# United States Court of Appeals FOR THE EIGHTH CIRCUIT

___________ No. 96-2037

___________ Guidry Cablevision/Simul Vision * Cable System, * * Plaintiff - Appellant, * * Appeal from the United States v. * District Court for the * Eastern District of Missouri. City of Ballwin, * * Defendant - Appellee. *

___________ Submitted: January 13, 1997 Filed: July 8, 1997

___________ Before LOKEN, BRIGHT, and MORRIS SHEPPARD ARNOLD, Circuit Judges.

___________ LOKEN, Circuit Judge.

The Cable Communications Policy Act of 1984, 47 U.S.C. §§ 521 e t seq. (the “Cable Act”), stabilized federal regulation of the cable television indust ryby addressing issues that had vexed the Federal Communication s Com mission for many years. One such issue is whether state and loca l governments may franchise federally regulated cable operators. Congress
answer ed with a qualified yes, allowing local governments to franchis e “cable systems,” but placing limits on permissible franchise terms and als o def ining cable systems to exclude so-called private cable systems. Th e Commis sion in turn has invoked federal preemption to preclude loca l governments from requ iring that an exempt private cable operator obtain a local franchise.

### -2- This cas e involves one type of private cable system, the satellit e master antenna televi sion system, commonly referred to as “SMATV.” SMATV systems use antennae or receivers to capture over-the-air broadcast signal s and satellite-transmi tted signals. SMATV operators then retransmit these signals by wire to television subscribers within a single building o r complex of buildings. The statutory exemption d oes not apply to a private cable system that “us es any public right-of-way.” 47 U.S.C. § 522(7)(B). The issue before us is whether an SMATV system “uses” a public right-ofway when its cables c ross under a public street. We look for guidance to the Supreme Court’s recent analysis of the word “use” in a differen t statutory context in Bailey v. United States , 116 S. Ct. 501, 505 (1995). Although some have assumed that simply crossing a public street is use, we reach a contrary conclusion and hold that the City of Ballwin, Missouri, is preempted from requiring Guidry Cablevision/Simul Vision Cable System (“GuidryCable”) to obtain a cable franchise. Accordingly, the district court’s judgment awarding the City unpaid franch ise fees must be reversed.

I.

Seven Tr ails West is an apartment complex in Ballwin consisting o f
severa l commonly owned, multiple unit buildings. The complex include s Seven Trails Drive, which was dedicated as a pub lic street in 1977. Seven Trails West owns the land under Seven Trails Dri ve, but the City maintains the street as a public right-of-way. In 1984, Seven Trails West contracte d with Guidry Cable to build and operate an SMATV system. Because the SMATV transmission lines must cross Seven Trails Drive to serve all apartments in the complex, Guidry Cable obtained an excavation permit from the City and placed its lines some seventeen to twenty inches under Seven Trail s Drive. All of the other SMATV equipment is located on

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property owned by Seven Trails West. No part of the system passes over or touches the surface of Seven Trails Drive.

In June 1984, before passage of the Cable Act, the City grante d GuidryCable a cable television franchise for its SMATV system at Seve n Trails West. Guidry Cable initially accepted the franchise but quit payin g franch ise fees in July 1986. After five years of inaction, the Cit y revoke d Guidry Cable’s franchise and threatened to remove its SMAT V equipment. Guidry Cable commenced this action s eeking declaratory relief, and the City counterc laimed for unpaid franchise fees. After the parties submitted the case on stipulated facts, the district court entered judgmen t dismissing Guidry Cable’s claims and awarding the City $65,214.32 on its counterclaim. Guidry Cable appeals. The parties have briefed and argued many issues, but the Cable Act preemption question is dispositive.

II.
For many years, the F.C.C. did not regulate cable television sy stems. See generally Midwest Video Corp. v. FCC , 571 F. 2d 1025, 1029-35 (8th Cir. 1978), af f’d , 440 U.S. 689 (1979). In the early 1970's, the Commissio n adop ted a regime of “deliberately structured dualism,” requiring cabl e operators to obtain federal certificates of compliance while permittin g local governments (including States) to franchise cable operator s
con sistent with minimum federal standards. Local franchising wa s appropriate, the Commission explained, “because cable makes use of streets and ways” and because local authorities are better able “to parcel large urban areas into cable districts” and “to follow up on service complaints. ” Cable Television Report & Order , 36 F.C.C.2d 143, at ¶¶ 177-78 (1972).

