The Facebook, Inc. v. Connectu, Inc et al

Filing 1359

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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PILLSBURY WINTHROP SHAW PITTMAN LLP RONALD E. VAN BUSKIRK #64683 CHRISTOPHER R. BALL #111280 50 Fremont Street Post Office Box 7880 San Francisco, CA 94120-7880 Telephone: (415) 983-1000 Facsimile: (415) 983-1200 Email: ronald.vanbuskirk@pillsburylaw.com GIBSON, DUNN & CRUTCHER LLP ROBERT S. METZGER #81294 333 South Grand Avenue Los Angeles, CA 90071 Telephone: (213) 229-7000 Facsimile: (213) 229-7520 Email: rmetzger@gibsondunn.com SBC WEST LEGAL DEPARTMENT BOBBY C. LAWYER 525 Market Street, 20th Floor San Francisco, CA 94105 Telephone: (415) 778-1213 Facsimile: (415) 882-4458 Email: bl2153@sbc.com Attorneys for Plaintiff and Petitioner PACIFIC BELL TELEPHONE COMPANY, doing business as AT&T CALIFORNIA UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA ) PACIFIC BELL TELEPHONE COMPANY, ) a California corporation doing business as ) AT&T CALIFORNIA, ) ) Plaintiff and Petitioner, ) ) vs. ) ) THE CITY OF WALNUT CREEK and THE ) CITY COUNCIL OF THE CITY OF ) WALNUT CREEK, ) ) Defendants and Respondents. ) ) ) ) No. C 05-04723 MMC AT&T'S MOTION FOR SUMMARY JUDGMENT ON THE FIRST, THIRD AND NINTH CLAIMS FOR RELIEF [Fed. R. Civ. P. 56 and Local Rule 16-5] Date: April 21, 2006 Time: 9 a.m. Courtroom: 7, 19th Floor [Hon. Maxine M. Chesney] 700388554v2 AT&T'S MOT. FOR SUMM. JUDG. ON FIRST, THIRD, AND NINTH CLAIMS Case No. C 05-04723 MMC 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 700388554v2 TABLE OF CONTENTS Page I. II. III. INTRODUCTION......................................................................................................1 BACKGROUND........................................................................................................3 THE COURT SHOULD GRANT SUMMARY JUDGMENT FOR AT&T ON ITS 253 CLAIM. .............................................................................................. 5 A. Congress Has Preempted Local Regulation Under 253 in Order to Encourage Rapid Deployment of New Telecommunications Facilities and Technologies............................................................................................6 The Franchise Condition Will Affect Telecommunications Services............7 The Franchise Condition Does Not Fall Within 253(b) or (c). ............... 14 B. C. IV. THE COURT SHOULD GRANT SUMMARY JUDGMENT FOR AT&T ON ITS THIRD AND NINTH CLAIMS FOR RELIEF..........................................15 A. B. C. The City's Attempt to Locally Franchise AT&T's IP Video Services Is Preempted by 7901. ................................................................................... 15 California Cable Law Does Not Authorize the City to Franchise AT&T's Video Services................................................................................19 The Federal Cable Act Also Does Not Authorize the City to Locally Franchise AT&T's IP Video Services. ......................................................... 22 V. CONCLUSION. ....................................................................................................... 24 i AT&T'S MOT. FOR SUMM. JUDG. ON FIRST, THIRD, AND NINTH CLAIMS Case No. C 05-04723 MMC 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 TABLE OF AUTHORITIES Cases Anderson v. Time Warner Telecom of California, Inc., 129 Cal. App. 4th 411 (2005)......................................................................................17 Bell Atl.-Md., Inc. v. Prince George's County, 49 F. Supp. 2d 805 (D. Md. 1999), vacated and remanded on other grounds, 212 F.3d 863 (4th Cir. 2000)........................................................................13 City of Auburn v. Qwest Corp., 260 F.3d 1160 (9th Cir. 2001) ..................................................................... 8, 12, 15, 16 City of Chicago v. Comcast Cable Holdings, L.L.C., 384 F.3d 901 (7th Cir. 2004) ....................................................................................... 25 Commercial Commc'ns, Inc. v. Pub. Utils. Comm'n, 50 Cal. 2d 512 (1958)..................................................................................................17 County of Inyo v. Hess, 53 Cal. App. 415 (1921) .............................................................................................. 18 County of Los Angeles v. Southern California Tel. Co., 32 Cal. 2d 378 (1948)............................................................................................18, 24 Cox Commc'ns PCS, L.P. v. City of San Marcos, 204 F. Supp. 2d 1260 (S.D. Cal. 2002) ................................................................. 12, 15 In re Backman Water Co., 5 CPUC2d 358 (1981) ................................................................................................. 23 In re State of Minnesota, 14 F.C.C.R. 21,697 (1999) ............................................................................................ 8 In re TCI Cablevision of Oakland County, Inc., 12 F.C.C.Rcd 21396 (1997) ...................................................................................... 7, 8 Industrial Truck Ass'n v. Henry, 125 F.3d 1305 (9th Cir. 1997) ....................................................................................... 6 Liberty Cablevision of P.R., Inc. v. Municipality of Caguas, 417 F.3d 216 (1st Cir. 2005) ....................................................................................... 27 Pac. Tel. & Tel. Co. v. City of Los Angeles, 44 Cal.2d 272 (1955)............................................................................................passim Pacific Tel. & Tel. Co. v. City and County San Francisco, 197 Cal. App. 2d 133 (1961) ................................................................................. 19, 20 Petaluma v. Pacific Tel. & Tel. Co., 44 Cal. 2d 284 (1955)..................................................................................................24 Qwest Communications Inc. v. City of Berkeley, 433 F.3d 1253 (9th Cir. 2006) .............................................................................. passim - ii AT&T'S MOT. FOR SUMM. JUDG. ON FIRST, 700367674v2 THIRD AND NINTH CLAIMS Case No. C 05-04723 MMC 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Qwest Corp. v. City of Portland, 385 F.3d 1236 (9th Cir. 2004) ............................................................................. 8, 9, 13 Qwest Corp. v. City of Santa Fe, 380 F.3d 1258 (10 Cir. 2004) ................................................................................ 14, 16 Reno v. ACLU, 521 U.S. 844 (1997) ......................................................................................... 6 San Diego v. Southern California Tel. Corp., 42 Cal. 2d 110 (1954)..................................................................................................18 Sprint Telephony PCS, L.P. v. County of San Diego, 377 F.Supp.2d 886 (S.D. Cal. 2005) ....................................................................... 6, 12 TCG New York, Inc. v. City of White Plains, 305 F.3d 67 (2d Cir. 2002) .......................................................................................... 13 Tily B., Inc. v. City of Newport Beach, 69 Cal. App. 4th 1 (1998)............................................................................................24 Western Union Tel. Co. v. Hopkins, 160 Cal. 106 (1911).....................................................................................................24 Western Union Telegraph Co. v. Hopkins, 160 Cal. 106 (1911).....................................................................................................18 Williams Communications, Inc. v. Riverside, 114 Cal. App. 4th 642 (2003)................................................................................20, 21 Constitution California Constitution Article 7 ....................................................................................................................... 