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8/2/2019 USDC Opinion

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F I LEDFor P t i L ~ ~ ~ ~ t ~ . ~ r " IUNITED STATES COURT OF APPEALS " ,'-',I{

FOR THE NINTH CIRCUIT PHILLIP 8. WINBERR','CLU-lK. us C O : J ~ l Of , ' ? r : ' ~ J

PREFERRED COMMUNICATIONS, INC., )a California corporat ion, ))P l a i n t i f f -App e l l a n t , )) No. 84-5541v. )} DC# CV 83-5846-CBMCITY OF LOS ANGELES, CALIFORNIA,}a municipal corporat ion; and

D E P A R T ~ E ~ T OF WATER AND POWER, )) QPINIO!la municipal ut i l i ty , )

Defendants-Appellees. )})------ - -- - - - - - - - - - - - - - - - )

Appeal from the United States Dis t r ic t Courtfor the Central Dis t r ic t of CaliforniaConsuelo B. Marshall, Dis t r ic t Judge, PresidingArgued and Submitted December 7, 1 9 8 ~

Before: S ~ E E D , ANDERSON, and FERGUSON, Circui t Judges.

St\EED, Ci rcui t Judge:

Preferred Communications, Inc. (PCI) brought an actiona r is ingun de r 4 2 U. S C. 1 983 ( 19 82) a g a in 5 t t he Cit Y 0 f Lo 5 .Angeles (the City) and the Los Angeles Department of Water andPower claiming a deprivation of r ights protected under the Firs tand Fourteenth Amendments, as well as violat ions of the federalan t i t rus t laws, and various s t a t e law violat ions . The di s t r i c t


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court had jur i sdict ion under 28 U.S.C. 1331, 1337, 1343, 2201,2202 (1982), and under i t s pendant ju r i sd ic t ion . I t found as a

"matter of law that the City 's regulatory scheree did not violatethe f i r s t Arr,endment r ights of a prospect:ve cable te levis ionoperator and that the City was immune from an t i t rus t l i ab i l i tyunder the s ta te action exemption established in parr.e.I-Y.... Brown,317 U.S. 341 (1943). Accordingly, the court dismissed PCI'scomplaint without leave to amend, pursuant to Fed. R. Civ. P.8l2(b)(6) .1

PCI appeals from th is d i s ~ i s s a 1 . As the d i s t r i c t court10II disrr:iEsed PCI's federal claims without leave to amend, i t s

decision iE f inal and appealable . Whitt ington y.-Hbjt t inatcD,1'\ ,733 F.2d 620,621 (9th Cir . 1984); ~ Q n . f l i . : i v, WestinghouseII 4 ~ . . t J l i . - J : . Q . . t . P . . . . . . L ' 623 F. 2 d 11 7, 119 ( 9 t h C r. 1980). This co u r t

therefore has jur isdic t ion over PCI's t imely appeal under 28J( , U.S.C. 1291 (1982). We affirm the d i s t r i c t cour t ' s decision

insofar as i t per ta ins to the p l a in t i f f ' s ant i t rus t claims and18 reverse i t s dismissal of the Firs t Amendment claim. 219 1 .

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A decision to dismiss a complaint for fa i lure to s tc te aclaim upon which re l i e f can be granted is reviewable de novo.G J . l j l l Q . I 1 J . . . l _ J ; Y J . . l . n . t y - . - C L f - . - O n ~ , 731 F.2d 1379, 1381 (9th Cir . 1984).In conducting th is review, we must accept a l l mater ial al legat ionsin the complaint as t rue . 1 3 ~ n . e L . . Y - , - . k : l . z z r u . . Q , 730 F.2d 1319,1320(9th Cir . 1984). All doubts are resolved in favor of the

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plair , t i f f . E..ilLest W.-..liQhn_L.JnC. y . CQdd...ins, 615 F.2d 830, 834-35(9th Cir . 1980). A dismissal cannot be upheld ~ I u n l e s s i t appearsbeyond doubt tha t the pla in t i f f can prove no se t of facts insupport of his claiD ..... hich .....ould en t i t l e hi iTt to re l ief . ,n l..Q. at834 (quoting Conley 3 .... GibsQn, 355 U.S. 41, 45-46 (1957)) i accc::d.l i . Q l ~ . t 3 ~ l J Q . J . D y e s t m e n t Co" 672 F.2c 1305, 1309 (9th Cir . 1982) .With these pr inc iples in mind, .....e tUrn to PCI 's coroplaint.

II.

THE C o t ~ P L A I F I As al leged in PCI's complaint, the per t inent fac ts

appear as follows. PCI is a corporation which ..... as organized forthe purpose of operating a cable te levis ion system in an area ofLos Angeles designated by the City as the Scuth Central Dis t r i c t .PCI's intended operation enta i led the ins ta l la t ion of a net .....ork ofdis t r ibut ion cables in the region pcr ..... ished to serve. PC:propcsed to at tach i t s cable to exis t ing public ut i l i ty f ac i l i t i e s-- poles and conduits located on property o .....ned in fee by theu t i l i t y and on or under easements o .....ned by the ut i l i ty runningover both public and pr iva te r ights of ..... ay.

For a number of years , u t i l i t i e s throushout the s ta te ofCal i forn ia have dedicated surplus space on the i r fac i l i t i e s fors imilar uses. The Cali fornia l eg i s l a ture recognized th i sdedicat ion, at l eas t with regard to nonmunicipal u t i l i t i e s , wheni t enacted Cal. Pub. Uti l , Code 767.5(b) (West Supp. 1984)(dedicat ing surplus space and excess capacity on public ut i l i tysuppor t s t ruc tures for use by cable te levis ion companies) .

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A c c o ~ d i r . g l Y I PCI approached t ~ o ut i l i t i e s in the Los Angeles area- - the Pacif ic Telephone and Telegraph Company and the Los AngelesDepartment of Water and Power - - to negot iate a lease of space onthose companies' poles and conduits . Both u t i l i t i e s informed PCIthat such an agreement would not be possible unt i l PCI obtained a

o cable te levis ion franchise from the City. PCI then pet i t ioned theCity in an attempt to obtain such a franchise.

8 The City al locates franchises through an auctionprocess . Franchising or l icensing the construct ion of a cableC)I

i te levis ion system i s authorized by Cal. Gov't Code 53066 (Westlu ISupp. 1984).3 The City requires companies wishing to par t ic ipate

:; II in the process to submit to a var ie ty of condit ions. p.. potent ia lp, bidder must pay a s1'o,ooo f i l ing fee and a $500 good fa i th deposit1 and must agree to pay up to an addi t ional S60,OOO to reimburse the1 ) City fo r expenses incurred in holding the auct ion. I t must16 provide the City with a deta i led proposal outl ining i t s intended

operat ions over the succeeding nine years and must demonstrate to18 the sa t i s fac t ion of the City tha t i t has a "sound f inancial base,"19 that i t s proposed operat ions const i tute "sound business plans,"20 and that i t has the proper "character qual i f icat ions" and21 "demonstrated business experience." The City also requires22 hopeful bidders to ~ g r e e to pay the City a percentage of future23 annual gross revenues and to provide a var ie ty of customer

services , including at l eas t 52 channels of video serv ice and: : : ~ in teract ive (two way) service.'16

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More s ign i f ican t ly , the City exacts a c o ~ m i t m e n t to: IiI provide various mandatory access and leased access channels.

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I Bidders must agree to provide, without compensation, two c h ~ n n e l s for use by the City and by other government en t i t i e s , two channelsfor use by educational i n s t i t u t ions , and two channels for use bythe general public, along with s t a f f and f ac i l i t i e s to aid inprogramming. Bidders must fur ther agree to provide two leasedaccess channels as well . An undertaking to provide portableproduction f ac i l i t i e s and to permit free use by the City of a l lpoles , towers, ducts , and antennas is a+so required.

Final ly, potent ia l cable operators must agree to leave avar ie ty of business decis ions to the discre t ion of the City.Pricing and customer re la t ions are l e f t to the City ' s cont ro l .The operator must form a "cable f ranchise advisory board," SUbjectto City approval. Last ly, the City reserves the r igh t to inspectthe cable a ra t ion upon demand and requires a waiver of any r igh tto recover for damages or other injury ar is ing from the cablefranchise or i t s e n f o r c e ~ e n t .

After the submission of bids from companies will ing to submit to the foregoing condit ions, the City chooses the operator i t deems to be "best" for each area. I t awards jus t one franchise in each region. The City refused pe l ' s request ;o r a franchise b e c ~ u s e PCI had fa i led to ~ a r t i c i p a t e in the auction process , The City wil l not permit PCI to operate a cable te levis ion system in the South Central Dis t r i c t under any circumstances.