### S ee also In re Orth-O-Vision, Inc. , 69 F.C.C.2d 657 (1978) , 2 

### recon. denied , 82 F.C.C.2d 178 (1980) (preempting franchising o f MATV systems), aff’d sub nom. New York State Comm’n on Cabl e Television v. FCC , 669 F.2d 58 (2d Cir. 1982).
-4- As the market for cable television grew and new technologies em erged, the F .C.C. exempted private cable systems such as SMATV from its cabl e rules, usually over the vehement protest of regulated cable operators

. Alo ng with this federal exemption, the Commission preempted loca l governments from franchising private cable syste ms. In the case of SMATV, th e Commission concluded that preemption was necessary because SMAT V systems are the customers of interstate satellit e transmissions, and local licens ing that restricts the growth of SMATV receivers would b e inco nsistent with the federal policy of fostering “open entry in th e satellite field for the purpose of creating a mo re diverse and competitive telecommunications en vironment.” In re Earth Satellite Commun., Inc. , 95 F.C.C.2d 1223, 1231 ( 1983), aff’d sub nom. New York State Comm’n on Cable Television v. FCC , 749 F.2d 804 (D.C. Cir. 1984). 1

The Cable Act retained this dual regulatory framework. Loca l governments may franchise “cable systems” consistent with federal standard s regarding issues such as franchise fees, renewal procedures, and ownership restrictions. See 47 U.S.C. §§ 541-547; H.R. Re p. No. 98-934, 98th Cong., 2d Sess. 44 (1984), reprinted in 1984 U.S.C.C.A.N. 4655, 4656-64. Congres s enacted a private cable exemption in § 522(7)(B), commenting that thi s exemption is directedat SMATV systems, and left the F.C.C.’s franchising preemption decisions in place in § 541(e). See H.R. Rep. No. 98-934, 1984 U.S.C.C.A. N. at 4681, 4700. The Supreme Court rejected a due proces s challe nge to § 522(7)(B) in FCC v. Beach Commun., Inc. , 508 U.S. 30 7 (1993).

### -5- III.
Guidry Cable argues that its SMATV system is exempt from Cable Ac t regulat ion, and therefore the City may not require a cable franchise

. Section 522(7)(B) defines an exempt private system as :

a facility that serves only subscribers in 1 or more multiple unit dwellings under com mon ownership, control, or management, unless such a facility o r facilities uses any public right-ofway. Because Seven Trails West is admittedly a common ly owned group of multiple unit dwellings, the issue is whether Guidry Cabl e “uses a public right-ofway" because its transmission lines cross underneath Seven Trails Drive,
a pub lic street. The Cable Act does not define the term “use,” and th e published committee report simply repeats the statutory language. See 198 4 U.S.C.C.A.N. at 4681. In Bailey , the Supreme Court explained that “th e word ‘use’ poses some interpretational difficulties because of th e different meanings at tributable to it.” The word “draws meaning from its context,” and a court must consider “not only th e bare meaning of the word but also its placement and purpose in the statutory scheme.” 116 S. Ct. at 505 -06. Therefore, “use” in § 522(7)(B) must be construed in th e context o f the Cable Act and the F.C.C.’s prior regulation of the cabl e television industry.

Traditional cable systems deliver programming throughout a municipalityby means of cables laid under city streets or along utility lines. They thereby make extensive use of public rights-of-way, avoiding the ne ed to negotiate easements with countless private property owners

. This is “use” consistent with the word’s ordinary meaning -- “to employ, to av ail oneself of, and to carry out a purpose or action by means of. ” Bai ley , 116 S. Ct. at 506 (quotations omitted); see 43A W ORDS AND P HRASES , Use; Used at 252

### It also seems significant that Seven Trails West, not th e 2 

### City, owns the land underlying Seven Trails Drive. However, w e doubt whether the extent of federal regulatory preemption shoul d depend u pon who owns the land beneath a public right-of-way. I f federal telecommunications law preempts the City from requiring a cab le franchise, that does not affect its authority to otherwis e regul ate use of land beneath a public street. In general, non

disrup tive uses by abutting property owners are permitted. Se e McQuillin, M UNICIPAL 

### C ORPORATIONS 

### § 30.85 (3d ed. 1990).
-6- (We st 1969). This active interaction between cable operators and loca l governments is also the reason for the F.C.C.’s long-standing tolerance of local cable franchisi ng. “The dual federal-local jurisdictional approach to re gulating cable systems is largely premised on the fact that cabl e systems necessarily i nvolve extensive physical facilities and substantial construction upon anduse of public rights-of-way in the communities they serve.” In re Definition of a Cable Television System , 5 F.C.C.R. 7638, 7639 (1990).
Guidry Cable’s involvement with the City’s public right-of-way is far les s substantial. Though Guidry Cable’s system must cross Seven Trail s Drive, this public street is an obstacle that must be overcome to serve th e entir e, commonly owned Seven Trails complex, not an asset in serving a myriad of independent subscribers. The City has provided no service o r benefit to Guidry Cable’s system, and Guidry Cable paid for the initia l cost and disruption of crossing under the City’s street when it obtained an excavation permit. Thus, in the most practic al sense, Guidry Cable has not “used” the City’s public right-of-way. 2