21 United States Constitution Article VI, section 2 ...................................................................................................... 6 Statutes and Codes California Public Utilities Code Section 233 .................................................................................................................. 15 Section 234 .................................................................................................................. 16 Section 7901 ......................................................................................................... passim Section 7901.1 ............................................................................................................. 17 Government Code Section 53054.2(b) ...................................................................................................... 20 Section 53066 et seq..................................................................................19, 20, 21, 24 Section 53066(a)..........................................................................................................19 Section 53066(e)..........................................................................................................19 - iii 700367674v2 AT&T'S MOT. FOR SUMM. JUDG. ON FIRST, THIRD AND NINTH CLAIMS Case No. C 05-04723 MMC 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 United States Code Title 47, section 151 et seq. ........................................................................................... 1 Title 47, section 153(46)................................................................................................8 Title 47, section 253(a)..................................................................................................6 Title 47, section 522(10)..............................................................................................22 Title 47, section 522(9)................................................................................................23 Title 47, section 541 .......................................................................................... 1, 22, 24 Title 47, section 541(a)(2) ........................................................................................... 23 Title 47, section 556(b)................................................................................................22 Rules and Regulations Federal Rules of Civil Procedure Rule 56...........................................................................................................................1 Local Rules of the United States District Court for the Northern District of California Rule 16-5 ....................................................................................................................... 1 Other Authorities 1965 Cal. AG LEXIS 44, at *3 (1965)....................................................................................21 1976 Cal. Op. Att'y Gen. 376 (1976), 1976 Cal. AG LEXIS 67, at *6 (1976).......................17 1981 Cal. PUC LEXIS 458, at 24-25 (1981)...........................................................................21 46 Op. Att'y Gen. Cal. 22 (1965)............................................................................................21 Conn. Gen. Stat. 16-331-333(J_ (1988 & Supp. 1990) ...................................................... 23 Del. Code Ann.., title 26, 601 to 616 (1989) ...................................................................... 23 H.R.Rep. No. 104-458 (1996) (Conf.Rep.) ............................................................................... 6 Haw. Rev. Stat., 440G-1 to 16 (Supp. 1990)......................................................................23 - iv 700367674v2 AT&T'S MOT. FOR SUMM. JUDG. ON FIRST, THIRD AND NINTH CLAIMS Case No. C 05-04723 MMC 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 NOTICE OF MOTION AND MOTION FOR SUMMARY JUDGMENT PLEASE TAKE NOTICE that on April 21, 2006 at 9:00 a.m., or as soon thereafter as the matter may be heard before the Honorable Maxine M. Chesney, in Courtroom 7 of the above-entitled court, located at 450 Golden Gate Avenue, San Francisco, California, plaintiff and petitioner PACIFIC BELL TELEPHONE COMPANY, doing business as AT&T California ("AT&T"), will and hereby does move for summary judgment, pursuant to Local Rule 16-5 and Rule 56 of the Federal Rules of Civil Procedure, on the first claim for relief (for declaratory judgment based on preemption under 253 (" 253") of the federal Telecommunications Act of 1996 (the "Telecom Act"), 47 U.S.C. 151 et seq.); on the third claim for relief (for declaratory judgment that AT&T's state franchise under California Public Utilities Code 7901 (" 7901") entitles AT&T to use its telephone lines to transport IP video services in addition to traditional voice services without a franchise, and that the 7901 franchise satisfies the franchise requirements under 47 U.S.C. 541, to the extent applicable); and on the ninth claim for relief (for a declaration and judgment, and a writ of mandate, that AT&T's state franchise under 7901 entitles AT&T to use its telephone lines to transport IP video services in addition to traditional voice services without a franchise). This motion is based on this notice of motion and motion; the memorandum of points and authorities that follows; the administrative record of the proceedings before the City of Walnut Creek previously lodged with the Court; 1 and on such matters as may be presented to the Court upon the hearing on this motion. MEMORANDUM OF POINTS AND AUTHORITIES I. INTRODUCTION. The City of Walnut Creek ("Walnut Creek" or "the City") seeks to change the rules under which AT&T has been operating in California for nearly a century. As a telephone corporation, AT&T has a statutory franchise under 7901 to construct, maintain and operate See Notice of Lodging of Record of Proceedings, dated February 27, 2006. Citations to the record are made to the bates-stamped designation (for example, "AR 0001" refers to page 1 of the record). 700388554v2 1 -1AT&T'S MOT. FOR SUMM. JUDG. ON FIRST, THIRD, AND NINTH CLAIMS Case No. C 05-04723 MMC 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 its telephone lines within the public rights-of-way. Under long-standing authority, AT&T does not lose its franchise right because its lines will be used to transmit video services, along with other traditional voice services, as long as it does not "incommode the public use." The City's authority is limited to reasonable controls over the time, place and manner in which the public rights-of-way are accessed. The City, however, has refused to allow AT&T to improve its telecommunications network by imposing a restrictive permit condition that has nothing to do with the City's management of the rights-of-way. This action by the City violates both state and federal statutes prohibiting local interference with telecommunications services. The undisputed material facts, as contained in the administrative record, establish that the City's action is preempted and invalidated under both 253 and 7901. Section 253(a) preempts all local government regulation that "may prohibit or have the effect of prohibiting" the provision of telecommunications services. AT&T sought to improve its network in Walnut Creek so that residents could receive a broad range of benefits that will be available with new technologies that AT&T plans to deploy. The City, however, has interposed itself as a "gatekeeper" on what services AT&T can provide via its network. The City demanded that AT&T accept a condition on the encroachment permit at issue that AT&T would not provide Internet Protocol ("IP")-based video services over its network, after enhancements are complete, without agreeing to a local "cable franchise agreement" (the "Franchise Condition"). This Franchise Condition is preempted under 253 for two reasons. First, it may have a prohibitive effect on AT&T's delivery of telecommunications services because it denies residents the ability to choose one type of communications product (video), while