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In re Alleged Non-Compliance by RCN of NY

March 1, 2006

IN THE MATTER OF ALLEGED NON-COMPLIANCE BY RCN OF NY, A WHOLLY-OWNED SUBSIDIARY OF RCN CORPORATION, WITH THE REQUIREMENTS OF N.J.S.A. 48:5A-15, 16, 17, AND 22 REQUIRING MUNICIPAL CONSENT FROM THE CITY OF JERSEY CITY AND A CERTIFICATE OF APPROVAL FROM THE BOARD FOR NEWPORT COMMUNITY IN JERSEY CITY, NEW JERSEY


On certification to the Superior Court, Appellate Division, whose opinion is reported at 375 N.J. Super. 12 (2005).

SYLLABUS BY THE COURT

(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized).

RCN of New York (RCN) operates a satellite master antenna (SMATV) system which provides cable programming to residents in the Newport Building Complex in Jersey City. The SMATV system receives a microwave signal at a master antenna in Newport and retransmits that signal to the Newport complex through cables that run underneath public roads.

This matter requires the Court to determine whether RCN's SMATV system is a cable system as defined in the Federal Cable Act (Cable Act) and, thus, subject to regulation by this State's Board of Public Utilities (BPU). Under the Cable Act, a cable system that does not use a public right-of-way is exempt from state regulation.

In 2003, the BPU sent an order to RCN stating that RCN's SMATV system is a cable system under the Cable Act and directed RCN to comply with the New Jersey Cable Television Act by filing for a certificate of approval and for Jersey City's consent. RCN conceded that its cables run underneath public roads but claimed that those cables do not "use" a public right-of-way within the meaning of the Cable Act. The BPU then issued an order in which it stated that RCN's running of its cables under a public road is a sufficient use of the public right-of way to qualify RCN as a cable system under the Cable Act.

On appeal, the Appellate Division reversed the BPU and, in a reported opinion, held that RCN's SMATV system is not a cable system under the Cable Act. The BPU appealed and this Court granted certification.

HELD: RCN's Newport facility constitutes a cable system under section 522(7) (B) of the Federal Cable Act and is subject to BPU regulation.

1. To understand and interpret "use," the statutory term in question, we first set forth a discussion of the cable industry's regulatory history and the policies underlying the Cable Act. We need to determine whether RCN's wires use any public right of way within the meaning of section 522(7) (B). Because we find the statue is ambiguous, we then examine agency interpretation of the provision. Finally, we consider whether we are required to defer to that interpretation. (pp. 5-6)

2. The Federal Communications Commission (FCC) laid the foundation for the current dual, state-federal regulatory scheme when it preempted state regulation of operational aspects of cable systems but preserved local control of the non-operational aspects of the industry. The FCC established exceptions that exempt certain cable providers from regulation. Relevant to this appeal is the FCC's 1983 declaratory judgment exempting from state and local regulation those SMATV systems that receive wireless signals into antennas stationed on private property. One year later, Congress passed the Cable Act, which adopted the dual, federal-state regulatory system first established by the FCC. Congress chose to preserve such state regulatory power because, like the FCC, it recognized that localities should be able to exert some control over cable because it crosses public rights of way. (pp. 6-8)

3. Whether a cable provider falls within the ambit of the Cable Act and is thus subject to state regulation hinges on whether its facility qualifies as a cable system. The statute defines a cable system but such term does not include a facility that serves subscribers without using any public right-of-way. (pp. 8-9)

4. The term "using," as employed in section 522 (7) (B) of the Cable Act is ambiguous. The Act does not define that term, nor does legislative history shed light on its proper interpretation. (p. 11)

5 A 1984 United States Supreme Court decision (Chevron) instructs us that if a statute is silent or ambiguous with respect to a specific issue, reviewing courts should look to the interpretation of the agency administering that statute. Because the ambiguous statutory language and legislative history do not resolve what constitutes "use" of a public right-of-way, we therefore consider whether the FCC has provided its own interpretation of that section. We will not afford to the BPU the deference that Chevron provides to federal agencies interpreting federal law. If state courts applied deference to a local authority's interpretation of the Cable Act, it would subvert Congress' goal of achieving a national policy concerning cable communications. (pp. 12-13)

6. The FCC determined that closed transmission paths such as wires "use" a public right-of-way under the meaning of the Act when those paths cross the right of way. The FCC stated that when it had used the word "crossing" in its notice of proposed rule-making , it had not meant to imply anything different from the statutory term "using," and that if the SMATV facility does cross a public right-of-way, it will be considered a cable system for purposes of the Cable Act and FCC rules. The FCC justified its decision to equate "use" with cross in explaining that states and localities should be able to regulate cable facilities with closed transmission paths that cross public rights-of-way because of the physical imposition and substantial construction upon those rights-of-way by the closed transmission paths. (pp. 13-18)

7. Under Chevron, this Court only must determine that the FCC's interpretation is not arbitrary, capricious, or manifestly contrary to the statute. We hold that the interpretation meets Chevron's deferential standard. The FCC's interpretation rationally relates to the intrusion of wires and cables on public rights-of-way while promoting growth and increased competition in the field of satellite transmission. Because many of the local regulatory powers triggered by such a crossing under the FCC's interpretation relate directly to the ability and right of municipalities to manage and seek compensation for that physical intrusion, the FCC's interpretation is rational. (pp. 19-20)

8. The interpretation is reasonable not only because it enables municipalities to manage and seek compensation for the physical intrusion of wires on their public roads, but also because it promotes the growth of wireless technology. The FCC has long exempted wireless video providers from regulation to entice investment in the field of satellite transmission. Freedom from obtaining a franchise, annual fees, compliance with local customer service laws, and all the other responsibilities concomitant with regulation is a rational means of motivating companies to pursue research, development, and investment in the wireless field. (pp. 20-21)

9. The FCC's "use"-equals-"cross" interpretation has the distinct advantage of providing a clear rule of law. If Congress had intended to carve out an exception for minimal use, it could have done so expressly. Section 522(7) (B) does not evidence such an intent. (pp. 21-22)

10. Applying the FCC's interpretation to the facts of this appeal, and because RCN admits that its wires cross River Drive South and Newport Parkway, we conclude that RCN's facility constitutes a "cable" system within the meaning of section 522(7) (B) and is subject to BPU regulation. We add only that we find no reason to grandfather RCN. When RCN assumed operation of the SMATV facility, it was or should have been aware that the facility's wires run underneath roads that had been dedicated to the public in prior years. (p. 22)

The judgment of the Appellate Division is REVERSED and the matter is REMANDED to the BPU for proceedings consistent with this opinion.

CHIEF JUSTICE PORITZ and JUSTICES LONG, LaVECCHIA, ALBIN, WALLACE and RIVERA-SOTO join in ...


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