Other reasons why the F.C.C. has supported local franchising o f fed erallyregulated cable operators also do not apply to Guidry Cable’ s SMATV system at SevenTrails West. Local governments are better able “to parcel large urban areas into cable districts,” 36

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F.C.C.2d at ¶ 177, but districting is not necess ary when the boundaries of

a commonly owned apartment complex define the SMATV system. Franchising regula tion also protects individual consumers from the market power a traditional cable operator may enjoy once its sy stem is installed, whereas an apartment complex owner has countervailing bargaining power because it represents numerous potential subscribers.

In In re Definition of a Cable Television Sys. , 5 F.C.C.R. 763 8 (1990), the F.C.C. considered whether MATV and SMATV systems “use” a publi c right -of-wayif they transmit signals overa public street by radio o r infrar ed transmission. The Commission concluded that this would no t deprive a system of the § 522(7)(B) exemption: Congress did not intend to include within the meaning of th e term“use” of a public right-of-way the mere passing over o f suc ha right-of-way by electromagnetic radiation. . .

. [R]adio waves may cross a public right-of-way but do not us e it.

5 F.C.C.R. at 7642. Thus, the Commission has expressly recognized tha t crossing is distinct from using. Of course, crossing a public street by burying cables underneath it is a more physical interaction with cit y property than crossin g over the street with infrared transmissions. That may be why the Commission’s Report and Order did not address whethe r crossing a public right-of-way by buried cable is “use” for purposes o f § 522(7)(B). We conclude that both forms of crossing are not “use,” eithe r in the natural meaning of that word, or by applying the contextual analysi s mandated in Bailey . Accordingly, we disagree with the contrary dicta in two district court de cisions. See Liberty Cable Co. v. City of New York , 893 F. Supp. 191, 195 (S.D.N.Y.), aff’d , 60 F.3d961 (2d Cir. 1995), cert. denied , 116 S. Ct. 1262 (1996); Channel

### -8-

One Systems, Inc. v. Connecticut Dep't of Pub. U til. Control , 639 F. Supp. 188, 199 (D. Conn. 1986).

Throug hits private cable preemption decisions, the F.C.C. ha s ado pted a policy of allowing competition to regulate the development o f SMATV s o as to encourage the development of satellite transmission o f television programming. Congress in the Cable Act endorsed this policy. In § 522(7)(B), it de fined the cable systems entitled to a private system exemption from federal regulation, and in § 541( e), it left the Commission free t o develop an appropriate preemption policy for exempt facilities

. We are unwilling to thwart this policy by broadly and unrealisticall y construing the word “use” in the exception to the statutory exemption , thereby reducing the competitive role of SMATV a nd other emerging delivery syst ems in these fast-changing telecommunications markets. As Justic e Steven s observed in his concurring opinion in Beach Communications , 50 8 U.S. at 320, “Regulation is sometimes necessary, but it is alway s burdensome. A decisi on not to regulate the way in which an owner chooses to enjoy the benefits of an improvement to his own property is adequately justified by a presumption in favor of freedom.”

The j udgment of the district court is reversed and the case i s remanded for further proceedings consistent with this opinion.
BRIGHT, Circuit Judge, dissenting.
I respectfully dissent. I believe t hat Guidry Cable used the public right-of-way by digging under the street to lay its cable.

When a “s tatute is silent or ambiguous with respect to the specific issue, the question for the court is whether the agency’s

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answer is based on a permissible construction of the statute.” Chevro n U.S.A. Inc. v. Natura l Resources Defense Council, Inc. , 467 U.S. 837, 843 (1984). In applying that standard, the FCC’s interpretation of the Cable Act a nd what constitutes “use of a public right-of-way” is entitled t o “considerable weight” and this court’s deference. See id. at 844.