purporting to permit others (voice, data, Internet) that are carried over the same network and delivered to consumers over ordinary telephone lines. Second, municipalities are not free to exercise discretion or assert dominion over which services are offered by telephone companies. By attempting to control AT&T's right to enhance its network based on a particular service, the City has exceeded its limited right to manage AT&T's physical use of the rights-of-way. -2700388554v2 AT&T'S MOT. FOR SUMM. JUDG. ON FIRST, THIRD AND NINTH CLAIMS Case No. C 05-04723 MMC 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 The City's actions are also preempted by 7901. Under long-standing principles of state law, AT&T does not require municipal consent to install, operate or improve its telecommunications network. In California, that consent--or franchise--is extended by the State through 7901 for the benefit of telephone companies and the customers they serve. The 7901 franchise contains no limit on the type of communications that can be carried over a telephone company network. Rather, a long line of well-reasoned cases establishes that 7901 authorizes AT&T to use its telephone lines to deliver any form of electronic communications, including video programming, without the necessity of obtaining any separate "cable franchise" from the City. Because the City's actions unmistakably conflict with these established principles of federal and California law, the Court should grant summary judgment for AT&T on its first, third and ninth claims. II. BACKGROUND. AT&T and its predecessors have provided communications services to customers in Walnut Creek for over 90 years. AR 0383 ( 1). AT&T now serves over 67,000 residential and business customers in the City. AR 0259 ( 2). Historically, AT&T provided local telephone exchange services transmitted over twisted-pair copper wires placed on overhead poles or in underground conduit. In recent years, AT&T has upgraded its network by installing new fiber optic cable that carries greater communications traffic at higher speeds. AR 0259 ( 4); AR 0383. With the advent of "broadband" services by which customers can access the Internet through high-speed connections, AT&T expanded its deployment of fiber optic cable. AR 0260 ( 5). With these improved facilities, AT&T has expanded its services to include a mix of voice telephony (including three-way calling, caller ID, voicemail and video telephoning) and Internet backbone and DSL Internet access services. AT&T has been able to provide this array of integrated services to businesses and residential customers in Walnut Creek by installing, maintaining and upgrading its telephone lines and related facilities within public rights-of-way pursuant to its long-standing franchise rights under 7901. As -3AT&T'S MOT. FOR SUMM. JUDG. ON FIRST, 700388554v2 THIRD AND NINTH CLAIMS Case No. C 05-04723 MMC 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 the City recognizes, "California Public Utilities Code Section 7901 gives [AT&T] a right to install `telephone lines' throughout the state." AR 0415 ( 1). In October 2004, AT&T announced Project Lightspeed, a capital improvement project to significantly increase the efficiency and capacity of AT&T's telephone lines. AR 0261 ( 8); AR 0387. In completing Project Lightspeed, AT&T and its affiliated companies will invest approximately $4 billion over the next two to three years to upgrade existing facilities and deploy 38,000 miles of fiber optic cable to increase bandwidth and throughput speeds throughout the 13 states served by AT&T, including California. AR 0261 ( 8). As part of this work, AT&T will install upgraded facilities to support the communications services that it currently provides, as well as new IP-based services, including IP video services. AR 0261 ( 9). See also AR 0393 ("The additional fiber and technology will become part of the entire SBC communications network, and will carry both traditional and newer technology based services by telephone or other customer owned devices."); AR 0643:19-20 ("Existing copper wire will carry ultimately the bandwidth over which Lightspeed services are provided."); AR 0287 ("Project Lightspeed facilities will carry traditional voice services as well as DSL, high speed data and other broadband services."). In deploying Project Lightspeed, AT&T needs to maintain and repair existing telephone lines and install new cable and facilities in public rights-of-way in Walnut Creek. In addition to extending fiber optic cable further into the neighborhoods, AT&T will "condition" its existing twisted-pair copper wires, which typically extend the last few thousand feet from the fiber-fed node to the customer premises. AR 0264 ( 13-14). This requires the removal, in some locations, of equipment known as "bridge taps" and "load coils" that had been placed on the lines in earlier years to extend analog voice grade telephone service, but which are no longer necessary and can have the effect of degrading service quality and performance of the current communications network. Removing this equipment will facilitate the transmission of AT&T's existing DSL-delivered broadband, voice and other telecommunications services, as well as its provision of a suite of new, IPbased services over these lines. AR 0264 ( 13). See also AR 0246 ("Removing these -4AT&T'S MOT. FOR SUMM. JUDG. ON FIRST, 700388554v2 THIRD AND NINTH CLAIMS Case No. C 05-04723 MMC 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 electronics also will facilitate the transmission of ABC's existing DSL broadband and voice services."). On June 7, 2005, AT&T applied to the City for an encroachment permit to perform line conditioning work on overhead wires along one block of Walnut Avenue. AR 0276. The application noted that the work was related to Project Lightspeed. On June 21, 2005, the City issued an encroachment permit, Permit No. EP05-0434, for the work. AR 0276-77. Attached to the permit was a special rider entitled "Additional Permit Conditions for Project Light Speed [sic]" containing the Franchise Condition: By accepting this permit, SBC agrees on behalf of itself and its affiliates that it will not provide video programming (including but not limited to programming delivered using internet protocol) over facilities located with [sic] the City's rights-of-way to subscribers within the City without first obtaining a cable franchise or an open video system franchise from the City. (Emphasis added). AT&T immediately disputed the legality of the franchise condition. AR 0286-0287. On July 1, 2005, AT&T filed an administrative appeal of the Franchise Condition with the City Council, pursuant to Walnut Creek Municipal Code 7-1.107. AR 0290. On October 18, 2005, the City Council held a hearing on the appeal (AR 0593-0692), received written submissions and oral testimony (AR 0243-0393, 0398-0447), and adopted a resolution denying AT&T's appeal. AR 0694-0697. AT&T filed this action 30 days later. III. THE COURT SHOULD GRANT SUMMARY JUDGMENT FOR AT&T ON ITS 253 CLAIM. AT&T's first claim is for declaratory judgment based on preemption under 253 of the Telecom Act. Compl. 