In the
United States Court of Appeals
For the Seventh Circuit

Nos.  98-2729, 98-2901, 98-2940, 98-3064,
98-3078, 98-3079, 98-3267 & 98-3474

CITY OF CHICAGO; TEXAS COALITION OF CITIES ON
FRANCHISED UTILITIES ISSUES; CITY OF ST. LOUIS;
CHARTER TOWNSHIP OF MERIDIAN and CITY OF EAST
LANSING, MICHIGAN; ALLIANCE FOR COMMUNICATIONS
DEMOCRACY, ALLIANCE FOR COMMUNITY MEDIA, and
CHICAGO ACCESS CORPORATION; NATIONAL CABLE
TELEVISION ASSOCIATION, INC.; NATIONAL ASSOCIATION
OF TELECOMMUNICATIONS OFFICERS AND ADVISORS
(NATOA); and MICHIGAN CABLE TELECOMMUNICATIONS
ASSOCIATION,

Petitioners,

and

21ST CENTURY TELECOM GROUP, INC.; MICHIGAN
COALITION TO PROTECT PUBLIC RIGHTS OF WAY
FROM TELECOMMUNICATIONS ENCROACHMENTS;
and GREATER METRO TELECOMMUNICATIONS
CONSORTIUM,

Intervening Petitioners,

             v.

FEDERAL COMMUNICATIONS COMMISSION and
UNITED STATES OF AMERICA,

Respondents.

and

ENTERTAINMENT CONNECTIONS, INC.; RCN TELECOM
SERVICES, INC.; and WEDGEWOOD COMMUNICATIONS
COMPANY,

Intervening Respondents.



Petitions for Review of an Order
of the Federal Communications Commission.
No. 98-111


Argued September 14, 1999--Decided December 7, 1999



  Before BAUER, ROVNER, and EVANS, Circuit Judges.

  EVANS, Circuit Judge. Today we review a
declaratory ruling of the Federal Communications
Commission that Entertainment Connections, Inc.
(ECI), the operator of a satellite master antenna
television system (SMATV), is not a "cable
operator" of a "cable system" as defined in 47
U.S.C. sec. 522(5) and (7) and thus is not
subject to a requirement that it obtain a
franchise from a local government in order to
operate. In re Entertainment Connections, Inc.
Motion for Declaratory Ruling, FCC 98-111, 13 FCC
Rcd. 14277 (1998) (JA 418-61). After the FCC
ruled in the ECI case, several petitions for
review were filed in various parts of the
country, two of which were filed in accordance
with the procedures for multidistrict petitions,
and the Panel on Multidistrict Litigation sent
them to us. Subsequently, other cases were also
transferred here and consolidated with this one.

  ECI has about 1,600 subscribers in 12 large
apartment buildings of at least 100 residents
each in East Lansing and Meridian Township,
Michigan. ECI began operations by using a
satellite master antenna system, known as a
"headend," on top of each building it served.
Under this method of operation it is uncontested
that no local franchise was necessary, in part
because the signal was not sent over the public
right-of-way. Then in 1996 ECI altered its method
of operation but continued to provide its service
without a franchise. East Lansing and Meridian
made it clear that they thought ECI now needed a
franchise.

  The change of operation in 1996, giving rise to
the claim that a local franchise is now required,
was as follows. As before, ECI receives signals
through its own satellite master antenna
television facility, or "headend." The headend is
placed on top an apartment building. But now ECI
transmits the video signals from the headend to
both its customers in the building on which the
antenna is located and to those in other
buildings. The signal is transmitted to the other
buildings by fiber optic and coaxial cables,
which are located in the public right-of-way but
which are owned by Ameritech. For this purpose
Ameritech used 12-strand cable, one strand of
which is used for ECI's video signal. Ameritech's
facilities connect to junction boxes located in
the buildings; those in turn connect to ECI's
interior building drop lines, which in turn
connect to the subscriber's television sets. To
obtain Ameritech services ECI subscribes to
Ameritech's Supertrunking Video Service, for
which it pays a monthly tariff.

