United States District Court, E.D. Pennsylvania
February 11, 2004.
RCN CORPORATION and RCN TELECOM SERVICES OF PHILADELPHIA, INC., Plaintiffs,
NEWTOWN TOWNSHIP, BUCKS COUNTY, COMMONWEALTH OF PENNSYLVANIA, Defendant
The opinion of the court was delivered by: JAMES KELLY, Senior District Judge
MEMORANDUM AND ORDER
Presently before the Court is a Motion for Summary Judgment filed by
Defendant Newtown Township (the "Township"), located in Bucks County,
Pennsylvania requesting that judgment as a matter of law be entered in
its favor, dismissing the Complaint by which Plaintiffs RCN Corporation
and RCN Telecom Services of Philadelphia, Inc. (collectively, "RCN") seek
relief under the Cable Communications Policy Act of 1984 (the "Act"),
47 U.S.C. § 545 (2003). In its Complaint, RCN, a cable television
operator, seeks, inter alia, modification of the "Non-Exclusive Cable
Television Franchise Agreement" (the "Franchise Agreement") it entered
into with the Township, the franchising authority, claiming that its
provisions are commercially impracticable within the purview of the Act.
The Township contends that although the Act authorizes some modifications
of franchise agreements, RCN's proposed modifications are beyond the
scope of the Act's authority, and RCN effectively seeks to terminate and
replace the current Franchise Agreement. For the following
reasons, the Township's Motion for Summary Judgment is GRANTED.
On December 16, 1998, the Township and RCN entered into the Franchise
Agreement which granted RCN a 15-year non-exclusive franchise right to
construct and maintain a cable television system for the Township.
In August 2001, RCN met with Township officials to verbally request
modification of the Franchise Agreement, and on October 16, 2001, RCN
submitted its written request to the Township, which included a draft
franchise agreement to that effect. (RCN's Compl. Ex. A.) This draft
proposes several modifications, including the creation of a regional
franchising entity comprised of multiple townships and a larger
geographic scope wherein RCN would install and operate a cable television
system, in contrast to the purely local system agreed upon in the
original Franchise Agreement.*fn1
The Township rejected RCN's proposed service area modification, and, in
turn, served RCN with a notice of default under the Franchise Agreement.
Reacting to RCN's perceived
default, the Township also drew down on RCN's $250,000.00 letter of
credit and made a claim against a $100,000.00 performance bond RCN posted
pursuant to the Franchise Agreement terms. In a letter to the Township
dated December 20, 2001, RCN objected to the notice of default and to the
Township's allegation that it was in non-compliance with the Franchise
Agreement. (Compl. Ex. E.)
On February 28, 2002, the Township's Board of Supervisors (the "Board")
held a public hearing to determine whether RCN breached the Franchise
Agreement. On that same day, before the hearing convened, RCN
hand-delivered a written request to the Township seeking the same
modifications of the Franchise Agreement as set forth in RCN's October
16, 2001 proposal, and restoration of the $250,000.00 letter of credit
drawn down by the Township in November 2001. (Compl. Ex. F.) The Board
did not address RCN's modification request during that hearing.
On March 14, 2002, the Board issued an opinion stating that RCN
committed anticipatory material breach of the Franchise Agreement and
entered judgment against RCN for $2,192,000.00 in liquidated damages.
(Compl. Ex. G.) On April 12, 2002, RCN appealed the Board's decision to
the Bucks County Court of Common Pleas where RCN avers it is currently
Since RCN's request for modification was not addressed at the February
28, 2002 hearing, the Board held a public hearing
addressing that request on August 14, 2002. On August 28, 2002, the
Board denied RCN's petition for modification, prompting RCN to file the
instant action for declaratory and injunctive relief pursuant to Section
545 of the Act.*fn2
RCN contends that the Township's refusal to modify the Franchise
Agreement violates Section 545, which permits modification of franchise
"facilities or equipment" in the event the agreement provisions become
commercially impracticable for the cable operator. See
47 U.S.C. § 545(a)(1)(A). In its Complaint, RCN petitions this Court for
a trial de novo, to modify the Franchise Agreement's commercially
impracticable provisions, vacate the $2,192,000.00 judgment rendered by
the Board, and order the Township to restore RCN's $250,000.00 letter of
credit. Further, RCN requests an order staying the Township's claim
against the $100,000.00 performance bond and the action in the Bucks
County Court of Common Pleas.