36-43. Because preemption is a matter of law (Industrial Truck Ass'n v. Henry, 125 F.3d 1305, 1309 (9th Cir. 1997)), preemption claims are routinely resolved on summary judgment. That is particularly true for preemption claims based on 253. E.g., Qwest Communications Inc. v. City of Berkeley, 433 F.3d 1253 (9th Cir. 2006) (affirming summary judgment for Qwest on its 253 challenge to city ordinance); Sprint Telephony PCS, L.P. v. County of San Diego, 377 F.Supp.2d 886 (S.D. Cal. 2005) (granting summary judgment on 253 claim, finding that ordinance was preempted). -5AT&T'S MOT. FOR SUMM. JUDG. ON FIRST, 700388554v2 THIRD AND NINTH CLAIMS Case No. C 05-04723 MMC 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 A. Congress Has Preempted Local Regulation Under 253 in Order to Encourage Rapid Deployment of New Telecommunications Facilities and Technologies. The primary purpose of the Telecom Act was "to reduce regulation and encourage the rapid deployment of new telecommunications technologies." Reno v. ACLU, 521 U.S. 844, 857 (1997). See also Qwest Communications Inc. v. City of Berkeley, supra, 433 F.3d at 1255 ("the purpose of the act was to reduce regulation of telecommunications providers by creating a `procompetitive, de-regulatory national policy framework'") (quoting H.R.Rep. No. 104-458 (1996) (Conf.Rep.)). In striking down local efforts to impede the installation of new fiber optic networks, the Federal Communications Commission ("FCC") has stressed that "the administration of the public rights-of-way should not be used to undermine the efforts of either cable or telecommunications providers to either upgrade or build new facilities to provide a broad array of new services." In re TCI Cablevision of Oakland County, Inc., 12 F.C.C.Rcd 21396, 78 (1997). Yet this is precisely what the City is attempting to do in this case. The administrative record leaves no room for debate that Project Lightspeed will enable residents of Walnut Creek to access new features and functionality through a more powerful, multi-purpose IP-based broadband network. Equally clear is that the City has improperly wielded its right-of-way authority to stop the Lightspeed build out. Congress has sought to carry out this purpose by preempting local laws that conflict with its deregulatory mandate. Exercising its powers under the Supremacy Clause (U.S. Const. art. VI, 2), Congress included an express preemption clause in 253 of the Telecom Act, providing that "[n]o State or local statute or regulation, or other State or local legal requirement, may prohibit or have the effect or prohibiting the ability of any entity to provide any interstate or intrastate telecommunications service." 47 U.S.C. 253(a). Congress assigned a limited role to municipalities in order to avoid a patchwork of local regulation that would thwart national objectives. As the FCC has observed, a national framework is necessary because "an array of local telecommunications regulations that vary from community to -6700388554v2 AT&T'S MOT. FOR SUMM. JUDG. ON FIRST, THIRD AND NINTH CLAIMS Case No. C 05-04723 MMC 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 community is likely to discourage and delay the development of telecommunications competition." In re TCI Cablevision of Oakland County, Inc., supra, 12 F.C.C.Rcd 21396. 2 The Ninth Circuit has held that the scope of federal preemption under 253 "is virtually absolute and its purpose is clear--certain aspects of telecommunications regulation are uniquely the province of the federal government and Congress has narrowly circumscribed the role of state and local governments in this arena." City of Auburn v. Qwest Corp., 260 F.3d 1160, 1175 (9th Cir. 2001) (internal citation and quotation omitted). As the Ninth Circuit recently reiterated, "[w]e have interpreted this preemptive language to be clear and `virtually absolute' in restricting municipalities to a `very limited and proscribed role in the regulation of telecommunications.'" Qwest Communications Inc. v. City of Berkeley, supra, 433 F.3d at 1256. Thus, 253 preempts not only regulations that prohibit outright the ability of an entity to provide telecommunications services, but also those that "may have the effect of prohibiting the provision of telecommunications services[.]" Qwest Corp. v. City of Portland, 385 F.3d 1236, 1241 (9th Cir. 2004) (emphasis in original). With respect to public rights-of-way, the "narrowly circumscribed role is set forth in 253(c). This `safe harbor' clause permits state and local government control over the use of the rights-of-way, so long as the control is management of the rights-of-way itself and not control of the telecommunications companies with facilities in the rights-of-way." Qwest Communications v. City of Berkeley, supra, 433 F.3d at 1256. B. 1. The Franchise Condition Will Affect Telecommunications Services. AT&T is a telecommunications provider that seeks to upgrade its telephone lines to provide improved telecommunications services and new IP services. To determine the preemption issue under 253(a), the Court may consider whether the Franchise Condition "`may have the effect of prohibiting the provision of telecommuni2 As the FCC has ruled, 253(a)'s preemptive scope is not limited to statutes or regulations, but includes any "legal requirement." See In re State of Minnesota, 14 F.C.C.R. 21,697, 18 (1999) ( 253(a) extends to agreement between State and developer requiring developer to dedicate fiber-optic cable to state and granting exclusive access to developer). Clearly, it applies to the Franchise Condition the City has imposed here. -7700388554v2 AT&T'S MOT. FOR SUMM. JUDG. ON FIRST, THIRD AND NINTH CLAIMS Case No. C 05-04723 MMC 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 cations services.'" Qwest Communications Inc. v. City of Berkeley, supra, 433 F.3d at 1257 (quoting Qwest Corp. v. City of Portland, 385 F.3d at 1241). There is no dispute that AT&T is a telecommunications company and the principal provider of telecommunications services in Walnut Creek. 3 Those services include local and long distance voice service, private line data services (such as DS1 and DS3 lines), advanced data services such as ATM and frame relay, operator services, 911, special switched access services, Internet access and more. AR 0388. AT&T provides these telecommunications services over its existing network facilities, including aerial and underground twisted pair copper wires and fiber optic cable. Through Project Lightspeed, AT&T seeks "to upgrade its network in portions of its service territory." AR 0694 ( 2). See also AR 0384 ( 1) ("Project Lightspeed will involve enhancements to the existing network in both the outside plant and in SBC's central offices and inter-office network"). As the City recognized, this upgrade includes "constructing telecommunications facilities within the public rights-of-way as part of Project Lightspeed." AR 0411 (emphasis added). See also AR 0413 ("SBC has applied for encroachment permits to begin constructing telecommunications facilities") (emphasis added). In imposing the Franchise Condition, the City relied in part on its "Telecommunications Policy" (see AR 0609:24-0618:25), under which it believed it had the right to "regulate telecommunications" in order "to promote the widest availability possible to telecommunications services" and "receive fair compensation for the use of public rights-of-way by telecommunications providers." AR 0415. The City also recognized that, in addition to constructing telecommunications facilities, Project Lightspeed involves maintaining and rehabilitating, or "conditioning," existing facilities. See AR 0428 ( 3) ("Project Lightspeed work will also include `conditioning' work on existing lines, such as removing copper bridges and other devices, which is needed to help provide the additional system capacity."). It was AT&T's A party provides "telecommunications services" when it offers "telecommunications for a fee directly to the public, or to such classes of users as to be effectively available directly to the public, regardless of the facilities used." 47 U.S.C. 153(46). -8700388554v2 AT&T'S MOT. FOR SUMM. JUDG. ON FIRST, THIRD AND NINTH CLAIMS Case No. C 05-04723 MMC 3 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 application for a permit to "condition" existing telephone lines on Walnut Avenue that led to the City's imposition of the Franchise Condition--even though these lines have been (and will continue to be) used for the transmission of telecommunications services, including traditional voice telephone service. AR 0246, 0264 ( 13-14); 0267-0268 ( 4); 0271-0272 ( 2, 4). As the City Council was advised, "the network operations in which we [AT&T] are doing construction, maintenance, and rehabilitation work on our existing network does involve the legacy communications services, including plain old telephone service, current data services, dial-up