  In February 1997 ECI asked the FCC for a
declaratory ruling that it was not required to
have a franchise. The FCC, over a one-member
dissent, found that ECI is not a cable operator
because it does not provide service through a
cable system and, therefore, it does not need a
franchise. The FCC based its conclusion on a
convergence of factors. One was that ECI's
facilities are located on private property.
Ameritech transports ECI's signal using 12-strand
cable, one strand of which is used for ECI's
signal. The other 11 strands are available to
other cable providers, and ECI has committed to
make its interior building line drops available
to other programming providers. The facilities
used by Ameritech to provide service to ECI were,
for the most part, not constructed at ECI's
request. ECI and Ameritech are separately owned;
their relationship is as carrier-user. Under the
agreement between the companies ECI has no right
to control or repair Ameritech cable, and
Ameritech lacks editorial control over the
content of ECI's programming.

  In addition, the FCC said that it was guided by
the knowledge that a local jurisdiction's
authority to regulate cable has been premised on
the fact that cable systems involve extensive
physical facilities and substantial construction
on the public right-of-way. And, of course, ECI
does not itself have facilities on the public
right-of-way.

  The FCC ruling analogized ECI's operation with
what is called "video dialtone" service. Video
dialtone was a regulatory framework, designed by
the Commission, that permitted local telephone
companies to make available, on a
nondiscriminatory common carrier basis, a
platform for the delivery of video programming
and other services from the separately owned
headend facilities of programmers to subscribers.
Video dialtone, the FCC said, did not trigger a
franchise requirement because an entity that
maintained reception and transmission equipment
wholly on private property and transmitted the
video signal through the public right-of-way by
means of a local exchange carrier's facilities,
made available on a common carrier basis, was not
a cable operator. The Court of Appeals for the
District of Columbia upheld the FCC. National
Cable Television Ass'n v. FCC, 33 F.3d 66 (D.C.
Cir. 1994). In the ECI case, the FCC said that
although the provision for video dialtone no
longer exists, the underpinnings of the video
dialtone decisions remain sound--that is, that
where there is no single system or unified
control, there is no cable system.

  The FCC also found that ECI qualifies for the
private cable exemption to the definition of a
cable system which is provided for operations
which do not use the public right-of-way. 47
U.S.C. sec. 522(7)(B). The FCC reasoned that
Ameritech, not ECI, is the entity using the
public right-of-way; therefore, ECI qualifies for
the exemption. Finally, the FCC noted that its
ruling was consistent with the "pro-competitive
mandate" given the Commission by Congress in the
Telecommunications Act of 1996.

  Our first inquiry involves the degree of
deference, if any, to which the decision of the
FCC is entitled: that is, is it entitled to
deference under Chevron, U.S.A., Inc. v. Natural
Resources Defense Council, 467 U.S. 837 (1984)?
Although some of the parties dispute it, we think
it is pretty much beyond argument that the first
prong of the Chevron analysis is met. That prong
is a determination whether a statute is silent or
ambiguous with respect to the issue we are
considering. We believe our discussion which
follows will highlight the ambiguities we find in
the statute. If the statute is silent or
ambiguous, then, under Chevron, we decide whether
the agency's determination is based on a
permissible construction of the statute. We may
not substitute our own construction of a statute
when an agency has interpreted it in a reasonable
fashion. Holly Farms Corp. v. NLRB, 517 U.S. 392
(1996). In other words, so long as the agency has
set out a reasonable interpretation, it does not
matter whether, in the first instance, we would
have come to the same conclusion. Wisely, we
believe, we have noted that specialized agencies
are "more qualified than generalist courts to
handle technical matters within their purview.
They are the experts. Court second-guessing of
administrative decisions typically 'do[es] not
make [for] better technical decisions than [those
of] agencies.'" United Transp. Union--Illinois
Legislative Bd. v. Surface Transp. Bd., 169 F.3d
474, 476 (7th Cir. 1999), citing United States v.
Baxter Healthcare Corp., 901 F.2d 1401 (7th Cir.
1990).

  Although the Chevron requirements are met, we
consider a few other obstacles certain parties
have attempted to throw in the path of our giving
Chevron deference to the FCC decision. Some
parties contend that the FCC was not granted
regulatory authority over 47 U.S.C. sec. 541, the
statute setting out general franchise
requirements. We disagree. The FCC's regulatory
authority was first set out in United States v.
Southwestern Cable Co., 392 U.S. 157 (1968), and
its authority continues to be recognized. See
AT&T v. Iowa Utils. Bd., 119 S. Ct. 721 (1999).
We have said that the FCC is charged by Congress
with the administration of the Cable Act. Time
Warner Cable v. Doyle, 66 F.3d 867 (7th Cir.
1995); see 47 U.S.C. sec. 543. We are not
convinced that for some reason the FCC has well-
accepted authority under the Act but lacks
authority to interpret sec. 541 and to determine
what systems are exempt from franchising
requirements. See National Cable Television Ass'n
v. FCC, 33 F.3d 66 (D.C. Cir. 1994).