In its instant Motion for Summary Judgment, the Township
contends that there is no genuine issue of material fact in dispute
as RCN's modification request is neither a proper modification request
nor an allowable modification under the Act.
II. STANDARD OF REVIEW
Pursuant to Federal Rule of Civil Procedure 56(c), summary judgment
"shall be rendered forthwith if the pleadings, depositions, answers to
interrogatories, and admissions on file, together with the affidavits, if
any, show that there is no genuine issue as to any material fact and that
the moving party is entitled to a judgment as a matter of law."
Fed.R.Civ.P. 56(c). Thus, this Court is required, in resolving a motion
for summary judgment under Rule 56, to determine whether "the evidence is
such that a reasonable jury could return a verdict for the nonmoving
party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). In
making this determination, the evidence of the nonmoving party is to be
believed, and the district court must draw all reasonable inferences in
the nonmoving party's favor. Id. at 255. Furthermore, while the movant
bears the initial responsibility of informing the court of the basis for
its motion, and identifying those portions of the record which
demonstrate the absence of a genuine issue of material fact, Rule 56(c)
requires the entry of summary judgment "after adequate time for discovery
and upon motion, against a party who fails to make
a showing sufficient to establish the existence of an element essential
to that party's case, and on which that party will bear the burden of
proof at trial." Chelates Corp. v. Citrate, 477 U.S. 317, 322-23 (1986).
A. The "Modification" Requested
The parties agree that the issue is whether RCN's request for
modification of the Franchise Agreement falls within the ambit of Section
545 of the Act.
RCN proposes to establish a regional franchising authority which would
be comprised of Newtown Township, the only area covered in the original
Franchise Agreement, in addition to the following political bodies:
Newtown Borough, Lower Makefield Township, Middletown Township,
Northampton Township and Warmister Township. (Compl. Ex. H Ex. 4 Sec. 1
¶ K (defining "Franchising Authority" within the Proposed Cable
Television Franchise Agreement); see also Def.'s Br. Supp. Summ. J. at
The Township contends that RCN's proposal does not request a
modification of "facilities or equipment" or "services," pursuant
to Section 545 of the Act, and, even if it did, the Township does
not have the power or jurisdiction to grant RCN's regional modification
request. (Def.'s Reply Br. Supp. Summ. J. at 5.) RCN, however, argues
that its modification request seeking the creation of a regional
authority and a greater geographic region of service does, in fact,
directly pertain to the Franchise Agreement's "facilities or equipment,"
and "services," and, therefore the modifications are well within the
ambit of Section 545 of the Act.
The narrow question before the Court is whether this proposed
modification that expands the scope and geographic extent of the region
or area initially covered by the Franchise Agreement is a proper
modification request relating to "facilities or equipment" or to
"services" as permissible under Section 545.
B. Relevant Provisions of the Act
To that end, Section 545 of the Act permits cable operators to seek
modification of a franchise agreement when requirements for "facilities
or equipment" become commercially impracticable to perform,*fn4 or when
the operator's desired deviation from the
contracted service requirements continue to maintain the mix, quality,
and level of services.*fn5 47 U.S.C. § 545(a)(1).
If a request for modification under Section 545 of the Act has been
denied by the final decision of a franchising authority, a cable operator
may petition a United States district court for relief under the Act.
47 U.S.C. § 555(a)(1). In this matter, the Board, acting as the
franchising authority, issued its final decision when it denied RCN's
request for modification and, thus, this Court is authorized to review
RCN's modification petition under the Act. See Cablevision Systems Corp.
v. Town of East Hampton, 862 F. Supp. 875, 887 (E.D.N.Y. 1994).
