the honorable the united states court of appeals for the st circuit is now in session all persons having any business before this honorable court make it their attendance and they shall be heard god save the united states of america and this honorable court cordesman session today's cases will be called as previously announced and times will be as a lot of the council the st case today is massachusetts massachusetts department of communications and cable versus the federal communications commission at all appeal number one  reserve two minutes of my time the revival of i may you may thank you so the question in this case as you know is whether the department may continue to regulate the rates or basic cable service that is sold by charter in the thirty two massachusetts communities that are affected here basic cable as you know is the lowest tier of cable service it generally encompasses only a small handful of channels and it is quite inexpensive according to the d record the regulated rate for cable in the for basic cable in the communities here most of the communities runs between twelve dollars and eighteen dollars a month  commissioner snarks in his concurring statement below said those consumers relying on basic cable service while they may be a few are often our most underprivileged consumers and often are on fixed incomes similarly community cable access in their comments and the record said that it is the poorest among us who subscribe to basic cable and senator markey referred to the vulnerable populations d who subscribe to basic cable and it isn't just viewed it on the record here that if the rates for basic cable are deregulated they will rise substantially in most of the affected communities and in some of them nearly doubling and finally i think it's worth noting that that we're talking only about the regulation for the rates of basic cable service everything else that charter sells including their broadband internet service which there are major provider in communities and their higher tier cable services which where you have dozens of channels and movie channels and sports and so forth all of that is unregulated and will remain unregulated we're talking only about basic cable so the question here turns on whether charter has carried its burden to show that the local exchange carriers test or the left test in the communications act for effective competition has been met in this  will be you have to be paid if they become the regulator it does your honor there this is and in the appendix at page two hundred and forty six dollars there is a letter indicating a letter from are indicating that if the rates are deregulated they will go to twenty three dollars eighty nine cents a month and then on top of that there's an additional so called broadcast broadcast surcharge or something like that which will go from the regulated rate of eight or nine dollars a month to i think about twelve dollars a month so those are the rates that we're that we're talking about thank you the so i think let's begin with what i think is the most straightforward reason why the why the test is not satisfied in this case and that is that the lek test requires that the provider must offer video programming services directly to subscribers directly so subscribers and that word directly does not appear in any of the other tests for effective competition it appears only intellect test and so i think you know it's a fairly straightforward technical reading that offering it directly to subscribers must exclude indirect means of offering the service to subscribers and the service at issue here service that charter has invoked in order to show that effective competition exists is that it is an internet based service called direct t v now which is offered by a company called directv l l c that service a subscriber in order to receive that service must not only buy the service itself but must also by separately a broadband internet connection most likely from charter itself ironically you know to receive the service and so because the service is delivered not directly from direct we go back a ways there's nothing in the statute that mandates it be read the way you're reading at the f c c had issued regulations before this case which offered a pardon upon which defined offer directly and a different way than you are encouraging at i don't understand whether you are making a textual argument if so what is it i don't understand if you're saying the offers means in the context of all of the effective competition tests including the left us and so if we look at that regulation and specifically subsection easy one of the regulation offers in part refers to whether whether the provider is physically able to deliver service that is what offers means so then if you look at the statute well here you have to not only offer the service but they have to offer it directly to subscribers and at the end the f c c said that direct t v offers service directly to subscribe barriers because directv now has a quote direct customer relationship with the subscriber and which directv now markets direct  subscribers directly bale's subscribers and subscribers pay direct t v now and they don't pay an intermediary so what is unreasonable means in each two it refers to impediments whether they're whether impediments exist and whether customers are reasonably aware but there's nothing in the regulation that talks about forming a contractual relationship or  creating a billing relationship so if he wants to incorporate those concepts into the word offers they're free to do so but they have to amend the regulation for the notice and comment they have not done that here i think it's remaining but what d with the word spy any means so the words nd time the same sentence so you have to read the whole thing in context exactly so your honor and i think that i think that emphasizes why the word offers has to in compass the delivery of video and therefore why directly you know modifies that we're as you say you have to read the whole sentence so the whole sentence here you have to essentially adverbial phrase is that modify the same verb which is offers of the delivery of video how is the video delivered by any means so i make two points about that st of all that tells us that the word offers has to encompass delivery of video otherwise by any means doesn't make any sense as a mod the word offers but the nd think point i would make is that the by any means phrase cannot possibly mean by any means directly or indirectly or you know by any interact by any direct or indirect means because if it does that then it has written directly to subscribers out of the statute because then i have another question sure so just to finish the thought the you can't use the by any means phrase to to overwrite the words directly to subscribers we have to give meaning to every word in the statute basic statutory construction and so but again the problem with doing the way it's order and yes you see want to do that directly to subscribers having to do with billing is that that is not in the definition of offers that the f c c has used for twenty seven years so thank you jeff minutes it's a basic element of contract law that you form a contract by consumers when they offer is accepted they have a contract i do not understand why you say that there was no fair a notice to any one of what the term offer met and that would have required the f c c to go through notice and comment rule making to say oh we mean it in the normal contractual sense of the word so the