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III ...PCI ' s appeal ra ises two issues - - one const i tut icnal and

one s ta tu tory . The cons t i tu t iona l one is whether the Ci ty ' s cablefranchise procedure in any respect viola tes the Firs t A m e n d ~ . e n t .

' The s ta tu tory one is whether the City is imrr,une from a n t i t r ~ s t l i ab i l i ty under the doctr ine of Parke.L-Y.....-BJ;Qiill , 317 U.S. 341

I (1943) .II p! 'I

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PCI's arguments amount to a sweeping at tack a g a i ~ s t theI Ci ty ' s cable te levis ion franchising process. PCI contends, int:r

a l i a, t hat i t s rig h t' to con s t r Uc t a cab 1. e te l e vis ion s y s t e r.: anddisseminate programrr.ing via the cable nediuIT. should not beconditioned upon having to par t i c ipa te in an auction procedure orbe otherwise subject to the Ci ty ' s d i scre t ion . I t maintains tha tthe City cannot choose which cable providers may use the City ' sfac i l i t i e s to in s ta l l and operate cable systems and cannot

! condit ion tha t use on such requirements as the City has imposed in1 th i s case ..

These content ions are wide-ranging. Were we to atterr.ptto respond in l ike measure, we would not escape the charge ofrendering advisory opinions poorly d i s g ~ i s e d as sweeping dic ta .On the other hand, we cannot regard th is case as one which ise i ther unripe for decision or moot. PCI has sought a franchisefrorr, the City which the City to date has refused to grant .

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An escape f r o ~ our dilemma would be to ident ifyf u n d a ~ e n t a l issue which, i f decided in favor of the City, w o u l ~

..require affirming the judgment of the dis t r i c t court and which, i fdecided adversely to the City, would require reversal and aredesign by the City of i t s procedures relat ing to c a ~ l e t e l ev i s ion . Ke bel ieve such an iEsue is as followE:

Can the City, consis tent ,,;ith the Firs t Anlendr:1ent, l imi t access by means of an auction process to a given region of the City to a s ingle cable te levis ion company, when the public u t i l i t y fac i l i t i e s and other publ ic property in that region necessary to the ins ta l la t ion and operat ion of a cable te levis ion syster:1 are physical ly capat le of accommodating more than one systerr?

Ke do not decide the val idi ty of any of the speci f ic requirementscal led for by the City 's franchising process . In par t icu la r , wedo not decide whether the City may validly require cable operatorsto turn over channels for use by the governrnRnt, by educationalin s t i tu t ions , and by the publ ic and fer leased use by others . 4

The City denies that even th is issue need be confronted.I t asser t s tha t pcr lacks standing to challenge i ts franchisingprocess . Although not denying the presence of a physical capaci tyto accommodate more than one cable television system, the Citymaintains tha t the physical scarci ty of avai lable space on publicut i l i ty s t ruc tures , the economic scarci ty of the cable medium, andthe disruptive ef fec t tha t ins ta l l ing and maintaining a cablesystem has on the publ ic domain each jus t i fy i t s effor t tor es t r i c t access to i t s f a c i l i t i e s to a single cable te levis ioncorrpany. Finally , the Cit ies of Palo Alto and Menlo Park and theTown of Atherton, as amici curiae, asser t tha t the City ' s

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I,I! f ranchising scheme presents no irnpecirrent to PCI's abi l i ty toor igina te p r o g r a ~ i n g and thus does not contravene the Firs tAmenon,ent. Each of "these arguments wil l be considered in turn.

Ke conclude tha t the question we consider raised by t h i ~ appeal should be answered negat ively. For that reason we reverse

(, I: the d i s t r i c t cour t ' s dismissal of PCI's Firs t IHT,endn,ent claim.A. Standing

8 The City contends tha t , because i t did not par t i c ipa tein t h ~ auction process , PCI lacks Art ic le I I I standing tochallenge the City 's regula t ions . The Supreme Court se t out themini10uD requirer.:ents for standing in Y9..ll..fy forge C h r i ; t i ~ n

12464 (1982). To invoke a ccur t ' s author i ty , a party ITlLst:"show tha t he personally has suffered s o ~ e actualor threatened injury as a resul t of the p u t a t i v e ~ y i l l ega l conduct of the defendant ," ~ ~ . t . . . Q l } ~

j -.t.Qj; .s...-.Y_L.YiJ.ll-9s;..-.9.f .....B..eJ.J.1.LQQQ , 4 41 U. S. 91 , 9 91(, (1979), and tha t the injury " fa i r ly can be tracedto the challenged act ion" and "is l ikely to be1-:' redressed by a favorable decision," .sJjTc9ILLE ~ ~ ~ ~ I ~ ~ D . t ~ I y ~ l ! l ~ ~ ~ ~ s ~ , 426 U.S. 26,18 38 , 4 1 (1976) .19 lJL. a t 472 (footnote orr,itted). 5

PCI suffered no actual or threatened in jury, the City2120

maintains. Any injury is said to be purely specula t ive . Ke22 disagree . PCI's action chal lenges the auct ion process i t s e l f . I t

has been barred from access because of i t s refusal to enter the2 ~ , bidding process and abide by the Ci ty ' s numerous condi t ions . I t

follows tha t PCI clear ly a l leges a real in jury, fa i r ly t raceable20 to the challenged action of the City . I f PCI i s r igh t on i t s

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ii B." : Turning to the issue of the f i r s t Amendment protect icnIi(, Ii enjoyed by cable t e l ev i s ion , i t i s c lear that some such protect ion

, t 6-Ii eX1S s. W&Q--..S2tellite PrQQ!;lcts C o ~ City 01I l l l d , i s : I : i l Q ~ , 694 F.20 119, 127-29 (7th Cir . 1982); ,C.Q;::rr:cnityl IC) i ~ Q z ~ ~ j ~ s i o r r s ~ ~ ~ y . City of B Q ~ ~ , 660 F.2d 1370, 1376 (lOth

Ii C i r . 1 9 81), ~ ~ . . L t I Qi s l I l . . l i ~ , 4 56 tJ. S. 1 00 1 ( 19 82); l : t i . Q ~ V ic eQI I ) I:C y . . . r . P J _ ~ - I l l , 57 1 F.20 1025, 1052-:)7 (8th Cir. 1978), aff'g.-ill)I I Ii

I I:I: 9 . t b s ; 1 _ i l l ' . Q 1 l r ~ ~ , 44 0 U.S. 689 (1979); l : l . 9 E c e - - - . - E - . 9 ) ; - ' o l L . i ~ J Inc '_ ' lJJ : . l l ,56 7 F.20 9, 43-51 (D ' ,C . Cir . ) , .UJ:--L Q s ~ , 434 U.S. 829 (1977).1 \ I:

l-l . The p r o b l e ~ before us is ~ h e t h e r th is protect ion ~ e r ~ i t s an I I aff i rDat ive a n s ~ e r to the issce th is appeal ra ises or requires aIf) negative ar:s\,;er.

In i t i a l ly , the City argues tha t the s tandards appl icableto govetr:reent regulat ion of broadcasting also govern the

:1) reg;Jlation '0 cable. We disagree . hOe: recognize that the Fi r s tAreendment a l l o ~ s the government greater l a t i tude in regulating the

2-: b r 0 ad cas t IT'.ediu l: i t han i t e n joysin r e CJ L; 1 a t in g o t her , mo ::: e

: : ~ 190 (1943). And severa l cour t s , to a varying extent , have appliedthe broadcasting standards to the government's ef for t s to regulate

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iI,II, II 80; E ~ ~ ~ ~ j j j ~ ~ ~ Q C Q r p ~ ~ ~ , 399 F.2d 65, 69 (8th Cir .il

'III Sup p. 97 6, 9 8 3 - 8 S (D. R 1. 1983). e dec 1 i r. e t 0 do so. "EachIi-l" 11 r r e c i i ~ r r . of expression . . must be assessed for Fi r s t AffiendnentI

purposes by s tandards s ~ i t e d to i t 11( Ii- III "[Dl i f ferences in the charac te r i s t i cs of new media jus t i fyR I

differ t :nces in the Fi r s t Arr:enckent s tandards applied to them. E.e..do II L J Y D _ r ~ Q ~ ~ ~ a CQ., 395 U.S. at 386. Despite the superf i c i a l

lu Iis imi la r i ty between broadcasting and cDble te levis ion, there are

Jills ign i f i can t di fferences between the two media t h ~ t have Fi rs tJ: II!i A 1 Ii mencrr.en t consequences.

