Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-93-01652/USCOURTS-caDC-93-01652-0/pdf.json

Parties Involved:
American Scholastic TV Programming Foundation
Appellant
BellSouth Telecommunications, Inc.
Intervenor
Federal Communications Commission
Appellee
GTE Service Corporation
Intervenor
School Board of Roanoke County
Intervenor

Document Text:

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United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued January 13, 1995 Decided February 10, 1995

No. 93-1652

AMERICAN SCHOLASTIC TV PROGRAMMING FOUNDATION, ET AL.,

PETITIONERS

v.

FEDERAL COMMUNICATIONS COMMISSION,

RESPONDENT

SCHOOL BOARD OF ROANOKE COUNTY;

BELLSOUTH TELECOMMUNICATIONS, INC.;

GTE SERVICE CORPORATION,

INTERVENORS

And Consolidated Cases Nos. 93-1653 and 93-1654

-

Petition for Review of an Order of the

Federal Communications Commission

-

Charles Cervantes argued the cause for petitioners. With him on the briefs was Adrian Cronauer.

Joel Marcus, Counsel, FederalCommunicationsCommission, argued the cause for respondent. With

himon the briefwere William E. Kennard, GeneralCounsel, and Daniel McM. Armstrong, Associate

General Counsel, Federal Communications Commission.

William D. Freedman argued the cause for intervenors. With him on the joint brief was Gail L.

Polivy. Colleen M. Egan entered an appearance for intervenors School Board of Roanoke County,

et al.

Matthew R. Sutherland entered an appearance for intervenor BellSouth Telecommunications, Inc.

Before EDWARDS, Chief Judge, WALD and SENTELLE, Circuit Judges.

Opinion for the Court filed by Circuit Judge WALD.

Dissenting opinion filed by Circuit Judge SENTELLE.

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WALD, Circuit Judge: On August 30, 1993, the Federal Communications Commission

("FCC" or "Commission") granted three school boards affiliated with a local telephone company

licenses to provide wireless cable service on the Instructional Television Fixed Service ("ITFS")

spectrum. These licenses were mutually exclusive with applications made by petitioners, three

nonprofit educational organizations, who challenge the grant of these licenses to the school boards

on several grounds. We conclude that (1) petitioners waived their challenge to the FCC's rule that

wireless cable is not a "cable system" within the meaning of the Cable Communications Policy Act

of 1984, Pub. L. No. 98-549, 98 Stat. 2779 (1984) ("Cable Act" or "Act"), by failing to raise it before

the agency, (2) the Commission'sinterpretation, that § 533(b) oftheCable Act, prohibiting telephone

companiesfromproviding video programming in their localservices area, prohibits onlythe provision

of video programming over a cable system, is a reasonable one, and (3) the FCC's conclusion that the

school boards gave adequate assurances of funding is supported by the record and not arbitrary or

capricious. Accordingly, we deny the petition for review.

I. BACKGROUND

A. The Cable Act and Cross-Ownership Restrictions

Congress enacted the Cable Act in 1984 to "establish a national policy concerning cable

communications." 47 U.S.C. § 521(1) (1988). See also American Civil Liberties Union v. FCC, 823

F.2d 1554, 1557-60 (D.C. Cir. 1987) (detailing background and purposes ofCable Act), cert. denied,

485 U.S. 959 (1988). The Act establishes a framework for state and local regulation of cable fees,

rates, and service, mandates privacy and consumer protection safeguards for cable systems, and

imposes a series of media cross-ownership restrictions. Among these cross-ownership restrictions

is § 533(b)(1), which prohibits a telephone company from providing "video programming" within its

service area.

B. Wireless Cable

Wireless cable operates bytransmitting television signals over the microwave bands. Because

it broadcasts on the microwave band, it is only accessible to users equipped with specialized antennas

and converters. Since the general public lacks this equipment, wireless cable, like cable, offers a

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private, multi-channel distribution network. Wireless cable, however, operates without any cable or

other physical connection between the operator and the viewer.

In a 1990 order, the FCC concluded that a "cable system" as used in the Cable Act

"encompasses only video delivery systems that employ cable, wire, or other physically closed or

shielded transmission paths ... outside individual buildings," and thus does not include wireless cable

or a range of other technologies. In the Matter of Definition of a Cable Television System, 5

F.C.C.R. 7638, 7638 (1990).

C. Instruction Television Fixed Service

The FCC reserves certain segments of the wireless cable microwave band for Instructional

TelevisionFixed Service stations. ITFS stations are authorized to provide "educational, instructional,

and cultural material" to students enrolled for credit, for use in training programs, for administrative

activities, or in connection with other educational television systems. See 47 C.F.R. § 74.931(a)-(d)

(1993).

In order to make ITFS commercially viable, the FCC allowsthe instructionalstationsto lease

excess capacity to commercial stations. These leasing arrangements are subject to several

restrictions, including, for instance, the requirement that the station air at least twelve hours per week

of actualITFS programming during the first two years of operation, and twentyhoursthereafter. See

id. § 74.931(e).