reason again is simply that the f c c has had this this exact definition the one in the regulations for what offers mea anything to do with creating a billing relationship that is not what the f c c said they use that as evidence that they put out marketing make ariel's making an i'm probably just missing your point but do you have anything further to add on this i mean i guess i would just get to the main points of this argument  regulation are they physically able to deliver service are there any regulatory technical or other impediments and is this is the service you know are our customers reasonably aware that the service exists so they have applied that consistently look at all of the f c c decisions over all of these years that is what they have asked they have asked those questions when they determine whether a service has offered they have never asked until this case they have never asked whether whether there was you know a billing account i'm sorry they didn't they they asked was there an offer and then they gave three or four reasons for thinking there was an question just as i mean pediment issue i do understand the attorney general's argument that costs should be considered in an impediment how do you gauge how much cost is a not to be an impediment it can't be to every last person  point to say that when it appears undisputed that there will be there are thousands of households in the affected areas that that find cost to be a barrier or impediment to their ability to purchase broadband service that is enough you know whether i agree with you it wouldn't be just like if there's eleven dollars family that can't but can't buy it that probably doesn't qualify but here the the record is fairly clear all of the number parties generally agree that we're talking something like twenty percent of households that don't have broadband internet that is thousands of households in the affected areas that i think that that suffices under any reasonable deemed offered and that what the commission was attempting to do there was to give context to the term offer and make sure that the offer that was being made was bona fide and it includes a couple of different elements  to deliver service although it does not say deliver service over one  if we want to go back to the i think it's most helpful to go back to the plain text of the statute itself because in the statute and and  basically that the phrase directly to subscribers must be read in a certain way and the petitioner reads that phrase to mean that to qualify for competing service a provider of competing service may not use rd party facilities in order to deliver that service it was it's own facilities otherwise if it uses rd party thought syllabi it's making an indirect offering so let's go to the text of the statute which you can find at page eleven the f c c is brave statutory a denim and the statute begins a local exchange carriers or its affiliate or any multi channel video programming distributor using the facilities of such carrier or its affiliate offers video programming services directly to subscribers by any means other than direct home satellite services i'd like for the court to focus on the st parent particular clause any multi channel video programming distributor using the facilities of a local exchange carriers affiliate there is a whole class of providers that is using rd party facilities to deliver service to subscribers and yet the statute specifically provides that that group of on affiliated m v p d s can't offer service directly to subscribers and i think that's why the commission's reading of this statute makes more sense the idea is the commission looked at the term offer and said it means basically means a business relationship a customer relationship directv is is marketing the service directly to subscribers when subscribers accept the service directv is sending it to those subscribers the subscribers are receiving it from direct t v and the subscribers are paying direct t v there is no intermediary in that sense thank you thank you your honor i'd like also to discuss the the impediment question and judge sarah's had mentioned this earlier the question of impediment here the argument that has been raised is whether the cost of broadband is an impediment to households taking direct t v now the record shows that eighty percent or more of households in the franchise areas are already subscribing to broadband and the commission reasonably found that when so many households were already subscribing to the service and could immediately start receiving direct t v now  that the cost of broadband was not an impediment to to the offering now the petitioner is pointing to the twenty percent that don't receive broadband that don't currently have broadband but it's certainly reasonable for the commission to look at the well again you're author of the the test here does not require an offering to everybody in the entire market and in fact if you look at the other effect is competition tests a couple of them the the competing provider test and the municipal provider test specify that an offering must be made to at least fifty percent of households in the franchise area but there is there is not no statutory test here for effective competition that requires that the offer be made effectively to every household within the community so even if even if the twenty percent are not able to afford broadband i think under the terms of the statute and the commission's understanding of it that's not an impediment to an offering that satisfies the sketches so you would consider cost never to be fall within that within the meaning of  wouldn't go that far your honor there could be a situation it's back may i ask a question i can take it that you think there may be a situation not this in which cost could be an impediment and indeed i read the f c c order as leaving that issue open it is also your position that at eighty percent already paying for broadband  there doesn't that that makes the decision rational that the broadband cost cannot be an impediment especially when you look at the fifty percent mark in other areas but as to that twenty percent do we is there anything in the record as to whether they actually have broadband available or whether they are have made a choice not to sign up for broadband because of cost reasons you honor the record indicates that broadband is now available to close to one hundred percent of the subscribers in these franchise areas in terms of why the twenty percent is not subscribing to broadband we don't have specific information in the record the petitioner cites some generalized observations that the commission itself has made in the past that the cost of is discouraging some people from subscribing to broadband so while we don't have specific numbers in this case presumably there are some people in massachusetts who are not subscribing to broadband because they find it too expensive but we don't know how much how much of the twenty percent that is we just we just don't know there's not enough in the record i think from the commission's perspective it was not enough to have found that the vast majority of households in the franchise areas regulation regulation if you if you mean cable rate regulation i don't i don't know that the commission has any particular position on that i think it's clear that congress made a policy judgment many years ago that once effective competition took hold in particular markets that rates at that point should be set by the competitive market rather than by