n: '\ iI h e SU F r e 17, e Co u r t I s d e t e r rr. ina t ion t o o 11 0 \0,' g r e c. t e rIII il governn,ent intr:;sion intc the aff2:irs of broadcasters res ts or. thE:'

1(, physical scarcit::l of radiowavesi the electrol1lagnetic spectrum1 simply is physical ly incapable of carrying the rressages of a l l who

19 Al...tQ, 579 F. Supp. 1553, 1563 (N.D. Cal. 1984). AS Just ice

Unlike other modes of express ion, radio inherent lyis not avai lable to a l l . That is i t s uniquecharac te r i s t ic , and tha t is why, unlike other modesof express ion, i t is SUbject to governmental2-! \, regulat ion. The r igh t of free speech doesnot include, however, the r ight to use the::,c, f ac i l i t i e s of radio without a l icense .2(. 319,

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I I 14 t, 3, 1 458 (D C. C r . ) , .cnJ:-L g ~ j _ e f u 104 S. C::. 525 (} 9 R3); s...c.Q_ttI

: I Y..L _ E . Q ~ . P k L S , 702 .F.2d 1263, 1272 (9th Cir . 1983) f : ; g . r ~ gg;.'l.ikQ,I t 104 S. Ct. 1439 (1984). ~ i t h o u t l icens ing, the broadcast sI-ectrcrwould be rendered vi r tua l ly use:ess to a l l .

, That is not the case under the alleged facts before us. (, I! per wishes to obtain permission to s t r ing i t s cable frc'l7l u t i l i t y

peles and through ut i l i ty conduits . Because of pe l ' s refusal toc o r r ~ l y wIth the Ci ty ' s auct ion process , the City has ~ j t h h e l d tha tB I9 Ii p e r ~ i s s i o n . cannot accept the Ci ty ' s content ion tha t , becauseII the aV21lable space on secr. f ac i l i t i e s is to an cndetermined0 :;

II extent physically lirr:itec, the Firs t Amend:;:ent star.dards1I applicable to the regelat ion of bro cast ing pern'it i t to r es t r i c t2 I

I , I:I access and alJow only a single cable Frovider to ins tu l l andI: operate a cat le te levis ion syste:c.Apparently the only case to a p ~ l y t ~ e physical scarc i ty">

ra t ion ale t 0 cab 1 e te l e \' is':' 0 n i n s u chad i re c t f ash ion i s D..l.2k(,I

case involved the FCC's ef for t s to recu!ate an ear ly community3antenna syster. tha t r:-:erely retrans:7,ittec s i sna l s received fron:9broadcastin 's s ta t ions ; ca:::lle technOlogy, ho ....ever, has evclved

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I..23 IIII at 1563 n.19. More recent cases have express ly concluded tha t theph Ys ic a 1 sea re i t y ra t ion ale doe s not a pply to cab 1 e S . e ~ J . . . L . 9 . . . . . . ,

O ~ . . e g j 1 ~ Q l l J j . . i . . t . . e J J : Q Q J . l c t s Co., 694 F.2d at 127 (" [FJ requency2(' in terference lis1 a problem that does not ar i se with cable

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essent ia l precondit ion of [b::-oaacast] theory - - physical. I in terference and s c a r c i t ~ requi; ing an umpiring role forII therefore , is ag o v e r n ~ e n t - - is absent ." ) ., IiI douLtful precedent today.7

Moreever, PCl has alleged in i t s complaint that tbere Uspace avai lable on the City 's poles and in i t s conduits . pcr has . !

8 alleged tha t the City has held i t s e l f out as a provider of spacen on i t s u t i l i ty po:es to cable te levis ion companies and that stDte

10 II l a ~ resui res private u t i l i t i e s to make space avai lable for theI! 'I attachr;,ent of te levison cable. Cal. Pub. Uti l . Code

' 767.5(b) (hest Supp. 1 9 8 ~ ) . Because must accept t b e s ~ H i a l leqa t ions as t rue, ' we must finei tha t the physiccl scarci tv tha tI' :

Ii J1\:; could jus t i fy increased reg'Jlcticn of cable operatlons does not

II1'\ ii ex i s tin t his cas e . I';e ex pre s s no 0 pin ion 0 n th e iss u e 0 f t r. e

I!I(,:i rlianner in which the City should . : l l lccate access to poles andI'1- I c o n d ~ i t s to competing cable systems when these s t ructures are18 incapable of accommodating a l l those seeking access .

2. til-1.!H 2 J _tLY l l Q f 2 Q - l . Y J _ll .. t i ! j ~ t t J . Q l1--.-9i.-G 9 ' s ~ _ l l l [ r & . l l i9 .llfgyJ->1tiQIl20 The City asser t s next tha t , because cable te :evis ion i s21 a natura l ~ o n o p o l Y I economic scarci ty j us t i f i e s government,

regula t ion . We need not decide th is issue a t th is t ime. PCl 'scomplaint al leges tha t co e t i t ion for cable services i seconomically feas ible in the Los Angeles area. As we must acceptth is a l lega t ion as t rue , we must conclude that no natura l monopoly

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In passing, we note that the Supreroe Court rejectec anargcment that rested a part icular government regulat ion of the

l'NrJ.J..l..Q, 418 1l.S. 241 (197-1), the COl:rt inval idated a s ta tes ta tu te grant ing po l i t i c a l candidates a r iSht to equal space toreply to cri t icism in ne ....' spapers. Tbe Court reft.:sed to acc t thep la in t i f f ' s argument tha t because economic condi t ions made entryinto newspaper markets di f f i cu l t , the government could impose al imited r ight of access to the press . Although the Courtacknowledged that most newspapers enJoy a monopoly in thei r areasof dis t r ibu t ion , i t did not conclude that th is circumstance gaver i ~ e to a duty to provide public access to the press . S ~ ~ ~ a t249-58; Ljdwest ~ i d e Q C ~ , 571 F.2d at l 0 5 6 ~ t l Q ~ ~ ~

567 F.2d at 46.Several cases , however, have concluded tha t cable 's

alleged natural monopoly charac ter i s t i cs do provide a basis forSOIr.e degree of government regulat ion. ~ ~ J ! L L , C Q . [ . J . l ~ ! : Y I T 1 1 I 1 J . U ] j . k 9 1 j . Q D ~ Q . . . . , 660 F.2d a t 1379; B ~ M . h l i ~ ~ ~ p J ~ i o . I L J 2 i F b Q s 3 . f ' J ~ 2 5 . M , 571 F. Supp. at 985-86; ~ ~ ~ ~ . . Q Q Q . e 9 J i - . - S ~ te 11 i.P...rQQ.J.lD S CQ'., 694 F. 2d at 127 -2 8; l i . 9 p l s i ~ y j . l i l _ S : Q P 1 ~ J Y . . l - - I n ~ - L ~ P . e D l ! y j " ~ Y . 1 1 . l - . C ~ p J . e s . i J 3 i Q f l . . l ~ ~ ' 562 F. Supp. 543, 547 (h' .D. Ky.1982) . I n . c Q r n m J J . r : l j ~ Q J : i l i I l J . l a i g ~ Q r i 2 _ . c . Q - L ' the Te nth C i rc u i tdist inguished T.9.rn.i.ll.Q by tying the natural monopolycharac te r i s t ics of cable to the fact tha t ins ta l l ing and operatinga cable system burdens public ut i l i ty fac i l i t i e s and s t ree t s . Thecocr t asserted that the economic scarci ty present in IQrnillQ "was

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unrelated to a disrupt ive use of the publ ic domain reqcir ing agovernrrent l i cense ." 660 F.2d a t 1379. A cable company, bycont ras t , "must s igni f icant ly iDpact the public dorrain in orcier toopera te ; without a l i cense , i t cannot engage in cable broaocastir.g

! to disseminate infornlat ion. nThis s taterrent is much too broad. I t suggests tba t

simply because cable ' s dis rupt ion of the publ ic don,ain gives r i seto a need for l i censing , i t would also jus t i fy the monopoly theCity seeks to create by i t s auction process. We f ind itnecessary, however, to undertake a mere deta i led inquiry intowhether tbe City ' s auct ion process is a perrr iss ible governniental

8response to the burden imposed by cable on public resources .no ..... turn to tha t ques t ion .