Internet." AR 0629:14-19. Conditioning the existing phone lines would facilitate the transmission of telecommunications services in the future, including voice services. AR 0264 ( 13) ("Removing this equipment also facilitates the transmission of SBC's existing broadband services, as well as phone service."). As the Assistant City Attorney admitted at the hearing, "[t]here will be certain enhancements of the system for their other [i.e., non-video] services." AR 0612:15613:11. Once the Project Lightspeed enhancements are complete, AT&T will provide all of its services over the same network. AR 0388. As the City observed, "SBC will be bundling its video programming services with telecommunications or information services such as Internet and telephone services . . . ." AR 0696A (emphasis added). Thus, "Lightspeed will utilize existing optical fiber within SBC's backbone" (AR 0414) and "[e]xisting copper wire will carry ultimately the bandwidth over which the Lightspeed services are provided." AR 0643:19-20. When completed, Project Lightspeed upgrades will support AT&T's provision of its existing telecommunications services as well as its IP video service. The City Council was advised by AT&T that "the video service that will be provided is going to be part of a host of services that will include the traditional voice and other services that we're already providing, albeit in terms of new technologies provided by different and new means." AR 0637:15-19. While the City argues that Project Lightspeed will enable the provision of certain IP-supported services not falling within the definition of "telecommunications," the essential (and undisputed) point is that the upgrade also will facilitate the provision of -9AT&T'S MOT. FOR SUMM. JUDG. ON FIRST, 700388554v2 THIRD AND NINTH CLAIMS Case No. C 05-04723 MMC 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 services that indisputably are telecommunications. As explained at the hearing, Project Lightspeed "is not synonymous with video. It is a project to enhance the existing network to provide bigger pipes, more bandwidth so that we can provide a variety of services and functions." AR 0649:11-15. The undisputed evidence before the City Council established that "Project Lightspeed is SBC's plan to further upgrade its telecommunications network to enable SBC to increase the amount of available bandwidth to resident and end users and in turn provide a bundle of integrated communications services, such as voice, including Voice Over Internet Protocol (`VOIP') service, High Speed Internet Access (`HSIA') and IP video service." AR 0383 ( 2). 2. Franchise requirements of the kind at issue here "may have the effect" of prohibiting telecommunications services. AT&T applied for an encroachment permit for network maintenance, rehabilitation and enhancement, but was given a permit with a special condition that required AT&T to accept classification of its telecommunications network as a cable television system subject to a local cable franchise agreement. The City proposed that AT&T accept a 58-page Franchise Agreement (AR 0295-0362) with numerous and onerous conditions. When imposed as a condition to receive permits necessary for enhancements to a telecommunications network, this Franchise Agreement serves as a classic example of the sort of local action that Congress sought to preempt under 253. Under the proposed Franchise Agreement, for example, AT&T would be required to submit to an architectural design review process, agree to construction deadlines, comply with various tests and inspections, adopt system requirements, comply with interconnection agreements, pay a 5% franchise fee, agree to rate regulation, comply with review requirements, acknowledge the City's right to require the franchise, etc. A franchise condition which limits AT&T's ability to maintain and enhance its network without accepting burdensome municipal authority over that network has no relationship to the management of the public rights-of-way, as is permitted under 253(c) and, in addition, "may have" sufficient prohibitive effect on AT&T's provision of telecommunications services to violate 253(a). As the Ninth Circuit has observed, a - 10 AT&T'S MOT. FOR SUMM. JUDG. ON FIRST, 700388554v2 THIRD AND NINTH CLAIMS Case No. C 05-04723 MMC 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 demand for a franchise agreement has "the effect of prohibiting such services" in violation of 253 because it creates "a substantial and unlawful barrier to entry into and participation in the [cities'] telecommunications markets." City of Auburn, supra, 260 F.3d at 1176. That burden is even greater on statewide telecommunications providers, such as AT&T, who are already subject to regulation by the California PUC. As explained at the City Council hearing, "[w]hen you start looking at what is the burden, it is not just having to go through the process of hammering out arrangements on a city-by-city basis, when you have over 500 local jurisdictions in California to deal with alone. It is the dual regulatory systems. We're already subject to regulation and oversight at multiple levels simply by virtue of being a telecommunications company and providing telecommunications services." AR 0637:4-14. The Ninth Circuit recently reaffirmed that local governments may not impose onerous conditions on a telephone corporation's access to the rights-of-way. City of Berkeley, supra, 433 F.3d at 1257-58 ("[a]lthough not identical to the franchise application process in Auburn, the exemption process in this case is similarly onerous, and therefore, has the same discouraging effect"). See also Sprint Telephony PCS, L.P. v. County of San Diego, 377 F. Supp. 2d 886, 895 (S.D. Cal. 2005) (regulatory scheme and use permit regulations found preempted by 253 in part because they included "burdensome submission requirements"); Cox Commc'ns PCS, L.P. v. City of San Marcos, 204 F. Supp. 2d 1260, 1265 (S.D. Cal. 2002) (permit process has "the effect of prohibiting . . . telecommunications companies from using the public rights-of-way" when it requires "a lengthy application process"). 4 4 The Ninth Circuit's holdings are consistent with numerous decisions elsewhere. E.g., TCG New York, Inc. v. City of White Plains, 305 F.3d 67, 76-77 (2d Cir. 2002) ( 253 was violated where approval process for franchise under city ordinance suffered from "extensive delays"); Bell Atl.-Md., Inc. v. Prince George's County, 49 F. Supp. 2d 805, 814-15 (D. Md. 1999), vacated and remanded on other grounds, 212 F.3d 863 (4th Cir. 2000) (court invalidated city ordinance substantially similar to Franchise Condition, holding that "any `process for entry' that imposes burdensome requirements on telecommunications companies and vests significant discretion in local governmental decision-makers to grant or deny permission to use the public rights-of-way `may . . . have the effect of prohibiting' the provision of telecommunications services in violation of the [Act]"). - 11 700388554v2 AT&T'S MOT. FOR SUMM. JUDG. ON FIRST, THIRD AND NINTH CLAIMS Case No. C 05-04723 MMC 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Issuing the permits without a franchise condition would have allowed AT&T to upgrade its network facilities and offer its customers precisely the type of new telecommunications technologies that were anticipated by the Telecom Act. In fact, the record shows that the franchise condition has caused AT&T to halt the build-out in Walnut Creek. AR 0265, 16; see also AR 0630:16-17 ("we have shut down our Lightspeed deployment in Walnut Creek"). As AT&T explained, "[w]e will not allow our network to be held hostage in this manner. We will simply bypass Walnut Creek . . . ." AR 0673:14-16. AT&T's burden under 253 is only to show its provision of such services "may be prohibited," a legal determination that can be made based on the terms of the Franchise Condition and the Administrative Record. In City of Portland, the Ninth Circuit rejected the argument that "Qwest was required to make an actual showing of `a single telecommunications service that it . . . is effectively prohibited from providing.'" 