With certain limited exceptions not relevant here, only accredited educational institutions and

nonprofit organizations with educational purposes are eligible for ITFS licenses. See 47 C.F.R. §

74.932 (1993). Where more than one eligible institution applies for a mutually exclusive license, the

FCC chooses among them based on a point system, which awards points to applicants if they are,

among other things, physically located in the community or an accredited school. The applicant with

the highest number of points is awarded the license. See 47 C.F.R. § 74.913 (1993).

This case involves competing applications for three ITFS licenses in the Roanoke, Virginia

area. In November, 1991, each of three nonprofit educational organizations applied for one of the

licenses. Shortly thereafter, three local school boards in affiliation with Botetourt Communications,

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1The three memorandum opinions and orders are identical except for the names of the parties. 

Subsequent citations will be only to the first, Botetourt County School Board.

Inc. ("BCI"), the parent company of a local exchange telephone service provider, applied for the same

licenses. In each case, because the school board affiliated with BCI was local and an accredited

educational institution, whereas the nonprofit organization was neither, the school board received a

greater number of points.

In connection with their applications, the nonprofit organizationsthe American Scholastic

TV Programming Foundation, the American Foundation for Instructional Television, and the

Excellence in Education Network (collectively, "ASTV")petitioned the FCC to deny the licenses

to the school boards on two grounds: first, that the award of an ITFS license to entities affiliated

with a local telephone company violates § 533(b) of the Cable Act, which prohibits telephone

companiesfromproviding video programming in theirlocalservice areas; and second, that the school

boardsfailed to meet the FCC'srequirement of establishing "reasonable assurances of funding." The

FCC rejected ASTV's petitions to deny and awarded the licenses to the school boards. See In re

Applications of Botetourt County School Board, American Foundation forInstructional Television,

8 F.C.C.R. 6265 (1993); In re Applications of Excellence in Education Network, Salem City School

Board, 8 F.C.C.R. 6269 (1993); In re Applications of School Board of Roanoke County, American

Scholastic TV Programming Foundation, 8 F.C.C.R. 6273 (1993).1 We affirm.

II. SECTION 533(b)'S VIDEO PROGRAMMING PROHIBITION

Section 533(b)(1) of the Cable Act provides that:

It shall be unlawfulfor any common carrier ... to provide video programming directly

to subscribers in its telephone service area, either directly or indirectly through an

affiliate owned by, operated by, controlled by, or under common control with the

common carrier.

The Cable Act defines "video programming" as "programming provided by, or generally considered

comparable to programming provided by, a television broadcaststation." 47 U.S.C. § 522(19) (Supp.

V 1993).

The Commission ruled that § 533's prohibition does not extend to video programming via

wireless cable, and thus does not prevent the grant of licenses to the school boards affiliated with

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BCI, a telephone company parent. The Commission reasoned that, though the terms of § 533(b)

suggest no limitation on the type of video programming prohibited, the structure of the statute as a

whole and its legislative history indicate that Congress meant only to prohibit "video programming"

over a cable system. The Commission relied primarily on § 533(b)'s placement within the Cable Act,

the general purpose of which is " "to establish a national policy concerning cable communications.'

" Botetourt County School Board, 8 F.C.C.R. at 6266 (quoting 47 U.S.C. § 521(1)), to conclude

that § 533(b) was concerned solely with the provision of video programming over cable systems. It

drew support for thisinterpretation from the legislative history of the Cable Act, which explains that

" "[i]t is the intent ofsection [533(b)] to codify current FCC rules concerning the provision of video

programming over cable systems by common carriers.' " Id. at 6267 (quoting H.R. REP. NO. 934,

98th Cong., 2d Sess. 56 (1984), reprinted in 1984 U.S.C.C.A.N. 4655, 4693 (emphasis added)). It

concluded that the intent behind the definition and use of the term "video programming" in the Act

wasto describe one type of cable service, rather than to encompass video programming by all means

of transmission. The Act's definition of video programming, it reasoned, "refers to the nature of the

programming offered on a cable service, not the means of transmission. A cable system is capable

of transmitting not only video programming, but also audio, data, and a variety of other signals. The

definition in subsection [ (19) ] merely specifies a particular service provided by cable systems."

Botetourt County School Board, 8 F.C.C.R. at 6267 n.6.

ASTV counters this interpretation of § 533(b), offering two alternative arguments for the

inclusion of wireless cable within § 533(b)'s prohibition. First, assuming that § 533(b) only restricts

video programming by a cable system, ASTV argues that wireless cable is a cable system within the

meaning of the Act and that the Commission erred in ruling to the contrary. Alternatively, ASTV

arguesthat § 533(b) is not limited to video programming over a cable system, but that it prohibits all

video programming by a telephone company in its service area, regardless of the means of

transmission.