  Some parties argue that the declaratory ruling
should not have been made because it is not
outcome-determinative of the dispute and does
nothing to resolve a state court case filed in
Michigan regarding whether a franchise is
required under state law. This is really an
argument that the FCC should not have heard ECI's
petition in the first instance. We see no merit
to the argument. The FCC has authority to issue
declaratory rulings. 5 U.S.C. sec. 554(e); 47
C.F.R. sec. 1.2. This case resolves the
controversy over whether the federal franchise
requirement applies in this instance.
Furthermore, the petition for a declaratory
ruling from the FCC was filed on February 4,
1997, before the state court action was filed on
October 31, 1997.

  Others contend that Chevron deference is due
regulations, but not declaratory rulings. Our
cases show otherwise. An agency can, of course,
promulgate its policy through individual
adjudicative proceedings rather than rulemaking.
NLRB v. Bell Aerospace Co., 416 U.S. 267 (1974).
And Chevron deference has been applied to
adjudicative proceedings. Edward J. DeBartolo
Corp. v. Florida Gulf Coast Bldg. & Constr.
Trades Council, 485 U.S. 568 (1988). An agency's
interpretation of a statute it administers
commands deference, regardless of whether it
emerges as a result of an adjudicative
proceedings or a rulemaking process. Cowherd v.
United States Dep't of Hous. and Urban Dev., 827
F.2d 40 (7th Cir. 1987).

  In fact, it is unclear whether deference should
be given to statements of an agency which are
much less compelling than decisions in
adjudicative proceedings. In Commonwealth Edison
Co. v. Vega, 174 F.3d 870 (7th Cir. 1999), cert.
denied, ___ S. Ct. ___ (Oct. 4, 1999), we made
the point that the deference to be given to
informal expressions of an agency's view is
unresolved, but that some deference, at least, is
to be paid even to views set forth in amicus
curiae briefs filed by an agency. The ruling
before us is a result of procedures which are far
from informal or casual. When ECI filed its
petition on February 4, 1997, the FCC issued a
public notice seeking comment on the motion.
Several parties filed responses both in support
of and opposition to ECI's position. Only then
did the FCC proceed to make its ruling on June
30, 1998.

  Our inquiry thus becomes whether the statutes
are silent or ambiguous and, if so, whether the
agency interpretation is a reasonable one. As we
make this inquiry, it will also become clear
that, while the agency interpretation is, of
course, not the only possible one, it is one
which we are now convinced we would arrive at
ourselves, were we the ones making the original
determination.

  The question of deference to the FCC in cable
regulation comes against a backdrop of agency
hesitation to be in the business of cable
regulation at all. The first commercial cable
television system appeared in the 1950's as
"Community Antenna Television," or "CATV." It was
not until 1960 that the FCC began asserting
jurisdiction over CATV systems, and since that
time its role has gradually increased. In 1968
the Supreme Court upheld the FCC's authority in
this area. United States v. Southwestern Cable
Co., 392 U.S. 157 (1968). Eventually the FCC
preempted local regulation in a number of ways,
including signal carriage, pay cable, leased
channel regulation, and access. But the FCC
declined to preempt the role of local governments
in franchising cable systems because of the
burden that would have put on the agency. Cable
Television Report and Order, 36 FCC 2d 143, 325
(1972); Clarification of the Cable Television
Rules, 46 FCC 2d 175 (1974). The Commission
ultimately determined that it was cable
television's use of public rights-of-way which
was the primary rationale for local control. New
York State Comm'n of Cable Television v. FCC, 749
F.2d 804 (1984). In Duplicative and Excessive
Over-Regulation of Cable Television, 54 FCC 2d
855, 861 (1975), the Commission said:

The ultimate dividing line [between federal and
local regulation], as we see it, rests on the
distinction between reasonable regulations
regarding use of the streets and rights-of-way
and the regulation of the operational aspects of
cable communications. The former is clearly
within the jurisdiction of the states and their
political subdivisions. The latter, to the degree
exercised, is within the jurisdiction of this
Commission.

