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March 28, 1969

The UNITED STATES of America and The Federal Communications Commission and Robert T. Bartley, Kenneth A. Cox, Rosel H. Hyde, Nicholas Johnson, H. Rex Lee, Robert E. Lee, James J. Wadsworth

The opinion of the court was delivered by: BODY

 BODY, District Judge.

 The Commission, on the other hand, argues that this Court does not have jurisdiction, and even if it did, the plaintiff is without "clean hands" in seeking equitable relief. In addition, the Commission argues that no undue delay exists in disposing of plaintiff's case before the Commission.


 Plaintiff was organized to establish and operate a community antenna television system in various Bucks County communities. During 1965 the governing bodies of Warminster, Bensalem, Warrington, Lower Southampton and Falls Townships in Bucks County passed ordinances granting plaintiff franchises to establish and operate CATV systems in each of the townships. The Falls Township ordinance was enacted on December 2, 1965. Plaintiff's plan was to carry all of the Philadelphia VHF and UHF stations and the four New York independent stations. (KYW-TV, WFIL-TV, WCAU-TV, WIBF-TV, WPHL-TV, WUHY-TV, WKBS-TV, Philadelphia; WHYY-TV, Wilmington; and WNEW-TV, WOR-TV, WPIX, WNDT, New York).

 On February 18, 1966 the Broadway Maintenance Corporation acquired Bucks County Cable TV, Inc. (Broadway Maintenance Corporation has been substituted as plaintiff in this action.) When Bucks County Cable TV, Inc. was purchased it had spent approximately $32,000 on the five antenna system franchises.

 On March 8, 1966, to be effective on March 17, 1966, the Federal Communications Commission issued its Second Report and Order, 2 FCC 2d 725 (1966) and promulgated rules intended to regulate CATV systems for the first time. (47 CFR, Subpart K, Sections 74.1100 through 74.1109.) Section 74.1107(a) *fn3" restricted the carriage by CATV systems of so-called "distant signals" into homes in the one hundred largest television markets. In essence, the rule means that unless a television broadcasting station transmits a signal of at least Grade B in quality into one of the one hundred largest television markets, a CATV system operating within that market is prohibited from supplying that particular television station to its subscribers.

 New York is the largest or number one television market in the country. Philadelphia is fourth. This rule meant that plaintiff could carry New York signals in Bucks County communities so long as the area served fell within the Grade B contour of the particular New York station being retransmitted. An exception might be made, however, under footnote 69 *fn4" of the Second Report which covers situations like plaintiff's where the community antenna system proposed to serve an area included within the Grade B contours of two major areas, viz., New York (1) and Philadelphia (4).

 The rules further provided for notification prior to the commencement of new service. Notice goes to all television stations with Grade B signals in the community of the system. Section 74.1105(a) in addition provides that such notice by the new system shall be given:

"* * * within sixty (60) days after obtaining a franchise or entering into a lease or other arrangement to use facilities; in any event, no CATV system shall commence such operations until thirty (30) days after notice has been given * * *"

 Section 74.1109 provides for procedures to be followed when a waiver of rules is sought, such as the footnote 69 situation. This same section provides:

"Where a petition involves new service to subscribers (other than service coming within the provisions of 74.1107(a) of this chapter), the Commission will expedite its consideration and promptly issue a ruling whether on the merits of the petition or on the inter-locutory question of temporary relief pending further procedures."

 Section 74.1105(c) provides for an "automatic stay" on new service where another station applies for a waiver of the rules (as in the case of a footnote 69 situation):

"Where a petition with respect to the proposed service is filed with the Commission, pursuant to § 74.1109 of this chapter, within thirty (30) days after notice, new service which is challenged in the petition shall not be commenced until after the Commission's ruling on the petition or on the interlocutory question of temporary relief pending further procedures * * *"

 The plaintiff engaged the services of the George P. Adair Engineering Company, specialists in the field, to conduct a survey and prepare a report showing the Grade B contours of the New York stations. On August 26, 1966 Adair reported that although some of the five communities were within the Grade B contours of some of the New York television stations, only Falls Township was within the Grade B contour of all of the independent New York television stations. Since plaintiff had determined that it must carry the New York stations to be profitable, it decided to construct and market a CATV system in Falls Township only.