A. Waiver of the "Cable System" Argument

We do not consider the first argument, that wireless cable is a "cable system" under the Act,

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because ASTV failed to raise it before the Commission in the proceedings below. The Commission's

determination that wireless cable is not a "cable system" within the meaning of the Act dates from a

1990 order issued subsequent to a Notice of Proposed Rulemaking. See In the Matter of Definition

of a Cable Television System, 5 F.C.C.R. 7638 (1990). ASTV did not challenge this rule in the

proceedings below. Rather, it confined itself to what is now its second argumentthat § 533(b)

prohibitstelephone companiesfromproviding video programming of anytype, regardless of whether

it is video programming by cable. This court cannot revisit the Commission's 1990 ruling when the

Commission had no opportunity to do so below.

The Communications Act requires that the Commission rule on issues of law or fact before

they are subject to judicial review. Section 405(a) provides that:

The filing of a petition for reconsideration [before the Commission] shall not be a

condition precedent to judicial review of any such order, decision, report, or action,

except where the party seeking such review ... (2) relies on questions of fact or law

upon which the Commission ... has been afforded no opportunity to pass.

47 U.S.C. § 405(a) (1988). "We have construed this section as codifying the exhaustion of

administrative remedies doctrine, which "requires complainants, before coming to court, to give the

FCC a fair opportunity to pass on a legal or factual argument.' " American Tel. & Tel. Co. v. FCC,

974 F.2d 1351, 1354 (D.C. Cir. 1992) (quoting City of Brookings Mun. Tel. Co. v. FCC, 822 F.2d

1153 (D.C. Cir. 1987)).

ASTV argues that § 405's exhaustion requirement is satisfied because the argument it now

presses was raised before the Commission by other parties in 1990. We have held that parties may

satisfy the exhaustion requirement by relying on the fact that another party to the same proceeding

raised a particular argument. See Cellnet Communications Inc. v. FCC, 965 F.2d 1106, 1109 (D.C.

Cir. 1992). Where the issue was raised only by parties to another proceeding that took place three

years earlier, however, the bounds of vicarious exhaustion have been exceeded. That an agency at

one time considers and rejects certain arguments does not mean that the agency can thereafter be

bypassed. Respect for the agencies' role under Chevron U.S.A. Inc. v. Natural Resources Defense

Council, Inc., 467 U.S. 837 (1984), requires that the Commission have a fair opportunity to pass on

ASTV's challengewhich amounts, in effect, to a request for reconsideration of a rule three years

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2Although the 30-day limitation on challenges to Commission orders had expired by the time

of ASTV's petition before the Commission, see 47 U.S.C. § 405, "a party who possesses standing

may challenge regulations directly on the ground that the issuing agency acted in excess of its

statutory authority in promulgating them" regardless of statutory time limits on challenges. NLRB

Union v. FLRA, 834 F.2d 191, 195 (D.C. Cir. 1987); see also Overland Express, Inc. v. ICC,

996 F.2d 356 (D.C. Cir. 1993) ("[W]e generally allow claims ... that a regulation is in excess of

statutory authority when raised as a defense to an agency enforcement action" irrespective of

statutory time limits), vacated on other grounds, 114 S. Ct. 2095 (1994); American Tel. & Tel.

Co. v. FCC, 978 F.2d 727, 734 n.7 (D.C. Cir. 1992), cert. denied, 113 S. Ct. 3020 (suggesting

the same for nonenforcement proceedings where the party is nevertheless harmed by application

of the regulation). 

after its adoptionjust as it must have the fair opportunity to pass on other issues of law.2 We

therefore conclude that ASTV waived its challenge to theCommission's 1990 determination. For the

purposes of this decision, we take as a given the Commission'srule that wireless cable is not a "cable

system" within the meaning of the Act.

B. The Scope of Section 533(b)

Assuming, then, that wireless cable is not a "cable system" within the meaning of the Act, we

consider ASTV's alternative argument that the Commission erred in concluding that § 533(b) only

prohibits telephone companies from providing video programming via cable. Here, ASTV argues

that theCommission'sinterpretation contradictsthe plain language ofthe statute. As the Commission

is interpreting a statute it is charged with administering, our review is guided by Chevron, 467 U.S.

837 (1984). We must first determine whether the statute speaks to the precise question at issue. If

so, our inquiry is at an end. If the statute is ambiguous, then we must determine whether the

Commission's interpretation is a reasonable one. See 467 U.S. at 842-43.

Looking to the language of § 533(b)(1) itself, there is nothing to indicate that it is anything

but a blanket prohibition of all video programming, whether transmitted by cable or not. Our inquiry,

however, does not end here, but must continue to "the language and design ofthe statute as a whole."

Fort Stewart Schools v. FLRA, 495 U.S. 641, 645 (1990) ("If, upon examination of "the particular

statutory language at issue as well asthe language and design of the statute as a whole,' it is clear that

the Authority's interpretation is incorrect, then we need look no further.") (quoting K Mart Corp v.