Despite the division of authority, the FCC
determined that certain types of systems did not
need to be franchised by local governments. More
on that later.

  Then in 1984 Congress adopted the Cable
Communications Policy Act. It provided that, with
limited exceptions, a cable operator could not
operate without a franchise from a local
government. Under this Act a "cable operator" is
a person who provides service over a "cable
system," in which it either owns a "significant
interest" or "controls or is responsible for" the
system's management and operation. A "cable
system" was defined as a "facility, consisting of
a set of closed transmission paths and associated
signal generation, reception, and control
equipment that is designed to provide cable
service which includes video programming and
which is provided to multiple subscribers within
a community." 47 U.S.C. sec. 522. The definition
of "cable system," however, contained a "private
cable" exception which exempted facilities that
serve "only subscribers in 1 or more multiple
unit dwellings under common ownership, control,
or management, unless such facility or facilities
uses any public right-of-way." sec. 522(6)(B)
(1988).

  In 1996 Congress again revised the
Communications Act in the Telecommunications Act
of 1996 by removing the requirement that a system
serve "multiple unit dwellings under common
ownership, control, or management" in order to
benefit from the private cable exemption. The
1996 Act provides that the term "cable system"
does not include "a facility that serves
subscribers without using any public right-of-
way." 47 U.S.C. sec. 522(7)(B). In the FCC's
view, this amendment broadened the exemption.

  The statutory provisions have consistently
provided for exceptions to local regulation, and,
as we said, the FCC has found that some types of
systems are not subject to the local franchise
requirement. Certain systems with some attributes
at least similar to the ECI system have a history
of exemption from the requirement. First is the
type of system ECI originally operated. Under
that system ECI had a headend on each building it
served, rather than, as now, a headend on one
building with the signal sent to other buildings.
The former arrangement was not subject to the
franchise requirement. A second kind of system
exempted was that operating under the FCC video
dialtone rules, rules which were promulgated
under 47 U.S.C. sec. 533(b), which has since been
repealed. In its decision affirming the FCC's
determination that video dialtone systems did not
require a franchise, the Court of Appeals for the
District of Columbia quoted the Commission's
statement that "[r]egulation [of the local
telephone carrier] as a cable system would be
duplicative because common carrier regulation
'incorporate[s] the same concerns about public
safety and convenience and use of public rights
of way that provide a key justification for the
cable franchise requirement.'" The court agreed,
saying that the "Commission's interpretation of
the exemption to avoid duplicative regulation is
self-evidently reasonable." National Cable
Television Ass'n, 33 F.3d at 73 and 74.

  When SMATV--like the ECI system which transmits
from an antenna to multiple buildings, not
necessarily commonly owned--appeared, the FCC
exempted those systems as well. In re Earth
Satellite Communications, Inc., 95 FCC 2d 1223
(1983), affirmed by New York State Comm'n v. FCC.
A year later, in the 1984 Act, Congress defined
the private cable exemption as one for systems
serving subscribers on multiple unit dwellings
under common ownership and which do not use the
public right-of-way. The Commission then decided
if SMATVs serve buildings with separate owners,
the SMATV needed a local franchise. That decision
was upheld against an equal protection challenge
to the underlying statutory restriction regarding
ownership. FCC v. Beach Communications, Inc., 508
U.S. 307 (1993). Then Congress again amended the
exemption, deleting the requirement regarding
common ownership but doing nothing to clarify
what "using" the public right-of-way entailed.

  In contrast to systems exempted from franchise
requirements, another type of system with some
similarities to the ECI system has been required
to have a local franchise. This is the type of
system referred to as "channel service." Channel
service is the provision by a local telephone
company on a common carrier basis of video
transport services to a cable operator holding a
local cable franchise. Unlike video dialtone, in
channel service the facilities are for the
exclusive use of the cable operator, rather than
accommodating multiple video programmers.
Furthermore, a channel service facility is
typically built, the Commission says, at the
request of the cable company. Under this
arrangement the cable company would obtain a
franchise, and the common carrier would need
approval from the FCC to extend its facilities
under 47 U.S.C. sec. 214 but was not required
itself to obtain a franchise from a local
governmental authority.

  Our point in all of this is that the exemption
from local franchise requirements of some
technology which does, in fact, provide cable
programming is not a novel nor a static one. Nor
does the ever-evolving technology allow the
boundaries which are drawn to always be clear and
distinct. We find this background information
helpful to understanding the issue before us--
which, of course, remains whether the FCC's
interpretation is reasonable.

