted by legislative history. 47 U.S.C. §532 requires operators to set aside a specified portion of their channel capacity for "commercial use," defined as the provision of video programming. Congress specifically preempted local authority to require additional capacity for "commercial use." 47 U.S.C. §532(b)(2). The legislative history makes it clear, however, that Congress did not intend to foreclose additional, local third party capacity set-asides for non-video programming: "this restriction...only applies to the designation of channel capacity for purposes of providing video programming." 1984 U.S.C.C.A.N. at 4687.

Second, Appellants claim that the "nondiscriminatory access" condition will require the local governments to engage in detailed common carrier-type regulation. However, a litigant’s forebodings about potential implementation problems cannot strip the City and the County of their right to adopt a condition that itself is not illegal. Courts do not decide hypothetical questions. If at some point in the future, the local governments propose methods to implement the condition that exceed their authority, AT&T can always return to court for relief.

47 U.S.C. §544(f)(1) states that "[a]ny Federal agency, State, or franchising authority may not impose requirements regarding the provision or content of cable services, except as expressly provided in this title." Appellants, again reading the statute to preempt broadly, argue that any regulation that may affect the provision of a service is prohibited by the section. In order to create an impression that there is some support for their position, Appellants cite a brief phrase from United Video, Inc. v FCC, 890 F.2d 1173, 1189 (D.C. Cir. 1989), and then proceed to criticize the district court’s analysis as "irrelevant" for applying a "content neutrality" test to determine whether Section 544(f) had been violated. In fact, United Video makes it quite clear that Appellants’ arguments are insupportable and that the test applied by the district court was the right test to apply.

In United Video, the federal appeals court explained the background against which Congress adopted Section 544(f) and its proper construction. It noted that historically local communities had specified both the type of "facilities" and the "services" that the cable operator must provide. In the Cable Act, "Congress determined that local governments should have the power to require particular cable facilities, but ... [not] ‘to dictate the specific programming to be provided . . .’" 890 F.2d at 1189, quoting H.R. Rep. No. 98-934, reprinted in 1984 U.S.C.C.A.N. 4655, 4663. The court went on to conclude that "the key [to what localities can do] is whether a regulation is content-based or content-neutral." Congress was not "concern[ed] with regulations ... that are not based on the content of cable programming and do not require that particular programs or types of programs be provided." Id.

The district court, applying this analysis, recognized the obvious: the open access condition is not based in any respect on what information is carried or provided through Appellants’ cable modem platform. It is a facilities requirement, not a services requirement. A customer using the cable modem platform can access any information, including the information developed by ISPs who might wish to take advantage of the open access condition. The open access condition therefore is a permitted "content neutral" requirement under the United Video test.

Storer Cable Communications v. City of Montgomery, Ala., 806 F.Supp. 1518 (M.D. Ala. 1992) also supports the district court’s analysis. The Storer court upheld local cable regulations which prohibited discrimination in the provision of cable programming, and which were designed to assure "free and vigorous competition by curtailing ... anticompetitive abuses employed by cable providers who can leverage their market power." Id. at 1528. The court found that the challenged ordinance was not barred by Section 544(f)(1) because it focused on "the market effects of the targeted licenses, not on the content of the programming." Id. at 1545. The open access condition likewise, does not target programming content. See also Morrison v. Viacom, Inc., 52 Cal. App. 4th 1514, 61 Cal. Rptr.2d 544 (Cal. Ct. App. 1997) (Section 544(f) does not preempt state antitrust claims alleging the unlawful tying of cable programming services).