Cartier, Inc., 486 U.S. 281, 291 (1988)). As we have observed in the past, "while the immediate

statutory text isthe "best evidence' of congressional intent, the Court has never held that it isthe only

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3

In Tataranowicz, we addressed a statutory provision that the repeal of medicare benefits for

certain services would "not apply to an individual receiving such services during" a set transition

period. The agency had applied this exemption only to claimants who were eligible to receive

medicare for the services during the transition period, not to those who were still receiving

services, but whose benefits had already expired earlier in the year. 959 F.2d at 275-80. We

acknowledged that this restriction on the applicability of the exemption was not written into the

terms of the provision, and that, indeed, "[r]ead without inquiry into context, the provision

appears unambiguous," and contrary to the agency's interpretation. Id. at 276. Nevertheless,

based on a review of the statutory context and legislative history, we found that the intended

scope of the restriction was ambiguous, and accordingly upheld the agency's decision under

Chevron.

such evidence." Tataranowicz v. Sullivan, 959 F.2d 268 (D.C. Cir. 1992) (citing cases for the

proposition that court must examine context and design ofstatute as a whole in determining whether

a term is ambiguous), cert. denied, --- U.S. ----, 113 S. Ct. 963 (1993).3

Upon examination of the statute as a whole, we find sufficiently strong indications that

Congress meant only to reach video programming via cable to render the statute's use of the term

"video programming" ambiguous. We start with § 533(b) itself. In one of § 533(b)'s subsections,

Congress authorizes a waiver of the prohibition "[i]n those areas where the provision of video

programming directly to subscribers through a cable system demonstrably could not exist except

through a cable system " connected to a telephone company. 47 U.S.C. § 533(b)(4) (1988)

(emphasis added). Though, as a matter of pure logic, it could be that § 533(b)(1) restricts all video

programming and § 533(b)(4) provides an exception only for certain types of video programming,

we cannot think of any practical reason why the rule and the exception would not be coextensive.

Admittedly, taken alone, this difference between the rule and the exception would not render the rule

ambiguous. But, in combination with other indications of congressional intent discussed below, the

exception does signal a lack of certainty about Congress' precise intended scope for the "video

programming" bar.

Section 533(b) is found within Part II of the Act, entitled "Use of Cable Channels and Cable

Ownership Restrictions." See Immigration and Naturalization Service v. National Center for

Immigrants' Rights, 502 U.S. 183, ---, 112 S. Ct. 551, 556 (1991) ("[T]he title of a statute or section

can aid in resolving an ambiguity in the legislation's text."). In conformity with this title, each of the

other "ownership restriction" provisions in the Act is unambiguously limited to cable operators. At

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4The Cable Act of 1984 was amended in 1992, with some additions to § 533, but none to §

533(b). See Cable Television Consumer Protection and Competition Act of 1992, Pub. L. No.

102-385, § 11, 106 Stat. 1486 (1992). Each of the amendments to § 533 addresses cable-related

ownership restrictions. § 533(a)(2) applies to multichannel multipoint distribution service

("MDS"), a form of wireless cable, but only to the extent of making it unlawful for a cable

operator also to hold an MDS license. See 47 U.S.C. § 533(a)(2). 

5The 1992 amendments to the Act include some references to the "multichannel video market"

generally, which would include wireless cable. See, e.g., 47 U.S.C. § 548(a) ("The purpose of

this section is to promote the public interest, convenience, and necessity by increasing competition

and diversity in the multichannel video programming market...."). These amendments, of course,

do not elucidate the intent of the earlier Act. 

6

See id. § 521(2) (to "establish franchise procedures ... which encourage the growth and

development of cable systems ..."); id. § 521(3) (to "establish guidelines for the exercise of

Federal, State, and local authority with respect to the regulation of cable systems"); id. § 521(4)

(to "assure that cable communications provide ... the widest possible diversity of information

sources and services ..."); id. § 521(5) (to "establish an orderly process for franchise renewal

which protects cable operators ..."); id. § 521(6) (to "promote competition in cable

communications ..."). 

the time § 533(b) was enacted,4the additional ownership restrictions in this partall codified at §

533 of the U.S. Code(1) made it unlawful for a person "to be a cable operator if such person ...

owns or controls" a local television broadcast station, Cable Communications Policy Act of 1984,

Pub. L. No. 98-549, sec. 2, § 613(a), 98 Stat. 2779, 2785 (1984) (amended 1992), (2) empowered

theCommission to prescribe cross-ownership rules "with respect to the ownership or control of cable

system by persons who own or control other media of mass communications which serve the same

community served by a cable system," id. § 613(c), (3) denied states and franchising authorities the

power to "prohibit the ownership or control of a cable system" because of a person's ownership or

controlof anymedia ofmass communication, id. § 613(d) (amended 1992), and (4) authorized a state

or franchising authority to "hold any ownership interest in a cable system" provided it follows

restrictions on the exercise of editorial control, id. § 613(e).