3 1 2 i ' ; ; ~ L . t . : ~ ) t j Q j J _ . Q i J l l b j j 5 _ ~ ~ J . l l ~ S ' ~ _ ' p ~ j l _ . J . t . : ~ t i i j . 5 i l 1 i ~ D ~ ~ L ! : - - L l i ill--DJ;_M.9JJH i i Q n

Concluding tha t cable is not cnaracter ized by physicalscarc i ty analogous to t ha t of the broadcast r.1eoiun; or by econolrlicscarc i ty does net r;lean t ha t .al l resc la t ion of c2b)E operat ions is

C i r . ) , ~ J " L Q s > ~ , 434 C.S. 829 (1977). The F i r s t Arr,endmentdoes not preclude governr.,ent regula t ion of noncommunicativeaspects of speech.S . p D J l i i ' - . 9 ~ , 453 U.S. 490, 502 (1961) (Opinion of White, J . ) ("[Tlhegovernrrent has l eg i t imate in te res t s in cont ro l l ing thenoncommunicative aspects of the medium, but the Fi r s t andFourteenth Amendments foreclose a s imi lar i n t e re s t in contro l l ingthe communicative aspects .") (c i t a t ion omit ted) .

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:IiII:I1i The Supreme Court art iculated a te s t for a s s e s s i ~ g theI!

I! I'"

reascnabJ eness of 5 u ~ h regu la t i on s in 1 J J l i . t . > J 3 ~ ~ _ S 3 ~ ~ ~ . ~ : I I! [A] g o v e r n ~ e n t regulat ion is suff ic ient ly jus t i f ied'I! i f i t is withir. the cons t : tu t iona l pc\-.'er of the

g o v e ! n ~ e n t ; i f i t furthers an importar.t or subs tant ia l governmental in te res i ; i f the < I;I goverr,rrenta::' in te res t is I 'nrelated to the

'Ii suppression of free expression; and i f the ,. !, incidental res t r ic t icn on al leged Fi rs t Anendment I freedons is no grea ter than is essen t i a l to the - I fur therance of tha t in te res t . , I R

f) :'I R ! ; . L ~ , 748 F.2d 527, 534-35 (9th Cir . 1984) . pcr concedes thatIiJ () I the City has an in te res t in minir.:izir.g the disrupt ion of t[:eI,11 I'I public domain and tha t thIS in te res t is "unrelated to the'IIII I, sUFpression of free express ion. n9 The question preser.teci, tben,I:11, IiI is whether allowir.g only the conpany selected through theIIH14 " francbise auction process tc erect and operate a cable s tern in,il each region is the lEast res t r ic t ive r..eans aV2.:.l2tle to the CityI" II1(, III to fur ther i t s in te res t in protect ing public resources . Ke holdI'IiI - I tha t under the facts alleged in th is case i t is not .

I Cable te levjs ion, to r e ~ e a t , requires the use of ~ u b l i c8I fac i l i t i e s , and th is provides a jus t i f ica t ion for some governDent')

regula t ion . The City has legi t imate in te res t s in public safety20and in maintaining public thoroughfares. In .cMr:uni.t.J:1;..Ql;',1J.WJ,.t;.fl.sj.Q.D.-r2......, 660 F.2d a t 1377, the court recognized tha tcable enta i l s use of the public domain and tha t th i s use23const i tutes a basis for governmental regulat ion tha t is not-1present in case of n e ~ s p a rs :)

A city ne s control over the number of times i t sci t izens must bear the inconvenience of having i t s26- 15


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I: s t ree ts dug up and the best times for i t to occur. Thus, g o v e r n ~ e n t and cable operators are t ied in a"Ii" way that government and newspapers are not .Ii

I , I!1 at 1378; ~ c Q r d Q E & S 9 ~ ~ t e l l i t e ~ ~ ~ t ~ ~ , 694 F.2d at 127Ii-i I'II


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I . Q ~ l l Q , 418 U.S. 241 , 258 (1974) ('''The choice of material to gointo a newspaper, and the decis ions made as to l imi ta t ions on thes ize and content of the paper, and treatment of public issues and

4 public off ic ia l s whether fa i r or unfair - - const i tute theexercise of edi tor ia l control and judgment. I t has yet to be

(, demonstrated how goverr.ment regulat ion of th is crucia l procEss canbe exercised consis ten t with Firs t Amendment guarantees of a free

R press as they have evolved to th is t ime.")4 . I b ~ J ~ h l i _ f . . Q r u j . 1 D ~ . c J : r i n e a S J ~ ~ 1 < OD G . 9 ~ ' 1 Q . f 1 l 1

ES:-9llbli.Qn10 Cur conclusion tha t the question before us should be11 answered, "No," is aided by Supreme Court cases shaping the publicJ f o r u ~ doctrine. Khat PCl wants, in essence, i s a r ight of access

IJ " t 0 u ti 1 i t l' pol e and con d l i t S U: 2l tar e e i t [; E: r 0 ',om e d 0 r con t r 0 11 e dIi14 I by the City, subject , of course , to reasenable terms designed toI1


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8

.

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I

1-

18

21

22

2-1

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pa r t ic u 1art i Jne . " w 2 . y r . ~ _ ~ L s - , ~ . t y , 408 U.S. 104, 116I (1972); J 1 D j ~ 9 - - S J : j l 1 . g - ~ J ~ 1 1 2 ! ; J J ; J n i , 710 F. 2 d 1410 , 1414 (9 t h,

.i Cir. 1983) ("l-lerely p . e ~ ~ i t t i n g public access to prof 'erty otherthan s t r ee t s or parks . . does not open the fac i l i ty for use asa pcblic fore1.1. The place or i t s intended use mcst s o m e h o ~ render the fac i l i ty appropria te for expression.") (c i ta t ion

I omit ted) .The Supreffie Court has ident i f ied three categories of

public proper ty . At one extreme are "places which by longt rad i t ion or by government f i a t have been devoted to assembly ancldet-ate . . "This category includes "s t ree t s and parks . [ that] haveir.;r.errloriall 1 been held in t r u s t for the use of the public aro ,time out of mind, have been used for purposes of assel.1bly,communicating ~ h ~ u g h t s between c i t i zens , and disccssing publ icquest ior .s ." , 307 U.S. 496, 515 (1939) (Opinion of R G b e r t ~ , J.l. In such places , the Fi rs t Amencment sharply cur t a i l s the gove:nment 's abi l i ty to l imi t expressive ~ c t i v i t y .

may not ban communicaticn ent i re ly , i t may enforce content -neut ra lregulat ions of the ti;r,e, place, and ~ I a n n e r of expression tha t "arenarrowly t a i lored to serve a s ign i f i can t governn.ent i n t e r e s t , andleave open ample a l t e rna t ive channels of communication."~ . x - . Y - , - . l J . . e ' r ' . . . J 1 1 1 . : : r : L 2 . ; ; l l i J ~ , 312 U.S. 569 (1941). To pass cons t i tu t iona lscrut iny, a content-based exclusion of expression must be"necessary to serve a corr,pel1ing s ta te in te res t and narrowly

- 1B
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II

460 U.S. II d r a .'n t 0 a ch i e " e t hat end,". II at 45; ~ ; j j ; ' y - - - Y - , - . B . . L Q ; " ' I 1 , 447 U.S. 455, 461-62 (1980) .iI

A sec 0 n d c ~ a t ego ry e 0 r i s e s pub 1 i c p r 0 per t l' t hat theI government has opened for use by the put l ic for expressive: II(,

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:I The th i rd and f ina l catesory is property "which i s notIII'"

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Ii i : l . i 9 ~ ..L ....Y... ~ - . D ~ , 454 U.S. 263 (1981) (universi ty meetingf ac i l i t i e s opened for use by s tudent groups) . Although the s ta tei s net required to re ta in the open character of i t s f ac i l i t i e sindef in i t e ly , while i t does so, the s tandards applicable to the

II t rad i t iona l public forum govern the s t a t e ' s regulatory ef for t s .II government is e ~ p o w e r e d to enforce reasonable t i ~ e , place, andIn ~ a n n e r regulat ions .. ...d......