Finally, against all logic, Appellants assert that the open access condition is content based because it is triggered by the AT&T decision to provide Internet access -- a cable service that AT&T says "has a particular kind of content." Appellants are confusing a rule triggered by provision of a certain kind of cable service (Internet access), with a rule that would be triggered by the content of information being disseminated. "Narrow tailoring" principles under First Amendment analysis make it entirely appropriate to aim a content-neutral requirement precisely to prevent anticompetitive conduct. By contrast, a content-based requirement is based upon "the ideas or views expressed," and requires the state to examine "the content of the message to be conveyed." Forsyth Cong., Georgia v. The Nationalist Movement, 505 U.S. 123, 134 (1992). A regulation is not content-based merely because it has "an incidental effect on some speeches or messages but not others." Ward v. Rock Against Racism, 491 U.S. 781, 791 (1989). Accordingly, courts have uniformly treated open access requirements geared towards video programming and carriage of broadcasting as content-neutral. Time Warner Entertainment, L.P. v. F.C.C., 93 F.3d 957, 972 (D.C. Cir. 1996) (requirements for third party leased access are content neutral); Turner II at 195 (treating requirement for carriage of broadcast stations as content neutral). There is no reason to treat the cable modem condition any differently, for it has even less to do with content. It is triggered by the provision of the cable modem platform, rather than what is provided over it.

The City and County retain broad police power authority to protect consumers and competition, so long as they do not violate the Cable Act. 47 U.S.C. §556(a). See also 47 U.S.C. 522(d)(1); 47 U.S.C. §521 nt; 47 U.S.C. §152 nt. Appellants have failed to show that the open access condition is inconsistent with any provision of the Cable Act. It follows that the City and County, acting pursuant to their police powers, had the right to impose the open access condition.

That Congress chose to preserve local authority, particularly in the areas of competition and consumer protection, is entirely unremarkable. "[S]tate common law and statutory remedies against monopolies and unfair business practices . . . is an area traditionally regulated by the states." California v. ARC America Corp., 490 U.S. 93, 101, 109 (1989). The preservation of such local authority is, by itself, fatal to Appellants’ preemption claims.

In addition, however, the authority to impose a pro-competitive condition is specifically preserved by 47 U.S.C. §533(d), see Statement of Facts. It provides, among other things, that "[n]othing in this section shall be construed to prevent any ... franchising authority from prohibiting the ownership or control of a cable system ... in circumstances in which the ... franchising authority determines that the acquisition ... may eliminate or reduce competition in the delivery of cable service in such jurisdiction."

This provision is a "clear and manifest" demonstration that Congress meant to allow localities to address competitive issues at the time of transfer. It also affirms that Congress intended to leave the "determination" of competitive effect to the locality. An action taken by a federal agency could not affect this local authority. Here, the City and County did determine the merger would reduce competition in the provision of cable service, and prohibited AT&T from controlling the cable system unless it accepted the open access condition.

The open access condition thus falls squarely within the powers reserved by 47 U.S.C. §533(d).

Appellants, however, argue that the provision is irrelevant, because it does not specifically exempt the open access condition from the operation of other preemptive provisions of the Act. This argument can go nowhere. The extent to which the four provisions relied on by Appellants have any preemptive effect is determined by examining Congressional intent. Appellants suggest that one should read the four provisions to eviscerate a specific reservation that Congress inserted in 1992; leaving unclear why Congress bothered with the reservation at all. In fact, because it is clear that Congress intended to allow communities to deny transfers based on anticompetitive effects, the other provisions of the Cable Act must be read in a way that gives effect to this reservation.

Appellants also make the remarkable assertion that §533(d) is not relevant because it permits a denial of ownership or transfer, but does not allow the imposition of transfer conditions. As the district court properly concluded, the right to deny an application necessarily carries with it the right to establish conditions. ER202 (citing Nollan v. California Coastal Comm’n, 483 U.S. 825, 836 (1987)). In any case, because AT&T refused to accept the open access condition, the City’s and County’s ordinances denied the transfer request, precisely the remedy protected under 47 U.S.C. §533(d)(2).

Appellants claim that Section 533 does not apply because it is "beyond dispute" that cable competition in Portland would be unaffected by the AT&T acquisition of TCI. Actually, the parties’ statements of undisputed fact show the reverse: the evidence before the City and County was that the merger would reduce competition in the provision of cable service.