  There are two subsections of the Act with which
we need to be primarily concerned. Section 522(5)
of Title 47 provides a definition of a cable
operator. It is undisputed that ECI provides
cable service, but it is only a cable operator if
it provides "cable service" over a "cable system"
in which it owns a significant interest or if it
controls or is responsible through any
arrangement the management and operation of the
cable system:

[A]ny person or group of persons (A) who provides
cable service over a cable system and directly or
through one or more affiliates owns a significant
interest in such cable system, or (B) who
otherwise controls or is responsible for, through
any arrangement, the management and operation of
such a cable system[.]

The term "cable system" is defined in 47 U.S.C.
sec. 522(7):

the term "cable system" means a facility,
consisting of a set of closed transmission paths
and associated signal generation, reception, and
control equipment that is designed to provide
cable service which includes video programming
and which is provided to multiple subscribers
within a community, but such term does not
include . . . (B) a facility that serves
subscribers without using any public right-of-
way.

Given the ECI operation, a number of questions
are raised by these provisions. First, what is
required for ownership of a significant interest
or for control of management of the system?
Another ambiguity we see is what is meant by
"using" the public right-of-way.

  The FCC looked to many aspects of the ECI
service and determined that several factors,
taken together, meant that ECI is not a cable
operator because it does not provide service to
its subscribers through a cable system. That the
combination of factors is what the Commission
relied on is supported by its cautionary word to
other providers that the ruling is "expressly
limited to the facts before the Commission as
presented by ECI." para. 73.

  In determining whether the FCC ruling is
reasonable, we need to look fairly and carefully
at what the agency actually said. The importance
of that relatively simple concept inspires us to
repeat the factors on which the FCC relied:

(i)  there is absolute separation of ownership
between ECI and Ameritech and there is nothing
more than the carrier-user relationship between
them; (ii) ECI's facilities are located entirely
on private property; (iii) Ameritech provides
service to ECI pursuant to a tariffed common
carrier service; (iv) Ameritech has no editorial
control over the content of ECI's programming;
(v) the facilities primarily used by Ameritech to
provide service to ECI were not constructed at
ECI's request; (vi) there is capacity to serve
several other programming providers; and (vii)
ECI has committed to make its drops available to
other programming providers.

para. 73. The FCC did not say, as more than one
party contends, that ECI is not a cable system
because it does not have complete ownership of
the system. For instance, the Commission did not
simply say that a cable operator "must own all
the facilities used to transmit its signal across
public rights of way . . . ." as the City of
Chicago claims./1 And while it is literally true
that "[t]here is no language in section 602(7)
[47 U.S.C. sec. 502(7) defining "cable system"]
that makes the ownership of the components of a
cable system relevant,"/2 it is also true that
a cable system is run by a cable operator. To be
a cable operator one must in some way own the
system or control or be responsible for the
management and operation of the system. In other
words, the mention of ownership and control is
found in the definition of "cable operator," but
it is reasonable for the FCC to decline to read
the related provisions regarding "cable operator"
and "cable system" in splendid isolation from one
another. Ownership and control are relevant
factors under the statutes. Furthermore, the
separation of ownership between ECI and Ameritech
is an element, but not the sole basis, of the FCC
decision. It is not unreasonable to conclude that
when considered with all the factors relied on,
if the components of the operation are completely
under separate ownership and control, there is no
entity which owns a significant interest in the
system or who controls, manages, or operates the
system as a whole. 

  In addition, the exemption in sec. 522(7)(B),
referred to as the private cable exemption,
states that the definition of "cable system" does
not include facilities which serve subscribers
"without using public right-of-way." As we said,
our question is, what exactly does "using" mean?
In the ECI system, the signal is transmitted on
Ameritech supertrunking video lines. Those lines
are on the public right-of-way. But Ameritech
provides the service to ECI as tariffed common
carrier service. ECI pays for the service. ECI
does not control where the lines go or the path
over which the signal is sent. For the most part,
the lines were not constructed at ECI's request.
Other programmers can use the other 11 strands in
the cable. Furthermore, Ameritech, as a
telecommunications provider, is regulated under
Title II of the Communications Act, 47 U.S.C.
sec. 201 et seq. In order to put the lines up in
the first place, Ameritech had to gain access to
the public right-of-way. In addition, it offers
its supertrunking video service to providers on
a nondiscriminatory common carrier basis under
tariffs approved by the Michigan Public Service
Commission.

