Wilentz, Sullivan, Pashman, Clifford, Schreiber, and Handler.
The opinion of the Court was delivered by WILENTZ, C.J.
This case involves a conflict between state and local power in the franchising of cable television companies. It concerns the extent to which regional considerations as perceived by the Board of Public Utilities Commissioners may prevail over local considerations as perceived by the affected municipalities. In particular we are concerned here with the power of the Board to impose a certain cable television service provided by one company upon two non-consenting municipalities which preferred another service from a different company. The Board decision was based on various regional considerations, including its
conclusion that the decision was necessary to assure continued low-cost cable television service to three other neighboring municipalities.
Given the complexity of the matter, we have preceded our detailed discussion of the factual and procedural setting with a general description of the facts and the Cable Television Act, N.J.S.A. 48:5A-1 et. seq. (the Act) (I), followed by the relevant history of the CATV industry and the ACT (II). With this background, the factual and procedural details of the case (including a discussion of the Appellate Division decision) are set forth (III), leading to an analysis of the critical portions of the Act (sections 17(b), (c) and (d)) (IV) and the action of the Board (V). We conclude with a summary of our holding (VI).
GENERAL DESCRIPTION: THE ACT AND THE FACTS
The Act, discussed in more detail below, provides a framework for the issuance of CATV franchises and the regulation of cable television service. The power over cable television, both in franchising and regulation, is divided between the Board and the municipalities. The Board sets certain minimum technical requirements for all cable companies in the State. The municipality then selects a cable television company and the type of service that conform at least to the minimum requirements. The Board has the ultimate power to grant or deny the right to operate where a municipality has given a company consent thereto. The Board's power to override municipal action, whether it be a denial or a consent, is greatest when regional considerations affecting the cable television needs of an area beyond the municipality are threatened by the municipal decision.
The statutory plan is effected by requiring companies to obtain from the Board a certificate of approval in order to
operate, N.J.S.A. 48:5A-15.*fn1 A precondition for the certificate is possession of a consent from the municipality where the company will be operating. (section 22).*fn2 A municipality may, after holding public hearings on the applications for consent (section 23(b)), choose a company or companies that will provide the service which it desires. The municipality is expected to ground its decision on "all requirements" of the Act (section 25), "and of [the] rules, regulations and orders duly promulgated by the director," but to ensure compliance with the Act's terms, a further review by the Board is required. This review, which may require a hearing under certain circumstances, addresses "public convenience and necessity" (section 16(b)) in addition to the matters examined by the municipality, such as the applicant's ability, including financial, to provide the service it proposes and the rates it intends to charge its customers, section 16. Here, the Board has the authority to deny certification to an applicant, even where a municipality has granted consent, if the applicant does not meet the standards set out in section 16.*fn3 In addition, the Board has the task, not explicitly delegated to the municipality, of examining the application in its regional, as well as merely local, context, section 17(b).
Generally, therefore, although it has broad discretion to grant or deny operating certificates, the Board does not dictate to the municipalities what company or type of service they may choose.
The purpose of this two-tiered approach is
to protect the interests of the several municipalities of this State in relation to the issuance of municipal consents for the operation of cable television companies within their several jurisdictions, and to secure a desirable degree of uniformity in the practices and operations of cable television companies in those several jurisdictions . . . . [section 2(c)]
In the case before us, Clear Television Cable Corporation (Clear) held municipal consents for two entire townships (Dover and Berkeley Townships in Ocean County). It was operating on the mainland area of both pursuant to Board certification, but had not obtained certification for the beach areas which are physically separated from the mainland by Barnegat Bay. The subject of this case is Clear's application for these beach certificates, which were also sought by National Video Systems (National). National had been denied consent by the municipalities to operate in the townships, although it presently serves neighboring townships which are contiguous to the beach areas contested by the two companies. National intervened in Clear's beach application proceeding before the Board. The Board heard the two contestants for the beach area and regarded the issue as being whether the cable television needs of the region would be better served by a grant to Clear or to National. It determined that it was empowered to "make its own independent
analysis of "regionalization' factors to determine whether a municipal consent may impede adequate service," Hearing Examiner's Report and Recommendations, I/M/O Application of Clear Television Cable Corp., Docket Nos. 735C-5007 & 746C-6028, 11/30/76, at 21 (Finding 2). On balance it concluded that the cable needs of the region would be better served by a grant to National. The question before us is whether the Board has the authority to make this grant.