385 F.3d at 1241. "We do not agree that Qwest was required to make an actual showing of a single telecommunications service that it . . . is effectively prohibited from providing. We have previously ruled that regulations that may have the effect of prohibiting the provision of telecommunications services are preempted." Id. The same conclusion was reached by the Tenth Circuit in Qwest Corporation v. City of Santa Fe, 380 F.3d 1258 (10 Cir. 2004). Finding that "[i]t is enough that the [state or local requirement] would `materially inhibit' the provision of services," the court held that a requirement that generates "substantial costs . . . meets the test and is prohibitive under 47 U.S.C. 253." 380 F.3d at 1271. Here, the same telephone lines are being used to transmit both telecommunications services and multi-purpose IP-based services. Hence, a restriction that bars provision of AT&T's IP-video services (absent a franchise) may "have the effect" of causing AT&T (or any other telecommunications provider) not to install and upgrade facilities that are used to provide bundled telecommunications services. As we explain in section IV below, under 7901, AT&T has a state-wide franchise to use its telephone lines to provide additional services along with traditional telephone services. A telecommunications carrier such as AT&T should be allowed to integrate new services with its existing services without losing - 12 AT&T'S MOT. FOR SUMM. JUDG. ON FIRST, 700388554v2 THIRD AND NINTH CLAIMS Case No. C 05-04723 MMC 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 its underlying protection as a carrier or suffering the unnecessary burden of an overlay cable franchise. The basic point is undisputed that in Walnut Creek, AT&T's existing and new services will be transmitted over the same network. By conditioning AT&T's right to install facilities used to transport both its existing communications services and IP-based services over the same telephone lines, upon AT&T's agreement to enter into a cable franchise, the City is interfering with and obstructing AT&T's ability--and right--to provide telecommunications services that depend on the same network enhancements. The City's actions thus are a material impediment to AT&T's ability to timely modifying and upgrading its facilities. If localities are permitted to demand franchises as a condition of permitting use of the public rights-of-way, construction of new telephone lines may be discouraged and deployment of telecommunications service to new customers inhibited, contrary to Congress' basic mandate under the Telecom Act. 3. The City may not deny AT&T a permit based on factors unrelated to the management or use of the rights-of-way. A local regulation may have the effect of prohibiting telecommunications services when the municipality's actions are based on factors that are unrelated to the physical management of the rights-of-way. City of Auburn, supra, 260 F.3d at 1176, 1179 (in holding that 253 preempted regulations permitting city to "consider discretionary factors that have nothing to do with the management or use of the rights-of-way," the court noted that "perhaps most problematic, the ordinances grant the [cities] unfettered discretion to insist on unspecified franchise terms and to grant, deny, or revoke a franchise based on unnamed factors"). Walnut Creek is exercising discretion on whether to allow AT&T access to the public rights-of-way to install and upgrade its telecommunications infrastructure that is used, and will continue to be used, to deliver both traditional telecommunications services as well as a variety of more advanced broadband, voice and Internet access services. By conditioning access to the rights-of-way upon AT&T's agreement to a restriction that is not directly - 13 AT&T'S MOT. FOR SUMM. JUDG. ON FIRST, 700388554v2 THIRD AND NINTH CLAIMS Case No. C 05-04723 MMC 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 related to the City's management of AT&T's physical use of the rights-of-way, the City acts in derogation of 253. See, e.g., Qwest Communications v. City of Berkeley, supra, 433 F.3d at 1258-59 (municipal ordinances preempted by 253(a) because they afforded "the City significant discretion to deny the companies the ability of providing telecommunications services[,]" and impermissibly regulated the carrier's "technical and legal qualifications rather than the actual management of the public rights-of-way itself"); Cox Commc'ns, 204 F. Supp. 2d at 1266 (under 253, "[t]he courts have clearly said that local governments do not have discretion to deny permits"). C. The Franchise Condition Does Not Fall Within 253(b) or (c). The City cannot satisfy the "safe harbor" subsections of 253. Subsection (b) by its terms does not apply to the City (it applies only to states). Subsection (c) authorizes local regulations only with respect to the physical use and management of the rights-of-way, but does not permit local authorities to regulate either the carrier itself or its services. Not even the City contends that the Franchise Condition is related to the physical management of the rights-of-way. Moreover, subsection (c) does not authorize cities to deny permits to telecommunications providers for access to public rights-of-way based on discretionary factors unrelated to the physical use and management of the rights-of-way. E.g., City of Auburn, 260 F.3d at 177 ("As the FCC has explained, right-of-way management means control over the right-of-way itself, not control over companies with facilities in the right-of-way[.]"); accord Qwest Corp. v. City of Santa Fe, 380 F.3d 1258, 1273 (10th Cir. 2004) (provisions of city's ordinance unrelated to "the management of the city's rights-of-way . . . are not saved from preemption by 253(c)"). By imposing a condition on SBC's ability to upgrade its communications network based on AT&T's future services, rather than AT&T's physical use of the public rights-of-way, the City is improperly attempting to regulate a provider and its services, which it is not authorized to do under 253(c). - 14 700388554v2 AT&T'S MOT. FOR SUMM. JUDG. ON FIRST, THIRD AND NINTH CLAIMS Case No. C 05-04723 MMC 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 IV. THE COURT SHOULD GRANT SUMMARY JUDGMENT FOR AT&T ON ITS THIRD AND NINTH CLAIMS FOR RELIEF A. The City's Attempt to Locally Franchise AT&T's IP Video Services Is Preempted by 7901. 1. Section 7901 authorizes AT&T to install its telephone lines without a local franchise. AT&T's existing franchise from the State pursuant to 7901, in and of itself, is sufficient to authorize AT&T to construct and operate its facilities in the public rights-of-way to provide any form of electronic communication, including IP video services, without obtaining an additional local franchise from the City. Section 7901 provides in relevant part that: Telegraph or telephone corporations may construct lines of telegraph or telephone lines along or upon any public road or highway . . . in such manner and at such points as not to incommode the public use of the road or highway. Under the Public Utilities Code, the term "telephone line" is defined broadly to include "all conduits and other real estate, fixtures and personal property used to facilitate communication by telephone." Cal. Pub. Util. Code 233 (emphasis added). Thus, under California law, any and all facilities used to "facilitate communication by telephone" are "telephone lines," regardless of whether such facilities are copper, fiber or some other material. See, e.g., Commercial Comms., Inc. v. Pub. Utils. Comm'n, 50 Cal.2d 512, 523 (1958) ("[T]he medium over which the communication can be effected is not prescribed by law."). The Court of Appeal recently reiterated that a "fiber optic network is a telephone line." Anderson v. Time Warner Telecom of Cal., Inc., 129 Cal. App. 4th 411, 415 (2005). It is undisputed that AT&T's facilities are "telephone lines" because