Hastie, Chief Judge, and Maris and Adams, Circuit Judges.
This case presents the question whether the regulatory arrangement promulgated by the Federal Communications Commission (FCC) to control the growth of community antenna television (CATV), has been applied to petitioner-appellee in a manner depriving it of due process. Principally at issue is the application of the FCC's automatic stay provision to the proposed CATV operation of Bucks County Cable TV, Inc. (Bucks).
A community antenna or cable television system picks television signals off the air with a specialized receiving antenna, amplifies them, and transmits them through coaxial cable to the television receiving sets of home viewers who pay for the service.
The main cable television growth has been in areas of limited television service where off-the-air signals are available from only one or two stations. In these areas, CATV's main attraction has been its ability to offer subscribers a full complement of network programming. More recently CATV systems have spread into the nation's larger cities which already receive the three major networks. Aside from improved reception, CATV systems are able to supply subscribers in the larger cities with an even greater selection of programs by importing signals of non-network stations from other communities.
On April 22, 1965, the FCC released a Notice of Inquiry and Notice of Proposed Rule Making, 1 F.C.C. 2d 453, proposing to regulate all CATV operations. In the notice, the FCC expressed particular concern with cable television's recent movement into the nation's major television markets. The FCC and Congress had previously decided that the development of UHF broadcast stations was essential for the achievement of adequate local interest programming within the major markets. The FCC was primarily concerned in the notice with the effect that the importation of signals from outside communities would have on the ability of UHF stations to develop as effective outlets for local self-expression.
In 1965, subsequent to the release of the Notice of Proposed Rule Making, Bucks received municipal franchises to establish and operate CATV systems in five Bucks County, Pennsylvania communities. Bucks planned to carry to its subscribers the signals of all the Philadelphia stations and to import the signals of four New York City non-network stations. Bucks considered the carriage of New York signals necessary to attract a sufficient number of subscribers to make its operation profitable.
On March 8, 1966, in its Second Report and Order, 2 F.C.C.2d 725, the FCC announced regulations for cable television operations, 42 C.F.R. 74.1100-74.1109. The Commission found that the importation of signals from other communities into the major markets posed a serious threat to the development of UHF broadcasting within the major markets. CATV systems were, therefore, restricted from importing into any of the nation's 100 largest television markets the signals of outside television stations at least where the signals of those stations would be extended beyond their Grade B contours.*fn1 47 C.F.R. 74.1107(a).
In addition, the FCC adopted a procedure whereby it could resolve objections to any proposed CATV operation before it commenced service. It provided that a CATV system was required to give notice to all television broadcast stations within whose Grade B contours it planned to operate, at least thirty days prior to commencing new service. 47 C.F.R. 74.1105(a). If within thirty days after such notice a station objected to an aspect of the proposed service, the challenged portion of that service would be stayed pending consideration by the FCC. 47 C.F.R. 74.1105(c). The rules also provide that in such a case "the Commission will expedite its consideration and promptly issue a ruling * * *". 47 C.F.R. 74.1109(f).
The five communities in which Bucks was franchised to establish CATV systems are all part of the Philadelphia television market, being within the prime reception area or Grade A contour of the Philadelphia broadcast stations. Of these five communities, Falls Township, less than ten miles from Philadelphia, is also within the fringes of the Grade B contours of the New York City independent stations. Bucks decided to construct a CATV system only in Falls Township. It contends that its decision was based on the belief that the carriage of New York Grade B signals into Falls Township was authorized by the existing rules.
In September, 1966, six months after the release of the Second Report and Order, Bucks began construction in Falls Township. Over approximately the next two years, it invested $267,000 in out-of-pocket expenditures and committed itself to $150,000 of long term expenditures. On May 17, 1968, in compliance with the rules, Bucks gave notice to area stations of its intention to commence service. Two Philadelphia UHF stations filed timely petitions objecting to that part of Bucks' proposed service which contemplated carriage of New York City signals. The objections put into effect the automatic stay provision of section 74.1105(c) which prohibited Bucks from carrying the challenged signals pending consideration by the FCC. The parties filed extensive pleadings and on August 7, 1968, the matter became ripe for consideration. On October 23, 1968, with no action having been taken by the FCC, Bucks filed a petition for temporary relief requesting permission to commence carriage of the New York signals pending the FCC's determination of the UHF stations' objections.
On December 13, 1968, the FCC released a Notice of Proposed Rule Making and Notice of Inquiry, 15 F.C.C.2d 417, in which it proposed revisions of its CATV rules. The new rules were intended "to substitute a definitive policy for the evidentiary hearing procedure" adopted in the Second Report and Order. The FCC dealt directly with the situation in which the Grade B contour of a station in one market overlaps a portion of another market. Under the new standards a CATV system would be prohibited from importing signals from one major market into a community within 35 miles of the center of another major market without the consent of the originating broadcast station. Since Falls Township is less than ten miles from Philadelphia, and the New York stations have thus far refused retransmission consent, the new rules would effectively bar Bucks from importing the New York City signals.
Pending final action on the proposed rule changes, the FCC suspended all action on CATV systems awaiting its approval and announced that CATV operations would be authorized to commence service only if "entirely consistent with the proposed rules." 15 F.C.C.2d 417 at para. 51 and 52. Only CATV systems lawfully in operation prior to December 20, 1968, the date of publication of ...