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In re Meadowlands Communications Systems Inc.

Decided: July 9, 1980.

IN THE MATTER OF THE APPLICATION OF MEADOWLANDS COMMUNICATIONS SYSTEMS, INC. FOR CERTIFICATES OF APPROVAL IN THE MUNICIPALITIES OF EAST RUTHERFORD, CARLSTADT, LYNDHURST, EAST NEWARK, NORTH ARLINGTON AND RUTHERFORD AND THE APPLICATION OF WEST HUDSON COMMUNICATIONS SYSTEMS, INC. FOR A CERTIFICATE OF APPROVAL IN THE TOWN OF KEARNY. IN THE MATTER OF THE PETITION OF MEADOWLANDS COMMUNICATIONS SYSTEMS, INC. AND WEST HUDSON COMMUNICATIONS SYSTEMS, INC. FOR AUTHORITY TO TRANSFER CAPITAL STOCK ON ITS BOOKS. IN THE MATTER OF THE PETITION OF KALEIDOSCOPE CABLE T.V., INC. ALLEGING ARBITRARY REFUSAL IN THE TOWN OF KEARNY. IN THE MATTER OF THE APPLICATION OF MICRO-CABLE COMMUNICATIONS CORPORATION D/B/A UA-COLUMBIA CABLEVISION OF NEW JERSEY FOR A CERTIFICATE OF APPROVAL IN THE MUNICIPALITIES OF LYNDHURST, CARLSTADT, RUTHERFORD, EAST RUTHERFORD AND NORTH ARLINGTON


On Appeal from Board of Public Utilities.

Matthews, Ard and Polow. The opinion of the court was delivered by Matthews, P.J.A.D.

Matthews

[175 NJSuper Page 57] Appellants UA-Columbia Cablevision of New Jersey (UA-Columbia) and Suburban Cablevision (Suburban) appeal from an order of the Board of Public Utility Commissioners (Board) granting certificates of approval to Meadowlands Communications Systems, Inc. (Meadowlands) to construct and operate a cable television system in seven Bergen and Hudson County communities. UA-Columbia appeals the issuance of certificates of approval to Meadowlands for the communities of North Arlington, Lyndhurst, Rutherford, East Rutherford and Carlstadt in Bergen County. Suburban appeals the decision as to Kearny and East Newark located in Hudson County.

There is no dispute as to the facts in this case -- only the Board's interpretation of those facts. Three cable television companies are contending for the right to own and operate cable television systems in seven Bergen and Hudson County communities. The primary issues are arbitrary denial of municipal consents and regionalization.

Meadowlands Communications Systems, Inc. and West Hudson Communications Systems, Inc. are recently established cable television companies. Guy Savino, a native of Lyndhurst, is the president, founder and sole owner of the stock of both corporations. According to Savino, the corporations were established to provide a communication network in Kearny and the Meadowlands peninsula. The underlying concept was to create a system in which local residents and civic leaders would be able to present local origination programs over the cable television network. That was the actual premise on which Meadowlands presented its successful application to the subject communities. It readily admits that it was not chosen to build the cable T.V. system on the basis of its technical or financial strength.

Comcast, with headquarters in Bala-Cynwyd, a suburb of Philadelphia, is a publicly held corporation with an annual volume of business upwards of $12 million. Currently, 70% of its assets are invested in the cable television business. Comcast operates ten cable T.V. systems servicing approximately 70,000 subscribers in some 26 municipalities across the United States. Comcast currently has an agreement with Meadowlands to purchase 85% of Meadowlands' stock, provided that the Board approves the transfer and grants certificates of approval for the construction of cable T.V. systems in all seven communities. Comcast would then provide the financing to build the system. It appears that the day-to-day operation of the system would remain in the hands of Savino.

UA-Columbia is a nationwide multi-system operator that has been operating in New Jersey since 1970-71. At the time of the hearings UA-Columbia had completed construction on 14 cable television franchises throughout northern New Jersey. At the municipal hearing UA-Columbia primarily stressed its technical

and financial capability to build and operate a cable television system.

Suburban Cablevision, at the time of the hearings, was a cable television company serving some 22,000 subscribers in Essex and Hudson Counties. MacLean-Hunter Cable Television Limited, a Toronto based firm, owns 75% of the stock of the corporation and provides the financial backing for the construction of the cable T.V. systems. Suburban currently operates a system in Harrison, which is immediately adjacent to Kearny.