they are, and will be, used to "facilitate communication by telephone." AR 0393 ("The additional fiber and technology will become part of the entire SBC communications network, and will carry both traditional and newer technology based services by telephone or other customer owned devices."); AR 287 ("Project Lightspeed facilities will carry traditional voice services as well as DSL, high speed data and other broadband services."); AR 0643:19-20 ("Existing copper - 15 AT&T'S MOT. FOR SUMM. JUDG. ON FIRST, 700388554v2 THIRD AND NINTH CLAIMS Case No. C 05-04723 MMC 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 wire will carry ultimately the bandwidth over which Lightspeed services are provided."). In fact, the City Attorney acknowledged in response to a question from a City Council member that "if we were to take the position that they [AT&T] cannot even construct their system without a franchise, not only would we be stopping them from building a cable system, we would be stopping them from installing what are truly telephone lines. And therefore we might run afoul of certain provisions of state law." AR 0616:14-20 (emphasis added). It is also undisputed that AT&T is a "telephone corporation" because it has been managing and operating its telephone lines in California for more than a century. Cal. Pub. Util. Code 234 (a "telephone corporation" is "any corporation that owns, controls, operates or manages a telephone line for compensation in California"). As such, AT&T possesses a franchise under 7901 in every place where it is maintaining and operating telephone lines. See County of Los Angeles v. Southern California Tel. Co., 32 Cal. 2d 378 (1948) ("Section [7901] has been judicially construed by many [California Supreme Court] decisions . . . and it has been uniformly held that the statute is a continuing offer extended to telephone and telegraph companies to use the highways, which offer when accepted by the construction and maintenance of lines constitutes a binding contract based on adequate consideration."). Because AT&T is a "telephone corporation" and its facilities constitute "telephone lines," AT&T is authorized under its 7901 franchise to install and upgrade its facilities in the public rights-of-way without obtaining any separate franchise from the City. See, e.g., San Diego v. Southern California Tel. Corp., 42 Cal. 2d 110, 116-17 (1954) ("When a telephone corporation obtains a franchise under section 536 [now Section 7901], it need not obtain a franchise from local authorities.") (emphasis added); Western Union Telegraph Co. v. Hopkins, 160 Cal. 106, 119 (1911) (holding that the "state franchise included the right to such exclusive occupation by the company of portions of the streets as is maintained for the purpose of its system, leaving nothing in that behalf to be granted by the municipality") (emphasis added); County of Inyo v. Hess, 53 Cal. App. 415 (1921) ("[U]nder and by virtue of the provision of [Section 7901], telephone corporations are granted the right and privilege to use the public highways over which to construct and operate lines of telephone wires, free - 16 AT&T'S MOT. FOR SUMM. JUDG. ON FIRST, 700388554v2 THIRD AND NINTH CLAIMS Case No. C 05-04723 MMC 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 from any grant made by subordinate legislative bodies.") (emphasis added); 1976 Cal. Op. Att'y Gen. 376 (1976), 1976 Cal. AG LEXIS 67, at *6 (1976) ("[W]hen accepted [the 7901 franchise] gives the utility a franchise to use all public highways without the necessity of a grant from a city or other subordinate governmental entity.") (emphasis added). In light of 7901, the City's only power with respect to AT&T's Lightspeed facilities and services is to "exercise reasonable control as to the time, place, and manner in which the roads, highways and waterways are accessed." Pub. Util. Code 7901.1; Pac. Tel. & Tel. Co. v. City and County of San Francisco, 197 Cal. App. 2d 133, 152 (1961) ("[B]ecause of the state concern in communications, the state has retained to itself the broader police power of granting franchises, leaving to the municipalities the narrower police power of controlling location and manner of installation."). 2. AT&T is entitled to use its telephone lines interchangeably to provide any form of electronic communications, including video programming The City may argue that AT&T's plan to use its telephone lines to provide additional services, such as video programming, exceeds the scope of its 7901 franchise. However, the California Supreme Court rejected this argument more than 50 years ago. In Pac. Tel. & Tel. Co. v. Los Angeles, 44 Cal.2d 272 (1955), a case involving AT&T's predecessor Pacific Telephone and Telegraph Company, the California Supreme Court held that under then section 536 (now Section 7901) Pacific was "entitled to use its lines interchangeably for transmitting telephone messages, telegraph messages, teletypewriter messages, telephotographs, program services (including radio and television broadcasts) and any other communication service by means of the transmission of electrical impulses." Id. at 281 (emphasis added). Indeed, the Supreme Court held that "[Section 7901], which authorizes telephone companies to construct their lines along public highways, places no restrictions upon what may be transmitted by means of electrical impulses over those lines." Id. at 282 (emphasis added). The Court emphasized that requiring a state franchisee to obtain additional local franchises in order to provide non-telephone services "would defeat the very - 17 700388554v2 AT&T'S MOT. FOR SUMM. JUDG. ON FIRST, THIRD AND NINTH CLAIMS Case No. C 05-04723 MMC 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 purpose of [Section 7901], as it would interfere substantially with the ability of telephone companies to provide adequate communication service to the people of the state." Ibid. Four years later, in Pacific Tel. & Tel. Co. v. San Francisco, 51 Cal. 2d 766 (1959), the Supreme Court confirmed that "that the construction and maintenance of telephone lines in the streets and other public places within the city is today a matter of state concern and not a municipal affair" (id. at 768), even though the lines in question were used to provide nontelephone services such as the transmission of television programs. Id. at 772-73. Accordingly, the Court held that "[Section 7901] gives a franchise from the state to use the public highways for the prescribed purposes without the necessity for any grant by a subordinate legislative body" (emphasis added). In Williams Communications, Inc. v. Riverside, 114 Cal. App. 4th 642 (2003), the California Court of Appeal reinforced the broad implications of these Supreme Court decisions. In that case, Williams sought a refund of franchise fees paid to the City of Riverside (as a condition of installing its telephone lines) on the ground that such fees were prohibited under 7901. The trial court ruled that Williams was not entitled to a refund, holding that: (1) "[i]f a telephone company installs cables to be used for non-telephone purposes, it is not protected by Public Utilities Code 7901" and (2) "Plaintiff Williams . . . had failed to disprove defendants' position that the City could require a license agreement because plaintiff's cable would carry open video, cable TV, [and] Internet services which are not subject to Public Utilities Code 7901." Id. at 649. The Court of Appeal reversed. Adhering to the Supreme court's City of Los Angeles and San Francisco decisions, the Williams court held that "the fact that other data is transmitted over the telephone lines does not deprive Williams of the protection afforded by section 7901," adding that "[l]ocal franchises are prohibited because `[t]he undisputed evidence in this case discloses that all the communication services provided by the telephone company involve the transmission of intelligence by electrical impulses through its lines.'" Id. at 654 (quoting City of Los Angeles) (emphasis added). - 18 700388554v2 AT&T'S MOT. FOR SUMM. JUDG. ON FIRST, THIRD AND NINTH CLAIMS Case No. C 05-04723 MMC 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 The City argues in its motion to dismiss that AT&T's IP video service must be classified as a "cable service" subject to local franchising under federal and state cable television laws (Mot. to Dismiss, pp. 11-13); and that even if AT&T's IP video service is not a cable service, the City still has residual municipal power to impose a franchise since no federal law preempts regulation of video services as such (id., pp. 13-15). The City ignores the California decisions discussed above which categorically prohibit requiring 7901 franchisees to obtain an additional local franchise in order to deliver any form of electronic communications over their telephone lines. Moreover, neither California nor federal cable law authorizes the City to franchise any services that AT&T may provide via its facilities. B. California Cable Law Does Not Authorize the City to Franchise AT&T's Video Services. 