 On May 17, 1968, plaintiff gave notice of new service to area television stations required by Section 74.1105(a). On June 17, 1968 two Philadelphia UHF stations, Channels 17 and 29, filed a petition for waiver of the Rules with the Commission under Section 74.1109(a). The petition admitted that Falls Township was within the Grade B contours of the New York television stations but requested the Commission to prohibit plaintiff's proposed service on the ground that it would adversely affect the ability of their UHF stations to maintain a usable and high quality local service. (This is the kind of exception mentioned in footnote 69 of the Second Report, 2 FCC 2d at 786.) Although the Federal Communications Commission neither reviewed the merits of the UHF petition nor took other action on the petition, plaintiff's proposed new CATV service was "automatically stayed" under Section 74.1105(a). On July 17, 1968, the plaintiff filed an "Opposition" to the UHF petition with the FCC. On August 7, 1968, the UHF stations filed a reply.

 On October 23, 1968 plaintiff filed a "Petition for Temporary Relief" with the FCC requesting that the FCC permit plaintiff to commence service from already constructed facilities pending a hearing. The FCC denied this request in a Memorandum Opinion and Order adopted January 22, 1969, after the first hearing had taken place before this Court. It stated, "Bucks County has made no showing to justify the extraordinary relief requested."

 The evidence adduced by plaintiff shows that by October the delay by the FCC in hearing the petition by the UHF stations was seriously threatening plaintiff's business. The plaintiff had over 800 applications for service and a number of them had made their deposits. Some customers were canceling their contracts and others were complaining about plaintiff's failure to commence service. While plaintiff could have transmitted the Philadelphia stations, it was clearly the objected-to New York signals that make plaintiff's service attractive.

 On November 15, 1968, the two objecting UHF stations filed their answer to plaintiff's petition for temporary relief. On November 25, 1968, plaintiff filed its reply with the Commission. On December 4, 1968, the UHF stations filed a Motion to Strike with the FCC, which was the last paper filed with the FCC by the parties on this matter now before this Court.

 Then, on December 13, 1968, without having taken any action on the UHF stations' petitions, the FCC made public its Proposed Rule Making and Notice of Inquiry, Docket No. 18397. The proposal intended to "grandfather" the presently existing CATV systems which would otherwise be prohibited or restricted by the proposed rules, if they had commenced service, not in violation of existing rules, prior to December 20, 1968.

 As part of the FCC's "Interim Procedures", under the proposed rules, paragraph 51 states:

"Effective upon the issuance of the Notice, the Commission will halt the hearing process in all top 100 market proceedings (including those with a 'footnote 69' issue) wherever it stands * * *"

 Then paragraph 52 continues:

"Commission action on pending and future Section 74.1109 petitions of this nature will be held in abeyance pending the outcome of this procedure."

 Under the proposed rules a 35-mile zone would replace the Grade B contour and the "footnote 69" situation. Paragraph 49 states:

"We are proposing further to codify in the rules the so-called 'footnote 69' situation, i.e., where a central metropolitan area of one major market falls within the predicted contours of stations in another major market, so as to avoid the San Diego type of hearing and preserve the local character of such markets against the element of unfair competition. For this purpose it appears that the same 35 mile zone may be appropriate. * * *"

 The statement continues:

"The attached rules would prohibit a CATV system operating in a community located wholly within the 35 mile zone of a television station in a major market from carrying the signal of a television station in another major market unless the community of the system is also located wholly within the 35 mile zone of the station in the other market or unless the retransmission consent requirement is fulfilled."

 Thus, it would be possible for a system like Bucks County to transmit the New York stations if it (1) obtained consent to retransmit from the New York stations, and (2) obtained permission from the FCC under paragraph 52 of the proposed rules which reads:

"A CATV system may request relief from the proscription of Section 74.1105(c) in order to carry such signals in areas which would be permissible under the attached proposed rules. Such relief will be granted only to the extent that the request is entirely consistent with the proposed rules and with the public interest, as evidenced by the considerations in the particular case."

 On December 19, 1968, in disregard of the stay imposed by Section 74.1105(c) and in order to obtain the benefit of the "grandfathering" provisions of the proposed new rules, the plaintiff commenced carriage of the four New York independent television stations on its Falls Township CATV system. *fn5"

 The instant action was filed on December 24, 1968.

 On January 8 and 9, 1969, the plaintiff tried to obtain permission from the four New York stations for the retransmission of their signals into Falls Township. Only Channel 13, the educational channel, agreed to give permission; *fn6" the others refused.

 On January 13, 1969, hearing in this cause took place and was continued to January 28, 1969, for oral argument.

 On January 22, 1969, the FCC adopted a Memorandum Opinion and Order which was released on January 23, 1969. The main purpose of the order was to grant plaintiff a hearing and to consolidate its case with that of twenty-four other stations in the Delaware County Cable Television Company case, Docket No. 18140, et al. The order states, inter alia, that the petitioners, the UHF stations, Channels 17 and 29, have the burden of proceeding and the burden of proof with respect to a ...

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