Meadowlands and UA-Columbia both first applied for municipal consents in the communities of Lyndhurst, North Arlington, Rutherford, East Rutherford and Carlstadt in 1973. Despite a strong presentation by UA-Columbia as to its financial and technical capability to build a cable television system and the introduction of a letter from the office of Cable Television stating that Meadowlands was financially unable to build a system, UA-Columbia did not receive any municipal consents.

Suburban and Meadowlands were the principal contenders for the municipal consents in East Newark and Kearny. Again, despite its lack of experience in the cable television business, Meadowlands received consents in both communities.

Following receipt of the municipal consents Meadowlands began the search for the financial and technical support needed to construct a cable television system. Meadowlands spent approximately $54,000 in this effort. However, it had little success until January 1976 when Meadowlands received a loan offer from Fidelity Union Trust Company for $1.6 million. Having received the necessary financial support for the construction of a cable television system, Meadowlands filed its applications for certificates of approval with the Board of Public Utilities pursuant to N.J.S.A. 48:5A-15 on March 12, 1976. Seven days later the Office of Cable T.V. (OCTV) advised Meadowlands that "[t]he municipal consents involved are . . no longer effective." The basis for that decision was the recently promulgated regulations (N.J.A.C. 14:18-11.19 and 11.23) which required holders of municipal consents granted prior

to the effective date of the regulations to file for certificates of approval within 30 days after the effective date of the regulations (December 18, 1975). The OCTV advised each affected municipality of the invalidity of the Meadowlands' consents.

Meadowlands sought and obtained an extension of time until June 1, 1976 to satisfy OCTV as to the viability of its plans and to persuade OCTV to accept the petitions for certificates of approval. Meadowlands subsequently advised Kearny of this extension and a further possible extension in a letter dated June 2, 1976.

Following receipt of the extension for consideration, Fidelity Union advised Meadowlands that it was cancelling the $1.6 million loan offer. The reason for the decision was not the uncertainty of the Meadowlands' petitions, but rather, a decision by the bank not to pursue any CATV loans. That action left Meadowlands with no financial backing to pursue the cable T.V. system.

Kearny requested a firm statement from the Board as to the viability of the Meadowlands' application on June 8, 1976.

On June 29, 1976 the OCTV advised Meadowlands that no further extensions would be granted, and since Meadowlands had not been able to present additional information as to its financial status, the franchises (or municipal consents) were deemed null and void. Kearny was advised of that decision on July 1, 1976.

The OCTV reversed its decision as to the Meadowlands' petitions on July 12, 1976. At that time the OCTV concluded that the March 12 petitions had been timely filed since the time periods in the regulations did not begin to run until January 21, 1976, the date the regulations were filed with the Secretary of State. The OCTV would now consider the Meadowlands' applications on their merits. The OCTV forwarded copies of this letter to all seven municipalities, including Kearny.

Meadowlands subsequently filed supplementary information on July 20, 1976. Meadowlands also filed a petition seeking permission to transfer 85% of its common stock to a wholly-owned

subsidiary of Comcast Corporation. (An agreement to this effect between Comcast and Meadowlands was executed on November 12 (or 17), 1976.)

Despite the assurances from the OCTV that the Meadowlands' applications would now be considered, Kearny began proceedings to repeal Meadowlands' municipal consents on July 14, 1976, and the municipal consent ordinance was repealed on August 11, 1976.

On October 20, 1976, the night before the commencement of OCTV hearings on Meadowlands' applications for certificates of approval, Kearny held a hearing on the recently filed application of Suburban. Despite objections by Meadowlands as to the propriety of the proceedings, the Kearny mayor and council allowed Suburban to proceed with its presentation. Subsequently, on November 10, 1976, Kearny adopted a resolution awarding the municipal consent to Suburban. An ordinance to this effect was adopted on December 22, 1976.

Hearings on Meadowlands' petitions for certificates of approval began on September 21, 1976 with the first testimony heard on October 21, 1976. UA-Columbia filed its petitions alleging arbitrary denial on November 19, 1976 after the hearings began. In its brief UA-Columbia admits that it did not file these petitions until it saw the problems Meadowlands had in obtaining financing and the vacillation by the OCTV with respect to the validity or invalidity of the Meadowlands' municipal consents.

During the course of the hearings, Kearny and Suburban moved to dismiss the Meadowlands' petition with regards to Kearny on the grounds that Kearny had revoked the Meadowlands' consent. The hearing examiner recommended dismissal of the motion on the ground that even assuming that Kearny effectively revoked the Meadowlands' consent, N.J.S.A. 48:5A-17(b) gives the Board authority to grant certificates of approval ...


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