The FCC interpreted the Cable Act and addressed what constitutes a cable system under the Act in In re Definition of a Cable Televisio n System , 5 F.C.C.R. 7638 (1990). The FCC stated that Congress neve r intende d the Cable Act to include systems that transmit their signal s throughradio waves instead of through physical cables or wires. Id. at 7639. The FCC’s discussion relies extensively on the notion that radi o transmissions fall outside the scope and ordinar y meaning of “cable.” See generally id. The FCC described the difference between services usin g radio waves and wires or cables as a “sharp contrast.” Id. Neverthel ess, the majority in this case relies on the FCC’s comment that “‘radio waves may cross a public right-of-w ay but do not use it,’” to conclu de that the FCC distinguished between “crossing” and “using” fo r purposes of laying cable underneath a public street. Maj. Op. at 7 (quoting I n re Definition of a Cable Television System , 5 F.C.C.R. a t 7642). To the contrary, the FCC stated that if a facility employin g “close d transmission paths,” such as cable instead of radio waves , “cross[es] a public right-of-way, it will be con sidered a cable system for pur poses of the Cable Act . . .” and, therefore, subject to loca l regulation. In re De finition of a Cable Television System , 5 F.C.C.R. at 7642. The FCC made repeated references to “crossing a public right-of-way ” when explaining which systems fall outside the scope of the Cable Act’ s private cable system exemption. See, e.g. , id. at 7641 ("'the exception is not available unless . . . there is no crossing

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of a public right-of-way . . . .'" (internal citation omitted))

. Furthe rmore, parties brought the issue whether “use” and “cross” ar e synonymous to the attention of the FCC and it regarded them a s interchangeable:

We . . . sought comment in the Notice “with respect to th e question of what constitutes a crossing of a public right-ofway, . . . .” As noted by several parties, the specifi c statut orylanguage refers to “uses” of a public right-of-wa y and our use of the term “crossing” was not meant to impl y anything different.
Id. at 7641-42.

Ot her court decisions demonstrate that the FCC’s interpretation o f “use” a s synonymous with “cross” is a permissible construction of th e statute. Most notably, the Supreme Court described the FCC’s conclusion that a vi deo system “is subject to the franchise requirement if it s transmis sion lines . . . use or cross any public right-of-way” a s “[c]onsistent with the plain terms of the statut ory exemption.” F.C.C. v. Beach Communications, Inc. , 113 S. Ct. 2096, 210 0 (1993) (emphasis added). Likewise, two district courts stated that crossing a public right-of-way constitutes use. See Liberty Cable Co. v. City of New York , 893 F. Supp. 191, 195 (S.D.N.Y.), aff’d , 60 F.3d 961 (2d Cir. 1995), cert. denied , 116 S. Ct. 1262 (1996); Channel One Systems, Inc. v. Connecticut Dep’t of Pub. Util. Control , 639 F. Supp. 188, 199 (D. Conn. 1986) (“a person providing cabl e television service using public rights-of-way by cables crossin g under a pub lic road . . . is a cable operator and must obtain a franchise.”). The majority dismisses the aformentioned authority summaril y despite acknowledging that cable crossing underneath a public street “is a . . . physical interaction with city property.” Maj. Op. at 7.

In stead, the majority relies on the Supreme Court’s interpretatio n of “use” in a criminal statute. See id. (relying on Bailey v. Unite d States , 116 S. Ct. 501, 505 (1995)). I believe a criminal case statin g that a person is not “using” a gun locked in the trunk of a car, is clearl y distinguishable from a civil case

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decid ing whether a company is “using” a public street by crossin g underneath it with a cable to reach more customers.
In additi on, the majority regards the public street as “an obstacle that [Guidry Cable] must overcome to serve the entire . . . complex” rathe r than “an asset in ser ving a myriad of independent subscribers.” Maj. Op. at 6. The majority n eglects to consider, however, how Guidry Cable chose to ov ercome this “obstacle.” According to the FCC, a “sharp contrast ” exist s between facilities employing radio waves and those employin g physical cable. In re Definition of a Cable Tel evision System , 5 F.C.C.R. at 7639. By exempting facilities utilizing radio waves from loca l regulation, Congress provided an incentive to such facilities ove r facilities employing physical cables and wires.
Thus, Guidry Cable could have avoided “physical interaction” wit h cit yproperty, and thereby the franchise fees, by employing radio wave s instead of physical cable to cross the city’s street. Guidry Cable instea d chose to rely on cable, thereby requiring an excavation permit from th e cityand subjecting itself to the city’s franchise fees. The majority’s opin ion, however, undermines the Cable Act’s preference for facilitie s employing radio waves rather than physical cables, allows Guidry Cable to escape par t of its obligation in return for the excavation permit an d denies the local government the ability to regul ate industries which cross public rights-of-way.
I believe the FCC provided a reasonable and usual construction of the term “use.” Accordingly, I would affirm.
A true copy.

Attest:
CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT.