Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 In the Matter of ) ) Telephone Company-Cable Television ) CC Docket No. 87-266 Cross-Ownership Rules, Sections ) 63.54 - 63.58 ) PARTIAL OPPOSITION OF THE NATIONAL TELECOMMUNICATIONS AND INFORMATION ADMINISTRATION TO PETITION FOR CLARIFICATION OR RECONSIDERATION Thomas J. Sugrue Phyllis E. Hartsock Acting Assistant Secretary for Acting Chief Counsel Communications & Information William F. Maher, Jr. Associate Administrator Tim Sloan Office of Policy Analysis and Development National Telecommunications and Information Administration U.S. Department of Commerce Room 4713 14th Street and Constitution Ave., N.W. Washington, D.C. 20230 (202) 377-1816 February 19, 1992 TABLE OF CONTENTS Section Page SUMMARY i I. INTRODUCTION AND SUMMARY OF POSITION 1 II. ALTERNATIVE 1: A LEC PROVIDING "VIDEO DIALTONE" 5 DOES NOT NEED A CABLE FRANCHISE BECAUSE IT IS NOT PROVIDING "CABLE SERVICE" III. ALTERNATIVE 2: LECS PROVIDING "VIDEO DIALTONE" 7 ARE NOT "CABLE OPERATORS" IV. ALTERNATIVE 3: LECS ARE NOT "CABLE OPERATORS" 9 BECAUSE LEC FACILITIES USED TO PROVIDE "VIDEO DIALTONE" ARE NOT A "CABLE SYSTEM" V. CONCLUSION 13 SUMMARY NTIA partially supports and partially opposes GTE's petition for clarification or reconsideration (GTE Petition) of the First Report and Order (Order) in CC Docket No. 87-266. In the Order, the Commission ruled that when a local exchange carrier (LEC) offers video distribution facilities to unaffiliated programmers on a common carrier basis (what the Commission referred to as "video dialtone"), neither the LEC nor its programmer/customers need a cable franchise pursuant to Section 621(b) of the Cable Communications Policy Act of 1984 (Cable Act). NTIA, like GTE, strongly supports this policy determination; it is consistent with the terms of the Cable Act, and will also promote competition in the provision of video programming to the home. Nonetheless, NTIA questions the Commission's legal rationale for its conclusion that Section 621(b) does not require LEC providers of "video dialtone" to obtain cable franchises. Section 621(b) states that "a cable operator may not provide cable service without a franchise." In analyzing the applicability of that provision to LECs, the Commission declared that because LECs providing video dialtone services would not be providing "cable service," they would not come within the definition of "cable operators" subject to the franchise requirement of Section 621(b). This analysis may not go far enough, however, because it appears to consider only the first part of the Cable Act's two- part, disjunctive definition of the term "cable operator" in Section 602(4). Left as it stands, the Commission's reading of the term "cable operator" could be subject to challenge, which could in turn undermine the Commission's procompetitive construction of Section 621. Recognizing this, the GTE Petition urges the Commission to bolster its construction of Section 621 by holding that a LEC facility used to provide "video dialtone" services is not a "cable system" unless the LEC also functions as a cable operator, i.e., provides video programming directly to subscribers. Because there are other interpretations of the Cable Act that may better support the Commission's conclusions, NTIA opposes the GTE Petition to the extent that it would foreclose Commission consideration of alternative justifications. NTIA, like GTE, recommends that the Commission carefully reconsider its Order and justify its present conclusion on the franchise issue based on a more detailed examination of the relevant provisions of the Cable Act. However, NTIA believes that such a conclusion can best be supported by the analysis set forth in NTIA's comments and reply comments in a related proceeding -- that LECs offering "video dialtone" do not need a cable franchise because they are not providing "cable service." We recognize, nevertheless, that an elaboration of the Commission's reasoning in the Order or the argument in the GTE Petition could also justify the Commission's conclusion on the franchise issue. Each of the three alternative arguments, if found to be valid, is sufficient to support the Commission's determination, which both NTIA and GTE support, that under a "video dialtone" model, a LEC need not obtain a cable franchise for the transport facilities that it provides to unaffiliated programmer/customers. Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 In the Matter of ) ) Telephone Company-Cable Television ) CC Docket No. 87-266 Cross-Ownership Rules, Sections ) 63.54 - 63.58 ) PARTIAL OPPOSITION OF THE NATIONAL TELECOMMUNICATIONS AND INFORMATION ADMINISTRATION TO PETITION FOR CLARIFICATION OR RECONSIDERATION The National Telecommunications and Information Administration (NTIA), as the Executive branch agency principally responsible for the development and presentation of domestic and international telecommunications and information policy, respectfully supports in part and opposes in part the petition filed by the GTE domestic telephone operating companies, GTE Service Corporation, and GTE Laboratories (GTE) for clarification or reconsideration[1] of the Commission's First Report and Order (Order) in the above-captioned proceeding.[2] I. INTRODUCTION AND SUMMARY OF POSITION In the Order, the Commission ruled that when a local exchange carrier (LEC) offers video distribution facilities to unaffiliated programmers on a common carrier basis (what the Commission referred to as "video dialtone"), neither the LEC nor the programmers that use its facilities (programmer/customers) need a cable franchise pursuant to Section 621(b) of the Cable Communications Policy Act of 1984 (Cable Act).[3] NTIA strongly supports this policy determination;[4] it is consistent with the terms of the Cable Act, and will also promote competition in the provision of video programming to the home. Nonetheless, NTIA questions the Commission's legal rationale for its conclusion that Section 621(b) does not require LEC providers of "video dialtone" to obtain cable franchises. Section 621(b) states that "a cable operator may not provide cable service without a franchise."[5] In analyzing the applicability of that provision to LECs, the Commission declared that: [u]nder the video dialtone model . . . the local telephone companies providing video dialtone services would not be providing "cable service" and thus would not come within the definition of "cable operators" subject to the franchise requirement of Section 621(b).[6] This analysis may not go far enough, however, because it appears to consider only the first part of the Cable Act's two- part, disjunctive definition of the term "cable operator" in Section 602(4).[7] Under the first part of that definition, provision of "cable service" is a necessary characteristic of a "cable operator."[8] The second part, however, does not refer to the provision of "cable service", but simply states that an entity can be a "cable operator" if it "controls or is responsible for, through any arrangement, the management and operation of such a cable system."[9] Under one reasonable reading of this provision, a LEC offering "video dialtone" services could, in fact, be deemed a "cable operator" if the facilities it uses to provide such services are a "cable system." Left as it stands, the Commission's reading of the term "cable operator" could be subject to challenge, which could in turn undermine the Commission's procompetitive construction of Section 621. Recognizing this, the GTE Petition urges the Commission to bolster its construction of Section 621 by holding that a LEC facility used to provide "video dialtone" services is not a "cable system" unless the LEC also functions as a cable operator, i.e., provides video programming directly to subscribers.[10] GTE's argument, which we discuss in greater detail below, has both strengths and weaknesses. NTIA, like GTE, recommends that the Commission carefully reconsider its Order and justify its present conclusion on the franchise issue based on a more detailed examination of the relevant provisions of the Cable Act. NTIA believes that such a conclusion can best be supported by the analysis set forth in NTIA's comments and reply comments in a related proceeding -- that LECs offering "video dialtone" do not need a cable franchise because they are not providing "cable service."[11] We recognize, however, that an elaboration of the Commission's reasoning in the Order or the argument in the GTE Petition could also justify the Commission's conclusion on the franchise issue. We discuss these three arguments in turn below.[12] Nevertheless, each of the alternative arguments, if found to be valid, is sufficient to support the Commission's conclusion, which both NTIA and GTE support, that under a "video dialtone" model, a LEC need not obtain a cable franchise for the transport facilities that it provides to unaffiliated programmer/customers.[13] II. ALTERNATIVE 1: A LEC PROVIDING "VIDEO DIALTONE" DOES NOT NEED A CABLE FRANCHISE BECAUSE IT IS NOT PROVIDING "CABLE SERVICE" In NTIA's view, the most satisfactory approach to the franchise issue is for the Commission to declare that, under a "video dialtone" model, a LEC need not obtain a cable franchise because it is not providing "cable service." Such a conclusion is fully consistent with Section 621(b) and, as importantly, is valid whether or not the LEC is considered a "cable operator" or whether its "video dialtone" facilities are deemed a "cable system." As noted above, Section 621(b) (with a limited exception not relevant here) requires a franchise only when a "cable operator" provides "cable service."[14] Accordingly, if a LEC offering "video dialtone" is not deemed to be providing "cable service," it would not need a cable franchise, even if it would otherwise be considered a "cable operator." Under the Cable Act's definition of "cable service," the Commission can reasonably conclude that a LEC offering "video dialtone" services would not be providing "cable service." The Act defines "cable service" as "(A) the one-way transmission to subscribers of (i) video programming, or (ii) other programming service, and (B) subscriber interaction, if any, which is required for the selection of such video programming or other programming service."[15] As the Commission points out in the Order, under the "video dialtone" model, the LEC itself is not providing the video programming directly to subscribers. Rather, the LEC is simply acting as a conduit in providing broadband common carrier-based service that enables its customer/programmers to provide video programming to subscribers.[16] NTIA notes, moreover, that forcing LECs to obtain a cable franchise for their "video dialtone" facilities would overturn long-standing regulatory practice. As the Commission points out in the Order, LECs have provided video distribution facilities (the facilities that will be at the heart of their "video dialtone" offerings) to cable operators for many years without having to obtain cable franchises.[17] Moreover, requiring LECs to obtain a cable franchise for their "video dialtone" facilities would engage state and local authorities in reviewing LEC construction of new interstate[18] common carrier transmission facilities, a task that Congress has delegated to the Commission exclusively pursuant to Section 214 of the Communications Act.[19] Accordingly, the Commission could reasonably conclude that a LEC would not be providing "cable service" under a "video dialtone" model. For that reason, the Cable Act does not require the LEC to obtain a cable franchise for the facilities used to furnish "video dialtone," even if the LEC is deemed a "cable operator." III. ALTERNATIVE 2: LECS PROVIDING "VIDEO DIALTONE" ARE NOT "CABLE OPERATORS" A second approach to the franchise issue, based on the Order, would be to bolster the Commission's current conclusion that a LEC offering "video dialtone" is not a "cable operator" because it is not also providing "cable service." This could be accomplished by reading the two-part definition of the term "cable operator" to mean an entity providing cable service over a cable system who either (A) "owns a significant interest in such cable system," or (B) "controls or is responsible for, . . . the management of" that cable system -- that is, by reading subclause (B) of Section 602(4) to modify subclause (A). This interpretation has the advantage of including within the term "cable operator" the common scenarios in which an entity would provide cable service over a cable system, i.e., by owning, controlling, managing, or operating that system. It would also give meaning to the word "such" in subsection (B) of Section 602(4), which could seem superfluous unless it is understood to refer back to the cable system described in subsection (A) -- a system over which the owner/manager/operator provides cable service. We note, however, that this reading of the term "cable operator" has some difficulties because of the structure and syntax of Section 602(4).[20] That provision contains two distinct subclauses, only the first of which mentions provision of "cable service." Moreover, the introductory word "who" in each subclause could indicate that both were intended to modify "any person or group of persons," rather than any other word or phrase. In particular, the use of "who" in both (A) and (B) weakens the argument that subclause (B) was meant to modify "over a cable system" or any other phrase in subclause (A). For these reasons, we recommend that the Commission base its actions in this proceeding on an alternative legal interpretation of the Cable Act, in addition to, or instead of, its conclusion that a LEC offering "video dialtone" is not a "cable operator." IV. ALTERNATIVE 3: LECS ARE NOT "CABLE OPERATORS" BECAUSE LEC FACILITIES USED TO PROVIDE "VIDEO DIALTONE" ARE NOT A "CABLE SYSTEM" A third approach to the franchise issue, based on the GTE Petition, rests on the fact that, as noted above, the definition of "cable operator" presupposes the existence of a "cable system." GTE contends that a LEC facility used to provide "video dialtone" services is not a "cable system" unless the LEC also "functions as a cable operator," i.e., "transmit[s] video programming to subscribers."[21] GTE states that the definition of "cable system" in Section 602(6) of the Act specifically excludes: a facility of a common carrier which is subject, in whole or in part, to the provisions of Title II of [the Communications Act], except . . . to the extent such facility is used in the transmission of video programming directly to subscribers.[22] GTE contends that the phrase "is used in the transmission of video programming" is ambiguous, and requests that the Commission construe it to mean "is used by a common carrier functioning as a cable operator" (i.e., providing video programming directly to subscribers).[23] Under this interpretation, a LEC facility used to furnish "video dialtone" services would not be a "cable system," the LEC would not be a "cable operator" and, therefore, would not need a cable franchise for that facility under Section 621.[24] GTE's argument has the advantage of not being precluded by the language of Section 602(6). Nevertheless, it also has some difficulties. First, by effectively inserting the phrase "by a common carrier functioning as a cable operator" into the proviso in Section 602(6)(C), GTE's proposed interpretation is contrary to the general rule that, in construing legislation, words of limitation should generally not be added to a statute.[25] Moreover, although GTE's proffered language is not necessarily inconsistent with the plain language of Section 602(6)(C), there is no evidence that Congress intended that proviso to be read as narrowly as GTE proposes. The use of the passive voice in the proviso, coupled with the absence of any limiting prepositional phrase, arguably suggests a congressional intent that the words be construed broadly to include all potential users. GTE contends that if Congress had intended such a result, it would have written "is used by any person."[26] However, given the open-ended nature of the quoted phrase, it seems as likely that if Congress had intended to restrict the proviso in the way GTE advocates, it would have inserted the language "by a common carrier functioning as a cable operator" after the words "is used." Further, insertion of GTE's proffered language would cause the proviso in Section 602(6)(C) to read "except . . . to the extent that such facility is used by a common carrier functioning as a cable operator in the transmission of video programming directly to subscribers." However, if, as GTE suggests, a "cable operator" is one who "transmit[] video programming to subscribers,"[27] inclusion of GTE's limiting language would render the concluding portion of the proviso superfluous, a result that is contrary to usual practices of statutory construction.[28] Acceptance of GTE's language would produce another untoward result. It would define as a "cable system" a LEC-provided "video dialtone" facility used by that LEC functioning as a cable operator to transmit video programming directly to subscribers. That would mean, however, that under 602(4)(B) a "cable operator" would be an entity that owns, operates, or manages a facility used by a common carrier functioning as a cable operator. In other words, the definition of "cable operator" would become, in one important context, circular. The Commission should be cautious in assuming that Congress intended such a result, especially in light of the absence of supporting legislative history. V. CONCLUSION For the foregoing reasons, NTIA respectfully requests that the Commission deny GTE's petition but modify its analysis, based on the foregoing discussion, to support further its conclusion that, under a "video dialtone" model, the providing LEC does not need a cable franchise. Respectfully submitted, Thomas J. Sugrue Acting Assistant Secretary for Phyllis E. Hartsock Communications & Information Acting Chief Counsel William F. Maher, Jr. Associate Administrator Tim Sloan Office of Policy Analysis and Development National Telecommunications and Information Administration U.S. Department of Commerce Room 4713 14th Street and Constitution Ave., N.W. Washington, D.C. 20230 (202) 377-1816 February 19, 1992 Certificate of Service I, Cheryl A. Kinsey, hereby certify that on this 19th day of February, 1992, copies of the foregoing "Opposition of the National Telecommunications and Information Administration to Petition for Clarification or Reconsideration" were sent by first class mail, postage prepaid, to the following: James R. Hobson, Esq. Donelan, Cleary, Wood & Maser, P.C. 1275 K Street, N.W., Suite 850 Washington, D.C. 20005-4078 Joan Griffin, Esq. 1850 M Street, N.W., Suite 1200 Washington, D.C. 20036 Ward W. Wueste, Jr., Esq. P.O. Box 152092 Irving, TX 75015-6314 Cheryl A. Kinsey ----------------------------------------------------------------------------- ENDNOTES [1] Petition of GTE for Clarification or Reconsideration, CC Docket No. 87-266 (filed Jan. 16, 1992) (GTE Petition). [2] Telephone Company-Cable Television Cross-Ownership Rules, Sections 63.54 - 63.58, CC Docket No. 87-266, FCC 91-334 (released Nov. 22, 1991). [3] Id.  47-52. For a detailed discussion of "video dialtone," see id.  10-11, 23-36. The Commission also declared that the telephone-cable crossownership restriction does not apply to interexchange carriers that do not also provide local telephone service, as defined in Section 3(r) of the Communications Act. Id.  44-46. No party has petitioned the Commission to reconsider that ruling. [4] See Reply Comments of NTIA in MM Docket No. 89-600, at 2-7 (filed Apr. 2, 1990); Comments of NTIA in MM Docket No. 89- 600, at 14-22 (filed Mar. 1, 1990). See also Order  50 n.80. [5] 47 U.S.C.  541(b)(1) (1988). Persons lawfully providing cable service as of July 1, 1984 need not obtain a franchise unless the relevant franchising authorities requires them to do so. Id.  541(b)(2). [6] Order  50 (footnotes omitted). [7] 47 U.S.C.  522(4) (1988). [8] Id.  522(4)(A) ("cable operator" is any person "who provides cable service over a cable system and . . . owns a significant interest in such cable system"). [9] Id.  522(4)(B). [10] GTE Petition at 3-4. [11] See Reply Comments of NTIA in MM Docket No. 89-600, at 2-7 (filed Apr. 2, 1990); Comments of NTIA in MM Docket No. 89- 600, at 14-22 (filed Mar. 1, 1990). [12] Because we urge the Commission to consider legal arguments other than that proposed in the GTE Petition, this pleading is a partial opposition to that petition. However, NTIA supports the ultimate conclusion of both the GTE Petition and the Order -- that a LEC offering "video dialtone" need not obtain a cable franchise. [13] In the Order, the Commission concluded that, under a "video dialtone" model, a LEC's programmer/customers would not need cable franchises because they would not be "cable operators." Order  52. As this determination is fully consistent with the Cable Act, and is not the subject of petitions for reconsideration, NTIA will not address it in this pleading. [14] See 47 U.S.C.  541(b)(1) (1988). [15] Id.  522(5). [16] Order  51. One could, of course, argue that LEC provision of the facilities used by unaffiliated customers to deliver video programming to subscribers would involve the LEC in the "transmission" of video programming and, thus, provision of "cable service." NTIA believes that a more reasonable interpretation of the word "transmission" would require active LEC participation in the selection and distribution of video programming to subscribers, functions performed by the programmer/customers, not the LEC offering "video dialtone." [17] Id. [18] Because LEC-provided video distribution facilities are used to carry interstate video communications, they have long been considered to be interstate services subject to federal oversight. See General Tel. Co. of California v. FCC, 413 F.2d 390 (D.C. Cir.), cert. denied, 396 U.S. 888 (1969). [19] See Comments of NTIA in MM Docket No. 89-600, at 22 n.47 (filed Mar. 1, 1990). [20] In contrast, the legislative history seems to support a disjunctive reading. For example, the House Report indicates that: "Cable operator" means any person or group of persons who provides cable service over a cable system and, . . . owns a significant interest in such cable system. The term also means any person or group of persons who otherwise controls or is responsible for, . . . the management and operation of a cable system. H.R. Rep. No. 934, 98th Cong., 2d Sess. 41, reprinted in 1984 U.S. Code Cong. & Admin. News 4655, 4678. [21] GTE Petition at 3-4. [22] See id. at 3 (quoting 47 U.S.C.  522(6)(C) (1988)). [23] GTE Petition at 3. [24] Id. at 4. [25] See, e.g., Eubanks v. Wilkinson, 937 F.2d 1118, 1125 (6th Cir. 1991) ("[c]ourts generally do not add words of limitation to statutes because they are aware of the dangers of intruding on the legislative function"). See also N. Singer, 2A Sutherland Stat. Const.  47.38, at 264-266 (5th ed. 1992) (words should not be added to a statute except as necessary, for example, to correct obvious or inadvertent omissions, to render the statute sensible, rational, or intelligible, or to give effect to legislative intent). [26] GTE Petition at 4 (emphasis in original). [27] Id. at 3. [28] See, e.g., In re Bellanca Aircraft Corp., 850 F.2d 1275, 1280 (8th Cir. 1988) ("statute should not be interpreted so as to render the legislature's language mere surplusage"); United States v. Union Gas Co., 792 F.2d 372, 379-380 (3d Cir. 1986) ("statute should be construed so that effect is given to all its provisions, so that no part will be inoperative or superfluous") (quoting N. Singer, 2A Sutherland Stat. Const.  46.06, at 119 (5th ed. 1992)).