Finally, Appellants argue that the open access requirement is not "within the ambit" of §533(d) because the provision only applies to "competition in the delivery of cable services," and does not apply to competition between a cable system operator and "entities which provide online services over telephone lines." ATT Brief at 49. This argument is too facile by half. The open access condition protects competition in the provision of cable modem service via the cable system, not some other medium. Nor can it be argued that third party use of a system to reach customers does not involve "delivery" of service. 47 U.S.C. §533(a) (purpose of providing leased access for third parties is to increase competition in the delivery of video programming).

The FCC’s amicus brief declares that the agency has not preempted local authority to address the open access issue.

The brief does not support AT&T’s statutory preemption claims -- and, in fact, implicitly rejects the AT&T arguments that both local and federal agencies are without authority to require open access of cable operators.

The FCC simply asserts it has authority to address the open access question and to preempt any local open access initiatives. Whatever the parties may think of the FCC assertion of authority, the Court need not, and the FCC specifically requests that the Court not, address the theoretical limits of the FCC’s power to preempt local open access protections. That can await another case.

The predicate for any First Amendment claim is a restriction on protected speech -- "the inquiry for First Amendment purposes is not concerned with economic impact." Warner Cable Communications, Inc. v. City of Niceville, 911 F.2d 634, 638 (11th Cir. 1990), reh’g denied, 920 F.2d 13 (11th Cir. 1990), cert. denied, 501 U.S. 1222 (1991); Young v. American Mini Theatres, Inc., 427 U.S. 50, 78 (1976) (Powell, J., concurring)); see also P.A.M. News Corp. v. Butz, 514 F.2d 272 (D.C. Cir. 1975).

As the district judge properly concluded, the open access condition does not require Appellants to carry or to associate themselves with any particular speech. ER205, citing Pruneyard Shopping Center v. Robins, 447 U.S. 74 (1980). Appellants will only be transmitting speech they already agreed to transmit. The City and County rule is simply a facilities requirement that affects the economic arrangements under which competitors will be able to reach subscribers.

Appellants’ argument is thus nothing more than an attempt to conflate First Amendment and access-to-property issues. At the cable industry’s urging, however, Courts have held that First Amendment is not implicated by access rules requiring a landlord to allow a competing cable operator to use the landlord’s property to reach potential customers within a building. AMSAT Cable Ltd. v. Cablevision of Connecticut Limited Partnership, 6 F.3d 867 (2d Cir. 1993). The result here should be the same. This is an economic regulation case, not a First Amendment case.

Appellants argue that a regulation requiring a cable operator to carry "particular programming" is subject to a "danger of abuse" and should be subject to heightened scrutiny" Here, however, no particular programming is required. As the district court found, there also is no danger of government abuse because the government does not regulate the content of the speech provided to the subscriber. Heightened scrutiny, therefore, is not required; nor is heightened scrutiny required merely because this case involves the cable industry, as the AMSAT and Niceville cases demonstrate. See also Time Warner v. F.C.C., supra (upholding rate regulation provisions of Cable Act without strict scrutiny).

Under the intermediate scrutiny test, a government regulation will be upheld if it advances important governmental interests unrelated to the suppression of free speech and does not burden substantially more speech than necessary to further those interests. United States v. O’Brien, 391 U.S. 367, 377 (1968).

The government interest in preventing monopolization of a medium of mass communication and assuring that consumers can receive information from a variety of sources is plainly substantial. Turner II; see also Part II.B.4, supra. Appellants argue, however that there was insufficient proof that "open access" serves that important government interest, or that it is narrowly tailored to avoid overburdening speech.

In support of this claim, Appellants assert (relying on Turner) that there are no substantial legislative findings showing any real threat to competition. This misreads the requirements of Turner II. In Turner II, the Court addressed the significance of legislative findings in the face of a substantive challenge to the reasonableness of the legislation. It did not determine that legislative findings are necessary to survive First Amendment scrutiny, particularly where, as here, the plaintiffs have not alleged that the local government’s action was arbitrary or that it lacked support based on the record.

Nor does Turner II require that a certain volume of evidence be produced to sustain the declared government interest. The Turner cases merely require that a community be able to provide some "empirical support or at least sound reasoning" to support a claim that a regulation incidentally affecting speech is justified by a substantial government interest.The empirical data need not rise to the level that might be required for a court or administrative agency to resolve an issue. It is enough that the evidence permit the legislative body to draw "reasonable inferences" that a problem is more than "fanciful." Century Communications Corporation v. Federal Communications Commission, 835 F.2d 292, 305 (D.C. Cir. 1987).

The evidence before the localities in support of an open access requirement was overwhelming, as shown in the Statement of Facts. Appellants belittle this evidence because some of it came from their competitors. But: "[i]t is the nature of the legislative process to consider the submissions of the parties most affected by legislation." 520 U.S. at 199. Appellants submitted no meaningful rebuttal to the information submitted by others. The local governments were not required to investigate further given the information before them. And the district court was not required to look further to resolve a complaint that raised no such factual dispute as to the support for the local action.

Nor is the localities’ conclusion undercut by the FCC’s decision not to impose a national open access condition. The FCC Order was issued after Portland had acted. The Order stated that the concerns raised by open access advocates were not frivolous. That the FCC came to a different conclusion is not significant for First Amendment purposes: "‘the possibility of drawing two inconsistent conclusions from the evidence does not prevent ... [a] finding from being supported by substantial evidence.’" Turner II at 211.

Appellants also argue that the district court failed to consider the effect of the condition on Appellants’ speech. But the Court conducted precisely the analysis required by O’Brien. The court knew that subscribers could obtain the same information with or without an open access condition and that Appellants remained free to offer a cable modem service to subscribers. On that basis, the court properly found that speech was not burdened. The "burdens" Appellants’ hypothesize, ATT Brief, pp. 6, 56, were by and large not even raised below. Here, as below, Appellants do threaten that if they cannot offer the cable modem platform on a monopoly basis, they may not provide it at all. However, Appellants cannot turn their own desire to maintain a monopoly platform into a cognizable speech burden, Associated Press.

Appellants offer a half-hearted claim that the open access requirement is subject to strict scrutiny because it is content-based, an argument not made below. There appear to be two bases for the claim. One is that the open access condition reaches only a particular type of programming (Internet access), and thus singles out a particular type of speech. In fact, the TCI franchisees are already subject to provisions designed to ensure third party access to compete with the Franchisee in the provisions of video programming. 47 U.S.C. §532. Franchisees were also subject to requirements for public, educational and governmental use of the cable system. 47 U.S.C. §531. The open access condition results in consistent treatment, not a singling out.

Appellants argue that the ordinance is content-based because its obligations are triggered by their decision to offer Internet access. But, assuming this were so, "[s]peaker-based laws demand strict scrutiny when they reflect the Government’s preference for the substance of what the favored speakers have to say (or aversion to what the disfavored speakers have to say)." Turner Broadcasting System, Inc. v. FCC (Turner I), 512 U.S. 622, 658 (1994). The open access condition reflects no favoritism or aversion. It applies if AT&T offers a cable modem platform. Its application does not depend on the content provided using that platform. See pp. 44-45, supra.

This case does not involve a private company using private property. It involves companies that hold franchises: special privileges that allow them to occupy valuable public property. Should local governments dedicate public property to the use of a single internet content provider? To grant such an advantage to one speaker at the expense of another raises significant concerns. "The State may not, consistently with the spirit of the First Amendment, contract the spectrum of available knowledge." Board of Education v. Pico, 457 U.S. 853, 866, 102 S.Ct. 2799, 73 L.Ed.2d 435 (1982) (plurality opinion).

At a minimum, municipal and county governments cannot be forced to allow the use of public property and rights-of-way in service of one messenger and to the disadvantage of its competitors: "[The First] Amendment rests on the assumption that the widest possible dissemination of information from diverse and antagonistic sources is essential to the welfare of the public ... Freedom to publish means freedom for all and not for some." Associated Press, 326 U.S. at 20.

Appellants offer the argument, which they did not make below, that the open access condition is barred by the Commerce Clause because it was enacted for the purpose of protecting local businesses and their employees. Appellants also argue that the open access requirement violates the Commerce Clause because it imposes burdens on interstate commerce which are not outweighed by the local benefits of the regulation.