The singular focus on the regulation of cable systems holds throughout the Act.5In addition

to the purpose of "establish[ing] a national policy concerning cable communications," 47 U.S.C. §

521(1), Congress declared five other purposes, allrelated solely to cable.6 The regulatory provisions

of the Act likewise relate solely to cable. The Act (1) empowers state and local franchising

authorities to require cable operators to designate channel capacity for public, educational or

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governmental use, see 47 U.S.C. § 531 (1988), (2) requires cable operators to designate a certain

percentage oftheir channel capacity to unaffiliated commercial operators,see 47 U.S.C. § 532 (1988

& Supp. V 1993), (3) establishes a framework in which state and local authorities may exercise their

franchising authority over the rates, fees, services and equipment of cable systems, see 47 U.S.C. §§

541-47 (1988 &Supp. V. 1993), (4) imposes penalties on the unauthorized reception of cable service

communications, see 47 U.S.C. § 553 (1988 & Supp. V 1993), and (5) imposes privacy, consumer

protection, and equal employment opportunity requirements on cable operators, see 47 U.S.C. §§

551, 552, 554 (1988 & Supp. V 1993). The Act's unwavering focus on cable operators and systems

inevitably puts in doubt the petitioners' proposition that Congress in § 533(b)(1) alone sought to

regulate beyond the scope of cable systems by restricting noncable "video programming" as well.

Finally, as we observed in Tataranowicz, 959 F.2d at 277, even where the language of a

statute is "superficially clear, legislative history may callsuch apparent clarity into question." See id.

at 277-78 (collecting cases); see also Building &Constr. Trades Dep't v. Department of Labor, 932

F.2d 985 (D.C. Cir. 1991) (Under Chevron 's first step, "the plain language would seem to control

the issue before us, unlessthere is evidence in the legislative historythat Congressintended something

else."); State of Ohio v. Dep't of the Interior, 880 F.2d 432 (D.C. Cir. 1989) ("We next examine the

legislative historyof[the Act] to ascertain ifthere are anycountervailing indicationsto our conclusion

and also to check on Interior's assertions that certain parts of the history are inconsistent with our

conclusion and so render the statute ambiguous within the meaning of Chevron."). In Associated

General Contractors v. California State Council of Carpenters, 459 U.S. 519 (1983), for instance,

the Court rejected the "literal reading" of § 4 the Clayton Act, 15 U.S.C. § 15, which authorizes a

private damages action for "[a]ny person who shall be injured in his business or property by reason

of anything forbidden in the antitrust laws." See 459 U.S. at 529-30. The Court looked to the

legislative history of the preceding Sherman Act to conclude that § 4 was narrower than itslanguage

suggested, reasoning that it was originally enacted with the intent of preserving the common law

background, which limited actionable injuries to a narrower range than that suggested by the

language. See id. at 529, 531 ("The repeated references to the common law that preceded the

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7Both the House and Senate adopted the report as their explanations of the Act. See 130

CONG. REC. S24,285 (daily ed. Oct. 11, 1984), 130 CONG. REC. H12,245 (daily ed. Oct. 11,

1984). 

enactment of the Sherman Act make it clear that Congress intended the Act to be construed in the

light of its common-law background.").

In this case, the legislative history of the Cable Act strongly suggests that Congress did not

intend the "video programming" prohibition to extend to noncable video programming. The House

Report on the Act, formally adopted by both the House and Senate,7explains that the Act

"[e]stablishesrestrictions on the ownership of a cable system by ... local telephone companies." H.R.

REP. NO. 934, 98th Cong., 2d Sess. 20 (1984) (emphasis added). Of § 533(b), the Report states that

it "prohibits a common carrier from selecting or providing the video programming to be offered over

a cable system." Id. at 57 (emphasis added).

The Report's identification of the genesis of the § 533(b) prohibition provides perhaps the

strongest indication that the prohibition is limited to video programming by cable. "It is the intent

of section [533(b)]," Congress reported, "to codify current FCC rules concerning the provision of

video programming over cable systems by common carriers, except to the extent of making the

exemption for rural telephone companies automatic." Id. at 56 (emphasis added). The FCC rule that

Congress intended to codify in § 533(b) forbade telephone companies from "furnishing ... cable

television service to the viewing public in its telephone service area," 47 C.F.R. § 63.54 (1983), and

could not have been more explicit in its limitation to cable television service.

Where the FCC precursor to § 533(b) forbade telephone companies from providing "cable

television service," § 533(b) forbids instead "video programming." What, then, to make of this

change? The House Report is consistent with the Commission's conclusion that Congress' intent in

using the term "video programming" rather than "cable television service" was to narrow the bar to

one type of cable service, rather than to expand the scope of the prohibition to all video

programming, regardless of the transmission medium. The Commission concluded that the Act uses

the term"video programming" "merely [to]specif[y] a particular service provided by cable systems."

Botetourt County School Board, 8 F.C.C.R. at 6267 n.6. The House Report establishes that

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Congress wanted to ensure that nonvideo programming cable services would not be covered by the

restriction of § 533(b). The Report details the nonvideo programming services that cable is able to

provide, including voice and data traffic and at-home shopping, and explains that its prohibition on

telephone company activities reaches only video programming:

Section [533(b)] applies only to the provision of video programming directly to

subscribers of such programming by common carriers....

The Committee intends that nothing in this section shall be construed to limit

the telephone company provision of information services or other non-video

programming, transmissions, or communications services....