THE LEGISLATION AND THE CATV INDUSTRY
The Act balances the interest of municipalities in obtaining cable service that meets their own needs against the interest of the State and the public in assuring that the statewide cable system operates efficiently. The recognition of the dual nature of cable service -- as a regional "network" and also as a consumer service historically subject to local control -- is embodied in section 17 of the Act. The goal of the statute is to
assure that local considerations -- and perhaps local inadequacies -- in any one municipality should not be allowed to affect other municipalities adversely or to inflict upon subscribers a service of lower quality than might reasonably be expected. [State of New Jersey CATV Study Comm'n, Report to the Governor and Legislature (pursuant to Assembly Concurr. Resolu. No. 2041 of 1971), 1972, p.42]
Cable television's dual local/regional nature is based on the purposes and technology of the industry itself. Cable television operates through the transmission of television signals over special cables that run along ordinary utility and public rights of way. Essential to its operation are two types of equipment: the antenna and the cable. Towering antennae are constructed in high places to pick up the broadcast signal, sometimes in locations that are outside the municipality to be served. Cables are strung from the antenna to the customers' homes, at times across one municipality having one service to another having a different service. In this regard, the cable television industry requires intermunicipality cooperation. One of the features that
sets cable television apart from ordinary broadcast television is its unique ability to carry a multiplicity of signals, thereby providing access to the air to many small groups of local origin and interest as well as to national broadcasts.
The cable industry developed initially in New Jersey and elsewhere as a local service subject only to municipal permission to operate on public rights-of-way. Center for Analysis of Public Issues, Crossed Wires: Cable Television in New Jersey, Princeton 1971, pp. 5-7, 9.
Before the enactment of the New Jersey Cable Television Act in 1972, the FCC and local municipalities were the only source of regulation of the industry in this State. FCC regulation was confined to promulgating certain technical and safety standards, integrating the cable system into the over-the-air system, and encouraging cable operators to develop local and community service programming. State of New Jersey CATV Study Comm'n, Report to the Governor and Legislature (Pursuant to Assembly Concurr. Resolu. No. 2041 of 1971) 1972, p.11. Municipalities were primarily concerned with cable's use of public rights of way, and would grant cable television franchises in return for annual fees or taxes and sometimes promises from the companies to provide community access to one or two channels. Ibid. at 9. As part of this municipal regulation, there were problems with cable companies "sitting on" their municipal franchises while a locality remained unserved until the area grew to a threshold population. There were also allegations of municipal corruption in the granting of franchises. See, e.g., CATV Study Comm'n, Report, supra, at 35-36; Crossed Wires, supra, at 22-24. As a result of the lack of centralized planning, cable development in New Jersey by the early 1970s had resulted in a patchwork of service across the State, with some populous communities receiving double cable service and certain rural areas, where cable service was not economically feasible, receiving no service whatsoever. CATV Study Comm'n, Report, supra, at 31-32, 35-36. In response to the problems arising from a lack of central organization assuring sensible regional
development, the Legislature, while recognizing the desire for continued local control, enacted various corrective provisions, including the "regionalization" section of the Act. These provisions were based on the Study Commission's Report that recommended
a comprehensive system of State regulation and supervision, capable of adjusting local conflicts and overriding local considerations wherever the same may tend to vitiate efforts to secure adequate CATV service to all municipalities of the State . . . . [State of New Jersey CATV Study Comm'n, Report to the Governor and Legislature, (Pursuant to Assembly Concurr. Resolu. No. 2041 of 1971) 1972 at 41-42].
The section of the Act that sets forth the "regionalization" power of the Board is 17(b):
In considering any such application, the board shall take into consideration the probable effects upon both the area for which certification is sought and neighboring areas not covered in the municipal consents; and if it finds that the probable effects, for technical and financial reasons, would be to impede the development of adequate cable television service, or create an unreasonable duplication of services likely to be detrimental to the development of adequate cable television service in any area either within or without the area for which certification is sought, it may deny the certificate or it may amend the certificate so as to
(1) direct that areas covered in the application be excluded from the area certified, or
(2) direct that areas not covered in the application be included in the area certified.
Section 17(b)(2) authorizes the Board to require a company to provide service to an area greater than that covered by the consent when necessary to promote efficient cable television development, whether that area is within or without the municipality, if the company has already obtained a municipal consent and is requesting Board certification for an area.*fn4 This power to regionalize under section 17(b) is limited by section 17(c) (if the enlarged area is already subject to a certificate) and, in this
case, its exercise is complicated by section 17(d)*fn5 which restricts the Board's certification power to reverse a municipal denial of consent to instances where the denial is "arbitrary." The meaning and interplay of these sections are treated in detail in part IV.
FACTS AND PROCEDURAL HISTORY
Dover and Berkeley both consist of mainland areas and beach areas. The controversy in this case centers on their beach areas which are located on Island Beach Peninsula. The Peninsula lies parallel to the mainland and is separated from it by Barnegat Bay. The Dover and Berkeley beach strips are thus separated by water from the mainland part of the municipalities. The beach strips themselves are not contiguous; rather they are bordered by the beach municipalities of Lavallette, Seaside Heights and Seaside Park, which receive cable television service from National.*fn6
Until these proceedings the beach strips of Dover and Berkeley had not received cable service at all. The mainland of Berkeley Township was serviced by Clear, which received a municipal franchise covering all of Berkeley Township in 1970, before promulgation of the Act. Clear had not, however, developed the beach area. In November 1973, ...