regulation and that's all the commission is doing here it's implementing the policy judgment that was made by congress many years ago at the time congress made it it was clear that cable had a dominant position in the marketplace and was facing virtually no competition it's now more than twenty five years later and the market is very different and the cable industry is facing competition from multiple sources and indeed prior fact if your question is getting to whether the lead test at some point would no longer be satisfied yes that's what i've been getting at and what would happen should that  no longer exists in massachusetts at that point regulation again if the commission approved the certification position rate regulation could resume ok thank you if there are no further questions i would just ask that good morning your honor may please the court just occurring amundson on behalf of intervene or charter communications we agree with the f c c and with the arguments set forth by mr carr as to the proper interpretation of the left test under that test eighteen he's affiliate direct t v now offers video programming services directly to subscribers in charters franchise areas in massachusetts and hawaii and those services are comparable to the video programming services the charter c granted chart position is not only correct on the wall but also alliance the regulatory scheme with the realities of today's increasingly competitive marketplace for video programming services congress explicitly provided in section five hundred and forty three dollars that its preference was for competition and that rate regulation was meant to end once effective competition took root charter is subject to effective competition in massachusetts and hawaii and we ask that the c is decision day affirms i think to underscore just three points that we've been discussing this morning st is as to the meaning of the offer and the phrase offers video programming services directly to subscribers by any means as judged terrorist pointed out that by any means has to be read as a whole in the statute so the authors video programming services directly to subscribers by any how to add into a statute the requirement that the left words affiliate be using its own facilities and chose not to do so here f c c is decision that offers means  means a direct relationship between the provider and the subscriber is reasonable and is and should be according deference by the court the nd point you address the argument made by your opponent that the f c c has departed it's traditional regulatory definition  in section or in regulation seventy six point nine zero five the f c c said that a service should be deemed offered where where the provider is physically able to deliver the service to potential franchise areas their contention instead is that it must do so using its own facilities and so again i think we need to look back to the plain terms of the statute and the plain terms of the statute do not impose any sort with a billing requirement which was not contained and its prior definition offer and it can't do that that's statute and all that offers requires is that there be a relationship between the provider and the subscriber and what it what is the service that you will this day you deliver  we charter communications libertyville service but direct t v now delivers a streaming service over broadband network networks that is comparable to one that competes with charter service in the in the relevant franchise areas is the service is the delivery of the program over the television this is not the you're right that you know programming services are delivered to subscribers that's correct your honor however the phrase delivery earned the phrase directly does not mean that it has to be done using the lack or the like and filling its own facility that that that  i don't think they're just spewing that the regulation is satisfied here in fact directv now is able to physically deliver that instead what they are arguing is that directive you know that to satisfy the left test it the leftwards it doesn't i must deliver the programming using its own facilities and that congress did not include that as a requirement in the test instead it used very broad forward looking language by any means so congress was looking toward the future towards the development of new technologies and actually rejected proposals that would have imposed particular facilities based or technology based requirements instead congress rather than kind of a backward looking test that would have held lex and their affiliates to the facilities that were available to them at the time congress impose very broad forward looking cable subscribers in the franchise areas have a broadband connection so that's what i mean that no matter how poor that they are and that other twenty percent they already have the broadband if they're not your basic service something not having to pay for that extra connection to the broadband that's correct your honor as to chargers existing subscribers approximately one hundred percent of them already have broadband connections and so direct t v now and charter are already in competition for those same subscribers where all the subscriber would have to do is choose between charter and direct t v now and would not have to purchase any additional broadband subscription counsel on the other side that's right we don't dispute in this proceeding that direct t v is physically able to deliver service what we dispute is that they're able to deliver the service directly directly subscribers because that is what the statute demand was not the directly requirement is not in the regulation but it is in the statute and that is unlike any of the other effective competition test it's unique to the left has also just wanted to take a minute to sort to sort of back out a little bit and explain why it makes sense that congress would have written this directly to subscribers requirement intellect test whereas it didn't in the other test for effective competition and that is because of the unique competitive threat that congress was responding to when it wrote the left test in one thousand nine hundred and ninety six what was happening then is that telephone local telephone companies which by their nature are already hardwired into virtually every household in a community were beginning to enter the market for free video in ways that they had not been able to do before for both technological and legal reasons so congress made the decision in one thousand nine hundred and six that it would invite your telephone companies into this market but it would also create a special test a special effective competition test for the telephone company that would you know that applies in the way that we've discussed but it makes sense that they would limit that test to circumstances where the service is delivered directly to the subscribers because that is what the telephone companies do they deliver it directly over wires that already exist and i finally just wanted to follow briefly on judge lynch is not supposed to turn on the happenstance of corporate relationships and whether a t n c owns or does not own direct t v it's supposed to turn on a competitive threat posed by by telephone companies or entities that are like telephone companies that are wired into their customers into their customers homes thank you very much thank you thank that concludes argument in this case attorney cravats attorney current attorney having said action disconnection the hearing at this time