The Act permits modification of a franchise agreement only when it
relates to "facilities or equipment" or "services." Specifically, Section
545 of the Act provides:
During the period a franchise is in effect, the
cable operator may obtain from the franchising
authority modifications of the requirements in
(A) in the case of any such requirement for facilities
or equipment, including public, education, or
governmental access facilities or equipment, if the
cable operator demonstrates that (i) it is
commercially impracticable for the operator to comply
with such requirement, and (ii) the proposal by the
cable operator for modification of such requirement is
appropriate because of commercial impracticability; or
(B) in the case of any such requirement for services,
if the cable operator demonstrates that the mix,
quality, and level of services required by the
franchise at the time it was granted will be
maintained after such modification.
47 U.S.C. § 545(a)(1) (emphasis added).
Permissible modifications under the Act are limited as they must
initially qualify as modifications of "facilities or equipment" or
"services." First, by explaining how "services" and "facilities or
equipment" may be regulated, Section 544 of the Act (the "SFE Section")
provides an intelligible framework for permissible requirement
modifications as contemplated under the Act. Second, as Section 545
follows in succession to the SFE Section and authorizes modification of
"services" and "facilities or equipment" requirements, Section 545's use
of the terms "services" and "facilities or equipment" should be construed
consistent with the framework first laid out by the SFE Section.
While Section 545 does address the grounds for permissible modification
of requirements "for services" and "for facilities or equipment," it does
not provide for changes that merely involve or relate to such things. The
terms "services" and "facilities or equipment" are not defined in the
Act, so the Court will employ the doctrine of noscitur a sociis as an aid
in its understanding of those terms. See In re Continental
Airlines, 932 F.2d 282, 288 (3d Cir. 1991) (deriving the meaning of an
unclear word from words immediately surrounding it). By employing this
doctrine, the meaning of ambiguous statutory terms may be derived from
the meaning of accompanying terms. Id.
1. "Services" Interpreted
The SFE Section allows a franchise authority to establish requirements
for "broad categories of video programming or other services."
The term "services" is not defined within the text of the Act, but
definitions of three other terms in Section 522, the Act's definition
section, provide guidance. First, the term "cable service," which
contains the word "service," is defined as follows:
(A) the one-way transmission to subscribers of (i)
video programming, or (ii) other programming service,
(B) subscriber interaction, if any, which is required
for the selection or use of such video programming or
other programming service;
47 U.S.C. § 522(6). In this definition, a service is something that is
communicated to or received from cable subscribers. Second, contained
within that definition of "cable service" is the term "video programming"
which is defined as the "programming provided by, or generally considered
comparable to programming provided by, a television broadcast station."
47 U.S.C. § 522(20). By comparing video programming to a television
broadcast, it seems reasonable that a cable service can be the viewable
content of a cable company's transmissions. Third, also found within the
Act's definition of "cable service," is the term "other programming
service," which is defined as the "information that a cable operator
makes available to all subscribers generally." 47 U.S.C. § 522(14). The
focus of the service here is that it is information. Since these defined
terms all relate to and are used in conjunction with the term "service,"
and these terms appear to address cable transmission or programming
directly, it stands to reason that "services" relate to cable
programming. And, in light of the Act's definitions and both the SFE
Section's and Section 545's focus on cable communications provided by
cable operators through a cable franchise agreement, the term "services"
appears to be interchangeably used by the Act with the term "cable
services," as defined by Section 522.
Further, the Act's SFE Section forbids franchising authorities from
regulating "services" provided by a cable operator, but allows
franchising authorities to require that cable operators:
(1)Provide 30 days' advance notice of any change
in channel assignment or in the video programming
service provided over any such channel.
(2) Inform subscribers, via written notice of any
change in channel assignment or in the video
programming service provided over any such channel.
47 U.S.C. § 544(h). The SFE Section further refers to "services"
by stating that a franchise authority may enforce any permitted
franchise requirements "for broad categories of video programming or
other services." 47 U.S.C. § 544(b)(2)(B). The SFE Section is instructive
because it makes a bright-line distinction, seemingly guided by First
Amendment concerns, in allowing the franchise authority to regulate
non-expressive aspects of "services," such as requiring that notice be
given about the franchisee's changes in programming , while precluding
the franchise authority from regulating expressive content of cable
services, such as criteria that would require the franchisee to tailor
program content to reflect the franchise authority's aesthetic faculties.