1. The cable franchising statute has no application to AT&T's facilities. California statutes distinguish between cable television operators, which are subject to local franchising obligations under Government Code 53066 et seq., and other types of video providers, such as satellite broadcasters, which are not. In particular, 53066(a) authorizes cities to franchise only "the construction of a community antenna television system." Similarly, 53066(e) provides that "[n]o person may commence the construction of a cable television system without a franchise or license granted by the city, county, or city and county in which the cable television system will operate." Section 53066, which authorizes cities to franchise the construction of systems in public rights-of-way within their control, provides no authority for the City's actions. Because AT&T received authorization from the State to construct its facilities in the public rights-of-way, and to use those facilities to transmit any form of electrical impulse without local franchising, 53066 is plainly inapplicable. Moreover, on their face, these provisions apply only to a system that is constructed from its commencement as a "cable television - 19 700388554v2 AT&T'S MOT. FOR SUMM. JUDG. ON FIRST, THIRD AND NINTH CLAIMS Case No. C 05-04723 MMC 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 system" or "community antenna television system." 5 Here, however, AT&T did not construct its facilities as a cable system; it constructed its facilities as a telecommunications network. As the California Supreme Court has indicated, these facilities remain a "telecommunications network" even when the progress of technology means that video programming now may be delivered over the same wires as basic telephone calls and other telecommunications services. Indeed, as reflected in City of Los Angeles and its progeny, telephone networks, including AT&T, actually have been transmitting television signals for decades. No court has held that this capability causes such facilities to lose their character as "telephone lines" or transmutes them into cable systems subject to the cable television franchising laws. AT&T's Lightspeed enhancements will add capacity to AT&T's telephone network and thus improve its effectiveness in managing many capacity-intensive applications, including video. But since AT&T's network (like almost all telecommunications networks) already has the capacity to transmit video, there is no basis to conclude that AT&T commences the construction of a cable system simply by enhancing the capacity of its telecommunications network in a manner that improves its existing capabilities. 2. The 7901 franchise preempts any authority the City may otherwise have under Government Code 53066 et seq. Even assuming that 53066 were facially applicable to AT&T's telephone lines, this section does not effectively delegate the state's franchising authority over such lines to the City. Nor does it justify interposing the overlay of a city-by-city franchising regime upon telephone companies for any services they may provide. No California case has held that 53066 authorizes a city to impose a cable franchise on the construction of lines installed pursuant to a telephone company franchise under 7901. Indeed, the only relevant authority suggests that, in case of conflict between 53066 and 7901, the latter must prevail. A "cable television system" is "a community antenna television system, under common ownership and control, serving a franchise area or two or more contiguous or electronically connected franchise areas." Gov. Code 53054.2(b). - 20 700388554v2 AT&T'S MOT. FOR SUMM. JUDG. ON FIRST, THIRD AND NINTH CLAIMS Case No. C 05-04723 MMC 5 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 See 46 Op. Att'y Gen. Cal. 22 (1965); 1965 Cal. AG LEXIS 44, at *3 (1965) (concluding that if a CATV were also deemed to be a telephone line, "section 7901 . . . probably would require that cable be considered part of the statewide franchise and thus exempt from local franchising") (emphasis added). The Attorney General's opinion is consistent with general state law principles that preclude local governments from interfering with state-authorized operations. As the California Public Utilities Commission summarized in In re Backman Water Co., Even when a city has the general power to regulate an activity normally conducted by both utilities and nonutilities, that power cannot be exercised to prevent a utility from commencing a state-authorized operation. (Harbor Carriers, Inc. v Sausalito (1975) 46 CA 3d 773.). . . . An attempt to use the franchise as a second certificate of public convenience and necessity is not a use of the power in the manner prescribed by law; the franchise power cannot govern any topic already governed by statewide law. 5 CPUC2d 358 (1981); 1981 Cal. PUC LEXIS 458, at 24-25 (1981) (emphasis added). See also Cal. Const., art. 7 (providing that a "county or city may make and enforce within its limits all local, police, sanitary, and other ordinances and regulations not in conflict with general laws") (emphasis added); Tily B., Inc. v. City of Newport Beach, 69 Cal. App. 4th 1, 19 (1998) (holding that local law is preempted where it "duplicates, contradicts or enters an area fully occupied by general laws, either expressly or by implication"). If the California Legislature, in enacting Government Code 53066 et seq., had intended to deprive telephone companies of their right to use their lines to transmit any form of electronic communications without a local franchise (which AT&T strongly disputes), this intention could not be given effect because the 7901 franchise "constitutes a binding contract based on adequate consideration, and that the vested right established thereby cannot be impaired by subsequent acts of the Legislature." County of Los Angeles v. Southern California Tel. Co., 32 Cal. 2d 378, 384-85 (1948) (emphasis added); Petaluma v. Pac. Tel. & Tel. Co., 44 Cal. 2d 284, 288-289 (1955) ("[B]y constructing, maintaining and operating telephone lines, [the utility] acquired a state franchise to use the streets and other public places in the city for telephone lines and equipment. The state franchise rights thus acquired were vested rights which could not be impaired by a subsequent delegation of - 21 AT&T'S MOT. FOR SUMM. JUDG. ON FIRST, 700388554v2 THIRD AND NINTH CLAIMS Case No. C 05-04723 MMC 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 power to the city . . . ." (emphasis added)); Western Union Tel. Co. v. Hopkins, 160 Cal. 106, 120 (1911) (affirming that the state telecommunications franchise, once accepted, "became a contract between the company and the state, secured by the constitution of the United States against impairment by any subsequent state legislation"). It is unlikely that the Legislature in enacting cable laws pertaining to CATV intended to eviscerate or limit the 7901 rights of telephone cor

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