H.R. REP. NO. 934 at 57.

In sum, our examination of the statute and its legislative history convinces us that § 533(b)

is, at the least, ambiguous as to whether its prohibition of "video programming" applies to noncable

video programming. We arrive, accordingly, at the second step of Chevron analysis, and must

determine whether the Commission's interpretation of the ambiguous provision is a permissible one.

The same features of the statutory structure and legislative history, discussed above, that contribute

to § 533(b)'s ambiguity also lend strong support to the Commission's conclusion that Congress

intended to regulate only video programming via cable.

ASTV argues in addition that the underlying purposes of the Cable Act support the

application of § 533(b) to wireless cable. Here we are in decidedly murky territory. Congress

adopted § 533(b) without legislative findings, explaining simply that itsintent was "to codify current

FCC rules concerning the provision of video programming over cable systems by common carriers,"

H.R. REP. NO. 934 at 56, and, of the Act's cross-ownership provisions in general, that they were

intended "to prevent the development of local media monopolies, and to encourage a diversity of

ownership of communications outlets." Id. at 55. There is currently a fierce debate over whether §

533(b) as applied just to cable hinders or fosters competition and diversity in ownership. See, e.g.,

US West, Inc. v. United States, No. 94-35775, 1994 WL 719064, at *10-*11 (9thCir. Dec. 30, 1994)

(noting conclusions by the FCC and the Antitrust Division of the Department ofJustice that § 533(b)

fails to promote competition and diversity). Given this economic policy debate, we certainly are in

no position to determine whether applying § 533(b)'s restriction to wireless cable would further the

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8

In particular, Congress enacted the Pole Attachment Act in 1978, Pub. L. No. 95-234, 92

Stat. 35, which instructed the FCC to "regulate the rates, terms, and conditions for pole

attachments," 47 U.S.C. § 224(b)(1). The Commission's implementing regulations sharply vitiate

the pole access discrimination concern by eliminating the danger of discriminatory pricing, though

not denial of access. See Chesapeake and Potomac 1994 WL 661825, at *3; US West, Inc. v.

statutory goal of encouraging competition and diversity in ownership of communications outlets.

Surely, resolution of this policy issue would require a detailed analysis of the wireless cable industry,

which we neither have before us, nor should we appropriately deal with even if we did. Under these

circumstances, we decline to inferfromCongress'generallyarticulated purpose ofincreasing diversity

in ownership of communications outlets that it intended § 533(b) to apply to wireless cable as well

as cable.

ASTV argues further that the obvious purposes of § 533(b) are (1) to prevent telephone

companies from having an interest in the local market for video programming services, because that

interest would give them a motive to discriminate against unaffiliated cable companies by denying

access to telephone poles for cable, or offering this access only on unfair terms, and (2) to prevent

telephone companiesfromhaving the opportunityto cross-subsidize video programming services with

revenues from their monopolistic telephone activities. The underlying dangers of pole access

discrimination and cross-subsidization, it argues, are equally present whether a telephone company

provides video programming through cable or wireless cable, and, therefore, the congressional

purposes are served by the application of § 533(b)'s prohibition to wireless cable programming.

ASTV Brief at 31-32.

The two purposes identified by ASTV are those actually advanced by the Commission when

it adopted the telephone-cable cross-ownership prohibition in 1970. See Chesapeake and Potomac

TelephoneCompany v. United States, Nos. 93-2340 &93-2341, 1994 WL661825, at *2-*3 (4thCir.

Nov. 21, 1994). Congress, however, has never in law or legislative history specifically adopted these

purposes. ASTV is correct in pointing out that these purposes suggest no reason to distinguish

between wireless cable and cable. But, given serious questions as to whether the two concerns

underlying the FCC's original promulgation of the rule survive in light of industry and regulatory

changessince 1970,8as well asthe fact Congressitself has never embraced these purposes asits own,

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United States, 1994 WL 719064, at *2. 

Many, including the FCC, also maintain that regulation and oversight independent of §

533(b) prevents telephone companies from engaging in illegal cross-subsidization. See US West,

1994 WL 719064 at *11 ("In its recommendation to Congress that § 533(b) be repealed, the FCC

concluded that "existing safeguards ... constitute an effective means of preventing

cross-subsidization.' ") (quoting In re Telephone Company-Cable Television Cross-Ownership

Rules, 7 F.C.C.R. 5781, 5828-29 (1992)). 

they provide too weak a reed for the inference pressed upon us by petitioners that Congress meant

the video programming prohibition to extend to wireless cable. We find the Commission's more

limited interpretation of § 533(b) permissible.

III. REASONABLE ASSURANCES OF FUNDING

Alternatively, ASTV challengesthe Commission's conclusion that the school boards met the

Commission's requirement of establishing "reasonable assurances" of funding. In assessing such

determinations, "the court applies a deferentialstandard ofreview, affirming the agency's conclusions

if they "are supported by the record and ... are not arbitrary or capricious.' " Swan Creek

Communications, Inc. v. FCC, 39 F.3d 1217 (D.C. Cir. 1994) (quoting WHW Enterprises, Inc. v.