Under the framework of the SFE Section, specific regulation of
"services" is generally prohibited because it would impose one person's
taste upon another person. A reasonable conclusion would be that the term
"services" is the subject matter transmitted between a cable operator and
2. "Facilities or Equipment" Interpreted
The terms "facilities" and "equipment" are not defined in the Act, but
a reasonable assumption is that the terms are interrelated since they
seemingly are always coupled in various sections of the Act.
Specifically, Section 522, the SFE Section and Section 545 refer to the
terms collectively as, "facilities or equipment." Section 545
particularly supports this
interrelation as it sets forth one test, a commercial impracticability
test, that applies to a modification of either a "facilities or
equipment" requirement by which a franchise authority must allow the
Next, Section 522, the Act's definition section, provides guidance to
the meaning of "facilities or equipment." Section 522 defines a "cable
system," in relevant part, as a "facility, consisting of a set of closed
transmission paths and associated signal generation, reception, and
control equipment that is designed to provide cable service which
includes video programming and which is provided to multiple subscribers
within a community." 47 U.S.C. § 522(7)(emphasis added). In this
context, facilities are structures comprised of equipment that are
technologically designed to effectuate the cable programming
Morever, the SFE Section addresses regulation of "facilities or
equipment." The SFE Section allows the franchising authority, here, the
Township, to establish and enforce certain requirements for "facilities
or equipment." 47 U.S.C. § 544(b)(1)-(2). As discussed in the Services
section above, the SFE Section, outlines that a franchise authority may
not regulate or set-up
requirements regarding the content of cable programming, but may set
requirements for the facilities and equipment by which such programming
is transmitted. 47 U.S.C. § 544; see Robert F. Copple, Cable Television
and the Allocation of Regulatory Power: A Study of Governmental
Demarcation and Roles, 44 Fed. Comm. L.J. I, 86-7 (1991) (discussing the
Act's SFE Section). In sum, what the Act does allow a franchise authority
to regulate, and in turn, modify, are the intricacies of the physical
structures themselves, the "facilities or equipment" through which cable
programming is transmitted.
C. Legislative History of The Act
Even with examining the accompanying words, the meanings of the terms
"services" and "facilities or equipment" under the Act are not entirely
transparent from the text alone, and therefore, this Court looks to the
Act's legislative history for additional guidance on the scope of the
terms "services" and "facilities or equipment." The parties disagree as
to whether this Court should review the legislative history of the Act.
The United States Court of Appeals for the Third Circuit has counseled,
"it is always appropriate to look to the legislative history to help
interpret a statute." Paskel v. Heckler, 768 F.2d 540, 543 (3d Cir.
1985); see generally In re Continental Airlines, 932 F.2d 282, 288 (3d
Cir. 1991) (noting that both the legislative history
and the doctrine of noscitur a sociis be employed to clarify ambiguity).
1. "Facilities or Equipment" Examined
The SFE Section distinguishes between impermissible regulation of the
expressive components versus permissible regulation of the non-expressive
components of a franchise agreement. See 47 U.S.C. § 544; see also
Copple, 44 Fed. Comm. L.J. 1, 87 (1991). The Act's legislative history
provides some clarity as to the meaning of the terms "facilities or
equipment," and is best illustrated through analogy: "facilities or
equipment" represent the "hardware" of a cable system while "services,"
as discussed infra, represent the "software." Copple, 44 Fed. Comm. L.J.
1, 87-8 (1991). "Facilities or equipment" serve as a medium for cable
services, just as hardware serves as a medium for data-processing or
Two discussions within the House Report help to explain the scope of
"facilities or equipment." First, under a section entitled "Services and
Facilities," the House Report explains:
Many franchise agreements in effect today specify in
great detail the type of facilities that a cable
operator must construct (e.g. channel capacity,
two-way capability, and `institutional loop' to link
libraries and hospitals), as well as the services that
the operator must provide (e.g., cable news network,
HBO, The Health Channel). . . .