The claims are based on nothing more than appellate brief supposition; there is no valid Commerce Clause claim here. To begin with, Commerce Clause claims generally only apply where localities act in a field where Congress has not spoken, that is, where Congress’ own exercise of the Commerce Clause power is "dormant." Merrion v. Jicarilla Apache Tribe, 455 U.S. 130, 154-55 (1982). Congress’ exercise of its Commerce Clause powers in the field of telecommunications is anything but "dormant."

If, as the City and County have demonstrated above, Congress did not preempt local governments from enacting an open access condition, then a court should not "infer from the ‘dormant’ commerce clause ... that the Constitution adopts a particularized view of cable television regulation which may be at variance with that which Congress has so painstakingly constructed." Storer Cable, 806 F. Supp. at 1554.

Appellants cite C&A Carbone, Inc. v. Town of Clarkstown, 511 U.S. 383 (1994) for the proposition that the Commerce Clause "prohibit[s] state or municipal laws whose object is local economic protectionism." ATT Brief at 58. This is not correct. Appellants have invoked the "rationale for the rule" in place of the rule itself. The real rule is: "state statutes that clearly discriminate against interstate commerce are routinely struck down, . . . unless the discrimination is demonstrably justified by a valid factor unrelated to economic protectionism." New Energy Co. of Indiana v. Limbach, 486 U.S. 269; Carbone at 390. Actual discrimination, or a prohibited burden on commerce, is required.

On its face, the open access provision does not discriminate between local and non-local businesses. Appellants’ Brief identifies America Online, a Virginia corporation, as a bete noire -- preeminent among the "other providers of Internet and online services" that benefit from the open access requirement. ATT Brief at 56. There was no evidence presented below that the open access requirement discriminates against interstate firms and in favor of local commercial interests.

Appellants’ assertion that the open access requirement would have a constitutionally impermissible effect on interstate commerce is belied by the admission below (Reply Memorandum In Support of Summary Judgment, at 40), and a key finding of the district court: that the open access condition would only affect the City of Portland and Multnomah County. In an effort to create an effect after having argued there is none, Appellants invite the Court to speculate what would happen if 30,000 jurisdictions adopted the open access rule. However

Pacific Northwest Venison Producers v. Smitch, 20 F.3d 1008, 1012 (9th Cir.1994); accord International Ass’n of Indep. Tanker Owners v. Locke, 148 F.3d 1035, 1068 (9th Cir. 1998). The Appellants’ burden below was to prove their case factually. Appellants did not include any effects on commerce in their list of "undisputed material facts," SER1-5, let alone introduce any evidence. The district court properly dismissed the commerce clause claim for want of proof. ER206.

Appellants argue that under Healy v. Beer Institute, 491 U.S. 324, 336 (1989), a court must take into account the way in which "the challenged statute may interact with the legitimate regulatory regimes of other States and what effect would rise if not one, but many or every, [jurisdiction] adopted similar legislation." In the first place, Healy merely indicates what a court should consider -- it does not shift the burden of proof to the court to consider "facts" never presented. Hence, Appellants’ failure to carry their burden is still fatal to their claim.

Moreover, Healy merely instructs that in determining the significance of the extraterritorial impact of a statute (and hence whether it creates a Commerce Clause problem), one considers the practical effects "arising from the projection of one state regulatory regime into the jurisdiction of another State...." The analysis, in other words, is only made if there is an extraterritorial effect. There was none shown here.

For reasons set forth above, this Court should affirm the decision of the district court.

I hereby certify that on September 7, 1999, I filed the five copies of BRIEF OF APPELLEES with the Office of the Clerk, U.S. Court of Appeals for the Ninth Circuit, 95 Seventh Street, San Francisco CA 94103-1526, via Federal Express overnight courier service on said day.

I further certify that on September 7, 1999, I served true copies of said documents via Federal Express overnight courier upon:

______________________________
Joseph Van Eaton
Attorney for Appellees City of Portland
and Multnomah County