II by t radi t ion or designation a forum for public c o ~ ~ u n i c ~ t i c n "

There, "[ i ln addit ion to time, place , and manner regulat ions, theState may reserve the forum for i t s intended purposes,communicative or otherwise, as long as the regulat ion on speech isreasonable and not an e f fo r t to suppress expression merely becausepublic off ic ia ls~ ~ s j ~ ~ ~ , 460 U.S. a t 46.

a. .l.Lt.i...U J ~ ' _ K . 9 1 ~ ~ ~ ~ n 9 J . J j __l t .rL1l.Qt Trasti t iona..lPublic fQrujnsre ject the contention tha t merely because ut i l i t J '

poles and conduits are located on or under public s t ree t s and- 19
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p la in t i f f s sought to post signs on lampposts and ut i l i ty poles .I t is possible , therefore , tha t although the public ut i l i ty polesand conduits are not public forums t rad i t ion or des ignat ion ,

0; I each may nevertheless serve as a forum for expression via the

(. Metropoli tan T ; ~ n ~ . . 2 9 . . L t 9 i i . Q ~ t h Q r . i t y , 745 F.2d 767 ,773 (2d Cir .1984) ("Public property, which i s nei ther a t rad i t iona l nor

R a designated publ ic forum, can s t i l l serve as a forum for Firs t o Amendment expression i f the expression is appropriate for the!u proper ty . . and is not' incompatible with the norr:-al ac t iv i ty11 of a par t icu la r place at a par t i cu la r t i :re. '" ) (citZltion or..itteo)

I, Tr:us, ..;h i le a f la t ban on sign posting IT,ay constitutE: a narrowly

lf i1-

19

2021

222'21

20

ta i lored rrease:e to pro:rote the City 's in te res t in e ~ i m i ~ a t ~ n g

banning the ins ta l la t ion of cable is not necessar i ly the l ca s tres t r ic t ive way to fur ther the Ci ty ' s in te res t in n'inirdzing

408 U.S. 104, 116 (1972) ("The nature of a place, ' the pat te rn ofi t s norrral ~ c t i v i t i e s , dictate the kinds of regula t ions of time,place, and n,anner tha t are reasonable . I") (quoting Hright ,~ Q D . J 3 t j l . 1 l j ; : j . Q D - - . 9 J ) - - . 1 b ~ Q r n ~ , 22 Vand. L. Rev. 1027, 1042 (1969}).

Second, PCI 's complaint suf f ic ien t ly al leges tha t theuti 1 i t Y fa c i I i t ie s at issue d.Q. cons t i tu te a kind of public forum,ei ther by t radi t ion or by designat ion. The Sta te of Cal i forn iahas dedicated "surplus space" on public u t i l i t y s t ructures for use

- 21

,.'... ' : , ' " " " , - .... - ~ .


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by cable te levis ion companies. CuI. Pub. Uti l . Code 767 . S (b ) (Kest Supp. 1 9 8 4 ) . And as to City-owned s t ruc tures , pcral leges that the Los Angeles Department of Water and Power hasheld i t s e l f out to cable companies as a provider of poleattachment services . Moreover, the franchis ing process i t s e l f

G const i tu tes the Ci ty ' s ef for t to grant at l eas t some access to i t sf a c i l i t i e s .

Treating the ut i l i ty s t ructures as a type of publicforum places l i rr i ts on the City 's ab i l i ty to exercise i t s

8

I l icensing power. Khile the City may promulgate reasonatle tirre,10 Ii place , and manner regulat ions , i t ~ a y not l im i t access under theII III.:.' il circumstances set for th in the issue before us.

11 Y . . L ~ j J : Y J > L j U ...rliJjIL9b.9l'2, 394 O.S. 147, 150-51 (1969) (" [Al 120 .....1 \ IIsubjecting the eXErcise of Fi r s t Arrendment f r e e d o ~ 5 to the pr ior-lres t ra in t of a l icense , without narrow, object ive, and def in i t e

Ie) standards to guide the l icensing autbor i ty , is

18 E J ~ . b E . Q n . d , 743 F.2d 1346 , 1357 (9th Cir. 1984) ("Unfettered19 1 discre t ion to l icense speech cannot be l e f t to administrat ive20 bodies ." ) . The City may not so l i c i t "bids" from prospective21 speakers and deny access to i t s fac i l i t i e s to a l l save the highest22 "bidder" in each region.23 ?>loreuver, even i f l l n ~ s n 1 . requires the conclusion that

the u t i l i t y poles and conduits do not const i tu te a public forumfor the purpose of cable t ransniss ion , the City may not suppress

26 ' expression on those s t ruc tures merely because i t disagrees with- 22
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III!

Ii the sake r ' s vi e',.;po in t . S5.& P S r . . . . r Y J 9 J . l . i l j : i Q D ~ Q . 9 j . . . t i ~ l l , 460IIii 11.5. at 46. y,'hile an outr ight ban .,.,.oulci be vie'Wpoint neut ra l , .seeT 9 1 ( 1 ) ~ Y ~ ~ . $ J Q J J i J J ~ , 104 S. ct. at 2128-29, the Ci ty ' s action inthe ins tant case crea tes an impermissible risk of covertdiscr imination based on the content of or the vie.,.,.s expressed in

(\ I the opera tor ' s proposed prograrring. &.s;. p&i..f..!'QO y . J I l t ~ r U L ~ ~ J . SQcie-..tyJ..Qr K r i s h o ~ t _ J : . . Q i l l C i o u s ~ , 452 U.S. 640, 649 (1981) .Yiocent does not suppor t the Ci ty ' s at tenpt to single out one8

() cable te levis ion company to be the one speaker i t 'Will p ~ r n ; i t to10 use public property for expressive purposes, 'While i t forbids

access for those purposes to a l l others .J I1 I Allowing a procedure such as the Ci ty ' s 'Would be akin tol!

IiII ; allowins t ~ e g c v e r n ~ e n t discre t ion to grant a permit for theIi11 I operat icn of n e " " ' ~ p a p e r vending machlnes located on public s t ree ts

only to the n e " " ' ~ p a p e r that the governrrent believes "best" serves


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address a s i tuat ion in which the City lacks the fac i l i t i e s to'I, I accomr;;odate a l l who othen..-ise meet i t s condit ions .

R

18192021

23

..5. l:1il IlQslJ: Q..G'_..9 J l . d J ~ ' ~ j ; 9 J ; . . . e ~ . s ~ b 9 ..nn..e..l5JJ) i L J . : . h e - . - . . U . t ~ y J . ' ~ . . L J ; . - . . P & . ; ? . t D ~ - - - . . . ~ ~ . . s ~ j J L - . t l l e Ca b . . l . e ~ . . . . i . \ J J D Amici suggest that the Ci ty ' s l icensing procedur t

imposes no res t r ic t ion on PCl 's Firs t Amendment r igh t s . TbeI mandatory access and leased access requirements, amici asser t ,! provide PCl with the opportunity to or igina te programn.ing and to

disseminate i t s message using the cable medium. The City merelyw o ~ l d require that PCl use another ' s ~ i r e s to t r a ~ s m i t i t sprogramming. Ke disagree.

Ke re jec t the contention tha t the Ci ty ' s accessrequirements provide complete p:otect ion for the exercise ofexpressive r igh t s . Arranging programming for an ent i re .cat lete levis ion system enta i l s engaging in a wide variety of pr0tectedac t iv i t i e s . lO S ~ b s t i t u t i n g the chance to share a few mandatoryaccess and leased access channels with others for the r ight tooperate an ent i re cable system necessar i ly diminishes pe l ' sopportunity to engage in such protected ac t iv i t i e s . A lawallowing free expression in public parks only for a few minutes a t6 a.m. hardly provides an adequate replacement for the r ight tof ree , lntrammeled d ~ b a t e in tha t forum. By the sarre reasoning, webelieve the City 'S franchis ing program does not provide PCl withan adequate subs t i tu te for i t s r ight to operate a cable system.

Our conclusion can be reached in another way. The casesrecognize t l lat an otherwise valid res t r ic t ion on protectedexpression may be rendered inva l id , i f the modes of communication

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8()

J(;I J il

,I

:1I, I1:' II

I: ' I 1-1 III,

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I - IIIIS192021.,.,... n:: .\2'"~ ( ,

tha t rer::ain are inaceq'Jate. SeeJ e . g . , T 9 , X 9 ~ ' S ' J : ~ J . . Q r V j n . ~ ~ n t , 104S. Ct. a t 2132-33; licll.LQll, 452 U.S. at 654-55. B'Jt the reverse

Jis not truC'. That 1 5 , an otherwise inval id res t r i c t ion onprotected act iv i ty is not saved by the ava i lab i l i ty of other ~ a n s of express ion.61, 76 77 (1981) (" ' [OJ ne is not to have the exercie of hiEl iber ty of expression in appropriate places abridged on the pleathat i t may be exercised in some other place. I" ) (quoting

1346, 1355 & n.8 (9th Cir . 1984) . The City 's arsument is hard todis t inguish from an asser t icn tha t a law prc!l ibi t ing Mr. X or Mrs.y f r o ~ putl ishing a newspaper is val id , so lcng as each i fprovided an adequate space to pr in t his or her ~ e s s a g e in alreadyexis t ina n e ~ s p a p e r s . Obvio'Jsly, such a law ~ o u l d be inval id . Keconclude, therefore , that allowing pcr access to another ' schannels is not the equivalent of providing i t access to anaudience by means of i t s own cable.

We repeat the iss'Je we undertook to resolve:Can the City, cons is tent ' .dth the Fi rs t }\ITlendment,l i ~ i t access by means of an auction process to agiven region of the City to a s ingle cablete levis ion company, when the public u t i l i t yfac i l i t i e s and other public property in tha t regionnecessary to the ins ta l la t ion and operation of acable te levis ion system are physical ly capable ofa c c o r n ~ o d a t i n g more than one system?

l lOur answer lS no, thelY' t cannot .- 25


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v.

ANT I T FJ) S T HlllJ.1.NJ.TI

Sta tes , a c t ~ n g "as sovereigns ," are immune froml i a b i l i t y under the Sherman Act. .E9_Ll


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!I

Three quest ions confront us. The f i r s t i s whether the, IiiI City acted under a "c lear ly art iculated and aff i rmat ive lyIl, II,I expressed" s ta te p o l i ~ y displacing c o ~ p e t i t o n with regu12tion orII monopoly in the area of cable t e lev i s ion . AT.other q:.Jestion ar ises

fron l the fac t that the 5cprerre Ccu r t has ir:posed the f ~ r t h e r requirement of act ive s ta te supervision over s t ~ t e pcl i c i esauthorizing ant ic t i t i ve conduct as a condit ien to

Rn II grant ing s ta te ac t ion imJ:lunity to such conduct ., ReJ;jlj L.J.,j ~ , ; ~ _ B ~ . s Y S j . Q t i ~ r L J j - - . . t : . 1 ' ~ . l - . h J . \ , l l ! J ~ 1 . i ; . . c ~ L I 445

I! (1980) . h"hether th is act ive supervis ionr e q u i [ e ~ e n t arpl ies to r runic ipal i t les there :ore r . L : ~ t also beaddressed. The th i rd quest ion is whether our helding with respectto the Fi r s t A ~ e n d s e ~ t depr ives the City , as PCl contends, of anyEtste action i r n ~ u n i t y under the an t i t ru s t laws.

Follc..dng L l l ~ . S ~ and BQ\.;lder, th is c i r cu i t hasat,." 0 par t t es t fo r assessing the ava i lab i l i ty o f

municipal P ~ . . r y, B..rQJill ilT:lT:Unlt:i.To prove tha t a pol icy i s c lear ly ar t i cu la ted

20 and aff i rmat ive ly expressed, the City mustdemonstrate not only the exis tence of a s ta teI policy to displace competi t ion with regula t ion , but21 Ii also tha t the l eg i s l a ture contemplated the kino. of')1 act ions alleged to be antico e t i t i ve ..

~ " C . r J . l J . p - ' L i ~ ..La, 746 F.2d l370, 1373 (9th Cir . 1984) .2(.

- 27
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. The City 's franchis ing process is authorized by Cal.

;} i Gov't Code 53066 (West Supp. 1984) .13 That provis ion isent i re ly p e r m i s s i v e ; ~ i t does not require or compel franchising orexclusive franchising, but merely provides t t a t c i t i e s "may"l icense or franchise the construct ion of community antenna

(, te l e J i s ion s ys t ems u sin 9 pub 1 i c p r 0 per t y and e a s emen t s C e n t ~ r y f e d ~ ~ , Inc. v. City Qf ~ ~ ~ , 579 F. SUPF. 1553,

8 1556:'7 (N.D. Cal. 1984) (discllssing sect.ion 53066).o PCI argues that a "clear ly ar t iculated and aff i rmat ively

10 expressed" s ta te policy means a clear and express s ta te policy toI I supercede the ant i t rus t laws and that sect ion 53066 does not

re f l ec t such a pol icy. PCI points out that the provision merelypermits c i t i e s to franchise cable systems and to consideraccepting considerat ion other than cash in awarding the franchise.Consequently, PCI contends, the City 's determinat ion to el iminate

16 competit ion among cable operators by l imit ing the number ofI f ran chi s esit iss u e s ref 1 e c t s ti..t..Y. pol icy not 5...t.illl pol icy. We18 disagree.19 In making th i s argument, PCl re l ies on the Supreme20 Court ' s decis ion in E 9 ~ l d e r . There, the municipali ty passed an21 ordinance placing a moratorium on the pla in t i f f cable company's22 effor ts to expand i t s Gervice. The ci ty planned to invi te new23 companies to submit proposals for cable service . The pla in t i f f

sued, in ter a l ia , under the an t i t ru s t laws. 455 U.S. a t 45-47.The ci ty was a "home rule" municipal i ty , granted extensive powers

2G of self-governr::ent by the s ta te const i tut ion. lJ:L.. a t 43 & n . l .- 28


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.:.

"(,

Ro

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i l

14

15

1-18

10

202]

2223 i24

26

The question faced by the Court was whether the hone ruleI provision in the s ta te const i tut ion alone afforded s ta te action

!/ immunity tc the ci t : / . The Court decided that i t did not . TheII1 requirerrent of "a clear ly ar t iculated and aff i rmat ively expressEoI s ta te policy" is not sa t i s f ied ""hen the Stc.ite's posi t ion is one

of mere n ~ . L : i l - . l i l - : i respecting the ITH.:nicipal act icns challenged asII ant iccmpeti t ive. A State that al lo ....'s i t s municipal i t ies to do BE IiI'

they please can hardly be said to have 'conterrplated' the speci f icanticompetit ive actions for which municipal l i a b i l i t y is sought."lJL. at 55.

PCI asser ts tha t , l ike the ~ o m e rule provis ion a t issuein EYJ.l.l!.:3S;...r, the permissive s tance taken by Cali fornia with regardto cable franchising re f lec t s ITere nectra l i ty with respect tow h e t ~ e r cable should be competi t ive. The City "can choose toprescribe monopoly service , while . . another can elect f ree-market competiton . " lJL. at 56. Both a l t e rna t ives arecomprehended by the power granted by the s t a t e . lQ....; S : : I j l ~ Eletl.rj.


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'.

cable te levis ion regulat ion. 455 U.S. a t 55 ("Nor can [ theanticompeti t iveJ actions be t ruly described as 'comprehendedwit h in the po .... e r s ~ ~ , ' sin c e the t e r m , g ran t ed , ' nece s s a r i 1 Y

q implies an aff i rmat ive addreSSing of the subject by the s t a t e . '


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..~ ' n ~ , 670 F.2d 813, 823 n.8 (9th Cir . ) , ~ . . . L J - QS:.Di1:J), 456 l ' .S.

, 1011 (1982). Tr.e c ~ s e s do not require " tha t a po l i t i c a l. II subdivision necessar i ly r n ~ s t be able to ~ o j n t to a spec i f i c ,, I detai led l cs i s la t ive a ~ t h o r i 2 a t i o n b e f 0 = ~ i t properly rray a s ~ I t aI


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U t y ~ i J J . J ~ Q n , 745 F.20 1266, 1269 (9th Cir . 1984) (quotin? Bil.Q~ ~ . Q B _ l \ l J 1 l J J , : ~ s ! 1 1 ~ ' ! ; _ T H U J ~ . J _ f _ L . J . _ . s . t n Q _ ~ . . 5 . e I . i . r ~ _ . L


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"impose condit iGns, res t r ic t Ions , and l imi ta t ions" cn the use ofpublic s t ree ts and on the construction of cable te levisen s y s t e ~ ~ . However, concluded that "the l eg i s l a ture necessar i lyconteITplated that c i t i e s would l imi t the nurnter of cable providersdespi te the anticornpetit ive ef{ects that such action might have."l..d. a t 1 2 6 9 7 0 . The ref 0 r e, the s ta t ute a f for d e d s ta t e act i enimmcnity to the c i ty ' s decis icn tc issue a s ingle , nonexclusivel icense .