  Under those circumstances, is it reasonable to
say that ECI is not "using" the public right-of-
way? It is true that ECI pays for Ameritech's
capability to transmit its signal and that signal
is being sent over the wires, wires for the most
part which were already in place. But is this the
sort of use that Congress was concerned with?

  We think it likely that when the average person
thinks of the construction of a cable system, he
thinks of the installation of cables, either on
poles or underground. That this sort of
construction is highly intrusive on local
governments is a large part of the reason for the
local franchising requirement. The City of
Chicago itself refers to the burden state and
local governments must bear from cable
construction. It is true, as the FCC notes, that
there are other concerns as well: mandatory
carriage of television broadcast signals,
nonduplication protections, local access,
technical standards, and equal employment
opportunity requirements. But construction on the
right-of-way may be preeminent among them, and if
not preeminent, certainly highly important,
important enough to have special recognition in
the Act. It is also the primary reason the FCC
has left franchising to local authorities:

[L]ocal governments are inescapably involved in
the process because cable makes use of streets
and ways and because local authorities are able
to bring a special expertness to such matters,
for example, as how best to parcel large urban
areas into cable districts.

In re Earth Satellite Communications, at para.
22.

  In ECI's system, construction of a cable system
over the public right-of-way is not necessary.
Ameritech had previously constructed its
supertrunking system. It seems incontrovertible
that in some important and historical sense of
the word, it is reasonable to conclude that ECI
has not "used" the public right-of-way.

  Finally, several parties, particularly the City
of Chicago, spend considerable time extolling
what they see as the public-interest virtues of
widespread local franchising authority over ECI-
like SMATV systems. These parties, however, are
in the wrong forum for airing their concerns.
Their real quarrel is with Congress and the
authority it has given to the FCC under current
law.

  For all these reasons, the petitions for review
of the FCC's order are DENIED.


/1 Reply brief of petitioner City of Chicago, filed
August 24, 1999, at 3.

/2 Reply brief at 6.








  ROVNER, Circuit Judge, dissenting.  If the FCC
had unfettered authority to decide whether ECI is
a cable operator, I would, in all likelihood, be
joining my two colleagues today. Judge Evans
makes a compelling case for the legitimacy of the
FCC's judgment on this question. But the FCC's
discretion is limited by the terms of the
statute; only if there are ambiguities or gaps in
those provisions may the FCC substitute its own
judgment for that of the Congress. In this case,
I find the statutory language to be so plain as
to foreclose the FCC's rationale and conclusion,
and for that reason I respectfully dissent.

  As the majority points out, to qualify as a
"cable operator," a company must either (A)
provide service over a "cable system" in which it
"owns a significant interest" or (B) it must
"otherwise control[ ] or [be] responsible for,
through any arrangement, the management and
operation of such a cable system." 47 U.S.C.A.
sec. 522(5) (Supp. 1999). There can be no real
doubt that ECI qualifies as a cable operator
under either of these two prongs.

  ECI owns a "significant interest" in the cable
system at issue here. Id. ECI owns the "headend,"
where the video signals are first received, and
at the other end of the system it owns the
junction boxes and interior building drop lines
whereby the signals are distributed to
subscribers in the multiple dwelling units that
ECI serves. There would be nothing to transmit
over Ameritech's lines (and of course nothing to
receive from those lines) absent the system
components that ECI owns. In that sense, it
defies logic to characterize ECI's interest as
anything but "significant."

  It is equally clear, in the alternative, that
ECI "otherwise controls or is responsible for,
through [some] arrangement, the management and
operation of . . . a cable system." Id. As the
entity that has contracted with subscribers, it
is ECI that is responsible for acquiring the
programming its customers want, establishing a
price, and delivering the video signals. ECI, and
only ECI, is the company that subscribers look to
for service. For the purpose of transmitting its
programming to those subscribers, ECI has
installed and maintained ownership of some
equipment (the headend, the junction boxes, and
the interior building drop lines), while leasing
other equipment (one strand of Ameritech's
twelve-strand cable). ECI has, in this way,
assembled the components of a functioning cable
service. It did not construct and does not own
all of those components, but it is nonetheless
responsible for those it does not own by
subscribing to Ameritech's Supertrunking Video
Service. If Ameritech provided spotty service,
ECI would still be the company that subscribers
looked to, given that Ameritech itself provides
no cable service at all. Likewise, if Ameritech
decided to abandon its lines or to cancel its
lease with ECI, ECI would have to make alternate
arrangements in order to continue providing
service. There can be little doubt, then, that
ECI, is "responsible"--partly through ownership
and partly through leasing--for the system that
delivers cable programming to its subscribers.