FCC, 753 F.2d 1132, 1139 (D.C. Cir. 1985)).

The Communications Act empowersthe Commission to require license applicantsto provide

information on their financial qualifications. See 47 U.S.C. § 308(b) (1988 & Supp. V 1993). Based

on this authority, the Commission requires that license applicants show that they have "reasonable

assurances" offunding. "Reasonable assurances" can fall short of a legally binding commitment. This

court has held, for instance, that the FCC was obliged to find the reasonable assurancesstandard met

when an applicant offered a bank's nonbinding letter stating that it would provide a loan upon

licensing and the fulfillment of ordinary credit criteria. See Multi-StateCommunicationsInc. v. FCC,

590 F.2d 1117, 1118-20 (D.C. Cir. 1978), cert. denied, 440 U.S. 959 (1979).

In this case, each of the school boards' funding for the ITFS comes from BCI, the telephone

company to which they have agreed to lease excess capacity. Each school board has an agreement

with BCI, under which BCI will finance the construction of its ITFS facilities and the school board

will lease excess capacity on its four allocated channels to BCI. These agreements constitute the

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9Each of the three ITFS licenses granted to the school boards covers four ITFS stations. 

Seven additional ITFS channels are available in the Roanoke area. FCC Brief at 6 n.2. 

school boards' "reasonable assurances" of funding, and they give BCI numerous discretionary

opportunities to terminate the agreement: (1) if the FCC does not provide the license to the school

board, "or otherwise within six months of execution of the Agreement"; (2) upon breach or default

by the school board; (3) within 120 days of execution of the agreement if circumstances exist "which

would interfere with the Lessee's business plan"; (4) if BCI fails to obtain access, through similar

excess capacity agreements, to at least 16 channels in the area; or (5) "at any time for any reason"

provided BCI provides 6 months notice. See Airtime Lease Agreement at 20-22, reprinted in Joint

Appendix ("J.A.") at 293-95.

ASTV argues that this agreement "is so littered with provisions allowing BCI to void the

agreement in its discretion that the agreement provides no "reasonable assurance' of "present

commitments' of construction and operation capital required by ... FCC Form 330 and case law."

ASTV Brief at 36. The FCC rejected this argument, noting that "[i]t is common ... for an ITFS

licensee to fund construction and operation of itsfacilitiesthrough an excess capacity lease. Indeed,

the right to lease excess capacity came about as a result of our recognition that educational entities

holding ITFS licenses often lack the financial wherewithal to build and operate ITFS systems."

Botetourt County School Board, 8 F.C.C.R. at 6268.

We find no infirmity in the Commission's conclusions that the licensing contingency is

reasonable, and that the unlimited option to terminate with six months notice is permissible because

it providesthe school boardstime to find a replacementsource offunds. We are, however, somewhat

perplexed by the Commission'streatment ofthe 16-channel contingencythe provision that BCI can

terminate ifit failsto lease excess capacity on at least 16 channels.9 The Commission determines that

this contingencyis acceptable byassuming that it issomehow limited by good faith: "[W]e do assume

that parties to a contract such as the lease will operate in good faith, and thus we will not presume

... that BCI will terminate the agreement if it cannot conclude further leases for twelve channels."

Botetourt County School Board, 8 F.C.C.R. at 6268. Good faith, however, does not prevent a party

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to a contract from terminating an agreement when the express conditions of a termination option are

met.

Nevertheless, like the Commission, "we find nothing irregular in BCI's insistence that it

requires excess capacity from sixteen ITFS channelsto make its operation commercially viable." Id.

Admittedly, this condition creates some risks to the school boards, but BCI has attested that it "is

fully committed to the project and stands ready to proceed upon grant of the ... application[s]."

Declaration of Robert F. Nay ¶ 11, reprinted in J.A. at 52, 54. As the Commission's declared goal

in authorizing excess capacityarrangementsisto "creat[e] businessrelationships betweeneducational

instututions and wireless cable companies that would permit ITFS service to flourish," Botetourt

County School Board, 8 F.C.C.R. at 6268, we believe the Commission is in the best position to

determine the degree of riskwithin boundsthat is acceptable in fostering these relationships. In

this case, we have no reason to believe that the risk to the school boards is so great as to mandate a

finding that the agreement lacks "reasonable assurances."

IV. CONCLUSION

For the foregoing reasons, we find no error in the Commission'srejection of ASTV's petitions

to deny and its grant of the licenses to the school boards.

Petition denied.

SENTELLE, Circuit Judge, dissenting: Although I am in agreement with most of the majority's

careful opinion, my one area of disagreement is unfortunately outcome determinative. I join without

reservation the majority's rejection of petitioner's late asserted attack on the Commission's

construction of "cable system" under the Cable Communications Policy Act of 1984. Likewise, I am

incomplete agreement with themajority's conclusionthat the schooldistrict's "reasonable assurances"

of adequate funding easily survives our review. However, I am not so convinced as to the Court's

upholding of the Commission's construction of the proscriptive language of 47 U.S.C. § 533(b).