, see no reascn to reach a di f fe ren t resul t tb isIi case. Sect icn 53066 express ly notes that c i t i e s "may a u t h o r i ~ e I the [franchisee or l icensee] to place ~ i r e s , c o n ~ u i t s , andI appurtenances . . alon:::; or across s t ree t s , high...ays, a l leys ,I

I! public pr e r t i e s , or public easer.;ents," indicatIng tbeIi l eg i s la tu re ' s a ~ a r e n e s s tha t i t ~ a s delegating regclatoryIi.1 authori ty to deal ~ i t h th1 burden p l a c e ~ on public resourcezIi cable te levis ion. That some c i t i e s , to minimize tr.e disrupt ion ofI' public resources, might l imi t the nUITLer of cable providers seemsII to US to const i tute at l eas t a reasonable consequence of the i r

engaging in the author ized regulatory ac t iv i ty . This poss ib i l i tysurely was in the conte lat ion of the l eg i s l a ture when i t enactedsect ion 53066. Accordingly, we conclude that the City actedpursuant to a "c lear ly ar t i cu la ted and aff i rmat ively expressed"s ta te policy to displace competiton with regula t ion .

. ? ~

2')20 sacond

The Supreme Court ,requireffient of act ive

as pointed out above,s ta te supervis ion for

se t out as ta te action

- 33 -


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8 . . l l . l . c r 0 L 1 J ~ l l L I 4 4 5 V. S. 9 7 (19 80). I nvol ved in the cas e was anant i t rus t challenge ' to Cal i forn ia ' s resale price maintenancE andprice post ing requirements for the wholesale wine t rade . Althoughthe Court found tha t the s ta tu te sa t i s f ied the "c lear lyart iculated and aff i rmat ive ly expressed s ta te policy" t e s t , iQ. a t

, 105, i t nevertheless s truck down the law because Cal i forn ianei ther exercised di rec t contro l over wine prices nor reviewed the

() reasonableness of the pr ices se t by the ....,ine dealers . l .Q. a t 100,IU 105-06. The Court concluded that the s ta tu te did not shield theII dealers from an t i t ru s t l i ab i l i ty because the s ta te did notI: actively supervise i t s anticornpetitive policy. l..Q. at I05-C6.

t l i ~ l l applied the act ive s ta te supervision requirement1.1 to conduct by 2.IJ,Yitt..f. par t ies . In E...oJ,Jjd.eJ.:., ho',.,'e';er, the Court1


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'. 1\I authorizat ion for loca l conduct is analogous to r uir ing act ive

I! supervison of pr ivate conduct; i t t es t s whether challenged localac t iv i ty is trGly s ta te action ~ n d therefore ent i t led toimmunity." P. Areeda, , 212.2a, at 47 (St.:Pp.

R 'C i r . 1 9 83 ) , S ' ~ ~ aD ted I 1 0 4 S. Ct. 3 5 0 8 (1 9 84 ) . h"e a r e noto will ing to erode loca l a u t o n o ~ y by requiring s ta tes to overseelU regulatory functions tha t are best l e f t to mt.:nicipal discre t ion .11 To do so puts the s ta tes in the odd posi t ion of enforcing

at 71 n.6 (Rehnsuist , J . , dissent ing) i G Y J Q g I ~ ~ ~ ~ ~ n s i t C ~ , 726 F.2c at 1434.

L';s E l i ~ _ c . t : - - . . l l i 1 t h e ~ D ' s_O,glr. ; ! ~ - " ; ~ ~ _ i l L ~ D r J l l D i l Y - 9 - I r . g . . 5 ~ i 3 " L _ J J ) ~ ~ . t J , . f f i f ; D . Q . z : ; S : L . t J c i u . . L . t . b ~ 1 ~ . ; : ; ~ ~ r t. t Ql j D L t ~ _ b ~ E b ~ ~ f ~ ~ h l ~ ~ r ~ ~ ~ \\e have already held that PCI adequately alleged a

s rec i f ic viclat lcn of the Fi r s t Arnendrrent. PCl contends tha t af indin0 of unconst i tut ional i ty in any respect en t i t l e s i t to

20 prevai l on"i ts an t i t ru s t claim as well . To the extent sect ion21 53066 authorizes the City to use i t s franchis ing process in an22 unconst i tut ional rr.anner, PCI asser t s , the s ta tu te cannot afford

s ta te action immunity to the Ci ty ' s ant icompet i t ive franchis ing2 ~ process . We reJect th is content ion .

PCI's argument confuses two separate sets of purposes:20 the purposes served by the an t i t ru s t laws and the purposes served

by the Firs t Arrendment. Sta te action is immune from the an t i t ru s t- 35


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,.i 1a\.'5 merely because the s ta te i t s e l f has decided to act . f u : : ~ s . t l

y. Ec r}...:i.n , 1 0 4 S. Ct. 19 89, 1 99 8 (1 9 8 4) . Co n 9 res s did not in ten dthe S h e r ~ a n Act to &xtend to the sovereign acts of s ta te

-4 9 0 verr. if;e n t s . p _L.. . Y . . . ~ . . t J ) - - H n , 3 I 7 U. S. 3 4I , 35 1 ( 19 43). 'T eFi r s t A ~ e n d m e r . t , on the other hand, is directed at g o v e r n ~ E n t ,

o both federal and s ta te . 'There is no ITore reasen to subjec t thes ta te to an t i t ru s t l i ab i l i ty because of Firs t Amendment violat iensthan there would be, for example, to deprive it of a federaJ

C) subsidy such as mass t r ans i t aid.I t makes no dif ference that here i t is the City that i sf)

charged with the Firs t Affiendment violat ion. For an t i t ru s tIpurposes, i t is the s ta te tha t has acted. "Clear ar t i cu la t ion"2and nact ive supervis ion" are merely analyt ica l toels used todetermine whether acts carr ied out by municipal i t ies and pr iva te

1


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Ijj ItIi t r oub l ing cO!'" ' .sti tutional gues t ions . I cs inS access requirer-er ; ts

I on the pres s ..... 0\.::0 no doubt be i nva l id . 5..!;J;: t'iiJrni BS'ul;J'II b : t . : J ~ . h j - . D c C Q , ~ ' , TC;;iilJ...Q, 418 t,1.S. 241 (1974). Ccur t s r.3ve'II div iced as to the ef fect of the T..QLrUll..Q holding on th e v a l i c i t y, of access r e q u i ~ e ~ e n t s iroposed on cab le t e l ev i s ion opera to r s .II f : Q . ; : ; : . p ' p ~ ~ ~ ~ ' ~ s t V i Q s > " ? - . . C . 9 l l ~ . . . . . . . , 571 F.2d 1 0 2 5 , 1 0 5 5 - 5 6 (Eth.. I: C i r . 1978) (suggest . :ng t h c t to tbe exter . t the gcveri. :r .ent1sI! i n t e r e s t in ir:-t:'osir.g sech requi rer:-,ents sterrs fro;r, t[,e eCOn0:-71C "Ii sc a r c i t y of t::e cab:e nediw:7', tb e Seprer:'e COt.:rt 's dec i s l cn l r l Ii T . . Q ~ 1 1 J J J . . . . Q c a s t s cons ide rab l e doubt on th e governrrent ' s ab i l i t y to

( . i do s o ) , ~ - = - - ; - ' ~ ~ l r ' t . . e . . r - 9 . . r . Q J J f u i ~ , 440 U.S. 689 (1979) :rUth l:lQJ_E.XOff ice , I . D J ; ; . . . . . . . . 5 . J - . E ~ , 56 7 F.2d 9 , 46 n.82


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'.

7. In r1.i.QJ:!sst -Yjdeo C o ~ - , - y ~ ~ J : , the Eighth Circui t l irri teoBbs:};. H i l l . . ; ; - . . : . L ; . ~ to it.s facts , further ur:dercutt ing i t s.!i precedent ial valee. 571 F.2d at 1054 n.71 (reading 8 ~ c l s . I lUlls ViceQ as upholdinS FCC ef fo r t s to regulate cable operators I

'Ii.. us e 0 f r.;i c r c .... a ve s ) ; ~ ~ e a 1 S Q ~ 1 L : n ' _ . f ~ ~ . . e D L - - . J D . . , 579 F. SJpp .. at 1563 n.19 (ooubt::Jg ccntinuing vit311ty of B ~ - - , - u U l l . . s - - - . Y . i . Q j ; . Q . ) . 4 1 ~ " : 8. The Tenth Circui t also suggested that newspapers tad enjoyed alons t radi t ion of freedom from a o v e r n ~ e n t in terference, whilecable te levis ion had not. ~ . r r ~ L . ..t t Y _ S : . Q r : : : . : i . : . J . . : : l i c Q t i Q ; ; ~ . . . J ; ~ ' . , 66 0 F.2da t 1379; ~ c c Q L Q ~ l L i . . t ~ Cablevisi9D.......Q.f Rhod.e Is:a.nQ, 571 F.Supp. at 985. This dis t inc t ion merely begs the quest ion.