  The FCC's analysis skirts these evident points
by positing that there is no "cable system" for
ECI to operate. para. 61. That notion is
impossible to reconcile with the statutory
definition of such a system, however. In relevant
part, the statute provides:

[T]he term "cable system" means a facility,
consisting of a set of closed transmission paths
and associated signal generation, reception, and
control equipment that is designed to provide
cable service which includes video programming
and which is provided to multiple subscribers
within a community . . . ." 

47 U.S.C.A. sec. 522(7) (Supp. 1999)./1 It is
undisputed that "cable service" is what ECI
provides to its subscribers. para. 49. The
pertinent question, then, is whether there is a
cognizable facility consisting of the elements
identified in the statute that is designed to
deliver that service. Plainly there is. In fact,
no one really denies that ECI delivers its cable
service over a set of closed transmission paths
and associated signal generation, reception, and
control equipment. See para.para. 54-55. ECI has
constructed and owns the portions of the system
that initially receive the programming signals
and ultimately distribute those signals to the
subscribers living within the buildings ECI
serves; Ameritech, on the other hand, carries the
signals over the public way via cabling that it
has leased to ECI./2 

  The FCC nonetheless denied the presence of a
"cable system" because "there is an absolute
separation of ownership between ECI's headend
facilities, which are located entirely on private
property, and the transmission facilities owned
and controlled by Ameritech." para. 55. The two
companies are entirely independent, the FCC
emphasized. ECI, on the one hand, has "total
control" over the programming it delivers to its
subscribers, while Ameritech, on the other,
exercises "complete stewardship" over the lines
that deliver ECI's signal over the public way.
para.para. 55, 56. The relationship between the
two is that of carrier and user, nothing more.
para. 55. Consequently, in the FCC's view, "ECI's
facilities and Ameritech's facilities do not
constitute a single, integrated cable system."
para. 61.

  The fundamental flaw in the FCC's analysis is
that it seizes upon ownership of the transmission
lines and elevates that consideration to
preeminence in determining whether or not a
"cable system" exists. Congress, by contrast,
directed the FCC to look at whether there is a
set of closed transmission paths and associated
equipment that delivers cable service to
subscribers; nowhere in the statutory definition
did it mention ownership of the transmission
paths--or any other particular system component--
as a relevant factor. sec. 522(7); see also ante
at 12-13. Moreover, in defining who constitutes
a "cable operator," Congress spoke in terms of a
person who either (A) "owns a significant
interest" in a cable system or (B) "otherwise
controls or is responsible for, through any
arrangement, the management and operation of such
a cable system." sec. 522(5). This language quite
clearly envisions that one can operate a cable
system without being the sole owner of the system
components--without, in fact, holding any
ownership interest at all in the transmission
paths that cross the public way. To that extent,
the statutory terms belie the notion that there
must be a "single, integrated cable system" in
which the cable provider owns the transmission
paths on the public way as well as the components
located on private property. See para. 61. ECI
owns the latter and leases the former. No one can
deny that by virtue of this arrangement, ECI has
assembled a facility that functions precisely as
Congress defines the term "cable system." Only by
importing an ownership criterion that is not
found in the statutory language, and which is in
evident tension with that language, can the FCC
escape this conclusion. As the FCC itself
acknowledged, Congress considered but
"intentionally omitted the Commission's previous
requirement that all portions of a cable system
be under common ownership or control." para. 56.
However great the FCC's regulatory authority, it
does not have the power to rewrite the statutory
scheme; neither do we. E.g., Chevron, U.S.A.,
Inc. v. Natural Resources Defense Council, Inc.,
467 U.S. 837, 842-43, 104 S. Ct. 2778, 2781
(1984).

  The statute, of course, exempts from the
definition of a "cable system" "a facility that
serves subscribers without using any public
right-of-way." sec. 522(7)(B). The FCC believed
it is Ameritech, not ECI, that "uses" the public
way because it is Ameritech that installs,
repairs, and maintains the lines that traverse
the public way. para. 62. In its view, ECI's
"mere interaction" with Ameritech's lines does
not constitute the type of "use" that Congress
had in mind when defining a "cable system." Id. 

  Again I find it impossible to reconcile the
FCC's construction with the language that
Congress has employed. The first point to make is
Commissioner Tristani's: The statute asks not
whether ECI uses the public way, but whether the
facility that delivers ECI's programming does.
Tristani dissent at 5. Here, of course, the
leased portion of the cable system without
question crosses and therefore "uses" the public
right-of-way. In any case, common sense tells us
that ECI itself also "uses" the public way in
delivering cable programming to its subscribers.
Quite simply, without access to the Ameritech
lines that cross the public way, ECI's signals
would have nowhere to go. The lines, certainly,
belong to Ameritech, but ECI uses those lines--
and thus avails itself of the public way in which
they are located--no less by leasing the lines
than by owning them outright. One can buy a car
to drive around town or rent one--either way one
makes use of both the car and the public streets
that the car traverses. The legislature's choice
of the term "use," as opposed to a more specific
and limiting term, signals that it meant to reach
the very type of access to the public way that
ECI has arranged. Smith v. United States, 508
U.S. 223, 229, 113 S. Ct. 2050, 2054 (1993). And
I discern no ambiguity in the term that would
permit the FCC to regulate in Congress' stead.
"Use" is a broad term, but its breadth alone does
not create ambiguity. See Pennsylvania Dep't of
Corrections v. Yeskey, 524 U.S. 206, 118 S. Ct.
1952, 1955-56 (1998); Bass v. Stolper,
Koritzinsky, Brewster & Neider, S.C., 111 F.3d
1322, 1326 (7th Cir. 1997); Haroco, Inc. v.
American Nat'l Bank & Trust Co. of Chicago, 747
F.2d 384, 398-99 (7th Cir. 1984), aff'd, 473 U.S.
606, 105 S. Ct. 3291 (1985). Neither the FCC nor
my colleagues seem to dispute that ECI's
transmission of signals over the public way
through Ameritech's lines constitutes a "use" in
the ordinary sense of that term (see ante at 14);
they simply think that there are plausible policy
reasons that support construing the term more
narrowly. Fine, but the authority to narrow the
statute rests solely with Congress. Having chosen
a term with an expansive, commonsense meaning,
and supplying no definition of its own indicating
that the term should be given a more
particularized construction, Congress has bound
us to the broader meaning of the word. Smith, 508
U.S. at 228-29, 113 S. Ct. at 2054. Because ECI's
leasing of Ameritech's lines for the purpose of
transmitting its programming surely constitutes
a "use" of the public way in ordinary parlance,
the exemption is not applicable here.

  For all of these reasons, I would grant the
petitions for review, reverse the FCC's
declaratory ruling, and hold that ECI is a "cable
operator" which must obtain a franchise from the
communities in which it provides service.




/1 The statute proceeds to exempt from the
definition of "cable system" facilities that do
not use any public way. I address that exemption
separately below.

/2 The parties have spilled much ink in the briefs
debating whether this arrangement has the
exclusivity characteristic of the more
traditional cable systems that are constructed
and owned entirely by the cable operator. Here,
because Ameritech carries ECI's signals over
multi-stranded cables, other cable providers
could (assuming they were able to install
junction boxes and interior drop lines on the
same properties that ECI serves) lease other
strands of wire in Ameritech's cables and serve
the same customers that ECI serves. See National
Cable Television Ass'n, Inc. v. FCC, 33 F.3d 66,
74-75 (D.C. Cir. 1994) (distinguishing "channel
service" from "video dialtone"). What of it?
Whether the wire that ECI leases in Ameritech's
cable is the solitary strand in the cable or one
of 100, that wire is nonetheless dedicated to
ECI's exclusive use for the duration of the
lease. Other providers can, of course, lease
parallel strands in the same bundle, just as they
theoretically could lay cable of their own
following the same paths that Ameritech has
blazed. ECI still provides service through a
unified system of components that could be
duplicated, perhaps, but cannot be intruded upon
by other providers. Cf. id. at 75 (noting that by
offering "video dialtone" service to subscribers
in order to evade franchising requirement, a
cable provider "would . . . have to give up its
control over, including the right to exclude
others from, the channel capacity that it
formerly leased"); see also Tristani dissent at
3-4.
_