I agree with the majority that the proper framework for our analysis is dictated by Chevron

U.S.A. Inc. v. NRDC, Inc., 467 U.S. 837 (1984). As the majority notes, under that rubric, if "the

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statute speaks to the precise question at issue ... our inquiry is at an end." Maj. op. at 9, citing

Chevron, 467 U.S. at 842-43. Looking to the statute, I conclude that Congress has spoken to the

precise question at issue. The statute renders it "unlawful for any common carrier ... to provide video

programming directly to subscribersin itstelephone service area, either directly or indirectly through

an affiliate owned by, operated by, controlled by, or under common control with the common

carrier." 47 U.S.C. § 533(b)(1). The definition section of Cable Act defines "video programming"

as "programming provided by, or generally considered comparable to programming provided by, a

television broadcaststation." 47 U.S.C. § 522(19) (Supp. V 1993). Applying this statutorydefinition

to the statutory mandate ofsection 533, I can read nothing but an unambiguous bar to all provisions

of video programming by a common carrier to subscribersin a telephone service area whether or not

by cable. Therefore, I would conclude that our inquiry should be at an end.

We should invalidate the Commission's construction, allow the petition for review, and never

reach the second step of Chevron. I do not find Fort Stewart Schools v. FLRA, 495 U.S. 641, 645

(1990), supportive of departing from the plain meaning of the words of the statutory section. While

in that case, the Supreme Court certainly sanctioned examination not only of "the particularstatutory

language at issue," but also "the language and design of this statute as a whole," id. at 645 (citations

omitted), it did so in the context of instructing the use ofthe expanded examination when that greater

context made it "clear that the [agency's] interpretation is incorrect." Id. Nothing in the Supreme

Court'slanguage changes the initialstep of the Chevron analysis. A contextual examination, like the

language of the words, is part of the Court's mission to "give effect to the unambiguously expressed

intent of Congress." Id., quoting Chevron, 467 U.S. at 842-43. As I read the language of Fort

Stewart Schools, the Court in that case was sanctioning the use of context to resolve otherwise

ambiguous language, not to create an ambiguity in an otherwise unambiguous statutory provision.

I do not suggest that it is never possible to look beyond the words ofthe provision in question

to make patent an otherwise latent ambiguity. As the majority notes, we have "observed in the past

[that] "while the immediate text is the "best evidence" of congressional intent, the Court has never

held that it is the only such evidence.' " Maj. Op. at 9, quoting Tataranowicz v. Sullivan, 959 F.2d

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268 (D.C. Cir. 1992). But I read our circuit law as elucidated in Tataranowicz as furthering the

teachings of McCarthy v. Bronson, --- U.S. ----, 111 S. Ct. 1737, 114 L.Ed.2d. 194 (1991). That

is, that we may "rel[y] on context to reject "the most natural reading' of a statutory phrase."

Tataranowicz, 959 F.2d at 276 (quoting McCarthy, 111 S. Ct. at 1740). I do not read either circuit

law or McCarthy as permitting us to rely on context to reject the only natural reading of a statutory

phrase. Here, upon examination of the context, it still appears to me that the ban on provision of

video programming by a common carrier to subscribers in its service area is absolute.

Ifthe context and the structure ofthe statutoryscheme as a whole rendered the apparent plain

meaning either absurd or inconsistent with congressional goals, I might well join the majority'sresult.

But I read the teaching of Tataranowicz and McCarthy as a form of the older doctrine that "where

the literal reading of a statutory term would "compel an odd result,' we must search for other

evidence of congressional intent to lend the term its proper scope." Public Citizen v. U.S. Dep't of

Justice, --- U.S. ----, ----, 109 S. Ct. 2558, 2566 (1989) (citations omitted). However, I agree with

Justice Kennedy that this doctrine is a legitimate but narrow exception to "the normal rule" that

"[w]here the language of a statute is clear in its application ... we are bound by it." Id. at 2574

(Kennedy, J., concurring in judgment). I would further apply his reasoning that "[t]his exception

remains a legitimate tool ... only as long as the Court acts with self- discipline by limiting the

exceptionsto situations where the result of applying the plain language would be, in a genuine sense,

absurd." Id. at 2575. Here I do not find that to be the case.

In the present case, I do not find the result of applying the plain language to be either absurd

or inconsistent with the broader goals and structure of the statute. Whether Congress intended to

prohibit common carriersfrom competing with cable systemsin the provision of video programming

by all means, as the words seem to state, it would be not at all absurd or unnatural for Congress to

have placed that limitation on trade in the "cable ownership" section. Indeed, it would seem to me

just as natural to place it there as if the restraint were the more limited one contemplated by the

Commission's interpretation. I therefore do not find the expanded examination of the statutory

scheme and its goal to bring to light some previously hidden ambiguity but rather to conflict with the

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plain language of the statute. Therefore, while it is entirely possible that Congress acted with the

intent supposed by the Commission, it did not write a statute limited to that goal. I therefore would

allow the petition for review.

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