The d is t r i c t court in B ~ r k E h i J ~ C ~ p l ~ ~ ~ n offered a moreheJpfuJ dis t inc t ion . I t asserted tha t , while a n e ~ s p a p e r ' s o natural monopoly did not preclude the publ ic 's use of the pr in t Ii medh:r., cable ' s natura l monopoly did prevent public use of the Ii) i, te levis ion Dedium. 571 F. SL:pp. at 986. As a fac tua l matter ,. however, i t is not clear t t a t th is is t r ee . a . L 9 s ~ ~ ~ : . . : . . . . . s J - ~ S : ' 11. 1 707 F.2d 1 4 4 3 , 1 4 5 9 (D.C. CiL) (not:.ng the pro l i rat lon ofi! b r o a d c a ~ t staticns r;ir:ce the M j . j . ~ . . J ~ j J ; 9 ~ Q s ~ . u . n . g CClse ar,rJ thE:

I ~ I , fact thE:.t nc .... tr;(:re ar-e D.ary rr,ore s ta t ions than newspa rs , anc!' conclL:dir:g that n it s e e ~ s unlikely that the Fi r s t A r r e ~ rer:t1::'11. protectic;Js of broadcast politic.:::.l speech .,.,ill c o n t ~ a c t :u r the r ,and t bey '.,'e l l ex nd . n ) , !&.l :L de:: i e C, 1 0 4 S . C:::. 5 2 ; Cl9 83) .

I ' ; A n ~ ir : r e v i e ~ i r 9 a d i s ~ i s s a l , we must tesclve a ll OOL:btE lr: favorof the p la in t i f f .1jI" ':IP

16 , 9. In the i r ar.icus br ie f , the Cit ies of Palo Alto, Menlo Park,and Atherton suggest severa l other government " in teres ts" served1- by a res t r ic t ive franchis ing regi;;:e. An-ici asser t tha t the CityI'" has in te res t s in preventing "cream s k i ~ . m i n g n - - ~ i [ i n g only18 af f luen t , and therefore ~ o r e prof i table , port ions of the f r ~ n c h i s eii area; ensuring the provis ion of community access and leased access19 to cable faCi l i t ies , and encouraging the development of s ta te -cf t he -a r t cable terrs. Amici contend tha t these in te res t s serve20 I to jus t i fy the Ci ty ' s approach to cable franchising.21 On the present s t a t e of the record, we cannot agree. Here,the City bears the b ~ r d e n of proving that the elements ,) f the-n" O J r . . i ~ n t e s t are sat is f . ied . P J J , " ' Y l . . i F g _ - - . T 1 : ~ j l . . t t l . . S . . L _ J . i l l : - t . . . . . s .... City ofF.e n.t.Qn, 748 F . 2 d 527, 535 (9 t h C i r . 1 9 3 4 ) ; f ' i r s t ~ ; a t ' 1 Si!M_.Qi2' l3Qtl.9D_..Y .... J .e l l .9 t l i , 435 U. S. 765, -;' 8 6 (1978) ; U r . 9 . Q - L - - - B . l . U : . I L I 427U.S. 347, 362 (1976) (Opinion of Brennan, J . ) . Nothing in the24 record suggests that the City has a subs tan t ia l in te res t in any ofthe c n c ern s r a i sed by a IT! i c i . As,,,e i n d i cat ed i n I : l A ; l . t ~ 2 ~ T . r t f ~ 1 . f ' J j i , the City must jus t i fy i t s regulatio!1s in terms of i t s

o ~ n probleITs. I t ITay not rely on the problems faced by other20 con.munities or on j us t i f i ca t ions tha t are merely conclusory ands p e c u 1 a t i ve . 74 8 F. 2 d at 53 6 - 37 Fur the r DO rei the r e IT< us t be- 39
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,., ., '.. iIII1\Iii!:,'i a showing tha t these in te res t s are "unrelatedI; of free exp::es:::ion." S n ~ . r . i ! : n , 391 U.S. a t, ": nothing in the record on th is issue. F:nal ly ,. Ii convinced tha t r e s t r l c t ~ n s the n u ~ b e r of cable

to the s ~ F p r e s s i c n 377. ' I ' h2 : e : swe are notoperators f c r t ~ e : E these intere5tE in the manner least b ~ r d e n s o ~ e on protectedl I: express ion. As we noted ear l i e r , we express no opinion as towhether the City ~ a y impose i t s access and coverage r e q L : r e ~ e n t s ji by other means. These issues are not before us .

Iti(, I 1 C I n ad c i t ion t o o rig ina t in g the i row n pro 9 r a IT IT: i n 9 I cab: ete levis ion operators exercise consloerab1e edi to r ia l discret ionregarding what the i r prograrr,rning wil l inclt:de. FCC v. ~ L j . ~ ~il CQ r P . , 440 U. S. 689 I 707 & n. 1 7 (l97 9). Ec: i to r ia 1 j ud 9 IT,e n tII is ent l t1ed to Fi r s t Arrenc:-:,ent protec t icn . ~ J - , g ..L 1 ~ lieJi!J.9J-,-,..p.lishl.:;s_ !:...Q... --Y J --.!.o-=....'}.U..l.Q I 418 U. S . 24 l, 257 - 58 (1974)


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franchise, l icer.se , permit , or o thendse l , i t passes muster underthe pr inciples announced here . But we cannot agree with thesuggestion in the l eg is la t ive hIstory that the provis ion "grantsto the franchising author i ty the discre t ion to d e t e r m i ~ e thenumber of cable operators to be author ized to provide service in apar t i cc la r geographic area ." H.R. Rep. No. 934, 98th Cong., 2dSess. 59 (1984). A construct icn of such breadth would be inva l id .12. The Boulder case concerred i t s e l f only with the ava i lab i l i tyof in junct ive r e l i e f . ~ n . t \ . l ; Y f ~ Q ~ " ' ; i 1 . . L - . l f 1 . 9 ~ ~ . . t . Y - o f J 9 1 . Q AltQ,579 F. SUppa 1553, 1555 n.6 (N .D. Cal. 1984). Whether a majori tyof the Court would s imilar ly cu r t a i l a municipal i ty ' s s ta te actionimmunity in a su i t seeking t reble darr,ages rerrains unse t t led.L t ! . 9 4 ~ . . . . e , 4 3 5 U. S. a t 4 4 2 - 4 3 ( B1 a c k mun, J., d is sen t in g); see aJ : : L Y . J . . . J ) t l L o . . i l ~ . . i ~ n CQ., 428 U.S. 579, 614 n .6 (1976)(Blackmun, J . , concurring in Judgment) (discussing ava i lab i l i ty of

a defense based on the unfairness of holding a pr iva te partyl i ab le where the s t a t e ' s part Ic ipat ion docinates a decis ion toadopt a res t ra in t challenged under the an t i t ru s t laws andassert ing tha t "unfaIrness" would be a defense only to therecovery of daGages, not to a su i t seeking in junct ive r e l i e f ) .S ~ 5 _ g s ' n l i ~ 1 l 1 P. Areeda, l \ . D l i . t ~ ~ 5 L - L h ' 2l2.2b, at 48-49 (Supp.1982) (arguing tha t daGages should not be availabJe in an t i t ru s tsu i t s brought agains t ~ u n i c i r a l i t i e s and s u g g e s t i ~ g tha t an t i t ru s tscrutiny of municipal act ions rray be more readi ly j ~ s t i f i e d i fdamages are unavai lab le) . Pecacse ....'e concl-..:ce thct the s ta tutoq:author izat icn for the Citv 's franchis ing s c h e ~ e sa t i s f i e s theB Q ~ l Q ~ t es t , ....' e d o n 0 t r a c h t his iss u e .13. relevant par t , sect ion 53066 provides:

Any ci ty or county or ci ty and county in the s ta te of Cal i forn ia Gay authorize by franchise or l icense the construct ion of a community antenna te levis ion system. . The award of the franchise or l icense may be made on the basis of qual i ty of service , ra tes to the subscr iber , i n c o ~ e to the c i ty , county, or ci ty and county, experience and f inancia l responsibi l i ty of the appl icant plus any other considerat ion tha t wil l safeguard the public in te re s t , rather than a cash auction bid . Any cable te levis ion franchise or l icense awarded . . pursuant to th i s sect ion ITay authorize the grantee thereof to place WIres, conduits and appurtenances for the community antenna te levis ion system along or across such public s t r ee t s , h i g h ~ a y s , a l l eys , public proper t ies , or pcbl ic easements of said ci ty or county or ci ty and county.
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