H.R. Rep. No. 98-934, at 26 (1984), reprinted in
1984 U.S.C.C.A.N. 4655, 4663 (emphasis added) [hereinafter House Report].
The second instructive House Report discussion is found under the
section entitled "Regulation of Service, Facilities and Equipment." This
section further details the scope of "facilities or equipment" subject
matter eligible as a permissible modification under the Act:
Facility and equipment requirements may include
requirements which relate to channel capacity; system
configuration and capacity, including institutional
and subscriber networks; headends, and hubs; two-way
capability; addressability; trunk and feeder cable; and
any other facility or equipment requirement, which is
related to the establishment and operation of a cable
system, including microwave facilities, antennae,
satellite earth stations, uplinks, studios and
production facilities, vans and cameras for PEG use.
House Report at 4705. That the word "facility" is used to describe the
physical makeup and capability of its component parts in order to transmit
cable programming, it was contemplated that the terms "facilities or
equipment" relate to the structural and technological design and capacity
of the facility, equipment, and its component parts.
2. "Services" Examined
The SFE Section authorizes regulation of a cable system's structural or
physical components while remaining harmonious with First Amendment
freedom of expression concerns by limiting regulation of cable
programming and services.
First, under the section entitled "Services and Facilities," the House
Report explains that, "[m]any franchise agreements in effect today
specify in great detail . . . the services that the operator must provide
(e.g., cable news network, HBO, The Health Channel)." House Report at
4663. Under the SFE Section of the Act, "services" provided by the cable
operator are the content of cable transmissions provided by the cable
operator. For example, a franchise authority may bind a cable operator to
its offer to provide a category of programming, such as a hearing
impaired channel and service. See Tribune-United Cable v. Montgomery
County, 784 F.2d 1227, 1229 (4th Cir. 1986). Therefore, "`[s]ervices'
could then be characterized as the `software' of a cable system and would
include the actual video programming and other related cable services."
Copple, 44 Fed. Comm. L.J. I, 88 (1991).
Despite RCN's characterization of its modification requested under the
"services" or "facilities or equipment" provision of Section 545, RCN's
modification actually requests an expansion of the scope and geographic
extent of the region or area within which the Agreement initially
covered. The crux of RCN's request is to effectively broaden the
Franchise's service area to be regional in scope, creating a contract for
a regional franchise.
RCN mistakenly construes the Act to contemplate such a change as a
modification under Section 545.
As discussed in detail above, Section 545 establishes the situational
threshold that must be met to justify any modifications. The SFE Section
and its counterpart, Section 545, do not contemplate an expansion of the
service area from local to regional, as exists in this matter, as
constituting a proper modification of the "services" and/or "facilities
or equipment" requirements. RCN mistakenly believes that any change that
merely touches upon a facility, piece of equipment, or service
necessarily falls within the purview of Section 545 of the Act.
After a review of RCN's modification request, this Court finds that
there is no genuine issue of material fact as to the nature of RCN's
request. Requiring that the Township consent to replacing the purely
local system agreed upon in the Franchise Agreement with a broader
regional franchising entity comprised of multiple townships over a larger
geographic area, is not a modification as contemplated by Section 545 of
the Act. RCN's requested expansion is not a proper modification of
"facilities or equipment" or "services" requirements within the purview
of the Act. Accordingly, the Township's Motion for Summary Judgement is
Since we find that RCN's request is not a modification as contemplated
by the Act, RCN's remaining requests for declaratory and injunctive
relief are moot.
AND NOW, this ___ day of February 2004, in consideration of the Summary
Judgment Motion filed by Defendant Newtown Township, Bucks County,
Commonwealth of Pennsylvania (the "Township") (Doc. No. 10), the Answer
and Memorandum of RCN in Opposition to (Doc. Nos. 11 & 12), and the
Township's Reply Brief (Doc. No. 13) thereto, it is ORDERED that the
Township's Motion for Summary Judgment is GRANTED.
The Clerk of Court shall enter judgment in favor of Defendant Newtown
Township and against Plaintiffs RCN Corporation and RCN Telecom Services
of Philadelphia, Inc.